UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 97-31215
LOUISIANA INSURANCE GUARANTY ASSOCIATION,
Plaintiff,
VERSUS
RAPIDES PARISH POLICE JURY, ET AL.,
Defendants,
***********************************
RAPIDES PARISH POLICE JURY,
Defendant - Cross-Defendant - Appellant,
VERSUS
HAFCO, INC.,
Defendant - Claimant - Appellee.
Appeal from the United States District Court
for the Western District of Louisiana
July 22, 1999
Before GARWOOD, DAVIS, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge:
2
In this appeal we are asked to decide whether the district
court erred by granting summary judgment in favor of third-party
plaintiff-appellee, Hafco, Inc. (“Hafco”), on its cross-claim
against third-party defendant-appellant, Rapides Parish Police
Jury, Louisiana (“Rapides Parish”). Hafco, a general contractor,
sued Rapides Parish when the parish’s surety went bankrupt without
paying Hafco for work it had performed on a public works project.
Because Hafco is not a proper claimant under the Louisiana Public
Works Act (“LPWA”), La. Rev. Stat. 38:2241, et seq., and because
there is no privity of contract between Hafco and Rapides Parish,
we reverse the district court’s ruling and remand this action for
further proceedings consistent with this opinion.
I.
In 1986 Rapides Parish entered a contract with CLD
Enterprises, Inc. (“CLD”), to renovate a recreational area at
Cotile Lake in Rapides Parish, Louisiana. To ensure the completion
of the project, Rapides Parish secured a performance bond from a
surety, Sunbelt Southern Lloyds (“Sunbelt”). When CLD ultimately
failed to complete the project, Rapides Parish demanded that
Sunbelt arrange for its completion. Sunbelt complied and
contracted with Hafco to complete the project. After Hafco
finished the project it requested payment from Sunbelt. When
Sunbelt refused Hafco sued Sunbelt and Rapides Parish in Louisiana
3
state court alleging that it was owed $746,691. Sunbelt was
subsequently declared insolvent and placed into liquidation.
Hafco then amended its original state court complaint and
named the Louisiana Insurance Guaranty Association (“LIGA”) as a
defendant.1 On May 22, 1989, LIGA filed an interpleader suit in
federal district court naming roughly 60 claimants. Hafco, one of
the named claimants, then filed a cross-claim against Rapides
Parish and moved for summary judgment. In that motion Hafco
alleged that Rapides Parish was liable for the money owed on
Hafco’s contract with Sunbelt. On January 7, 1991, in a memorandum
order, the district court granted Hafco’s motion for summary
judgment and awarded Hafco $631,938, which was determined to be the
amount of money owed Hafco minus various deductions. The district
court based its ruling on the finding that Rapides Parish was
statutorily liable to Hafco under the LPWA; specifically, La. Rev.
Stat. § 2244(B). See La. Rev. Stat. § 2244(B). On February 8,
1991, Rapides Parish filed a motion for a new trial, which the
court construed as a motion for reconsideration. The district
court denied that motion on April 1, 1991, and Rapides Parish
appealed that ruling on April 25, 1991. Hafco then moved for final
judgment pursuant to Rule 54(b) of the Federal Rules of Civil
1
LIGA was substituted for the insolvent Sunbelt by
operation of law, and is obligated to the extent of “covered
claims” which existed prior to the determination of Sunbelt’s
insolvency. La. Rev. Stat. § 22:1382(1)(b).
4
Procedure. See Fed. R. Civ. P. 54(b). The district court granted
the motion on June 10, 1991.
In the meantime, a settlement agreement was reached between
LIGA and Hafco, in which LIGA agreed to pay Hafco $200,000 in
exchange for Hafco’s promise to release LIGA from all claims
arising from this dispute. On June 12, 1991, the district court
approved the settlement agreement and dismissed with prejudice all
of Hafco’s claims against LIGA. On June 13, 1991, Rapides Parish
filed a second notice of appeal, challenging the district court’s
January 7 order granting summary judgment in favor of Hafco. Then,
on June 19, 1991, Rapides Parish filed another motion for new
trial. In that motion Rapides Parish argued that the settlement
agreement between LIGA and Hafco extinguished the district court’s
judgment in favor of Hafco, and, in the alternative, that the
settlement operated as on offset against any judgment.
On November 11, 1991, in a per curiam opinion, the Fifth
Circuit dismissed Rapides Parish’s June 13 appeal so as to allow
the district court to rule on Rapides Parish’s June 19 motion for
new trial. On November 6, 1997, about six years later, the
district court denied the motion.2 On November 14, 1997, Rapides
Parish filed the instant appeal.
2
There is no explanation in the record for this lengthy
delay.
5
II.
We review a district court’s summary judgment ruling de novo.
Coulter v. Texaco, Inc., 117 F.3d 909, 911 (1997). Questions of
law, including the construction and effect of an unambiguous
contract, are always reviewed de novo. Nolan v. Golden Rule Ins.
Co., 171 F.3d 990, 992 (5th Cir. 1999). In determining whether the
granting of summary judgment was proper, we view all factual
questions in the light most favorable to the non-movant. Lemelle
v. Universal Mfg. Corp., 18 F.3d 1268, 1272 (5th Cir. 1994).
III.
On appeal Rapides Parish argues that the district court erred
by granting summary judgment in favor of Hafco because Hafco is not
a proper claimant under the LPWA. In addition to that statutory
argument, Rapides Parish contends that Hafco cannot prevail on a
breach of contract action because there is no privity of contract
between it and Hafco. We begin our analysis by first determining
whether Hafco has a statutory cause of action under the LPWA.
A.
The district court’s summary judgment ruling was based on the
finding that Rapides Parish was liable for Sunbelt’s debt pursuant
to La. Rev. Stat. § 2244(B). That section provides:
If any objections are made by the claimants
they shall be tried summarily. Whenever it is
6
found that the surety is not solvent or
sufficient to cover the amount of the bond or
that the governing authority has failed to
exact the bond or record the bond within the
time allowed, the governing authority shall be
in default and shall be liable to the same
extent as the surety would have been.
La. Rev. Stat. § 2244(B). Based on this provision, the district
court found that Rapides Parish was liable to Hafco to the same
extent as Sunbelt. Importantly, the district court’s analysis
rested on § 2244 and § 2244 only. No other statutory provisions in
the LPWA were referenced by the district court, and no further
analysis was brought to bear. If the district court had ventured
beyond § 2244, however, it would have realized that Hafco, as
general contractor, is not a proper claimant under § 2244.
Hafco’s cross-claim against Rapides Parish is based on § 2244.
That section, which is codified within a statutory subdivision
entitled “Claims of Subcontractors, Materialmen, and Laborers on
Public Works,” affords “claimants” the statutory right to recover
from a parish or other governing authority when the surety becomes
insolvent. The class of claimants that may recover under § 2244 is
specifically defined in § 2242 as:
any person to whom money is due pursuant to a
contract with the owner or a contractor or
subcontractor for doing work, performing
labor, or furnishing materials or supplies for
the construction, alteration, or repair of any
public works.
La. Rev. Stat. Ann. § 38:2242(A)(1). Thus, to bring suit as
claimant under § 2244 the plaintiff must have some contractual
7
relationship with the owner, a contractor, or a subcontractor. See
Thurman v. Star Elec. Supply, Inc., 307 So. 2d 283, 286 (La. 1975)
(observing that the public contract law “only embraces creditors of
the contractor and subcontractors . . . . [A] claimant must
demonstrate a contractual relationship with either the contractor
or a subcontractor.”). That requirement promotes Louisiana’s long-
standing policy of protecting certain types of claimants by
permitting those claimants to recover from the governing authority.
Louisiana v. McInnis Bros. Constr., 701 So. 2d 937, 943 (La.
1997).3
In this case the summary judgment record reflects that Hafco
is seeking to recover money owed on a contract with Sunbelt, the
surety, and not on a contract with the owner, Rapides Parish, or on
3
Throughout its history Louisiana has sought to protect
those who perform work and supply materials for the construction
and repair of buildings and other works. See Louisiana v. McInnis
Bros. Constr., 701 So. 2d 937, 943 (La. 1997) (explaining this
history). At the turn of the 19th century, the first Louisiana
Civil Code protected workmen and suppliers by granting them a lien
on the building or improvement as well as on the underlying real
property. See La. Civ. Code art. 3216 (1825); La. Civ. Code art.
3249 (1870); La. Civ. Code art. 3249 (1984). For many years,
however, workmen and suppliers engaged by state agencies for public
projects were not entitled to the same protection because liens
were not enforceable against public property. McInnis Bros.
Constr., 701 So. 2d at 943. In 1918, the Louisiana legislature
sought to eliminate that inequity by promulgating Act 224, the
forerunner to the current Public Works Act, La. Rev. Stat. §
38:2241, et seq. Id. Although it did not afford the state workers
a lien on the public work itself, it achieved the same end by
granting them a “privilege against the unexpended fund in the
possession of the authorities with whom the original contract has
[sic] been entered into.” Pigeon-Thomas Iron Co. v. Drew Bros.,
111 So. 182, 183 (1926).
8
a contract with a general contractor or subcontractor. Indeed, it
is undisputed that Hafco never directly contracted with Rapides
Parish. Thus, Hafco cannot properly be considered a claimant under
the plain language of § 2242. To find otherwise we would have to
assume that Sunbelt was transformed from a surety to a general
contractor once CLD defaulted and Rapides Parish demanded the
completion of the project. We refuse to invoke that legal fiction.
The evidence in the summary judgment record plainly demonstrates
that Hafco is a general contractor, was hired in that capacity to
finish the project, and in fact successfully effected the
completion of the project.
We find no merit in Hafco’s contention that the district
court’s ruling is supported by H & H Sewer Sys., Inc. v. Insurance
Guar. Assoc., 392 So. 2d 430 (La. 1980). In that case a Louisiana
town hired a contractor to install a new sewer system. In
compliance with Louisiana law, the contractor procured performance
bonds from a surety. After the contractor defaulted on the
contract, the surety hired H & H Sewer Systems to complete the
project. When the surety went bankrupt, H & H Sewer Systems sued
LIGA for money it was owed under its contract with the surety. In
the resulting appeal the Louisiana Supreme Court was asked to
decide the sole issue of “whether H & H Sewer’s claim is a covered
claim, that is, one which arises out of and is within the coverage
of the performance bonds.” Id. at 432. The Louisiana Supreme
9
Court held that the claim was covered, and that LIGA was liable,
because “H & H Sewer had a direct contract with [the surety] for
labor and materials used in performance of the contract between the
[town] and [the first contractor],” and “its claim against [the
surety] is clearly one arising out of and within the coverage of
the performance bonds.” Id. at 433. That holding does not lend
itself to the present case for several reasons.
In H & H Sewer Systems, the contractor brought suit against
LIGA under 22 La. Rev. Stat. § 1382(1). The determinative issue in
that case was whether the contractor’s claim against LIGA was a
“covered claim” under statutory provisions that govern LIGA’s
liability. The court’s holding was that the contractor’s claim was
a covered claim because it fell within the coverage of the
performance bonds.
In this case, however, the contractor is suing the governing
authority, not LIGA, and its right to recovery rests on § 2244, a
completely different statute. Moreover, unlike H & H Sewer
Systems, this case does not turn on a coverage question relating to
the performance bond. Instead, we are being asked to decide the
much different question of whether Hafco may be considered a
claimant under the statutory language of § 2242. Finally, in H & H
Sewer Systems the contractor sued LIGA based on the terms of a
contract it had directly entered with the surety. There is no such
contractual relationship between the disputing parties in this
10
case.
We note that the previous version of § 2242 broadly defined
claimant as “any person to whom money is due . . . .” La. Rev.
Stat. § 2242 (1950). In 1985, however, the Louisiana legislature
restricted the scope of that definition through an amendment that
added the qualifying phrase “pursuant to a contract with a
contractor or subcontractor . . . .” La. Rev. Stat. § 2242(A)
(1985). Accordingly, by interpreting § 2242 to exclude Hafco, the
general contractor, we are effectuating the manifest intent of the
Louisiana legislature.
Accordingly, we conclude that Hafco does not fall within the
definition of claimant in § 2242, and thus cannot as a matter of
law assert a claim against Rapides Parish under that statute. The
district court erred in granting summary judgment to Hafco based on
§ 2244.
B.
Rapides Parish’s second main contention is that Hafco cannot
recover on a common law breach of contract claim because there is
no contractual privity between Rapides Parish and Hafco.4 We
agree. It has long been recognized in Louisiana that “no action
for breach of a construction contract may lie in the absence of
privity of contract between the parties.” Rivnor Properties v.
4
The district court did not expressly address this
argument in its order granting summary judgment to Hafco.
11
Herbert O’Donnell, Inc., 633 So. 2d 735, 743 (La. Ct. App. 1994).
Here, there is no dispute that Sunbelt hired Hafco directly, and
that Hafco lacked a contractual relationship with Rapides Parish.
Thus, as there is no privity between the two parties, Hafco may not
recover on a breach of contract claim.5
IV.
Based on the foregoing, we hold that the district court erred
in granting summary judgment in favor of Hafco on its § 2244 claim
against Rapides Parish. We further find that based on the summary
judgment record, Hafco may not maintain a breach of contract claim
against Rapides Parish, as there is no privity of contract between
the two parties. Accordingly, we reverse the district court’s
judgment and remand this action for further proceedings consistent
with this opinion.
5
Rapides Parish asserts numerous other arguments assailing
the district court’s grant of summary judgment. Since we have
concluded that the district court’s decision was erroneous based on
its incorrect application of §§ 2244 and 2242, there is no need to
consider these additional arguments.
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