Sundown Energy, L.P. v. Steven Haller

Case: 13-30294 Document: 00512860820 Page: 1 Date Filed: 12/08/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 13-30294, United States Court of Appeals
consolidated with Nos. 13-30721 & 13-30748 Fifth Circuit
FILED
December 8, 2014
Nos. 13-30294 & 13-30721 Lyle W. Cayce
Clerk
SUNDOWN ENERGY, L.P.,
Plaintiff-Appellant,
v.
STEVEN G. HALLER; FLASH GAS & OIL SOUTHWEST,
INCORPORATED,
Defendants-Appellees.
Consolidated with No. 13-30748
SUNDOWN ENERGY, L.P.,
Plaintiff-Appellee,
v.
STEVEN G. HALLER; FLASH GAS & OIL SOUTHWEST,
INCORPORATED,
Defendants-Appellants.
Appeals from the United States District Court
for the Eastern District of Louisiana
Before STEWART, Chief Judge, and DENNIS and ELROD, Circuit Judges.
CARL E. STEWART, Chief Judge:
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This consolidated appeal arises from a dispute between Steven G. Haller
and Flash Gas & Oil Southwest, Inc. (collectively, “Defendants”) and Sundown
Energy LP (“Sundown”) regarding the terms of a settlement agreement.
Sundown sued Defendants in state and federal court, seeking a partition of
land they co-owned, return of rental payments, and a right of way over Haller’s
property. On the day trial was set to begin in federal court, the parties agreed
to a settlement. Because the parties had not yet agreed on a written draft of
the settlement, the agreement was read into the record before the district
court. However, subsequently, the parties were unable to agree on the terms
of the settlement. In the first appeal, No. 13-30294, Sundown challenges the
district court’s interpretation of the settlement agreement. In the second
appeal, No. 13-30721, Sundown contests the district court’s enforcement of the
settlement. Lastly, in No. 13-30748, Defendants appeal the district court’s
denial of their motion for contempt. For the reasons stated herein, we
REVERSE in part and AFFIRM in part.
I.
Sundown owns an oil and gas production facility in Plaquemines Parish,
Louisiana. Although Sundown could access its facility via the Mississippi
River, it did not have a viable land route. Sundown thus sought permission
from landowners with property between its facility and the nearest public
highway—Louisiana Highway 39—to cross their property. 1 Haller owns one
of the tracts of land between Sundown’s facility and Highway 39 (“Haller
Tract”). Located on the Haller Tract is a camp used by Haller and his guests
for hunting and fishing. Levee Leisure, Inc. (“Levee Leisure”), a company
Haller owns, possesses a surface lease on a contiguous tract of land. Flash Gas
& Oil Southwest, Inc. (“Flash Gas”), another company owned by Haller, leased
1 Another highway is technically closer; however, it does not present a feasible option
for a land route.
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the Haller Tract from Haller and the surface lease from Levee Leisure. Unlike
the majority of the landowners Sundown contacted, Haller refused to grant
Sundown permission to cross his property. 2
In 2006, Sundown entered into a lease (“Flash Lease”) with Flash Gas
for the use of a dock facility and canal access on land allegedly owned by
Defendants. The lease also permitted Sundown to use a road on the Haller
Tract to reach the dock and its facility. In 2010, Haller refused to renew the
Flash Lease.
II.
Once it became apparent that Sundown would be unable to reach an
agreement with Haller, Sundown filed suit against Haller in federal court,
requesting a right of passage over the Haller Tract and return of the rental
payments it made to Flash Gas pursuant to the Flash Lease. 3 Sundown
claimed that its facility was an “enclosed estate” under Louisiana Civil Code
article 689 and thus entitled to a right of passage. Sundown also filed suit in
state court, seeking a partition by licitation of land co-owned by Haller and
Sundown.
In federal court, Defendants filed a motion to dismiss Sundown’s suit,
which the district court denied, and Sundown filed a motion for summary
judgment, which the district court granted in part. The court found that
Sundown’s facility was an enclosed estate but that there were genuine issues
of material facts precluding summary judgment on, inter alia, the location of
the right of way for Sundown. Defendants later filed a motion for summary
judgment regarding Sundown’s claim for return of rental payments. The
2 Initially, one other landowner refused to permit Sundown to cross; however; that
landowner agreed to a settlement with Sundown.
3 Sundown alleges that it discovered that neither Flash Gas nor Haller owned the
property subject to the Flash Lease.
3
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district court granted the motion, holding that Sundown could not recover its
rental payments because it had undisturbed possession of the land. Before a
trial was held, however, the parties agreed to a settlement resolving both the
federal suit and state suit.
The parties read the terms of the settlement agreement to the district
court. They agreed on the location for the route Sundown would use to access
its facility. Sundown was entitled to use this route regardless of which party
owned the land in dispute. Sundown was also granted a temporary right of
way by Haller to access the dock. In addition, Sundown would obtain bids for
the cost of building the road to its facility. 4 Moreover, Haller agreed to not
object to Sundown’s acquisition of any permits or approvals necessary for
construction. The parties also agreed to participate in an auction for “the
other’s co-ownership interest in Tracts 1 and 2 with the high bidder paying its
bid price to purchase the other’s interest in both tracts.” If Sundown had the
winning bid, it would grant a ninety-nine year recreational lease to Haller.
The parties agreed to dismiss the federal and state suits and pay their
respective costs. The parties’ attempts to formulate a written contract
memorializing the terms of their agreement were unsuccessful. Subsequently,
both parties filed cross-motions for enforcement of the settlement agreement,
urging the district court to adopt their respective interpretations of the
settlement.
The district court therefore interpreted the provisions of the settlement
read into the record and filled in the gaps necessary for enforcement of the
settlement. Because the settlement agreement did not specify how the auction
proceeds were to be disbursed, the district court held that the magistrate judge
4 Depending on the route and cost of building the road, Haller would pay Sundown a
portion of the cost.
4
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(“MJ”) would have discretion to resolve that issue. However, the court noted
its preference that the MJ use the approach advocated by Haller if the parties
did not dispute their respective ownership interests—that is, the winning
bidder would pay the portion of the bid corresponding to the party’s ownership
interest in the auctioned property. As for the duration of the right of way, the
court noted that the agreement described it as temporary and thus imposed
what it considered to be a reasonable period of time—nine months. 5
The district court also held that, if it was the losing bidder, Sundown
would no longer be entitled to use the dock facility. The court was persuaded
by “the absence of any provisions in the settlement agreement addressing
Sundown’s lease of the dock in the event it is not the high bidder.” 6 In addition,
the court held that Haller was entitled to hunt and “store fuel on the property
subject to the recreational lease.” After noting that recreational leases in
Louisiana usually permit lessors “to lease the property for oil, gas, and mineral
exploration,” the court held that Sundown had that right subject to the
following conditions: 1) it must try to use directional drilling; 2) if directional
drilling is not feasible, then the parties must submit to arbitration; and 3)
Sundown must give Haller notice when it desires to use the property for
mineral, gas, or oil exploration purposes. Additionally, the court held that
Haller must pay his portion of the construction costs within ten days of
receiving a bill for the construction from Sundown.
The district court then instructed the MJ to conduct the auction. 7 The
MJ conducted the auction, and Haller submitted the highest bid—$1.5 million.
Thereafter, the district court, adopting the MJ’s recommendation, ordered
5 The court noted, however, that this time could be changed if Sundown experienced
construction delays that were beyond its control.
6 Conversely, the settlement agreement stated that Sundown would have access to the
dock facility if it was the high bidder.
7 Sundown appealed this ruling, but the appeal was dismissed as premature.
5
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Sundown to sell its ownership interest in the auctioned land to Haller.
Sundown timely appealed.
After the district court approved the auction, Sundown refused to
consummate the sale of the auctioned land. Defendants proceeded to file a
motion for enforcement of judgment, which the district court granted.
Sundown timely appealed the court’s judgment. In its order enforcing the
parties’ settlement agreement, the district court held, inter alia, that “if the
platform, lights, and other structures are incorporated into the tract of land,
i.e., attached to the property by any means, th[e]n those items are component
parts of the land and therefore immovable and are not subject to removal,
except by the owner of the property.”
Meanwhile, Sundown removed the loading platform located on the
auctioned land. Defendants filed a motion for contempt, alleging that
Sundown was not entitled to remove the platform. After holding an
evidentiary hearing, the district court denied the motion. The district court
reasoned that the platform constituted movable property, Sundown retained
title to the platform, and the Flash Lease was invalid. Defendants timely
appealed.
We will first address Sundown’s appeal of the district court’s
interpretation of the settlement agreement and then proceed to the district
court’s enforcement of the settlement agreement. Lastly, we will turn to
Defendants’ appeal of the district court’s denial of their motion for contempt.
III.
A.
“Although federal courts possess the inherent power to enforce
agreements entered into in settlement of litigation, the construction and
enforcement of settlement agreements is governed by the principles of state
law applicable to contracts generally.” E. Energy, Inc. v. Unico Oil & Gas, Inc.,
6
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861 F.2d 1379, 1380 (5th Cir. 1988) (citations and internal quotation marks
omitted). We therefore apply Louisiana law to interpret the settlement
agreement.
The parties dispute the proper standard of review. Sundown argues that
the de novo standard applies because settlement agreements are interpreted
like contracts and Louisiana law considers issues of contract interpretation
and any corresponding ambiguity to be questions of law. Sundown
acknowledges that the clear error standard would apply if the district court
found the settlement agreement to be ambiguous but argues that the clear
error standard is inapplicable because there is no ambiguity. Conversely,
Defendants argue that the manifest error standard applies because the district
court’s decision concerned the validity and extent of the parties’ settlement
agreement. The manifest error standard is also applicable, Defendants
contend, because the settlement agreement was ambiguous.
“Of course, we, not the parties, determine our standard of review.” See
United States v. Clark, 89 F. App’x 453, 456 (5th Cir. 2004) (per curiam)
(unpublished) (citing United States v. Herrera, 313 F.3d 882, 885 n.* (5th Cir.
2002) (en banc)). That said, the existence and validity of the settlement
agreement are not at issue. Instead, the parties dispute the terms of the
settlement. Whether the settlement agreement is ambiguous is a legal
question. See Kenner Fire Fighters Ass’n Local No. 1427 v. City of Kenner, 09-
129, p. 5 (La. App. 5 Cir. 9/29/09); 25 So. 3d 147, 150. The district court’s
factual findings “are not to be disturbed unless manifest error is shown.” Id.
(citation omitted); see also Gebreyesus v. F.C. Schaffer & Assocs., 204 F.3d 639,
642 (5th Cir. 2000).
B.
7
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Contracts are interpreted based on the parties’ intent. Prejean v.
Guillory, 2010-0740, p. 6 (La. 7/2/10); 38 So. 3d 274, 279. “The reasonable
intention of the parties to a contract is to be sought by examining the words of
the contract itself, and not assumed.” Id. at 279. If the contract is
unambiguous and does not have absurd consequences, we apply the ordinary
meaning of the contractual language. Id. Moreover, we may not ignore an
unambiguous contractual provision simply because, in our view, it does not
align with the parties’ intent. Id. Rather, we must interpret “[e]ach provision
in a contract . . . in light of the other provisions so that each is given the
meaning suggested by the contract as a whole.” La. Civ. Code art. 2050. If the
contract is ambiguous, however, we may resort to parol evidence to interpret
the contract. Doyal v. Pickett, 628 So. 2d 184, 187 (La. Ct. App. 2d Cir. 1993).
“Any doubtful provisions must be interpreted in light of the nature of the
contract, equity, usages, the conduct of the parties before and after the
formation of the contract, and other contracts of a like nature between the
same parties.” Id.
C.
On appeal, both parties advance conflicting interpretations of the
settlement agreement. Indeed, their disagreement is such that it calls into
question the validity of the settlement agreement. See Crawford v. United
Serv. Auto. Ass’n, 2003-2117, p. 5 (La. App. 1 Cir. 3/24/05); 899 So. 2d 668, 671
(“A compromise is valid only if there is a meeting of minds between the parties
as to exactly what they intended at the time the compromise was reached.”).
Nonetheless, upon reviewing the record, we are convinced that the parties
agreed to a settlement, albeit not the version ultimately enforced by the district
8
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court. 8 See Klebanoff v. Haberle, 43, 102, p. 11 (La. App. 2 Cir. 3/19/08); 978
So. 2d 598, 604 (noting that disagreement over “incidental matters” does not
preclude a finding that the parties entered into a compromise).
Although Sundown raises a number of arguments contesting the district
court’s interpretation of the settlement agreement, Sundown’s arguments
largely revolve around two alleged errors. First, Sundown contends that the
district court erred by ignoring the clear and unambiguous terms of the
settlement agreement. Second, Sundown argues that the district court’s
interpretation contravened the parties’ intent. We agree that the version of
the settlement interpreted by the district court conflicts with the terms read
into the record by the parties.
Because the terms of the settlement agreement are controlled by the
parties’ intent, see Prejean, 38 So. 3d at 279, we will first examine the
agreement read into the record. It is clear that the parties agreed on the route
Sundown would use to access its facility. Sundown was to use this path to
access the dock as well if it acquired the auctioned property. The parties also
specified alternative routes for Sundown depending on whether Sundown
would need a permit before beginning construction on the road. Haller agreed
to not impede Sundown’s ability to acquire any permits necessary to fulfill the
settlement. In addition, the parties stated that Sundown would begin
construction as soon as some preliminary matters were handled. Sundown was
also obligated to get at least two separate bids for the different routes.
Depending on the route selected, Haller agreed to pay Sundown a portion of
the cost.
8 Several times during their recitation of the settlement agreement, the parties
repeatedly stated that they had reached a settlement.
9
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The parties agreed that they “would bid against each other in a
mandatory buy/sell to purchase the other’s co-ownership interest in [the
auctioned property] with the high bidder paying its bid price to purchase the
other’s interest in both tracts.” This auction was to occur within thirty days of
the parties executing the settlement documents. Although the parties had not
agreed on all of the details of the auction, they agreed that the “mandatory
buy/sell” would operate like an open auction and the high bidder would own
the land. If Haller won the auction, Sundown agreed to use a right-of-way to
reach its facility and would not own the dock. Conversely, if Sundown was the
highest bidder, it would use the agreed-to-route to access its facility and the
dock. In addition, Sundown would give Haller a ninety-nine year recreational
lease for a specified area. Lastly, the parties agreed to dismiss the state suit
and other pending claims and pay their respective costs.
Here, the district court erred by imposing several terms which either
conflicted with or added to the agreement read into the record by the parties.
Although the parties gave the district court the authority to enforce and
interpret the settlement agreement, the district court did not have the power
to change the terms of the settlement agreed to by the parties. In addition to
the above terms, the district court imposed a nine-month time limit on
Sundown’s use of the right-of-way 9 and gave Haller the right to review
estimates for the costs of the road to be constructed by Sundown. The district
court also mandated that Haller pay his portion of the construction costs within
ten days of receiving the bill. As for the auction, the district court stated that
the highest bidder would pay the other party the amount of the bid price
corresponding to the party’s ownership interest. Moreover, the district court
9 If Sundown needed additional time and was not at fault for the delay in the
construction, the district court held that Sundown could petition the court for additional time.
10
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found that Haller’s ninety-nine year recreational lease encompassed the right
to hunt and store fuel on the property and that Sundown would retain the right
to lease the property for oil, gas, and mineral exploration with some
restrictions.
Although the district court did an admirable job of resolving the disputes
between the parties, the court overstepped its authority when it added
provisions to the settlement agreement. See Prejean, 38 So. 3d at 279
(“Accordingly, when a clause in a contract is clear and unambiguous, the letter
of that clause should not be disregarded under the pretext of pursuing its spirit
. . . .”). “A compromise settles only those differences that the parties clearly
intended to settle . . . .” Klebanoff, 978 So. 2d at 605. When limited to the terms
recited to the district court, it is apparent that the settlement agreement does
not resolve every dispute which could potentially arise. However, that is not
required. See Walk Haydel & Assocs. v. Coastal Power Production Co., 98-0193,
p. 4 (La. App. 4 Cir. 9/30/98); 720 So. 2d 372, 374 (noting that a settlement
agreement is enforceable although it “may encompass less than all the issues
between the parties”). Accordingly, we hold that the district court erred when
it interpreted the settlement agreement to include those items not mentioned
during the parties’ oral recitation of the settlement agreement. The district
court should have found the settlement agreement to encompass only those
matters expressly stated by the parties.
IV.
A.
Sundown’s arguments challenging the district court’s enforcement of the
settlement agreement mirror its arguments regarding the district court’s
interpretation of the agreement. Essentially, Sundown argues that the district
court abused its discretion by enforcing a settlement agreement that did not
conform to the parties’ agreement.
11
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B.
We review a district court’s decision to enforce a settlement agreement
for an abuse of discretion. Quesada v. Napolitano, 701 F.3d 1080, 1083 (5th
Cir. 2012). “A district court abuses its discretion if it (1) relies on clearly
erroneous factual findings; (2) relies on erroneous conclusions of law; or (3)
misapplies the law to the facts.” Del Bosque v. AT&T Adver., LP, 441 F. App’x
258, 260 (5th Cir. 2011) (unpublished) (per curiam) (citation and internal
quotation marks omitted). Any factual determinations the district court makes
when deciding whether to enforce a settlement agreement are subject to the
clear error standard. Deville v. U.S. ex rel. Dep’t of Veterans Affairs, 202 F.
App’x 761, 762 (5th Cir. 2006) (unpublished) (per curiam).
C.
As we stated earlier, the district court erred in its interpretation of the
parties’ settlement agreement. The district court thus enforced a settlement
agreement which differed from the actual agreement read into the record by
the parties. We therefore hold that the district court abused its discretion
when it enforced the settlement agreement. See Middlebrooks v. Int’l Indem.,
95-1364, p. 8 (La. App. 3 Cir. 3/6/96); 670 So. 2d 740, 744 (holding that trial
court erred when it imposed a requirement on a party not aligning with the
settlement agreement).
V.
A.
Lastly, Defendants challenge the district court’s denial of their motion
for contempt. In its order enforcing the parties’ settlement agreement, the
district court held, inter alia, that “if the platform, lights, and other structures
are incorporated into the tract of land, i.e., attached to the property by any
means, th[e]n those items are component parts of the land and therefore
immovable and are not subject to removal, except by the owner of the
12
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property.” Relying on testimony by Mr. McGuire, the vice-president and
general counsel for Sundown, the district court found that the “platform was
simply placed over two pilings and could be removed by lifting the pilings.”
The court also found that “[t]he pediments or pedestals simply rested on the
ground and did make a hole but there were no steel pilings.” Moreover, the
court held that Sundown retained title to the platform and the Flash Lease
was invalid. 10
Defendants claim that because the platform was immovable, Sundown
violated the district court’s order when it removed the loading platform from
the dock. Defendants also argue that Sundown no longer possessed a right to
the loading platform under the Flash Lease. In addition, the district court
erred, Defendants contend, by holding that they lacked title to the loading
platform and that the Flash Lease was invalid. Defendants allege that these
rulings contradicted the district court’s prior finding that the lease was binding
irrespective of whether Defendants had title to the property. Defendants also
argue that Sundown’s status as a co-owner of the disputed land did not give it
permission to remove the platform.
B.
A district court’s decision to deny a motion for contempt is reviewed for
abuse of discretion. Piggly Wiggly Clarksville, Inc. v. Mrs. Baird’s Bakeries,
177 F.3d 380, 382 (5th Cir. 1999). We review the district court’s factual
findings for clear error and its legal conclusions de novo. Am. Airlines, Inc. v.
Allied Pilots Ass’n, 228 F.3d 574, 578 (5th Cir. 2000). The classification of an
10 Under the Flash Lease, Defendants had sixty days to remove their possessions from
the leased property before it became the property of the lessor, Flash Gas. Haller argued
below that this sixty-day time period had expired and Sundown was thus prohibited from
removing the platform under the lease.
13
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item as movable or immovable is reviewed de novo. Bayou Fleet P’ship v. Dravo
Basic Materials Co., 106 F.3d 691, 693 (5th Cir. 1997).
C.
To establish civil contempt, the moving party must prove by clear and
convincing evidence that a party violated “a definite and specific order of the
court requiring him to perform or refrain from performing a particular act or
acts with knowledge of the court’s order.” Travelhost, Inc. v. Blandford, 68
F.3d 958, 961 (5th Cir. 1995) (citation and internal quotation marks omitted).
The moving party has presented sufficient evidence if it “produces in the mind
of the trier of fact a firm belief or conviction . . . so clear, direct and weighty
and convincing as to enable the fact finder to come to a clear conviction, without
hesitancy, of the truth of precise facts of the case.” Hornbeck Offshore Servs.
v. Salazar, 713 F.3d 787, 792 (5th Cir. 2013) (citation and internal quotation
marks omitted).
“Tracts of land, with their component parts, are immovables.” La. Civ.
Code art. 462. Under Louisiana Civil Code article 463, “Buildings, other
constructions permanently attached to the ground, standing timber, and
unharvested crops or ungathered fruits of trees, are component parts of a tract
of land when they belong to the owner of the ground.” When determining
whether an item falls within the scope of article 463, “Louisiana courts
generally rely on three criteria: the size of the structure, the degree of its
integration or attachment to the soil, and its permanency.” Bayou Fleet P’ship,
106 F.3d at 693–94.
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D.
As an initial matter, we disagree with Sundown’s argument that
Defendants’ notice of appeal is insufficient. In the notice, Defendants
challenge the district court’s denial of their motion for contempt. 11
We hold that the district court correctly denied Defendants’ motion for
contempt. Sundown only violated the district court’s order if the loading
platform was immovable. For example, in Bayou Fleet Partnership, we found
that a limestone working base was immovable property under Article 463. 106
F.3d at 694. The base was “massive in size” and had been undisturbed for a
significant period of time. Id. Moreover, the base was sufficiently attached to
the property because it “actually formed the surface level of the property” and
heavy machinery was required to dig the base out of the ground. Id.; see also
Smith v. Arcadian Corp., 95-87, p. 6 (La. App. 3 Cir. 5/31/95); 657 So. 2d 464,
467 (finding that a reactor was immovable when it was attached to the land
with concrete, connected to other equipment with pipes, and attached to a
building with steel). Conversely, stockpiles of limestone were movable
property despite their massive size because they lacked sufficient attachment
and permanence. Bayou Fleet P’ship, 106 F.3d at 694.
The district court correctly found that the loading platform at issue is
not immovable. Although the platform is substantial in size and was only
moved after litigation commenced between the parties, the platform was not
permanently attached to the property. Rather, it “was simply placed over two
pilings.” Moreover, Sundown was able to remove it by lifting the platform from
the pilings. In fact, the platform did not lose any of its utility after Sundown
11 Sundown also alleges that Defendants failed to argue below that the Flash Lease
prohibited the removal of the loading platform. To the extent that Sundown is attempting to
make a waiver argument, we are not persuaded. Defendants raised the issue of the Flash
Lease to the district court and, thus, preserved their argument on appeal.
15
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moved it; Sundown used the platform at another location. The pilings were
dug into the ground; however, that fact does not demonstrate sufficient
attachment to classify the platform as immovable. Ultimately, Defendants
have failed to demonstrate that the district court clearly erred in its factual
findings.
Contrary to Defendants’ argument otherwise, the district court’s denial
of the motion for contempt did not contradict an earlier ruling. The district
court’s earlier ruling did not state that the Flash Lease was valid. Rather, the
district court merely stated that, under Louisiana law, Sundown could not
recover the rent it paid under the lease regardless of whether Defendants
actually owned the leased property. This ruling hinged on Sundown’s
uninterrupted possession of the leased property, not the validity of the lease.
VI.
For the above-stated reasons, we REVERSE in part and AFFIRM in part
the judgment of the district court.
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JAMES L. DENNIS, Circuit Judge, concurring in part, dissenting in part:
I respectfully concur in part in, and dissent in part from, the majority
opinion.
Like the majority, I conclude that the parties entered into a valid
settlement and compromise, but I disagree with the majority’s conclusion that
the district court erred in interpreting and enforcing the parties’ agreement
with respect to the partition of the lands that they co-owned.
In my view, the district court ultimately and correctly concluded that the
parties entered a compromise in open court by which they agreed to partition
Tracts 1 and 2, which they owned in indivision, by sale to the highest bidder
at a nonpublic auction between only the co-owners. The parties thereby
implicitly agreed that the sale proceeds would be divided between the co-
owners in proportion to their shares, consistent with a partition by licitation
provided for by Louisiana Civil Code article 811. 1
The parties’ conduct and the very language of their compromise reveal
that they intended to conduct the auction and distribute the proceeds of the
sale as ordered by the district court. Before their compromise, Sundown was
suing Haller for a partition by licitation of Tract 1 in state court because
Sundown believed that Tract 1 was not susceptible to partition “in kind.” The
parties’ compromise recited in open court expressly contained all of the
elements of a partition by licitation of Tracts 1 and 2 as provided for by La.
Civ. Code art. 811, except for the proviso that “the proceeds shall be distributed
1 See La. Civ. Code art. 811, Revision comment (b): “Partition by licitation is a sale of
a thing held in indivision, with the proceeds of the sale divided among the co-owners in
proportion to their shares. If the sale of the thing to a third person is excluded by previous
agreement, an auction is conducted among the co-owners.”
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to the co-owners in proportion to their shares.” However, the parties did not
explicitly state how the proceeds would be divided or that they would not be
divided proportionately as per La. Civ. Code art. 811. Subsequently, the
parties participated in an auction between themselves, and they expressed at
the auction their mutual understanding that (1) their co-ownership of Tracts 1
and 2 was divided as follows: Haller 57% and Sundown 43%; (2) they were
bidding on the total purchase price to be paid in; and (3) the highest bid amount
would be distributed according to the proportionate share owned by each co-
owner.
Furthermore, Sundown does not anywhere in its briefs set forth or
explain any other reasonable interpretation of the parties’ compromise that
they recited in open court and that they carried out by their conduct towards
each other at the auction. Sundown seems to suggest that the parties agreed
to a different auction scenario by which each party would bid only for the other
party’s interest in the two tracts. Even if each party had tried to restrict its
bid to what it would pay for the other party’s interest, however, each bid would
have had to be translated into the total purchase price for the entirety of the
two tracts in order to determine who had made the highest bid at the end of
the auction, and to give the winning bidder credit for the value of the
percentage of the property it already owned. Conducting the auction in the
roundabout fashion suggested by Sundown therefore would not have changed
the result. 2 The way the parties and the magistrate judge proceeded by having
2 As the magistrate judge explained, there was no other logical, reasonable way to
distribute the proceeds than to distribute based on the undisputed percentage ownership
interests. Any other distribution scheme would “alter[] Haller’s substantive property rights
by effectively pretending that he never had an ownership interest in the two tracts at
all. . . . Were a third party to have purchased the two tracts, Haller would be entitled to
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each party submit its bid in turn as a person bidding on the total purchase
price of the two tracts was consistent with the Civil Code and a reasonable
interpretation of what the parties recited in open court in their compromise
and carried out in their conduct at the auction. Therefore, I have difficulty in
finding any persuasiveness in Sundown’s argument that the parties agreed to
something different from what amounts to a partition by licitation as defined
by La. Civil Code art. 811 rev. cmt. (b).
Under the undisputed facts and circumstances here, applying the
appropriate Civil Code principles, I see no legal error in the manner in which
the district court conducted the auction or enforced its result. La. Civil Code
art. 1768 provides: “Conditions may be either expressed in a stipulation or
implied by the law, the nature of the contract, or the intent of the parties.” The
district court, like a Louisiana court that applies the Civil Code concepts and
rules by second nature in interpreting parties’ contracts, correctly found that
the parties here who agreed to a compromise settling a lawsuit that sought a
partition by licitation of Tract 1, 3 by holding a non-judicial auction of Tracts 1
and 2 between themselves and excluding third persons, implicitly intended—
by the nature of the compromise and its close resemblance to a partition by
licitation—that the proceeds of the sale would be divided among the co-owners
in proportion to their shares.
57.7% of the sale amount. That percentage of ownership does not change simply because the
only two bidders at the auction for the property were the parties to th[e] lawsuit.”
3 If Sundown had succeeded in its state court suit, Tract 1 would have been partitioned
by licitation; that is, it would have been sold by public auction to the highest bidder, with the
proceeds divided between the co-owners, Sundown and Haller, in proportion to their shares.
See La. Civ. Code art. 811, Revision Comment (b).
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Because an extrajudicial or non-judicial partition agreement is a
nominate contract, 4 it is subject to those special provisions in the Civil Code on
the contract of partition. See La. Civ. Code art. 1916; Andrea Carroll and
Richard D. Moreno, 16 La. Civ. L. Treatise, Matrimonial Regimes § 7:22 (3d
ed. 2013). Such special provisions that apply to partitions include, for example,
La. Civ. Code art. 811, instructing that the proceeds of a partition by licitation
or private sale shall be distributed to the co-owners in proportion to their
shares. Although under the Louisiana Civil Code, “parties are free to contract
for any object that is lawful, possible, and determined or determinable,” La.
Civ. Code. art. 1971, here there is no genuine evidence that the parties
intended for the proceeds of the partition sale by non-judicial auction, between
the co-owners and excluding third persons, to be divided among the co-owners
in any way other than in proportion to each co-owner’s share, so the rule
provided for in a partition by licitation under La. Civ. Code art. 811 controls.
Furthermore, even if we were to conclude that the compromise
entered by Sundown and Haller did not implicitly call for the auction sale
proceeds to be divided between them in proportion to each co-owner’s share,
that open or doubtful provision should be interpreted as provided for by the
Civil Code in such a situation. La. Civ. Code art. 2053 provides: “A doubtful
provision must be interpreted in light of the nature of the contract, equity,
usages, the conduct of the parties before and after the formation of the contract,
and of other contracts of a like nature between the same parties.” Article 2054
provides: “When the parties made no provision for a particular situation, it
4“Nominate contracts are those given a special designation such as sale, lease, loan,
or insurance.” La. Civ. Code Ann. art. 1914.
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must be assumed that they intended to bind themselves not only to the express
provisions of the contract, but also to whatever the law, equity, or usage
regards as implied in a contract of that kind or necessary for the contract to
achieve its purpose.” Article 2055 provides: “Equity, as intended in the
preceding articles, is based on the principles that no one is allowed to take
unfair advantage of another and that no one is allowed to enrich himself
unjustly at the expense of another. Usage, as intended in the preceding
articles, is a practice regularly observed in affairs of a nature identical or
similar to the object of a contract subject to interpretation.” Applying these
articles here, a Louisiana court would conclude that the express provisions of
the settlement agreement and the law, equity, and usage in an agreement of
this kind implies, and is necessary for the agreement to achieve its purpose,
that the proceeds of the sale should be divided between the parties according
to their respective co-ownership shares.
Although the district court may have erred in initially giving the
magistrate judge a choice as to how to proceed with the auction, the magistrate
judge, and ultimately the district court, correctly perceived and followed the
intention of the parties and applied the legally correct interpretation of
Louisiana law in the auction, partition, sale, and division of the sale proceeds
so that any error in respect to those matters was harmless. Consequently, I
would affirm the district court’s judgment ordering Sundown to transfer its
interest in Tracts 1 and 2 to Haller upon distribution of the net sale proceeds
due Sundown for its proportionate share in the co-owned properties. Because
Haller is entitled to acquire full ownership of the co-owned properties
upon making the payment due, the issues with respect to Haller’s 99 year
recreational lease and Sundown’s mineral rights on those properties appear to
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be moot, but in an abundance of precaution I would remand them for further
consideration by the district court.
On the other hand, I agree with and concur in other parts of the
majority opinion, viz., its affirmance of the district court’s denial of the
Defendants’ motion to hold Sundown in contempt; its interpretation and
declaration of the parties’ agreement with respect to the right of way and road
construction giving Sundown access to its property; and its vacating of the
district court’s imposition of terms as to a nine-month time limit on Sundown’s
use of a temporary right of way during road construction, Haller’s right to
review road construction cost estimates, and the requirement that Haller pay
his portion of construction costs within ten days of receiving the bill.
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