Court: Louisiana Court of Appeal; October 1, 2014; Louisiana; State Appellate Court
Driver Pipeline Company, Inc. (Driver) appeals a partial summary judgment favoring Cadeville Gas Storage, LLC (Cadeville), which dismissed several of Driver's claims. The contract between Driver and Cadeville, dated November 9, 2012, required Driver to construct natural gas pipelines for Cadeville's storage facility for a total price of $5,430,130. Cadeville was obligated to supply the necessary materials and permits, with a completion deadline of February 28, 2013. Driver failed to meet these deadlines, attributing delays to Cadeville's failure to provide timely and suitable materials and permits. In April 2013, Driver submitted change orders exceeding $3 million, some of which were for work completed in January 2013, but Cadeville refused to approve them.
Driver's lawsuit filed on May 31, 2013, alleged multiple breaches by Cadeville, including failure to provide engineering drawings, timely materials, proper specifications, and necessary permits. Driver claimed a total of $4,045,574.05 owed, including legal interest and attorney fees. In response, Cadeville filed an answer and a reconventional demand, accusing Driver of breaching the contract by not completing the work on time and other failures. Cadeville sought to dismiss Driver's claims regarding the disputed change orders through a motion for partial summary judgment filed on September 16, 2013. The court ultimately reversed the summary judgment and remanded the case for further proceedings.
Cadeville asserted that their contract explicitly discouraged change orders and mandated prior written approval before any changes could occur. On April 1, 2013, Driver submitted seven change orders without obtaining this approval, which included costs such as $16,341.00 for additional silt fence and $2,045,877.00 for Driver acceleration. On April 12, 2013, Driver submitted four additional change orders, also without required approval. Cadeville argued that due to Driver's non-compliance with the contract terms regarding change orders, it was entitled to a partial summary judgment to dismiss Driver’s claims related to these eleven change orders.
Discovery disputes ensued, leading Driver to file a motion to compel on November 12, 2013, and oppose Cadeville’s motion for partial summary judgment on November 25, 2013. A hearing on both motions occurred on December 4, 2013, resulting in the trial court granting Driver’s motion to compel and subsequently granting Cadeville's motion for partial summary judgment, thus dismissing Driver’s claims for Change Orders 17-27. The trial court ruled that no oral modification of the agreement was permissible, certifying the judgment as final and appealable.
Driver appealed, raising two issues: the timing of the motions and the trial court's granting of partial summary judgment. The appellate court chose to address only the second issue first, ultimately finding merit in Driver's argument that there were genuine issues of material fact regarding whether Cadeville was obligated to pay for the change orders. Consequently, the court determined that the trial court erred in granting the motion for partial summary judgment, leading to a reevaluation of the case.
A motion for summary judgment must be granted if the combined evidence (pleadings, depositions, interrogatory answers, admissions, and affidavits) demonstrates no genuine issue of material fact, and the moving party is entitled to judgment as a matter of law, as outlined in La. C.C.P. art. 966(B). A material fact is defined as one that could impact the plaintiff's cause of action. The moving party has the burden of proof; however, if the movant is not responsible for proving the case at trial, they need only show a lack of factual support for essential elements of the adverse party’s claims. If the adverse party fails to provide sufficient factual support, summary judgment is warranted (La. C.C.P. art. 966(C)(2)). Summary judgments can address specific issues without resolving the entire case (La. C.C.P. art. 966(E)). Partial summary judgments are not final unless designated as such after confirming there is no reason for delay (La. C.C.P. art. 1915(B)(1)).
Contracts create, modify, or extinguish obligations between parties (La. C.C. art. 1906) and have the force of law (La. C.C. art. 1983). Contract interpretation aims to determine the common intent of the parties (La. C.C. art. 2045). Clear and explicit contract terms should not be further interpreted unless they lead to absurd consequences (La. C.C. art. 2046). Ambiguous provisions must be construed to be effective (La. C.C. art. 2049), and all provisions should be interpreted in context with one another (La. C.C. art. 2050). Doubtful provisions should consider the contract's nature, equity, the parties' conduct, and similar contracts (La. C.C. art. 2053). Parol evidence may clarify ambiguities or uncertainties in a written contract, despite being inadmissible to alter contract terms (Dixie Campers, Inc. v. Vesely Co.; ScenicLand Const. Co. LLC v. St. Francis Med. Ctr. Inc.). When determining intent becomes a factual question, summary judgment is appropriate only if no genuine material fact issues exist (First Bank, Trust v. Redman Gaming of Louisiana, Inc.).
Driver asserts that the contract necessitates Cadeville's payment for additional scheduled items through change orders 17-19, arguing these orders were simply a means to invoice costs rather than necessary adjustments. The contract's General Terms and Conditions outline procedures for changes in work, specifically in Section 9, which allows Cadeville to modify the work at any time and requires Driver to follow revised instructions upon receiving written authorization. Paragraph 9.2 specifies that if changes involve work with a set price in the Contract Pricing Schedule, Driver will be compensated accordingly. For work without a predetermined price, Driver must submit a cost estimate and obtain written approval from Cadeville before proceeding.
Driver claims that change orders 17, 18, and 22 are covered under the unit price schedule in Exhibit B, which lists costs for additional quantities of materials exceeding the basic contract provisions. The basic contract includes specific quantities of silt fence, hay bales, and mats, with set prices for additional items: $6.50 per linear foot for silt fence, $14 per hay bale, and $350 per mat. Exhibit B also stipulates that while additional quantities should be identified and authorized through a Change Order before installation, any unforeseen events that necessitate a Change Order must be communicated to Cadeville immediately. In such cases, Cadeville may expedite approval via written documentation, though this is limited to changes not exceeding $12,000 or a series of changes totaling more than $25,000. After expedited approval, Driver must submit a formal Change Order for signature.
Driver asserts that Cadeville was aware of the daily usage of specific items through reports provided by Driver. Driver claims that change orders 19 and 23 pertain solely to the unit price schedule for extra work as outlined in the contract. Change order 19 specifically relates to the installation of additional 5,000-pound river weights for 24-inch pipe, with a specified installation cost of $3,700 each. The contract stipulates that additional welds on 24-inch pipes would incur a cost of $956 each. Driver argues that these changes did not necessitate a formal change order since Cadeville personnel with decision-making authority had approved them, thus obligating Cadeville to cover these costs.
Driver also contends that the trial court incorrectly granted partial summary judgment regarding change orders 20-21 and 24-27, asserting that the extra costs stemmed from Cadeville’s failure to fulfill its contractual obligations. Driver cites various contract provisions to support this claim, including:
- **Exhibit C, Section 4**: Specifies that the company is responsible for providing listed materials, with no obligation for additional items unless specified, and the contractor bears costs related to those materials.
- **Exhibit C, Section 5**: States the company must provide necessary property and rights-of-way for effective operations.
- **Exhibit C, Section 10**: Indicates that if the contractor faces delays due to the company's failure to provide necessary equipment, materials, or permits, the contractor will be compensated, and the time for completion will be adjusted accordingly.
In essence, Driver maintains that the contractual terms support its position that change orders were unnecessary and that Cadeville is liable for the associated costs.
Charges related to extra cost change orders were attributed by Driver to work necessary for expediting project completion. Driver asserts that delays stemmed from Cadeville's inefficiency in providing pipe and obtaining essential permits, with one instance nearly resulting in project shutdown due to lack of available pipe. Upon securing the pipe, Cadeville requested that Driver expedite the work to regain schedule. Driver claims that Cadeville’s delays adversely affected its subcontractors: Jones Brothers Trucking, Pierce Construction and Maintenance Co., Inc., and Blue Fin Services, LLC. Driver argues that a genuine issue of material fact exists regarding Cadeville’s responsibility for payment of these change orders. Evidence was presented indicating that Cadeville had previously compensated for additional work without requiring prior approval or signed change orders, suggesting a lack of clarity in contractual obligations.
The existence of complex contractual provisions leads to multiple legal and factual disputes regarding Cadeville's obligation to pay the disputed charges, including whether change orders were necessary and if Cadeville approved the additional costs. Consequently, the trial court's decision to grant partial summary judgment in favor of Cadeville was deemed erroneous.
Furthermore, Driver contends that the trial court also erred by granting partial summary judgment despite factual disputes over whether the contract was modified orally or through actions implying consent, as per Louisiana jurisprudence. Legal principles state that contracts are binding as law between parties, and modifications can occur through oral agreements or conduct. Despite the written contract’s requirement for change orders to be in writing, precedents affirm that written contracts can be altered by oral agreements or party conduct. Thus, the possibility of contract modification remains significant in this case.
Modification of a written agreement can be implied through silence, inaction, or conduct, with the burden of proof resting on the party claiming modification to establish facts supporting such a change by a preponderance of evidence. Relevant case law includes *Pelican Elec. Contractors v. Neumeyer* and *Amitech U.S.A. Ltd. v. Nottingham Const. Co.*, which affirm these principles. Cadeville argues that its contract's Article VI prohibits any oral modifications, stating that the contract and its exhibits constitute the entire agreement, superseding prior negotiations and requiring future modifications to be in writing and executed by authorized officials. This provision mirrors the case of *Salley v. Louviere*, where the Louisiana Supreme Court ruled that while parol evidence is generally inadmissible to contradict a written contract, it may be permitted to prove subsequent agreements that modify it, as long as the law does not mandate such agreements to be in writing. The court clarified that the prohibition against parol evidence applies to antecedent or contemporaneous agreements, not to modifications made after the initial contract was executed.
The court found that the lessee established a verbal agreement to terminate the lease, despite the presence of an integration clause in the contract, which generally excludes prior or contemporaneous agreements not included in the contract. This clause does not, however, prevent subsequent modifications made verbally, by inaction, or through implication. Cadeville's reliance on cases concerning integration clauses, such as Harnischfeger KSale Corp. v. Sternberg Co. and Henning Const. Inc. v. First Eastern Bank and Trust Co., was deemed inappropriate. In Harnischfeger, the court excluded parol evidence of warranties because the contract explicitly stated there were no other agreements; this case was not relevant as it did not involve a subsequent oral agreement. Similarly, Henning involved negotiable instruments governed by the Uniform Commercial Code (UCC), which mandates that modifications must be in writing; however, the UCC does not apply to construction contracts, making Henning irrelevant to the current case. Cadeville also cited Chrysler Fin. Corp. cases to argue that oral modifications are ineffective if a contract stipulates that modifications must be in writing, but these cases lacked supporting legal authority.
Both cases involve motor vehicle credit transactions subject to the Louisiana Motor Vehicle Sales Finance Act (LMVSFA), which mandates that such agreements be in writing for enforceability and prohibits consumers from waiving their rights under the Act. The current case, however, does not pertain to vehicle purchases, rendering the LMVSFA inapplicable. Cadeville argues based on a contract provision with Driver that any amendments must be made in writing. The specific provision discourages change orders and requires contractors to notify the company of any previously unidentified errors promptly, allowing for adjustments only if the errors were not reasonably discoverable during the bidding process.
Legal precedent indicates that even when a contract stipulates written change orders, modifications can still occur orally or through the parties’ conduct. Cadeville's assertion that the parties 'opted out' of this principle lacks supporting authority. The case of Rhodes Steel Bldgs. Inc. v. Walker Const. Co. illustrates that oral modifications can be recognized despite a written requirement, as the appellate court reversed a trial court's refusal to consider such evidence. Cadeville incorrectly interprets Rhodes as supporting its 'opt out' argument, as the court noted that oral modifications could be proven regardless of contractual language prohibiting them. Similarly, in Lantech Const. Co. LLC v. Speed, the courts permitted recovery for change orders based on oral agreements despite a written requirement, reinforcing that written contracts can still be modified through oral agreements and party conduct, even when the contract explicitly demands written requests for modifications.
The contract in question does not explicitly prohibit oral modifications, leading to a contradiction in the case. Cadeville conceded that if the law regarding oral amendments is applicable, there are genuine material issues concerning whether an oral agreement to modify the original contract existed. Evidence presented by the plaintiff indicated that Cadeville had paid for unapproved work, suggesting deviations from the contractual provisions Cadeville now seeks to enforce. Additionally, email communications between the parties supported claims of modifications. The court found that legal precedent allows for oral or implied modifications to a written contract, even when a written modification requirement exists, which applies to this case. The trial court's decision to grant partial summary judgment in favor of Cadeville was deemed erroneous, leading to a reversal and remand for further proceedings. The discovery process was contentious, with significant disputes over document production resulting in a motion to compel. Despite Cadeville's argument that a summary judgment would expedite appellate review, the court rejected this notion. Costs from the appeal were assessed to Cadeville.
Cadeville's counsel argued for the necessity of granting the motion for partial summary judgment to conserve court resources and to obtain an early determination from the Second Circuit regarding the implications of the Rhodes Steel decision. Counsel emphasized that while they could return to trial later if needed, the immediate ruling would allow for necessary discovery related to reconventional demands and prepare for future proceedings contingent on the Second Circuit's timeline. The trial court acknowledged that writs could be taken if necessary but noted the difficulty in obtaining a review from the Second Circuit. The court expressed openness to being overruled in its decision. Ultimately, Cadeville's counsel reiterated that an early decision would be beneficial for all parties involved.
