Reliance Ins. Co. v. Department of Transp. and Development, Office of Highways

Decision Date29 May 1985
Docket NumberNo. 84,84
Citation471 So.2d 248
PartiesRELIANCE INSURANCE COMPANY v. The DEPARTMENT OF TRANSPORTATION AND DEVELOPMENT, OFFICE OF HIGHWAYS of the State of Louisiana. CA 0300. 471 So.2d 248
CourtCourt of Appeal of Louisiana — District of US

Gordon A. Pugh, Michael D. Hunt, Bernard Balkin, Baton Rouge, for plaintiff-appellee Reliance Ins. Co.

John C. Miller, Baton Rouge, for third party defendant-appellee Pepper and Associates.

James B. Frederick, Baton Rouge, for defendant-appellant Dept. of Transp. and Development, Office of Highways, State of La.

Susan M. Theisen, David R. Robertson, Alexandria, for defendant-appellee Plaquemines Parish Commission Council.

Before GROVER L. COVINGTON, C.J., and LOTTINGER and JOHN S. COVINGTON, JJ.

JOHN S. COVINGTON, Judge.

Reliance Insurance Company (Reliance) alleges multiple causes of action against the Louisiana Department of Transportation and Development, Office of Highways (DOTD) in its petition styled "Petition for Breach of Contract, Retainage, Delay and Other Damages". Reliance alleged, as its sixth cause of action, DOTD's refusal to pay retained funds after the lien period had lapsed on the highway construction project which ViCon, Inc. contracted with DOTD to perform. Reliance executed its contractor's Bond No. B952280, as surety, on behalf of ViCon, Inc., as principal, and DOTD, as obligee.

After DOTD put ViCon, Inc. in default, Reliance and DOTD entered into a Take Over Agreement and Reliance performed the contract; DOTD executed its Certificate of Satisfactory Completion (Acceptance) on December 3, 1980 and recorded it on December 11 in the official records of Plaquemines Parish. The Clerk and Recorder of Plaquemines' Lien and Privilege Certificate, issued February 4, 1981, reflected that no liens were filed within the statutory 45 day lien period. Retained funds amounted to $277,447.94.

Attempts to persuade DOTD to pay the retainage to Reliance without Reliance executing an indemnity and hold harmless agreement failed. However, Reliance furnished DOTD the requested indemnity and hold harmless agreement, under protest, on March 16, 1981. Nevertheless, DOTD refused to pay the retainage, either in whole or in part, and this litigation ensued.

The District Court granted Reliance's motion for partial summary judgment for the retainage plus legal interest from February 4, 1981; the judgment, signed on June 11, 1982, was suspensively appealed by DOTD.

On the basis of DOTD's Motion to remand, which alleged that serious legal and factual errors produced an inflated judgment, we remanded on May 17, 1983, stating as follows:

Justice would best be served by a remand of this case. We are dealing with an appeal from a partial summary judgment. Many issues are still before the trial court, and it is in a better position to determine the merits of DOTD's assertion of legal and factual errors. (No. 82 CA 0810).

The Supreme Court denied Reliance's application for writs of certiorari on June 27, 1983, 435 So.2d 453.

The District Court held another hearing on Reliance's motion for partial summary judgment on October 28, 1983. At the hearing DOTD submitted the affidavit of its construction auditor, Ronald J. Delaune. The Court's written reasons for judgment were dated and filed in the record on January 18, 1984 and the judgment awarding the sum of $277,447.94 was signed on January 20, 1984. DOTD suspensively appealed the judgment.

DOTD designated the record in the previous appeal, No. 82 CA 0810, and, inter alia, Delaune's affidavit, the Court's reasons for judgment and judgment, to comprise the record of its latest appeal.

ASSIGNMENTS OF ERROR

DOTD assigns as error on the part of the District Court its failure to:

1. Recognize the issue of material fact raised by the DeLaune affidavit; and

2. Refer the issues to the merits as called for in the remand order.

DOTD states the issues to be (1) whether the DeLaune affidavit raises any issue of material fact and (2) whether the District Court properly determined the merits of DOTD's assertion of legal and factual error "as called for in the remand of this case".

DISTRICT COURT

Judge Daniel W. LeBlanc stated in his Written Reasons for Judgment dated January 18, 1984, in pertinent part as follows:

... In the opinion of this Court, the affidavit [of Ronald J. DeLaune] does not raise any issue of material fact.

The DOTD made its final inspection of this project and found that the project was completed in accordance with the plans and specifications. The acceptance was filed timely and no liens were filed against the project. Mover's affidavit showed the amount of the retainage. There was no counter affidavit regarding the amount of the retainage. It was clear to this Court that mover was then, and is now, entitled to the partial summary judgment as prayed for.

If DOTD has overpaid due to a miscalculation, that issue can be raised by amended pleadings and can be decided at the trial on the merits.

TAKE OVER AGREEMENT

On October 4, 1979 DOTD and Reliance entered into a "Take Over Agreement", which provided, inter alia, that: (1) Reliance complete the project through its designated agents; (2) the contract between DOTD and ViCon, Inc. governs the rights and liabilities of DOTD and Reliance to the extent the first contract is not inconsistent with the Take Over Agreement; (3) DOTD pay Reliance "the balance of the contract price originally provided in the contract" between DOTD and ViCon, Inc. and that the "balance of contract funds ... still unexpended" is $3,004,733.84; (4) "by this Agreement or by operation of law" Reliance "has succeeded to all rights of ViCon, Inc. to payment ... under the original contract ..."; and (5) DOTD agreed "that it will not acknowledge or honor any claims or charges against such funds by any assignees, creditors, or transferees of ViCon, Inc., or any other parties making claim to any such proceeds or balances without consent of" Reliance "or by order of a court of competent jurisdiction after due notice to Surety".

ENTITLEMENT TO RETAINAGE

DOTD states in its brief that "except for a judgment against ViCon, Inc. in favor of the United States Government, dated July 16, 1980, ... Case No. 80-146 ... for the Eastern District of Louisiana" the Plaquemines Parish Clerk and Recorder's "lien certificate was clear". The foregoing obviously refers to the February 4, 1981 Lien and Privilege Certificate mentioned earlier. Our examination of the record reveals two lien and privilege certificates issued the same day by the same deputy clerk of court; one certificate contains identifying information on the July 16, 1980 Federal Court Judgment against ViCon, Inc. and the other one does not. It is therefore necessary to ascertain the underlying basis of the Federal Court judgment which DOTD urges as its reason for withholding retainage funds from Reliance.

"Case No. 80-146" was in fact Criminal Action No. 80-146, in which ViCon, Inc. pleaded guilty to a 197 count indictment charging, inter alia, ViCon, Inc. with conspiracy to defraud the United States of highway and airport construction, repair and maintenance funds. In Civil Action No. 81-1317, being an application for issuance of garnishment under a writ of attachment, styled "United States of America vs. ViCon, Incorporated", filed April 2, 1981 in the United States District Court for the Eastern District of Louisiana, the United States alleged, in pertinent part, as follows:

"10.

The Government was informed by a representative of the Louisiana Department of Transportation that his department has possession of and intends to disburse on Friday, April 3, 1981, approximately $277,447.90 representing retainage on a highway contract originally entered into between the Louisiana Department of Highways and ViCon, Incorporated.

The Government is informed that the State intends to pay the retainage to Reliance Insurance Company; however, the Government suggests that ViCon, Incorporated may have some property interest in said funds.

"...

"13.

The amount due the Government under its proposed claim would be no less than ..... $332,000.00." (Emphasis ours.)

Reliance's motion for summary judgment, motion to dissolve writ of attachment, and application for writ of mandamus ordering the release of funds other than DOTD retainage funds, were all denied. Judge Beer, in his reasons for denying the relief Reliance requested, stated, in part, as follows:

..... The government has impounded these funds, maintaining it has a right of set off based on the judgments previously rendered against ViCon and/or Reliance [Criminal Action 80-146 and Civil Action 79-4878] as well as the likelihood of a future judgment.

.... Thus, the government has a real and compelling interest in preserving access to funds allegedly due ViCon (but thereafter assigned to Reliance).

... [I]n Criminal Action 80-146, ... ViCon was fined $50,000.00, with a total exposure to fines totaling $100,000.00. To date, no part of this amount has been paid.

Under these circumstances, until such time as an evidentiary hearing can take place in which the question of the 'alter ego' relationship between ViCon and Reliance is fully resolved, there should be no release of funds which may be available to satisfy the yet unpaid fines and/or damages imposed against ViCon.

* * *

ViCon and Reliance seek dissolution of a writ of attachment ... pursuant to which all funds or property of ViCon in the hands of the Louisiana Department of Highways and Development (sic) were seized. ... Thus, the government's claims against ViCon and Reliance ... could total up to $459,045.34. Under these circumstances, a ruling on this motion should be stayed until an evidentiary hearing takes place in the course of which this court may determine the posture of the various parties in relation to the funds held by the Highway Department. ... Thus, the motion to dissolve the writ is held in abeyance. (Brackets, emphasis,...

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