214 So. 3d 1
La. Ct. App.2017Background
- Waterworks District No. 1 (seller) and Louisiana Dept. of Public Safety & Corrections (purchaser) entered a 20‑year Water Purchase Contract (Nov. 25, 2000): seller to install an 8" transmission main and supply potable water up to 80,000 gal/day; purchaser to pay $2,740/month plus $2.25 per 1,000 gallons.
- Contract contained a 30‑day non‑supply cancellation right for purchaser and late‑payment penalties/termination for nonpayment.
- Waterworks performed and billed for ~12 years. After Forcht‑Wade Correctional Center closed, the Department notified seller (Dec. 21, 2012) it was cancelling the contract effective Dec. 31, 2012, and stopped payments.
- Waterworks demanded $263,040 (remaining monthly base payments for ~8 years) and sued for breach; cross‑motions for summary judgment were filed.
- Trial court granted Waterworks’ summary judgment; appellate court sua sponte required clarification of the judgment, parties amended it, and the appeal proceeded.
- On de novo review, the appellate court concluded the contract was a multiyear contract for supplies/services under the Louisiana Procurement Code (LSA‑R.S. 39:1615C) and held the Department permissibly terminated for lack of appropriated funds; judgment for Department rendered and Waterworks’ claims dismissed with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Department could terminate the 20‑year contract when funds were not appropriated | Waterworks: the $2,740 monthly payment primarily compensated installation/installation cost (not a supplies/services contract), so R.S. 39:1615C does not apply | Department: contract is for supplies/services (purchase of water and related property); R.S. 39:1615C permits termination when funds not appropriated for multiyear contracts | Held for Department: contract construed as a multiyear contract for supplies/services and terminable under R.S. 39:1615C when funds unavailable |
| Proper characterization of the $2,740 monthly payment | Waterworks: characterized payment as separate obligation for cost of installing water main (capital/installation) distinct from water usage charges | Department: contract language shows $2,740 is monthly payment for water delivered—the agreement is for purchase of water, not a split capital payment | Held for Department: contract unambiguous; payments form part of purchase for water and related obligations; extrinsic negotiation evidence excluded |
| Whether contract language is ambiguous (necessitating parol evidence) | Waterworks: extrinsic negotiation documents show parties intended base rate to cover installation costs | Department: contract language is clear on its face; extrinsic evidence inadmissible to alter clear terms | Held: contract words are clear and explicit; interpretation is matter of law within four corners; parol evidence not considered |
| Whether summary judgment was appropriate | Waterworks: moved and obtained summary judgment below arguing no genuine issue of material fact | Department: cross‑moved arguing statutory termination defense defeats Waterworks’ claim | Held: appellate court reversed trial court, granted summary judgment for Department and dismissed Waterworks’ claims with prejudice |
Key Cases Cited
- Fonseca v. City Air of Louisiana, LLC, 196 So.3d 82 (La. App. 1 Cir. 2016) (appellate review of summary judgment is de novo)
- Janney v. Pearce, 40 So.3d 285 (La. App. 1 Cir. 2010) (summary judgment standards on appeal)
- Silwad Two, L.L.C. v. I Zenith, Inc., 111 So.3d 405 (La. App. 1 Cir. 2012) (contracts bind parties to full performance)
- Clovelly Oil Co., LLC v. Midstates Petroleum Co., LLC, 112 So.3d 187 (La. 2013) (contract interpretation follows plain, ordinary meaning when unambiguous)
- Sims v. Mulhearn Funeral Home, Inc., 956 So.2d 583 (La. 2007) (when contract language is clear, interpretation is question of law suitable for summary judgment)
- Hampton v. Hampton, Inc., 713 So.2d 1185 (La. App. 1 Cir. 1998) (courts give legal effect to parties’ contracts)
- All American Assur. Co. v. State Through Dept. of Civil Service and Div. of Admin., 621 So.2d 1129 (La. App. 1 Cir. 1993) (distinguishable: termination was permitted by explicit lease terms)