Plaquemines Holdings, L.L.C. v. CHS, Inc.

Case: 13-30957 Document: 00512906507 Page: 1 Date Filed: 01/16/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
____________ FILED
January 16, 2015
No. 13-30957
____________ Lyle W. Cayce
Clerk
PLAQUEMINES HOLDINGS, L.L.C.
Plaintiff - Appellee,
v.
CHS, INC.,
Defendant - Appellant.
____________________
Appeals from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:11-CV-3149
____________________
Before JOLLY and JONES, Circuit Judges, and GODBEY*, District Judge.
PER CURIAM:**
This appeal lies from a final judgment after a bench trial in a dispute
regarding a servitude agreement. Because the district court correctly construed
the servitude and sufficient evidence supports the court’s fact findings, we affirm
in most respects, with two minor exceptions.
*
District Judge of the Northern District of Texas, sitting by designation.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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I. BACKGROUND
A. Factual Background
Initially, the Ferruzzi conglomerate owned all of the real estate at issue
in this dispute, including a 30.43 acre tract fronting on the Mississippi River
with a grain elevator (the “CHS Property”) and a landlocked inland tract (the
“PH Property”) adjoining the CHS Property where Ferruzzi’s subsidiary,
Mississippi River Alcohol Company, Inc. (“Missalco”), intended to construct an
ethanol plant. There was to be synergy between the two operations because the
corn stored in the grain elevator would be the feedstock for the contemplated
ethanol plant. In 1994, Ferruzzi agreed to sell the riverside CHS Property to
ConAgra, Inc. Because this would leave the PH Property landlocked, Ferruzzi
required as a condition of the sale that ConAgra grant the PH Property a
servitude allowing construction of a dock on the river and a pipeline from the PH
Property across the CHS Property to the dock, so that the contemplated ethanol
plant could deliver its ethanol to barges for transport. See TX 1, ROA.1391-95
(the “Servitude Agreement”). Construction of the Servitude Agreement is the
core of this dispute.
At the time of the Servitude Agreement, the CHS Property included an
existing dock that was used for unloading and loading grain to and from the
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grain elevator on the shore. Unlike a fishing pier that might extend
perpendicular to the river bank out into the river, CHS’s dock is a structure out
in the river that runs parallel to the river bank and is navigable on both sides.
The Servitude Agreement designates an approximately 409 feet area adjacent
to CHS’s dock on the downriver side for construction of the PH Property dock
(the “Servitude Area”).
The CHS dock was used as follows at the time of the Servitude Agreement:
Grain would arrive from upriver in barges. The barges would accumulate in an
area downriver of the Servitude Area called the fleet. As barges were ready for
unloading, they would be towed from the fleet, across the Servitude Area to the
inboard, downriver side of the CHS dock. Personnel would remove the cover of
the barge, and equipment would unload the barge as it proceeded upriver along
the inboard side of the dock. After it was unloaded, at the upriver end of the
dock personnel would replace the barge cover and the barge would be towed back
downriver to the fleet area.
Defendant-Appellant CHS, Inc. (“CHS”) is successor-in-title to ConAgra
in the CHS Property. In approximately 2000, CHS constructed a structure – the
barge cover station – on the downriver, inland side of its dock, adjacent to the
Servitude Area. The barge cover station is two barges wide. As before, when a
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barge was ready to be unloaded, it was towed from the fleet through the
Servitude Area to the lane of the barge cover station closest to the dock, where
the cover was removed. After the barge was unloaded, it was towed again
through the Servitude Area to the second lane of the barge cover station, closer
to the bank, where the cover was replaced. The barge was then returned to the
fleet. While the barge traffic through the first lane was essentially the same as
what had occurred before construction of the barge cover station, use of the
barge cover station created the second transit of each barge through the
Servitude Area into the second lane of the barge cover station. See generally
ROA.1400-08, 1420-22.
Missalco and its successors were never able to complete the ethanol plant.
Eventually, Plaintiff-Appellee Plaquemines Holdings, L.L.C. (“PH”) bought the
PH Property and its rights under the Servitude Agreement out of bankruptcy.
PH has leased the PH Property to
Omega Refining, LLC (“Omega”) so that Omega can construct a facility to
recondition motor oil, which would be delivered to and shipped from a dock
constructed pursuant to the Servitude Agreement. PH and CHS have been
unable to agree to a location for construction of a dock in the Servitude Area.
This dispute followed.
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B. Procedural Background
PH initially filed this action in state court in 2011, seeking declaratory
relief, injunction, and money damages. CHS timely removed the action to the
federal district court below, invoking diversity jurisdiction. See 28 U.S.C. §§
1332, 1441(a). The case was tried to the court for two days. Following the
conclusion of the trial, with the consent of all parties, the court conducted a site
visit. The district court initially ruled in favor, generally, of PH; PH moved to
clarify, which the district court granted, entering an amended opinion,
ROA.1952-75, and judgment, from which CHS timely appealed. PH did not
cross-appeal.
The district court ruled that: (1) PH has the right to build a dock in the
Servitude Area; (2) the outer edge of the new dock (i.e., closest to the center of
the river) must be in line with the outer edge of the existing CHS dock; (3) CHS
may not object to construction of a new dock on the basis of interference with its
use of the barge cover station because the barge cover station was constructed
after the Servitude Agreement; (4) CHS may not object to the use of the
Servitude for motor oil refining; (5) PH’s lessee, Omega, could use the Servitude
Dock; and (6) if PH applies for a permit for the proposed dock with the Corps of
Engineers, CHS may not object based on interference with the barge cover
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station and must assist PH in the permitting process. The district court also
ruled in favor of CHS on several issues, which are not involved in this appeal.
“The standard of review for a bench trial is well established: findings of
fact are reviewed for clear error and legal issues are reviewed de novo.” Lehman
v. GE Global Ins. Holding Corp., 524 F.3d 621, 625 (5th Cir. 2008) (quoting In
re Mid-South Towing Co., 418 F.3d 526, 531 (5th Cir. 2005)).
C. General Principles Regarding Servitudes
All parties agree this appeal is governed by Louisiana substantive law.
For those not familiar with the vocabulary of Louisiana civil law, “it is ‘uniformly
accepted in the law of Louisiana that the common law word ‘easement’ is the
same as the Louisiana ‘servitude.’ ’” Rose v. Tenn. Gas Pipeline Co., 508 F.3d
773, 776-77 (5th Cir. 2007) (quoting Quibodeaux v. Andrus, 886 So. 2d 1258,
1261 (La. Ct. App. 2004)). The party that benefits from the servitude (here PH)
is the “dominant estate,” and the party burdened by the servitude (here CHS)
is the “serviant estate.” See LA. CIV. CODE art. 646. Louisiana further
distinguishes between a “personal” servitude, which benefits a person, and a
“predial” servitude, which benefits an interest in property. Compare id. with id.
art. 639.
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When there is a contract, it is law between the parties and
must be performed in good faith and enforced according to its terms.
When, as here, the contract creates a conventional predial servitude,
the mode of use of the servitude is regulated by the contract. If,
however, the contract is silent on a non-essential question, like the
mode of use, Louisiana’s law of conventional obligations in general
and predial servitudes in particular supplies the answer, filling in
the blanks.
Terrebonne Parish Sch. Bd. v. Columbia Gulf Trans. Co., 290 F.3d 303, 311 (5th
Cir. 2002) (footnotes omitted). “One principle of servitude jurisprudence is that
ambiguity in a servitude agreement must be construed in favor of the servient
estate . . . .” Id. at 315 (citing LA. CIV. CODE art. 730 (“Doubt as to the existence,
extent, or manner of exercise of a predial servitude shall be resolved in favor of
the servient estate.”)). “Another well-established rule of servitude law is that
the dominant estate owner . . . must not ‘aggravate’ the condition of the servient
estate.” Id. at 316 (citing LA. CIV. CODE art. 743 (“Rights that are necessary for
the use of a servitude are acquired at the time the servitude is established. They
are to be exercised in a way least inconvenient for the servient estate.”)).
II. THE DISTRICT COURT MOSTLY GOT IT RIGHT
A. The District Court Correctly Permitted Motor Oil Use
In the district court, CHS argued that the Servitude Agreement applied
only to transport of ethanol. The court found that transport of motor oil would
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be permissible. CHS appeals from that portion of the judgment below, but it
does not seriously attack the factual underpinnings of the district court’s ruling.1
The Court will first consider certain interrelated definitions in the
Servitude Agreement:
“Plant” shall mean that certain plant for the production of
Product located on the Missalco Property, together with any future
additions and alterations thereto.
“Product” shall mean all ethanol produced by the ethanol
production facility on the Missalco Property, as well as all other
products manufactured, distilled, refined or otherwise produced
through operation of the Business on the Missalco Property.
“Business” shall mean the business activities and operations
on the Missalco Property, including without limitation the business
of ethanol production and other related grain processing activities,
the production of other grain-based chemicals and processed
commodities, and such other business activities and operations as
may from time to time be carried out on the Missalco Property,
provided that Missalco shall not exercise the Servitudes hereunder
for other unrelated business activities and operations (i.e., non-grain
processing) without the prior written consent of Company, which
consent shall not be withheld unless such unrelated use
unreasonably interferes with Company’s business activities and
operations at the Elevator.
Appellant’s Record Excerpts (“RE”) 45, 47 (emphasis in original). Thus, the
Plant produces the Product, the Product is what is produced by the Business, the
Business is ethanol production and other unrelated business activities with the
1
Although this was CHS’s second argument on appeal, it is useful to address it first, as
it informs the discussion of CHS’s first argument.
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prior consent of CHS, which consent shall not be withheld unless the unrelated
business unreasonably interferes with CHS’s business activities and operations
at the grain elevator. The district court found factually that the use of the
servitude for motor oil would not unreasonably interfere with operations of the
elevator, and CHS does not seriously challenge that fact finding. This Court’s
review of the record shows that factual determination is not clearly erroneous.
There was ample record evidence that motor oil is not materially different from
ethanol in terms of its impact on operations of the elevator. CHS’s complaint is
not really about what would flow through the pipeline to the proposed dock, but
rather the location of the proposed dock.
The Court agrees with CHS that the Conclusion of the Amended Opinion
inadvertently expands this ruling past the confines of its logic – motor oil is no
worse than ethanol – to allow any nonethanol product. The Court therefore
reforms paragraph 9 of the Conclusion of the Amended Opinion to replace the
language “non-ethanol products, including refined motor oil,” with “refined
motor oil.” ROA.1973-74.2
2
In an odd subset of this portion of its brief, CHS appears to argue that the district
court correctly limited use of the pipeline to transport from the plant to the dock only, which
would prevent use of the dock to deliver used motor oil to the plant. The Court agrees with
PH that this direction issue was not raised below and that no extraordinary circumstances
justify this Court considering that question in the first instance. See In re Liljeberg Enters.,
Inc., 304 F.3d 410, 468-69 (5th Cir. 2002). The Court accordingly expresses no opinion on that
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B. The District Court Correctly Allowed PH’s Lessee to Use the Dock
Section 15.1 of the Servitude Agreement provides as follows:
15.1 Nature of Agreement. It is the intention of the parties
hereto that this Agreement shall constitute both a personal and
predial servitude agreement pursuant to and governed by Louisiana
law. The grant of servitude rights to Missalco hereunder shall also
include the use of such servitude rights by Invitees of Missalco but
only to the extent reasonable and necessary to perform the services
for Missalco for which they were authorized to enter the Company
Property. Missalco shall not authorize any Invitee or other person
to enter the Company Property except as reasonably necessary for
Missalco to exercise its servitude rights for its legitimate needs in
operating the Plant. All personal servitude rights granted to
Missalco hereunder shall be appurtenant solely to the Plant, are
limited to the operation of the Business, and are not assignable,
transferable or severable apart from a transfer of the Plant and, if
the Missalco Property is ever subdivided, the Servitudes shall
remain appurtenant to the Plant site and shall not pass with or be
appurtenant to any subdivided portion of the Missalco Property not
containing or serving the Plant.
RE 56. The Servitude Agreement expressly defines “Invitee” to include “any
lessee.” RE 46. CHS argues that the inclusion of use by invitees is limited by
the phrase “but only to the extent reasonable and necessary to perform the
services for Missalco for which they were authorized to enter the Company
Property.” CHS contends that this language limits use by invitees to the
common scenario in which operators of industrial facilities may lease a portion
subject.
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of the facility to a service provider to assist the service provider in providing its
services to the facility.
CHS loads too much meaning into section 15.1. As shown by the definition
of “Invitee,” the Servitude Agreement expressly contemplates that PH can lease
its property. As the district court held, section 15.1 serves only to limit the
lessee’s access to CHS’s property: that access is limited to “legitimate needs in
operating the Plant.” As discussed in the preceding section, see supra Part II.A,
it would be unreasonable for CHS to withhold its consent to refining used motor
oil. Thus, upon proper request by PH, Omega’s refinery will constitute the
“Plant,” and by the terms of section 15.1, Omega will be entitled to access to
CHS’s property (to the extent authorized by the Servitude Agreement) for its
legitimate needs in operating the Plant. The district court correctly held that
section 15.1 does not preclude Omega as PH’s lessee from using the proposed
dock.
C. Post-Servitude Agreement Construction of the Barge
Cover Station Cannot Deprive PH of Use of Its Servitude
Section 9 of the Servitude Agreement provides:
Company, as owner of the Company Property subject to the
Servitudes, expressly reserves the right to alter and modify any
present and future improvements upon the Company Property,
including the relocation of paths of access, and further reserves the
right to develop and use the Company Property in any manner that
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it deems fit, so long as such development does not physically damage
any Servitude Works owned by Missalco or its Invitees, and does not
unreasonably limit or otherwise adversely affect any existing or
future exercise of rights under the Servitude, or the use,
maintenance, repair, replacement or operating of the Servitude
Works facilitating the use of the Servitude.
RE 53 (emphasis added). The barge cover station was built after execution of the
Servitude Agreement. Both section 9 and the Louisiana Civil Code provide that
PH’s rights under the Servitude Agreement cannot be diminished by the later
construction of the barge cover station. See LA. CIV. CODE art. 743 (“Rights that
are necessary for the use of a servitude are acquired at the time the servitude
is established.”).
It is undisputed that the subsequent construction and use of the barge
cover station altered CHS’s use of its dock in two important ways: (1) it added
a second “lane” of barge traffic; and (2) it doubled the volume of barge traffic
through the Servitude Area, as each barge now must pass through twice to the
barge cover station, once for uncovering and once for re-covering. The district
court correctly held that under section 9 of the Servitude Agreement, the
construction of the barge cover station cannot limit PH’s exercise of its rights
under the Servitude Agreement to construct a dock. It follows, then, as the
district court held, that “[t]he potential for a dock proposed by PH to interfere
with CHS’ barge cover station operations does not constitute reasonable grounds
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for CHS to withhold or delay its approval under the” Servitude Agreement.
ROA.1965 (Amended Opinion at 14).
D. CHS Did Not Assume the Section 10.2 Obligation to Assist
Section 10.2 of the Servitude Agreement provides:
10.2 Permits. Missalco shall obtain any licenses, permits or
other approvals from any Governmental Authority that may be
necessary to carry out the construction, maintenance and operation
of any Servitude Works. Company further agrees to use reasonable
efforts to assist Missalco, at Missalco’s expense, to obtain any
necessary licenses, permits or other approvals from any
Governmental Authority, including without limitation as may be
necessary to construct or carry out Servitude Works.
RE 54. Based on this provision, the district court imposed two different
obligations on CHS: (1) CHS must assist PH in obtaining a permit to construct
its dock (provided the other requirements of the Servitude Agreement are
satisfied); and (2) CHS is prohibited from objecting to the Corps of Engineers
that any proposed dock by PH would interfere with CHS’s barge cover station
operations.
The Court agrees with CHS that it did not assume the obligation to assist.
Article 651 provides: “The owner of the servient estate is not required to do
anything.” LA. CIV. CODE art. 651. Comment c to that article provides “The
owner of the servient estate may bind himself by a personal obligation to
perform certain affirmative duties in connection with a predial servitude. These
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obligations may be heritable, but they are not transferred to successors by
particular title without express stipulation to that effect.” Id. cmt. c (emphasis
in original). It is undisputed that CHS did not expressly stipulate to the
obligation to assist in obtaining permits.
PH points to two comments suggesting exceptions to this principle for
“incidental duties” or “accessorial” duties. See LA. CIV. CODE arts. 651 cmt. (b),
746 cmt. (b). The Court holds that an obligation to assist with permitting is not
an incidental or accessorial duty. The Court therefore vacates the portion of the
judgment requiring CHS to assist PH in obtaining the required permit from the
Corps of Engineers.
The prohibition on objecting, however, stands on a different footing. The
district court held, and we have affirmed, that PH is entitled under the
Servitude Agreement to construct its dock notwithstanding interference with
CHS’s barge cover station operations. This right is independent of section 10.2.
The trial court invoked section 10.2 only for the proposition that CHS could not
do indirectly – by objection to the Corps of Engineers – what it could not do
directly by withholding its approval. But that is the case independently of
section 10.2. Moreover, under Louisiana law, “[t]he owner of the servient estate
may do nothing tending to diminish or make more inconvenient the use of the
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servitude.” La. Civ. Code art. 748. Objecting to the Corps of Engineers on a
basis prohibited by the Servitude Agreement would tend to diminish or make
more inconvenient the use of the servitude. Accordingly, the Court affirms the
district court’s judgment that CHS cannot object to the Corps of Engineers or
any other permitting process based solely on a proposed dock’s interference with
the operation of CHS’s barge cover station.3
E. The Unrecorded Site Visit Was Not Reversible Error
With the consent of all parties, the trial judge conducted a site visit after
the bench trial. Although a court reporter was present, the reporter could not
hear all of the judge’s conversations at the site visit due to the ambient noise.
CHS argues that this violated the Court Reporter Statute, 28 U.S.C. § 753(b),
and requires reversal. Violations of the Court Reporter Statute are reversible
only if prejudicial. See Veillon v. Exploration Servs., Inc., 876 F.2d 1197, 1200
(5th Cir. 1989). If there were error here, it is harmless. First, the district court
procured a recap of those communications immediately afterward on the record
3
CHS claims this aspect of the trial court’s judgment violates its free speech rights under the First
Amendment. It does not violate the First Amendment for a court to enforce the parties’ contractual
agreement that limits speech. See Democratic Nat’l Comm. v. Republican Nat’l Comm., 671 F. Supp. 2d 575,
596 (D.N.J. 2009). CHS also suggests that this issue may not be ripe because the specific dock plans have
not yet been submitted. The district court specifically addressed two plans submitted at trial, Options 1 and
2, modified to be in line with CHS’s dock. This is sufficiently concrete for judicial review.
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and under oath. Second, the conversations simply restated what the witnesses
had testified to during the trial. Third, although the court noted in its Amended
Opinion that it had conducted a site visit, it did not state that it relied on any
off-the-record conversations during that site visit in making its factual findings.
See ROA.1952 (“Having considered the evidence and the testimony adduced at
trial, the record, and the post-trial memoranda of counsel, and the law, the
Court now issues its opinion . . . .” (emphasis added)). Finally, nowhere in its
Amended Opinion does the district court expressly rely on anything said off the
record at the site visit. CHS thus fails to show prejudice and is not entitled to
relief under the Court Reporter Statute.
AFFIRMED IN PART, MODIFIED IN PART, REVERSED AND
VACATED IN PART.
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