J. Michael Howell & Associates, Inc., 4 M Auto, L.L.C., Auto Gap, Inc., and Auto Gap Insurance Company VS Sierra W/O Wires, Inc.

Annotate this Case

Download PDF

NOT DESIGNATED FOR PUBLICATION STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT 2010 CA 1019 J MICHAEL HOWELL ASSOCIATES INC 4 M AUTO L C AUTO GAP INC AND AUTO GAP INSURANCE COMPANY VERSUS SIERRA W WIRES INC O I DEC 2 2 2010 Judgment rendered On Appeal from the 22 Judicial District Court Parish of St Tammany State of Louisiana No 2007 15431 Division I The Honorable Reginald T Badeaux III Judge Presiding Alex J Peragine Counsel for the Plaintiffs Appellees Amanda W Cox J Michael Howell Covington Louisiana 4 M Auto L Auto Gap Inc and C Auto Gap Insurance Company Henry A King John A Cangelosi Counsel for DefendantA Sierra W Wires Inc O Associates Inc ellant New Orleans Louisiana BEFORE KUHN PETTIGREW AND KLINE JJ 1 Judge William F Kline Jr retired is serving as judge pro tempore by special appointment of the Louisiana Supreme Court KLINE J This matter arises from a contract dispute between J Michael Howell Associates Inc 4M Auto LLC Auto Gap Inc and Auto Gap Insurance Company collectively Howell Group and Sierra W Wires Inc Sierra After O a trial on the merits the trial court ruled in favor of Howell Group Judgment was rendered and Sierra appeals For the following reasons we affirm the judgment FACTS AND PROCEDURAL HISTORY Sierra is an information technology IT service company located in s Pennsylvania Bruce Freshwater is Sierra chief executive officer The Howell Group located in Mandeville Louisiana primarily sells ancillary automobile insurance products such as gap insurance J Michael Howell runs the Howell Group businesses In late 2006 Howell Group retained Sierra to perform daily IT remote server management services Mr Freshwater negotiated on behalf of Sierra and Robert Magaletta a friend of Howell and owner of ShadowTrack negotiated on behalf s of Howell Group The provisions of the contract were documented by the execution of a mutual non disclosure agreement signed October 23 2006 and an IT Management Contract signed November 13 2006 The IT Management Contract specified the services to be performed by Sierra in two categories 1 Scope of Work and 2 Out of Scope work This proceeding arises out of a dispute regarding the applicability of the Out of Scope portion of the agreement The Scope of Work portion of the contract is not at issue The IT Management Contract Out of Scope provisions cover 1 3 party rd software integrations 2 website modifications redesign and 3 customized PA reporting SQL website etc except for reports that are already part of the system The IT Management Contract Section IX also contained a Limitation of Liability provision This provision provides in pertinent part that Under no circumstances shall Sierra be liable for any indirect incidental punitive special or consequential damages including without limitation loss of profits The maximum liability of Sierra to client for any and all loss claim damage or liability of any kind including due to Sierra negligence shall be limited to the amount paid by client to Sierra during the month preceding the claim The limitations of liability set forth above shall apply i regardless of the form of action whether in contract tort strict liability or otherwise and ii whether or not damages were foreseeable This limitations of liability shall survive failure of any exclusive remedies in this agreement In early 2007 the parties began discussing changing the software Howell Group was using to keep its records and how it processed the data of its various businesses s Sierra employee from Pennsylvania Angela Bennese was the s project computer programmerdeveloper who was put to work on this job She reviewed Howell operations on March 21 22 2007 to gauge its database needs s Ms Bennese testified that she was hired to develop the database into a webbased SQL application Ms Bennese testified that the work for the SQL database development was not included in the original IT Management Contract No terms of this agreement were reduced to writing Ms Bennese made recordings in the Incident Management System about IMS her progress on this software conversion project The SQL database development work was to begin in April and was estimated to be completed in two to three months 2 When the work fell behind SQU is an acronym for structured query language which is a progranirni language for querying and ng modifying data and managing databases 3 The IMS was employed by all of Sierra customers to track incidents cases tickets etc s k schedule Mr Magaletta on behalf of Howell Group and Mr Freshwater on behalf of Sierra agreed in writing that Sierra would lower its rates from 00hour to 39 and that Sierra would provide Howell Group with daily 80 hour 75 progress reports from Ms Bennese Sierra also agreed to provide Howell Group with a weekly accounting of time spent and monies due for the SQL database development project The database development project was not completed within the projected timeframe Howell Group expressed concern about this as well as about the cost overruns Five months and over 30 into the project Howell Group 00 000 terminated both the IT Management Contract and the agreement for the SQL database development In August 2007 Howell Group stopped paying Sierra s invoices and demanded the return of its information and documents maintained by Sierra Sierra informed Howell Group that it needed another 185 hours to complete the SQL database development project In July 2007 Howell Group hired another company to create and develop its new SQL database outstanding invoices refused to pay On August 31 2007 Sierra formally demanded payment of Howell Group contested the validity of the invoices and Sierra then disconnected Howell Group access to its server s which thereby cut off the business access to its databases Howell Group then s paid the invoices apparently in order to continue operating Sierra reconnected its access on September 4 2007 Howell Group filed suit for breach of contract Sierra countersued for invoices for the work and services it had provided but claimed were still unpaid After trial the trial court found that there was an oral contract for the development services that was separate and apart from the work provided for in the IT Management Contract It further concluded that the SQL database development work did not fall under the IT Management Contract Out of Scope provisions s 4 and was not subject to its limitation of liability clause It further concluded that since the IT Management Contract specified that all modifications must be in writing this oral contract for the SQL development could not be part of the written contract The trial court ruled in favor of Howell Group and awarded it 62 736 35 which represented reimbursement of money paid by Howell Group to Sierra for the SQL database development project Sierra appealed and asserted the following assignments of error 1 The trial court committed legal error when it erroneously interpreted the IT Management Contract and concluded that the SQL services were not Out of Scope items defined in the IT Management Contract 2 The trial court committed legal error when it erroneously interpreted the terms of the Limitation of Liability provisions contained in the IT Management Contract 3 The trial court committed legal error when it admitted evidence of an alleged new oral contract between the parties which has not been previously pled by Howell 4 The trial court committed legal error by including invoices for Scope of Work services and other services that were unrelated to Howell claim for s SQL services in its award of damages to Howell 5 The trial court committed legal error when it failed to award Sierra damages for unpaid invoices STANDARD OF REVIEW AND APPLICABLE LAW The proper interpretation of a contract is a question of law and subject to de novo review on appeal Montz v Theard 01 0768 p 5 La App 1 Cir 2 02 27 818 So 181 185 2d When considering legal issues the reviewing court accords no special weight to the trial court but conduct a de novo review and renders judgment on the record Id Further appellate courts also have a constitutional duty to review facts and have every right to determine whether the trial court finding was clearly wrong based on the evidence or clearly without evidentiary support Radcliff 10 L C Inc v Zip Tube Systems of Louisiana Inc 071801 071802 p 17 La 1 App E Cir 8 998 So 107 119 The reviewing court must do more than simply 08 29 2d review the record for some evidence with supports or controverts the trial court s findings it must instead review the record in its entirety to determine whether the trial court findings were clearly wrong or manifestly erroneous Id The task of s the reviewing court is not to assess whether the trial court factual findings are s right or wrong in an absolute sense nor to determine whether the court of appeal or another trier of fact might reasonably reach a different conclusion from the same evidence but solely to ask whether this fact finder resolution of the conflicting s evidence was reasonable in light of the record as a whole Id DISCUSSION Interpretation ofthe IT Agreement and its Limitation ofLiability Clause Sierra argues in its first and second assignments of error that the SQL database development project comes under the Out of Scope provision of the IT Management Contract and is thus subject to the limitations of liability provisions provided for in that agreement There is no dispute that the database development project at issue does not come within the Scope of Work provision of the written contract The trial court found that the SQL database development project was separate from the IT Management Contract and thus not subject to the latter s limitations of liability clause It further held that the IT Management Contract could not be read to negate any other agreement made by the parties rather it correctly observed that other agreements that do not meet the requirements of the IT Management Contract are separate agreements We begin our de novo review of the record in this context The provision at issue provides as follows Out of Scope items these items are listed below and may not be a full and complete list but are put in place to set the standard on out of scope items and will require customer approval prior to start C7 all out of scope items will be billed on a pre negotiated time and materials basis d 3 1 party software integrations 2 website modificationsredesign 3 customizing reporting SQL website etc Except for reports that are already part of the system In addition the parties added in Mr Howell handwritten script 4 Up to s 4 hrs of out of scope work is provided at no cost Any additional hours will be invoiced at 80 with prior approval This provision was initialed by Mr hr 00 Howell Both parties acknowledge their intent in connection with the database development project at issue was to completely change Howell Group database s into a webbased SQL application Sierra argues that this project comes under the Out of Scope provisions as listed above particularly number three which mentions SQL Howell Group however asserts that the development of its database was a separate agreement and not encompassed in the Out of Scope clause Howell Group contends that the SQL reference in 3 was for SQL reporting and not the development of an SQL database Regarding the Out of Scope clause we note that it does not clearly delineate the items covered under the IT Management Contract rather the clause states that the three examples are provided to set the standard on out of scope items Clearly the development of the database is not specifically included in the three listed items Therefore we conclude that there is some ambiguity as to the meaning of this clause Moreover the provision at issue does not appear to contemplate the development of an SQL database s Sierra employee hired to perform the work Ms Bennese testified that the rec 706 work for the SQL database development was not included in the original IT Management Contract This testimony was supported by the testimony of the Howell Group representative Mr Magaletta He testified that at the time the IT Viz Management Contract was signed Howell Group had an accurate database even though it was not an SQL database He testified that the new SQL database development application did not have anything to do with the existing Access application After a careful review of the record we conclude that there appears to be little relationship between the three items listed in the Out of Scope provision used to set the standard for the out of scope work and the development of a web based SQL application to replace Howell Group Access database As such we s conclude that the agreement to develop a new database was not contemplated in the IT Management Contract under the out of scope items provision Therefore we also conclude that the agreement to develop the SQL database application is a separate contract not governed by the overall written IT Management Contract agreement We note that the trial court ruled that the oral contract regarding the development of the database could not have come under the IT Management Contract agreement because it was not in writing as mandated by the contract It is well settled that in certain instances written contracts may be modified by oral contracts even when the written contract contains a provision stating otherwise See Amitech U LTD V Nottingham Construction Co 092048 p 17 A S App La 1 Cir 10 29 So3d 2010 WL 426277 It is also well settled that district court oral or written reasons for judgment form no part s of the judgment and that appellate courts review judgments and not reasons for judgment Bellard v American Cent Ins Co 07 1335 07 1399 p 25 La 08 18 4 980 So 654 671 Even so the trial court correctly concluded that the 2d contract was outside of the original IT Management Contract and therefore not subject to the written contract limitations of liability Accordingly the first and s second assignments of error are without merit 8 Evidence ofan Oral Contract that Sierra claims was not Originally Plead Sierra alleges in its third assignment of error that Howell should not have been permitted to introduce parol evidence of a separate oral agreement Sierra argues citing James Const Group L v State ex rel Dept of Transp and C Dev 070225 p 5 La 1 Cir 11 977 So 989 993 that this App 07 2 2d introduction results in reversible legal contravention to basic contract principles error because it stands in direct Particularly Sierra argues that parol evidence may not be admitted to explain or contradict the parties intent as evidenced by the IT Management Contract agreement Conversely Howell argues that this rule of parol evidence does not apply because the evidence regarding the work entailed in developing the database was not offered as an explanation or contradiction of the written IT Management Contract agreement Rather the evidence introduced established that there was an agreement separate and apart from the written agreement Moreover Howell Group argues that it did not expand the pleadings as alleged by Sierra because its original petition describes in paragraph 8 the negotiation of a third and separate agreement between Howell Group and Sierra regarding the SQL database development project and it also asserted a claim for breach of contract in paragraph 20 of the petition As discussed hereinabove we conclude that Howell Group was not seeking to explain or to vary the terms of a written contract but to utilize the witnesses to establish that the negotiations between it and Sierra were for work on the development of a database pursuant to a new contract Such use of parol evidence is not prohibited Moreover parol evidence may be used to show the true cause or consideration for a contract McCarroll v McCarroll 962700 La 10 97 21 701 So 1280 1286 Thus it follows that in certain instances parol evidence 2d may be introduced to show the true cause of the oral agreement Accordingly the W trial court properly admitted the testimony of various witnesses This evidence helps to resolve the issues of whether the oral agreement was or was not a modification of the written document and to establish the terms of the oral agreement This assignment of error is without merit Calculation ofDamages Sierra argues in its fourth assignment of error that the trial court incorrectly included invoices in the damage award that were unrelated to Howell Group s claim for the SQL database development project It asserts that this alleged miscalculation resulted in awarding damages to the Howell Group that had been billed for Scope of Work and other services that were not subject to the contested claims of this proceeding These include invoice 537 allegedly for 00 068 time billed prior to the SQL database project 3 And also includes five other invoices not introduced into evidence 014168 14581 00 300 14729 68 628 and 14785 00 300 14325 00 300 00 300 Conversely the Howell Group contends that its Chief Financial Officer Heather Heburn testified to the amount of the money it paid to Sierra for the SQL database development project as approximately 35 Howell Group further 52 736 argues that Sierra did not object to this testimony at trial Thus Howell Group contends that Sierra complaints in this regard do not matter since this testimony s was introduced without objection to the amount Sierra was paid for the services Sierra bases it claim on a document it filed on September 30 2007 entitled Court Ordered Memorandum Addressing Damages and Monetary Value of Source Code Despite this title we can find no court order in the record reserving or holding open the issue of damages pending memoranda from the parties In s fact the memorandum submitted pursuant to the trial court preliminary judgment signed July 1 2009 orders the parties to submit memoranda only on the subject of source code This July 1 2009 judgment awarded Howell Group 10 52 736 35 which was made final by the judgment on appeal now before us Accordingly Sierra arguments contained in its memorandum filed September 30 s 2007 entitled Court Ordered Memorandum etc cannot constitute admissible evidence since they were only attached to its memorandum and were never offered or admitted into evidence As Howell Group points out therefore there is no evidence in the record to contradict the testimony on the amount of damages offered by Heather Heborn Accordingly this assignment of error is without merit Failure to Award Paymentfor Unpaid Invoices In Sierra final assignment of error it alleges that the trial court erred in s failing to award damages that it prayed for in its reconventional demand for Howell Group alleged unpaid invoices It argues that the written contract clearly s provides the following At any time during the term should Client have a bona fide quality of service problem caused by Sierra that remains unresolved for more than thirty 30 days following written notice to Sierra the Client may cancel this Agreement at no charge to Sierra Client agrees that all outstanding Sierra invoices must be satisfied prior to cancellation These alleged unpaid invoices 652 672 676 1110 totaling and 17 316 2 Sierra contends were introduced into the evidence at trial and remain unpaid Howell Group counters that there is no evidence that these invoices fall under the IT Management Contract agreement The remote services invoices Howell Group claims were always described as Managed Services Howell Group observes that the trial court found as a fact as stated in its reasons that there is no indication that these invoices represent work and goods used in anything other than the SQL Project and associated work In order for Sierra to be paid for these invoices pursuant to its reconventional demand it must prove its entitlement to the funds A plaintiff in 11 reconvention bears the burden of establishing its claim in the same manner as a plaintiff in the main demand Miller v Leonard 5 So 79 81 La 1991 8 2d Although invoices 652 672 and 676 were specifically plead in Sierra s reconventional demand we find no evidence showing that they or invoice 1110 are unpaid or that they are related to a project other than the database development project Nor does Sierra direct us to any such evidence in its briefs In its factual findings the trial court implicitly concluded that Sierra failed to meet its burden of proof on the reconventional demand We conclude that the trial court was not manifestly erroneous in reaching its implicit conclusion that Sierra failed to meet its burden on its reconventional demand Accordingly this assignment of error is without merit DECREE For the foregoing reasons we affirm the judgment of the trial court The cost of this appeal is assessed to Sierra W Wires Inc O AFFIRMED Accordingly to llniforin Rules Courts of Appeal Rule 2 12 which provides that unless the argument includes a 4 suitable reference place in the record the court may disregard the argument on that error 12

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.