author: KYZAR, Judge

text:
    METALS USA PLATES & SHAPES SOUTHEAST, INC. c/w O'Neal Steel Louisiana, LLC v. LOUISIANA DEPARTMENT OF REVENUE
    17-699
    Court of Appeal of Louisiana, Third Circuit.
    March 21, 2018
    Nicole Gould Frey, David R. Cassidy, Breazeale, Sachse & Wilson, L.L.P., P. O. Box 3197, Baton Rouge, LA 70821-3197, (225) 387-4000, COUNSEL FOR PLAINTIFF/APPELLANT; O'Neal Steel Louisiana, LLC
    Aaron Long, Brandea P. Averett, Antonio C. Ferachi, Adrienne Quillen, Louisiana Department of Revenue, P. O. Box 4064, Baton Rouge, LA 70821-4064, (225) 219-2080, COUNSEL FOR DEFENDANT/APPELLEE: Louisiana Department of Revenue
    Court composed of Billy Howard Ezell, Van H. Kyzar, and Candyce G. Perret, Judges.
   KYZAR, Judge

O'Neal Steel Louisiana, LLC (O'Neal), appeals from the Board of Tax Appeals' judgment, which held that certain commercial purchases of fuels and gases were not excluded from sales tax under La.R.S 47:301(10)(x) and dismissed O'Neal's refund claim for $3,423.33. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

O'Neal, which has its principal place of business in Lafayette, Louisiana, is engaged in the metals business, including welding and metals fabrication. O'Neal purchased, and paid sales tax on, welding gases that are used as shielding gases in the welding process. O'Neal filed a refund claim with the Louisiana Department of Revenue (LDR) for sales taxes it paid for the period beginning January 2011 through February 2014, claiming various exemptions such as the Manufacturing, Machinery, and Equipment exemption and the Fuels exemption, which it claims includes welding gases. LDR allowed most of the refund claimed but denied the portions for sales taxes paid on the purchase of welding gases. O'Neal then appealed the ruling of LDR to the Board of Tax Appeals' (the Board). At the hearing, O'Neal submitted evidence that sales taxes were in fact paid on O'Neal's purchases of welding gases. The parties stipulated that O'Neal filed a $10,066.07 refund claim for sales taxes paid, of which $9,250.32 was initially denied, but that LDR thereafter allowed another $2,393,42. The parties further stipulated the sum of $3,423.33 in sales taxes paid on fuel for which O'Neal continued to claim entitlement to a refund. The Board held that commercial purchases of fuels and gases were not excluded from tax under La.R.S. 47:301(10)(x) and dismissed O'Neal's refund claim for the $3,423.33. This appeal followed.

O'Neal asserts the following assignments of error:

1. It was reversible error to judicially repeal 2008 La. 2nd Ext. Sess. Act 1 (Act 1), which excluded all commercial off-highway fuel purchases from tax, because simultaneous legislation, 2008 La. 2nd Ext. Sess. Act 9 (Act 9), excluded only commercial purchases of butane and propane fuels from tax.
2. The trial court erred in finding Acts 1 and 9 are in conflict.
3. The trial court erred in failing to give effect to all laws passed by the legislature.
4. It is reversible error to tacitly repeal Act 1 without any attempt to harmonize it with Act 9.

OPINION

The resolution of this dispute hinges entirely on the interpretation of two acts passed by the Louisiana Legislature in the same session, each applicable to the purchase of the welding gases at issue here and certain exemptions from sales taxes for those purchases. Act No. 1 of the 2008 Second Extraordinary Session, excluded from tax any fuel or gas purchased, and Act No. 9 of the same session, exempted only butane and propane gases. Each act attempted to amend and reenact the same provision, La.R.S. 47:301(10)(x). The Board found that the latter act tacitly repealed the first and denied O'Neal's claim based upon that finding. Thus, the sole issue presented to the Board was a legal one: whether the O'Neal purchases of welding gases were exempt from sales tax under La.R.S. 47:301(10)(x).

Although a deferential standard of appellate review is applied to the factual conclusions of an administrative tribunal such as the Board, the same is not true for issues of law, "Questions of law, such as the proper interpretation of a statute, are reviewed by [an appellate] court under the de novo standard of review." Land v. Vidrine , 10-1342, p.4 (La. 3/15/11), 62 So.3d 36, 39"On legal issues, the appellate court gives no special weight to the findings of the trial court, but exercises its constitutional duty to review questions of law and renders judgment on the record." State, Through La. Riverboat Gaming Comm'n v. La. State Police Riverboat Gaming Enf't Div. , 95-2355, p. 5 (La.App. 1 Cir. 8/21/96), 694 So.2d 316, 319. "Appellate review of a question of law involves a determination of whether the lower court's interpretive decision is legally correct." Johnson v. La. Tax Comm'n, 01-964, p. 2 (La.App. 4 Cir. 1/16/02), 807 So.2d 329, 331, writ denied. 02-445 (La. 3/8/02), 811 So.2d 887.

On review of the district court's judgment, no deference is owed by the court of appeal to factual findings or legal conclusions of the district court, just as no deference is owed by the Louisiana Supreme Court to factual findings or legal conclusions of the court of appeal. See La.Const. art. 5, § 5 (C); Donnell v. Gray, 215 La. 497, 41 So.2d 66, 67 (1949).

Eicher v. La. State Police, Riverboat Gaming Enf't Div., 97-121, p.6 (La.App. 1 Cir. 2/20/98), 710 So.2d 799, 803, n.5, writ denied, 98-780 (La. 5/8/98), 719 So.2d 51.

Prior to 2008, the law in question, La.R.S 47:301(10)(x) (emphasis added), provided that "[f]or purposes of the sales and use tax imposed by the state... the terms 'retail sale' or 'sale at retail' shall not include the sale or purchase by a consumer of any fuel or gas, including but not limited to butane and propane, for residential use by the consumer ." During the 2008 Second Extraordinary Session of the Louisiana Legislature, law makers attempted to expand the sales tax exclusion for gases found in La.R.S. 47:301 Act No. 1 and Act No. 9 were both introduced in the 2008 Second Extraordinary Session and both revised La.R.S. 47:301(10)(x) ; however, the revisions enacted by each Act arguably contradict each other.

It is well established that in the case of conflict between two acts of the legislature, it is the last expression of legislative will that controls. State v. St. Julian, 221 La. 1018, 61 So.2d 464 (1952), Board of Ethics In Re Davies , 10-1339 (La.App. 1 Cir. 12/22/10), 55 So.3d 918. "There is no other reasonable rule that could be applied to conflicting statutes passed at the same session of the legislature than to hold that the later expression of the legislative will must govern." St. Julian , 61 So.2d at 466. Therefore, to determine whether O'Neal was exempt from paying sales tax on its purchases, we must first ascertain whether the two acts are irreconcilable.

On appeal, O'Neal asserts that it was error for the Board to find that the two acts contradict each other. It argues that the two acts can be read together and harmonized as was done by the Louisiana State Law Institute (the Law Institute). Act No. 1 of the 2008 Second Extraordinary Session provided the following language:

"(x) For purposes of the sales and use tax imposed by the state ... the terms 'retail sale' or 'sale at retail' shall not include the sale or purchase by a consumer person of any fuel or gas, including but not limited to butane and propane, for residential use."

Act No. 1 was signed by the Governor on March 24, 2008 and had an effective date of July 1, 2008. The terms which were struck through were removed from the statute by Act No. 1, and the terms which were underlined were added to the statute by Act No. 1.

Act No. 9 of the 2008 Second Extraordinary Session was also signed by the Governor on March 24, 2008 and had an effective date of July 1, 2008. It provided the following language:

(x) For purposes of the sales and use tax imposed by the state ... the terms "retail sale" or "sale at retail" shall not include the following:
i. The sale or purchase by a consumer of any fuel or gas, including but not limited to butane and propane, for residential use by the consumer.
ii. Beginning July 1, 2008, the sale or purchase by any person of butane and propane.

As shown above, Act No 9 restated and adopted all of the pre-2008 version of the statute and also expanded the exclusion to include all purchases of butane and propane by any person. Act No. 1 excluded from the definition of "retail sale" or "sale at retail" all purchases by "any person of any fuel or gas, including but not limited to butane and propane." 2008 La. Acts No. 1, § 1 (Emphasis added.) Act No. 9 excluded from the definition of "retail sale" or "sale at retail" all purchases by "a consumer of any fuel or gas, including but not limited to butane and propane, which is purchased for residential use by the consumer ." 2008 La. Acts No. 9, § 1 (Emphasis added.) Act No. 9 also excluded all purchases by any person of butane and propane beginning July 1, 2008.

In contrast, the published version of La.R.S. 47:301(10)(x), during all times pertinent here, provided as follows:

For purposes of the sale and use tax imposed by the state ... the term 'retail sale' or 'sale at retail' shall not include the following:
(i) The sale or purchase by a person of any fuel or gas, including but not limited to butane and propane.
(ii) Beginning July 1, 2008, the sale or purchase by any person of butane and propane.

A review of the published version of the statute confirms that the Law Institute completely deleted subpart (i) of Act No. 9 and replaced it with the text of Act No. 1 and kept subpart (ii) of Act No 9. O'Neal argues that this revision means that the Law Institute found no conflict between the acts, O'Neal further asserts that the Law Institute's finding should be given deference pursuant to Louisiana jurisprudence, which states:

"A reviewing court should afford considerable weight to an administrative agency's construction and interpretation of its rules and regulations adopted under a statutory scheme that the agency is entrusted to administer, and its construction and interpretation should control unless they are found to be arbitrary, capricious, or manifestly contrary to its rules and regulations."

Delahoussaye v. Bd. of Supervisors of Cmty. and Tech. Colls. , 04-515, p.5 (La.App. 1 Cir. 3/24/05), 906 So.2d 646, 649.

As previously noted, statutory interpretation is a question of law and is reviewed de novo. Therefore, no deference is allotted to a lower court's or agency's interpretation. However, even if deference were owed, we find that the Law Institute is not the appropriate administrative agency to which it would be owed under the facts at hand.

As noted by LDR, the Law Institute is not the legislature, and it does not have the authority to make or interpret the law. The text published by the Law Institute does not represent either the prior version of La.R.S. 47:301(10)(x), the amendments made by Act No. 1, or the amendments made by Act No. 9. The printed, published version is a combination and attempted harmonization of the acts that was unauthorized by the Louisiana Legislature. The Law Institute is granted the duty to publish the text of all new legislation of a general and public nature, assigning to these laws an appropriate Title, Chapter, and Section number and indicating the source of the legislative acts from which they are taken. La.R.S, 24:252(A). It is not entrusted to interpret the acts of the legislature or make decisions regarding which portions of an act to publish and/or omit. Its authority is limited to such actions as renumbering and rearranging sections and section parts, inserting or rewording headnotes, and correcting reference numbers. Id. The Law Institute is not permitted to alter the sense, meaning or effect of any act of the legislature. La.R.S. 24:253. It is the Louisiana Department of Revenue that is tasked with administering and enforcing tax laws enacted by the legislature. Louisiana Revised Statutes 36:451(B) specifically states that the Louisiana Department of Revenue "shall be responsible for assessing, evaluating, and collecting the consumer, producer, and any other state taxes specifically assigned by law to the department."

If a conflict between two or more legislative acts affecting the same subject matter in the same provision of law occurs and cannot be resolved, the Law Institute is required to notify the secretary of the Senate and the clerk of the House of Representatives prior to preparing the printer's copy. La.R.S. 24:252(B). Rather than complying with the provisions of La.R.S. 24:252(B), the Law Institute attempted to merge the two acts. In doing so, the Law Institute omitted a large portion of the last enacted act, Act No. 9, and as a result, the published version of La.R.S. 47:301(10)(x), at all times pertinent, did not reflect the Louisiana Legislature's last expression of legislative will.

''Legislative intent is the fundamental question in all cases of statutory interpretation, and rules of statutory construction are designed to ascertain and enforce the intent of the statute.'' Downs v. J. & J. Maint., Inc., 97-511, p.8 (La.App. 3 Cir. 10/8/97), 702 So.2d 845, 850, writ denied, 97-2848 (La. 1/30/98), 709 So.2d 715. The rules of statutory construction applicable in this case are those pertinent to conflicting legislative acts and to repeal by implication. Louisiana Civil Code Article 8 provides, "Laws are repealed, either entirely or partially, by other laws. A repeal may be express or implied... It is implied when the new law contains provisions that are contrary to, or irreconcilable with, those of the former law." Therefore, when a legislature enacts a statute without mention of existing statutes on the same subject matter, the later act may, by necessary implication, effect the repeal of the preexisting law. State v. Piazza, 596 So.2d 817 (La. 1992).

It must be noted that such a repeal by implication is not favored in Louisiana law. Bebop's Ice House, Inc . v. City of Sulphur, 00-602 (La.App. 3 Cir. 12/6/00), 774 So.2d 369. This is based on the presumption that when the legislature enacts new legislation, it envisions the whole body of law, and all acts on a single subject should be construed so as to give effect to both whenever possible. Piazza , 596 So.2d 817. However, when two acts are clearly irreconcilable, are clearly repugnant as to essential matters relating to the acts, and are so inconsistent that the two cannot have concurrent operation, then the presumption against implied repeal falls, and the later statute governs. Id. at 819. Further, Louisiana jurisprudence is clear that "where the obvious purpose of the law is to cover the whole subject matter therein dealt with, it supersedes all prior pertinent legislation." St. Julian, 61 So.2d at 466 ; State v. Tate, 185 La. 1006, 171 So. 108 (1936).

In the present case, both acts in question were passed in the same legislative session, but evidence in the record establishes that Act No. 9 was passed later in time than Act No. 1. Both were intended to amend the same statute. The question, therefore, is whether the two arguably conflicting statutes can be reconciled consistent with legislative intent.

[W]hen inconsistent amendments to the same statute have been adopted at the same legislative session, the court should attempt to construe the statute so as to give effect to both amendments consistent with legislative intent. Only when it is impossible to give effect to both amendments should the court allow the time of passage of the acts to be the controlling factor. Allowing the later act to control effectively recognizes a repeal by implication of the earlier act, and such recognition of a repeal by implication should occur only when the acts passed in the same session are so repugnant that they cannot stand together.

Piazza, 596 So.2d at 819.

O'Neal argues that the two acts can be read together and harmonized, as done by the Law Institute in this case, and that the Board erred when it found the two acts in conflict and that Act No. 9 had tacitly repealed Act No. 1. However, the Law Institute was forced to delete a large portion, the entirety of subpart (i), of Act No. 9 in its attempts to merge the two acts. As the Board noted, the plain wording of the Law Institute's version of La.R.S. 47:301(10)(x) makes La.R.S. 47:301(10)(x)(ii), which exempts the purchase of butane and propane by any person, superfluous and unnecessary since La.R.S. 47:301(10)(x)(i) exempts such purchase in any event as it excludes the sale or purchase of any gas for any purpose. Further, the very fact that O'Neal's purchases of welding fuel are either taxable or non-taxable depending upon whether Act No. 1 or Act No. 9 applies is evidence that the two acts are in conflict and cannot be harmonized.

O'Neal asserts that the Board did not consider whether Act No. 1 and Act No. 9 could be reconciled, but a review of the Board's written reasons for judgment shows otherwise. The Board clearly viewed the two individual acts and found them to be in direct conflict. It notes LDR's argument that the distinction between "residential" use found in Act No. 9 and all uses implied in Act No. 1 constitutes a real conflict, and the Board agreed. As specifically stated in its reasons for judgment regarding the taxability of O'Neal's purchases, "[t]his dichotomy of tax treatment resulting from the separate application of Acts 1 and 9 to the facts of this case ipso facto creates a conflict between these two acts." The Board further elaborates in a footnote to its written reasons, "The text limiting the broader exemption to residential uses by a consumer (which was deleted by Act 1) was explicitly retained in the re-enactment of Act 9; this also creates a direct textual conflict that can only be resolved by ascertaining the last expression of legislative will." It is clear the Board considered the two acts and found them to be plainly irreconcilable. We agree. Act No. 1 and Act No. 9 cannot be harmonized to give effect to both consistent with legislative intent, and accordingly, the later act impliedly repealed its predecessor. Piazza, 596 So.2d 817.

O'Neal argues further that LDR did nothing to correct the apparent conflict between the acts or the Law Institute's version until a taxpayer claimed a refund some nine years later. However, this allegation is directly refuted by Revenue Information Bulletin No. 08-022, which was published on July 21, 2008 and admitted into evidence. This Bulletin, published by LDR, attempted to resolve the conflict between Act No. 1 and Act No. 9, stating, "since Act 9 was the last expression of Legislative will during the Second Extraordinary Legislative Session, the amendments to La.R.S. 47:301(10)(x) by Act 9 are controlling and supersede the amendments to the same statute by Act 1." Moreover, testimony in the record establishes that welding gases, such as those at issue, have been taxed by LDR consistently at all times pertinent. It is clear that LDR did not suddenly change its opinion after O'Neal filed for a refund, but rather has maintained its current position with respect to Act No. 1 and Act No. 9 since their enactment.

O'Neal next argues that the Board's ruling must be reversed because it causes internal inconsistency as it renders superfluous 2017 La. Acts No. 424, § 1, which amended La.R.S. 47:301(10)(x) to conform to the language of Act No. 9 of the 2008 Second Extraordinary Session. O'Neal asserts that courts should give effect to all parts of a statute when interpreting it and should not give a statute an interpretation that makes any part superfluous or meaningless, citing Bridges v. Bullock , 48,231 (La.App. 2 Cir. 9/25/13), 124 So.3d 1171. However, O'Neal's argument appears to ignore that the Louisiana Legislature amended La.R.S. 47:301 in 2016. It did so by restating the entirety of La.R.S. 47:301(10)(x) in its published, though incorrect, form. This restatement of the published version expanded the tax exclusion found in La.R.S. 47:301(10)(x) from the previous act, Act No. 9. To remedy this oversight, the legislature introduced Act No. 424 in 2017, which would make La.R.S. 47:301(10)(x) conform again to the language of Act No. 9. The law in Louisiana was changed in 2016 by the restatement of La.R.S. 47:301 by the legislature to include the published version of the statute. Act No. 424 was therefore necessary in order to amend the statute to once again limit the pertinent exclusion to "[t]he sale or purchase by a consumer of any fuel or gas, including but not limited to, butane and propane, for residential use by the consumer ." 2017 La. Acts No. 424, § 1 (Emphasis added.) Accordingly, we find this argument without merit.

Finally, O'Neal attempts to argue that the law is ambiguous, and that it is, therefore, entitled to have any ambiguity resolved in its favor as the taxpayer. However, O'Neal has failed to show how the text of either Act No. 1 or Act No. 9 is ambiguous. The fact that this court must determine which act controls is not evidence of ambiguity, but conflict. As the Board noted in its reasons for ruling:

Not only have the Petitioners failed to carry their burden of proof on this issue, the Secretary has established by a preponderance of the evidence that [Act No. 9] is the last expression of legislative will, and therefore Act 9 controls. Act 9 is also the later enactment of law concerning the matter (being signed into law after Act 1).

A reading of the rules governing statutory construction makes apparent that where acts are in direct conflict, the rule that the last in order of position will prevail must be applied. St. Julian, 61 So.2d 464. "There is no other reasonable rule that could be applied to conflicting statutes passed at the same session of the legislature than to hold that the later expression of the legislative will must govern.'' Id. at 466. Based upon a thorough reading of the plain wording of the two acts, we find them to be in conflict. We, therefore, conclude that the last expression of the legislative will, Act No. 9, impliedly repealed Act No. 1.

DISPOSITION

For the reasons assigned, the judgment of the Board of Tax Appeals is affirmed, and O'Neal Steel Louisiana, LLC's refund claim for $3,423.33 is dismissed. All costs of this appeal are assessed to O'Neal Steel Louisiana, LLC.

AFFIRMED.

      The Board consolidated this matter with another taxpayer, Metals USA Plates & Shapes Southeast, Inc., which had an identical dispute except for the amount of the refund claimed. That matter has likewise been appealed but in a different appeal venue.


source: Caselaw Access Project

author: McDONALD, J.

license: Public Domain

text:
    CROSSTEX ENERGY SERVICES, LP, Crosstex LIG, LLC, and Crosstex Processing Services, LLC v. TEXAS BRINE COMPANY, LLC, et al.
    2017 CA 0863
    Court of Appeal of Louisiana, First Circuit.
    Judgment Rendered: December 21, 2017
    Leopold Z. Sher, James M. Garner, Peter L. Hilbert, Jr., Martha Y. Curtis, Neal J. Kling, Jeffrey D. Kessler, New Orleans, Louisiana and Robert Ryland Percy, III, Gonzales, Louisiana and Travis J. Turner, Gonzales, Louisiana and Eric J. Mayer, Houston, Texas, Attorneys for Defendant/Third Party-Plaintiff/Appellant, Texas Brine Company, LLC
    Mary S. Johnson, Ingrid K. Laurendine, Mandeville, Louisiana, Attorneys for Third-Party Defendants/Appellees, National Union Fire Insurance Company of Pittsburg, Pa., And AIG Specialty Insurance Company (in their respective capacities as alleged pre-2012 insurers of Texas Brine Company, LLC)
    BEFORE: WHIPPLE, C.J., McDONALD, and CHUTZ, JJ.
   McDONALD, J.

In this appeal, an insured appeals a summary judgment in favor of its insurers concluding the insurers did not owe the insured a duty to defend against the plaintiffs' claims in the underlying litigation and dismissing the insured's third party demand against the insurers with prejudice. We affirm.

FACTS AND PROCEDURAL HISTORY

This suit is one of several arising from the August 2012 appearance of a sinkhole near Bayou Corne in Assumption Parish, Louisiana. EnLink f/k/a Crosstex , the plaintiffs in the underlying litigation, own and operate a natural gas pipeline that traverses the edge of a salt dome. Texas Brine operates brine production wells, including the Oxy Geismar # 3 well, on property above the salt dome. EnLink filed suit against Texas Brine, among others, alleging the sinkhole was caused, in whole or part, by the failure of the Oxy Geismar # 3 salt cavern and that the sinkhole engulfed a section of EnLink's pipeline, rendering the pipeline displaced, damaged, and unusable.

In response to EnLink's suit, Texas Brine filed a third party demand for declaratory judgment seeking defense and indemnity from insurers, National Union Fire Insurance Company of Pittsburgh, Pa. (National Union) and AIG Specialty f/k/a AISLIC (sometimes, collectively AIG Insurers), under certain pre-2012 liability policies issued to Texas United Corporation. In due course, the AIG Insurers filed a motion for summary judgment, claiming they had no duty to indemnify or defend Texas Brine in this suit, because EnLink's alleged damages did not occur during the effective dates of any of the relevant policies, the last of which indisputably expired on March 1, 2009, more than three years before the sinkhole appeared. In a judgment signed February 14, 2017, the district court granted summary judgment in favor of the AIG Insurers, in their capacities as Texas Brine's pre-2012 insurers, and dismissed Texas Brine's third party demand against them.

Texas Brine appealed from the judgment. While the appeal was pending, EnLink apparently settled its claims against Texas Brine and those claims were dismissed. According to Texas Brine, however, this appeal still presents the issue of whether genuine issues of material fact exist such that the AIG Insurers owed Texas Brine a duty to defend Texas Brine on the EnLink claims against it until the date those claims were resolved and dismissed.

Texas Brine contends the district court erred in granting summary judgment to the AIG Insurers because there are genuine issues of material fact as to when EnLink's damage began that preclude summary judgment on the AIG Insurers' duty to defend. Specifically, Texas Brine argues the pre-2012 AIG policies do not limit coverage to property damage that manifests itself during the policy period but should be interpreted to cover possible hidden property damage to EnLink that may have resulted from earth movement that may have occurred during the policy periods. Texas Brine also contends the district court erred, because another district court in other sinkhole-related cases denied summary judgment to insurers on the duty to defend issue.

SUMMARY JUDGMENT

A motion for summary judgment is a procedural device used to avoid a full-scale trial when there is no genuine issue of material fact. Jones v. Anderson , 16-1361 (La. App. 1 Cir. 6/29/17), 224 So.3d 413, 417. After an opportunity for adequate discovery, a motion for summary judgment shall be granted if the motion, memorandum, and supporting documents show there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law. LSA-C.C.P. art. 966A(3). The only documents that may be filed in support of or in opposition to the motion are pleadings, memoranda, affidavits, depositions, answers to interrogatories, certified medical records, written stipulations, and admissions. LSA-C.C.P. art. 966A(4).

The burden of proof rests with the mover. Nevertheless, if the mover will not bear the burden of proof at trial on the issue that is before the court on the motion for summary judgment, the mover's burden on the motion does not require him to negate all essential elements of the adverse party's claim, action, or defense, but rather to point out to the court the absence of factual support for one or more elements essential to the adverse party's claim, action, or defense. The burden is on the adverse party to produce factual support sufficient to establish the existence of a genuine issue of material fact or that the mover is not entitled to judgment as a matter of law. LSA-C.C.P. art. 966D(1).

Appellate courts review evidence de novo under the same criteria that govern the trial court's determination of whether summary judgment is appropriate. Jones , 224 So.3d at 417. Thus, appellate courts ask the same questions: whether there is any genuine issue of material fact and whether the mover is entitled to judgment as a matter of law. Id. Because it is the applicable substantive law that determines materiality, whether a particular fact in dispute is material can be seen only in light of the substantive law applicable to the case. Id.

DUTY TO DEFEND

Whether an insurance policy provides or precludes coverage is a dispute that can be properly resolved within the framework of a motion for summary judgment. George S. May Int'l Co. v. Arrowpoint Capital Corp. , 11-1865 (La. App. 1 Cir. 8/10/12), 97 So.3d 1167, 1171. The party seeking a declaration of coverage under an insurance policy must establish every fact essential to recovery and that the claim falls within the policy coverage. Id. Generally, the insurer's obligation to defend suits against its insured is broader than its obligation to indemnify for damage claims. Arceneaux v. Amstar Corp. , 10-2329 (La. 7/1/11), 66 So.3d 438, 450. The issue of whether a liability insurer has the duty to defend a civil action against its insured is determined by application of the "eight-corners rule," under which an insurer must look to the "four corners" of the plaintiffs petition and the "four corners" of its policy to determine whether it owes that duty. Maldonado v. Kiewit Louisiana Co. , 13-0756 (La. App. 1 Cir. 3/24/14), 146 So.3d 210, 218. The insurer's duty to defend suits brought against its insured is determined by the factual allegations of the injured plaintiff's petition, with the insurer being obligated to furnish a defense unless it is clear from the petition that the policy unambiguously excludes coverage. See Arceneaux , 66 So.3d at 450. Thus, assuming the factual allegations of the petition are true, if there could be both coverage under the policy and liability to the plaintiff, the insurer must defend the insured regardless of the outcome of the suit. Id. Additionally, the court must liberally interpret the factual allegations of the petition in determining whether they bring the plaintiff's claim within the scope of the insurer's duty to defend the suit brought against its insured. Maldonado , 146 So.3d at 219. If a petition does not allege facts within the scope of coverage, however, an insurer is not legally required to defend a suit against its insured. Id.

We now review de novo the documents filed by the parties in support of and in opposition to the AIG Insurers' motion for summary judgment. See LSA-C.C.P. arts. 966A(4) and D(2). It is undisputed that the AIG Insurers provided insurance coverage to Texas United Corporation under policies effective from March 1, 1991 through March 1, 1995 and from March 1, 1996 through March 1, 2009 (the pre-2012 AIG policies). The AIG Insurers filed pertinent excerpts from the pre-2012 AIG policies in support of their motion. Generally, the Insuring Agreement of each of the policies provided, in pertinent part:

SECTION I-COVERAGES
COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY
1. Insuring Agreement.
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of
"bodily injury" or "property damage" to which this insurance applies. We will have the right and duty to defend any "suit" seeking those damages. We may at our discretion investigate any "occurrence" and settle any claim or "suit" that may result....
b. This insurance applies to "bodily injury" and "property damage" only if:
(1) The "bodily injury" or "property damage" is caused by an "occurrence" that takes place in the "coverage territory;" and
(2) The "bodily injury" or "property damage" occurs during the policy period.

Also, generally, the policies defined "property damage" as:

a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or
b. Loss of use of tangible property that is not physically injured. All such loss shall be deemed to occur at the time of the "occurrence" that caused it.

Further, each of the pre-2012 AIG policies defines "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions."

The pre-2012 AIG policies provided coverage for property damage only if it occurred during the policy period. It is undisputed that no pre-2012 AIG policy was in effect on August 3, 2012, the day the sinkhole near Bayou Corne appeared. Nevertheless, Texas Brine argues that, although EnLink may have discovered its pipeline damage on August 3, 2012, there are genuine issues of material fact as to whether hidden damage occurred before then, due to subsidence and other non-visible underground damage in the years before the sinkhole became visible. Thus, according to Texas Brine, the possibility that EnLink could have sustained damage during the pre-2012 AIG policy periods precludes summary judgment on the AIG Insurers' duty to defend.

To support its opposition to the summary judgment, Texas Brine filed three expert opinions. The first expert, William Barnhart, opined that InSAR analysis, a technique used to observe active ground surface deformation, was consistent with ground surface subsidence near the salt dome from 2007 through 2011. The second expert, John Carico, opined that pre-2012 earth movement in the Bayou Corne area "could have" damaged EnLink's pipeline earlier than March 1, 2012. The third expert, Peter Knowe, opined that, "if" pre-2012 earth movement damaged EnLink's pipeline, such hidden damage would be covered under pre-2012 occurrence policies, even if the sinkhole did not appear until 2012.

We first note that, under the "eight-corners rule," Texas Brine's experts' opinions are irrelevant to determining the AIG Insurers' duty to defend Texas Brine against EnLink's claims. It is EnLink's allegations that determine the AIG Insurers' duty to defend, and Texas Brine cannot use expert opinions to add to EnLink's allegations, or to dictate a certain interpretation of EnLink's allegations, in its attempt to defeat summary judgment on the duty to defend issue. See Vaughn v. Franklin , 00-0291 (La. App. 1 Cir. 3/28/01), 785 So.2d 79, 85, writ denied , 01-1551 (La. 10/5/01), 798 So.2d 969 (rejecting insurer's argument to look beyond allegations of petition to determine duty to defend). Further, even if we did consider the expert opinions, they do not create a factual dispute as to whether EnLink sustained property damage during any of the specific, relevant policy periods, but only speculation that such could have occurred before 2012.

We now review EnLink's petition to determine if it alleged that property damage occurred during any of the pre-2012 AIG policy periods. EnLink filed its original petition against Texas Brine in April 2013 and then amended it multiple times. In support of their respective positions on summary judgment, the AIG Insurers and Texas Brine both point to allegations from EnLink's petition, including the original, first amended, second amended, and fifth amended and restated petitions. We summarize pertinent allegations as follows, italicizing words and phrases relevant to EnLink's damages:

• EnLink owns/operates a petroleum gas storage facility situated near Bayou Corne; EnLink also owns/operates a pipeline that traverses the western edge of the Napoleonville salt dome near the Oxy Geismar # 3 brine production salt cavern.
• Since 1975, Texas Brine has leased the right to produce salt from land located on the salt dome.
• In 1982, Texas Brine and a land lessee drilled the Oxy Geismar # 3 well and Texas Brine remained the operator at least until 2015.
• In 1984, Texas Brine was informed of concerns about Oxy Geismar # 3's proximity to the edge of the salt dome; Texas Brine knew or should have known of all risks related to drilling and mining of the Oxy Geismar # 3 and had a duty to operate the Oxy Geismar # 3 as a prudent operator and in a reasonable manner.
• In at least 2007, Texas Brine became aware that the Oxy Geismar # 3 cavern was mined so close to the edge of the salt dome so as to threaten the cavern's integrity but continued to operate on the cavern.
• In about March 2009, Texas Brine ceased mining the Oxy Geismar # 3 well, and in June 2011, Texas Brine plugged and abandoned the Oxy Geismar # 3 well.
Beginning in May 2012 , reports were made that natural gas was bubbling to the surface of waterways near the salt dome, which forced EnLink to perform continuous inspections, monitoring, probing, excavation, surveying, gas sampling and analysis, and related permitting to ensure the integrity of its pipelines in the area.
On August 3, 2012 , a sinkhole emerged adjacent to EnLink's pipeline and has since engulfed a section of the pipeline.
• EnLink's pipeline was displaced, damaged, and rendered unusable due to the sudden soil subsidence, earth movement, and soil instability caused when the sinkhole occurred.
• The failure of the Oxy Geismar # 3 cavern caused, in whole or in part, the sinkhole and associated soil subsidence and instability; the Oxy Geismar # 3 cavern is unstable and continues to collapse.
• EnLink has incurred substantial damage from the sinkhole, and Texas Brine's role in causing or contributing to the sinkhole renders it directly liable to EnLink for damages sustained as a result of the sinkhole emergence.
• Due to the salt dome's potential instability, caused by the Oxy Geismar # 3 cavern failure, EnLink conducted structural integrity tests of its caverns and has transferred butane from adjacent caverns to more remote caverns.
• Due to the Oxy Geismar # 3 cavern failure, EnLink was prevented from expanding its storage facility as planned; lost storage cavern contracts with third parties; and, was required by state agencies to take responsive actions to the incident.
• Acts by Texas Brine, Texas United, and United Brine, and defective things they owned or over which they had garde, caused or directly contributed to the destabilization of the Oxy Geismar # 3 cavern and the eventual formation of the sinkhole causing damages to EnLink.
• Texas Brine's fault caused EnLink the following damage , without limitation: expenses associated with testing to determine the source of natural gas releases and subsequent gas monitoring; lost revenues associated with the shutdown of the pipeline; costs to relocate the
pipeline; anticipated demolition costs for removing the pipeline's unusable section; expenses associated with salt dome and cavern structural integrity tests; costs and lost revenues associated with product transfers between caverns; lost storage cavern contract revenue; lost future revenue from lost facility and business expansion opportunities; costs to respond to state agency directives; interests, and other damages to be proven at trial.

Liberally reading EnLink's allegations, we do not find that they bring EnLink's claims within the scope of the AIG Insurers'

duty to defend Texas Brine in this case. Although EnLink alleges that Texas Brine has operated the Oxy Geismar # 3 well and cavern since 1982, had a duty to be a prudent operator, and was aware in 1984, or at least in 2007, of concerns about the stability of the Oxy Geismar # 3 well and cavern, the first property damage for which EnLink seeks compensatory damages are expenses associated with inspections, monitoring, and other actions that it performed in response to May 2012 reports of bubbling natural gas. The May 2012 natural gas bubbling occurred over three years after the last pre-2012 AIG policy expired. Contrary to Texas Brine's assertions, EnLink does not allege that there was hidden damage to its pipeline, due to subsidence or other non-visible underground damage, at any time before the sinkhole became visible on August 3, 2012. Thus, also contrary to Texas Brine's assertions, this court need not resolve a "conflict" created by another district court judge's rulings in the Pontchartrain Natural Gas System v. Texas Brine, et al. , case, 23rd JDC, No. 34,265 (Pontchartrain) , and in the Florida Gas Transmission Company, LLC vs. Texas Brine Company, LLC, et al. , case, 23rd DC, No. 34,316 (Florida Gas) . Those rulings are not before us here and have no bearing on what EnLink has alleged in this case.

Based on our application of the "eight-corners rule," under the dear terms of the pre-2012 AIG policies, the AIG Insurers' duty to defend Texas Brine has not been triggered, because EnLink has not alleged that property damage occurred during a relevant policy period. And having so found based on EnLink's allegations alone, we need not consider purported "admissions" EnLink or Texas Brine may have made in earlier summary judgment litigation against Liberty Insurance Underwriters, Inc., another of Texas Brine's insurers; nor need we address Texas Brine's argument that the "exposure" theory versus the "manifestation" theory triggers insurance coverage in property damage cases.

After a thorough de novo review of the record, we find that the AIG Insurers met their initial burden of pointing to an absence of factual support for an element essential to Texas Brine's duty to defend claim. See LSA-C.C.P. art. 966D(1). The AIG Insurers pointed out that EnLink's allegations against Texas Brine did not bring EnLink's claim within the scope of the AIG Insurers' duty to defend Texas Brine during the effective dates of any of the pre-2012 AIG policies. See Maldonado , 146 So.3d at 219. Once the AIG Insurers demonstrated this lack of evidence, the burden shifted to Texas Brine to specifically show where EnLink alleged any property damage that occurred during a relevant policy period. See LSA-C.C.P. arts. 966D(1) and 967B. Since Texas Brine did not do so, but instead relied on speculative expert opinions extraneous to EnLink's allegations, there is no genuine issue of material fact, and the AIG Insurers are entitled to summary judgment as a matter of law. Id. ; accord Craig M. v. DA Exterminating Co., Inc. , 12-0626 (La. App. 1 Cir. 9/13/13), 186 So.3d 673, 679-80. Accordingly, we find the district court properly granted summary judgment in the AIG Insurers' favor.

CONCLUSION

For the foregoing reasons, the district court's February 14, 2017 judgment, granting summary judgment in favor of National Union Fire Insurance Company of Pittsburgh, Pa. and AIG Specialty Insurance Company, in their alleged capacities as Texas Brine's pre-2012 insurers, and dismissing Texas Brine's third party demands against them with prejudice, is affirmed. We assess appeal costs to Texas Brine.

AFFIRMED.

      The original petition was filed by Crosstex Energy Services, LP; Crosstex LIG, LLC; and Crosstex Processing Services, LLC (Crosstex). In March 2014, the plaintiffs' names changed, respectively, to EnLink Midstream Operating, LP; EnLink LIG, LLC; and EnLink Processing Services, LLC. Here, we sometimes refer to the plaintiffs in the underlying litigation as EnLink.

      In the original petition, EnLink named Texas Brine Company, LLC, as the defendant who operated the wells. In a fifth supplemental, amended, and restated petition, EnLink additionally named Texas United Corporation and United Brine Services Company, LLC, as defendants, claiming they were both alter egos of Texas Brine Company, LLC, which acted in concert with and/or as part of Texas Brine Company, LLC, in causing EnLink's damages. We sometimes refer to the three defendants as Texas Brine.

      In the original third party demand, Texas Brine named National Union, American International Surplus Lines Insurance Company (AISLIC) and American International Specialty Lines Insurance Company (also AISLIC) as third party defendants. In responsive pleadings, including their motion for summary judgment here, the third party defendants identify themselves as National Union and AIG Specialty Insurance Company f/k/a AISLIC and AISLIC. We sometimes collectively refer to these third party defendants as AIG Insurers.

      The relevant policies identify Texas United Corporation as the insured. For purposes of this motion for summary judgment only, without waiving their right to contest Texas Brine's status, the AIG Insurers allowed Texas Brine to be considered an additional insured.

      Zurich American Insurance Company, another insurer against which Texas Brine filed an incidental demand, moved for summary judgment and partially joined in the AIG Insurers' motion for summary judgment. Texas Brine filed an omnibus opposition to the motions. The district court heard the motions at the same hearing and then issued one judgment in the AIG Insurers' favor and another judgment in Zurich's favor. Texas Brine appealed both judgments. We review the AIG Insurer judgment here, under docket number 2017 CA 0863, and the Zurich judgment under docket number 2017 CA 0895, also decided this day.

      This language is the same in most of the pre-2012 AIG policies and is substantively the same in all of the policies.


author: KING, JUSTICE, FOR THE COURT: CHAMBERLIN, JUSTICE, DISSENTING:

text:
    WHITNEY BANK f/k/a Hancock Bank, a Mississippi State Chartered Bank d/b/a Hancock Bank v. TRIANGLE CONSTRUCTION COMPANY, INC.
    NO. 2016-CA-00728-SCT
    Supreme Court of Mississippi.
    October 5, 2017 Rehearing Denied February 8, 2018
    ATTORNEY FOR APPELLANT: DEREK ANDREW HENDERSON
    ATTORNEYS FOR APPELLEE: D. RONALD MUSGROVE, MICHAEL SHELTON SMITH, II, MACY DERALD HANSON
    EN BANC.
   KING, JUSTICE, FOR THE COURT:

¶ 1. In this lien priority case, a property owner defaulted on his obligations, and the construction lender foreclosed the property. The general contractor had a materialman's lien on the property. At the foreclosure sale, the purchase price for the property was significantly lower than the total amounts owed. The sole issue before the chancery court was which lien had priority-that of the construction lender, or that of the contractor. The chancery court found that the contractor's lien had priority. Because the chancery court did not abuse its discretion, this Court affirms.

FACTS AND PROCEDURAL

HISTORY

¶ 2. Knight Properties purchased a piece of property on which it planned to build a residential development. In February 2007, Hancock Bank issued a line of credit to Knight Properties in the amount of $2.25 million. In gathering information to approve the loan, Hancock obtained the contract between Knight Properties and Triangle Construction Company, Inc., entered into on February 12, 2007, for Triangle to be the contractor on the project. Before approving the loan, Hancock checked Triangle's contractor's license to ensure it possessed a valid one. Hancock and Knight executed a promissory note and a deed of trust on the property. Later in 2007, Knight conveyed the property to Reunion of Biloxi Development LLC, a conveyance that was essentially a name change. Reunion assumed Knight's debt to Hancock and a new promissory note in the amount of approximately $1.9 million was signed.

¶ 3. The first draw on the loan was made on February 19, 2007, in the amount of $966, 872.71, and was used to pay off the balance of the existing purchase loan on the land. Hancock Bank had financed the original purchase of the property, so it used the line of credit to pay off the existing balance to itself. The remaining draws occurred sporadically through May 11, 2009, with Hancock distributing a total of nine draws, in the total amount of $1,704,660.42. For each distribution, Hancock's attorney, George Murphy, checked the chancery court for liens on the property and obtained an owner and/or contractor affidavit from Chad Knight. The affidavit attested that all subcontractors, materialmen, and other such laborers had been paid in full any amounts owed. The affidavit also had the contractor waive any claim to a lien and affirmed that "[t]he owner has no interest or ownership in the contracting firm or firms and the contractor has no interest in the real property described above[.]" Chad Knight then signed each affidavit twice for Reunion, as both the owner and the contractor. Murphy testified that Hancock had not informed him that Triangle was the contractor, and that information would have changed the way he did things in that he "certainly" would have had the contractor sign the affidavit. Hancock asserted that the information that Triangle was the contractor was sent to Murphy at some point via fax. Hancock also had the site inspected by an engineer to ensure that the progress matched the requested disbursement amount.

¶ 4. On March 31, 2008, Reunion and Triangle entered into a contract for Triangle to be the contractor on the project. It provided that Triangle "agrees to furnish all materials and perform all work necessary to complete Reunion Place Subdivision .... The scope of work to achieve completion is further described as Site Improvements, Water Improvements, Sewer Improvements, Storm Drainage Improvements. The project will be constructed based on the plans drawn by [the engineer.]" It also provided that all subcontracts were subject to the approval of both the owner and the engineer. The contract stated that the contractor would submit an invoice to the owner and the engineer on the twenty-fifth of every month and that the invoice was payable by the tenth of the following month. It provided that work on the project would cease if the invoice was not paid in full by the fifteenth of the following month. Work commenced on the project. Financial problems then arose for Chad Knight. Some time around October 2008, Triangle pulled off the work site for nonpayment, but it eventually returned.

¶ 5. In December 2008, Henry Knue and Donna Smith, Hancock Bank employees assigned to the Reunion loan, had a conversation about Triangle. Knue emailed Chad Knight with a subject line "Draw Pending-Triangle Construction" and stated "Please email or fax invoice due Triangle construction so that I may accurately instruct attorney for disbursement." Chad Knight replied that he was faxing the invoice, "However, I'm not sure what you mean regarding the disbursement instructions to the attorney. The draw needs to be disbursed to Reunion Development as all draws have been. We will pay our contractors and vendors." Knue forwarded this to Smith as an "fyi," and Smith responded that "All of our attorney letters that support the disbursement instruct the attorney to disburse any outstanding invoices, etc. that may be out there. I know he is aware of this." Knue replied that the fax he had received from Knight was not a Triangle invoice, but a Reunion invoice. He stated that he "delivered the check so as not to delay the draw given the urgency in posting before end of day on Wednesday. Attorney has historically disbursed to them and executing an affidavit stating no outstanding invoices. Maybe we can address this in Tuesday's meeting with them as well?" Smith replied that "I think that is fine .... As long as there are no liens outstanding to Triangle and they are continuing to do the work, then we should be fine. But be sure that your instructions letter to the attorney states that any outstanding liens are paid for."

¶ 6. On April 27, 2009, Chad Knight emailed Smith with a draw request, and stated "FYI, we plan to send payment from this draw and our funds directly to the subcontractor (Warren Paving), as our last payment to the Triangle construction apparently did not end reach the sub. We've taken steps to protect against this happening again." On April 28, 2009, Carla Roy from Hancock emailed George Murphy's paralegal and asked her to update Reunion's title in anticipation of a "progress draw." On May 5, 2009, the paralegal informed Roy that the update was complete. Roy responded "Great, I will schedule the draw with you as soon as we have everything in place on our end. Thanks for the update." Smith, who was copied on this email chain, then emailed Roy, stating "I have a call into Chad to discuss the draw amount, no work on the property since the contractor called and stated he pulled off the property and also the Erosion issues that I inspected this morning!! I will let you know when I hear from him!!" Smith described her inspection of the property, noting that "the roads like caving in and it look [sic] delapidated [sic] basically, like nothing had been going on for several weeks. There was no movement on the property." Yet Hancock distributed a draw to Reunion on May 9, 2009. Additionally, during the majority of this time period, Hancock was aware that Reunion was having financial difficulties. One Hancock document noted that "[t[here have been some issues with the contractor on the job and payment issues with him being paid which both sides state are being taken care of however, this has caused the contractor to pull off the job site for more than 8 weeks now and no work has been complted [sic]."

¶ 7. Triangle filed a construction and materialmen's lien on the property on December 16, 2009, in the amount of $214,314.18. After Reunion defaulted on the construction loan, Hancock filed a complaint against Chad Knight, Reunion, and Triangle, among others, and also moved for foreclosure. The chancery court authorized Hancock to foreclose on the property. A third party purchased the property at the foreclosure sale for $800,000. Triangle filed a counterclaim against Hancock for the $214,314.18 it was owed. Hancock filed a motion for summary judgment as to Triangle, which the chancery court denied.

¶ 8. After a bench trial on the matter, the chancery court found that Triangle's lien had priority over Hancock's claims. The chancery court specifically found that Triangle was the general contractor on the project and that Hancock failed to use reasonable diligence in disbursing the construction loan. It thus ruled that Triangle's lien had priority over Hancock's deed of trust, and that Triangle must be paid first out of the foreclosure proceeds. The chancery court awarded Triangle attorneys' fees in the amount of $106,350.48 and awarded Triangle pre- and post-judgment interest at the rate of eight percent. Hancock appeals, arguing that 1) the chancery court erred in its determination that the loan funds did not go into the project because the first portion of the loan funds went to pay off an existing loan on the property; 2) the chancery court erred by determining that Hancock did not use reasonable diligence in disbursing the loan; 3) the chancery court erred in awarding Triangle pre- and post-judgment interest at the rate of eight percent; and 4) the chancery court erred in awarding Triangle attorney's fees and expenses.

ANALYSIS

1. Standard of Review

¶ 9. "Findings of fact made by a chancellor may not be disturbed or set aside on appeal unless manifestly wrong." Cotton v. McConnell , 435 So.2d 683, 685 (Miss. 1983). "This is so whether the facts found be characterized as ultimate facts or as mere evidentiary facts." Id. This Court "must consider the evidence in the light most favorable to the party in whose favor the fact findings were made. [This Court] must also give that party the benefit of all reasonable inferences which may be drawn from the evidence. If when [this Court does] this [it] find[s] that there is substantial evidence which supports the finding of fact made by the chancellor, [it] must affirm." Peoples Bank & Trust Co. and Bank of Miss. v. L & T Developers, Inc. , 434 So.2d 699, 704-05 (Miss. 1983). Furthermore, this Court must "assume that the chancellor resolved in favor of appellees all conflicts in the evidence on fact issues with respect to which the chancellor made no findings of fact." Id. at 705. Thus, this Court employs an abuse of discretion standard for review of a chancellor's decisions. McNeil v. Hester , 753 So.2d 1057, 1063 (Miss. 2000). Questions of law, however, are reviewed de novo. Id.

2. Lien Law

¶ 10. "The lien of a deed of trust securing a construction loan has priority over mechanics' and materialmen's liens only to the extent that[:] (a) the funds disbursed actually went into the construction, or (b) to the extent that the construction lender used reasonable diligence in disbursing the construction loan." Guaranty Mortg. Co. of Nashville v. Seitz , 367 So.2d 438, 441 (Miss. 1979). Thus, to the extent Hancock can show that its funds actually went into the construction or that it used reasonable diligence in disbursing the loan, its lien holds priority over Triangle's lien.

3. Whether the funds went into the construction.

¶ 11. Hancock argues that because the first disbursement went to pay off itself for the existing loan on the land, those funds actually went into the construction, because construction is impossible without the land, a so-called "purchase-money" rule within the construction funds test. The chancellor rejected this argument. Triangle argues that money advanced to purchase undeveloped land is clearly not money that went into the construction project.

¶ 12. This Court has noted that " '[a] lender advancing construction funds must use reasonable diligence to see that these funds are actually used in payment for materials or other cost of construction . Such a construction mortgagee has preference over materialmen and laborers only to the extent that its funds actually go into the construction.' " Deposit Guaranty Nat'l Bank v. E.Q. Smith Plumbing & Heating, Inc. , 392 So.2d 208, 211 (Miss. 1980) (emphasis added) (quoting Wortman & Mann, Inc. v. Frierson Bldg. Supply Co. , 184 So.2d 857 (Miss. 1966) ). The intent is clearly that where a construction lender has actually contributed to the construction , such as materials or labor, (or used reasonable diligence to ensure that it is actually contributing to the construction ), then its lien takes priority over other parties who have contributed to the construction . See Peoples Bank , 434 So.2d at 707. What is less clear is whether the purchase price of property is a cost of construction. We recognize that some of our cases have, without discussion, separated the purchase money price and the costs of construction, while others have, without discussion, combined the two. See Wortman & Mann , 184 So.2d at 858 (purchase price of land advanced by construction lender not included in costs of construction); Deposit Guaranty , 392 So.2d at 209-10 (purchase price of land included in amount that received priority as a construction loan). The dissent correctly notes that in Wortman & Mann , "this language is merely a recapitulation of the testimony given at the trial court level. In its analysis, the opinion does not set forth how the purchase money should have been treated." Dis. Op. at ¶ 31. Yet, the dissent inexplicably treats the same recapitulation of trial testimony in the Deposit Guaranty and Virden cases as "dispositive" and "on point." Dis. Op. at ¶ 27. The entirety of the language in Virden was that the trial court "declared a first lien on these funds in favor of the Bank for $7,315.76," that "[o]nly $7,315.76 of the money advanced by the Bank actually went into the purchase of the lots and the construction of the houses," and that "only $7,315.76 of its money actually went into the project." Virden , 45 So.2d at 270. In its analysis, the opinion does not discuss how the purchase money should have been treated, as this particular finding was not challenged, and the Court merely affirms those findings. Peoples Bank , however, provides more clarity and discussion on this issue. L & T Developers, Inc., financed Bruce Homes, Inc.'s purchase of three tracts of undeveloped land. Peoples Bank , 434 So.2d at 703. Bruce Homes was a speculative builder and planned to build a residence on each of the three tracts. Id. After L & T financed the purchase, Bruce Homes obtained three secured construction loans from two different banks. Id. Materialmen then provided goods and services to the project. Id. at 704. Bruce Homes then defaulted on all its obligations and the properties were foreclosed. Id. The liens of L & T, the materialmen, and the construction lenders were all valid, so the issue was priority among the valid liens. Id. at 714.

¶ 13. As to the priority of construction lender versus materialmen, the Court noted the principle that the equities favor the materialmen. Id. at 705.

A materialman, a mechanic or other similar parties ... typically furnishes supplies, materials or services which are indispensible to the successful prosecution of the construction project. That these potential lienors render their services and perform their work, generally on credit, is to everyone's benefit, including the construction lender. For as these parties give value, the value of the construction lender's collateral is enhanced.
If, as here, the materialmen are not paid, quite likely the construction lender will be unjustly enriched at their expense. For in this situation, if the construction lender were allowed a priority over the materialmen, it would have received the enhancement to the value of its collateral while the materialmen, without whose services the bank cannot expect the secured construction loan transaction to succeed, would as a practical matter be without security, and, most likely, with little prospect of getting paid.
We emphasize the ease with which the construction lender may protect itself. Construction lenders may make advances in the form of drafts or checks payable directly to materialmen or payable to materialmen and the builder jointly. Such a practice, of course, would render the present fiasco impossible. Even where such tight controls are not exercised, many construction lenders require affidavits to the effect that all materialmen and potential construction lienors have been paid. Without doubt in this sort of situation the bank/construction lender is in a far better situation than is the materialman to protect itself and police the use of the construction loan funds and thereby avoid the predicament which has in fact ensued.

Id. The Court then acknowledged that materialmen generally have constructive notice of the construction lender's deed of trust, which takes priority, but no "further than its equities require," which means that it should not be given priority "except to the extent that the money secured thereby was actually used in paying for the construction of the building." Id. at 707 (quoting First Nat'l Bank of Greenville v. Virden , 45 So. 2d 268 (1950) ).

¶ 14. The Court then discussed the materialmen's priority versus the seller who financed the purchase of the land, and who knew that the undeveloped land was bought with an aim toward construction. In affirming the trial court's decision that the materialmen's liens had priority over L & T Developers's (as original landowner/seller and the party providing the financing for the land purchase) liens, the Court noted that the materialmen

are parties who supplied materials and labor to the improvements on the two lots, thereby enhancing the value of these projects. Through sweat and elbow grease, these two construction lienors in a very real sense created value which previously was not there. The landowner, on the other hand, has made no similar contribution. The landowner had the far greater capacity to protect his interest, and, further, the landowner profits directly from the success of the overall construction project to which the materialmen so materially contribute.

Peoples Bank , 434 So.2d at 714. The Court did not consider the financing of the property as a version of a "construction loan." It considered it separately; if the bright-line rule was that the purchase price of the land to be used for a construction project automatically consists of "funds going into construction," L & T in this case would have automatically trumped the materialmen's liens, because its loan to purchase the property would have been deemed as a "cost of construction." However, Peoples Bank clearly contemplates that the purchase price of the property is not a cost of construction under some circumstances. We decline to decree a bright-line rule as to whether the purchase money for the land is a cost of construction. The dissent advocates that we adopt a bright-line legal rule that the purchase money for the land in a construction loan is automatically a cost of construction. Chancery courts are courts of equity. We find that the better rule is to allow a chancery court to examine the facts and equities of each case and determine whether purchase money for the land can be claimed as a cost of construction that fairly prioritizes a construction lender's lien over those of materialmen. This result is supported by the caselaw that goes in both directions, because, in each case involving purchase money cited by both this opinion and the dissent, this Court affirmed the findings of the trial court, either way. Examining the specific facts of this case under the standard of review, thus assuming that the chancellor resolved all conflicts in the evidence on fact issues with respect to which the chancellor made no findings of fact in favor of Triangle and giving Triangle the benefit of all reasonable inferences, we cannot find reversible error in the failure to credit the $966,000 that Hancock disbursed to pay itself as a cost of construction. Hancock using a generic "line of credit" to pay itself the balance of the original loan is even further removed from the actual construction on the project than L & T Developers' financing the original land purchase in Peoples Bank . For this reason, this Court finds that the chancery court did not abuse its discretion when it found that Hancock's lien did not have priority over Triangle's lien.

4. Whether Hancock exercised reasonable diligence.

¶ 15. Hancock argues that it used reasonable diligence in disbursing the construction funds by obtaining an owner/contractor affidavit, checking the chancery court records for liens, and inspecting the property before disbursements. To be sure, Hancock dotted the "i's" and crossed the "t's." Yet, the chancery court rejected this argument because Hancock knew or should have known that materialmen and contractors were not being paid. Hancock may not cloak its actual knowledge of the issues that were occurring by simply doing the "proper" paperwork.

¶ 16. First, the affidavits stating that no payments were outstanding were suspect. Chad Knight signed as both owner and contractor, despite averring that the owner and contractor had no financial interest in one another in the same affidavit, and despite the evidence indicating that Chad Knight was not indeed the general contractor, a fact that evidence indicates Hancock knew. Murphy testified that had he known that Triangle was actually the contractor, he would have done things differently. Chad Knight also informed Hancock at one point that Triangle had not paid a subcontractor. In December 2008, Hancock employees had a conversation regarding Triangle's invoices and a disbursement, indicating that Hancock may have known of payment problems, especially when giving Triangle the benefit of all reasonable inferences drawn from the evidence, as this Court's standard of review demands. Moreover, before the May disbursement, Triangle informed Hancock that it was not being paid. Smith inspected the site herself and noted that it appeared as though no work had been done for awhile and noted that "the" contractor had pulled off the project. Viewing the evidence in the light most favorable to Triangle, it is not implausible to find that Hancock knew that Triangle was the contractor, knew that Reunion was having difficulty paying contractors and subcontractors, and knowingly allowed Chad Knight to falsely sign affidavits as the contractor. The chancery court did not abuse its discretion in determining that Hancock did not exercise reasonable diligence in disbursing the construction loan funds and thus its lien does not receive priority.

5. Whether eight percent interest was appropriate .

¶ 17. Hancock argues that an interest rate of one percent over prime would be fair in "today's financial world." Triangle argues that Hancock waived this argument by failing to make a contemporaneous objection and, in any event, that the award is fair.

¶ 18. The statute providing for interest gives the trial judge wide discretion. Miss. Code Ann. § 75-17-7 (Rev. 2016). The chancellor stated that "[t]here was no dispute expressed as to the [pre-judgment] interest that I would also award." Hancock did not object. The chancellor then awarded post-judgment interest at eight percent and the attorney for Hancock replied "Thank you, sir." Hancock did not object to an eight percent interest rate in chancery court. Therefore, this argument is waived. See City of Jackson v. Jordan , 202 So.3d 199, 206 (Miss. 2016) ("If a proper contemporaneous objection is not made, an error is waived.").

6. Whether the chancery court erred in awarding attorney's fees and expenses in the amount of $106,350.48 .

¶ 19. Hancock argues that the chancery court's award of attorney's fees is unreasonable. It argues that the chancery court did not consider the appropriate factors, but that all it "required as proof was that the former governor lay his bill on the table." Triangle argues that Hancock waived any objection to the award of attorney's fees by failing to make a contemporaneous objection, and in the alternative, argues that the chancery court did not commit manifest error, as the chancellor went through the appropriate factors and found that the fees were reasonable and warranted.

¶ 20. While Hancock did not object to the reasonableness of the attorney's fees at the moment the chancellor made the award, it did vociferously object to the reasonableness of the fees at the time Triangle placed the attorney's bill into evidence. Thus, Hancock preserved this argument for appeal.

¶ 21. The chancery court has wide discretion in awarding attorney's fees. Armstrong v. Armstrong , 618 So.2d 1278, 1282 (Miss. 1993). In this case, the chancellor found:

With respect to the attorney's fees, they're higher than what lawyers on the Coast get, but we are used to seeing lawyers come in here from other places that do get much higher fees.
I went through the whole first round of casinos failures and junk bonds and all that, and all the-everybody that came down here from anywhere else-they had a lot of lawyers from New York and they charge a whole lot more than you lawyers from Jackson do.
But I would assume that the-and I would think that the fees are consistent with what could be demanded by Governor Musgrove. Obviously, by calling him Governor, I know that he was a former Governor of the State of Mississippi, and as such, is able to attract good clients and able to get a lot of business that maybe someone else wouldn't.
And not just because of that, but because he's done an excellent job of presenting all of this, as has Mr. Henderson. I would say that the attorney's fees were fair and reasonable and just and should be awarded.
Now, with our domestic cases we have here, we go through something we call the McKee Factors, which is an explanation of why the attorneys should get those fees. And among the things that you-that the Court looks at is, what is the normal and reasonable fee for someone of that similar experience in that kind of a case, what is reasonable in the community where that attorney practices, that attorney's particular practice experience, and the complexity of the case, the amount of time they have to spend, you know, working on the case.
And in this one, I looked at-I guess we're getting close to 200 exhibits. There were a lot of depositions taken and an awful lot of work done to prepare this case so that it could tried [sic] in two days or two and a half days, instead of two weeks. And so I think that you all did an excellent job with that. And so I think that the attorney's fees should be awarded, and they are granted.

The exhibit that the chancellor examined was a six-page, single-spaced itemization of tasks completed regarding this case. The chancellor considered the appropriate factors and did not abuse his discretion in awarding attorney's fees.

CONCLUSION

¶ 22. Because the chancellor did not abuse his discretion in determining that Triangle's lien took priority over Hancock's lien, and because Hancock's loan for the undeveloped land did not go into construction, this Court affirms the judgment of the chancery court. Moreover, Hancock waived its argument that the eight percent interest award was error. The chancery court likewise did not abuse its discretion in its award of attorney's fees.

¶ 23. AFFIRMED.

WALLER, C.J., RANDOPLH AND KITCHENS, P.JJ., COLEMAN AND BEAM, JJ., CONCUR. CHAMBERLIN, J., DISSENTS WITH SEPARATE WRITTEN OPINION JOINED BY MAXWELL, J. ISHEE, J., NOT PARTICIPATING.

CHAMBERLIN, JUSTICE, DISSENTING:

¶ 24. Because I believe that the majority opinion goes against good policy and, more importantly, almost seventy years of precedent, I dissent.

¶ 25. As a preliminary matter, our caselaw is clear that the construction lender is entitled to priority over the materialmen in the amount that went into the construction of the project. Riley Building Supplies, Inc. v. First Citizens Nat'l Bank , 510 So.2d 506, 508 (Miss. 1987) ; Guaranty Mortg. Co. of Nashville v. Seitz , 367 So.2d 438, 441-442 (Miss. 1979) ; First Nat'l Bank of Greenville v. Virden , 208 Miss. 679, 45 So.2d 268 (1950). Likewise, to the extent any additional funds disbursed did not go into the construction project, in order to maintain priority, the construction lender must show that it used reasonable diligence to see that the funds were used in construction. Peoples Bank and Trust Co., et al. v. L & T Developers, Inc. , 434 So.2d 699, 707 (Miss. 1983) ; Deposit Guaranty Nat'l Bank v. E.Q. Smith Plumbing & Heating, Inc. , 392 So.2d 208, 212 (Miss. 1980), decision clarified , 396 So.2d 6 (Miss. 1981) ; Seitz , 367 So.2d at 441 ; see also Boackle, K.F., Mississippi Real Estate Foreclosure Law § 4:14 (2d ed. 2017); Jeffery Jackson et al., 6 Mississippi Practice Encyclopedia of Mississippi Law § 51:30 (2017).

¶ 26. The main issue is whether the amounts used in the first draw to pay off the existing purchase loan on the land constituted funds that went into construction. The answer is yes, as confirmed by cases dating back to 1950. This Court addressed a substantially similar case in Virden . Virden , 45 So.2d at 268. In Virden , money was borrowed to purchase lots and construct a residence. The Court held that "only $7,315.76 of the money advanced by the Bank actually went into the purchase of the lots and the construction of the houses ." Id. at 270 (emphasis added). The trial judge found that the bank had priority for the $7,315.76, and this Court affirmed. Id. Further, this Court stated in a footnote that the $7,315.76 actually went into the project. Id.

¶ 27. The Virden case is on point and dispositive. Further, other cases have addressed the issue subsequently and confirmed lien priority to include the purchase price of the property. See Deposit Guaranty , 392 So.2d at 208 (Holding that the bank had lien priority, which included the purchase price). However, the majority states that the holdings in Virden and Deposit Guaranty hold no weight because the treatment of the purchase money is simply a "recapitulation of trial testimony," as in Wortman & Mann, Inc. v. Frierson Building Supply Co. , 184 So.2d 857 (Miss. 1966). Maj. Op. at ¶ 12. Although the facts are laid out in the recapitulation of trial testimony, both cases have a holding that speaks on the status of the purchase money . The Virden Court held that "such mortgagee shall have preference only to the extent that its funds actually went into the construction." Virden , 45 So.2d at 271. The Court then affirmed the trial court, giving the mortgagee preference for $7,315.76, which included the price of the land. Id. Similarly, in Deposit Guaranty , the Court reversed the trial court. This Court held that the bank had priority, and the liens of the materialmen were extinguished by the foreclosure sale. Deposit Guar. Nat'l Bank , 392 So.2d at 212. The liens of the materialmen were extinguished because the bank disbursed $42,732 for purchase of the lot and construction, and the foreclosure sale realized only $38,000. Id. at 211, decision clarified , 396 So.2d at 7. Simply put, there is no Mississippi case that holds otherwise in similar circumstances, where the lender has made a construction loan that includes the purchase of the property that is still outstanding.

¶ 28. The logic behind these holdings is clear. We want banks to make construction loans. The bank, in general, is not going to make a construction loan unless its lien has priority. Therefore, it includes funds to pay off the existing mortgage as a part of the construction loan, thus ensuring its priority. In our case, although the bank was the same, Whitney was able to place its construction loan in a superior position by extinguishing the first mortgage. To hold otherwise would stifle such loans unless the purchase-money mortgage holder is willing to subrogate its priority.

¶ 29. The majority cites two cases which are held forth as supporting the proposition that such funds are not funds that went into construction. Alternatively, they state that it is a fact question subject to an abuse-of-discretion analysis that the chancellor got right in our case. I disagree on both counts.

¶ 30. The majority cites Peoples Bank , 434 So.2d at 699, to support its position. Peoples Bank is simply not on point and is too dissimilar to our case to control. Peoples Bank involved a separate loan for the purchase of the property that was not a part of the construction loans. Id. at 703. Peoples Bank clearly states that at the time of the construction loans, "the lien of the purchase money deed of trust held by L & T Developers, Inc. was prior in right to the liens of each of the three deeds of trust in favor of the construction lenders." Id. The main distinguishing feature in Peoples Bank is that, shortly after the construction loans, the purchase-money mortgage holder signed agreements subordinating its lien to that of the construction lenders. Id. In other words, the construction loan liens took priority because the purchase-money mortgage holder agreed to be subordinated to the construction loan liens. The Court went on to grant the materialmen priority over the construction lenders and then placed the construction lenders behind the landowner due to breach of a duty owed the landowner. Id. at 713. The priority between the materialmen and the landowner was not challenged on appeal. Id. at 714. That is simply not our case.

¶ 31. The majority, likewise, submits Wortman , 184 So.2d 857 in support. It opines that Wortman is an example of a case in which the purchase price was not included as funds that went into construction. It appears that the only language that supports this proposition is in the paragraph that reads:

The testimony shows that of the total sum advanced by the Loan Company, only $12,011.69 was actually used as payment for labor and materials that went into the construction of the two residences on lots Nos. 49 and 73. This sum does not include the purchase price of the two lots in the sum of $4,300.

Id. at 858. However, this language is merely a recapitulation of the testimony given at the trial-court level. In its analysis, the opinion does not set forth how the purchase money should have been treated. Id. at 858-61. Holding in favor of the lender, the Court found that there was reasonable diligence and a lack of notice by the materialmen. Id. at 860-61. Thus, the case turned on these two issues, and it never addressed the purchase price of the land and whether it was considered part of the construction.

¶ 32. The majority also deems the issue to be a finding of fact subject to an abuse-of-discretion standard. The issue of whether funds used to pay off the existing purchase loan on the land constitutes money going into the construction project is a question of law. That is not to say that there will not be circumstances where a fact finding is necessary when there is some question as to the purpose of the loan, whether the money was used to pay off the existing mortgage, diversion of the money, etc. The majority states that this dissent advocates adoption of "a bright-line legal rule that the purchase money for the land in a construction loan automatically is a cost of construction." Maj. Op. at ¶ 14. Where the issue is a question of law, my dissent merely upholds our precedent on the status of the purchase money. However, as stated above, where there are circumstances in which fact finding is necessary, my dissent does not hinder that in any way. In this case, however, the issue is one of law. All parties agree that the first draw went to pay off the balance of the existing purchase loan on the land, and no evidence has been submitted that this was anything other than the intention of the parties. Therefore, as all parties agreed to the status of the first draw, unlike the Majority states, I dissent to state that this Court should affirm the findings of the trial court but reverse the application of the law to the facts, as was done in Deposit Guaranty (and in Wortman on the issue of reasonable diligence).

¶ 33. The amount used to pay off the existing purchase loan on the land constitutes funds that went into construction. The determination of whether the monies used to pay off the balance of the existing purchase loan on the land is dispositive in that it consumes the entire amount obtained at the foreclosure sale. (The payoff was $966, 872.71 and the foreclosure purchase price was $800,000). Therefore, it is not necessary to get to a reasonable-diligence analysis.

¶ 34. For these reasons, I dissent.

MAXWELL, J., JOINS THIS OPINION.

      During the time at issue in this case, Chad Knight, the owner of Knight Properties, transferred ownership of the property to Reunion of Biloxi Development, LLC, which was also owned by Chad Knight. After the events at issue, the lender, Hancock Bank, changed to Whitney Bank. This opinion will refer to the entities as Reunion and Hancock, as those are the names on the documents at issue.

      The promissory note simply describes the loan as a line of credit, and does not specify that it is a construction loan.

      Hancock argues that Reunion was the general contractor and Triangle was a subcontractor. Ample evidence in the record disputes this, such as the contract between Reunion and Triangle indicating that Triangle was the general contractor; statements in emails by Hancock indicating that Triangle was "the" contractor; Chad Knight's deposition testimony that Triangle was the general contractor on the project; communications between Triangle and Reunion regarding Triangle, and not Reunion, paying subcontractors; and communications between Chad Knight and Hancock indicating that Triangle had the responsibility to pay subcontractors. The chancery court specifically found that Triangle was the general contractor on the project, and under an abuse of discretion standard, we cannot find that the chancery court erred in making this factual finding, given the abundance of evidence indicating that Triangle was the general contractor.

      Regardless of the veracity of Chad Knight's statement, he certainly put Hancock on notice that he had outstanding, unpaid invoices to contractors and/or materialmen. And it appears that he acknowledged to Hancock Bank that Triangle was the contractor.

      Several of the witnesses to the transactions testified, as well as both sides' experts, who testified as to whether Hancock's actions were against or compliant with banking standards regarding reasonable diligence.

      The dissent claims that this holding will stifle construction loans that include purchase money for land. Yet, as this Court has already noted, allowing errant construction lenders to automatically trump materialmen stifles development, as materialmen are less willing to work on credit, an arrangement that benefits everyone. Allowing a chancery court to perform its duties by finding facts and balancing equities ensures that the proper lien will receive priority under the specific facts of each case.

      If a portion of a construction loan for undeveloped land automatically and always trumps materialmen, it would be antithetical to ever give materialmen priority. To be sure, the current statute regarding contractor's liens (which was not in effect at the time Triangle's lien was filed) requires that, to maintain priority, a construction mortgagee must obtain either an affidavit from the owner stating that no work has been done and no materials delivered to the property, or it must obtain "an affidavit or sworn statement from the contractor, or owner if there is no contractor, ... regarding payment for work, materials or services provided." Miss. Code Ann. § 85-7-405 (Rev. 2011).

      Certainly, it would have been more prudent for Triangle to file a lien earlier in this case. However, that does not change the fact that Hancock had knowledge of the issues of nonpayment.

      The chancellor noted that "there was not one shred of evidence anywhere that the owner did any contracting. There was some-there was some indication from Compton that he shouldn't, and then there were steps taken to ensure that he didn't. But for him to say that he's the contractor and did zero contracting. It didn't show that he did anything." He noted that "the idea that Mr.-that Chad Knight was the contractor was an absolute fiction from the get-go, and that should never have been allowed. Therefore, there is no affidavit from the contractor that the-that the bills were paid."

      The chancellor clearly examined the detailed bill, as he did subtract from the award the amount that Triangle expended opposing Hancock's motion for summary judgment, because he determined that the motion was not unreasonable, even though he did deny it.