In Re: Tasch Inc

• Court: Court of Appeals for the Fifth Circuit
• Decided: August 1, 2002
• Docket: 01-31363
• Status: Unpublished

Opinion

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 01-31363 (Summary Calendar)

In The Matter Of: TASCH, INC., Debtor.

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TASCH, INC., Appellee,

versus

DIAMOND OFFSHORE DRILLING, INC., Appellant.

Appeal from the United States District Court for the Eastern District of Louisiana (No. 98-CV-3746-G)

July 31, 2002

Before JOLLY, STEWART, and PARKER, Circuit Judges.

PER CURIAM:*

* Pursuant to 5th CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5th CIR. R. 47.5.4. Diamond Offshore Drilling, Inc. (“Diamond”) appeals from the district court’s entry of

judgment in favor of Tasch, Inc. (“Tasch”) on its claim for breach of contract. For the following

reasons, we AFFIRM.

FACTUAL AND PROCEDURAL HISTORY

The present controversy arises out of a contract dispute concerning painting and sandblasting

services provided by Tasch. Tasch performed these services on a semi-submersible drilling rig

operated and owned by Diamond. On March 5, 1997, Tasch entered into a sub-contract with Sabine

Offshore Services, Inc. ("Sabine"), a corporation principally engaged in marine service activities. This

contract provided that Tasch would perform painting and sandblasting services to the underside of

the semi-submersible drilling rig, the Ocean Century, which was owned and operated by Diamond,

and was docked at Sabine's facilities. On May 5, 1997, Tasch and Sabine entered into a second

agreement for painting and sandblasting of the topside of the Ocean Century. On October 16, 1997,

Diamond suspended Tasch's performance. Prior to the suspension of performance, Tasch had

completed the work described in the March 5th agreement and approximately sixty-three percent of

the work provided for in the May 5th agreement. Tasch received $1,449,229 for these services.

On October 20, 1997, Tasch filed for Chapter 11 bankruptcy in the United States Bankruptcy

Court for the Eastern District of Louisiana. On March 9, 1998, the bankruptcy court granted Tasch's

motion to compel Sabine to turnover $53,398.98. On August 3, 1998, the bankruptcy court signed

an Order of Confirmation of plaintiff's Plan of Reorganization.

Tasch filed suit alleging that Diamond breached an oral contract for additional work that

became necessary because of Diamond's interference during the course of Tasch's performance on

the March 5th agreement. Tasch contends that after it began work, Diamond ordered that steel

2 replacement work be done by third parties on the Ocean Century, and that this replacement work

interfered with Tasch's performance and profitability. Tasch asserts that it made repeated complaints

to Diamond personnel about this interference and resulting delays, and that Diamond orally agreed

to compensate Tasch for such delays and such additional work required by t he steel replacement

work. Additionally, Tasch alleges that Sabine and Diamond did not pay the full amount owed under

the original contract price and for agreed upon additions to the original contract.

On February 8, 1999, the district court found the present action to be a non-core proceeding

otherwise related to a case under Chapter 11. In re Tasch, Inc., Nos. 97-15901 JAB & 98-1174,

1999 WL 64959, at *2 (E.D. La. Feb. 8, 1999). The matter was tried before a bankruptcy judge on

November 27th and 28th, and December 5th and 6th, 2000. On April 17, 2001, the bankruptcy court

submitted Proposed Findings of Fact and Conclusions of Law. It recommended that judgment be

entered in favor of Tasch and against Diamond in the amount of $450,000, as a result of an oral

contract between Tasch and Diamond. It also recommended judgment in favor of Tasch and against

Diamond and Sabine in the amount of $95,452, the unpaid balance for work under the original

contract with subsequent modifications. The defendants submitted objections to the proposed

findings. Tasch requested that judgment be entered in accordance with the recommendation. The

district court adopted the bankruptcy court’s Proposed Findings of Fact and Conclusions of Law and

entered judgment in favor of Tasch and against Diamond in the amount of $450,000, together with

prejudgment interest from October 21, 1998 to the dat e of entry of the judgment, post-judgment

interest at the federal legal rate, and costs. It further ordered that judgment be entered in favor of

Tasch and against defendants Diamond and Sabine in the amount of $95,452, in solido, together with

3 pre-judgment interest from October 21, 1998 to the date of entry of the judgment, prejudgment

interest at the federal legal rate, and costs. Diamond appeals.

STANDARD OF REVIEW

We review the bankruptcy court’s findings of fact under a “clearly erroneous” standard. FED.

R. CIV. P. 52(a); In re United States Abatement Corp., 79 F.3d 393, 397 (5th Cir. 1996). “If a finding

is not supported by substantial evidence, it will be found to be clearly erroneous.” 9A ALAN WRIGHT

& ARTHUR R. MILLER, 9A FEDERAL PRACTICE & PROCEDURE, § 2585 (1995). When the district

court has affirmed the bankruptcy court's findings, the review for clear error is strict. Traina v.

Whitney Nat’l Bank, 109 F.3d 244, 246 (5th Cir. 1997). We review mixed questions of law and fact,

as well as pure questions of law, de novo. In re Bass, 171 F.3d 1016, 1021 (5th Cir. 1999).

APPLICABLE LAW

Any contract for the repair of a vessel is a maritime contract, and therefore is governed by

maritime law. Todd Shipyards Corp. v. Turbine Serv., Inc., 674 F.2d 401, 412 (5th Cir. 1982). A

"vessel" is defined as a structure designed or utilized for "transportation of passengers, cargo or

equipment from place to place across navigable waters." Manuel v. P.A.W. Drilling & Well Serv.,

Inc., 135 F.3d 344, 347 (5th Cir. 1998). Courts have held that, for the purposes of maritime law, a

submersible oil drilling rig is a vessel. Id. at 348 (citing cases where a variety of special purpose

structures were held to be vessels for the purpose of maritime law). Because the Ocean Century, a

semi-submersible drilling rig, is a vessel, any contracts for work on the Ocean Century must be

construed in accordance with general maritime law.

“[G]eneral maritime law, where not previously developed, is determined by judicial analysis

of congressional enactments in the field of maritime law, relevant state legislation and state common

4 law.” Williams v. Carnival Cruise Lines, Inc., 907 F. Supp. 403, 405 (S.D. Fla. 1995) (citing Miles

v. Apex Marine Corp., 498 U.S. 19, 27 (1990)). "Drawn from state and federal sources, the general

maritime law is an amalgam of traditional common-law rules, modifications of those rules, and newly

created rules." E. River S.S. Corp. v. Transam. Delaval, Inc., 476 U.S. 858, 864-65 (1986). The

Supreme Court has recognized that maritime law, in the absence of a statute, is “developed by the

judiciary.” Id. at 864.

In maritime contract disputes, federal courts apply general principles of contract law. 1

THOMAS J. SCHOENBAUM, ADMIRALTY AND MARITIME LAW § 5-1 (2d ed. 1994) (citing Har-Win,

Inc. v. Consolidated Grain & Barge Co., 794 F.2d 985 (5th Cir. 1986)). However, to the extent that

it is not inconsistent with admiralty principles, st ate contract law may be applicable to maritime

contracts. Ham Marine, Inc. v. Dresser Indus., Inc., 72 F.3d 454, 459 (5th Cir. 1995).

DISCUSSION

On appeal, Diamond asserts six points of error. It maintains that: (1) the district court’s

conclusion that an oral contract existed between Diamond and Tasch was clearly erroneous because

there was insufficient evidence of the contract’s terms, (2) the district court’s conclusion that a

principal-agent relationship existed between Diamond and Sabine was clearly erroneous, (3) the

district court’s finding regarding estoppel was erroneous, (4) the district court erred in its finding that

Diamond interfered with or delayed Tasch’s performance of the contract, (5) Diamond failed to

comply with pretrial disclosure deadlines for testifying experts, and (6) the district court’s conclusion

regarding damages was clearly erroneous.

5 I. Existence of an Oral Contract

Diamond argues that the district court erred in finding that an oral contract existed because

no contract can exist when the consideration is not defined. It asserts that there was no testimony

regarding what compensation Diamond would give to Tasch for its services. Diamond also asserts,

relying heavily on Austin Elcon Corp. v. Avco Corp., 590 F. Supp. 507 (W.D. Tex. 1984), that the

agreements provided that any alterations must be in writing and, therefore, any requests for additional

work or promises to compensate, needed to be in writing to be enforceable.

Courts have consistently held that maritime law generally regards oral contracts as valid. See,

e.g., Kossick v. United Fruit Co., 365 U.S. 731, 734 (1961). It is well settled that a plaintiff suing

on a contract, whether written or oral, is required to establish the basic elements of a contract, i.e.,

offer, acceptance, and consideration. JOHN D. CALAMARI & JOSEPH M. PERILLO, CONTRACTS §§ 2.1,

4.1 (4th ed. 1998).

We agree with the district court’s conclusion that there is sufficient evidence that Tasch has

established the basic elements of an oral contract with Diamond. Tasch offered the testimony of

several witnesses who stated that representatives of Diamond verbally told them to do additional

work and that Tasch "would be taken care of" at the end of the job. This evidence is sufficient to

show that Diamond made Tasch an offer, which Tasch accepted by performing such additional work.

The consideration for this oral contract is that Tasch agreed to do additional work in exchange for

the promise of additional compensation. There was evidence at trial showing that there was a

meeting of the minds between Diamond and Tasch--Diamond wanted the delays handled and asked

for additional work to be done by Tasch, and Tasch handled the delays and did additional work.

6 Austin Elcon lends little support to Diamond. In Austin Elcon, the issue presented was

whether a requirement in a purchase order that modifications be in writing was enforceable under

Texas law and, if so, whether Avco waived the requirement or was estopped from enforcing it. 590

F. Supp. at 513. The court held that there was insufficient evidence to conclude that Avco waived

the requirement that modifications to the contract be executed in writing or to conclude that Avco's

conduct estopped it from enforcing that requirement. Austin Elcon's main evidence was testimony

that Avco “would take care of it down the line.” Id. It is important to note that in Austin Elcon, the

court found that there were “few conversations about the alleged extra work,” and that Austin Elcon

did “not maintain that the assurance was later repeated.” Id. In the instant matter, there was

significant testimony about Diamond’s assurances to Tasch. Moreover, this issue is tied up with

issues of witness credibility. The bankruptcy judge was in the best position to determine the witness’

credibility and we will not disturb these findings unless clearly erroneous. We find nothing erroneous

in the district court’s conclusion that an oral contract existed between Diamond and Tasch.

II. Principal-Agent Relationship

Diamond argues that the district court erroneously concluded that a principal-agent

relationship existed between Diamond and Sabine.

A party may be held responsible for the acts of its purported agent under three agency

theories. Wells Fargo Bus. Credit v. Ben Kozloff, Inc., 695 F.2d 940, 944 (5th Cir. 1983). The first

requires that the principal have endowed its agent with actual authority, express or implied, to carry

out its wishes. Id. To create an agency relationship based on actual authority, such authority must

have been delegated to the agent either by words that expressly or directly authorize him to do a

delegable act, or such authority may be implied from the facts and circumstances attending the

7 transaction in question. Implied authority may arise either independent of any express grant of

authority, as from some manifestation by the principal that the particular authority in question shall

exist in the agent, or it may arise as a necessary or reasonable implication required to effectuate some

other authority expressly conferred by the principal. Id. at 944-45.

The second method by which a third party can become bound by the acts of its agent is based

on apparent authority. Apparent authority arises when the principal, either intentionally or by lack of

ordinary care, induces t hird persons to believe an individual is his agent even though no actual

authority, express or implied, has been granted to such individual. Id. at 945.

The third theory under which a principal may be bound by the acts of its purported agent is

one based on estoppel. A party basing its claim upon the rules of estoppel must show not only

reliance, which is required when the claim is based on apparent authority, but also a change of

position such that it would be unjust for the speaker to deny the truth of his words. Id. at 946.

We agree with the district court’s conclusion that there was evidence presented at trial that

establishes a principal-agent relationship existed between Diamond and Sabine. Jack Allen (“Allen”),

a Tasch supervisor, testified that Tasch was interested in pursuing Diamond as a customer from 1993

to 1996. Allen testified that when Tasch had the opportunity to inspect the Ocean Century prior to

signing any agreement, he met with Robert Garcin (“Garcin”), Diamond's operation manager on the

Ocean Century project. Allen further testified that he met with both Garcin and Ken Osborne of

Sabine, prior to executing the March 5th contract. Garcin admitted that he met with Allen prior to

Tasch's submission of a bid for the underside work. Garcin also testified that during this meeting he

asked Tasch what type of work they had done in the past and if they had done any blasting or

painting. At Diamond's direction, the March 5th and May 5th contracts were between Tasch and

8 Sabine. Garcin testified that the contracts were structured this way because Tasch was not on

Diamond's approved vendor list and did not have a master service agreement. Most importantly,

Garcin admitted at trial that a contract was written between Diamond and Sabine directing Sabine

to contract the underside work to Tasch. Garcin further testified that this was done because his

technical people (Diamond employees) liked what Tasch had offered. This testimony establishes that

Diamond used Sabine as its agent in contracting with Tasch, and that Sabine had been granted

authority to act on behalf of Diamond in contracting with Tasch. This testimony also shows that

Tasch wanted to do business with Diamond and that Diamond wanted Tasch to do work on the

Ocean Century. The testimony, by Garcin's own admission, shows that Sabine was used as a conduit

of convenience, or agent, for this purpose. Although the district court did not elaborate upon which

theory it relied on in determining that an agency relationship existed, the testimony at trial supports

the view that there was apparent authority to act as an agent. As such, the district court did not err

in concluding that a principal-agent relationship existed between Diamond and Sabine.

III. Estoppel

The district court concluded that an alternative ground for liability existed against Diamond.

It found that if there was no oral contract between the parties, Diamond would still be liable to Tasch

under the theory of estoppel. Because we have already concluded that the court correctly found that

an oral contract existed, we do not reach this issue.

IV. Diamond’s Interference with Tasch’s Performance

Diamond asserts that there is insufficient evidence to support the finding that it interfered with

Tasch’s performance of the contract. The bankruptcy judge found that Diamond employees, agents,

and subcontractors directly controlled, altered, and interfered with Tasch's work. He concluded that

9 welding work on the heliport continuously interfered with Tasch's work on the topside. He also

found that Diamond directly interrupted Tasch's method of performance, causing a loss to Tasch.

Moreover, the court found that as a result of the interruptions, Tasch's performance was seriously

delayed, work had to be redone, and the welders tore leaks in the shrink-wrap, which necessitated

repairs to the containment process. In addition, Allen testified that the delay to Tasch was discussed

and complained about on a regular basis. He said he discussed it with the welders on the rig, with

the Diamond employees, and several times with Garcin. He also testified that Tasch was continually

told that delays would only last a few more days.

The bankruptcy judge found Tasch's description of events to be more credible than the

defendants' description. As noted previously, the bankruptcy court's findings as to witness credibility

are entitled to considerable deference due to its position as factfinder. See, e.g., Canal Barge Co.,

Inc. v. Torco Oil Co., 220 F.3d 370, 375 (5th Cir. 2000). The bankruptcy judge heard all of the

testimony in this action and was in the best position to make determinations of witness credibility.

Further, after reviewing the record, we conclude that a finding of interference by Diamond is

supported by, and consistent with, the evidence.

V. Pretrial Disclosure

Diamond argues that Tasch did not comply with the district court’s order, which required

Tasch to provide Sabine and Diamond with a report of its testifying experts’ opinions no later than

ninety days prior to the final pretrial conference. Diamond asserts that Allen testified about monetary

damages sust ained by Tasch, but the exhibits used by Allen were never included in the Amended

Pretrial Order and were not provided to Diamond. Tasch counters that it timely provided Diamond

10 with its expert’s report. It also maintains that the exhibits used by Allen were a summary of other

documents produced. Tasch also argues that Allen was not an expert, but a victim.

The court, in overruling Diamond’s objection to the exhibits, found that the exhibits reflected

testimony and/or exhibits already in the record. We agree. Moreover, Diamond’s contention that

Allen’s testimony constituted expert testimony is meritless.

VI. Damages

Diamond asserts that there was insufficient evidence of damages and that Tasch is not entitled

to quantum meruit damages. We disagree. Diamond’s arguments regarding the insufficiency of the

evidence are largely a rehashing of its other contentions, including its argument that there was no oral

contract. Moreover, “[o]nce a subcontractor has established a breach of contract by the prime, he

can recover the value of the work he has done or the service he has rendered. In other words, he is

entitled to a quantum meruit.” Citizens Nat’l Bank of Orlando v. Vitt, 367 F.2d 541, 546 (5th Cir.

1966) (emphasis added) (citation omitted). As such, we find no error.

CONCLUSION

For the foregoing reasons, we AFFIRM the district court’s entry of judgment in favor of

Tasch.

AFFIRMED.