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this opinion should not be published and is not precedent except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