Sentinel Indus. Cont. v. Kimmins Indus., 97-CA-00323-SCT.
| Decision Date | 29 July 1999 |
| Docket Number | No. 97-CA-00323-SCT.,97-CA-00323-SCT. |
| Citation | 743 So.2d 954 |
| Parties | SENTINEL INDUSTRIAL CONTRACTING CORP., Centre Industries Corp., Seaboard Surety Company, St. Paul Fire & Marine Insurance Company v. KIMMINS INDUSTRIAL SERVICE CORP. Kimmins Industrial Service Corp. v. Exxon Chemical Fertilizer Company. |
| Court | Mississippi Supreme Court |
Henry Laird, Jackson, Attorney for Appellants.
Barbara G. Werther, McLean, VA, William T. Reed, Pascagoula, Attorneys for Appellee.
William V. Courtney, Covington, LA, S. Wayne Easterling, Hattiesburg, Attorneys for Cross-Appellee.
BEFORE SULLIVAN, P.J., McRAE AND MILLS, JJ.
¶ 1. This appeal arises out of a series of contracts for the dismantlement of an ammonia plant owned by Exxon Chemical Fertilizer Company (Exxon) for shipment to and reassembly in Pakistan. Exxon's prime contracts on the project were with Centre Industries Corporation, an affiliate company of Sentinel Industrial Contracting Corporation, (Sentinel/Centre), and Sentinel/Centre entered into subcontracts with Kimmins Industrial Service Corporation (Kimmins). After completion of the project, Kimmins sued Sentinel/Centre, Exxon, and Sentinel/Centre's bonding companies for Phase II, Seaboard Surety Company and St. Paul Fire & Marine Insurance Company (Seaboard/St. Paul), for expenses Kimmins claimed to have incurred due to extra work required on the project outside the scope of the contracts. A jury awarded Kimmins $966,375 against Sentinel/Centre and Seaboard/St. Paul, and $724,593 against Exxon. However, the trial court granted Exxon's motion for J.N.O.V. Sentinel/Centre and Seaboard/St. Paul appeal to this Court from the jury's award of damages in favor of Kimmins, and Kimmins cross-appeals from the J.N.O.V. granted to Exxon, the denial of prejudgment interest and attorneys' fees, and the refusal of its bad faith claim instructions in this case. We reverse and remand the trial court's order denying Kimmins's motion for prejudgment interest. Finding no other errors, we affirm the trial court's judgment on all remaining issues in this case.
¶ 2. Exxon hired Sentinel/Centre as the general contractor in a project to dismantle Exxon's ammonia refinery in Pascagoula, Mississippi, for shipment to and reassembly in Pakistan. Sentinel/Centre hired Kimmins as its prime subcontractor, and Kimmins entered into various subcontracts for completion of the project. The project was divided into two parts: Phase I involved removal of asbestos insulation from the ammonia refinery, and Phase II was the actual dismantling of the refinery. Two separate contracts between Exxon and Sentinel/Centre covered each phase. Exxon agreed to pay Sentinel/Centre $2,181,269 for Phase I and $6,567,631 for Phase II. Similarly, Sentinel/Centre entered into two contracts with Kimmins dated April 4 and 30, 1991, to cover each phase. Under the Phase I subcontract, Kimmins agreed to completely remove the asbestos material for $1,375,000, plus the cost of payment and performance bonds. Sentinel/Centre agreed to pay Kimmins $4,525,000 for the dismantlement under the Phase II subcontract, plus the cost of payment and performance bonds. The Phase I asbestos removal began in April of 1991, and the dismantling in Phase II was completed in January of 1992. At the conclusion of the project, Exxon withheld funds from Sentinel/Centre, because it was dissatisfied with the work performed by Kimmins.
¶ 3. On January 29, 1993, Kimmins filed suit against Exxon, Sentinel/Centre, and Seaboard/St. Paul, claiming actual damages, punitive damages, attorneys' fees, costs, and interest due because of extra work it claimed it had to perform outside the scope of its contracts with Sentinel/Centre. Kimmins sued Sentinel/Centre for breach of contract; sued Seaboard/St. Paul for failure to pay Kimmins amounts due on the payment bond; and sued Exxon for quantum meruit, unjust enrichment, tortious interference, and negligence.
¶ 4. Sentinel/Centre and Kimmins entered into a partial settlement agreement on February 1, 1993, under which the parties agreed that the balance due on the subcontracts totaled $960,441. Sentinel/Centre agreed to pay Kimmins $482,059 ("distribution funds"), subject to Kimmins's obtaining waivers of lien and releases of claims from each of Kimmins's subcontractors. The remaining $478,382 was to be withheld, $202,522 for funds Exxon had withheld from Sentinel/Centre for damage to parts of the ammonia plant caused during dismantling ("backcharge funds"), and $275,806 in other funds retained by Exxon ("retainage"). The parties agreed that Sentinel/Centre would pay Kimmins any amounts successfully obtained from Exxon from these withheld funds, subject to negotiations between Kimmins and Sentinel/Centre regarding the $202,522 backcharges.
¶ 5. Kimmins filed its amended complaint on August 31, 1993, to include additional causes of action against Sentinel/Centre for breach of the settlement agreement, unlawful conversion of funds, and breach of fiduciary duty, and against Seaboard/St. Paul for breach of their duty of good faith and for damages resulting from Sentinel/Centre's alleged breach of the settlement agreement. Kimmins claimed that Sentinel/Centre and its surety, Seaboard/St. Paul, refused to pay Kimmins after it received waivers and liens from some of its subcontractors.
¶ 6. On May 17, 1994, Kimmins filed its motion for partial summary judgment relating to its claims against Sentinel/Centre and Seaboard/St. Paul for breach of the February 1, 1993, settlement agreement. Circuit Court Judge Bill Jones entered an order and judgment on September 6, 1994, finding that Sentinel/Centre had breached the settlement agreement and owed Kimmins $453,945.82, or any unpaid balance on the $482,059 originally agreed upon "distribution funds." The court also found Seaboard/St. Paul jointly and severally liable for any unpaid balance pertaining to the Phase II contract.
¶ 7. The case proceeded to trial, and on July 26, 1996, the jury returned a verdict in favor of Kimmins against Sentinel/Centre for Phase I in the amount of $92,327, against Sentinel/Centre and Seaboard/St. Paul for Phase II in the amount of $874,048, and against Exxon in the amount of $724,593. On February 28, 1997, the trial court entered its Final Amended Judgment, in which it granted Exxon's motion for J.N.O.V. The court denied various post-trial motions filed by the other parties, including Kimmins's motion for attorneys' fees and prejudgment interest. Sentinel/Centre and Seaboard/St. Paul appealed to this Court from the lower court's judgment, assigning as error the trial court's denial of their motions for directed verdict, J.N.O.V., and new trial based upon Kimmins's failure to prove that it was entitled to extra compensation, its inadequate proof of damages, and the validity of the jury's verdict. Kimmins filed a cross-appeal to reinstate the judgment against Exxon, for assessment of attorneys' fees and prejudgment interest, and for a new trial on its bad faith claim against Seaboard/St. Paul.
¶ 8. Although not addressed separately by the parties in their briefs, choice of law is central to the outcome of the contract, prejudgment interest, and attorneys' fees issues in this case. Out of simplification, choice of law on these issues will be briefly addressed separately at the outset. We find no need to address choice of law relating to the tort claims in this case, because the parties all agree that Mississippi law applies to those issues.
¶ 9. The prime contracts between Exxon and Sentinel/Centre contained a choice of law provision assigning Texas law to govern the interpretation of the contracts and legal relations of the parties. The subcontracts between Kimmins and Sentinel/Centre did not contain a specific choice of law provision. However, Kimmins maintains that the prime contracts were incorporated into the subcontracts, along with their choice of law provisions. Sentinel/Centre's position is that the subcontracts only referred to the prime contracts for details of Kimmins's performance and obligations, not the choice of law provision.
¶ 10. We agree with Sentinel/Centre. A plain reading of the subcontract language reveals that the parties' intention was to incorporate the prime contracts for purposes of detailing the plans and specifications, not to govern choice of law in any potential contract dispute. This position is supported by the testimony of Sidney Milgrim, the president of Sentinel/Centre, Kevin O'Toole, an engineering consultant hired as an expert witness by Sentinel/Centre, and Mark DeWitt, a general manager with Kimmins involved in negotiating the subcontracts and in managing the project in this case.
¶ 11. Moreover, the choice of Texas law provision in the prime contracts is invalid, as conceded by Exxon in its brief, because Texas law bears no reasonable relationship to or significant contacts with the parties or the subject matter of the litigation.
In deciding constitutional choice-of-law questions, whether under the Due Process Clause or the Full Faith and Credit Clause, this Court has traditionally examined the contacts of the State, whose law was applied, with the parties and with the occurrence or transaction giving rise to the litigation.... In order to ensure that the choice of law is neither arbitrary nor fundamentally unfair, ... the Court has invalidated the choice of law of a State which has had no significant contact or significant aggregation of contacts, creating state interests, with the parties and the occurrence or transaction.
Allstate Ins. Co. v. Hague, 449 U.S. 302, 308, 101 S.Ct. 633, 66 L.Ed.2d 521 (1981) (internal citations omitted). Because Texas has little contact with or interest in the outcome of a contract dispute between Kimmins and Sentinel/Centre regarding a project in Pascagoula, Mississippi, application of Texas law...
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