American Economy Insurance Company as Subrogee of Louisiana Investment Corporation and Louisiana Investment Corporation and Louisiana Investment Corporation VS MBD Construction Company, Inc., All Steel Building Systems LLC f/k/a All Steel Systems LLC and Metal Building Solutions, LLC
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NOT DESIGNATED FOR PUBLICATION STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT NUMBER 2012 CA 0676 AMERICAN ECONOMY INSURANCE COMPANY AS SUBROGEE OF LOUISIANA INVESTMENT CORPORATION AND LOUISIANA INVESTMENT CORPORATION VERSUS MBD CONSTRUCTION COMPANY INC ALL STEEL BUILDING SYSTEMS LLC F A ALL STEEL SYSTEMS LLC AND K METAL BUILDING SOLUTIONS L C 272 013 Judgment Rendered Appealed from the 19 Judicial District Court In and for the Parish of East Baton Rouge Louisiana Trial Court Number 585 441 Honorable Janice Clark Judge Mark R Pharr Lafayette III Attorneys for Appellants Plaintiffs American Economy Insurance Company as Subrogee of Louisiana Investment Corporation and Louisiana Investment Corporation LA and Anne L Cook Jeffery Lust Dallas TX Richard S Vale Attorneys for Appellee Pamela Noya Molnar Defendant F Lahatte Metairie LA Joseph III Company Inc Attorney for Appellee Steven C Judice Baton MBD Construction Defendant Rouge LA EKA Inc BEFORE PARRO WELCH AND KLINE JJ Hon William F Kline Jr retired is serving as judgepro tempore by special appointment of the Louisiana Supreme Court WELCH J The Economy Investment plaintiffs American Economy Insurance American Company as subrogee of Louisiana Investment Corporation and Louisiana Corporation Louisiana Investment appeal a summary judgment granted in favor of defendant MBD Construction Company Inc MBD dismissing the plaintiffs claims against that defendant For reasons that follow we reverse the judgment ofthe trial court and remand for further proceedings FACTUAL AND PROCEDURAL HISTORY On March C 24 2005 DG Partnership 1 L DG contracted with MBD to construct a commercial building a Dollar General store at 9399 Highway 67 in Clinton Louisiana The construction contract was the standard form agreement prepared by the American Institute of Architects AIA and contained a section pertaining to a waiver of subrogation for damages caused by losses covered by property insurance A certificate of substantial completion was issued for the construction project on July 5 2005 and on January 13 2006 a s contractor certification and warranty was issued by MBD to DG On January 17 2006 DG sold the property and building by act of cash sale to Louisiana Investment The act of cash sale provided Seller DG hereby sells and delivers with full warranty of title and with full substitution and subrogation to all rights and actions of warranty Seller may have unto Louisiana Investment Around December 11 2008 it snowed in the area of Clinton As a result of the snowfall the roof of the Dollar General store collapsed snow entered the building and caused property damage to the store The damages sustained by Louisiana Investment were covered by a policy of insurance issued by American 2 MBD subcontracted with All Steel Building Systems L All Steel C to provide metal building supply materials and framing for the building sconstruction All Steel contracted with Metal Building Solutions MBS to assist All Steel with providing the metal building supply materials and framing Although All Steel and MBS are parties to this suit the issues raised in this appeal do not pertain to either of those parties 2 Economy Louisiana Investment made a claim under the policy and American Economy paid the claim less a 1 deductible 000 Thereafter American Economy and Louisiana Investment commenced these proceedings seeking damages from several defendants alleged to be responsible for the collapse of the roof Specifically American Economy sought reimbursement for the monies it had paid to Louisiana Investment pursuant to its insurance policy and Louisiana Investment sought reimbursement for the 1 000 deductible relating to the claim Based on the waiver of the subrogation clause set forth in the construction contract between DG and MBD MBD filed a motion for summary judgment seeking the dismissal of the plaintiffs claims arguing that since DG sold the property to Louisiana Investment subject only to the rights that DG had and since DG waived its subrogation rights prior to the sale no subrogation rights were conveyed to Louisiana Investment Thus MBD contended that plaintiffs claims against MBD were barred by the waiver of subrogation After a hearing the trial court granted the motion for summary judgment and dismissed the plaintiffs claims against MBD with prejudice A judgment in accordance with the trial s court ruling was signed on August 18 2011 and it is from this judgment that the plaintiffs have appealed On appeal American Economy and Louisiana Investment contend that the trial court erred in granting the motion for summary judgment and in dismissing their claims against MBD because the construction contract between DG and MBD was not binding on Louisiana Investment as Louisiana Investment was not a party to the contract and there is no language in the construction contract or any other enforceable contract or agreement that assigns or otherwise binds any subsequent purchaser of the property such as Louisiana Investment to the terms conditions rights and responsibilities of the construction contract 3 LAW AND DISCUSSION A motion for summary judgment is a procedural device used to avoid a full scale trial when there is no genuine issue of material fact The summary judgment procedure is favored and designed to secure the just speedy and inexpensive determination of every action La C art 966 Power Marketing P 2 A Direct Inc v Foster 2005 2023 La 9 938 So 662 668 A motion for 06 6 2d summary judgment will be granted if the pleadings depositions answers to interrogatories and admissions on file together with affidavits if any show that there is no genuine issue of material fact and that the mover is entitled to judgment as a matter of law Id La C art 966 P B Summary judgments are reviewed on appeal de novo with the appellate court using the same criteria that govern the trial court determination of whether s summary judgment is appropriate that is whether there is any genuine issue of material fact and whether the mover is entitled to judgment as a matter of law Power Marketing Direct Inc 938 So at 669 In this case since the material 2d facts are not in dispute we look solely to the legal question presented by MBD s motion for summary judgment i whether as a matter of law the waiver of e subrogation in the construction contract between MDB and DG was binding on Louisiana Investment a subsequent purchaser ofthe property who was not a party to the construction contract We find that it was not It is well settled that only a party to a contract can be bound by its provisions Farmers State Bank and Trust Company v Leger 503 So 1141 2d 1143 La App 3rd Cir 1987 cities La C art 1983 which provides that ontracts c have the effect of law for the parties In this case there is no dispute 3 See Diamond B Construction Company Inc v City of Plaquemine 95 1979 La App 1St Cir 4 673 So 636 640 when a contract is to be interpreted by the court as a matter of 96 30 2d law a motion for summary judgment is a proper procedural vehicle to present the question to the court 4 that Louisiana Investment was not a party to the construction contract between DG and MBD and thus should not be bound by its terms However MBD contends that Louisiana Investment is bound by the waiver of subrogation by DG because Louisiana Investment as the purchaser of the property and building from DG could not acquire greater rights than those possessed by DG In determining whether Louisiana Investment is bound by the waiver of subrogation set forth in the contract between DG and MBD we are guided by the general rules of contract interpretation set forth in La C arts 2045 et seq The interpretation of a contract is the determination of the common intent of the parties La C art 2045 When the words of a contract are clear and explicit and lead to no absurd consequences no further interpretation may be made in search of the parties intent La C art 2040 The words of a contract must be given their generally prevailing meaning La C art 2047 Words susceptible of different meanings must be interpreted as having the meaning that best conforms to the object of the contract La C art 2048 Each provision in a contract must be interpreted in light of the other provisions so that each is given the meaning suggested by the contract as a whole La C art 2050 The construction contract entered into between DG and MBD provides in pertinent part as follows ARTICLE 11 INSURANCE AND BONDS 4 11 PROPERTY INSURANCE 1 4 11 maintain Unless otherwise provided DG shall purchase and property insurance written on a builder srisk allrisk or equivalent policy form in the amount of the initial Contract Sum plus value of subsequent Contract modifications and cost of materials supplied or installed by others comprising total value for the entire Project at the site on a replacement cost basis without optional deductibles Such property insurance shall be maintained unless otherwise provided in the Contract Documents or otherwise agreed in writing by all persons and entities who are beneficiaries of such insurance until final payment has been made as provided in Section 5 9 10 or until no person or entity other than DG has an insurable interest in the property required by this Section 11 to be covered 4 whichever is later 7 4 11 Waivers of Subrogation TAG and MBD waive all rights against 1 each other and any of their subcontractors sub subcontractors agents and employees each of the other and 2 the for damages caused by fire or other causes ofloss to the Architect extent covered by property insurance obtained pursuant to this Section 11 or other property insurance applicable to the Work 4 except such rights as they have to proceeds of such insurance held by DG as fiduciary Emphasis added By its terms this waiver of subrogation applies to damages caused by fire or other causes of loss to the extent covered by property insurance obtained pursuant to the contract or other property insurance applicable to the work Additionally the waiver of subrogation clause only applies to any property damage covered by insurance that was in effect during the time period required by 11 See Gray 1 4 Insurance Company v Old Tyme Builders Inc 2003 1136 La App 1 Cir St 04 2 4 878 So 603 608 writ denied 20041067 La 6 876 So 814 2d 04 18 2d See also Travelers Ins Co v Impastato 607 So 722 724 La App 4 Cir 2d th 1992 State v S U Guar Co 577 So 1037 1039 La App 4 2d th Fidelity Cir writ denied 581 So 684 La 1991 addressing the effects of a similar 2d waiver of subrogation provisions and finding that such waivers of subrogation reflect a clear intention to shift the risk of loss during construction to an insurer in order to avoid disputes which might cause delays in the completion of the construction Section 11 required property insurance to be maintained until at 1 4 least final payment or until no one other than the owner had an insurable interest in the building 4 The term Work was defined by 13 1 of the contract as the construction and services required by the Contract Documents whether completed or partially completed and includes all other labor materials equipment and services provided or to be provided by MBD to fulfill s MBD obligations 6 According to the January 13 2006 contractor certification and warranty s issued by MBD to DG Owner DG ha paid the Contractor MBD in full d under the c c between the parties c ha onstruction ontract onstruction d been fully and properly completed in accordance with the contract and a ll subcontractors suppliers and laborers have been paid in full for their work Thus as of January 13 2006 construction was complete final payment had been made and no other person or entity other than DG had an insurable interest in the building Because the waiver of subrogation clause only applied to any property damage covered by insurance that was in effect during the time period required by 1 4 11 and since that time period had lapsed before Louisiana Investment became the owner of the property the waiver of subrogation is not binding on Louisiana Investment or otherwise applicable to any of its claims for property damage after the time period required by 11 1 4 MBD also argues that the waiver of subrogation is effective as to Louisiana Investment based on this court decision in s Gray 2d 878 So 603 In Gray another panel of this court examined whether based on a virtually identical waiver of subrogation in a construction contract between the owner and the contractor a s contractor liability insurer was prohibited from seeking reimbursement from the s contractor subcontractor for damages paid due to the subcontractor faulty s workmanship or negligence Id The trial court determined that the waiver of subrogation precluded recovery by the contractor liability insurer and this court s affirmed the trial court ruling Id at 608 However in Gray the party against s whom the waiver of subrogation was applicable the contractor was a party to the contract containing the waiver and further the faulty workmanship at issue caused damage to the building before final payment had been made In other words the property damage occurred during the time period that the construction contract required the property insurance to be in effect thus the waiver of subrogation was 7 applicable Accordingly we find Gray is factually distinguishable and therefore not applicable to the case before us CONCLUSION Since Louisiana Investment was not a party to the construction contract between DG and MBD and since the waiver of subrogation is not otherwise enforceable against Louisiana Investment we must conclude that the trial court erred in granting MBD motion for summary judgment and dismissing the claims s of Louisiana Investment and American Economy against MBD The August 18 2011 judgment ofthe trial court is reversed and this matter is remanded to the trial court for further proceedings All costs of this appeal are assessed to the appellee defendant MBD Construction Company Inc REVERSED AND REMANDED 8
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