Board of Com'rs of Port of New Orleans v. Turner Marine Bulk, Inc.

• Decision Date: 16 December 1993
• Docket Number: No. 93-CA-0310,93-CA-0310
• Citation: 629 So.2d 1278
• Parties: The BOARD OF COMMISSIONERS OF The PORT OF NEW ORLEANS, v. TURNER MARINE BULK, INC.
• Court: Court of Appeal of Louisiana — District of US

Page 1278

629 So.2d 1278

The BOARD OF COMMISSIONERS OF The PORT OF NEW ORLEANS, v. TURNER MARINE BULK, INC.

No. 93-CA-0310.

Court of Appeal of Louisiana Fourth Circuit.

Dec. 16, 1993.

Peter J. Butler, Richard G. Passler, Peter J. Butler, Jr., Locke Purnell Rain Harrell, New Orleans, for appellee.

J. Michael Orlesh, Jr., Gerald O. Gussoni, Jr., and Mack E. Barham, Robert E. Arceneaux, Gail N. Wise, Barham & Arceneaux, and Jerald L. Album, Suzanne Ganucheau, Abbott & Meeks, New Orleans, for appellant.

Before BYRNES, WARD and PLOTKIN, JJ.

BYRNES, Judge.

On April 5, 1991, the defendant-appellant, the Board of Commissioners of the Port of New Orleans (the "Dock Board") entered into a written lease (the "Lease") with plaintiff-appellee Turner Marine Bulk, Inc. ("Turner") for the occupancy and operation of the New Orleans Bulk Terminal. On February 17, 1992, a piece of heavy equipment integral to the operation of the bulk terminal, a

shiploader, was blown into the Mississippi River during a storm and severely damaged. The shiploader is owned by the Dock Board, and is a part of the leased premises.

On March 17, 1992, after negotiations between the parties failed, Turner forwarded a letter to the Board, informing it of Turner's decision to terminate the lease "due to the collapse of the shiploader and related damage ... which has rendered the terminal substantially unusable for the handling of any bulk commodities to and from vessels and rail cars." No reference is made in the letter to any economic duress asserted by the Dock Board. The notice of termination was received and accepted by the Dock Board on March 24, 1992.

Turner continued to occupy the premises, but paid no rent. On August 31, 1992 the Dock Board issued a notice to vacate the premises. On September 1, 1992 the Board sent Turner a notice of default.

On September 14, 1992, Turner filed a petition seeking enforcement of the Lease by specific performance and injunction. In conjunction with this suit, it deposited the sum of $263,060.79, representing the rents owed from February 17 through September 13, 1992 into the registry of the court.

On October 2, 1992 the Board filed a Rule to Evict Turner to regain possession of the bulk terminal.

The trial court rendered judgment in favor of Turner and against the Dock Board, dismissing the Dock Board's Rule to Evict. The Dock Board appeals. We reverse.

ECONOMIC DURESS

Turner does not dispute the fact that it sent a letter to the Dock Board dated March 17, 1992 terminating the lease. It is also not contested that subsequently Turner neither vacated the premises, nor paid rent. Turner claims that its termination letter was the result of economic duress to which it was subjected by the Dock Board. Therefore, Turner argues that it has the right to rescind its termination and enforce the Lease because of the Dock Board's economic duress.

In order to decide this issue it is necessary to explain and interpret the lease. The first paragraph of Section 26 of the Lease provides in pertinent part that:

(a) Except as provided herein, the occurrence of any loss, damage or destruction of the Leased Premises, however caused and whether covered by insurance or not, shall not be grounds for cancellation or termination of this Lease or for reduction or abatement of rent. Board shall be under no responsibility to repair, replace or restore any of the Leased Premises which may be the subject of such loss, damage or destruction, and its failure to do so shall not be grounds for cancellation of this Lease. [Emphasis added]

When read by itself, this paragraph implies that the Board could simply collect and keep insurance proceeds from a loss and refuse to make them available to Turner for repairs.

However, where that paragraph commences with the phrase "except as provided herein" it is referring to, among other things, the two immediately succeeding paragraphs which were intended to modify its meaning. The first of those paragraphs provides that:

(b) Except as provided herein, Lessee agrees that it shall at its own cost, risk and expense promptly and with due diligence repair, replace or restore any and all of the Leased premises which may become the subject of such loss, damage or destruction, however caused. Lessee shall obtain the written consent of Board to the plans for any repairs, replacements or restorations. The proceeds derived from insurance policies and amounts recovered from third parties shall be applied toward such repair, replacement or restoration. Board agrees to make such insurance proceeds and amounts recovered from third parties available to Lessee for the payment of progress payments to Lessee's suppliers and contractors working on such repair, replacement or restoration. [Emphasis added]

This paragraph clearly shifts the risk of loss to Turner and requires the Dock Board to make insurance proceeds available to Turner only for "progress payments." It does not require the Dock Board to turn insurance proceeds over to Turner when they are received by the Dock Board, or even within a reasonable time thereafter. The insurance proceeds may be advanced by the Dock Board when they are received and/or no sooner than is required to meet progress payments, whichever is later. There is no requirement that the Dock Board advance repair funds to Turner from its own funds pending the receipt of insurance proceeds. Until progress payments are due the lease requires Turner to proceed "at its own cost, risk and expense promptly."

Additionally the lease requires Turner to obtain the written consent of the Dock Board to "the plans for any repairs, replacements or restorations." Turner never submitted any such plans to the Dock Board.

The next paragraph of the Lease gives Turner the right to cancel the Lease by giving the Dock Board notice within 30 days of the occurrence of damage that renders the leased premises substantially unusable. Under such circumstances, the Dock Board would be entitled to retain all insurance proceeds paid to it and obtain from Turner any insurance proceeds which Turner might have received.

The pivotal language in the trial court's reasons for judgment is contained in the following two paragraphs:

The court finds that Turner Marine's letter of March 17, 1992, terminating the lease, was executed under economic duress and was thus voidable. LSA-C.C. Art. 1959. Shortly after the loss, Turner Marine discovered that the Board had failed to purchase insurance with a deductible of $100,000.00 as required by the lease and paid for by Turner Marine. The Board then wrongfully refused to turn over the proceeds from the insurance and wrongfully refused to pay the difference in the actual and required deductible. At this point, Turner Marine believed that it had no alternative but to terminate. Otherwise, it would have to solely bear the full cost of repairing the Shiploader which would result in its economic downfall. [Emphasis added]

* * * * * *

Finally, the Court finds that the Board is not entitled to termination of the lease due to Turner Marine's failure to repair the Shiploader. A party who prevents performance cannot take advantage of the nonperformance by the other party. By its actions, the Board has effectively prevented Turner Marine from meeting this requirement under the lease.

Whether the Dock Board was required to turn over the insurance proceeds is a matter of interpreting the lease and a question of law. The meaning of the Lease language is clear. Therefore, this Court should look no further in determine the intent of the parties. Schroeder v. Board of Sup'rs., 591 So.2d 342, 345 (La.1991). As the meaning of this lease is to be determined solely from the words upon its face without the necessity of extrinsic evidence, this Court is as competent to review the evidence as the trial court and no special deference need be accorded the trial court's findings. Id. at p. 345. This Court is not bound by the manifestly erroneous/clearly wrong standard when reviewing the Lease. ¹

Turner does not contend that it submitted any progress payments to the Dock Board that went unpaid. Turner does not contend that it did any work to repair damage that was covered by insurance for which it was not reimbursed.

Turner Marine argued strenuously that its termination of the Lease on March 17, 1992 was an action solely attributable to economic duress, because the Dock Board would not advance the funds to repair the shiploader, and/or would not commit to fund the

shiploader repairs, and/or would not commit to turn over insurance proceeds to pay for the repairs. Turner Marine asserted that without such a commitment no lender would loan them the necessary funds pending receipt of the insurance proceeds in the form of progress payments. Turner contends that the Dock Board's refusal to provide economic assistance prevented Turner from receiving the funding for repairs. Finally, Turner contends that this left it without any options except to cancel the lease.

When asked why Turner did not file suit in February for breach of contract based on economic duress by the Dock Board, Turner asserted that the Lease required Turner to terminate within thirty days or commence repairs. Since Turner did not have the resources to complete repairs estimated to cost in excess of $3,000,000 it cancelled the lease. This argument is factually and legally invalid.

Turner possessed legal options other than termination of the lease. It could have filed a declaratory judgment action and/or a breach of contract suit and received timely appropriate relief. Disputes involving contract interpretation and benefits are routine issues for our courts. Turner retained experienced counsel immediately following the loss and was well aware of its legal options. Turner elected to cancel the lease, based on its financial condition and an evaluation of the lease. It cannot be said that the termination was caused by economic duress...