Odyssea Vessels, Inc. VS A & B Industries of Morgan City, Inc.
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STATE OF LOUISIANA COURT OF APPEAL FIRST CIRCUIT NO 2011 CA 2009 ODYSSEA VESSELS INC VERSUS A B INDUSTRIES OF MORGAN CITY INC Judgment Rendered g x Appealed from the 16th Judicial District Court I and for the Parish of St Mary State of Louisiana Case No 117590 The Honorable Paul J Demahy Judge Presiding C Gordon New Starling Orleans Jr Louisiana and Counsel for Plaintiffs Appellants Odyssea Vessels Inc and Odyssea Marine Inc David M Thorguson Morgan City Louisiana Dale P Martin Broussard Louisiana Counsel for Defendant Appellee A B Industries of Morgan City Inc i k k it it t BEFORE GAIDRY McDONALD AND HUGHES JJ GAIDRY J In this case involving a dispute over a shipbuilding contract the shipowner appeals a 00judgment in favor of the shipbuilder We 527 393 affirm FACTS AND PROCEDURAL HISTORY Odyssea Vessels Inc Odyssea solicited bids in the winter of 2005 for the construction of two ninety foot vessels four B A Industries of Morgan City Inc A issued a bid quotation in January 2006 of B 00 000 752 3 per vessel with the price to include all steel purchasing fabrication piping electrical painting engines generators underwater gear carpentry fenders and general outfitting The bid from A specifically B excluded the towing winch towing winch engine and electronics from the per vessel price Odyssea and A subsequently entered into two separate B vessel construction contracts one for Hull 317 and one for Hull 318 which provided that for the consideration of 3 per vessel A 00 000 752 B would furnish all facilities labar material supplies and equipment except items required by the plans to be furnished by Odyssea and perform all work necessary to construct the vessels and deliver the completed vessels and their component parts and systems to Odyssea on or before January 4 2007 Both contracts contained the following pertinent provisions 3 TIME FOR COMPLETION OF WORK The work of A shall be performed at A B s B facilities in Amelia Louisiana and shall be prosecuted with due diligence without delay or interruption except as may be caused by Acts of God inclement weather labor difficulties or disputes asual holidays and weekends fires accidents difficulty or delays in obtaining labor supplies equipment or machinery or other delays beyond the reasonable control of B A and shall thereafter be completed in every detail and particular on or before the 4 day of 2007 2 In the event of any such delay the date of completion shall be extended a period equal to the time lost by reason of any said causes provided A shall give prompt notice in B writing to Odyssea of any such delay stating the cause thereof It is agreed that A shall not be responsible for any B delays in completion of the wark of A associated with any B work to be performed by Odyssea or any late delivery of any Odyssea furnished items Furthermore A will not be B liable for any liquidated damages or penalties for failure to complete the work of A within the specified time B 4 CHANGES AND MODIFICATIONS Subject to the requirements of other work then pending at the facilities of A the right is reserved by Odyssea to B make any deductions from or additions to the said specifications on giving due notice in writing to A the B cost of any such changes to be agreed upon in advance by B A and Odyssea and added to or deducted from the Contract Price If any such change shall delay the compietion of the work of A A shall be allowed additional time BB sufficient to cover such delay A statement of the increased or reduced cost or any additional time required as aforesaid shall be submitted to Odyssea by A and shall be approved by B Odyssea in writing before any such change is made An attachment to contract signed by representatives of both A and B Odyssea provides It shall be the understanding of both A and Odyssea that B a complete drawing package complete nest tape package as well as all regulatory bodies drawing submittals and fees shall be considered owner furnished B A shall construct this vessel in accordance with the owner furnished drawings and specifications and shall be classed as an ABS Loadline vessel only On February 1 2006 almost a month after the signing of the contracts John Arceneaux of A sent an email to Chuck Denning of B Odyssea describing the delays which had already been encountered As we are all aware A and Odyssea Vessels signed B construction contracts on 1 for two 94 tugs At that time 06 4 we were all under the impression that Entech Associates would be able to produce the necessary information needed to start the vessel framing construction almost immediately However to date 2 we still have not gotten the necessary 06 1 information to start the construction process We have all been 3 informed through Bntech Associates that they have incurred some engineering setbacks that were unexpected to them With that being said A Industries would just like to formally B notify Odyssea Vessels that we will try our best to recover the lost time but would just like to formally inform you of the delays that we are all experiencing Then on April 6 2006 three months after signing the contracts Mr Arceneaux of A sent a letter to Mr Denning of Odyssea identifying B additional delays which had occurred or which were anticipated that Entech Associates had some delays at the start of this project due to the vessel being enlarged from 90 to 94 as well as recently losing an employee that was in We are all aware charge of this project However we are just in the beginning phases of construction and we are concerned that we will incur these problems throughout Another major problem is that in order to keep our production schedule for the two vessels we have had to release the nc tapes to Metals USA and they have already started cutting this material This means that all of the problems we have incurred on the first boat we will have the same problems with the second vessel construction At this time it is unknown the manhour delay that A has incurred B being that we have not fixed all of the problems yet Next are the delays in receiving the remainder of the design package Items still pending are all superstructure piping electrical shafting and underwater gear etc I have asked for this information on numerous occasions and have been given a number of different dates Still to date we have not received any of this information We need this information as soon as possible due to we have to find the price and order the necessary materials On May 2 2006 Mr Arceneaux wrote another letter to Mr Denning requesting that Odyssea demand a set completion date from Entech Associates and stating Please understand that we have been significantly delayed with this project from the very start with not getting the required information on time as well as the continuing engineering mistakes B A Industries is in need of the remaining package for this project With the industry growth that has taken place within the last couple of months materials are getting very difficult to find get a timely delivery as well as the prices are increasing dramatically e W cannot stress enough how much we need this information for one to keep these vessels within budget and two to stay on some sort of timely delivery 4 Another letter from A dated June 12 2006 states that A was B B still waiting for drawings and that this was a major delay which would ultimately delay the entire project The letter further states that A has B contacted Entech Associates on numerous occasions due to the many problems that had arisen and asks Odyssea to contact Entech Associates and ask them to please do whatever it takes to expedite the process as quickly as possible Another letter from A dated June 23 2006 stated tt on that date B at approximately five and a half months since the contracts were signed A B still had not received the remainder of the drawings The letter also stated that material costs had risen 35 to 40 and that once A finally B received all the approved drawings they would need to meet with Odyssea to discuss what addirional costs would be incurred A July 10 2006 letter from A stated that they still had not received B the remaining drawings for the hull structure piping systems electrical systems or underwater gear ABcB cautioned that they were in the process of closing up the hulls on the vessels and once the hull was completely closed up it would be very difficult and costly to install all of the necessary piping B A stated that the delivery of the vessels would likely be drastically delayed due to the lack of information An August 16 2006 email from Mr Arceneaux to Mr Denning stated that they still had not received the remaining drawings that the hull of vessel 317 was completely closed up and that would make it very difficult for the workers to do the work inside the hu1L continual delays created by Mr Arceneaux reiterated that the Associates were disrupting the time Entech frame for construction and again asked for Odyssea help in getting Entech s Associates to expedite their work so that the project was not further 5 delayed In a second email on that same date Mr Arceneaux advised Mr Associates had informed A that the hull B Denning that EnCech underwater gear and some piping drawings had been approved by the ABS but Entech Arceneaux the Associates did not provide the drawings to A and Mr B requested drawings far Mr B A Denning since to contact Odyssea not Entech Associates to obtain B A is Entech Associates customer Two change orders numbered 317 and 318 were prepared by 01 01 B A on November 6 2006 and approved by Odyssea on November 9 2006 These change arders stated B A Industries to provide labor material and equipment to modify existing quarter bitts Currently the bitts are constructed as per the provided drawings Bitts shall be modified as per the design of owner representative s The estimated cost of change orders 317 01 and 318 was 01 00 894 7each The change orders noted that no additional time would be added to the schedule based upon the change orders The change orders were signed by representatives ofA and Odyssea B A December 19 2006 email from Mr Arceneaux informed Mr Denning ofdifficulty in getting an invoice paid as agreed and of more delays in construction due to missing or inadequate drawings and modifications that needed to be made to the vessels For example the main engines would not fit through the designed cutouts so the engines would have to be disassembled and reassembled and majar steps would have to be taken in cutting the completed main deck cabin to get to the engine room Mr Denning replied to this email on December 28 2006 with Let s sic discuss after the holidays 6 On February 16 2007 Mr Arceneaux advised Mr Denning of his concerns that he had still not received any ABS approved drawings and that ABS inspectors had informed him that they also had no drawings with which to perform the required inspections Mr Arceneaux again asked for s Odyssea assistance in getting the ABS approved drawings from Entech Associates On April 23 2007 Mr Arceneaux emailed Mare Molaison of Entech Associates asking for certain drawings and informing him that those drawings were holding up progress and needed to be addressed Change orders 317 and 318 were prepared by A on May 14 02 02 B 2007 These change orders stated B A lndustries is to provide labor material and equipment to modify existing stairway leading from the fiddly to the engine room Currently the stairway is constructed as per the provided drawings The stairway shall be modified in a way to accommodate the relocation of the winch engine from the engine room space to the fiddly area The estimated cost of change orders 317 and 318 was 02 02 50 163 9 each and the change orders stated that no additional time would be added to the schedule Although the box signifying approva was checked on both change orders and a representative of Odyssea signed both change orders there is no date next to the approval on either change arder the signature line far A representative is blank on both change orders s B and the change orders are both marked NOT PAID Change orders 317 and 318 were prepared by A on May 23 03 03 B 2007 and approved by Odyssea on May 29 2007 These change orders stated B A Industries is to provide labor material and equipment to return the ariginally ordered main propulsion shafts and replace with the corrected length of shafts Also to 7 modify the originally designed tiller arms in arder to fit the required steering system The estimated cost of change orders 317 and 318 was 17 03 03 00 969 each and no additional time was added to the schedule based upon those change orders On May 25 2007 Mr Arceneaux emailed Mr Denning informing him that he had still not received information requested months before from Entech Associates Mt Arceneaux stated that vessel Hull 318 would be launched no later than June 1 2Q07 and if the requested information was not received prior to launch Odyssea would be responsible for dry the docking vessel at a later date for completion of that portion of the work On June 12 2007 Mr Arceneaux again emailed Odyssea asking for help in obtaining delayed drawings from Entech Associates because the drawings were holding up the machine shop work s On July 5 2007 apparently in response to complaints from Odyssea regarding the progress of the vessels and a statement by Mr Denning that Odyssea would have the vessels towed to another yard to be completed Mr Arceneaux sent a letter to Mr Denning outlining the many delays A had B experienced and stated B A Industries has had to endure a great deal of over cost due to the extended time frame in which it has taken to get to the point of construction we are at now linost A all associated equipment and materials for these projects have increased in price dramatically B A has multiple other projects under construction at the same time and some of our vendors as well as our own employees have had to move on to other projects that do not have these types of delays ar problems due to the delays that have been incurred on these vessels T electrical may have to be subcontracted to an he outside vendor due to our electrical staff has had to move on to other projects to begin and complete these vessels This is also a fact far the carpenter crew This particular vendar can not start the necessary process of interior joiner work until the interior electrical is at least roughed in This vendar has also had to move on to other projects due to the same delays 8 B A Industries does not see these vessels being completed in any sort of timely manner due to the delays that have been incurred to date as well as the amount of cost overrun that A Industries has had to endure B The July 5 2007 letter presented two options to Odyssea 1 Purchase the remaining balance of the contracts from A and remove the vessels to be B completed by another vendor ar Re the contracts for the 2 negotiate vessels to compensate A for all delays and costs endured A meeting B was held on July 16 2007 between A and Odyssea to discuss the options B presented to Odyssea in the July 5 2007 letter and afterwards Mr uc Arcenea sent a letter to Odyssea containing a proposal for an additional compensation agreement for A to complete the vessels B A surveyor hired by Odyssea inspected the boats on July 31 2007 and found that the warkmanship was in good order and to ABS standards but speculated that Hull 317 was only 45 to 50 complete and that Hull 318 was only 50 to SS complete The surveyor estimated that the vessels would take approximately six months each to be completed at a cost of approximately 1 million per vessei 15 On September 24 200 Odyssea filed suit against A alleging that B B A had breached the contracts by failing to deliver the vessels by January 4 2007 failing to work with due diligence and without delay or interruption failing to perform work for which it had been paid failing to adhere to clause 4 of the contracts regarding changes and modifications and failing to properly conshuct the vessels At the time the suit was filed Odyssea claimed that it had already paid to A 3 per vessel plus B 564 00 400 another 71 for change arders submitted by A and approved by 00 000 B Odyssea but despite those payments A had ceased work on the vessels B Odyssea also alleged that an inspection revealed that the vessels had some 9 deficiencies due s B to A ar its subcontractQrs negligence Odyssea claimed that it sustained damages as a result of A breach in the form of s B increased costs to complete the vessels loss of profits from the vessels attorney fees and costs Odyssea also requested the issuance of a writ of sequestration directing the sheriff to seize Odyssea property in A s s B possession B A filed a reconventional demand claiming that Odyssea breached the contracts and is liable to A for damages arising from the B breach Specifically A alleges that Odyssey breached the contract by B failing to timely provide things it was responsible for furnishing under the contract resulting in delays and by terminating the contract based upon the delays which it caused B A alsa asserted a privilege and lien on the vessels After a trial the jury found that Odyssea not A breached the B contract and that Odyssea breach caused a loss in the amount of s 00 527 393 to A Odyssea has appealed the trial court judgment and B assigns the foliowing trial court errors on appeal 1 The court erred in awarding damages for increased costs when the required change orders were not issued 2 The court erred in awarding damages for delay because the contract provides that the exclusive remedy for delays is an extension of the completion date 3 The court erred in failing to find that A breached the contracts by B refusing to complete the contracts without additional payments 4 The court erred in excluding testimony and limiting cross examination of witnesses A writ of sequestration was issued and the vessels were returned to Odyssea 10 5 The jury ei in finding that A delay in completing the work ed s B was excusable and not a breach of A obligations under the s B contracts DISCUSSION Legal agreements have the effect of law upon the parties and as they bind themselves they shall be held to a full performance of the obligations flowing therefrom Spohrer v Spohrer 610 So 849 851 La Ist 2d 52 App Cir1992 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 Spohrer v Spohrer 610 So at 852 The rules of 2d interpretation establish that when a clause in a contract as clear and unambiguous the letter of the clause should not be disregarded under the pretext of pursuing its spirit Spohrer v SpohYer 610 So at 852 2d Louisiana Civil Code article 2045 defines interpretation of a contract as the determination of the common intent of the parties Lindsey v Poole 579 2d So 1145 1147 La 2nd CiN writ denied 588 So 100 La App 2d 1991 Such intent is to be determined in accordance with the plain ordinary and popular sense of the language used and by construing the entirety of the document on a practical reasonable and fair basis Lindsey v Poole 579 2d So at 1147 s Odyssea first argument on appeal is that A could not be awarded B increased costs under the contracts when they did not issue the change orders required by the contracts The contractual provision calling for change orders is contained in the section entitled CHANGES AND MODIFICATIONS and calls for the preparation of change orders by A B in the event Odyssea makes deductions from or additions to the specs of the vessels in writing so that the parties can agree on the cost change and any 11 additional time required before the change is made There is no requiremenY in the contract that A prepare a change order when Odyssea is delayed in B delivering owner items to A nor is there evidence that furnished B Odyssea sent a written request to A requesting a change in the specs of B the vessels to provide for the late delivery of owner items i furnished e the complete drawing package the complete nest tape package as well as all regulatory bodies drawing submittals and fees as is called for under the contract to prompt the creation ofa change order Further there is no requirement in the contract that A provide any B sort of notice in order to secure an extension of time where the delay results from the untimely provision of owner items The first paragraph furnished under the section of the contract regarding time for completion of the work controls delays caused by Acts of God inclement weather labor difficulties or disputes usual holidays and weekends fires accidents difficulty or delays in obtaining labor supplies equipment or machinery or other delays beyond the reasonable control of A and provides that A is entitled to B B an eof the completiQn date equal to the period of time lost due to ension the delays provided A gives prompt written notice to Odyssea of the B cause of the delay The second paragraph of this section controls delays in completion caused by any late delivery of any owner items This furnished paragraph provides that A is not responsible for these delays and shall B not owe any damages far failure to complete the work within the specified time This paragraph does not have a similar requirement that A give B Odyssea notice of the cause of the delay in writing presumably because the cause of the delay is under Odyssea control and therefore known by s Odyssea Thus we do not find that any change orders were required under 12 the clear terms of the contract for Odyssea delays in delivering owner s furnished items This assignment of error lacks merit Odyssea next argues that the court erred in awarding damages to A B for Odyssea breach of the contract because the exclusive remedy provided s by the contract for Odyssea failure to timely deliver owner items s furnished was an extension of time for A to complete the work In fact what the B contract states is that A will not be responsible for delays caused by B Odyssea and will not be liable for any liquidated damages or penalties for failure to complete the wark on schedule B A argues that merely providing an extension of time when Odyssea dragged the project on indefinitely by failing to timely furnish necessary materials would not fully compensate A for lost time and increased labor and material costs If the B parties intended to lirnit Odyssea liability for causing delays to simply an s extension of time they could certainly have done so They did not Louisiana Civil Code article 1994 provides that an obligor is liable for damages caused by his failure to perform which results from nonperformance defective performance or delay in performance Damages for failure to perform are measured by the loss sustained by the obligee and the profit of which he has been deprived Since the contracts contain no expression of the parties intent to limit Odyssea liability for failure to s perform we find no error in the court award of damages as provided by the s Civil Code for Odyssea failure s Odyssea next argues that the court erred in failing to find that A B breached the contracts when it refused to complete the lump sum contracts without additional payments Odyssea argues that since A bid and B contracted to build the vessels for a lump sum it was a breach of those contracts to refuse to complete the vessels for the agreed lump sum upon 13 price We disagree As the jury concluded and we agree Odyssea breached the contracts when it failed to timely provide the owner items furnished under the terms of the contract afterwards when Odyssea threatened to take the vessels elsewhere to be completed because they were not finished by the completion date in the contracts A did not breach the contracts when it B sought to modify the parties agreements so that the vessels could be completed at A shipyard The evidence supports A assertion that s B s B this proposal by A was an attempt to resolve the parties differences B rather than an attempt to extract more money from the shipowner Thus we find no error in the jury finding that A did not breach the contracts s B s Odyssea next argument is that the court erred in excluding the testimony of Odyssea witness David McRae Mr McRae was the general s manager of a company C that had contracted with A for the E B construction of a vessel for a lump sum price during the same time period B A was constructing the vessels for Odyssea Odyssea alleges that Mr McRae would have testified that A had all of the necessary drawings at B the commencement of the contract to build C vessel and that only a s E few change orders were issued but that A still requested an increase in B the lump sum price to complete the vessel and also delivered the vessel after the agreed completion date Odyssea alleges that Mr McRae would upon have testified that it was his opinion that A delays with C vessel s B s E were due to A insufficient manpower and inability to complete all of s B the jobs undertaken at the time Mr McRae also would have testified to his belief that the real reason A was not working on C vessel was that B s E they had underbid the contract and were losing money A filed a motion B in limine to exclude Mr McRae testimony on the grounds that any delays s or extra charges in the construction of C vessel were not relevant to s E 14 s Odyssea claims against A In considering the motion the trial court B asked whether the only thing he going to talk about is the delay on s s E C project and the nature of C project and Odyssea attorney s E s answered yes The trial court then granted the motion and excluded Mr s McRae testimony Generally the trial court is granted broad discretion on its evidentiary rulings and its determinations will not be disturbed on appeal absent a clear abuse of that discretion Turner v Ostrotive 01 p 5 1 Cir 1935 App La 02 27 9 828 So 1212 1216 writ denied 02 La 836 2d 2940 2 03 7 2d So 107 Except as otherwise provided by law all relevant evidence is admissible LSA art 402 Relevant evidence is evidence having any E C tendency to make the existence of any fact that is of consequence to the determination of the action more or less probable than it would be without the evidence LSA art 401 Whether evidence is relevant is within the E C discretion of the trial court and its ruling will not be disturbed on appeal in the absence of a clear abuse of discretion BoudNeaux v Mic Cas Continent Co OS p 8 1 Cir 11 950 So 839 845 writ 2453 App La 06 3 2d denied 06 La 948 So 171 2775 1 07 26 2d Odyssea claims that Mr McRae testimony about what happened s with C vessel was relevant to prove that the true reason A was s E B delayed in constructing the vessels for Odyssea was not the untimely delivery of the plans but rather that Odyssea was understaffed and stopped working on the vessels because they were not producing enough profit We find no abuse of discretion in the triai court decision to exelude this s testimony as irrelevant Odyssea next argues that the court erred in limiting its cross examination of Mr Arceneaux about the reasons for the delays on C s E 15 project The court allowed Odyssea attorney to question Mr Arceneaux s about whether the C vessel was delivered on time ar if it was E substantially late after Mt Arceneaux tesrified that the C vessel was E delivered substantially late the court did not allow Odyssea to question him any further about the reasons for the delays on the C vessel Odyssea E argues on appeal that the evidence it sought to elicit on cross examination was relevant for the same reasons Mr McRae stestimony was relevant Just as with Mr McRae testimony we find no abuse of discretion in the trial s s court determination that this evidence concerning C vesse was not s E relevant to the claims between Odyssea and A These assignments of B error are without merit CONCLUSION For the reasons set forth hereinabove the judgment in favor of A B and against Odyssea is affirmed Costs of this appeal are assessed to plaintiff Oddysea Vessels Inc AFFIRMED 16
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