In Re: Tasch Inc ( 2002 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-31363
(Summary Calendar)
In The Matter Of: TASCH, INC., Debtor.
-----------------------------------------------------------------------------------------------------------------------
---
TASCH, INC., Appellee,
versus
DIAMOND OFFSHORE DRILLING, INC., Appellant.
Appeal from the United States District Court
for the Eastern District of Louisiana
(No. 98-CV-3746-G)
July 31, 2002
Before JOLLY, STEWART, and PARKER, Circuit Judges.
PER CURIAM:*
* Pursuant to 5th CIR. R. 47.5, the court has determined that this opinion should not be published and is not
precedent except under the limited circumstances set forth in 5th CIR. R. 47.5.4.
Diamond Offshore Drilling, Inc. (“Diamond”) appeals from the district court’s entry of
judgment in favor of Tasch, Inc. (“Tasch”) on its claim for breach of contract. For the following
reasons, we AFFIRM.
FACTUAL AND PROCEDURAL HISTORY
The present controversy arises out of a contract dispute concerning painting and sandblasting
services provided by Tasch. Tasch performed these services on a semi-submersible drilling rig
operated and owned by Diamond. On March 5, 1997, Tasch entered into a sub-contract with Sabine
Offshore Services, Inc. ("Sabine"), a corporation principally engaged in marine service activities. This
contract provided that Tasch would perform painting and sandblasting services to the underside of
the semi-submersible drilling rig, the Ocean Century, which was owned and operated by Diamond,
and was docked at Sabine's facilities. On May 5, 1997, Tasch and Sabine entered into a second
agreement for painting and sandblasting of the topside of the Ocean Century. On October 16, 1997,
Diamond suspended Tasch's performance. Prior to the suspension of performance, Tasch had
completed the work described in the March 5th agreement and approximately sixty-three percent of
the work provided for in the May 5th agreement. Tasch received $1,449,229 for these services.
On October 20, 1997, Tasch filed for Chapter 11 bankruptcy in the United States Bankruptcy
Court for the Eastern District of Louisiana. On March 9, 1998, the bankruptcy court granted Tasch's
motion to compel Sabine to turnover $53,398.98. On August 3, 1998, the bankruptcy court signed
an Order of Confirmation of plaintiff's Plan of Reorganization.
Tasch filed suit alleging that Diamond breached an oral contract for additional work that
became necessary because of Diamond's interference during the course of Tasch's performance on
the March 5th agreement. Tasch contends that after it began work, Diamond ordered that steel
2
replacement work be done by third parties on the Ocean Century, and that this replacement work
interfered with Tasch's performance and profitability. Tasch asserts that it made repeated complaints
to Diamond personnel about this interference and resulting delays, and that Diamond orally agreed
to compensate Tasch for such delays and such additional work required by t he steel replacement
work. Additionally, Tasch alleges that Sabine and Diamond did not pay the full amount owed under
the original contract price and for agreed upon additions to the original contract.
On February 8, 1999, the district court found the present action to be a non-core proceeding
otherwise related to a case under Chapter 11. In re Tasch, Inc., Nos. 97-15901 JAB & 98-1174,
1999 WL 64959, at *2 (E.D. La. Feb. 8, 1999). The matter was tried before a bankruptcy judge on
November 27th and 28th, and December 5th and 6th, 2000. On April 17, 2001, the bankruptcy court
submitted Proposed Findings of Fact and Conclusions of Law. It recommended that judgment be
entered in favor of Tasch and against Diamond in the amount of $450,000, as a result of an oral
contract between Tasch and Diamond. It also recommended judgment in favor of Tasch and against
Diamond and Sabine in the amount of $95,452, the unpaid balance for work under the original
contract with subsequent modifications. The defendants submitted objections to the proposed
findings. Tasch requested that judgment be entered in accordance with the recommendation. The
district court adopted the bankruptcy court’s Proposed Findings of Fact and Conclusions of Law and
entered judgment in favor of Tasch and against Diamond in the amount of $450,000, together with
prejudgment interest from October 21, 1998 to the dat e of entry of the judgment, post-judgment
interest at the federal legal rate, and costs. It further ordered that judgment be entered in favor of
Tasch and against defendants Diamond and Sabine in the amount of $95,452, in solido, together with
3
pre-judgment interest from October 21, 1998 to the date of entry of the judgment, prejudgment
interest at the federal legal rate, and costs. Diamond appeals.
STANDARD OF REVIEW
We review the bankruptcy court’s findings of fact under a “clearly erroneous” standard. FED.
R. CIV. P. 52(a); In re United States Abatement Corp., 79 F.3d 393, 397 (5th Cir. 1996). “If a finding
is not supported by substantial evidence, it will be found to be clearly erroneous.” 9A ALAN WRIGHT
& ARTHUR R. MILLER, 9A FEDERAL PRACTICE & PROCEDURE, § 2585 (1995). When the district
court has affirmed the bankruptcy court's findings, the review for clear error is strict. Traina v.
Whitney Nat’l Bank, 109 F.3d 244, 246 (5th Cir. 1997). We review mixed questions of law and fact,
as well as pure questions of law, de novo. In re Bass, 171 F.3d 1016, 1021 (5th Cir. 1999).
APPLICABLE LAW
Any contract for the repair of a vessel is a maritime contract, and therefore is governed by
maritime law. Todd Shipyards Corp. v. Turbine Serv., Inc., 674 F.2d 401, 412 (5th Cir. 1982). A
"vessel" is defined as a structure designed or utilized for "transportation of passengers, cargo or
equipment from place to place across navigable waters." Manuel v. P.A.W. Drilling & Well Serv.,
Inc., 135 F.3d 344, 347 (5th Cir. 1998). Courts have held that, for the purposes of maritime law, a
submersible oil drilling rig is a vessel. Id. at 348 (citing cases where a variety of special purpose
structures were held to be vessels for the purpose of maritime law). Because the Ocean Century, a
semi-submersible drilling rig, is a vessel, any contracts for work on the Ocean Century must be
construed in accordance with general maritime law.
“[G]eneral maritime law, where not previously developed, is determined by judicial analysis
of congressional enactments in the field of maritime law, relevant state legislation and state common
4
law.” Williams v. Carnival Cruise Lines, Inc., 907 F. Supp. 403, 405 (S.D. Fla. 1995) (citing Miles
v. Apex Marine Corp., 498 U.S. 19, 27 (1990)). "Drawn from state and federal sources, the general
maritime law is an amalgam of traditional common-law rules, modifications of those rules, and newly
created rules." E. River S.S. Corp. v. Transam. Delaval, Inc., 476 U.S. 858, 864-65 (1986). The
Supreme Court has recognized that maritime law, in the absence of a statute, is “developed by the
judiciary.” Id. at 864.
In maritime contract disputes, federal courts apply general principles of contract law. 1
THOMAS J. SCHOENBAUM, ADMIRALTY AND MARITIME LAW § 5-1 (2d ed. 1994) (citing Har-Win,
Inc. v. Consolidated Grain & Barge Co., 794 F.2d 985 (5th Cir. 1986)). However, to the extent that
it is not inconsistent with admiralty principles, st ate contract law may be applicable to maritime
contracts. Ham Marine, Inc. v. Dresser Indus., Inc., 72 F.3d 454, 459 (5th Cir. 1995).
DISCUSSION
On appeal, Diamond asserts six points of error. It maintains that: (1) the district court’s
conclusion that an oral contract existed between Diamond and Tasch was clearly erroneous because
there was insufficient evidence of the contract’s terms, (2) the district court’s conclusion that a
principal-agent relationship existed between Diamond and Sabine was clearly erroneous, (3) the
district court’s finding regarding estoppel was erroneous, (4) the district court erred in its finding that
Diamond interfered with or delayed Tasch’s performance of the contract, (5) Diamond failed to
comply with pretrial disclosure deadlines for testifying experts, and (6) the district court’s conclusion
regarding damages was clearly erroneous.
5
I. Existence of an Oral Contract
Diamond argues that the district court erred in finding that an oral contract existed because
no contract can exist when the consideration is not defined. It asserts that there was no testimony
regarding what compensation Diamond would give to Tasch for its services. Diamond also asserts,
relying heavily on Austin Elcon Corp. v. Avco Corp., 590 F. Supp. 507 (W.D. Tex. 1984), that the
agreements provided that any alterations must be in writing and, therefore, any requests for additional
work or promises to compensate, needed to be in writing to be enforceable.
Courts have consistently held that maritime law generally regards oral contracts as valid. See,
e.g., Kossick v. United Fruit Co., 365 U.S. 731, 734 (1961). It is well settled that a plaintiff suing
on a contract, whether written or oral, is required to establish the basic elements of a contract, i.e.,
offer, acceptance, and consideration. JOHN D. CALAMARI & JOSEPH M. PERILLO, CONTRACTS §§ 2.1,
4.1 (4th ed. 1998).
We agree with the district court’s conclusion that there is sufficient evidence that Tasch has
established the basic elements of an oral contract with Diamond. Tasch offered the testimony of
several witnesses who stated that representatives of Diamond verbally told them to do additional
work and that Tasch "would be taken care of" at the end of the job. This evidence is sufficient to
show that Diamond made Tasch an offer, which Tasch accepted by performing such additional work.
The consideration for this oral contract is that Tasch agreed to do additional work in exchange for
the promise of additional compensation. There was evidence at trial showing that there was a
meeting of the minds between Diamond and Tasch--Diamond wanted the delays handled and asked
for additional work to be done by Tasch, and Tasch handled the delays and did additional work.
6
Austin Elcon lends little support to Diamond. In Austin Elcon, the issue presented was
whether a requirement in a purchase order that modifications be in writing was enforceable under
Texas law and, if so, whether Avco waived the requirement or was estopped from enforcing it. 590
F. Supp. at 513. The court held that there was insufficient evidence to conclude that Avco waived
the requirement that modifications to the contract be executed in writing or to conclude that Avco's
conduct estopped it from enforcing that requirement. Austin Elcon's main evidence was testimony
that Avco “would take care of it down the line.” Id. It is important to note that in Austin Elcon, the
court found that there were “few conversations about the alleged extra work,” and that Austin Elcon
did “not maintain that the assurance was later repeated.” Id. In the instant matter, there was
significant testimony about Diamond’s assurances to Tasch. Moreover, this issue is tied up with
issues of witness credibility. The bankruptcy judge was in the best position to determine the witness’
credibility and we will not disturb these findings unless clearly erroneous. We find nothing erroneous
in the district court’s conclusion that an oral contract existed between Diamond and Tasch.
II. Principal-Agent Relationship
Diamond argues that the district court erroneously concluded that a principal-agent
relationship existed between Diamond and Sabine.
A party may be held responsible for the acts of its purported agent under three agency
theories. Wells Fargo Bus. Credit v. Ben Kozloff, Inc., 695 F.2d 940, 944 (5th Cir. 1983). The first
requires that the principal have endowed its agent with actual authority, express or implied, to carry
out its wishes. Id. To create an agency relationship based on actual authority, such authority must
have been delegated to the agent either by words that expressly or directly authorize him to do a
delegable act, or such authority may be implied from the facts and circumstances attending the
7
transaction in question. Implied authority may arise either independent of any express grant of
authority, as from some manifestation by the principal that the particular authority in question shall
exist in the agent, or it may arise as a necessary or reasonable implication required to effectuate some
other authority expressly conferred by the principal. Id. at 944-45.
The second method by which a third party can become bound by the acts of its agent is based
on apparent authority. Apparent authority arises when the principal, either intentionally or by lack of
ordinary care, induces t hird persons to believe an individual is his agent even though no actual
authority, express or implied, has been granted to such individual. Id. at 945.
The third theory under which a principal may be bound by the acts of its purported agent is
one based on estoppel. A party basing its claim upon the rules of estoppel must show not only
reliance, which is required when the claim is based on apparent authority, but also a change of
position such that it would be unjust for the speaker to deny the truth of his words. Id. at 946.
We agree with the district court’s conclusion that there was evidence presented at trial that
establishes a principal-agent relationship existed between Diamond and Sabine. Jack Allen (“Allen”),
a Tasch supervisor, testified that Tasch was interested in pursuing Diamond as a customer from 1993
to 1996. Allen testified that when Tasch had the opportunity to inspect the Ocean Century prior to
signing any agreement, he met with Robert Garcin (“Garcin”), Diamond's operation manager on the
Ocean Century project. Allen further testified that he met with both Garcin and Ken Osborne of
Sabine, prior to executing the March 5th contract. Garcin admitted that he met with Allen prior to
Tasch's submission of a bid for the underside work. Garcin also testified that during this meeting he
asked Tasch what type of work they had done in the past and if they had done any blasting or
painting. At Diamond's direction, the March 5th and May 5th contracts were between Tasch and
8
Sabine. Garcin testified that the contracts were structured this way because Tasch was not on
Diamond's approved vendor list and did not have a master service agreement. Most importantly,
Garcin admitted at trial that a contract was written between Diamond and Sabine directing Sabine
to contract the underside work to Tasch. Garcin further testified that this was done because his
technical people (Diamond employees) liked what Tasch had offered. This testimony establishes that
Diamond used Sabine as its agent in contracting with Tasch, and that Sabine had been granted
authority to act on behalf of Diamond in contracting with Tasch. This testimony also shows that
Tasch wanted to do business with Diamond and that Diamond wanted Tasch to do work on the
Ocean Century. The testimony, by Garcin's own admission, shows that Sabine was used as a conduit
of convenience, or agent, for this purpose. Although the district court did not elaborate upon which
theory it relied on in determining that an agency relationship existed, the testimony at trial supports
the view that there was apparent authority to act as an agent. As such, the district court did not err
in concluding that a principal-agent relationship existed between Diamond and Sabine.
III. Estoppel
The district court concluded that an alternative ground for liability existed against Diamond.
It found that if there was no oral contract between the parties, Diamond would still be liable to Tasch
under the theory of estoppel. Because we have already concluded that the court correctly found that
an oral contract existed, we do not reach this issue.
IV. Diamond’s Interference with Tasch’s Performance
Diamond asserts that there is insufficient evidence to support the finding that it interfered with
Tasch’s performance of the contract. The bankruptcy judge found that Diamond employees, agents,
and subcontractors directly controlled, altered, and interfered with Tasch's work. He concluded that
9
welding work on the heliport continuously interfered with Tasch's work on the topside. He also
found that Diamond directly interrupted Tasch's method of performance, causing a loss to Tasch.
Moreover, the court found that as a result of the interruptions, Tasch's performance was seriously
delayed, work had to be redone, and the welders tore leaks in the shrink-wrap, which necessitated
repairs to the containment process. In addition, Allen testified that the delay to Tasch was discussed
and complained about on a regular basis. He said he discussed it with the welders on the rig, with
the Diamond employees, and several times with Garcin. He also testified that Tasch was continually
told that delays would only last a few more days.
The bankruptcy judge found Tasch's description of events to be more credible than the
defendants' description. As noted previously, the bankruptcy court's findings as to witness credibility
are entitled to considerable deference due to its position as factfinder. See, e.g., Canal Barge Co.,
Inc. v. Torco Oil Co., 220 F.3d 370, 375 (5th Cir. 2000). The bankruptcy judge heard all of the
testimony in this action and was in the best position to make determinations of witness credibility.
Further, after reviewing the record, we conclude that a finding of interference by Diamond is
supported by, and consistent with, the evidence.
V. Pretrial Disclosure
Diamond argues that Tasch did not comply with the district court’s order, which required
Tasch to provide Sabine and Diamond with a report of its testifying experts’ opinions no later than
ninety days prior to the final pretrial conference. Diamond asserts that Allen testified about monetary
damages sust ained by Tasch, but the exhibits used by Allen were never included in the Amended
Pretrial Order and were not provided to Diamond. Tasch counters that it timely provided Diamond
10
with its expert’s report. It also maintains that the exhibits used by Allen were a summary of other
documents produced. Tasch also argues that Allen was not an expert, but a victim.
The court, in overruling Diamond’s objection to the exhibits, found that the exhibits reflected
testimony and/or exhibits already in the record. We agree. Moreover, Diamond’s contention that
Allen’s testimony constituted expert testimony is meritless.
VI. Damages
Diamond asserts that there was insufficient evidence of damages and that Tasch is not entitled
to quantum meruit damages. We disagree. Diamond’s arguments regarding the insufficiency of the
evidence are largely a rehashing of its other contentions, including its argument that there was no oral
contract. Moreover, “[o]nce a subcontractor has established a breach of contract by the prime, he
can recover the value of the work he has done or the service he has rendered. In other words, he is
entitled to a quantum meruit.” Citizens Nat’l Bank of Orlando v. Vitt, 367 F.2d 541, 546 (5th Cir.
1966) (emphasis added) (citation omitted). As such, we find no error.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s entry of judgment in favor of
Tasch.
AFFIRMED.
11