Breck Construction v. Air Liquide America

UNITED STATES COURT OF APPEALS
For the Fifth Circuit

No. 00-20586

BRECK CONSTRUCTION COMPANY, INC.

Plaintiff-Counter Defendant-Appellant,

VERSUS

AIR LIQUIDE AMERICA CORPORATION;
AIR LIQUIDE PROCESS & CONSTRUCTION, INC.

Defendants-Counter Claimants-Appellees.

Appeal from the United States District Court
For the Southern District of Texas
(H-98-CV-2533)
November 21, 2001

Before SMITH, DUHÉ and WIENER, Circuit Judges.

Per Curiam:1

Plaintiff and counter-defendant, Breck Construction Co., Inc.

appeals a summary judgment holding it liable for damages under a

construction contract. Contracting with Breck were Air Liquide

America Corporation (“ALAC”), owner of a plant in Longview, Texas,

and Air Liquide Process & Construction, Inc. (“ALPC”), the

engineer, both of whom are defendants and counter-claimants

(collectively called “AL”).

Breck sued AL on sworn account for overdue invoices, for

1
Pursuant to 5TH CIR. R. 47.5, the Court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
breach of contract, and for fraud. AL countersued for breach of

contract and breach of warranty pertaining to a tower erected by

Breck which leaned some inches from vertical and rust damage

discovered in the gear box of a compressor installed by Breck. On

cross motions for summary judgment, the district court found for

AL, denying Breck’s claims and awarding AL damages, minus amounts

withheld on Breck’s invoices. Breck appeals. Also at issue are

the denial of Breck’s claim for statutory attorney’s fees and

multiple claims of abuse of discretion in pre-trial matters. For

the following reasons, we reverse and remand.

DISCUSSION

A. Rust Damage. Breck challenges the district court’s summary

judgment finding it liable for rust damage to the gear box of the

compressor. We have independently reviewed the summary judgment

evidence and find the undisputed evidence as follows: AL ordered

the compressor new from Cooper Industries, who delivered it in

parts directly to Breck, who then assembled and installed it at the

Longview plant. At some point after installation, rust damage,

gasket residue, and standing water were found in its gear box. The

contract charged Breck with the responsibility to

exercise due care and attention in the handling of all
equipment and material supplied to him, to eliminate or
minimize the possibility of damage before, during and after
installation, and [to] provide suitable and adequate forms of
protection and storage to maintain said equipment and material
in a clean, functional and sound state. 3 R. 870.

The question whether a party fails to exercise due care in

2
performing its duties is ordinarily a question for a factfinder.

See Harle v. Krchnak, 422 S.W.2d 810, 815 (Tx. App.-Houston [1st

Dist.] 1967. writ ref’d n.r.e.)(discussing “reasonable care” in

negligence context); McBrayer v. Teckla Inc., 496 F.2d 122 (5th Cir.

1974)(discussing “in a reasonable and businesslike manner” in Texas

contract).

As in Harle, this record contains evidence that Breck

exercised “some degree of care.” Some evidence suggests that Breck

sought to follow the manufacturer’s installation guidelines by

refusing to break the manufacturer’s seals or open the gear box

cover unless in the presence of a manufacturer’s representative.

AL had agreed to provide all technical representatives at no cost

to Breck when required during equipment installation, and Breck

requested AL to schedule a visit from a Cooper authorized

representative. When AL refused due to budgetary constraints and

instructed Breck to proceed with assembly without the inspection

and supervision of a factory representative, Breck promptly began

assembly and mounting of the compressor in July 1997, without

opening the gear box. 11 R. 3796-95; 16 R. 5583; 3 R. 802, 700,

702, 699, 685-82.

There is evidence, too, that if a vendor’s representative had

been present at the assembly of the compressor, he would

customarily have opened and inspected the internals of the gear

box, and that he alone was authorized to remove inspection plates

3
to check the gear box.2 Evidence suggests that ALAC waived the

presence of factory representative at the compressor assembly, and

that ALPC assured Breck it would not be responsible for rust. 11

R. 3795, 3800; 3 R. 687-82; 20 R. 6945, 6946.

Additional evidence established that AL requested Breck to

nitrogen purge the compressor, to prevent oxidation and rust.

Other evidence suggests that water was already present when the

compressor was assembled, and that no one knows when the rust

formed. According to Breck’s expert Papacostas, a nitrogen purge

would not drive out settled puddles of water or remove accumulated

rust. Finally on the issue of nitrogen purge, the installation

manual prohibits alteration of the equipment without the presence

of a Cooper representative; also, the contract would prohibit

nitrogen purge without written permission of ALPC.3 11 R. 3795; 3

R. 700.

From the foregoing evidence, a fact finder might conclude that

Breck met its contractual duty by exercising all the care that was

2
A factory representative did come in October 1997 for “final assembly,
line-up, and start-up” of the compressor. At that time ALPC directed Breck to
disassemble the compressor to open ports for inspection, and extensive corrosion
was then discovered. 3 R. 699.
3
The contract provides, “In handling and installing . . . newly supplied
equipment, the Contractor . . . shall not modify, rework or in any other way
change the said equipment, except with the prior written permission of the
Engineer.” 3 R. 869.

4
“due” under the circumstances to protect the gear box and

compressor upon their arrival. Summary judgment is inappropriate

when the evidence is susceptible of different conclusions or

different inferences by the trier of fact. Chen v. City of

Houston, 206 F.3d 502, 506 (5th Cir. 2000), cert. denied, 121 S.Ct.

2020 (2001). Swanson v. General Servs. Admin., 110 F.3d 1180, 1191

(5th Cir.) cert. denied, 522 U.S. 948 (1997). Summary judgment is

inappropriate even where the parties agree on the basic facts, but

disagree about the factual inferences that should be drawn from

those facts. Impossible Electronic Techniques, Inc. v. Wackenhut

Protective Systems, Inc.,669 F.2d 1026, 1031 (5th Cir. 1982).

Accordingly, summary judgment on this issue is reversed and the

matter remanded for trial.

B. The Argon Tower. Breck also appeals the summary judgment

holding it liable for AL’s expenses to re-establish verticality of

the argon tower. The district court based its judgment on finding

that the tower declined from vertical by 3.5” within a year, and

holding that Breck warranted that the tower would not decline by

more than 1" in a year. We first address the scope of Breck’s

warranty.

Breck guaranteed 1) that “all work . . . shall conform to

specifications and to all other provisions of this Contract,” and

2) that all work would “be free from defects for a period of twelve

(12) months after completion.” Contract § 4.1.1, 3 R. 875. The

5
contract also contains instructions and specifications for the

tower’s erection procedure. 3 R. 922, 751-748.

The tower consists of a process vessel on the interior (for

cryogenic fabrication of argon gas)(installed by a third party,

Naptech), and an insulating exterior “cold box” structure to

support and protect the process equipment, erected by Breck. 16 R.

5562; 3 R. 753-52.

Under the contract, a fabricator was to ship two 100' sections

of the 200'-tall cold box along with a structural steel stair tower

approximately 100' tall, also to be shipped in two pieces. Breck

was responsible for welding “column sections” together, and for

unloading, placing, “leveling,” and grouting the stair tower.

Prefabricated structural steel parts (supports, platforms, ladders,

etc.) were to be delivered, with Breck to bear the responsibility

to “erect, fit-up, [and] level” those loose items. Step Two of the

erection procedures required Breck to have the lower section

“levelled and plumbed using shop markers.” Breck was then to

“verify verticality of the process vessel.” Step 9 required the

“upper section of Box #3 to be erected in vertical position” and

step 15 required Breck to “verify verticality of process vessels

and adjust if needed by using remaining adjustable supports” at

various elevations. A “final verification of vessels verticality”

was required in step 21.

These detailed specifications and erection procedures do not

define “verticality,” “leveling,” or “plumbed.” 3 R. 751-48. For

6
a verticality tolerance, Breck points to contract clause § 5.2 (not

in the erection procedures), providing for compliance with the code

of the American Institute of Steel Construction (AISC), which would

allow this 200' tower a 4.8" declination tolerance. See 3 R. 869;

4 R. 1313; 20 R. 7004.

The district court found no genuine issue of material fact as

to the tolerance for verticality for the cold box using, not AISC

standards, but “reasonable construction standards,” and finding

that tolerance to be 1-inch from absolute verticality for the

tower. 16 R. 5487.

Although contract interpretation is usually question of law

for the court, if the interpretation depends on resolution of

factual disputes, a trier of facts must resolve such disputes.

Cook Indus. Inc. v. Community Grain, Inc. 614 F.2d 978, 980 (5th

Cir. 1980) (recognizing whether and how to read rules of trade into

a contract as fact questions). If the meaning of a contract is

uncertain or if the contract is reasonably susceptible to more than

one meaning, then it is ambiguous and its meaning must be resolved

by a finder of fact. 718 Associates, Ltd. v. Sunwest N.O.P., Inc.,

1 S.W.3d 355, 360 (Tx. App.-Waco 1999). Where extrinsic evidence

is used to interpret an ambiguous contract, the interpretation is

a question of fact, not law. Thornton v. Bean Contracting Co.

Inc., 592 F.2d 1287, 1290 (5th Cir.), modified, 597 F.2d 62 (1979).

Reviewing the summary judgment evidence de novo, we find the

7
contract ambiguous as to the verticality tolerance, and that

determining the contractual intent depends on resolution of factual

disputes. Supporting AL’s position and the district court’s

finding is the fact that Breck’s project superintendent Marvin

Hopper declared, “I would not have satisfied myself with an inch

deviation or more.” 11 R. 3752;4 speaking about the appropriate

verticality tolerance, Breck’s president testified that he

“defer[s] to the project supervisor of getting with owners and our

clients and determining what they’re looking for.” 8 R. 2607. But

Hopper testified, too, supporting Breck’s position, that he

believes that the AISC Code applies to erection of the cold box

(the 1:500 standard, translating to a 4.8" declination tolerance

for the tower at issue). 11 R. 3752. Since the district court

found that the tower declined from vertical by less (approximately

3.5”), Hopper’s own testimony raises material fact issues as to the

contractual standard and provides grounds for reversing the summary

judgment. See Airmark, Inc. v. Advanced Systems, Inc., 715 F.2d

229, 230 (5th Cir. 1983) (recognizing fact issue regarding scope of

contractually agreed duty precluding summary judgment).

Additional questions surround the issue of whether and how to

read the AISC code into the contract. The AISC standard of applies

to “supplied equipment and materials” and “field assemblies” to be

4
Hopper noted that the 1" standard was “just a goal I set up for myself,”
explaining, “your goal is always for perfect. . . . Well in any job you do.
Your strive for the – you do the best you can do.” 11 R. 3683, 3752-51.

8
erected. Contract § 5.2 (3 R. 869). AL challenges the Code’s

application contending that the tower was not “supplied,” but does

not explain why the tower is not a “field assembly.” As Patterson

testified, the language of Section 7.11.3.2(d) of the AISC Code

certainly suggests that it would apply to such a process as the

tower erection, as it discusses prefabricated pieces assembled in

the field.5 Another dispute about how to apply the AISC code is

presented in the contrast between Patterson’s reference to section

7.11.3.2(d) entitled “Members Other than Columns,” and Hopper’s

designation of section 7.11.3.1 on “Columns” as applicable. 11 R.

3752, 3731. Finally, Patterson notes the paradox that AISC

standards seem to exclude process vessels altogether, by exempting

“pressure vessels” from its definition of “Structural Steel,” §2.2.

11 R. 3726, 3731.6 The questions of how and whether to read the

Code into the contract are factual. Cook, 614 F.2d at 980. Both

parties have offered arguable interpretations of how the AISC

standard applies. Because of the disputes about the appropriate

standard of verticality, the determination of the parties’ intent

is a question of fact calling for reversal of the summary judgment.

5
Section 7:11.3.2(d) provides that “Individual shipping pieces which are
segments of field assembled units containing field splices between points of
support” are considered plumb, level and aligned if the verticality tolerance
does not exceed 1: 500. 11 R. 3728.
6
Former CEO of ALPC Marchand, a chemical engineer, noted that the contract
incorporates both the AISC Code of Standard Practice and the Pressure Vessel
Handbook. 4 R. 1355-54. According to the Pressure Vessel Handbook, deviation
from vertical for the shell of a pressure vessel is a maximum of 1 ½" for a
vessel over 30', and no one has argued that this is the appropriate declination
standard. 4 R. 1308.

9
Transource Intern., Inc. v. Trinity Industry, Inc.,725 F.2d 274,

289 (5th Cir. 1984).

C. Damages. Because of our reversal pertaining to the gear

box and tower, we need not address Breck’s claims of error in the

award of damages.

D. Attorney’s Fees. AL withheld payment of invoices submitted

by Breck because of the repair expenses for the tower and the rust

damage, and the district court allowed an setoff of the withheld

amount from its damage award to AL. Breck contends that it

“prevailed” on its claim on the invoices so as to entitle it to an

attorney fee award, even if its claim is entirely offset by AL’s

counterclaims.

Under the “Notice to Cure” provision Owner has the right to

“withhold payment of any monies due” if Breck defaults, pending

corrective action to the satisfaction of Owner. Contract §§

11.1.2 & 11.1.3, 3 R. 887. In view of our holding with respect to

AL’s motion for summary judgment, whether Breck defaulted and

whether AL was within its rights to withhold payment on the

invoices are two unresolved facts bearing on whether Breck

“prevailed.” Accordingly, it would be premature to address the

question of statutory attorneys fees.

Though not framed as a separate assignment of error, Breck has

also asked this Court to reverse and render on its own motion for

summary judgment pertaining to its account and invoices, noting

10
that the district court recognized that Breck’s accrued balances

were due. See 22 R. 7750, when the court declared, “No evidence

proffered refutes the accuracy or propriety of the invoices.” This

recognition by the district court is apparently inconsistent with

the court’s statement, when denying Breck’s motion, that

significant issues exist regarding amounts Defendants owe Breck on

the accounts. 5 R. 1525. Our same reasons for declining to rule

on attorneys fees, however, preclude us from rendering summary

judgment for Breck on its invoices. The district court will have

ample opportunity to clarify the apparent inconsistency.

F. Pre-Trial Matters. Breck also contends that numerous

discovery abuses and other pre-trial rulings had the cumulative

effect of denying it due process. No error or defect in any ruling

or order is ground for disturbing a judgment or order, “unless

refusal to take such action appears to the court inconsistent with

substantial justice.” Fed. R. Civ. P. 61. Moreover, our

intervention into the district court's broad discretion in managing

pretrial discovery is “warranted ‘only upon a clear showing of

manifest injustice, that is, where the lower court's discovery

order was plainly wrong and resulted in substantial prejudice to

the aggrieved party.’” Douglass v. United Servs. Auto. Ass’n, 79

F.3d 1415, 1424 (5th Cir. 1996)(en banc)(quoting Maynard v. CIA,

986 F.2d 547, 567 (1st Cir. 1993)). Breck cannot show such

prejudice in view of our remand.

11
 In consideration of the foregoing, we vacate the judgment of

the district court based on the summary judgment rulings in favor

of AL, excepting that ruling denial of Breck’s motions for summary

judgment. Our ruling obviates the need to address the attorneys

fees issue and the allegations of discovery abuse and other pre-

trial matters. The judgment of the district court is

VACATED and the matter REMANDED.

12