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Cotton Exchange Investment v. Xcel Air Conditioning

United States District Court, E.D. Louisiana

May 3, 2019

COTTON EXCHANGE INVESTMENT
v.
XCEL AIR CONDITIONING ET AL.

         SECTION "L" (5)

          ORDER & REASONS

          ELDON E. FALLON U.S. DISTRICT COURT JUDGE.

         Before the Court is a motion for summary judgment filed by Defendant John T. Campo & Associates (“Campo”). R. Doc. 162. The Motion is opposed. R. Doc. 169. Campo has filed a reply. R. Doc. 178. The Court having heard oral argument on the motion on April 22, 2019, R. Doc. 179, rules as follows.

         I. BACKGROUND

         Plaintiff Cotton Exchange Investment Properties LLC (“Cotton Exchange”) alleges its hotel was damaged as a result of faulty workmanship performed by Defendants Commercial Renovation Services, Inc. (“CRS”) and Campo during the hotel's renovation. R. Doc. 23 at 2. Plaintiff further contends the hotel also sustained damages as a result of defective maintenance and repairs to the hotel's HVAC system performed by Defendant Xcel Air Conditioning Services, Inc. (“Xcel”). In the present suit, Cotton Exchange seeks recovery for its damages.

         In its complaint, Plaintiff alleges that in 2014, Supreme Bright New Orleans LLC (“Supreme Bright”), which owned the hotel at the time, executed several contracts for its renovation. R. Doc. 23 at 2. In January 2014, Supreme Bright contracted with Xcel to provide HVAC services, including the maintenance of the hotel's cooling tower, roof top units, and chilled water pumps. R. Doc. 1 at 3. That same month, Supreme Bright entered into a contract with Campo (the “Architectural Agreement”), whereby Campo would provide architectural, design, and engineering services. R. Doc. 23 at 4. A few months later, Supreme Bright contracted with CRS to serve as general contractor for the project. R. Doc. 23 at 2. In June 2015, the hotel was bought by Pacific Hospitality Group (“PHG”), who assumed the rights to all three contracts. R. Doc. 1 at 3. PHG subsequently assigned all of its rights, title, and interest in the purchase to Plaintiff, including the contracts with Xcel, Campo, and CRS. R. Doc. 1 at 4. Plaintiff alleges that under the terms of their respective contracts, Cotton Exchange was indemnified by all three Defendants for any property damage caused by their negligent acts or omissions related to the scope of their work. R. Doc. 1 at 5; R. Doc. 23 at 3-4.

         According to Cotton Exchange, the hotel suffered serious moisture damage as a result of Defendants' faulty workmanship, including water damaged walls and floors due to exposed chilled water piping, missing or improperly sealed insulation, and cracked or leaking draining pans. R. Doc. 23 at 7. Plaintiff claims it had to close the hotel due to this extensive damage. R. Doc. 23 at 6. Plaintiff canceled the HVAC contract pursuant to its terms in December 2015 and notified Xcel of the damage on three occasions. R. Doc. 1 at 5, 6. Xcel did not respond to the demand for indemnity. R. Doc. 1 at 6. Additionally, Plaintiff avers it demanded indemnity from CRS and Campo, but was also unsuccessful in these demands. R. Doc. 23 at 7. As a consequence, Plaintiff filed suit on December 16, 2016, bringing breach of contract and negligence claims against all three Defendants and breach of warranty of good workmanship claims against CRS and Campo. R. Doc. 23 at 7-16.[1]

         On June 25, 2018, Campo filed a third-party complaint against Cosentini Associates, Inc. (“Cosentini”), alleging that “on or about August 14, 2013, Cosentini submitted a proposal to Campo ‘to provide MEP/FP engineering design services' for the [hotel renovation] project.” R. Doc. 88 at ¶ 3. Campo further contends that, because “Cosentiti was responsible for providing MEP/FP engineering design services for the project, . . . Cosentini, not Campo, is responsible, to the extent any exist, which is disputed, for any error or omissions related to the MEP/FP design and/or the design services provided [by] Cosentini related to the MEP/FP design.” Id. at ¶ 12.

         Plaintiff and Defendant CRS filed a consent motion to stay proceedings against CRS pending the completion of arbitration, R. Doc. 44 at 1, which the Court granted on June 14, 2017, R. Doc. 45 at 1. The Court denied Defendant Xcel's motions to dismiss in August 2017. R. Doc. 51. On October 10, 2018, Cosentini filed a motion seeking to compel arbitration of Campo's claims against it, R. Doc. 111, which the Court granted on November 8, 2018, R. Doc. 127. On November 9, 2018, the Court severed Campo's third-party complaint against Cosentini from the main action. R. Doc. 134.

         II. PRESENT MOTION

         In the instant motion, Campo contends Cotton Exchange lacks standing to assert any contract claims arising under the Architectural Agreement against Campo, as Cotton Exchange was never validly assigned any rights to the Agreement. R. Doc. 162-1 at 10. Thus, because there is no privity of contract between Cotton Exchange and Campo, Campo argues Cotton Exchange has no cause of action for breach of contract or breach of the warranty of good workmanship. Id. First, Campo contends the sale and assignment of rights from Supreme Bright to PHG and subsequently to Cotton Exchange did not include the Architectural Agreement held between Campo and Supreme Bright. According to Campo, for the contract to have been included as an assigned operating agreement transferred from Supreme Bright to PHG under Section 2.1.8 of the purchase agreement, the Architectural Agreement “had to either (1) be assumed by PHG pursuant to the terms of an Assignment and Assumption Agreement or (2) listed as an Assumed Contract in Schedule 2.1.8 to the PHG Purchase Agreement, ” but that the Architectural Agreement was not assigned under either option. Id. at 15. Further, Campo submits PHG did not assume the rights to the Agreement pursuant to section 2.1.14, because that section requires Supreme Bright to provide copies of the Architectural Agreement to PHG, which Supreme Bright did not do. Id. at 15-16. Finally, Campo argues Supreme Bright did not confer Cotton Exchange rights in the Architectural Agreement directly. Id. at 16.

         Next, Campo contends the contract it held with Supreme Bright contained language requiring Supreme Bright to obtain Campo's consent before assigning Supreme Bright's rights to a third party, and that, because Cotton Exchange “has no evidence that Campo provided written consent to any assignment of rights in the Architectural Agreement, [Cotton Exchange] cannot prove that it is an assignee to the Architectural Agreement.” Id. at 13. Thus, even if subsequent amendments to the sales contract between Supreme Bright and Cotton Exchange were made to include the Agreement, which Campo denies, these amendments did not cure Supreme Bright's failure to obtain Campo's consent for the assignment, as the Architectural Agreement requires. Id. at 17.

         With respect to Cotton Exchange's breach of warranty claims, Campo argues, even if the Agreement were validly transferred to Cotton Exchange, Campo made no express warranty and, therefore, Cotton Exchange “cannot assert a breach of warranty of good workmanship claim against Campo for any express warranty.” Id. at 18. Moreover, Campo argues Cotton Exchange cannot bring breach of warranty claims pursuant to any implied warranties, as “the implied warranty of good workmanship is only implied from a building contract, ” not a contract for professional services, such as the Architectural Agreement. Id. at 18-19. Finally, Campo contends that, even if the Architectural Agreement includes an implied warranty, “the warranty of good workmanship implied in a building contract is also not automatically transferred to the subsequent purchaser of immovable property.” Id. at 19.

         Additionally, Campo moves for summary judgment on Cotton Exchange's negligence claims against it, as it avers Supreme Bright never conveyed a personal right to sue to either PHG or Cotton Exchange. Id. at 20. Because the right to sue for damage sustained to property before a sale is a personal right of the person or entity who owned the property at the time the damage was inflicted, and personal rights of the former owner do not pass with the property in an act of sale in the absence of an express and specific assignment of that ...


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