Fifth Circuit Court Cases - Case Law and Opinions from the 5th Circuit Federal Court - Court of Appeals

	ROMINGER LEGAL
		Fifth Circuit Court of Appeals Opinions - 5th Circuit
					Need Legal Help?
					Need Legal Help?
LEGAL RESEARCH CENTER
LEGAL RESEARCH CENTER			LEGAL HEADLINES - CASE LAW - LEGAL FORMS	NOT FINDING WHAT YOU NEED? -CLICK HERE

This opinion or court case is from the Fifth Circuit Court or Appeals. Search our site for more cases - CLICK HERE

LEGAL RESEARCH

COURT REPORTERS

PRIVATE INVESTIGATORS

PROCESS SERVERS

DOCUMENT RETRIEVERS

EXPERT WITNESSES

Find a Private Investigator

Find an Expert Witness

Find a Process Server

Case Law - save on Lexis / WestLaw.

Legal News - Legal Headlines

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 92-2649

GALIN CORPORATION and PETROPAK, INC.,
Plaintiffs-Appellants,
versus
MCI TELECOMMUNICATIONS CORPORATION,
Defendant-Appellee.

Appeal from the United States District Court
for the Southern District of Texas

( January 14, 1994 )
Before WISDOM, HIGGINBOTHAM, and SMITH, Circuit Judges.
HIGGINBOTHAM, Circuit Judge:
This is a diversity suit for breach of a construction
contract. The district court granted judgment denying relief to
plaintiffs at the outset of trial, but without allowing the parties
to present evidence to the jury. We agree with the district court
that plaintiffs' claims are barred by the terms of the release and
notice of claim provisions of the construction contract. We also
conclude that the district court's unusual grant of judgment at the
outset of trial was effectively a grant of summary judgment that
had been argued earlier. We affirm.

I
In March 1987, MCI Telecommunications Corporation invited bids
on a fiber optic cable installation route comprising eight sections
to extend through Georgia, Alabama and Tennessee. Galin
Corporation and Petropak, Inc., met with MCI personnel, made
extensive visits to various future work sites, and analyzed MCI's
plans, specifications, and bid instructions. Galin and Petropak
then submitted bids on six of the eight sections. MCI accepted no
bids on the project. In late August of the same year, MCI issued
new instructions for the installation of a shorter version of the
same fiber optic cable route. Before requesting a second set of
bids, MCI released to the prospective contractors an estimate of
the amount of subsurface rock that lay along the cable route.
Galin and Petropak again submitted a bid, this time at a lower
price, which MCI accepted. The parties executed a written
contract.
Galin and Petropak commenced work in early November. During
the project, MCI complained to Galin and Petropak of their lack of
timely progress and, on December 18, MCI gave Galin and Petropak
notice of termination by default for failure to meet the contract
schedule. On December 30, MCI eliminated the last seven miles of
the cable route from the contract.
Galin and Petropak say that they completed the installation of
the cable on or about February 21, 1988, "except for areas where
MCI had failed to obtain necessary permits or easements and where
2

MCI had misrepresented the existence of rocks"; and that they then
commenced cleaning up their work sites.
On April 22, 1988, MCI issued a proposed Final Modification of
Contract, which Galin and Petropak did not sign. As the project
had progressed, however, Galin and Petropak had signed a series of
releases in exchange for incremental payments from MCI. They
signed the last of these releases on May 13, 1988. Finally, in
July of 1988, MCI terminated the contract for non-performance.
Settlement negotiations failed and Galin and Petropak filed
this suit in a Texas court seeking compensation from MCI for breach
of contract, in quantum meruit, and in tort. MCI removed to
federal district court invoking the court's diversity jurisdiction.
MCI and Galin and Petropak then both moved for summary judgment.
The district court granted judgment to MCI on Galin and Petropak's
claim for breach of a covenant of good faith and fair dealing, but
left the remaining issues for trial.
When the case was called for trial, MCI asserted that the
district court should render judgment. The district court granted
the requested relief treating it as a motion for judgment as a
matter of law under Federal Rule of Civil Procedure 50(a).
Applying New York law, the court dismissed the case before the
first witness was called. Galin and Petropak appeal.
3

II
Galin
and
Petropak
pursue
several
claims.
Galin and Petropak allege that MCI deliberately underestimated
the amount of subsurface rock that lay along the route to decrease
the cost of construction. The subcontractor who performed the rock
probes, Galin and Petropak assert, did not work long enough to
produce the results that MCI released. Galin and Petropak argue
that MCI must have fabricated either some or all of the site
information. They claim to have relied on this falsely optimistic
information in their bid.
According to Galin and Petropak, MCI engaged in other
questionable business practices. They allege that MCI's designs
for installing the cable were faulty, that MCI failed to obtain
timely permission for them work on several stretches of the route,
that MCI interfered in their operations, that MCI forced them to
meet more exacting standards during the clean up process than the
contract required, and that MCI otherwise failed to support them.
Galin and Petropak sue for recovery on the contract, in
quantum meruit for extra-contractual work performed, for
compensation for MCI's wrongful interference with their contract
performance, and for compensation for MCI's breach of its duty of
good faith and fair dealing.1 The district court decided the case
1 Galin and Petropak wish to recover the balance owed on
their contract with MCI, compensation for the work they performed
outside the scope of their contract with MCI, and damages which
they incurred as a result of delays, acts of interference,
improper administration of the contract, misrepresentations, and
other reckless, grossly negligent, arbitrary and capricious acts
by MCI.
4

based on provisions in the contract that protect MCI from liability
and on the releases that Galin and Petropak signed. Galin and
Petropak argue that the protective provisions and releases are
inapplicable to their claims and, further, that MCI waived
application of the provisions. The parties agree that New York law
controls.
A.
At the outset, Galin and Petropak argue that the district
court improperly invoked Federal Rule of Civil Procedure 50(a) in
dismissing their case. First, they argue that Rule 50(a) required
that MCI move for judgment as a matter of law and that when the
court ruled MCI had not done so. Second, they argue that they had
not been fully heard by the court, as required by Rule 50(a),
before it rendered judgment. We need not address these contentions
as we construe the court's order as a grant of summary judgment and
affirm on that basis.
The district court early in the case denied MCI's motion for
summary judgment, to which Galin and Petropak had fully responded.
On reconsidering, the court concluded that the case did turn on the
notice and release provisions of the contract. This interpretation
presented no issues of fact and protected MCI from liability. The
court therefore ruled in MCI's favor, albeit under Federal Rule of
Civil Procedure 50(a).
Where a case does not require the resolution of material
facts, summary judgment is appropriate. See Seneca v. Phillips
Petroleum Co., 963 F.2d 762, 765 (5th Cir. 1992). We have in the
5

past affirmed summary judgment on grounds different than those
adopted by the trial court. Id. at 765; Church of Scientology v.
Cazares, 638 F.2d 1272, 1281 (5th Cir. 1981). Since both parties
had adequate opportunity to address the issues involved in summary
judgment prior to the district court's ruling, we see no impediment
to treating the judgment below as a grant of summary judgment.
Having so concluded, we consider the propriety of that judgment.
B. The Releases
Galin and Petropak signed several partial releases in exchange
for incremental payments from MCI, the last on May 13, 1988, after
installation of the cable route. They performed no work after
execution of this release other than cleaning the work sites.
The releases read in pertinent part:
Partial Release and Indemnity
In consideration of payments made heretofore, or to be
made based upon this invoice for labor, material,
equipment, subcontract work, and any and all costs
incurred for the performance of the contract work
invoiced thus far, the Contractor hereby unconditionally
and without reservation releases and indemnifies MCI and
their officers, agents, employees, assignees and heirs
from any and all liens, claims, demands, penalties,
losses, costs, damages and liability in any matter
whatsoever.
Galin and Petropak interpret the releases narrowly in two
ways: first, as applying only to the work specified in the
invoices they submitted; and, second, as applying only to the
contract work, as opposed to the extra work, which they performed.
The language of the releases precludes this interpretation.
Under New York law, where the language of a release admits of
only one interpretation, the proper interpretation of the release
6

is a question of law. Janos v. Peck, 251 N.Y.S.2d 254, 258 (N.Y.
App. Div.), aff'd, 254 N.Y.S.2d 15 (N.Y. 1964) ("Where... there is
a question as to the construction of a written contract between
the parties and the determination of that question may be reached
by reference to and a consideration of the plain and unambiguous
wording of the contract, the question, as one of law, should be
then and there resolved.") See also Metz v. Metz, 572 N.Y.S.2d
813, 815 (N.Y. App. Div. 1991). The releases that Galin and
Petropak signed list as consideration all compensation that MCI
paid Galin and Petropak in the past as well as the compensation the
invoice required MCI to pay Galin and Petropak in the future. The
terms of the release, however, are broader. The form releases MCI
from "all liens, claims, demands, penalties, losses, costs, damages
and liability in any matter whatsoever." As Galin and Petropak
signed nine releases in exchange for incremental payments, the
court interpreted the language of each release to reach all claims
of Galin and Petropak against MCI that existed at the time Galin
and Petropak signed each one. This interpretation is appropriate
as, under New York law, a general release "will bar suit on any
cause of action arising prior to the date of its execution and
delivery, in the absence of fraud or other vitiating circumstances
in its inducement or execution." Metz, 572 N.Y.S.2d at 815
(citation and internal quotation marks omitted). See also Troy
News Co. v. Troy, 563 N.Y.S.2d 301, 303 (N.Y. App. Div. 1990)
(holding a release that so specifies applies to future claims but
in the absence of specification applies to all claims in existence
7

when it is given). But see Herman v. Malamed, 487 N.Y.S.2d 791,
793-94 (N.Y. App. Div. 1985) (holding that a specific release
followed by an omnibus clause may be limited to the specified
terms). Galin and Petropak do not claim that MCI fraudulently
induced them to sign the releases. With the exception of their
claim for cleaning the work sites, neither do Galin and Petropak
deny that the claims which they now pursue existed when they signed
the various partial releases. Thus, they offer no basis for
refusing enforcement of the releases.
Galin and Petropak fail in their attempt to "marshal" case law
for the proposition that we may modify or void these releases. In
De Costa v. Williams, 462 N.Y.S.2d 799 (Sup. Ct. 1983), a New York
court looked to the actual understandings of the parties in
limiting the scope of a release. In doing so, however, the court
noted, "A mistaken belief as to the nonexistence of presently
existing injury is a prerequisite to avoidance of a release." Id.
at 802 (citation omitted). Galin and Petropak do not claim that
they were unaware at the time they signed the releases of the
claims they now pursue. They insist instead that they were aware
of them but had a different intent. They argue that they would
have offered evidence to this effect at trial.
Where a written agreement is unambiguous, as in the present
case, New York law does not allow consideration of extrinsic
evidence of the parties' intentions. "It has long been the rule
that when a contract is clear in and of itself, circumstances
extrinsic to the document may not be considered and that where the
8

intention of the parties may be gathered from the four corners of
the instrument, interpretation of the contract is a question of law
and no trial is necessary to determine the legal effect of the
contract." Janos, 251 N.Y.S.2d at 259 (citations and internal
quotation marks omitted). See also Rice v. Cohen, 555 N.Y.S.2d
800, 801 (N.Y. App. Div. 1990) (holding that clear and unambiguous
language in a document precludes consideration of extrinsic
evidence to interpret its meaning). The releases are unambiguous.
They bar Galin and Petropak's claims except those arising from
cleaning the work sites. The cleaning, as we explained, occurred
after May 13, 1988, so the last release did not reach claims from
that work. Nevertheless, a provision in the construction contract
precludes them.
C. The Notice of Claims Provision
Paragraph 18 of the construction contract set a time frame for
claims arising from unexpected circumstances. The paragraph
required Galin and Petropak to notify MCI within five days of an
event that could give rise to a claim on their part or that might
extend the period of time in which they would complete the
contract. It then provided that Galin and Petropak should submit
to MCI within fourteen days a statement substantiating the change
in circumstances and estimating its impact. Upon request, Galin
and Petropak would have to document any claims submitted for extra
compensation or for an extension of time.
Galin and Petropak do not deny that they failed to meet the
terms of this provision in submitting their claims to MCI. They
9

argue instead that the provision applies to events that occurred
during the completion of the contract, not to work that Galin and
Petropak undertook on MCI's behalf that was unanticipated and,
therefore, beyond the scope of the contract. They describe the
latter as "extra" work.
The seminal case in New York defining "extra" work is Savin
Brothers, Inc. v. State, 405 N.Y.S.2d 516 (N.Y. App. Div. 1978),
aff'd, 393 N.E.2d 1041 (N.Y. 1979). In Savin Brothers, the court
held that a contractor who allegedly performed extra work could not
recover for that work. Id. at 521. In reaching that conclusion,
the court defined extra work as "something necessarily required in
the performance of the contract which arises from conditions which
could not be anticipated." Id. at 519 (citation omitted). The
contract determines which party assumes the costs of extra work.
Id.
Galin and Petropak note that paragraph 15 of the contract
addresses changes in the arrangement made at MCI's behest. These
changes would not seem to encompass extra work. Paragraph 18,
however, sets the time frame for reporting "the happening of any
event" which Galin and Petropak believed might give rise to a claim
"for an increase in contract price" or "the period of performance."
Paragraph 18 addresses precisely the sort of unanticipated event
that results in extra work and requires that Galin and Petropak
report such events in a timely fashion.
Galin and Petropak submitted none of their claims within the
period of time prescribed by paragraph 18. They submitted their
10

first claim for recovery in excess of the contract on May 16, 1988.
They had ceased performing any work on the installation of the
capable in February of 1988, three months earlier. Similarly, they
did not submit their claim for cleaning the construction sites
until August 8, 1988. They had completed cleaning the sites on May
1, 1988. Galin and Petropak did not comply with the provision in
paragraph 18 requiring written notice of the event within five days
and an estimate of its impact within fourteen days. Without such
notice MCI could not respond to Galin and Petropak's concerns in a
timely manner. Because Galin and Petropak delayed in making their
claims, paragraph 18 precludes them from recovering for any extra
work they performed.
D. Waiver
Galin and Petropak argue, in the alternative, that MCI waived
its various defenses. They base this argument on MCI's willingness
to consider their claims.
"Waiver is an intentional relinquishment of a known right and
should not be lightly presumed." Gilbert Frank Corp. v. Federal
Ins. Co., 520 N.E.2d 512, 514 (N.Y. 1988) (citations omitted). A
decision by MCI not to enforce its rights immediately, and instead
to pursue completion of a contract, does not amount to such waiver.
See Seven-Up Bottling Co. v. Pepsico, Inc., 686 F. Supp. 1015, 1023
(S.D.N.Y. 1988).
The New York Court of Appeals' treatment of waiver in a
summary judgment context in Gilbert is instructive. 520 N.E.2d at
513-14. First, of course, a defendant must produce evidence which,
11

if uncontroverted, would establish a defense. The unambiguous
language of the releases and the notice of claims provision
satisfies this requirement. See id. at 514 (finding that a
contractual limitation on the period of time in which a claim may
be asserted carries defendant's burden in moving for summary
judgment). Second, the plaintiff must have the opportunity to
offer evidence of waiver of defense. Id. Applying this standard,
the lower appellate court in Gilbert had held "that since defendant
had not offered satisfactory explanations regarding the necessity
for the intensive activity which was undertaken with regard to
plaintiff's claim after the expiration of the limitations period,
there were questions of fact . . . requiring further development."
514 N.Y.S.2d 215, 218 (N.Y. App. Div. 1987). Unwilling to draw an
inference from the defendant's conciliatory posture, the Court of
Appeals reversed. 520 N.E.2d at 514. The Court of Appeals
explained that a plaintiff must offer "evidence from which a clear
manifestation of intent by defendant to relinquish the protection
of the contractual limitations period could be reasonably
inferred." Id. Thus, as a matter of law, a defendant's apparent
willingness to honor a plaintiff's claim is insufficient to prove
waiver. See also Silverstein Properties, Inc. v. Webber, Jackson
& Curtis, Inc., 480 N.Y.S.2d 724, 726 (N.Y. App. Div. 1984), aff'd,
482 N.E.2d 906 (N.Y. 1985) (holding that evidence of landlord's
willingness to address merits of tenant's claim, after time allowed
for claim by contract had expired, is insufficient to support
reasonable inference of waiver).
12

Galin and Petropak allege only that they had reason to believe
that MCI would entertain their claims. The letters from MCI on
which Galin and Petropak rely are representative. In one of these
letters, MCI's agent, Richard Yeats, reminded Galin and Petropak,
"Timely submittal of claims and back-up will facilitate the
contract close out." Yeats noted in another letter that "MCI has
stressed making... changes [in the terms of the contract] as they
occur, not at the end of the contract which makes negotiations and
contract close laborious." While these letters suggest lenience in
enforcing the notice requirement, they offer no basis for inferring
that MCI deliberately waived that requirement. Because Galin and
Petropak offered nothing to support a finding of waiver, invoking
waiver was insufficient to defeat summary judgment.
E. Evidence of Settlement
Galin and Petropak also contest the ruling of the district
court that evidence of the settlement process was inadmissible.
Galin and Petropak wished to use MCI's attempt to settle as proof
of the limited scope of the releases Galin and Petropak signed and
as evidence that MCI waived the notice provision of the contract.
As we hold that the releases are unambiguous on their face,
evidence of any attempts by MCI to settle are not relevant. See
Gilbert Frank Corp., 520 N.E.2d at 514. We need not address the
issue of admissibility.
AFFIRMED.
13