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L.L.C. v. 1031 Canal, L.L.C.

Court of Appeals of Louisiana, Fourth Circuit

February 27, 2019

1031 CANAL, L.L.C.

          APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2015-08240, DIVISION "B-1" Honorable Rachael Johnson

          Lloyd N. Shields Jessica R. Derenbecker Jeffrey K. Prattini SHIELDS MOTT L.L.P. COUNSEL FOR PLAINTIFF/APPELLEE


          Court composed of Judge Rosemary Ledet, Judge Sandra Cabrina Jenkins, Judge Dale N. Atkins


         1031 Canal, L.L.C. ("1031 Canal"), appeals the trial court's April 5, 2018 judgment granting summary judgment in favor of Hamp's Construction, L.L.C. ("Hamp's"). Finding that a question of fact exists regarding whether Hamp's defaulted under the contract and whether such default, if it occurred, triggered a setoff under the contract, we reverse the trial court's judgment granting summary judgment and remand for further proceedings.

         Background Facts

         1031 Canal is the owner of immovable property located at 1031 Canal Street, New Orleans, Louisiana ("Project Site") on which an abandoned building was located. 1031 Canal, as owner and general contractor, entered into a subcontract with Hamp's obligating Hamp's to perform demolition work at the Project Site. When demolition work was being performed on May 28, 2015, a common wall between the Project Site and a neighboring property, Rainbow Clothing located at 1027 Canal Street ("Rainbow Building"), partially collapsed, causing damage to the common wall and to the Rainbow Building. The cause of the wall collapse is in dispute. At the time that the collapse of the common wall occurred, Hamp's had been paid all but $117, 040.00 of the original contract price.[1]On June 3, 2015, 1031 Canal sent a "Notice of Breach of the Construction Contract and Notice of Claim for Damages" to Hamp's.

         Subsequently, 1031 Canal refused to pay Hamp's the remaining balance due under the contract, claiming that Hamp's was at fault in the wall collapse, that 1031 Canal incurred damages as a result and was thus entitled to setoff the damages by the amount still owed under the contract. In light of 1031 Canal's failure to pay, Hamp's initiated this lawsuit against 1031 Canal for the $117, 040.00 contract balance by filing a Petition for Breach of Contract and Damages on August 27, 2015. In response, on June 20, 2016, 1031 Canal brought a reconventional demand against Hamp's and its insurer, Gray Insurance, for 1031 Canal's alleged damages associated with the wall collapse.[2] 1031 Canal also filed third-party demands against the project architect and the project engineer that alleged each was also the cause of the wall collapse.

         Hamp's filed a motion for summary judgment on August 3, 2017, requesting a judgment against 1031 Canal in the amount of $117, 040.00, the balance due under the contract. In its response, 1031 Canal pled the affirmative defense of "setoff". The trial court granted the motion for summary judgment and ordered judgment in favor of Hamp's in the amount of $117, 040.00 plus judicial interest from the date of demand but did not provide written reasons for its ruling.

         On appeal, 1031 Canal asserts that the trial court erred in finding there was no genuine issue of material fact despite the factual affidavit and exhibits submitted in opposition to the motion for summary judgment and in failing to apply La. C.C. art. 1901 to deny the motion for summary judgment in light of 1031 Canal's reconventional demand based on setoff and contractual default.

         Standard of Review

         An appellate court's review of a trial court's ruling on summary judgment is de novo, using the same criteria used by the trial court in deciding whether summary judgment should be granted. Lewis v. Jazz Casino Co., L.L.C., 2017-0935, p. 5 (La.App. 4 Cir. 4/26/18), 245 So.3d 68, 72, writ denied, 2018-0757 (La. 9/21/18), 252 So.3d 877. With limited exceptions not applicable in this case, the summary judgment procedure is designed to secure the just, speedy, and inexpensive determination of every action. La. C.C.P. art. 966 A (2). "The procedure is favored and shall be construed to accomplish these ends." Id. A summary judgment shall be granted if the pleadings, memoranda, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to material fact, and that the mover is entitled to judgment as a matter of law. La. C.C.P. art. 966 A (3) and (4). Factual inferences reasonably drawn from the evidence must be construed in favor of the party opposing the motion, and all doubts must be resolved in the opponent's favor. Fiveash v. Pat O'Brien's Bar, Inc., 2015-1230, p. 7 (La.App. 4 Cir. 9/14/16), 201 So.3d 912, 917. In determining whether an issue is genuine, courts cannot consider the merits, make credibility determinations, evaluate testimony, or weigh evidence. Id.

         The burden of proof on a motion for summary judgment rests with the mover. La. C.C. P. art. 966 D (1). However, if the mover will not bear the burden of proof at trial on the matter that is before the court on the motion for summary judgment, the mover's burden on the motion requires him only to point out to the court that there is an absence of factual support for one or more elements essential to the adverse party's claim, action, or defense. La. C.C.P. art. 966 D (1). Thereafter, if the adverse party fails to produce factual support sufficient to establish that he will be able to satisfy his evidentiary burden of proof at trial, there is no genuine issue of material fact.

         Because Hamp's clearly set forth that it was owed a balance under the subcontract, the burden shifts to 1031 Canal at trial and in a summary judgment to prove the affirmative defense of setoff. La. C.C.P. art. 966 D (1). An affirmative defense is a defense that "raises a new matter, which assuming the allegations in the petition are true, constitutes a defense to the action." Bates v. City of New Orleans, 2013-1153, 2013-1587, p. 10 (La.App. 4 Cir. 3/26/14), 137 So.3d 774, 782. See also Buck's Run Enterprises, Inc. v. Mapp Const., Inc., 1999-3054, p. 4 (La.App. 1 Cir. 2/16/01), 808 So.2d 428, 431 (holding that "[a] party claiming setoff as an affirmative defense has the burden of proving his claim."). Thus, 1031 Canal bears the burden of proof to establish a genuine issue of material fact such that Hamp's is not entitled to judgment as a matter of law.

         Hamp's based its entitlement to summary judgment on the fact that 1031 Canal could not establish it was due liquidated[3] damages as a matter of law pursuant to La. C.C. art. 1893.[4] Hamp's also claimed that the parties expressly excluded setoff for any claims the ...

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