George Engine Co. v. Southern Shipbuilding Corp.

376 So. 2d 1040
CourtLouisiana Court of Appeal
DecidedNovember 30, 1979
Docket12785
StatusPublished
Cited by3 cases

This text of 376 So. 2d 1040 (George Engine Co. v. Southern Shipbuilding Corp.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
George Engine Co. v. Southern Shipbuilding Corp., 376 So. 2d 1040 (La. Ct. App. 1979).

Opinion

376 So.2d 1040 (1979)

GEORGE ENGINE COMPANY, INC.
v.
SOUTHERN SHIPBUILDING CORPORATION et al.

No. 12785.

Court of Appeal of Louisiana, First Circuit.

October 8, 1979.
Writ Refused November 30, 1979.

R. King Milling, W. Richard House, Jr., New Orleans, Maurice J. Le Gardeur, Jr., Covington, for plaintiff, George Engine Company, Inc., appellant.

*1041 John N. Gallaspy, Bogalusa, Charles Lee Eisen, Washington, D. C., for defendants, appellees.

Before COVINGTON, LOTTINGER and COLE, JJ.

COLE, Judge.

George Engine Company, Inc. (George), brought suit for rescission of contract asserting that its consent was vitiated by error in the principal cause. Named as defendants were Southern Shipbuilding Corporation (Southern) and two individuals, Alain R. Seligman and Roger Seligman, who agreed to be bound in solido with Southern for the faithful performance of the contract. This case was previously before the Louisiana Supreme Court on supervisory writs to determine if the arbitration clause in the contract which George sued to rescind required the issue of valid consent to be submitted to arbitration. The Supreme Court held that a party to a contract containing a mandatory arbitration provision could sue in a court of competent jurisdiction to rescind the contract on the ground that it was void ab initio. George Engine Co. v. Southern Shipbuilding Corp., 350 So.2d 881 (La. 1977). Accordingly, the case was remanded to the district court for a determination of the validity of George's consent. The trial court held the disputed contract to be valid and enforceable. George appeals.

The contract which is the subject of this suit [the Amendment] was signed by the parties on September 19, 1974. It modified and incorporated by reference the terms and conditions of five previously executed contracts for construction of five vessels. George asserts that Southern made material misrepresentations which constitute error in the principal cause of the contract. George maintains its principal motive or cause for agreeing to the Amendment was to secure from Southern firm and fixed delivery dates predicated upon information Southern had sought and received from its suppliers concerning the availability of materials. Southern freely admits it never made inquiries of its suppliers prior to incorporating new delivery dates into the Amendment. Moreover, Southern asserts George never asked it to consult its suppliers and Southern never represented it had done so.

The threshold issue on this appeal is whether firm, fixed, realistic delivery dates predicated upon the absence of supply problems were George's principal motive for agreeing to the Amendment.

On October 12, 1972, George contracted with Southern for construction of three tug supply vessels designated as Hulls 107, 108, and 109. These vessels were to be delivered in sequence on October 12, 1973, November 12, 1973, and December 12, 1973. On June 7, 1973, the parties executed two additional contracts for the construction of Hulls 110 and 111, which were to be delivered on March 31, 1974 and April 30, 1974. After contracting with Southern, George, in accordance with its usual business practice, entered into agreements with Transunion Vessel Leasing Corporation and J. Ray McDermott & Co., Inc. for the sale of the completed vessels.

The delivery dates set forth in the five original contracts were not met. A determination of the reasons and responsibility for the delays is not necessary for the disposition of this appeal. However, we note that Southern attributed the delays which occurred prior to the execution of the Amendment to labor and material shortages, untimely delivery of materials by suppliers, and change orders issued by George requiring modifications in the design and construction of the vessels.

L. L. Frierson, president of George, testified that when he became concerned about the delay in construction he met with Alain Seligman, president of Southern, and was told there were problems with procurement. Revised delivery dates were given but these too could not be met. According to Frierson, Southern made several revisions of the delivery dates and promised timely delivery repeatedly. The new dates were never honored. Southern's excuse for the additional delays was procurement problems. Evidence *1042 on these incidents, excluded by the trial court as irrelevant, was presented by George under a proffer. Disagreeing with the trial court's assessment of relevancy, we accepted into evidence the proffered testimony and exhibits.

In December 1973, Seligman approached Frierson and asked for an escalation in the contract price to cover the increased cost of materials. He claimed the delays caused by George's change orders had put Southern in the position of having to pay greatly increased prices for materials. Frierson responded by sending his auditors to Southern to verify the escalation. Seligman testified that for nine months he made repeated and frequent requests for cost of escalation, but Frierson never gave him an answer. On August 20, 1974, Seligman wrote a letter to Frierson in which he stated Southern would immediately phase down construction of the vessels if George did not agree to pay the cost of escalation.

Frierson testified this threat to stop construction put George in a very bad position with its lenders, including the customers who had contracted to buy and finance construction of the vessels. George feared that if construction stopped Transunion Vessel Leasing Corporation would withdraw its financing, which amounted to approximately $3.5 million advanced on demand notes. According to Frierson, Transunion Vessel Leasing had previously expressed its concern about the numerous delays in construction and had hinted it might end its financing. Additionally, George was aware the purchasers of the vessels were very anxious to get delivery. Hull 107, which was only two weeks from completion on August 20, 1974, had been committed by its purchaser to commence work in September off the Nigerian coast.

On September 13, 1974, suit was filed in federal court seeking a mandatory injunction to compel Southern to perform under the five original contracts. The court denied injunctive relief on September 16, 1974. At that point, George, after consultation with counsel, decided to resume negotiations with Southern.

Representatives and counsel for the two corporations met on September 18, 1974, to negotiate the terms of a settlement. There was a second meeting the next day at which the amending contract, subject of this suit, was signed. There is considerable dispute among the witnesses as to what was said about delivery dates at those two meetings.

Frierson, Herbert Colby, senior vice president of George, and Michael Crow, attorney for George, all testified that George had agreed to discuss Southern's claim for escalation only after receiving assurance that Southern could offer firm delivery dates. Frierson explained it was important to George to get Southern's commitment to delivery dates based on information from suppliers because George had to be able to assure its lenders and customers that there would be no further delays. According to these three witnesses, Seligman was questioned closely on September 18 about the proposed delivery dates and was told that George wanted realistic dates that Southern was sure it could meet. Colby testified he instructed Seligman to be liberal in calculating the delivery dates and to push back the dates if he had any doubts about Southern's ability to keep on schedule.

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