Opinion
Civil Action No: 04-3098 Section: "J"(5).
June 9, 2005
ORDER AND REASONS
Before the Court is Slidella, L.L.C.'s Motion to Dismiss a cross-claim filed against it by cross-claim plaintiff, Commercial Flooring Mini Blinds, Inc. ("Commercial Flooring"). Rec. Doc.78. The motion is opposed by Commercial Flooring. Rec. Doc. 87. Slidella, L.L.C. ("Slidella") seeks dismissal on the ground that it has insulated itself from liability to subcontractor Commercial Flooring by complying with section 9:4802(C) of the Louisiana Private Works Act. Upon reviewing the record, the memoranda filed, the opposition, and the applicable law, the Court concludes that the motion should be GRANTED and Commercial Flooring's cross-claim to enforce a privilege against an immovable, pursuant to the Louisiana Private Works Act, La.Rev.Stat. § 9:4801, should be DISMISSED.
Background
This action arises out of a dispute over a construction contract. Slidella contracted for Flournoy Construction Company, L.L.C. ("Flournoy") to build Slidella an apartment complex in Slidell, Louisiana called Greenbrier Estates. Flournoy then entered into a number of subcontracts with material suppliers and subcontractors, including Commercial Flooring.In conjunction with the construction contract entered into with Slidella, Flournoy entered into a Performance Bond and a Payment Bond with Travelers Casualty Surety Company of America. Performance bonds guarantee the contractor will perform the contract, and payment bonds guarantee that all bills for labor and materials contracted for and used by the contractor will be paid by the surety if the contractor defaults. These bonds, which identify Slidella as "Owner" and Flournoy as "Contractor" are in the amount of $10,855,918. A Notice of Contract with the bonds attached was executed on August 5, 2002 by Slidella and Flournoy.
Flournoy initiated this lawsuit against Slidella claiming, inter alia, damages for breach of contract. Slidella counterclaimed and Flournoy then impleaded 23 subcontractors and material suppliers and their insurers, including Commercial Flooring.
Commercial Flooring filed a cross-claim against Slidella to enforce a lien and privilege for the outstanding balance owed to Commercial Flooring pursuant to its subcontract with plaintiff and counterclaim-defendant Flournoy.
Standard of Review
The Court may dismiss a complaint for failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). The Court will dismiss a plaintiff's complaint if it appears "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995). In making this determination, "the court must accept all well-pleaded facts as true and view them in the light most favorable to the plaintiff." Calhoun v. Hargrove, 312 F.3d 730, 733 (5th Cir. 2002).
Discussion
Commercial Flooring's claim arises under the Louisiana Private Works Act ("LPWA"), which imposes liability on owners for claims arising out of the performance of work done pursuant to a contract on the owner's property by subcontractors, laborers, and sellers despite a lack of contractual privity with the owner. La.Rev.Stat. § 9:4802(A). Claims against the owner are secured by a privilege on the immovable on which the work was done. La.Rev.Stat. § 9:4802(B); Newt Brown, Contractor, Inc. v. Michael Builders, Inc., 569 So.2d 288, 290 (La.App. 2d Cir. 1991). "However, La.Rev.Stat. 9:4802(C) creates an 'escape hatch' for the owner if he fulfills certain conditions." Id.
Under the § 9:4802(C) "escape hatch":
The owner is relieved of the claims against him and the privileges securing them when the claims arise from the performance of a contract by a general contractor for whom a bond is given and maintained as required by R.S. 9:4812 and when notice of the contract with the bond attached is properly and timely filed as required by R.S. 9:4811.
To avail itself of the escape hatch, the owner must assure that a bond for the general contractor has been furnished. Bowles Edens Co. v. H H Sewer Systems, Inc., 324 So.2d 528 (La.App. 1st Cir. 1975).
In this case, Slidella claims that it has met the statutory requirements of the above provisions because the cross-claim against Slidella arises from the performance of a contract by a general contractor, Flournoy, for whom a bond has been given and maintained by Travelers in compliance with § 9:4812, and a notice of contract with the bond attached has been properly and timely filed with the mortgage office of St Tammany Parish in accordance with § 9:4811.
Commercial Flooring has opposed the motion by suggesting that another section of the Louisiana Private Works Act, § 9:4802(E), conflicts with and precludes the application of § 9:4802(C) because it expressly allows suits to be brought by subcontractors against owners without mentioning the exception of § 9:4802(C).
The Court disagrees, because if this were the case, there would be no purpose to subsection C. This interpretation also conflicts with the comments which provide that "[s]ubsections D and E make it clear that the liability of the owner, contractor, and surety are distinct from and supplemental to any contractual obligations that may exist." La.Rev.Stat. § 9:4802, cmt. (e). In other words, the purpose of subsection E is to make it clear that privity of contract is not required between the subcontractor and owner for purposes of this Act. It was not intended to negate the exception clause of subsection C.
Commercial Flooring further argues that compliance with § 4802(C) by an owner does not extinguish any claims or privileges against the owner by subcontractors because § 9:4823 does not include § 9:4802(C) as a way in which a claim under the Private Works Act may be extinguished. However, Commercial Flooring misinterprets this section of the Act. Section 9:4823 was not intended to operate apart from or in exclusion to § 9:4802(C). It would make no sense at all for the legislature to include an escape hatch in § 9:4802(C) only to overrule the escape hatch in a subsequent provision. Instead, the two provisions operate in conjunction — § 9:4802(C) providing the owner with relief from any claims filed by a subcontractor and § 9:4823 listing the ways in which non-precluded claims and privileges may be extinguished.
The Court's interpretation is reinforced by the case law considering the statute. In Newt Brown Contractor, Inc. v. Michael Builders, Inc., 569 So.2d 288 (La.App. 2d Cir. 1991), the court correctly applied § 9:4802(C) by first discussing whether the owner was immune from liability by meeting the requirements of § 9:4802(C) and then analyzing any possible limitations to the owner's liability imposed by § 9:4823.
Commercial Flooring contends that if § 9:4802(C) is interpreted in the manner advanced by defendant Slidella, absurd consequences would result because a subcontractor could timely file suit against the owner without joining the contractor and surety pursuant to § 9:4802(E) but then, to continue the suit, the subcontractor would have to join the contractor and/or surety pursuant to Slidella's interpretation of § 9:4802(C). Also, Commercial Flooring contends that under Slidella's interpretation of the statute, a subcontractor would have no cause of action for recognition and enforcement of a claim and privilege against an owner who caused a notice of contract with a bond attached to be filed even though, under § 9:4823, the filing of the notice of contract and attached bond does not result in the extinguishment or cancellation of the claim and privilege the subcontractor seeks to enforce.
However, these consequences appear absurd because of the misapplication of § 9:4802(E) and § 9:4823 by Commercial Flooring. If these provisions are read as excepting those claims which the "escape hatch" of § 9:4802(C) precludes, then the Act, as a whole, is logical and clear. "Well accepted principles of statutory interpretation dictate that when a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written and no further interpretation may be made in search of the intent of the legislature." Russo v. Vasquez, 648 So.2d 879, 882 (La. 1995).
Commercial Flooring further asserts that the only benefit of an owner's compliance with § 9:4802(C) is provided in § 9:4841. This section authorizes an owner to invoke a concursus proceeding against all claimants, the contractor and the surety. La.Rev.Stat. § 9:4841(A). Under this provision, if the owner has "properly and timely fil(ed) notice of a contract and bond as required by § 9:4811 and § 9:4812" then a judgment on the rule shall be rendered "directing the claims or privileges to be cancelled by the recorder and declaring the owner discharged from further liability for such claims or limiting the claims and privileges to the amounts as may be owed by the owner or otherwise granting such relief to the owner as may be proper." La.Rev.Stat. § 9:4841(D).
Section 9:4841, like § 9:4802(E) and § 9:4823, makes no reference to § 9:4802(C). The fact that "properly and timely filing a notice of the contract and a bond" may lead to a successful concursus proceeding by the owner does not negate the applicability of § 9:4802(C) as an "escape hatch" for owners. The two provisions do not operate as exclusive to one another nor is § 9:4802(C) only applicable through the concursus proceedings of § 9:4841.
This position is supported by the case law which has dealt with § 9:4802(C) and in which no mention is made of the concursus proceedings of § 9:4841. Jefferson Door Co., Inc, v. Forman Constr., Inc., 836 So.2d 552, 555 (La.App. 5 Cir. 2002), states that pursuant to § 9:4802(C), an owner who has required a timely-filed notice of contract and a properly-recorded bond from the contractor can avoid personal liability to the lien claimants with whom the owner does not have contractual privity. If the owner complies with § 9:4802(C), the lien claimant's rights are restricted to recovery of a set amount against the surety company, plus whatever contractual privity rights they may have against the general contractor. Id.
Essentially, Commercial Flooring's argument is that § 9:4802(C) should be either "trumped" by or pigeon-holed into subsequent provisions of the Louisiana Private Works Act. This would not only be unreasonable but would defeat the intent of this legislation which is not only to protect those who furnish the services, labor, or material for the construction of the property for the owner when he fails to comply with the mandates of the law, but also to protect the owners when they comply with the Act's provisions.
The documents submitted by Slidella in support of the motion, which are public record, show Slidella's compliance with § 9:4802(C) and Commercial Flooring does not argue otherwise. A clear and plain reading of the statute relieves Slidella from the claim asserted by cross-claim plaintiff, Commercial Flooring. No facts have been alleged by Commercial Flooring which indicate that it is entitled to enforce its privilege against Slidella.
Documents submitted by Slidella which are part of the public record may be considered by the Court in ruling on a motion to dismiss, without converting the motion into one for summary judgment. Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017-18 (5th Cir. 1996).
Conclusion
For the foregoing reasons, Commercial Flooring can prove no set of facts in support of its claim that would entitle it to relief. Accordingly,
IT IS ORDERED that defendant's Motion to Dismiss Pursuant to Rule 12(b)(6) (Rec. Doc. 78) should be and is hereby GRANTED.