Court Opinion

ID: 5090
Source: CourtListenerOpinion
Date Created: 2010-04-25 05:02:20+00
Date Added: 2024-06-11T12:11:49.553905
License: Public Domain

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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