UNITED STATES COURT OF APPEALS

For the Fifth Circuit

No. 98-30971

LINDY INVESTMENTS, LP, Etc; ET AL;

Plaintiffs

LINDY INVESTMENTS III, a Louisiana Limited Partnership; MAGNOLIA

CREEK APARTMENTS, a Louisiana Partnership;

Plaintiffs-Appellants-Cross-Appellees

MAGNOLIA CREEK, Louisiana Limited Corp.

Appellant-Cross-Appellee

VERSUS

SHAKERTOWN CORPORATION; ET AL;

Defendants

SHAKERTOWN 1992 INC; COMMERCE AND INDUSTRY INSURANCE CO. OF

CANADA

Defendants-Appellees-Cross-Appellants

Appeals from the United States District Court

For the Eastern District of Louisiana

May 2, 2000

Before KING, Chief Judge, DUHÉ and DeMOSS, Circuit Judges. 

DUHÉ, Circuit Judge:

In this redhibition case arising under Louisiana law, Lindy

Investments III, Magnolia Creek Apartments, and Magnolia Creek

(collectively “Appellants”) challenge the district court's order

predicating the execution of the Appellants' judgment upon return
 

1Appellants' argument that they are entitled to prejudgment

interest on their award is not properly before this court as the

issue was not included in the pre-trial order. See Elvis Presley

Enter., Inc. v. Capece, 141 F.3d 188, 206 (5th Cir. 1998) (“[I]f a

claim or issue is omitted from the [pre-trial] order, it is waived,

even if it appeared in the complaint.”)

2

of defective siding to the manufacturer, Shakertown 1992, Inc.

(“Shakertown”). Additionally, Appellants contest the district

court's refusal to award “litigation-related expenses” to

Appellants.1 At the same time, the Appellants and Shakertown

challenge the district court's conclusions on summary judgment

regarding the scope of the commercial general liability policy (the

“Policy”) issued to Shakertown by Commerce and Industry Insurance

Company of Canada (“C&I”). C&I cross-appealed contesting the award

for diminution in value. For the reasons stated herein, we AFFIRM

the trial court's decision except as to the issue of litigationrelated expenses which we DISMISS for lack of appellate

jurisdiction.

BACKGROUND

Appellants own and operate two apartment complexes in River

Ridge, Louisiana. Appellants purchased from Shakertown and

installed “Cascade Classic” exterior siding on both complexes.

Cascade Classic is a cedar shingle and plywood exterior siding that

Shakertown manufactured between 1992 and early 1995.

After noticing that the siding had begun to “peel” and

“delaminate,” the Appellants sued Shakertown and C&I in Louisiana

state court, alleging that the siding contained redhibitory defects
 

2LA. CIV. CODE art. 2520 et seq. (1870) Appellants sued C&I

under the auspices of Louisiana's direct action statute, LA. REV.

STAT. § 22:655 (1989) 

 

3By agreement of the parties in the pre-trial order, the court

severed the issue of “recovery of attorney's fees and litigationrelated costs” and had the parties “try the issue to the court

pending the outcome of the jury trial.”

3

under Louisiana law.2 Defendants removed the suit to federal

court. Following a trial on the merits3, the jury found for the

Appellants and awarded them a total of $298,029 for “Rescission of

sale/Reduction in purchase price,” $9,059 for “Diminution of value”

of the buildings and $177,418 in “Reasonable Expenses.” The jury

also found that the Appellants received a total of $14,901 of value

from their use of the defective shingles. 

The trial court entered judgment in the amount awarded by the

jury discounted by the $14,901 credit for use of the product and

subject to judicial interest running from the date of judgment.

The court conditioned execution of this judgment upon Appellants'

return of the siding to Shakertown.

Pursuant to the parties' agreement in the pre-trial order, the

court took up the issue of attorney's fees and litigation-related

costs after entering judgment on the merits. The court granted

Appellants' motion for attorney's fees and denied under Federal

Rule of Civil Procedure 54(d) Appellants' request for litigationrelated expenses. The court postponed determination of the amount

of fees and costs pending the outcome of this appeal.

Appellants appealed challenging the trial court's decisions
 

4Upon careful review of the record we find Appellants' expert

testimony regarding diminution in value sufficient to support the

jury's award. 

4

regarding return of the siding, the denial of litigation-related

expenses, and the scope of C&I's coverage. Shakertown crossappealed challenging the summary judgment ruling limiting the scope

of C&I's coverage. C&I cross-appealed challenging the sufficiency

of Appellants' evidence supporting the award for diminution in

value of the apartment complexes.4

JURISDICTION

Although no party contests our jurisdiction to decide this

matter, we must on our own motion consider it. See Thornton v.

General Motors Corp., 136 F.3d 450, 453 (5th Cir. 1998). Except in

rare circumstances not applicable here, our jurisdiction is limited

to final decisions of the district court. See 28 U.S.C. § 1291. 

By separating the trial on the merits from the award of

attorney's fees and costs, the trial court has created a two-track

system for appeals purposes. The trial court's decisions on the

merits are appealable final orders. See Budinich v. Becton Dickson

and Co., 486 U.S. 196, 202-3 (1988) (“[A] decision on the merits is

a 'final decision' for the purposes of § 1291 whether or not there

remains for adjudication a request for attorney's fees attributable

to the case.”). However, because the trial court has not yet

determined the amount of attorney's fees and costs due to

Appellants, we do not have appellate jurisdiction to entertain
5

Appellants' challenge to the denial of recovery for litigationrelated expenses. See Deloach v. Delchamps, Inc., 897 F.2d 815,

826 (5th Cir. 1990) (“Because a judgment is not final until both

liability and damages are determined, a judgment awarding an

unspecified amount of attorney's fees is interlocutory in

nature.”). Accordingly, we must dismiss for lack of appellate

jurisdiction Appellants' challenge to the trial court's refusal to

tax litigation-related expenses as costs under Rule 54(d). 

REDHIBITION

I. The Louisiana Law of Redhibition

Redhibition is the avoidance of a sale of a defective product

when the defect has rendered the product useless, or its use so

inconvenient and imperfect, that the buyer would not have purchased

it had he known of the defect. See LA. CIV. CODE art. 2520 (1870).

In general, the law requires the purchaser to “tender” the

defective product to the seller before filing any action in

redhibition. See Blue v. Schoen, 556 So.2d 1364, 1370 (La. App.

5th Cir. 1990); Vance v. Emerson, 420 So.2d 1032, 1035 (La. App.

5th Cir. 1982). Under the “tender requirement,” the buyer need not

physically return the product prior to suit; rather, he may satisfy

the requirement simply by offering to return the product for repair

and/or replacement. See Mitchell v. Popiwchak, 677 So.2d 1050,

1054 (La. App. 4th Cir. 1996).

Typically, the remedy contemplated in a redhibitory action is

full rescission of the sale. Rescission requires the seller to
6

return the purchase price and the buyer to return the thing

purchased, thus placing the parties in the positions they held

before the sale. See Capitol City Leasing Corp. v. Hill, 404 So.2d

935, 939 (La. 1981). This “return requirement,” though involving

the eventual tender of the defective product to the seller, is the

end result of a successful rescission and should not be confused

with the procedural pre-filing tender requirement mentioned above.

See Vance, 420 So.2d at 1035. 

Louisiana courts typically invoke rescissionary remedies in

redhibition cases where the product is totally unfit for its

intended use. When a redhibitory defect merely diminishes the

product's value or utility, however, a party can recover quanti

minoris damages for a reduction in the purchase price without

having to return the defective product. See Blue, 556 So.2d at

1369. The trial court has discretion to award either rescission or

quanti minoris in a successful redhibitory action, see LA. CIV. CODE

art. 2543 (1870); but cannot award both. See Grimes v. Alenco

Window Co., 638 So. 2d 1147, 1149 (La. App. 1st Cir. 1994) (“[the

buyer] is not entitled to recover for both the return of the

purchase price and for replacement of the defective item.”). We

must therefore determine which one of these two remedies is

appropriate. 

The trial record clearly indicates that Appellants sought a

full rescission. The district court's pre-trial order indicates

that “plaintiffs contend they are entitled to a rescission in the
 

5Although the parties' did not strike their reference to the

plaintiffs' entitlement to rescission vis a vis reduction in the

“LISTING OF CONTESTED ISSUES OF FACT,” we are confident that because this

is not an issue of fact and the parties specifically deleted its

appropriate listing as an issue of law their agreement to try this

as a rescission case is manifest.

 

6Appellants' argument that Appellees' failure to mention the

return requirement until after the jury came to its decision

constitutes unfair surprise and a waiver of the requirement is

7

sale.” Although the pre-trial order mentions the possibility that

the shingles may be “mechanically fastened” to the plywood in order

to prevent delamination, the parties downplayed this option as

unworkable. Moreover, in a handwritten amendment to the section of

the pre-trial stipulation marked “LISTING OF CONTESTED ISSUES OF LAW”

the parties struck a question asking, “If a redhibitory defect

exists, whether plaintiffs are entitled to a rescission of the

sale, or merely a reduction of the sales price.” Judging from the

single remaining reference to rescission and the striking of the

on-point question of law, we conclude that as of the beginning of

trial, Appellants sought rescission.5 

Turning to the jury's award, we note that the amounts awarded

for “rescission of sale/reduction in purchase price” equal the

stipulated purchase prices for the panels installed at both

complexes. We agree with the trial court that the jury's awarding

of the exact purchase price constitutes a proper rescission of

sale. That Appellants might now be required to live up to their

end of the rescissionary bargain and return the shingles should

come as no surprise to them.6
wholly without merit. Appellants' brief repeatedly confuses the

pre-filing tender requirement with the post-judgment return

requirement. Although under Louisiana law failure of tender is an

affirmative defense that must be raised by a dilatory exception of

prematurity, see Burns v. Lamar-Lane Chevrolet, Inc., 354 So.2d

620, 622 (La. App. 1st Cir. 1977), the return requirement is the

generally required result of rescission and thus does not need to

be separately pled. 

8

II. Return of the Siding

Appellants argue that the district court erred in ordering

them to return the siding to Appellees as a condition precedent to

the execution of the judgment. Appellants contend that the

district court should not have applied Louisiana Civil Code Article

2532 to require return because this provision was not in effect

when Appellants' cause of action arose. In the alternative,

Appellants note that Article 2532 does not require the purchaser to

return the defective product “until all his claims, or judgments,

arising from the defect are satisfied.” LA. CIV. CODE art. 2532

(1995). Finally, Appellants insist that they should be excused

from the return requirement under common law principles of equity.

A. Applicability of Article 2532 

Article 2532 of the Louisiana Civil Code reads in relevant

part: 

A buyer who obtains rescission because of a

redhibitory defect is bound to return the

thing to the seller, for which purpose he must

take care of the thing as a prudent

administrator, but is not bound to deliver it

back until all his claims, or judgments,

arising from the defect are satisfied.

LA. CIV. CODE art. 2532 (1995). Article 2532 is a product of the
9

1993 amendments to the Louisiana Civil Code and its effective date

was January, 1995. Because the sale giving rise to this action

occurred before the effective date of Article 2532, Article 2532

itself is inapplicable. See Insurance Storage Pool, Inc. v. Parish

Nat'l Bank, 732 So.2d 815, 819 n.1 (La. App. 1st Cir. 1999);

Jackson v. Slidell Nissan, 693 So.2d 1257, 1262 n.5 (La. App. 1st

Cir. 1997). Accordingly, the district court erred in referencing

Article 2532 as a basis for its decision. Nevertheless, the

district court did not rely solely upon this Article. Rather, the

court also noted that its decision was supported by “earlier case

law” and in fact relied upon pre-revision case law in coming to its

conclusion. Moreover, the Civil Code articles upon which the

drafters based Article 2532, namely Articles 2018 and 2033 of the

Code of 1870, see 1993 La. Acts 841 § 1, were in effect at the time

that Appellants' claims arose. Thus, the district court applied

the correct law concerning return of the shingles. 

B. Satisfaction of Claims as Condition Precedent to Return

Appellants' reliance upon Article 2532's provision that the

purchaser need not return the defective product “until all his

claims, or judgments, arising from the defect are satisfied,” LA.

CIV. CODE art. 2532 (1995), is misplaced. Because Article 2532 was

not in effect at the time of the transaction, it cannot guide our

decision in this case. See Insurance Storage Pool, 732 So.2d at

819 n.1; Jackson, 693 So.2d at 1262 n.5. Instead, we must look to

pre-amendment law to determine the validity of this condition. 
10

Before the enactment of Article 2532, Louisiana courts

required “return of the thing” either as a condition precedent to

the execution of the judgment or as a condition subsequent to it.

Compare Prince v. Paretti Pontiac Co., Inc., 281 So.2d 112, 117

(La. 1973) (“[T]here will be judgment in favor of plaintiff, . . .

in the amount of $4959.37, . . . conditioned upon the return of

[plaintiff's] 1970 Pontiac Lemans.”); Peoples Furniture & Gift v.

Carson Hicks/Friedricks Refrigeration, Inc., 326 So.2d 919, 924

(La. App. 3rd Cir. 1976) (“[A]s a condition precedent to the

execution of this judgment against defendants, plaintiff is ordered

to return the air conditioning unit to the defendants.”) with

Associates Fin. Serv. Co., Inc., 382 So.2d 215, 222 (La. App. 3rd

Cir. 1980) (“[Defendant must] pay and discharge remaining

obligation [on a truck] . . . contingent that upon payment of said

sum, [financing company] deliver the subject truck to

[defendant].”); Murret v. Mark II Elec. of La., Inc., 169 So.2d

556, 559-60 (La. App. 4th Cir. 1964). (“[D]efendant . . . [must]

deliver to plaintiffs their promissory note . . . . [D]efendant is

declared entitled to possession of the equipment upon [delivery of

the note].”). As pre-amendment law recognized both approaches as

acceptable, the district court did not err in requiring return of

the shingles as a condition precedent to the execution of the

Appellants' judgment. 

C. Equitable Avoidance of the Return Requirement

Appellants insist that the district court erred in not
11

excusing the return requirement. They note that Louisiana law does

not require the purchaser to return a defective product when the

product has been “consumed by use.” See Walton v. Katz & Besthoff,

77 So.2d 563, 566 (La. App. Orl. 1955) (holding that plaintiff

could sue for rescission of sale of defective paint despite his

inability to return the paint and restore the status quo ante

because paint was consumed by use). Appellants rely primarily upon

our decision in PPG Indus., Inc. v. Industrial Laminates Corp., 664

F.2d 1332 (5th Cir. 1982), and the Louisiana Fourth Circuit's

decision in Frank Brigtsen, Inc. v. Swegel, 258 So.2d 579 (La. App.

4th Cir. 1972) to support their consumed by use claim. We find

neither of these cases dispositive.

In PPG we did not address whether the products at issue,

spandrel wall panels, were consumed by use and therefore

unreturnable. We simply recognized that for statute of limitations

purposes a case may sound in redhibition even if the defective

product cannot be returned to the seller. See PPG, 664 F.2d at

1335. We did not determine that the spandrel panels were or were

not returnable. See id. As a result, PPG cannot support

Appellants' claim that the shingles were consumed by use. 

Appellants' interpretation of Brigtsen conflates the tender

requirement with the return requirement. In Brigtsen a homeowner

purchased 20,000 “Spanish moss simulated old” bricks. The

homeowner had installed 6,500 of these bricks. It rained that

night, washing off the bricks' coating. The homeowner complained
 

7Drayage costs are the costs of hauling away the unused

bricks.

12

to the seller and asked that the seller inspect the installed

bricks. After inspection, the seller hauled away the remaining

13,500 bricks and sued the homeowner on the open account for the

6,500 installed bricks and drayage costs.7 The homeowner sued in

reconvention claiming that the coating on the bricks was defective.

The trial court and the court of appeal agreed with the homeowner

and assessed drayage costs to the seller. See Brigtsen, 258 So.2d

at 579-581. 

On application for rehearing, the court of appeal appended to

its decision a per curiam denial of rehearing addressing the tender

requirement. The court waived the pre-filing tender requirement

noting that: 

To require the [homeowner] to incur the

additional cost of removing the installed

bricks from the garage in addition to drayage

costs, in order to tender them to plaintiff,

would, in our opinion, be an exercise in

futility and onerous, therefore unreasonable

in these circumstances.

Id. at 581. As the court's original opinion assessed drayage fees

to the seller, this reference to the homeowner's bearing drayage

costs makes sense only in reference to a hypothetical pre-filing

tender. Moreover, the case upon which the court relied in reaching

this conclusion, Zibilich v. Metry Upholstery, Inc., 148 So.2d 436

(La. App. 4th Cir. 1963), examined the pre-filing tender

requirement. Finally, the Brigtsen court's conclusion that “[t]he
13

law does not require one to do a vain and useless thing,” Brigtsen,

258 So.2d at 581-82 citing Harkness v. Leggett, 131 So. 190 (La.

1930); Perkins v. Chatry, 58 So.2d 349, 352 (La. App. Orl. 1952),

stems from a long line of Louisiana cases involving waiver of

allegedly futile pre-filing requirements, see Louisiana Highway

Comm'n v. Bullis, 200 So. 805 (La. 1941) (waiving need for tender

of true value of land before eminent domain proceeding); MacLeod v.

Hoover, 105 So. 305 (La. 1925) (waiving need for tender prior to

finalization of tax sale); Southern Sawmill Co. v. Ducote, 46 So.

20 (La. 1908) (waiving default requirement when obligor fails to

manufacture and deliver goods within a fixed time); Dwyer v. Tulane

Educ. Fund's Adm'rs., 17 So. 796 (La. 1895) (waiving default

requirement when contractor cannot complete building on time); and,

thus, is not an exception to the return requirement.

Louisiana's “consumed by use” case law holds plaintiffs to a

very high standard: a product is consumed by use only if it

“obviously cannot be returned.” Walton, 77 So.2d at 566 (used

paint); see also, Rapides Grocery Co., Inc. v. Clopton, 131 So. 734

(La. 1930) (planted seeds); Greenburg v. Fourroux, 300 So.2d 641

(La. App. 3rd Cir. 1974) (dead puppy), Molbert Bros. Poultry & Egg

Co. v. Montgomery, 261 So.2d 311 (La. App. 3rd Cir. 1972) (dead

chickens). The mere fact that a product may be useless once

returned does not warrant waiver of the return requirement. See

Vance, 420 So.2d at 1035 (holding that defective custom carpet must

be returned to seller despite the fact that the returned carpet
 

8Appellants insistence that the award of a “discount for use”

changes the jury's award from rescission into quanti minoris is

simply incorrect. See Alexander v. Burroughs Corp., 359 So.2d 607,

610-11 (La. 1978) (holding that a credit for purchaser's use of a

product may be appropriate in rescission even in favor of a bad

faith seller or manufacturer); Peoples Furniture, 326 So.2d at 924

(awarding $600 credit for use of defective air-conditioning unit in

rescission case).

 

9We review a grant of summary judgment de novo, viewing the

facts and inferences in the light most favorable to the party

opposing the motion. See Hall v. Gillman, Inc., 81 F.3d 35, 36-37

(5th Cir. 1996). Summary judgment is appropriate if the record

discloses “that there is no genuine issue as to any material fact

14

would be useless to the seller). 

We have not discovered any evidence in the record suggesting

that it would be impossible to remove the siding from the apartment

buildings. In fact, testimony indicates that the siding can be

removed. Although it will certainly be costly to remove it and it

will be of little value once removed, Louisiana law mandates that

the parties be put back in the positions they held before the sale.

To this end, the court properly ordered the Appellees to return the

purchase price minus an appropriate discount for the value

Appellants' received from use of the shingles8 and to pay an

additional $177,000 for the “reasonable expenses” Appellants will

incur in removing the siding. In exchange, Appellants must return

the siding as a condition precedent to the judgment. 

INSURANCE COVERAGE

The trial court ruled on summary judgment that the C&I Policy

covers only the jury awards for diminution in value, costs, and

reasonable attorney's fees.9 The trial court based its decision on
and that the moving party is entitled to a judgment as a matter of

law.” Fed. R. Civ. P. 56(c); accord Celotex Corp. v. Catrett, 477

U.S. 317, 322 (1986).

15

the Policy's “work product exclusion” which provides that the

Policy does not apply to “property damage to [Shakertown's]

products arising out of such products or any part of such

products.” Both the Appellants and Shakertown challenge this

ruling and insist that the Policy covers the awards for the

purchase price and reasonable expenses as well as the above

mentioned awards. Their argument is three-fold. First, they argue

that the work product exclusion is irreconcilable with the Policy's

“warranty exception” which excludes coverage for Shakertown's

liability “under any contract or agreement” except for “a warranty

of fitness or quality of products or work which is implied by

statute.” Second, they contend that even if the policy is

unambiguous, the work product exclusion is inapplicable because the

Appellants incorporated the shingles into their buildings making

them no longer Shakertown's product. Finally, they allege that

under Louisiana law when a defective product is incorporated into

a larger work, work product exclusions do not apply to the costs

associated with repair and replacement of the defective product and

that, accordingly, the Policy covers the award of “reasonable

expenses.” 

I. Ambiguity

We agree with the trial court and find no conflict between the
16

work product exception and the warranty exception. Under Louisiana

law, work product exclusions provide no coverage to the insured for

damage to his own product or for repair and/or replacement of his

defective product. See Aetna Ins. Co. v. Grady White Boats, Inc.,

432 So.2d 1082, 1085 (La. App. 3d Cir. 1983). As we have

previously held, work product exclusions act simply to limit

coverage to damage to the products of parties other than the

insured. See Gulf Miss. Marine Corp. v. George Engine Co., Inc.,

697 F.2d 668, 670 (5th Cir. 1983). In this case, such a limited

policy exclusion does not wholly thwart the working of the warranty

exception, as redhibition contemplates monetary liability beyond

damages to the defective product itself. See LA. CIV. CODE art. 2545

(1968). As such, we see no ambiguity in the Policy and no error in

the trial court's resolution of this issue.

II. Incorporation of the Siding into the Structure

Appellants and Shakertown cite no Louisiana law suggesting

that incorporation of an insured's product into a larger structure

makes the product no longer the “insured's product.” Moreover, we

have not found any Louisiana authority suggesting that Civil Code

Articles 465 and 493.1 regarding the attachment of products to

immovables somehow work such a transformation. 

The closest that any court interpreting Louisiana law has come

to addressing Appellants' and Shakertown's argument is our decision

in Gulf Mississippi where we held that “where the work of the

insured involves assembling, repairing, or installing parts owned
17

by another entity, the completed whole is not regarded as the

insured's product within the meaning of [a similar] exclusion

clause.” Gulf Miss., 697 F.2d at 673. Inasmuch as “a

subcontractor who installs components owned by the principal into

a completed work” is not “the manufacturer of the whole,” see id.

at 672, Louisiana law does not recognize the argument that

incorporation of a product into a larger entity transforms that

product for “work product exclusion” purposes. Moreover, we note

that the non-Louisiana cases relied upon by the Appellants and

Shakertown involve substantially more drastic “incorporation” than

that which the siding has undergone. See Imperial Cas. & Indem.

Co. v. High Concrete Structures, 858 F.2d 128 (3rd Cir. 1988)

(converting raw steel into beveled washers); Firemen's Ins. Co. v.

Bauer Dental Studio, Inc., 805 F.2d 324 (8th Cir. 1986) (converting

manufacturer's gold crown into a patient's filling through dental

workmanship); Aetna Cas. & Sur. Co. v. M&S Indus., Inc., 827 P.2d

321, 327 (Wash. App. Div. 2 1992) (converting “plywood panels into

an entirely different product designed to contain poured concrete”

in which the plywood “was only one component of the finished

product”). Accordingly, the trial court did not err in rejecting

this argument.

III. Coverage for Repair and Replacement as Reasonable Expenses 

Appellants and Shakertown contend that the work product

exception does not exclude from coverage the repairing and

replacing of a defective product incorporated into a larger work;
18

and, thus, that the Policy covers the award of reasonable expenses.

This proposition is directly contrary to Louisiana law. First, as

as the trial court noted, the award for reasonable expenses is to

compensate for the original installation and subsequent removal

costs, not for repair and replacement of the defective siding.

Second, the cases cited by the Appellants and Shakertown reiterate

that work product exceptions properly exclude coverage for damage

caused to the defective product itself. See Gardner v. Lakvold,

521 So.2d 818, 820 (La. App. 2nd Cir. 1988); Superior Steel, Inc.

v. Bituminous Cas. Corp., 415 So.2d 354, 357 (La. App. 1st Cir.

1982). The award for reasonable expenses does no more than

compensate the Appellants for the damage to the siding that

resulted from their defective nature. Appellants' and Shakertown's

argument is simply an incorrect reading of Louisiana law. 

CONCLUSION

For the foregoing reasons we DISMISS the issue of litigationrelated expenses for lack of appellate jurisdiction and AFFIRM the

trial court's decision on all other counts.