Louisiana Machinery Company, LLC v. Bihm Equipment Co.

329 So.3d 317

LOUISIANA MACHINERY COMPANY, LLC and Starr Indemnity & Liability Company

v.BIHM EQUIPMENT CO., Shaw Environment, Inc., a Subsidiary of Chicago Bridge and Iron Company, XL Insurance America, Inc.

2019 CA 1081

Court of Appeal of Louisiana, First Circuit.

Judgment rendered: AUGUST 10, 2021

Martin K. Maley, Sr., Stephen M. Irving, Baton Rouge, LA, Attorneys for Defendant/Cross-Claimant/Appellee, Don Bihm Equipment Company, Inc.

Tobin J. Eason, Mandeville, LA, Attorney for Defendant/Appellant, CB&I Environmental and Infrastructure, Inc.

BEFORE: GUIDRY, McCLENDON, WELCH, HOLDRIDGE, AND CHUTZ, JJ.

McCLENDON, J.

In this suit involving leases of construction rotary mixers, the lessee appeals a judgment awarding rent, attorney fees, and interest to the lessor. For the reasons set forth herein, we affirm in part and reverse in part.

FACTS

CB&I Environmental and Infrastructure, Inc., previously known as Shaw Environmental, Inc. (CB&I), subleased two rotary mixers, ASW00451 (451) and ASW00391 (391), from Don Bihm Equipment Co., Inc. (Bihm).¹ Bihm had leased the mixers from Louisiana Machinery Company, LLC a/k/a Louisiana Cat (Louisiana Machinery). Bihm delivered 451 to CB&I on February 26, 2015, and it delivered 391 to CB&I on March 18, 2015. On July 9 and 10, 2015, respectively, 391 and 451 caught fire and burned while being used by CB&I in a construction project in Hackberry, Louisiana. The mixers were a total loss as a result of the fires.

On July 14, 2016, Louisiana Machinery and its insurer, Starr Indemnity & Liability Company (Starr), filed suit against Bihm and CB&I, seeking damages.² Bihm answered the suit and filed a cross-claim against CB&I. Initially, Bihm alleged in its cross-claim that, pursuant to its lease agreements with CB&I, CB&I was responsible for insuring the mixers and was obligated to hold Bihm harmless from any claims against it. Bihm later amended its answer and cross-claim to seek unpaid rent of $958,000.00 from CB&I, plus rentals accruing in the future until the mixers were repaired or the damages paid, together with the costs of the proceedings and defense costs, including attorney fees.

Subsequently, Louisiana Machinery, Starr, and Bihm filed a partial motion and order to dismiss with prejudice that was signed by the trial court on September 19, 2018. In said motion, Louisiana Machinery and Starr had moved to dismiss all of their claims on the main demand against Bihm and CB&I with prejudice. Bihm had also moved to dismiss that part of its cross-claim against CB&I with prejudice as to any obligation of CB&I to provide insurance or to pay for the property damages to the two mixers. Bihm reserved its rights to proceed on its claims associated with the leases, including attorney fees, interest, and costs. The dismissal was based on CB&I's June 8, 2018 payment of $825,000.00 to Louisiana Machinery for the destroyed mixers.

Bihm's claims against CB&I proceeded to a bench trial on May 1, 2019. The evidence established that Bihm leased each mixer from Louisiana Machinery for $17,000.00 per month and then subleased the mixers to CB&I for $18,000.00 per month.³ The language in the "Rental Agreement" for each mixer provided, in pertinent part:

Lessee assumes full responsibility for erection, use, or operation of said equipment and asserted by any person shall be the responsibility of the Lessee who agrees to hold [Bihm] harmless of such claims. Rented equipment is to be returned in same condition as when received, less normal wear. In event of damage to equipment, rental continues until equipment is put back in serviceable condition acceptable to Lessor. Lessee is fully responsible for equipment including loss, destruction, or damage, whether with or without fault on part of Lessee. Lessee agrees to pay [Bihm] for any repairs or replacements at [Bihm's] established prices for similar repairs, parts or accessories.

CB&I paid rent on 451 from the date of delivery (February 26, 2015) through August 11, 2015, one month after the fire. CB&I paid rent on 391 from the date of delivery (March 18, 2015) through August 31, 2015, six weeks after the fire. When CB&I stopped paying rent to Bihm, Bihm stopped paying rent to Louisiana Machinery. On October 6, 2015, Bihm sent invoices to CB&I for the "[t]otal loss due to fire" for the mixers and, on March 11, 2016, sent a demand letter for the accrued rental payments and the replacement costs of the mixers.

On May 15, 2019, the trial court signed a judgment ordering CB&I to pay Bihm the principal sum of $378,000.00⁴ ; 25% attorney fees of $94,500.00; judicial interest of $49,547.84; and court costs of $1,775.16, which totaled $523,823.00. From this judgment, CB&I suspensively appeals. On appeal, CB&I raises three specifications of error. In its first assignment of error, CB&I contends that the trial court was manifestly erroneous in ruling that additional rent was owed under the lease after the mixers were destroyed. Next, CB&I contends that the trial court erred in imposing attorney fees based on a finding that there was an open account relationship between the parties under LSA-R.S. 9:2781. CB&I alleges that an open account cause of action was not pleaded, material facts were not alleged to assert such a cause of action, and the relationship of the parties was not an open account relationship. Finally, CB&I argues that the trial court erred in awarding any judicial interest, as the awards of additional rent and attorney fees were improper. Alternatively, CB&I avers that the trial court was manifestly erroneous in awarding judicial interest from the date Louisiana Machinery filed its lawsuit, as opposed to the date that Bihm amended its cross-claim to seek additional rent.

STANDARD OF REVIEW

Louisiana courts of appeal apply the manifest error standard of review in civil cases. Detraz v. Lee, 05-1263 (La. 1/17/07), 950 So.2d 557, 561. Under the manifest error standard, a factual finding cannot be set aside unless the appellate court finds that the trier of fact's determination is manifestly erroneous or clearly wrong. Id. In order to reverse a factfinder's determination of fact, an appellate court must review the record in its entirety and find that a reasonable factual basis does not exist for the finding, and further determine that the record establishes that the factfinder is clearly wrong or manifestly erroneous. Id. Additionally, the existence of an open account is a question of fact subject to the manifest error standard of review. Premier Tugs, LLC v. Caillou Island Towing Co., Inc., 19-1166 (La.App. 1 Cir. 6/18/20), 307 So.3d 218, 226. However, the proper interpretation of a contract is a question of law subject to de novo review on appeal. Montz v. Theard, 01-0768 (La.App. 1 Cir. 2/27/02), 818 So.2d 181, 185. When considering legal issues, the reviewing court accords no special weight to the trial court, but conducts a de novo review of questions of law and renders judgment on the record. Id.

DISCUSSION

Rent (Assignment of Error One)

In its first assignment of error, CB&I contends that the trial court was manifestly erroneous in ruling that additional rent was owed under the leases after the leased mixers were destroyed. A lease is a synallagmatic contract by which one party, the lessor, binds himself to give to the other party, the lessee, the use and enjoyment of a thing for a term in exchange for a rent that the lessee binds himself to pay. LSA-C.C. art. 2668. A lease contract forms the law between the parties, defining their respective legal rights and obligations. Hornbeck Offshore Operators, LLC v. Cross Group, Inc., 16-0174 (La.App. 1 Cir. 10/31/16), 207 So.3d 1141, 1147, writ denied, 16-2095 (La. 1/9/17), 214 So.3d 872.

In its reasons for judgment, the trial court determined that in light of the provision in the leases that CB&I was fully responsible for the equipment, including loss, destruction, or damage, the "loss" included rental payments. The trial court noted that, according to the leases, CB&I was obligated to pay Bihm for any repairs or replacements, that rental continued until the equipment was put back into serviceable condition, and that CB&I was required to keep in force and effect a policy of insurance covering any injury, damage, or loss to the equipment.⁵ Relying on this language, the trial court determined that the leases terminated at the point that the parties, particularly CB&I, acknowledged that the mixers could not be repaired and were considered totally destroyed, not on the date that the mixers burned or the date that Bihm acknowledged the mixers were a total loss. According to the trial court, it used July 14, 2016, the date Louisiana Machinery filed suit against Bihm seeking payment for the mixers, as the termination date of the leases, because at that point all of the parties were on notice that the mixers were destroyed.⁶ The trial court found that based on the language in the leases, until the date all parties were on notice the mixers were destroyed, CB&I was obligated to pay rent. We disagree.

Louisiana Civil Code article 2714 provides, in pertinent part, that if the leased thing is totally destroyed, without the fault of either party, the lease terminates and neither party owes damages to the other. CB&I contends that additional rent beyond the dates of destruction was not owed because the leases did not provide that rent was to continue if the mixers were destroyed, and therefore the provisions of Article 2714 control. According to CB&I, if the mixers were destroyed through its fault as a lessee, then Bihm as a lessor could recover damages pursuant to Article 2714 ; however, Bihm did not establish CB&I's fault or that Bihm sustained actual damages.

Article 2714 clearly provides that if the leased thing is totally destroyed, the lease terminates. This is more fully explained in the 2004 Revision Comments to Article 2714, which provide, in part:

(b) If the loss or destruction is total, ... then under Civil Code Article

...