
    C. BEL FOR AWNINGS, INC. v. BLAINE-HAYS CONSTRUCTION COMPANY.
    No. 88-CA-0268.
    Court of Appeal of Louisiana, Fourth Circuit.
    Sept. 29, 1988.
    
      Charles W. Nelson, Jr., New Orleans, for Blaine-Hays Const. Co., Inc.
    Sidney M. Bach, Gerald Wasserman, Bach & Wasserman, Metairie, for C. Bel for Awnings, Inc.
    Before WARD, WILLIAMS and PLOTKIN, JJ.
   WARD, Judge.

This appeal arises as a result of disputed interpretations of contractual obligations. On September 1, 1983 and February 13, 1984, Blaine-Hays Construction Company, a World’s Fair general contractor, entered into two subcontracts with C. Bel for Awnings, Inc. Both subcontracts contained a provision known as a “pay when paid” clause which read:

The contractor agrees to pay the subcontractor ... as the work progresses on estimates made and approved by the Contractor and/or Architect and payment received from the owner, (emphasis added)

When it became apparent Louisiana World Exposition, Inc. (LWE), the owner of the fair, was insolvent and could not fully pay its contractors, Blaine-Hays refused to make payments to C. Bel, although C. Bel had satisfactorily completed all work under both subcontracts.

After corresponding about payment, Blaine-Hays sent C. Bel two documents entitled “Agreement”. The documents are similar; only the job description and contract prices differ because each agreement refers to a separate subcontract. On August 16,1984 C. Bel signed the agreements and received partial payments under each subcontract. One of the agreements is attached as Appendix 1.

After the Louisiana Supreme Court held that “pay when paid” clauses express only a term for payment within a reasonable time, C. Bel made demand for payment in full. Blaine-Hays refused the demand. C. Bel then filed suit for the balance of payment. Blaine-Hays answered the suit, relying on the August 16 agreements which it maintains changed the “pay when paid” clause from a “reasonable time to pay” to a suspensive condition relieving it of the obligation to pay C. Bel until LWE paid it.

The Trial Court held that the subcontracts provide that C. Bel is entitled to be paid within a reasonable time and rejected Blaine-Hays’ construction of the agreements which would entitle C. Bel to be paid only if Blaine-Hays received payment. We reverse the ruling of the Trial Court.

In those cases relied upon by C. Bel, Southern States Masonry, Inc. v. J.A. Jones Construction Company, et al c/w Strahan d/b/a Strahan Painting Company v. Landis Construction Company, Inc., et al, 507 So.2d 198 (La.1987), World’s Fair subcontractors sued to recover payment from their contractors. The contractors defended thenrefusal to pay, claiming that the “pay when paid” clauses provided a suspensive condition that the contractors must first receive payment from LWE before they were obligated to pay the subcontractors.

The “pay when paid” clause in Southern States reads:

3.... Contractor shall pay to Subcontractor, upon receipt of payment from the Owner, an amount equal to the value of Subcontractor’s completed work, to the extent allowed and paid by Owner on account of Subcontractor’s work.... 507 So.2d at 200. (emphasis added)

In Landis the clause reads:

IN CONSIDERATION WHEREOF, The said Contractor agrees that he will pay to the said Sub-Contractor ... the value of the work completed and accepted each month for which payment has been made by said Owner to said Contractor ... 507 So.2d at 201. (emphasis added)

In both the Landis and Southern States cases, the Supreme Court disagreed with the contractors and concluded that the language of the “pay when paid” clauses expressed a term for payment, not a condition to payment. The Court determined that the parties considered payment by LWE to the contractor a reasonably certain event. Moreover, the payment obligations were expressed in mandatory terms by use of the phrases “when payment was received from the owner” and upon receipt of payment from the Owner ...”

The August 1984 agreements clearly remove the present case from the factual context of Southern States and Landis. In those cases there were no other agreements and the Supreme Court interpreted the “pay when paid” clause after examining the subcontracts. The only manifestation of the parties’ intent was in the “pay when paid” clause of the subcontracts. In this case, the parties’ expressed their understanding of the meaning of “pay when paid” in the August 1984 agreements. The agreements stated in part:

Whereas, LWE has failed to make required payments to Blaine-Hays under the Prime Contract:
Whereas, as of this date, Subcontractor has unpaid billings under the subcontract ... and the parties are desirous of providing a method for payment to the subcontractor if and when payments are received by Blaine-Hays from LWE: and
2. The parties acknowledge that under _paragraph 29 of the Subcontract, Subcontractor is hot entitled to receive payment from Blaine-Hays until Blaine-Hays receives payment from LWE.

This is convincing evidence that thé parties did not consider either payment by LWE as a reasonably certain event or that the “pay when paid” clause was merely a term for payment; but rather, that the parties considered the “pay when paid” clause a suspensive condition to payment.

Even if the clause were not a sus-pensive condition, the Trial Court ruling must be reversed. The agreements have the characteristics of “transaction or compromise”, C.C. art. 3071 et seq., as well as the appearance of a “novation,” C.C. art. 2185 et seq., vacated by Act of Jan. 1,1985, No. 331 (reenacted as amended at C.C. arts. 1879 et seq. [West 1987]).

Blaine-Hays apparently offered partial payment to avoid possible litigation under the subcontract. C. Bel accepted, and the dispute over payment under the subcontract was ended. The agreements provide in part:

6. Subcontractor agrees that it will take no legal action for collection of its billings under the Subcontract unless Blaine-Hays breaches this agreement.

C. Bel cannot now resurrect its claim against Blaine-Hays. A “transaction or compromise” occurred between the parties which must be given a force equal to the authority of things adjudged. C.C. art. 3078.

On the other hand, by executing the agreement, it appears the parties substituted one obligation for another. In the new obligation, Blaine-Hays promised to use its best efforts to obtain payment from LWE; C. Bel promised that it would take no legal action for collection of its billings under the subcontract. Arguably, a novation occurred.

Under either theory, C. Bel has no further claims under the subcontract. If the August 16, 1984 agreements are neither a “transaction or compromise” nor a “novation” they are meaningless. C. Bel would still only receive payment if and when Blaine-Hays was paid.

Accordingly, the Trial Court ruling is reversed. All costs of this appeal are assessed to C. Bel.

REVERSED.

APPENDIX I  