U.S. for Use and Ben. of Straus Systems, Inc. v. Associated Indem. Co. ( 1992 )

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 91-4517
UNITED STATES OF AMERICA, FOR THE USE AND BENEFIT OF STRAUS
SYSTEMS, INC,
Plaintiff,
STRAUS SYSTEMS, INC.,
Plaintiff-Appellant,
VERSUS
ASSOCIATED INDEMNITY COMPANY,
NATIONAL SURETY CORPORATION,
FIREMAN'S FUND INSURANCE COMPANY, AND
CONTRACT SURETY CONSULTANTS, INC,
Defendants-Appellees.
Appeal from the United States District Court
For the Eastern District of Texas
( June 25, 1992 )
Before GARWOOD and DeMOSS, Circuit Judges, and DUPLANTIER,*
District Judge.
PER CURIAM:
I.
In June 1983, Pyramid International, Inc. (Pyramid), as the
prime contractor, subcontracted with Straus Systems, Inc. (Straus)
for Straus to perform all mechanical work on the Red River Army
Depot Project (Project), a federal construction project for the
*
District Judge of the Eastern District of Louisiana, sitting
by designation.
maintenance and modernization of an army depot in Hooks, Texas.
When Pyramid defaulted in the summer of 1985, the Sureties,
hereinafter defined, took over as prime contractor of the project
pursuant to their performance bond. The Sureties hired Contract
Surety Consultants, Inc. (CSCI) as their agent to oversee and
manage the completion of the Project. Straus executed an Agreement
of Assignment Subcontract assenting to the assignment of the
subcontracts to the Sureties.
Between October 1984 and November 1985, Straus sent a series
of fifteen letters to Pyramid and later to the Sureties giving
notice of the delays encountered by Straus in completing its work
on the project. Straus never requested any additional time to
complete its work on the project, nor did it demand payment of a
specific amount of delay damages until October 1987, five months
after it completed its work on the project on May 31, 1987.
Straus finally brought suit in district court against
Associated Indemnity Company, National Surety Corporation and
Fireman's Fund Insurance Company, and their agent, Contract Surety
Consultants, Inc. (collectively the Sureties), the construction
sureties for Pyramid, for delay damages of approximately $1,000,000
arising out of its construction subcontract. Straus alleged claims
based on the Miller Act (40 U.S.C. § 270), breach of contract,
quantum meruit, and negligence. The district court granted summary
judgment for the defendants on all claims and denied Straus's
motion for a new trial.
Paragraph 17 of the subcontract, which describes the procedure
that Straus was to follow in the event of a delay in its work due
to the action or negligence of Pyramid, reads as follows:
DELAYS AND EXTENSION OF TIME: Should Subcontractor
be obstructed or delayed in the completion of the
work hereunder by the neglect, delay or default of
the Contractor or by any act of the Owner or by
substitutions or additions which may be required by
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Contractor or Owner, or by the unusual action of
the elements, then the date of substantial
completion shall be extended, such extension to be
equal to the duration of such obstruction or delay,
as reasonably determined by Contractor, but no such
extension shall be made unless a claim shall be
presented in writing by Subcontractor to Contractor
within 48 hours of the occurrence of such
obstruction or delay. (Emphasis added).
Paragraph 20 deals with compensation and payment to Straus.
and reads as follows:
COMPENSATION AND PAYMENT: Subcontractor agrees to
accept the specified compensation as full
compensation for doing all work, furnishing all
materials, and performing all provisions embraced
in this subcontract; for all loss or damage arising
out of the nature of the work as from the action of
the elements or from any unforeseen or unknown
difficulties or obstructions which may arise or be
encountered in the prosecution of the work until
its acceptance; and for all risks of every
description connected with the work. (Emphasis
added).
The trial court found that Straus failed to comply with the
procedural requirements found in Paragraph 17 that it give notice
for delay in order to maintain its suit for damages. Additionally,
the trial court noted in its order and opinion denying Straus's
motion for a new trial that a claim made for extension of time due
to delay was the only recourse open to Straus under the contract.
The issues raised by Straus on appeal are:
1. Whether paragraphs 17 and 20 of the
subcontract prohibit Straus from seeking delay
damages.
2. Whether Straus complied with the notice requirement
of the subcontract to maintain its suit for delay
damages.
3. Whether the sureties agreed to assume
liability for Pyramid's breach of contract.
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Because this Court has determined that Straus is precluded
from asserting claims for monetary delay damages by the terms of
the contract, and such holding is dispositive of Straus's claims,
we do not address issues numbers two and three.
We AFFIRM.
II.
The definitive issue on appeal in this case is whether the
subcontract allows a claim for monetary delay damages or whether
Straus was limited to an extension of time as compensation for the
delay caused by Pyramid. The interpretation of the subcontract is
a question of law which this Court reviews de novo. Hall v. State
Farm Fire and Casualty Co., 937 F.2d 210, 213 (5th Cir. 1991).
Texas law provides that when a Court construes a contract it
must look to the intent of the parties as expressed in the
contract. Fuller v. Phillips Petroleum Co., 872 F.2d 655, 657 (5th
Cir. 1989). In addition, the Court should consider the objective,
rather than the subjective intent of the parties. Where, as in
this case, there are no allegations of ambiguity as to the contract
language, the Court will determine the intent of the parties from
the instrument alone. Id. at 657.
Contract provisions indicating that the delay was within the
contemplation of the Parties have been found to be sufficient to
preclude recovery of damages for delay in a construction contract,
City of Houston v. R. F. Ball Constr. Co., Inc., 470 S.W.2d 75, 77
(Tex. Civ. App.--Houston [14th Dist.] 1978, writ ref'd n.r.e.).
Parties to a contract might foresee or consider the possibility of
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delay and contractually provide for a remedy to be applied upon
such occurrence. Id. It is not necessary that exclusion of delay
damages be express. Id. A provision in the contract for an
extension of time in case of delay caused by the contractor has
been held to afford the subcontractor an exclusive remedy,
precluding the recovery of damages from the contractor. Ericksen v.
Edmonds School Dist. No. 15, Snohomish County, 125 P.2d 275, 13
Wash. 2d 398 (Wash., 1942); See Burgess Constr. Co. v. M Morrin &
Son Co., Inc., 526 F.2d 108, 115 (10th Cir. 1975). See also United
States, to Use of Brown v. Miller-Davis Co., 61 F. Supp. 89, 90 (D.
Conn. 1945). (provisions in the principal contract for extension of
the completion date were held a bar to the subcontractors recovery
against the general contractor for delay).
Straus contends that Sureties owe it delay damages because
Pyramid and Sureties breached the implied obligation not to delay
Straus's performance; and that Sureties must make good on all loses
due to delays in the progress of the work because there is no
express provision in the subcontract to the contrary that releases
Sureties from this obligation. R.F. Ball, 570 S.W.2d 75.
The Sureties argue that the parties addressed the subject of
delay in Paragraph 17 of the subcontract and provided that the only
remedy was extension of time. They contend that Paragraph 20
confirms the parties intention to limit Straus to the compensation
provided by the subcontract.
While the subcontract itself might have been more clearly
drafted, we believe that when read as a whole and giving due
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consideration to Paragraphs 17 and 20, it indicates that the
parties thought about the problem of delay when they initially
contracted and agreed at that time that the sole remedy for delay
would be the extension of time. It is evident by these contract
provisions that delay was within the contemplation of the Parties
and that such provisions preclude recovery of damages for delay in
this construction contract. R.F. Ball, 570 S.W.2d at 77.
III. CONCLUSION
We affirm the trial court's holding that Sureties are not
liable for damages caused by the delay.
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