Subsea 7 Port Isabel, LLC v. Port Isabel Logistical Offshore Terminal, Inc.
Decision Date | 19 December 2019 |
Docket Number | NUMBER 13-17-00144-CV |
Citation | 593 S.W.3d 859 |
Parties | SUBSEA 7 PORT ISABEL, LLC, Appellant, v. PORT ISABEL LOGISTICAL OFFSHORE TERMINAL, INC., Appellee. |
Court | Texas Court of Appeals |
Richard B. Phillips Jr., Thompson & Knight, LLP, 1722 Routh Street, Suite 1500, Dallas, TX 75201, Attorney of Record for the Appellant.
Kevin G. Cain, Martin, Disiere, Jefferson & Wisdom, LLP, 808 Travis, 20th Floor, Houston, TX 77002, Brandy Wingate Voss, Law Offices of Brandy Wingate Voss PLLC, 820 E. Hackberry Avenue, McAllen, TX 78501, Attorneys of Record for the Appellee.
Before Chief Justice Contreras and Justices Rodriguez1 and Benavides
Opinion by Chief Justice Contreras
We issued our opinion and judgment in this case on June 20, 2019. Appellant/cross-appellee Subsea 7 Port Isabel, LLC (Subsea) has filed motions for rehearing and for en banc reconsideration. Without changing our previous disposition, we deny the motions, withdraw our June 20, 2019 opinion and judgment, and issue this substitute opinion and its accompanying judgment in their place.
This is a landlord-tenant dispute centering on the question of whether a sublease agreement was effectively renewed. The tenant, Subsea, contends by three issues that the trial court erred in awarding damages and prejudgment interest to the landlord, appellee/cross-appellant Port Isabel Logistical Offshore Terminal, Inc. (PILOT), after a jury found that the sublease was not renewed. PILOT brings eleven unenumerated cross-issues challenging (1) the trial court's failure to award attorney's fees, and (2) a provision in the final judgment allowing Subsea to remove improvements from the subject premises. We affirm in part and reverse and remand in part.
Subsea is an engineering and construction firm that manufactures and installs undersea oil and gas pipelines. Starting in 2007, PILOT leased around fifty-four acres at the port of Port Isabel, Texas, from the Port Isabel-San Benito Navigation District (PISBND). On April 29, 2008, Subsea entered into an agreement with PILOT to sublease about half of that property (the sublease premises or subject property), to be used as a "spoolbase" for its undersea pipeline operations. The agreement stated that "[t]his Sublease shall commence on May 1, 2008, and terminate on May 31, 2012 (the ‘Initial Term’)." Section II of the agreement, entitled "Option to Renew," stated in its entirety as follows:
As to rental fees, the agreement stated that "[d]uring the ‘rental abatement period’ (as that term is defined in the PRIME LEASES)," Subsea will pay a base rent of $11,800 per month, and after that period, the base rent will increase to $20,000 per month. The agreement further stated:
(Brackets and quotation marks in original.) Finally, the sublease agreement provided that any modifications or amendments to the agreement must be in writing and signed by the parties, and "[a]ny oral representations or modifications concerning this instrument shall be of no force or effect."
Also on April 29, 2008, Subsea, PILOT, and PISBND entered into a "Non-Disturbance Agreement" under which PISBND consented to PILOT subleasing the subject premises to Subsea. The "Non-Disturbance Agreement" provided that PISBND and PILOT will not amend or modify their lease agreement "in any way that affects the [Sublease] Premises or [Subsea]'s rights under the Sublease" without Subsea's prior written consent.
Subsea claims that it spent over $40 million to improve the subject property by, among other things, building a dock, building facilities for fabricating pipes and loading them onto ships, and stabilizing the ground with crushed rock. But after the Deepwater Horizon oil spill in 2010, drilling activity in the Gulf of Mexico slowed dramatically and the facilities on the sublease premises went virtually unused for several years. Thus, in early 2012, Subsea sought to renegotiate the terms of the Sublease before renewing under the agreement. According to Subsea, its operations manager Greg Donnelly spoke with PILOT's then-president, John Stafford, in February or March 2012 about renewing the sublease and about the possibility of "rent abatement." Subsea asserts that Stafford told Donnelly he would discuss the matter with PILOT's board, and that in the meantime, Subsea did not need to send written notice of its intent to renew the sublease before March 31, 2012, as required by the agreement.
Steve Bearden, PISBND's executive director, testified that Stafford told him "[Subsea] was going to renew the sublease." However, he acknowledged that Stafford never told him that Subsea "actually renewed the sublease." Bearden testified that PILOT negotiated a new lease with PISBND with a lower rental rate; that the new lease was signed two days after the deadline for Subsea to renew the sublease; and that PISBND would not have signed the new lease if it did not believe that Subsea had already renewed its sublease.
David Dennis, then PILOT's vice president, testified that Stafford told him prior to March 31, 2012, that Subsea "wanted to renew [its] lease." Laura Butler, a Subsea attorney, testified that Donnelly told her prior to March 31, 2012, that he had conversations with Stafford about renewing the sublease.2
In May 2012, Scott Brown replaced Stafford as PILOT's president. Donnelly sent an email to Brown on May 22 stating that Subsea intended to renew the lease. The following day, Butler sent a notice of renewal via certified mail. PILOT did not respond to the notices, believing that they were untimely and therefore invalid. Nevertheless, PILOT continued to send rent invoices to Subsea for two years after the initial sublease term expired, and Subsea paid those invoices. Brown testified at trial that he did not believe it was necessary for PILOT to advise Subsea that it considered Subsea a holdover tenant in violation of the sublease agreement.
In April 2014, PILOT sent an eviction notice to Subsea, demanding that Subsea vacate the premises by May 31, 2014. Subsea, believing that the sublease had been effectively renewed, refused to do so, leading to the instant litigation. In its live pleading, PILOT sought a declaratory judgment confirming that the sublease expired and was not renewed, damages for trespass3 and breach of contract, and attorney's fees. Subsea's live pleading sought a declaration that the sublease was validly renewed, damages for breach of contract and promissory estoppel, and attorney's fees.4
After two weeks of trial, ten of twelve jurors found that: (1) the parties did not orally agree to modify the renewal provisions of the sublease such that Subsea's oral notification and subsequent written notice were sufficient to renew the sublease; (2) PILOT is not estopped from denying that Subsea renewed the sublease; (3) PILOT did not waive strict compliance with the renewal provisions of the sublease such that Subsea's oral notification and subsequent written notice were sufficient to renew the sublease; (4) Subsea trespassed on PILOT's property; (5) PILOT is entitled to $634,710 in...
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