Roy Anderson Corporation v. 225 Baronne Complex, L.L.C.

ROY ANDERSON * NO. 2018-CA-0962
CORPORATION
*
VERSUS COURT OF APPEAL
*
225 BARONNE COMPLEX, FOURTH CIRCUIT
L.L.C. *
STATE OF LOUISIANA
*******

APPEAL FROM
CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2016-12444, DIVISION “G-11”
Honorable Robin M. Giarrusso, Judge
******
Judge Rosemary Ledet
******
(Court composed of Judge Joy Cossich Lobrano, Judge Rosemary Ledet, and
Judge Sandra Cabrina Jenkins)

Lloyd N. Shields
Adrian A. D'Arcy
Michael S. Blackwell
Laura E. Avery
SHIELDS MOTT L.L.P.
650 Poydras Street, Suite 2600
New Orleans, LA 70130

COUNSEL FOR PLAINTIFFS/APPELLEES

Leopold Z. Sher
James M. Garner
Christopher T. Chocheles
Jacob A. Airey
SHER GARNER CAHILL RICHTER KLEIN & HILBERT, LLC
909 Poydras Street, 28th Floor
New Orleans, LA 70112

COUNSEL FOR DEFENDANT/APPELLANT

AFFIRMED IN PART;
REVERSED IN PART;
AND REMANDED

SEPTEMBER 25, 2019

This is a dispute arising out of a construction contract to renovate a large

office building into a hotel, an apartment building, and a garage (the “Project”).

The general contractor filed a lien under the Louisiana Private Works Act. La. R.S.

9:4801, et seq. (the “PWA”).1 The parties involved in this appeal are as follows: (i)

the general contractor, Roy Anderson Corporation (“RAC”)—the plaintiff and

defendant-in-reconvention; (ii) the building owner, 225 Baronne Complex, L.L.C.

(“225 Baronne”)—the defendant, plaintiff-in-reconvention, and third-party

plaintiff; and (iii) the four sureties for the Project: Travelers Casualty and Surety

Company of America, Liberty Mutual Insurance Company, Fidelity and Deposit

Insurance Company of Maryland, and Federal Insurance Company (collectively

the “Surety Defendants”)—the third-party defendants.

From the trial court’s judgment granting RAC’s peremptory exceptions of

prescription and res judicata and granting the Surety Defendants’ peremptory

exceptions of no right of action and no cause of action, 225 Baronne appeals. For

1
Although the Legislature amended the PWA in 2019, the amendment does not make any
substantive change affecting the provisions of the PWA at issue here.

1

the reasons that follow, we reverse in part—as to the granting of RAC’s exceptions

of prescription and res judicata; affirm in part—as to the granting of the Surety

Defendants’ exceptions of no right of action and no cause of action; and remand.

FACTUAL AND PROCEDURAL BACKGROUND

The underlying facts regarding this appeal are undisputed and are set forth in

225 Baronne Complex, LLC v. Roy Anderson Corp., 16-0492 (La. App. 4 Cir.

12/14/16) (unpub.), 2016 WL 7238975, writ denied, 17-0326 (La. 4/7/17), 218

So.3d 116 (“225 Baronne I”). To provide a framework for analyzing the issues

presented by this appeal, we provide the following chronology of the relevant

factual and procedural events:

 November 8, 2013: 225 Baronne entered into a design-build contract with
RAC for the Project (the “Contract”); on the same date, the Contract was
recorded in the Orleans Parish mortgage records.

 October 23, 2015: Having achieved substantial completion of the Project,
225 Baronne recorded a Notice of Termination in the Orleans Parish
mortgage records.

 December 18, 2015: RAC signed a Confirmation of No Default, which
indicated that 225 Baronne was not in default of any previously billed
payment obligations;2 and 225 Baronne paid RAC $2,941,725.28.

 December 22, 2015: RAC recorded a Statement of Lien and Privilege
pursuant to La. R.S. 9:4802 of the PWA, stating that 225 Baronne owed it
$15,401,300 (the “Lien”) and that the balance owed “represents material,
labor, equipment, and services provided to Owner in connection with the
[Project].”

 December 28, 2015: 225 Baronne sent a demand letter to RAC requesting
that it immediately—within ten days—direct the Recorder of Mortgages for
Orleans Parish (the “Recorder”) to remove the Lien.

2
RAC, however, reserved its rights and defenses regarding its un-submitted extra work claims,
unbilled amounts, and liquidated damages.

2

 January 12, 2016: 225 Baronne instituted a summary mandamus
proceeding pursuant to La. R.S. 9:4833 and La. R.S. 44:114 to remove the
Lien (the “Lien Lawsuit”). The Lien Lawsuit petition—styled as a “Petition
for Removal of Statement of Claim and Privilege and for Damages”—was
filed against the Recorder and RAC.3

 February 22, 2016: The trial court ruled in 225 Baronne’s favor and ordered
the Recorder to remove the Lien. The trial court deferred ruling on
225 Baronne’s request for attorney’s fees and damages.

 April 21, 2016: The Recorder removed the Lien.

 December 14, 2016: On RAC’s appeal, this court, in 225 Baronne I, held
that the Lien met the statutory requirements of a valid lien. Accordingly, this
court reversed the trial court’s judgment and ordered the Recorder to
reinstate the Lien.

 December 21, 2016: RAC filed an ordinary proceeding (the “Enforcement
Lawsuit”)—styled as a “Petition to Enforce Lien and for Damages.” In its
petition, RAC alleged that 225 Baronne had failed to pay RAC the total
amount due for the work it had performed on the Project.

 April 7, 2017: The Louisiana Supreme Court denied 225 Baronne’s writ
application in 225 Baronne I.

 May 1, 2017: 225 Baronne answered RAC’s petition in the Enforcement
Lawsuit and reconvened against RAC seeking costs and attorney’s fees.

 September 1, 2017: The Recorder reinstated the Lien.

 November 13, 2017: 225 Baronne filed an amended reconventional demand,
asserting the following six causes of action against RAC: (i) racketeering;
(ii) fraud; (iii) breach of contract, (iv) negligent misrepresentation; (v) gross
negligence; and (vi) abuse of rights (the “Reconventional Demand”). 225
Baronne also filed a third party demand against the Surety Defendants,
seeking to recover from them under the performance and payment bonds
they issued regarding the Project (the “Third Party Demand”).

 February 2, 2018: 225 Baronne filed a fourth supplemental and amended
reconventional demand and third party demand, again raising the same six

3
In the Lien Lawsuit, 225 Baronne averred that the Lien was improper under La. R.S. 9:4833 for
the following two reasons: (i) the Contract barred the Lien; and (ii) the Lien contained amounts
that were not submitted to 225 Baronne for payment. 225 Baronne requested that the trial court
order the Recorder to remove the Lien and that it be awarded damages and attorney’s fees
incurred in having the Lien removed. Opposing the Lien Lawsuit, RAC contended that the Lien
met the requirements of La. R.S. 9:4822 and was proper.

3

claims against RAC as in the Reconventional Demand and the same claims
against the Surety Defendants as in the Third Party Demand.

 March 15, 2018: RAC filed prescription and res judicata exceptions, and
the Surety Defendants filed no right of action and no cause of action
exceptions (collectively the “Exceptions”).

 June 25, 2018: A hearing was held on the Exceptions, and the trial court
took the matter under advisement.

 July 24, 2018: The trial court granted the Exceptions.4

DISCUSSION

As noted at the outset, 225 Baronne appeals the trial court’s judgment

granting the Exceptions.5 Although 225 Baronne asserts multiple assignments of

error, we frame the issue presented as whether the trial court erred in granting the

Exceptions. We organize our analysis around each of the Exceptions—

prescription, res judicata, no right of action, and no cause of action.

Prescription

On appeal, 225 Baronne raises multiple theories in support of its position

that the trial court erred in sustaining RAC’s prescription exception, including

contra non valentum, relation back, suspension, and interruption. Because we find

the interruption theory dispositive, we do not reach the other theories.

4
The trial court provided the following written reasons for granting the exceptions of
prescription and res judicata:

What is clear to this Court is that while 225 Baronne Complex, LLC did
state a cause of action in its reconventional demand, they waited too late to file
said demand. It should have been filed along with the lien dispute, and as such, is
barred by res judicata. Additionally, the claim has prescribed. The law mandates
that suit be filed in a timely manner once the plaintiff SHOULD or COULD have
known they were damaged.
5
The trial court issued an amended judgment to clarify an ambiguity in the original judgment.
225 Baronne appealed from both judgments.

4

When evidence is introduced on the prescription exception, but the case

presents no dispute regarding the material facts, only the determination of a legal

issue, a de novo standard of review applies, “giving no deference to the trial

court’s legal determination”. Wells Fargo Fin. Louisiana, Inc. v. Galloway, 17-

0413, p. 8 (La. App. 4 Cir. 11/15/17), 231 So.3d 793, 800; see also Kirt v.

Metzinger, 19-0180, p. 4 (La. App. 4 Cir. 6/19/19), 274 So.3d 1271, 1273 (citing

Wells Fargo, supra, and observing that the legal correctness of a trial court’s ruling

on a prescription exception is reviewed under a de novo standard). Such is the case

here.6

A prescriptive period is interrupted “when the obligee commences action

against the obligor, in a court of competent jurisdiction and venue.” La. C.C.

art. 3462. Prescription is interrupted by the filing of suit “even when the petition

fails to state a cause of action.” Velazquez v. Landcoast Insulation, Inc., 08-804, p.

7 (La. App. 3 Cir. 12/10/08), 999 So.2d 318, 323. “An action commenced in a

court of competent jurisdiction and venue, or with service of process within the

prescriptive period, continues to interrupt prescription for as long as the suit

remains pending.” Ansardi v. Louisiana Citizens Prop. Ins. Corp., 11-1717, 12-

0166, p. 20 (La. App. 4 Cir. 3/1/13), 111 So.3d 460, 471-72 (citing La. C.C. art.

3463). When prescription is interrupted, the time that has elapsed is wiped out;

“[p]rescription commences to run anew from the last day of interruption.” La. C.C.

art. 3466. Prescriptive statutes are construed liberally in favor of maintaining the

6
In opposing RAC’s prescription exception, 225 Baronne introduced an affidavit.

5

obligation sought to be extinguished. Succession of Tompkins, 32,405, p. 5 (La.

App. 2 Cir. 12/8/99), 747 So.2d 1251, 1254.

Applying these principles, we find that the trial court erred in granting the

prescription exception. Prescription commenced running on December 22, 2015,

when RAC recorded the Lien, prescription was interrupted when 225 Baronne filed

the Lien Lawsuit on January 16, 2016. The Lien Lawsuit remained pending until

the Louisiana Supreme Court denied 225 Baronne’s writ application on April 7,

2017; prescription began to run anew at that time. Given that 225 Baronne filed the

Reconventional Demand on November 13, 2017, its claims are not prescribed.7

We, thus, reverse the trial court’s judgment granting RAC’s prescription exception.

Res Judicata

RAC’s exception of res judicata is based on this court’s 2016 decision in

225 Baronne I, which reversed the trial court’s judgment in the Lien Lawsuit and

ordered that the Lien be reinstated. The gist of RAC’s position is that this court’s

decision in 225 Baronne I precludes any and all claims by 225 Baronne arising out

of RAC’s work on the Project. Ruling in RAC’s favor, the trial court, in its written

reasons for judgment, stated that “[225 Baronne’s Reconventional Demand] should

have been filed along with the lien dispute, and as such, is barred by res judicata.”

On appeal, 225 Baronne contends that the trial court erroneously found that

it should have brought its Reconventional Demand, which asserted a $20 million

7
It is undisputed that the subsequent amendments to the Reconventional Demand related back to
the original one. The shortest prescriptive period is for 225 Baronne’s tort claims—one year. See
La. C.C. art. 3492 (providing “[d]elictual actions are subject to a liberative prescription of one
year. This prescription commences to run from the day injury or damage is sustained”).

6

tort claim via ordinary proceeding, with the summary mandamus proceeding to

remove the lien—the Lien Lawsuit. It emphasizes that, under Louisiana law, it

could not have cumulated an ordinary proceeding with a summary proceeding.8 For

this reason, among others, 225 Baronne contends that res judicata is inapplicable

here. RAC counters that the trial court correctly concluded that res judicata applies

here and that there was no procedural bar to 225 Baronne asserting its damage

claims in the Lien Lawsuit. Indeed, RAC emphasizes that 225 Baronne prayed for

damages in the Lien Lawsuit and that the Lien Lawsuit was captioned a “Petition

for Removal of Statement of Claim and Privilege and for Damages.”

An exception of res judicata presents a question of law and is reviewed de

novo. See Barrie v. City of New Orleans, 17-1001, p. 8 (La. App. 4 Cir. 5/23/18),

248 So.3d 483, 488, writ denied, 18-1041 (La. 10/15/18), 253 So.3d 1306. Stated

otherwise, the standard of review of an exception of res judicata requires an

appellate court to determine if the trial court's decision is legally correct or

incorrect. Bd. of Sup'rs of Louisiana State Univ. v. Dixie Brewing Co., 14-0641, p.

6 (La. App. 4 Cir. 11/19/14), 154 So.3d 683, 688 (collecting cases). Any doubt as

to whether res judicata applies is to be resolved against its application. Dixie

Brewing, 14-0641, p. 6, 154 So.3d at 688; Armbruster v. Anderson, 18-0055, p. 8

(La. App. 4 Cir. 6/27/18), 250 So.3d 310, 316, writ denied, 18-1276 (La. 11/5/18),

255 So.3d 1054.

“Principles of res judiciata are not ironclad.” Sharp v. Johnson Bros.

Corp., 95-1311, p. 11 (La. App. 4 Cir. 1/8/97), 687 So.2d 568, 573.

8
In support, 225 Baronne cites F.D.I.C. v. Lee, 942 F.Supp. 255, 258 (E.D. La. 1996), which
held that that “a mandamus suit may be brought by a summary proceeding while a suit for
declaratory judgment must be brought in an ordinary proceeding” and that “[f]or this reason a
petitioner in state court cannot cumulate a suit for mandamus with one for declaratory
judgment.”

7

In Louisiana, res judicata is codified in statutory provisions. Since the

Legislature revamped the res judicata statutory provisions in 1991, res judicata in

Louisiana, akin to federal law and common law, applies to “all causes of action

existing at the time of final judgment arising out of the transaction or occurrence

that is the subject matter of the litigation are extinguished. . . .” La. R.S. 13:4231;

Dixie Brewing, supra.

A second action is precluded by res judicata when all of the following five

elements are satisfied: (1) the judgment is valid; (2) the judgment is final; (3) the

parties are the same; (4) the cause or causes of action asserted in the second suit

existed at the time of the final judgment in the first litigation; and (5) the cause or

causes of action asserted in the second suit arose out of the transaction or

occurrence that was the subject matter of the first litigation. Schiff v. Pollard, 16-

0801, pp. 9-10 (La. App. 4 Cir. 6/28/17), 222 So.3d 867, 875 (quoting Burguieres

v. Pollingue, 02-1385, p. 8 (La. 2/25/03), 843 So.2d 1049, 1053).

The first three elements required for res judicata to apply are undisputed—

the judgment in the Lien Lawsuit is both valid and final, and the parties to the Lien

Lawsuit and the Reconventional Demand in the Enforcement Lawsuit are the

same. While the parties dispute whether the fourth and fifth elements are satisfied,

we find it unnecessary to resolve that dispute given we conclude that the

exceptional circumstances exception, codified in La. R.S. 13:4232 (A)(1),9 applies

here. See Dixie Brewing Co., 14-0641, p. 9, 154 So.3d at 689-90.

9
La. R.S. 13:4232 (A)(1) provides as follows:

A. A judgment does not bar another action by the plaintiff:

(1) When exceptional circumstances justify relief from the res
judicata effect of the judgment . . .

8

The exceptional circumstances exception “generally applies to complex

procedural situations in which litigants are deprived of the opportunity to present

their claims due to unanticipated quirks in the system, to factual situations that

could not be anticipated by the parties, or to decisions that are totally beyond the

control of the parties.” Oleszkowicz v. Exxon Mobil Corp., 14-0256, p. 5 (La.

12/9/14), 156 So.3d 645, 648 (quoting Kevin Associates, LLC v. Crawford, 04-

2227, p. 8 (La. App. 1 Cir. 11/4/05), 917 So.2d 544, 549).

Explaining the extraordinary circumstances exception, the Louisiana

Supreme Court in Terrebonne Fuel & Lube, Inc. v. Placid Ref. Co., 95-0654, 95-

0671, p. 13 (La. 1/16/96), 666 So.2d 624, 632, observed:

Although rarely mentioned, exceptions exist to the common law
theory of res judicata, as noted in the Restatement (Second) of
Judgments, § 26 (1982). These exceptions involve “exceptional
circumstances” as where (a) the parties have agreed that the plaintiff
may split his claim, or the defendant has acquiesced therein; (b) the
court in the first action has expressly reserved the plaintiff's right to
maintain the second action; (c) there are restrictions on the subject
matter jurisdiction of the courts; (d) the judgment in the first action
was plainly inconsistent with the fair and equitable implementation of
a statutory or constitutional scheme; (e) for policy reasons; or (f) it is
clearly and convincingly shown that the policies favoring preclusion
of a second action are overcome for an extraordinary reason.
Restatement (Second) of Judgments, § 26 (1982), pg 233-234.
As established elsewhere in this opinion, the instant case falls squarely

within the ambit of example (d)—that the judgment in the first action was plainly

inconsistent with the fair and equitable implementation of a statutory or

constitutional scheme—which the jurisprudence has labeled the “statutory-scheme

exception.” In re LB Steel, LLC, 572 B.R. 690, 703-04 (Bankr. N.D. Ill. 2017).

Under the statutory-scheme exception,“the general rule of claim splitting does not

apply where ‘it is the sense of the [statutory] scheme that the plaintiff should be

permitted to split [its] claim.’” Id. (quoting Restatement § 26(1)(d)).

9

Restatement § 26, Comment (e)—captioned “Implementation of a statutory or

constitutional scheme (Subsection (1)(d))”—provides that “it may appear from a

consideration of the entire statutory scheme that litigation, which on ordinary

analysis might be considered objectionable as repetitive, is here intended to be

permitted. See Illustration 5.” Illustration 5 reads as follows:

For nonpayment of rent, landlord A brings a summary action to
dispossess tenant B from leased premises. A succeeds in the action. A
then brings an action for payment of the past due rent. The action is
not precluded if, for example, the statutory system discloses a purpose
to give the landlord a choice between, on the one hand, an action with
expedited procedure to reclaim possession which does not preclude
and may be followed by a regular action for rent, and, on the other
hand, a regular action combining the two demands.

By analogy, the PWA’s statutory scheme discloses a purpose to afford an

owner with a fast-track, mandamus procedure, under La. R.S. 44:114, to obtain

removal of a clearly unjustified lien, coupled with a right to attorney’s fees and

damages in certain circumstances. See La. R.S. 9:4833. The fact that the owner

can—and here did—file a damage claim in the summary mandamus proceeding is

not outcome determinative of the res judicata issue. Rather, the dispositive issue is

whether, considering the sense of the entire PWA’s statutory scheme, an owner

should be allowed to split its claim—file a summary mandamus proceeding to

remove a clearly unjustified lien, but, if unsuccessful, be allowed to assert a

reconventional demand in the lien claimant’s ordinary proceeding to enforce the

lien. We answer that question in the affirmative.

The summary mandamus procedure is designed to address the situation

presented when the lien procedure is abused—used to encumber someone’s

immovable property without a reasonable basis to do so. See La. R.S. 9:4833,

cmt. (a)(2019) (observing that the summary mandamus procedure “is designed to

10

discourage the filing of a claim that is clearly unjustified, late, or otherwise made

without reasonable cause for believing it is valid in the hope that economic

pressure may be placed upon the owner or contractor to extract a settlement or

other payment as the price of a release”); see also S.D. Deacon Corp. of

Washington v. Gaston Bros. Excavating, Inc., 150 Wash.App. 87, 90; 206 P.3d

689, 691 (2009) (observing that “[t]he lien procedure can be abused by persons

who desire to encumber someone else's real property improvement without any

real basis for doing so”).

As the jurisprudence has recognized, “an improper or illegal lien recorded

against immovable property will hamper the owner in efforts to encumber or sell

the property.” Gauguin, Inc. v. Addison, 288 So.2d 893, 894-95 (La. App. 1st Cir.

1973) (internal citations omitted). “[T]o require the owner in all such cases to

await the outcome of ordinary proceedings to cancel the lien” would be unjust. Id.

at 895. “Many construction projects contemplate or are dependent upon financing

arrangements, leases, or conveyances that are to be consummated shortly after

completion of the work.” La. R.S. 9:4833, cmt. (a)(2019).

When the ruling in the summary mandamus procedure is in the owner’s

favor, “[t]he judgment rendered pursuant to the action is tantamount to a

declaration that the claimant has no privilege at all.” Thomas A. Harrell, Security

Devices, 48 La. L. Rev. 477, 489 (1987). Conversely, when the summary

mandamus proceeding does not result in a judgment in the owner’s favor, the lien

claimant, to preserve the privilege, is required to file an ordinary action to enforce

the privilege “within one year after the filing of the statement of claim or

privilege.” La. R.S. 9:4823(A)(2). A summary mandamus proceeding does not toll

the period for filing a petition to enforce the lien. Clark Constr. Co. v. Warren,

11

34,306, p. 2 (La. App. 2 Cir. 12/6/00), 774 So.2d 1091, 1092. Nor is a summary

mandamus proceeding precluded by the pendency of another suit concerning the

lien. Gauguin, 288 So.2d at 895. As these cases demonstrate, a summary

mandamus proceeding is separate and distinct from an ordinary action to enforce

the lien.

Summary mandamus proceedings arguably should be confined to cases in

which “the evidence undisputably shows the lien was improperly filed or the issue

is uncontested.” Rhodes Steel Bldgs., Inc. v. Walker Const. Co., 35,917, 35,918,

p. 12, n. 6 (La. App. 2 Cir. 4/3/02), 813 So.2d 1171, 1179 (addressing La.

R.S. 38:2242.1, which tracks the language of La. R.S. 9:4833 and provides for a

summary mandamus proceeding under the Public Works Act); S.D. Deacon Corp.,

150 Wash.App. at 90-91, 206 P.3d at 691 (observing that “[t]he summary

procedure provided by the statute is not to be used as a substitute for trial where

there is a legitimate dispute about the amount of work done and money paid” and

that “[e]very frivolous lien is invalid, but not every invalid lien is frivolous”).

In the summary mandamus proceeding, “[t]he owner of the property against

which a lien is filed who seeks to have the recordation cancelled and erased by a

rule to show cause merely calls upon the person recording the lien to show some

color of right to the lien and that the affidavit or other writing evidencing the claim

was timely filed.” Succession of Lard v. Poland, 42,284, p. 8 (La. App. 2 Cir.

6/20/07), 960 So.2d 1254, 1258 (citing Davis-Wood Lumber Co. v. Wood, 224 La.

825, 71 So.2d 125 (1954)). “To go further and require the person recording the lien

to prove the validity of each item making up his claim on the rule to show cause

would be to try the merits of the case by rule.” Id. As a commentator has noted, the

summary mandamus proceeding “was not intended to substitute for a trial on the

12

merits of the claim.” Thomas A. Harrell, Security Devices, 48 La. L. Rev. 477, 489

(1987).

In 225 Baronne I, this court observed that “[t]his opinion offers no position

on the amounts, if any, that may be owed under the Lien. That determination must

be made at a trial to enforce the Lien.” 16-0492, p. 8, n. 8, 2016 WL 7238975 at

**15. This court further observed that “the fact that the exact amount owed may be

in dispute is not sufficient to invalidate the [L]ien per se.” 16-0492, p. 7, 2016 WL

7238975 at **14. In 225 Baronne I, we acknowledged that, in the instant case,

there would be a subsequent, ordinary suit to try the merits of the Lien. For these

reasons, the nature of the PWA statutory scheme dictates that, in this context, the

owner—225 Baronne—be allowed to assert its claims in this ordinary proceeding.

Because the statutory-scheme exception thus applies here, the trial court erred in

granting RAC’s res judicata exception.

No Right of Action

The Surety Defendants issued payment and performance bonds for the

Project.10 225 Baronne contends that the trial court erred in granting the Surety

10
The PWA recognizes the difference between payment and performance bonds; however, the
PWA only regulates payment bonds. See Congregation of St. Peter's Roman Catholic Church of
Gueydan v. Simon, 497 So.2d 409, 412 (La. App. 3d Cir. 1986) (citing La. R.S. 9:4812(C)). The
distinction between these types of bonds is explained in 11A COUCH ON INS. § 163:10 (2019) as
follows:

A performance bond guarantees that the contractor will perform the
contract, and usually provides that, if the contractor defaults and fails to complete
the contract, the surety can itself complete the contract or pay damages up to the
limit of the bond.

A labor and material payment bond guarantees the owner that all bills for
labor and materials contracted for and used by the contractor will be paid by the
surety if the contractor defaults. The purpose of a payment bond or provision is to
protect the equity of the owner and the owner's property against the claims of
unpaid subcontractors or suppliers. Such a bond is not a general indemnity bond
and does not insure the reliability of the subcontractor in all accounts for fraud or
otherwise. Statutory requirements, and the language which is “typical” in a certain
bond, may vary considerably from state to state, especially as to payment bonds.

13

Defendants’ exception of no right of action under the payment bond.11

225 Baronne’s position is that because RAC has made a $15,401,300 claim against

it that includes amounts allegedly owed to subcontractors and because the plain

language of the payment bond obligates the Surety Defendants to pay or to

indemnify 225 Baronne from the claims of subcontractors, 225 Baronne has a right

of action against the Surety Defendants under the payment bond.12 The Surety

Defendants counter that 225 Baronne has no right of action because, as an owner,

it is not a proper claimant under the payment bond.

The standard of review of a trial court ruling on an exception of no right of

action is de novo. See N. Clark, L.L. C. v. Chisesi, 16-0599, p. 3 (La. App. 4 Cir.

12/7/2016), 206 So. 3d 1013, 1015. “The function of an exception of no right of

action is to determine whether the plaintiff belongs to the class of persons to whom

the law grants the cause of action asserted in the suit.” Gunasekara v. City of New

Orleans, 18-0639, p. 6 (La. App. 4 Cir. 1/30/19), 264 So.3d 1236, 1240. Simply

put, an exception of no right of action tests a plaintiff’s standing to assert a claim.

Id. (internal footnotes omitted).
11
As discussed elsewhere in this opinion, the Surety Defendants also filed an exception of no
cause of action as to 225 Baronne’s Third Party Demand against them under the performance
bond, which the trial court granted.
12
In support, 225 Baronne cites the following provision of the payment bond:

Section 1:

The Contractor and Surety, jointly and severally, bind themselves, their heirs,
executors, administrators, successors and assigns to the Owner to pay for labor,
materials and equipment furnished for use in the performance of the Construction
Contract, which is incorporated herein by reference, subject to the following
terms.

Section 4:

When the Owner has satisfied the conditions of Section 3, the Surety shall
promptly and at the Surety's expense defend, indemnify and hold harmless the
Owner against a duly tendered claim, demand, lien or suit.

14

The payment bond is a statutory bond; the provisions of the PWA governing

statutory bonds are incorporated into the payment bond as if set forth therein. See

La. R.S. 9:4812 (D).13 The PWA’s purpose is to protect subcontractors, among

others, who engage in construction projects and lack privity of contract with the

project owner. Buck Town Contractors & Co. v. K-Belle Consultants, LLC, 15-

1124, p. 5 (La. App. 4 Cir. 4/6/16), 216 So.3d 981, 984. To do so, the PWA grants

those parties rights to facilitate recovery of the costs of their work from the owner.

Buck Town Contractors, 15-1124, p. 3, 216 So.3d at 983 (citing Byron Montz, Inc.

v. Conco Construction, Inc., 02-0195, pp. 6-8 (La. App. 4 Cir. 7/24/02), 824 So.2d

498, 502-03.

Under the PWA, claims against the owner are secured by a privilege on the

immovable on which the work was done. See Newt Brown, Contractor, Inc. v.

Michael Builders, Inc., 569 So.2d 288, 290 (La. App. 2d Cir. 1990) (citing La

R.S. 9:4802(B)). Although La. R.S. 9:4802(A) imposes liability on owners for

13
La. R.S. 9:4812(D) provides that “[t]he bond of a legal surety attached to and filed with the
notice of contract of a general contractor shall be deemed to conform to the requirements of this
part notwithstanding any provision of the bond to the contrary, but the surety shall not be bound
for a sum in excess of the total amount expressed in the bond.” See also Peter M. Trapolin &
Assocs., Architects v. Twin City Fed. Sav. & Loan Ass'n (Twin City Sav. Bank, FSB), 488 So.2d
1191, 1193 (La. App. 4th Cir. 1986) (observing that “[t]he words ‘this part’ refer to the entire
Private Works Act”); H. G. Angle Co. v. Talmadge, 410 So.2d 1151, 1154 (La. App. 3d Cir.
1981) (when the contract and bond have been properly entered into and recorded pursuant to the
Private Works Act, the bond is considered a statutory bond; thus, the bond incorporates by
reference all of the provisions of the Private Works Act).

Although 225 Baronne cites the language of the payment bond to establish that the Surety
Defendants are obligated to pay or indemnify it from the claims of subcontractors, Section 14 of
the payment bond provides:

When this Bond has been furnished to comply with a statutory or other
legal requirement in the location where the construction was to be performed, any
provision of this Bond conflicting with said statutory or legal requirement shall be
deemed deleted herefrom and provisions conforming to such statutory or other
legal requirement shall be deemed incorporated herein. When so furnished, the
intent is that this Bond shall be construed as a statutory bond and not a common
law bond.

15

claims arising out of the performance of work under the contract, La.

R.S. 9:4802(C) expressly creates an “escape hatch” that relieves an owner of

liability when an owner complies with its provisions. See Newt Brown, supra

(observing that “[t]o avail itself of the escape hatch, the owner must assure that a

bond for the general contractor has been furnished”).

Here, the governing provision of the PWA is La. R.S. 9:4802(A), which

defines those persons granted a claim or privilege against the owner pursuant to the

PWA as follows:

(1) Subcontractors, for the price of their work.

(2) Laborers or employees of the contractor or a subcontractor, for the
price of work performed at the site of the immovable.

(3) Sellers, for the price of movables sold to the contractor or a
subcontractor that become component parts of the immovable, or are
consumed at the site of the immovable, or are consumed in machinery
or equipment used at the site of the immovable.

(4) Lessors, for the rent of movables used at the site of the immovable
and leased to the contractor or a subcontractor by written contract.
(5) Prime consultant registered or certified surveyors or engineers, or
licensed architects, or their professional subconsultants, employed by
the contractor or a subcontractor, for the price of professional services
rendered in connection with a work that is undertaken by the
contractor or subcontractor.14

A payment bond issued under the PWA stands in as security to respond to

claims made only by claimants listed in La. R.S. 9:4802(A). 225 Baronne, as the

owner, is not in the class of persons to whom the law grants a right of action under

14
The 2019 amendment to the PWA rewrote La. R.S. 9:4802(A)(5). As amended, this section
now provides:

(5) Professional consultants engaged by the contractor or a subcontractor, and the
professional subconsultants of those professional consultants, for the price of
professional services rendered in connection with a work that is undertaken by the
contractor or subcontractor.

16

the payment bond. The trial court, thus, did not err in granting the Surety

Defendants’ exception of no right of action under the payment bond.15

No Cause of Action

225 Baronne contends that that trial court erred in granting the exception of

no cause of action under the performance bond because the Surety Defendants

bound themselves to 225 Baronne for the performance of the Contract.16

225 Baronne further contends that RAC did not perform the Contract; thus, the

Surety Defendants are obligated to indemnify it from any damages it sustains for

RAC’s failure to satisfy its obligations. The Surety Defendants counter that 225

Baronne failed to state a cause of action against them under the performance bond

15
RAC cites one case that generally supports this conclusion. No Fault Tennis & Track, LLC v.
A-1 Asphalt Paving & Repair, Inc., 04-1297 (La. App. 5 Cir. 3/29/05), 900 So.2d 983. In No
Fault Tennis, however, involved a public works bond and not a PWA payment bond as in this
case.

In No Fault Tennis, the surety issued a performance bond and a labor and material
payment bonds in connection with a contract to resurface a public school athletic track. An
unpaid subcontractor sued the contractor and filed liens against the school board. The school
board filed a third-party claim against the surety. The appellate court affirmed the trial court’s
jugdment granting an exception of no right of action and dismissing the third-party claim under
the payment bond, in part, because the bond was statutory and because the school board was not
the proper claimant under the statute. The appellate court observed:

Section 2242 [of the Public Works Act] defines who may be a claimant
pursuant to a statutory payment bond. That section provides that only parties who
are owed money for providing labor and materials to the job in question are
proper claimants. The public body (or owner) of the project is not a “claimant”
under the statute, and therefore the School Board here has no right of action
against St. Paul under the payment bond, and the exception was properly
sustained.

No Fault Tennis, 04-1297, p. 3, 900 So.2d at 985.
16
In support, 225 Baronne cites Section 1 of the performance bond, which provides: “[t]he
Contractor and Surety, jointly and severally, bind themselves, their heirs, executors,
administrators, successors and assigns to the Owner for the performance of the Construction
Contract, which is incorporated herein by reference.”

17

because the bond contains specific conditions precedent to their liability that 225

Baronne failed to fulfill.

A de novo standard of review applies to a trial court ruling on an exception

of no cause of action. See Foti v. Holliday, 09-0093, p. 6 (La. 10/30/09), 27 So.3d

813, 817; Hershberger v. LKM Chinese, L.L.C., 14-1079, p. 2 (La. App. 4 Cir.

5/20/15), 172 So.3d 140, 143. “An exception of no cause of action is likely to be

granted only in the unusual case in which the plaintiff includes allegations that

show on the face of the petition that there is some insurmountable bar to relief.”

City of New Orleans v. Bd. of Directors of Louisiana State Museum, 98-1170, p. 10

(La. 3/2/99), 739 So.2d 748, 756. Such is the case here.

As noted elsewhere in this opinion, a performance bond guarantees that the

contractor will perform the contract.17 A performance bond is a conventional bond;

hence, the language of the bond itself controls. See Nat'l Am. Bank of New Orleans

v. Southcoast Contractors, Inc., 276 So.2d 777, 781 (La. App. 1st Cir. 1973)

(observing that a PWA performance bond is conventional in sense that the parties

are controlled by language, intention, and meaning of documents).

As the Surety Defendants contend, Section 3 of the performance bond

provides that the Surety Defendants’ obligations under the performance bond only

arise after 225 Baronne has satisfied that following four conditions precedent:

 Substantiates that it is not in default of its contractual obligations;

 Declares a Contractor Default;

 Terminates the Contract with notice to the Surety Defendants; and

17
The only reference in the PWA to a performance bond is in La. R.S. 9:4812(C), which
provides for a “presumption that a bond given under the Act comprehends both payment and
performance unless a guarantee of the contractor’s performance is expressly excluded.” La.
R.S. 9:4812, cmt. (d) (2019).

18

 Tenders the balance of the Contract price in accordance with the terms of
the Contract to either the Surety Defendants or a contractor selected to
perform the Contract.18

The first condition is not addressed by the parties; we thus confine our analysis to

the other three conditions.

Contractor Default

It is undisputed that 225 Baronne failed to formally declare a Contractor

Default. Nonetheless, 225 Baronne contends that RAC was in default, as a matter

of law, given it failed to meet the Contract deadlines to obtain a temporary

certificate of occupancy or achieve substantial completion by January 7, 2015. In

support, 225 Baronne cites La. C.C. art. 1990, which provides that “[w]hen a term

for the performance of an obligation is either fixed, or is clearly determinable by

the circumstances, the obligor is put in default by the mere arrival of that term. In
18
Section 3 of the performance bond provides the following three conditions precedent to
invoking the Surety Defendants’ liability under the performance bond:

§3 If there is no Owner Default under the Construction Contract, the Surety’s
obligation under this Bond shall arise after:

1. The Owner first provides notice to the Contractor and the Surety
that the Owner is considering declaring a Contractor Default. Such
notice shall indicate whether the Owner is requesting a conference
among the Owner, Contractor, and Surety to discuss the
Contractor’s performance. If the Owner does not request a
conference, the Surety may, within five (5) business days after
receipt of the Owner’s notice, request such a conference. If the
Surety timely requests a conference, the Owner shall attend.
Unless the Owner agrees otherwise, any conference requested
under this section 3.1 shall be held within ten (10) business days of
the Surety’s receipt of the Owner’s notice. If the Owner, the
Contractor and the Surety agree, the Contractor shall be allowed a
reasonable time to perform the Construction Contract, but such an
agreement shall not waive the Owner’s right, if any subsequently
to declare a Contractor Default;

2. The Owner declares a Contractor Default, terminates the
Construction Contract and notifies the Surety; and

3. The Owner has agreed to pay the Balance of the Contract Price
in accordance with the terms of the Construction Contract to the
Surety or a contractor selected to perform the Construction
Contract.

19

other cases, the obligor must be put in default by the obligee, but not before

performance is due.” Contrary to 225 Baronne’s contention, the performance bond

provides that 225 Baronne is required to provide formal notice of default before the

Surety Defendants’ obligations are triggered. As the Surety Defendants contend,

225 Baronne’s argument that it was sufficient that RAC was in default as a matter

of law pursuant to La. C.C. art. 1990 is unpersuasive.

Terminating the Contract

It is undisputed that 225 Baronne failed to terminate the Contract.

225 Baronne contends that because physical work on the Project was substantially

complete, any attempt to terminate would be futile and should not reasonably serve

as a condition for recovery. As the Surety Defendants contend, the Contract, which

is incorporated into the performance bond by reference, provides the terms by

which 225 Baronne could terminate the Contract, including a requirement that

225 Baronne give seven days written notice of its intent to terminate to both the

Surety Defendants and RAC. 225 Baronne failed to provide notice of intent to

terminate to the Surety Defendants and failed to terminate RAC. 225 Baronne thus

failed to satisfy this condition.

Tendering the Contract Balance

It is undisputed that 225 Baronne failed to tender the Contract balance to the

Surety Defendants or a contractor selected to perform the Contract. 225 Baronne

claims that it was not required to tender the balance for two reasons: (i) RAC failed

to complete the Contract; and (ii) 225 Baronne has the contractual right to set off

any amounts due RAC under the Contract. This argument overlooks the language

of the performance bond, which requires that 225 Baronne tender the Contract

balance. This condition was not satisfied.

20

Given that 225 Baronne failed to satisfy multiple conditions set forth in the

performance bond, the trial court did not err in granting the Surety Defendants’

exception of no cause of action under the performance bond.

DECREE

For the foregoing reasons, the trial court’s judgment granting RAC’s

peremptory exceptions of prescription and res judicata is reversed; the trial court’s

judgment granting the Surety Defendants’ peremptory exceptions of no right and

no cause of action is affirmed; and this matter is remanded for further proceedings.

AFFIRMED IN PART; REVERSED IN PART; AND REMANDED

21