Conmaco/Rector L.P. v. L&A Contracting Company
FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by Judge Jane Triche Milazzo.(ecm)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
L&A CONTRACTING COMPANY
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This is a civil action arising out of an equipment lease between Conmaco/Rector, L.P.
("Conmaco") and L&A Contracting Company ("L&A"). Conmaco seeks money damages for amounts
allegedly due and owing under the lease. Whether Conmaco can prevail turns largely on the
proper commencement date for rental payments. L&A denies breaching the equipment lease and
asserts a counterclaim for breach of the warranty against vices or defects. The counterclaim
requires the Court to determine whether Conmaco knew or should have known the equipment
leased was defective.
This matter was tried before the undersigned without a jury. Having considered the
evidence admitted at trial and the arguments of counsel, the Court announces its Findings of Fact
and Conclusions of Law pursuant to Federal Rule of Civil Procedure 52. To the extent a finding of
fact constitutes a conclusion of law, the Court adopts it as such. To the extent a conclusion of law
constitutes a finding of fact, the Court adopts it as such.
FINDINGS OF FACT
There are two primary issues in this case. First, the Court must determine the
commencement date of the lease. Conmaco contends that date is November 1, 2011; L&A argues
the date was December 20, 2011. Second, the Court must determine whether L&A has waived its
right to recover damages for breach of the warranty against vices or defects. The issue presented
is whether Conmaco knew or should have known the equipment leased was defective. For
purposes of clarity, the Court separates its findings of fact with respect to each issue.
I. Commencement Date of the Lease
The Plaintiff and Counterclaim Defendant in this matter is Conmaco—a Delaware limited
partnership that sells, services, and rents construction equipment. This equipment includes
winches and pumps for offshore operations, pile‐driving equipment, and lifting equipment.
The Defendant and Counterclaim Plaintiff is L&A. L&A is a Mississippi corporation that
performs contracting work in the Gulf region.
Conmaco and L&A have maintained a business relationship for approximately twenty‐five
years. Most of this business involves the sale and rental of pile‐driving equipement.
Some time in early 2011, L&A won a contract to perform flood control work on the Houma
Navigation Canal (the "HNC Project"). The HNC Project required L&A to drive several piles
approximately 90 inches in diameter into the Canal.
Michael Favoloro ("Favoloro") is the general manager of Conmaco. When Favoloro learned
in March 2011 that L&A had been awarded the HNC Project, he immediately contacted his
long‐time business associate Charlie Sutherland ("Sutherland"), who serves as L&A's vice
president. On behalf of Conmaco, Favoloro offered to provide a large pile‐driving hammer
manufactured by a Korean company, Shinsigae Powerquip, Inc. ("BRUCE"), to assist L&A
with the HNC Project.
On March 18, 2011, Conmaco sent a proposal to L&A for the sale and lease of a BRUCE
Model SGH‐3015 Acting Hydraulic Impact Pile Hammer (the "SGH‐3015") and certain
component parts, which L&A rejected. Conmaco submitted a second proposal dated March
29, 2011 (the "Second Proposal").
Walt Robbins ("Robbins")—an estimator for L&A—emailed Favoloro on April 28, 2011 and
requested Conmaco to "[b]egin acquiring [the SGH 3015]. We will be needing it onsite by
the first of November of this year." Robbins works under Cory Bielstein ("Bielstein") and
does not have authority to contract on behalf of L&A.
On May 2, 2011, Favaloro emailed Bielstein and Robbins, and carbon copied Sutherland.
Favoloro stated that the SGH‐0315 offered in the Second Proposal was committed to
another project "and may not be available for [L&A's] November 1, 2011 required delivery
date." Favoloro further advised that Conmaco was considering purchasing a new SGH‐3015
from BRUCE in order to accommodate L&A's request for a November 1, 2011 delivery.
On May 23, 2011, Favaloro emailed Sutherland directly, stating that Conmaco had reached
a deal with BRUCE but that it desired to revise the terms of the Second Proposal. At
Sutherland's request, Conmaco sent a revised lease (the "Lease"), which the parties
executed on or about May 23, 2011.
The equipment leased was an SGH‐3015 together with its component parts (the
"Hammer"), a pile skirt, a drive cap, and cap housing. The rental rate was $130,000.00 per
month with a three‐month minimum. The rent for the first three months was due in
advance: the first month was due when the Lease was signed; the second month was due
upon shipment from BRUCE's factory in Korea; and the third month was due upon delivery
of the Hammer to L&A's jobsite in Houma, Louisiana. Subsequent months would be due
"net 30 days from invoice date" and "payable . . . immediately upon [L&A's] receipt of an
invoice from [Conmaco]." The Lease further provided that L&A was responsible for the
freight charges from BRUCE's factory to L&A's jobsite ("Freight Out"), and for freight
charges from L&A's jobsite to Conmaco's yard in Belle Chasse, Louisiana ("Freight In").
The Lease also contains the following provisions:
THE RENTAL TERMS HEREUNDER SHALL COMMENCE ON THE
EARLIER OF THE DAY THAT THE EQUIPMENT LEAVES
LESSOR'S YARD FOR DELIVERY TO LESSEE OR THE RENTAL
COMMENCEMENT DATE SET FORTH IN THE SPECIAL TERMS
SECTION, ABOVE, AND SHALL TERMINATE ON THE LATER OF
THE EXPIRATION OF THE TERM SET FORTH IN THE SPECIAL
TERMS SECTION, ABOVE, OR ON THE DAY THAT THE
EQUIPMENT IS RETURNED TO LESSOR'S YARD. Lessee agrees
that it shall inspect the Equipment immediately upon its
arrival at the jobsite and within 72 hours thereafter, deliver
to Lessor written notice rejecting the Equipment due to a
specific condition or defect which renders the same
inoperable or defective in whole or in part. Lessee's failure
to deliver such notice to Lessor within such period shall
constitute an acknowledgment by the Lessee that the
Equipment has been delivered and installed by the Lessor as
required by this Lease, that the Equipment is in good working
order and is acceptable in all respects for Lessee's purposes
and that Lessee has accepted the Equipment 'AS IS, WHERE‐
IS" condition. If the Lessee gives Lessor written notice of
rejection, such notice shall specify, in detail, any defect or
other objection to the Equipment. UNLESS OTHERWISE
STATED HEREIN, LESSEE AGREES TO PAY THE ENTIRE COST OF
TRUCKING AND ANY OTHER FREIGHT CHARGES TO AND
FROM LESSOR'S YARD AND THE JOBSITE
LESSOR HAS MADE NO REPRESENTATION OF WARRANTY OF
ANY KIND, NATURE, OR DESCRIPTION, EXPRESS OR IMPLIED,
WITH RESPECT TO THE EQUIPMENT, INCLUDING, WITHOUT
LIMITATION, THE CONDITION OF THE EQUIPMENT, ITS
MERCHANTIBILITY OR ITS FITNESS FOR ANY PARTICULAR
PURPOSE; EXCEPT THAT LESSOR WARRANTS THAT IT WILL
HAVE TITLE TO THE EQUIPMENT AT THE TIME OF DELIVERY
THEREOF. AS TO LESSOR, THEREFORE, LESSEE EXPRESSLY
AGREES THAT IT LEASES THE EQUIPMENT “AS IS.” LESSOR
SHALL NOT BE LIABLE FOR ANY DAMAGES BY REASON OF
FAILURE OF THE EQUIPMENT TO OPERATE OR FAULTY
OPERATION OF THE EQUIPMENT OR SYSTEM. LESSOR SHALL
NOT BE HELD RESPONSIBLE FOR ANY DIRECT OR
CONSEQUENTIAL DAMAGES OR LOSSES RESULTING FROM
THE INSTALLATION, OPERATION, OR USE OF THE
EQUIPMENT. NO DEFECT OR UNFITNESS OF THE EQUIPMENT
SHALL RELIEVE LESSEE OF THE OBLIGATION TO PAY RENT OR
OTHERWISE PERFORM UNDER THE LEASE. LESSEE
ACKNOWLEDGES THAT THE FOREGOING LIMITATIONS OF
WARRANTY HAVE BEEN BROUGHT TO ITS ATTENTION BY
LESSOR AND THAT IT HAS READ AND UNDERSTANDS THE
THE VENDOR, METHOD OF SHIPMENT, MAKE, MODEL,
SPECIFICATIONS, PERFORMANCE, AND ALL OTHER MATTERS
RELATING TO THE ORDERING, DELIVERY, OPERATION, AND
PERFORMANCE OF THE EQUIPMENT HAVE BEEN SELECTED
AND DETERMINED BY LESSEE. LESSOR SHALL NOT BE LIABLE
FOR LOSS OR DAMAGE OCCASIONED BY ANY CAUSE,
CIRCUMSTANCE, OR EVENT OF WHATSOEVER NATURE,
INCLUDING BUT NOT LIMITED TO FAILURE OF OR DELAY IN
DELIVERY, DELIVERY TO THE WRONG PLACE, DELIVERY OF
IMPROPER EQUIPMENT OR PROPERTY OTHER THAN THE
EQUIPMENT, DAMAGE TO THE EQUIPME NT,
GOVERNMENTAL REGULATION, STRIKES, STORMS, WAR
EMERGENCIES, LABOR TROUBLES, BELATED RECEIPT OF
MATERIALS, FIRES, FLOODS, WATER, ACTS OF GOD OR
OTHER CIRCUMSTANCES OF LIKE OR UNLIKE NATURE.
The "Special Terms Section" referenced in paragraph 2 of the Lease provides in pertinent
part as follows: "Rental Commencement Date: Approximately November, 2011 (Exact date
The Lease is signed by Favoloro and Sutherland, and contains the latter's initials on each
On May 24, 2011, Conmaco issued invoice no. 13208 for the first month's rent, which L&A
paid in full the next day.
On September 15, 2011, the Hammer shipped from BRUCE's factory. Accordingly, Conmaco
issued invoice no. 13591 for the second month's rent, which L&A paid in full.1
On or about September 28, 2011, Favorolo received a telephone call from L&A's project
manager, Lynn Cox ("Cox"). Cox informed Favoloro that L&A would be unable to secure the
derrick crane required to operate the Hammer until early January. Thus, L&A would not
need the Hammer until that time.
On September 28, 2011, Favoloro emailed the president of Conmaco, Ralph Ross ("Ross"),
and the branch manager for Conmaco's east coast division, Butch Allen ("Allen"). Favoloro
explained that L&A did not need the Hammer until January. In light of this delay, Favoloro
queried whether the Hammer should still be delivered to L&A's jobsite or instead rerouted
to Conmaco's yard.
On the morning of September 29, 2011, Favorolo sent an email to Sutherland on which Ross
was carbon copied. Favoloro explained that Conmaco preferred to have the Hammer
delivered to its yard until L&A was ready for delivery. The email then provided as follows:
The record is unclear as to when L&A paid this invoice but it undisputed that the invoice was paid
It is important, however, that we agree that this does not affect the
terms of the Lease Agreement, as follows:
The transportation costs of approximately $50,000
will still be due and payable 10 days from invoice
The rental commencement date will remain as
The third month rent is due upon delivery to
It should be further understood that the costs to transport the
hammer package from Belle Chasse, LA to Dulac, LA [L&A's jobsite]
will be at L&A's expense.
The email requested Sutherland respond as soon as possible. Favoloro testified at trial that
the purpose of this email was to confirm Sutherland understood "that even though the
hammer was not being delivered to the job site on November 1st as originally requested
. . . the rental commencement date would still begin on November 1st."
Sutherland did not respond to the email. In fact, Sutherland testified at trial that he could
neither confirm nor deny that he received the email. This convenient lapse of memory
undermines Sutherland's credibility as a witness.
Favoloro telephoned Sutherland on September 29, 2011 and inquired whether he had
received the email and reviewed it, to which Sutherland responded affirmatively. Favoloro
then asked, "What do you think about it?" Sutherland responded, "Well, I guess it is what
it is." Sutherland did not dispute any of the terms in the email, including the November 1st
rental commencement date.
The parties subsequently conformed their conduct to the content of Favoloro's September
29, 2011 email. On October 4, 2011, Conmaco issued invoice no. 13664 for $50,700, which
covered freight charges from BRUCE's factory to Conmaco's yard. L&A paid the invoice on
October 13, 2011. On October 21, 2011, the Hammer was delivered to Conmaco's yard in
Belle Chasse. Accordingly, Conmaco issued invoice no. 13720 for the third month's rent,
which Conmaco paid on November 8, 2011. Under "Revised Terms," the invoice stated
"Rental Period: 10/21/11 to 2/01/12." Sutherland initialed the invoice next to the amount
due. On December 20, 2011, and at the request of L&A, Conmaco shipped the Hammer to
L&A's jobsite. Three days later, Conmaco issued invoice no. 13888 for $3,794.41 to cover
freight charges, which Conmaco paid on February 6, 2012.
During the week of January 2, 2012, L&A successfully drove a number of test piles with the
On January 9, 2012, L&A advised Conmaco that it discovered a casting problem with the
strike plate in the Hammer.
Conmaco arranged for BRUCE to cast a new strike plate. The Hammer was inoperable from
January 9, 2012 to February 28, 2012—the date it was returned to L&A in working
The Hammer remained at L&A's jobsite until April 25, 2012, after which it was returned to
Following receipt of the Hammer, Conmaco issued three invoices, none of which L&A has
paid. On April 27, 2012, Conmaco issued invoice no. 14265 for $6,113.60, which covered
(1) freight charges from L&A's jobsite to Conmaco's yard, and (2) disassembly charges.
Conmaco does not dispute the freight charge but contends it is not responsible for
disassembly charges. On May 3, 2012, Conmaco issued invoice no. 14282 in the amount
of $1,371.80 for damage to a shackle bracket on the Hammer.
Conmaco also issued a second invoice on April 27, 2012—invoice no. 14261—which forms
the crux of this lawsuit. The first part of the invoice charges Conmaco $368,333.33 for a
rental period of February 2, 2012 to April 26, 2012. The second part, however, provides a
"down time credit" of $195,000 for the period in which the Hammer was inoperable due
to the casting defect. The total amount charged in invoice no. 14261 is $173,333.33.
II. Whether Conmaco Knew or Should Have Known of the Defect in the Hammer
Conmaco is the exclusive distributor of BRUCE hammers in the United States and has sold
and rented various models for the last eight years.
Conmaco has only once experienced a problem with a BRUCE Hammer (the "Reid
Disaster"). In 2008, Conmaco learned that an SGH‐3015 it had rented—the same model
Conmaco leased to L&A—had a casting defect in the ram. BRUCE replaced the ram and the
hammer was fully functional thereafter. In fact, Conmaco rented the hammer again for a
seven‐month period and then sold it to another customer.
Following the Reid Disaster in 2008, Conmaco took multiple steps to ensure future
hammers it distributed from BRUCE would be fully functional. Conmaco visited BRUCE's
factory several times to meet with BRUCE's representatives. BRUCE informed Conmaco
that it had switched production of hammers to a larger, more well‐established foundry.
BRUCE also changed some of its testing and quality control procedures, which Conmaco
reviewed and approved. Finally, at some point subsequent to 2008, BRUCE became "ISO
900 Certified. ISO is an international standards organization that issues a certificate when
a manufacturer's quality control program is approved by a third‐party organization.
Conmaco purchased four hammers from BRUCE post‐Reid Disaster. Three of those
hammers did not have any manufacturing defects. The fourth is the Hammer at issue in
On July 8, 2011, Allen—who testified that he is "as familiar with the BRUCE Hammers as
anyone"—sent an email to James Yoo ("Yoo"), a BRUCE representative, on which Ross was
carbon copied. The purpose of the email was to ask questions about and provide
specifications for the SGH‐0315 that Conmaco would lease to L&A. Allen made several
inquiries, including whether the drive cap (also known as the strike plate) could handle the
stresses associated with L&A's job. Yoo responded approximately twenty‐four hours later
and assured Allen the drive cap would be sufficient.
Robert Harrold ("Harrold") has worked for Conmaco as a project manager for eighteen
years. His job duties include quality assurance and inspection of Conmaco's equipment.
Harrold personally inspected each component part of the Hammer—including the strike
plate—before shipment to L&A. Harrold did not observe any visual defects but conceded
on cross‐examination that a visual inspection would not reveal internal casting defects.
Such defects are best discovered using x‐ray or ultrasonic testing. Harrold could have
requested this information from BRUCE but chose not to do so. On redirect, Harrold
explained it is not customary for distributors like Conmaco to perform or request the results
of ultrasonic testing of equipment.
In addition to passing visual inspection, the Hammer also passed a "function test," which
involves turning the Hammer on and making sure all parts move together as designed.
Despite the foregoing precautionary measures, L&A discovered a casting defect in the strike
plate of the Hammer approximately three weeks after delivery.
Ross aptly compared the defect in the hammer involved in the Reid Disaster and the defect
discovered in L&A's Hammer: "similar problem, different component." The problems were
similar in that each involved a casting defect. But whereas the casting defect in the Reid
Disaster hammer was discovered in the ram, the defect in L&A's hammer was discovered
in the strike plate. The ram and strike plate are different components and perform
different functions. The ram is pulled up and then released with force onto the strike place.
The strike plate is connected to or covers the pile. Thus, in essence, the ram "strikes" the
strike plate, which in turn transfers force to the pile and drives it.
CONCLUSIONS OF LAW
The Court has subject matter jurisdiction over this matter pursuant to 28 U.S.C. § 1332,
which confers on the federal district courts original jurisdiction when the parties are completely
diverse, and the amount in controversy exceeds $75,000. Venue is proper, because a substantial
part of the events or omissions giving rise to the claims occurred in the Eastern District of Louisiana.
See 28 U.S.C. § 1391(b)(2).
I. Proper Commencement Date of the Lease
Conmaco contends the rental commencement date was November 1, 2011. L&A disagrees,
arguing instead that rental payments did not begin to accrue until December 20, 2011. The
starting point in any contractual dispute is the contract between the parties.
In this diversity case, Louisiana substantive law applies, including its principles of contract
interpretation. Bayou Steel Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 642 F.3d 506,
509 (5th Cir. 2011). "According to the Louisiana Civil Code, '[i]nterpretation of a contract
is the determination of the common intent of the parties.'" Guidry v. Am. Pub. Life Ins. Co.,
512 F.3d 177, 181 (5th Cir. 2007) (quoting La. Civ. Code art. 2045). In probing this intent,
a court looks first to the four corners of the contract. See Ortego v. State, Dept. of Transp.
& Dev., 689 So. 2d 1358, 1363 (La. 1997). "When the words of a contract are clear and
explicit and lead to no absurd consequences, no further interpretation may be made in
search of the parties' intent." La. Civ. Code art. 2046. Thus, parole or extrinsic evidence
generally may not be considered unless the contract is ambiguous on the issue of intent.
See Total E & P USA, Inc. v. Kerr–McGee Oil & Gas Corp., 719 F.3d 424, 435 (5th Cir. 2013).
A contract is ambiguous where (1) it fails to address a particular issue, (2) the terms are
susceptible to multiple meanings, (3) there is uncertainty or ambiguity as to its provisions,
or (4) the intent of the parties cannot be ascertained from the language chosen. See
Campbell v. Melton, 817 So. 2d 69, 75 (La. 2002). A doubtful provision "must be interpreted
in light of the nature of the contract, equity, usages, the conduct of the parties before and
after the formation of the contract, and of other contracts of a like nature between the
same parties." La. Civ. Code. art. 2053. If after examining parole evidence the contract is
still ambiguous, the contract is construed against its drafter. See Greenwood 950, LLC v.
Chesapeake La., LP, 683 F.3d 666, 669 (5th Cir. 2012). Whether a contract is ambiguous is
a question of law. Sims v. Mulhearn Funeral Home, Inc., 956 So. 2d 583, 590 (La. 2007).
The threshold issue is whether the Lease is ambiguous as to the rental commencement
date. Paragraph 2 of the general terms and conditions provides that "the rental terms
hereunder shall commence on the earlier of the day that the [Hammer] leaves [Conmaco's]
yard for delivery to [L&A] or the rental commencement date set forth in the Special Terms
section." The Special Terms provide as follows: "Rental Commencement Date:
Approximately November, 2011 (Exact date TBD)." Thus, the rental commencement date
is the earlier of the date the Hammer leaves Conmaco's yard for delivery to L&A or
"Approximately November, 2011 (Exact date TBD)." The Special Terms do not specify how
the "exact date" is to be determined.
Other provisions of the Lease also bear on the issue of ambiguity. The Special Terms
provide that L&A is responsible for freight charges from BRUCE's factory to L&A's jobsite.
Because the Hammer was to be shipped by BRUCE (and not Comaco), the general lease
terms with respect to the rental commencement date would never be activated. Thus, the
Lease suggests the parties intended the Special Terms to control. Because the Special
Terms only provide an approximate commencement date and do not specify how that date
will be determined, the Court finds the contract ambiguous. Accordingly, it is appropriate
to consider extrinsic evidence in determining the rental commencement date.
Of particular import in construing this ambiguous contract is the conduct of the parties
before and after execution of the Lease. See La. Civ. Code art. 2053. This conduct strongly
suggests the parties intended November 1, 2011 as the rental commencement date.
In response to the Second Proposal, Robbins—an L&A representative—emailed Favoloro
on April 28, 2011 and requested the Hammer be delivered to L&A's jobsite by November
1, 2011. Favoloro responded to this email on May 2, 2011 and carbon copied Sutherland.
The email twice referenced November 1, 2011 as the date on which the Hammer would be
delivered. Conmaco subsequently coordinated shipment to meet this deadline but was
informed by Cox in late September that L&A did not need the hammer until January. As a
result of his conversation with Cox, Favoloro emailed Sutherland on September 29, 2011
to confirm that November 1, 2011 would still be the rental commencement date. Although
Sutherland did not respond to the email directly, Conmaco acquiesced to and satisfied the
other terms in the email by paying (1) the third month's rent upon delivery of the Hammer
to Conmaco's yard, (2) freight costs from Conmaco's yard to L&A's jobsite, (3) and
transportation costs ten days from invoice. L&A's compliance with these terms and
conditions of the email is strong evidence that November 1, 2011—the other term in the
email—was the agreed‐upon rental commencement date. Favoloro followed up his
September 29, 2011 email to Sutherland with a telephone call in which he inquired whether
Sutherland agreed with the terms of the email. Favoloro's uncontroverted testimony is that
Sutherland responded: "I guess it is what it is." This testimony is yet further evidence that
L&A agreed to begin paying rent on November 1, 2011.
Conmaco also points to L&A's payment of invoice no. 13720 for the third's month rent as
evidence that L&A agreed to a November 1, 2011 rental commencement date. Under
"Revised Terms," the invoice states that the rental period is "10/21/11 to 02/01/12." Ross
testified at trial that the invoice provides October 21 as the rental commencement date to
memorialize the day the Hammer was delivered to Conmaco's yard. Thus, according to
Ross, the rental commencement date was still November 1, 2011. Indeed, Conmaco did
not charge L&A for the prorated month of October. Because the invoice was ultimately
paid, Conmaco argues L&A is deemed to have accepted the terms of the invoice— including
the November 1, 2011 rental commencement date—under Louisiana's "account stated"
rule. The Court disagrees.
Under the "account stated" rule, a debtor is deemed to have accepted the correctness of
an account rendered if he receives notice and fails to object within a reasonable time. See
Darby v. Lastrapes, 28 La. Ann. 605, 606 (La. 1876). Conmaco cites a 1978 Louisiana
appellate court case in support of its position. In Peterson Sales Co. v. C–Moore Glass, Inc.,
the defendant authorized the plaintiff to perform repairs on a truck. 296 So. 2d 397, 398
(La. Ct. App. 2d Cir. 1974). The plaintiff repaired the truck and sent several invoices to the
defendant, each of which the defendant received but did not pay. Id. at 398–99. The
defendant did not, however, protest the invoices to the plaintiff. Id. at 399. The plaintiff
filed suit to collect the open account, and the district court entered judgment in his favor.
Id. at 397. The appellate court affirmed, holding that the defendant's failure to object to
the invoices, coupled with his inability to prove the invoices were incorrect, were
dispositive. Id. at 399–400.
The "accounted stated" rule has been applied sparingly. See generally Succession of Drake,
359 So. 2d 249 (La. Ct. App. 2d Cir. 1978); Barron Builders & Mgmt. Co. v. J & A Air
Conditioning & Refrigeration, Inc., No. 96–2921, 1997 WL 685352 (E.D. La. Oct. 31, 1997);
Meg‐A‐Builders, LLC v. Maggio, No. 2008 CA 0937, 2008 WL 5377614 (La. Ct. App. 1st Cir.
2008) (unpublished). Thus, one could certainly question whether the rule has risen to the
level of jurisprudence constante, thereby acquiring precedential value. See Doerr v. Mobil
Oil Corp., 774 So. 2d 119, 128–29 (La. 2000) ("[I]t is only when courts consistently recognize
a long‐standing rule of law outside of legislative expression that the rule of law will become
part of Louisiana's custom under Civil Code article 3 and be enforced as the law of the
state."). More importantly, however, the account stated rule is only applied to suits on
open accounts. Unlike the accounts in the cases cited supra, the debtor in this case (L&A)
has actually paid invoice 13720.
Although the invoice is not dispositive, it is probative of the parties' intent. That invoice
13720 (which L&A paid in full) provides the rental period as "10/21/11" but only charges
rent as of November 1, 2011 is further evidence the parties intended a rental
commencement date of November 1.
The Court also looks to the equities in interpreting the Lease. See La. Civ. Code art. 2053.
"Equity . . . is based on the principles that no one is allowed to take unfair advantage of
another and that no one is allowed to enrich himself unjustly at the expense of another."
La. Civ. Code art. 2055. It is uncontroverted that the parties initially intended the Hammer
to be delivered to L&A's jobsite on November 1, 2011. It is also uncontroverted that the
Hammer was not delivered to L&A until December 20, 2011 due to a delay in L&A's
construction schedule. To the extent the delay caused any losses, those losses should be
borne by L&A—the party responsible for the delay.
The Court's conclusion that November 1, 2011 is the rental commencement date is
underscored by the dearth of evidence presented at trial in support of L&A's position. Both
Sutherland and Cox testified they believed rental payments would not begin to accrue until
the Hammer was delivered to L&A's jobsite. But there is reason to doubt the persuasive
value of both witnesses' testimony.
The Court finds Sutherland's credibility as a witness questionable. Sutherland conveniently
does not remember whether he received Favoloro's September 29, 2011 email. This
"maybe I did, maybe I didn't" explanation is highly suspect. Moreover, no evidence was
presented at trial to controvert Favoloro's recollection of a telephone conversation in which
Sutherland confirmed he received the email and assented to its terms. In fact, and perhaps
most tellingly, L&A's counsel did not attempt to elicit any testimony about the
Cox testified that he spoke with Favoloro on ten to fifteen separate occasions before the
Hammer was delivered to L&A and that Favoloro never stated the rental commencement
date was November 1, 2011. But Cox conceded on cross‐examination that he had "nothing
to do with the negotiation of Lease terms" and that he had "nothing to do with when the
Lease was supposed to commence." According to Cox, Favoloro dealt "exclusively" with
Sutherland during negotiation of the Lease. Thus, there was little reason for Favoloro to
discuss the rental commencement date with Cox.
L&A focused both at trial and in post‐trial briefing on the fact that Conmaco did not issue
monthly invoices for February, March, and April. Instead, Conmaco billed for those months
in one lump sum when the Hammer was delivered back to Conmaco. According to L&A,
Conmaco's failure to provide monthly invoices "points strongly towards the idea that
Conmaco itself did not think it was due any extra rent." The Court disagrees.
The Lease does not require monthly billing. Although rent is due "net 30 days from invoice
date," the Lease does not provide a deadline by which Conmaco must issue an invoice. The
Lease simply provides that rent is due "immediately upon [L&A's] receipt of an invoice from
[Conmaco]." This open‐ended provision allows Conmaco to bill at its leisure. Moreover,
Ross testified that it is "not uncommon" for L&A to wait until a rental returns before issuing
an invoice for previous months.
L&A also notes Robbins did not have contractual authority to bind L&A and that therefore
his actions on behalf of L&A—namely, sending an email in which he requested the Hammer
be delivered on November 1, 2011—should be disregarded. L&A cites no legal authority
in support of this position. To the extent L&A argues Robbins acted beyond the scope of
his mandate, L&A subsequently ratified his conduct and is therefore estopped from making
this argument. See Florida v. Stokes, 944 So. 2d 598, 603 (La. Ct. App. 1st Cir. 2006) ("In the
law of agency, ratification is the adoption by one person of an act done on his behalf by
another without authority."); N. Am. Specialty Ins. Co. v. Employers Reinsurance Corp., 857
So. 2d 606, 610 (La. Ct. App. 1st Cir. 2005) ("It is well settled that ratification amounts to a
substitute for prior authority.").
Finally, L&A highlights the fact that Conmaco never received anything in writing confirming
a November 1, 2011 rental commencement date. While it certainly would have been
preferable to receive written confirmation, the Court does not find this fact dispositive in
light of the other evidence presented at trial.
The rental commencement date in the Lease was November 1, 2011.
II. Whether Conmaco Knew or Should Have Known of the Defect in the Hammer
The warranty against vices or defects arises by operation of law in every contract of lease.
Ford New Holland Credit Co. v. McManus, 833 So. 2d 1130, 1133 (La. Ct. App. 2d Cir. 2002).
Under article 2696, the lessor warrants the thing leased "is suitable for the purpose for
which it was leased and that it is free of vices or defects that prevent its use for that
purpose." La. Civ. Code art. 2696. The warranty can be waived but only by clear and
unambiguous language brought to the attention of the lessee. Id. Even if these
requirements are met, a waiver is unenforceable "to the extent it pertains to vices or
defects of which the lessee did not know and the lessor knew or should have known." La.
Civ. Code. art. 2699(1).
The Court has already held that the Lease contains a clear, unambiguous waiver of which
L&A was made sufficiently aware. See Conmaco/Rector L.P. v. L & A Contracting Co., No.
12–1337, 2013 WL 5881576, at *5 (E.D. La. Oct. 30, 2013). Furthermore, the parties do not
dispute that L&A was unaware of the casting defect in the Hammer. See id. The issue for
trial was whether Conmaco knew or should have known of the defect in the Hammer.
Conmaco bears the burden of proof on this issue.2
The evidence presented at trial establishes that Conmaco did not know nor should it have
known of the defect in the Hammer. Just like the hammer in the Reid Disaster, the
Hammer in this case was a model SGH‐3015 that suffered from a casting defect. Crucially,
however, the ram was defective in the former whereas the defective part in the latter was
the strike plate. Moreover, the Reid Disaster happened approximately three years prior to
the incident in this case. Since that time, Conmaco and BRUCE have undertaken multiple
steps to forestall another casting failure. For example, Conmaco has made multiple site
visits to BRUCE's factory to meet with BRUCE representatives. For its part, BRUCE has
switched to a larger foundry, revamped its quality assurance program, and become ISO 900
Louisiana courts have not yet addressed which party bears the burden of establishing a waiver of
warranty in the context of lease. Louisiana courts have addressed this issue, however, with respect to a
waiver of the warranty against redhibitory defects. Those courts have uniformly held that the seller bears
the burden of proof. See, e.g., Wilks v. Ramsey Author Brokers, Inc., 132 So. 3d 1009, 1014 (La. Ct. App. 2d
Cir. 2014); Boos v. Benson Jeep‐Eagle Co., Inc., 717 So. 2d 661, 664 (La. Ct. App. 4th Cir. 1998); Monk v.
Oakdale Motors Inc., 544 So. 2d 98, 100 (La. Ct. App. 2d Cir. 1989). These cases stand for the principle that
the party invoking a warranty bears the proof of proving its enforceability. The Court finds this principle
equally applicable to a waiver under article 2699 and therefore holds that the lessor bears the burden of
Conmaco also undertook specific quality control steps with respect to the Hammer at issue
in this case. Prior to acquiring the Hammer, Allen inquired of Yoo whether the strike plate
could withstand the stresses of driving 90‐inch piles. Yoo assured him the Hammer was
reasonably fit for this use. Moreover, Conmaco performed a visual inspection test and a
function test, both of which the Hammer passed.
The Court's conclusion is further supported by the fact that L&A performed its own visual
inspection and did not discover any defect. Indeed, Sutherland conceded at trial that it was
L&A's obligation under the Lease to inspect the Hammer and advise Conmaco of any
Finally, it is important to note that the defect was not discovered until approximately three
weeks after the Hammer left Conmaco's possession and only after two test piles had been
successfully driven. A distributor such as Conmaco cannot reasonably be expected to know
of such latent defects, especially where the distributor performs its only own quality control
tests and reasonably relies on representations from an internationally‐known
Conmaco did not know nor should it have known of the defect in the Hammer. Accordingly,
the waiver of the warranty against vices or defects is enforceable and L&A's counterclaim
Having established the rental commencement date and dismissed L&A's counterclaim, the
Court must now calculate to the damages to which Conmaco is entitled. The rental period
under the Lease ran from November 1, 2011 until the Hammer was returned to Conmaco's
yard on April 26, 2012. L&A pre‐paid for the months of November, December, and January.
Thus, it technically still owes rent for February, March, and twenty‐six days of April,3 which
Conmaco has calculated as $368,333.30. But this amount is not yet payable.
The lease is clear that rent for subsequent months would be due "net 30 days from invoice
date" and "payable . . . immediately upon [L&A's] receipt of an invoice from [Conmaco]."
Under the plain words of the contract, L&A is not responsible for rental payments unless
it receives an invoice. L&A has not received a separate invoice for $368,333.30. Thus, there
is simply no basis under the Lease for recovery of $368,333.33.
L&A did, however, receive invoice no. 14261 for $173.333.33. Because L&A did not pay this
invoice within 30 days, the amount charged therein is due and owing.
Even it had received a separate invoice for $368,333.33, L&A contends the "down time
credit" of $195,000 that Conmaco offered in invoice no. 14261 is binding on the parties.
Thus, L&A appears to contend that Conmaco would only be entitled to recover $368,333.30
The Lease provides for prorated payments if the termination date does not fall on the last day of
less $195,000, or $173,333.30.4 Once again, L&A offers no legal theory in support of its
To the extent L&A argues the credit somehow modified the Lease, that argument fails. The
party asserting modification bears the burden of proving the parties mutually consented
to the agreement as modified. La. Civ. Code art. 1831; Taita Chem. Co., LTD v. Westlake
Styrene Corp., 246 F.3d 377, 387 (5th Cir. 2001). L&A did not pay invoice no. 14621 nor did
it otherwise manifest an intention to accept the credit. Quite the contrary, L&A refused to
pay the invoice and counterclaimed for moratory damages. Accordingly, Conmaco's offer
of a down‐time credit is not binding on the parties. See Cajun Constructors, Inc. v. Fleming
Constr. Co., Inc., 951 So. 2d 208, 214 (La. Ct. App. 1st Cir. 2006) ("[O]ne person may not
change the terms [of a contract] unilaterally.").
In sum, had Conmaco issued a separate invoice for $368,333.30 which L&A refused to pay,
Conmaco would be entitled to judgment in this amount. But Conmaco only invoiced for
Conmaco is entitled to recover $173,333.30 in rental payments.
Conmaco also seeks money damages for L&A's failure to disassemble the Hammer, freight
Unlike Conmaco, L&A chose not to provide a damages calculation in the event the Court finds the
rental commencement date is November 1, 2011. Thus, the Court can only speculate that L&A would not
dispute the total due in invoice no. 14261.
costs, and damage to the shackle bracket of the Hammer.
Invoice no. 14265 contains both the disassembly charge and the freight charge. L&A only
disputes the disassembly charge. Both Favoloro and Ross conceded at trial the Lease does
not explicitly allow Conmaco to charge for disassembly. Nonetheless, they contend it was
understood between the parties that such charges would be forthcoming. Specifically, Ross
testified that it is industry custom for an equipment lessor to charge the lessee for
When a contract is silent as to a particular situation, a court may consider "whatever the
law, equity, or usage regards as implied in a contract of that kind or necessary for the
contract to achieve its purpose." La. Civ. Code art. 2054. Conmaco essentially argues the
Court should consider "usage," which the Code defines as "a practice regularly observed
in affairs of a nature identical or similar to the object of a contract subject to
interpretation." La. Civ. Code. art. 2055. Whether usage has been established is a question
of fact. Foods & Servs., Inc. v. SHRM Catering Servs., Inc., 486 So. 2d 290, 292 (La. Ct. App.
3d Cir. 1986).
The threshold inquiry under article 2054 is whether the Lease is silent regarding
disassembly charges. Paragraph 5(b)(vii) is instructive:
"UPON THE . . . TERMINATION OF THIS LEASE, [L&A] SHALL
IMMEDIATELY RETURN THE EQUIPMENT TO [CONMACO] IN THE
SAME OR BETTER CONDITION AS WHEN RECEIVED BY [L&A],
REASONABLE WEAR, TEAR AND DEPRECIATION RESULTING FROM
PROPER USE THEREOF EXCEPTED, IT BEING UNDERSTOOD AND
AGREED THAT [L&A] SHALL BE RESPONSIBLE FOR THE FULL COST OF
ALL REPAIRS AND MAINTENANCE OF OR WITH RESPECT TO THE
EQUIPMENT WHICH ARE CAUSED BY [L&A'S] USAGE, WHETHER ON
ACCOUNT OF DAMAGE TO THE EQUIPMENT OR OTHERWISE.
This provision clearly sets forth L&A's delivery obligations. That the provision does not
expressly require L&A to disassemble the Hammer does not necessarily mean the Lease is
silent on the issue and that therefore resort to Article 2054 is warranted. To the contrary,
the imposition of certain obligations under Paragraph 5(b)(vii) implies the exclusion of all
other obligations, such as a requirement that L&A disassemble the Hammer before delivery
to Conmaco. See 17A John Bourdeaux et al., Corpus Juris Secundum § 415 (2014) ("Under
the maxim 'expressio unius est exclusio alterius,' the specification of items in a contact
implies the exclusion of all not expressed."). Moreover, as the drafter of this contract,
Conmaco was in the best position to clearly express its intention to charge L&A for
disassembly. See Mac Sales, Inc. v. E.I. du Pont de Nemours & Co., 24 F.3d 747, 751 (5th Cir.
1994). Courts must take care when applying Article 2054 so as not to enlarge the scope of
a contract beyond what the parties intended.
Even assuming arguendo the Lease is silent on disassembly charges, Conmaco's claim still
fails. Conmaco offered only the self‐serving, uncorroborated testimony of Ross as evidence
of industry practice.5 The Court finds such evidence insufficient as a matter of law to
L&A is only responsible for the freight charges portion of invoice no. 14265, which amounts
to $1,744.00 (including sales tax).
Invoice no. 14282 charges L&A $1,371.80 for damage to the shackle bracket of the
Hammer. The Louisiana Civil code provides that "[t]he lessee is liable for damage to thing
[leased] caused by his fault." La. Civ. Code art. 2687. The Lease excepts from this general
rule any "REASONABLE WEAR, TEAR, AND DEPRECIATION RESULTING FROM PROPER USE."
It is undisputed that the shackle bracket was damaged at some point after the Hammer was
delivered to L&A. But Conmaco did not adduce any evidence at trial to suggest L&A caused
the damage or that such damage resulted from anything other than normal wear‐and‐tear.
In fact, Cox testified that L&A used the Hammer exactly as Conmaco instructed. Conmaco
Favoloro testified that disassembly charges were understood between the parties due to "repeat
business," i.e, a prior course of dealing. "But a 'course of dealing'—while possibly relevant to equitable
considerations—does not provide a separate and independent basis for adding a contractual term when a
contract is silent." Mac Sales, 24 F.3d at 752 n.11. Rather, the appropriate frame of reference for
determining whether a practice is "regularly observed" is the industry or trade writ large. Id. at 752. Thus,
the fact that Conmaco may have charged L&A for disassembly charges in the past has little bearing on
whether such charges are customary in the heavy equipment industry as a whole. See id.
Cf. Foods & Servs., 486 So. 2d at 292 (finding uncorroborated testimony of party in industry
insufficient to establish usage); Baton Rouge Sash & Door Co., Inc. v. Saale, 298 So. 2d 115, 118 (La. Ct. App.
1st Cir. 1974) (same). Admittedly, these cases are distinguishable, because the testimony of the party
attempting to establish custom was challenged by the opposing party. In the instant case, L&A did not
controvert Ross' assertion that disassembly charges are customary.
did not address this testimony in cross‐examination or rebuttal.
L&A is not responsible for invoice no. 14282.
Conmaco also seeks attorney's fees. In this diversity case, attorney's fees awards are
governed by Louisiana law. See Wal‐Mart Stores, Inc. v. Qore, Inc., 647 F.3d 237, 242 (5th
Cir. 2011). "Louisiana courts have long held that attorney fees are not allowed except
where authorized by statute or contract." Stutts v. Melton, 130 So. 3d 808, 814 (La. 2013).
Thus, in an action for breach of contract, the prevailing party may not recover attorney's
fees "unless there is a specific provision therefor in the contract." Maloney v. Oak Builders,
235 So. 2d 386, 390 (La. 1970).
Paragraph 5(g) of the Lease clearly permits Conmaco to collect reasonable attorney's fees
and costs incurred in enforcing the Lease. Accordingly, Conmaco is entitled to attorney's
fees from L&A.
The remaining issue to be resolved is the applicable interest rate for outstanding invoices.
The Lease does not address this issue. Nonetheless, Conmaco argues it is entitled to an
interest rate of 18% per annum. In support of this argument, Conmaco references a printed
statement at the bottom of each invoice, which provides for an interest rate of 18% per
annum on all accounts past due. Conmaco appears to argue that by paying these invoices,
L&A agreed to the interest rate stated therein. The Court disagrees.
Louisiana recognizes two kinds of interest: conventional and legal. La. Rev. Stat. § 9:3500A.
Conventional interest must be fixed in writing and cannot exceed 12% per annum. La. Rev.
Stat. § 9:3500C(1). It is well‐established that a printed statement on the bottom of an
invoice does not constitute a written agreement to pay interest. C & A Tractor Co. v.
Branch, 520 So. 2d 909, 911 (La. Ct. App. 3d Cir. 1987); Succession of Drake, 359 So. 2d at
251. But even it did, the rate of 18% per annum is usurious and would therefore "result in
the forfeiture of the entire interest so contracted." La. Rev. Stat. § 9:3501.
Where, as here, an interest rate is not fixed in writing, the creditor is only entitled to legal
interest. Chittenden v. State Farm Mut. Auto. Ins. Co., 788 So. 3d 1140, 1151 (La. 2001); see
also La. Civ. Code art. 2000. The legal interest rate is fixed by statute. See La. Rev. Stat. §§
Conmaco is entitled to legal interest on its judgment against L&A.
Conmaco has proven the following damages by a preponderance of the evidence:
$173,333.33 (outstanding rent) + $1,744 (freight charges). Thus, Conmaco is entitled to
judgment against L&A in the amount of $175,077.33, plus legal interest at the rate provided
in Louisiana Revised Statute Section 9:3500B(1). Post‐judgment interest will accrue at the
federal rate. See Enhanced La. Capital v. Brent Homes, No. 12–2409, 2013 WL 5428687, at
*4 (E.D. La. June 6, 2013).
Conmaco is also entitled to attorney's fees. Within twenty days of the entry of this Order,
Conmaco shall file a motion before the magistrate judge to calculate the reasonable
attorney's fees and costs associated with bringing this action.
The Lease between Conmaco and L&A is a classic example of "high risk, high reward."
Although L&A received a favorable rate of rental on the Hammer, the Lease was fraught with peril.
L&A agreed to begin paying rent on November 1, 2011, regardless of whether the Hammer was in
its possession at the time. L&A also bargained away its right to recover damages for breach of the
warranty against vices or defects. In short, L&A gambled and lost. But it could have been a lot
worse. Conmaco could have recovered an extra $190,000 had L&A received a separate invoice.
Fortunately for L&A, this invoice never issued.
New Orleans, Louisiana, this 5th day of May, 2014.
JANE TRICHE MILAZZO
UNITED STATES DISTRICT JUDGE
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