O & M Const., Inc. v. State, Div. of Admin.
| Citation | 576 So.2d 1030 |
| Decision Date | 05 March 1991 |
| Docket Number | No. CA,CA |
| Court | Court of Appeal of Louisiana (US) |
| Parties | O & M CONSTRUCTION, INC. v. STATE of Louisiana, DIVISION OF ADMINISTRATION. 89 1136. |
Craig L. Kaster, Baton Rouge, for plaintiff-appellant O & M Const., Inc.
Robert A. Barnett, New Orleans, for defendant-appellee State of La., etc.
Before COVINGTON, C.J., and LANIER and GONZALES, JJ.
This action is a suit in contract by a general contractor seeking damages and the balance withheld under a public building contract. Suit was filed by O & M Construction, Inc. (O & M) 1, the general contractor, against the State of Louisiana, Division of Administration (State), as owner of the building. The trial court found that (1) the architect was wrong in withholding approval of one payment application (No. 23), (2) the architect was correct in delaying issuance of the substantial completion certificate and in assessing $66,400 in liquidated damages for delay, (3) O & M's workmanship did not cause the paneling to come unstuck from the walls, (4) O & M failed to construct the organ room ceiling at a height of eleven feet as required by the plans, (5) O & M failed to use the proper size aggregate for the sidewalks and entrance way to the building, (6) the architect was wrong in withholding $9,000 as a credit for nine inches of fill not needed for the building and should have withheld only $1,670, (7) O & M was not entitled to damages for delays caused by the State and (8) O & M was not entitled to any other damages. The trial court awarded O & M 2 legal interest on $92,502.62 (amount of payment application No. 23) from July 31, 1985 to April 21, 1987, and $13,211 (amounts wrongfully withheld by the State) together with legal interest thereon from the date of judicial demand until paid. O & M took this devolutive appeal. 3
On July 28, 1983, O & M and Odis F. Haymon entered into a contract with the State to build Phase II of the Music School Renovation at Louisiana State University (LSU) in Baton Rouge, East Baton Rouge Parish, Louisiana. The contract provided that O & M and Haymon were to be paid $3,630,000 for performance of the contract. The project was to be completed within 420 days of its commencement date and in accordance with the plans and specifications provided by Miller, Smith & Champagne (MSC), the project's architects. Aetna Casualty & Surety Company (Aetna) provided the performance and payment bond. The contract provided for assessment of the sum of $800 per day as liquidated damages for each consecutive calendar day after the completion date that work remained incomplete.
On August 10, 1983, the State sent O & M and Haymon a notice that work was to be commenced on or before August 29, 1983, and fully completed by October 23, 1984, 420 consecutive calendar days after the commencement date. The original completion date of October 23, 1984, was extended by various change orders to August 2, 1985.
The parties proceeded with the project without major conflict until July of 1985. O & M submitted payment application No. 23 on July 3, 1985. MSC refused to approve payment of application No. 23 based on various alleged contractual deficiencies.
On July 30, 1985, O & M sent MSC a written request for inspection along with a list of items which remained outstanding in an effort to obtain a certificate of substantial completion. O'Neil Champagne of MSC inspected the building on August 20, 1985, and made a ten page punchlist dated August 22, 1985, containing items which needed correction or completion. On October 24, 1985, upon recommendation of MSC, the State issued a certificate of substantial completion for the project and assessed $66,400 (83 days at $800 per day) as liquidated damages for delay between August 2, 1985 and October 24, 1985.
On November 6, 1985, the State accepted the project keeping the normal five percent retainage, plus liquidated damages of $66,400 for delay and $147,000 above the normal retainage for completion of the punchlist items.
Disputes arose between the parties as to O & M's responsibility for correcting certain items on the punchlist. The State contracted with other parties for completion of the project and deducted the amounts spent for completion from the balance owed to O & M.
In April and October of 1987, the State paid O & M the balance due on the project less the above deductions.
This suit followed.
SUBSTANTIAL COMPLETION
(Assignment of error number 3)
O & M contends that the trial court erred in finding that the State was justified in withholding substantial completion status for the project until October 24, 1985, and in assessing $66,400 as liquidated damages for delay. It contends that the lack of handrails and air conditioning balance report are not valid reasons for refusing substantial completion status.
Section 01701, part 1.03 of the contract deals with substantial completion and provides the following:
A. When contractor considers work is substantially complete, submit written notice, with list of items to be completed or corrected.
B. Should Architect/Engineer inspection find Work is not substantially complete, he will promptly notify Contractor in writing, listing observed deficiencies.
C. Contractor shall remedy deficiencies and send a second written notice of substantial completion.
D. When Architect/Engineer finds Work is substantially complete he will prepare a Certificate of Substantial Completion in accordance with provisions of General Conditions.
(Emphasis added)
Article 9.8.1 of the general conditions of the contract provides as follows:
When the Contractor considers that the Work, or a designated portion thereof which is acceptable to the Owner, is substantially complete as defined in Subparagraph 8.1.3, the Contractor shall prepare for submission to the Architect a list of items to be completed or corrected. The failure to include any items on such list does not alter the responsibility of the Contractor to complete all Work in accordance with the Contract Documents. When the Architect on the basis of an inspection determines that the Work or designated portion thereof is substantially complete, he will then prepare a Certificate of Substantial Completion which shall establish the Date of Substantial Completion, shall state the responsibilities of the Owner and the Contractor for security, maintenance, heat, utilities, damage to the Work, and insurance, and shall fix the time within which the Contractor shall complete the items listed therein. Warranties required by the Contract Documents shall commence on the Date of Substantial Completion of the Work or designated portion thereof unless otherwise provided in the Certificate of Substantial Completion. The Certificate of Substantial Completion shall be submitted to the Owner and the Contractor for their written acceptance of the responsibilities assigned to them in such Certificate.
(Emphasis added)
Article 8.1.3 of the general conditions of the contract defines the date of substantial completion as follows:
The Date of Substantial Completion of the Work or designated portion thereof is the Date certified by the Architect when construction is sufficiently complete, in accordance with the Contract Documents, so the Owner can occupy or utilize the Work or designated portion thereof for the use for which it is intended.
(Emphasis added)
Contracts have the effect of law upon the parties, and the courts are bound to give legal effect to all contracts according to the true intent of the parties. This intent is determined by the words of the contract, when these are clear and explicit and lead to no absurd consequences. La.C.C. arts. 1901 and 1945 (now La.C.C. arts. 1983, 2045 and 2046) 4; First National Bank of Commerce v. City of New Orleans, 555 So.2d 1345 (La.1990); Leenerts Farms, Inc. v. Rogers, 421 So.2d 216 (La.1982); Oberfell v. Oberfell, 516 So.2d 424 (La.App. 1st Cir.1987). They must be interpreted in a commonsense fashion, giving to the words of the contract their common and usual significance. La.C.C. art. 1946 (now La.C.C. art. 2047); Lambert v. Maryland Casualty Company, 418 So.2d 553 (La.1982); Fishbein v. Bankston, 426 So.2d 649 (La.App. 1st Cir.1982). All clauses of a contract are to be interpreted the one by the other, giving to each the sense that results from the entire act. La.C.C. art. 1955 (now La.C.C. art. 2050); John Bailey Contractor, Inc. v. State, Department of Transportation and Development, 439 So.2d 1055 (La.1983); Pendleton v. Shell Oil Company, 408 So.2d 1341 (La.1982). A cardinal rule in construction of contracts is that the contract must be viewed as a whole and, if possible, practical effect given to all parts, according to each the sense that results from the entire agreement so as to avoid neutralizing or ignoring any of them or treating them as surplusage. John Bailey Contractor, Inc. v. State, Department of Transportation and Development, 439 So.2d at 1058; Lambert v. Maryland Casualty Company, 418 So.2d at 559; Fishbein v. Bankston, 426 So.2d at 651.
Under Louisiana law, a building contractor is entitled to recover the contract price even though defects or omissions are present when he has "substantially performed" the building contract. 5 "Substantial performance" in such case means that the construction is fit for the purpose intended despite the deficiencies. This is a factual determination to be made by the trial court. Factors bearing on this factual determination include: the extent of the defect or non-performance, the degree to which the purpose of the contract is defeated, the ease of correction, and the use or benefit to the owner of the work performed. Airco Refrigeration Service, Inc. v. Fink, 242 La. 73, 134 So.2d 880 (1961); Orgeron v. Dobkowski, 476 So.2d 458 (La.App. 1st Cir.1985); Anderson v. Green, 454 So.2d 200 (La.App. 1st Cir.), writ denied, 459 So.2d 539 (La...
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