State of Louisiana, Department of Transportation and Development Versus Motiva Enterprises, LLC C/W State of Louisiana, Department of Transportation and Development Versus Dr. Coldwell Daniel, III

• Court: Louisiana Court of Appeal
• Decided: October 2, 2019
• Docket: 19-CA-32
• Status: Unknown

Opinion

STATE OF LOUISIANA, DEPARTMENT OF NO. 19-CA-32 TRANSPORTATION AND DEVELOPMENT C/W 19-CA-33 VERSUS FIFTH CIRCUIT MOTIVA ENTERPRISES, LLC COURT OF APPEAL C/W STATE OF LOUISIANA STATE OF LOUISIANA, DEPARTMENT OF TRANSPORTATION AND DEVELOPMENT

VERSUS

DR. COLDWELL DANIEL, III, ET AL

ON APPEAL FROM THE TWENTY-FOURTH JUDICIAL DISTRICT COURT PARISH OF JEFFERSON, STATE OF LOUISIANA NO. 643-350 C/W 636-170, DIVISION "J" HONORABLE STEPHEN C. GREFER, JUDGE PRESIDING

October 02, 2019

MARC E. JOHNSON JUDGE

Panel composed of Judges Fredericka Homberg Wicker, Marc E. Johnson, and John J. Molaison, Jr.

AFFIRMED MEJ FHW JJM COUNSEL FOR PLAINTIFF/APPELLEE, STATE OF LOUISIANA, DEPARTMENT OF TRANSPORTATION AND DEVELOPMENT James L. Bradford, III D. Stephen Brouillette, Jr.

COUNSEL FOR DEFENDANT/APPELLANT, MOTIVA ENTERPRISES, LLC Kelly B. Becker Matthew D. Simone Kathryn Z. Gonski Trinity A. Brown JOHNSON, J.

In this expropriation case, Plaintiff-in-reconvention, Motiva Enterprises,

LLC, appeals the trial court’s judgment granting a directed verdict in favor of the

State of Louisiana, Department of Transportation and Development (“DOTD”),

dismissing all of Motiva’s reconventional claims with prejudice. Because we find

Motiva failed to offer sufficient evidence to satisfy its burden of proving damages,

we affirm the judgment.

FACTS & PROCEDURAL HISTORY

This lawsuit arises out of a construction project involving the intersection of

Causeway Blvd. and Veterans Blvd. in Metairie that began in 2009 and ended in

2012. In connection with the project, the DOTD filed suit in 2006 to expropriate

land for purposes of the construction project. Specifically, it sought to

permanently take four feet of land for the project and to use an additional ten feet

of the land for a temporary servitude during construction.

The land at issue was owned by Dr. Coldwell Daniel, III, who leased it to

Shell Oil Company in 1957, which later, in 1998, assigned the lease to Motiva

Enterprises, LLC (a company formed from a partnership between Shell and

Texaco). At the time of trial, the lease was still in existence and contained several

five-year option periods to extend the lease through 2025. The lease gave Shell –

and then Motiva by assignment – the exclusive right to build on the site and to use

the site for a gas station.1

After the expropriation at issue and prior to the beginning of the construction

project, Shell decided to exit the retail business and move strictly to a wholesale

supply business. To accomplish this, Shell sought to divest itself of all the gas

stations it owned and operated, as well as those it leased to third parties, across the

1 Although the lessee company name changed in 1998, the gas station still operated, and continues to operate, as a Shell station.

19-CA-32 C/W 19-CA-33 1 country by packaging up each of its markets into a series of bulk sales to third

parties, whereby Shell would maintain the supply relationship to the buyer. The

New Orleans area bulk sale included the Shell station at issue, which was located

at the intersection of Causeway Blvd. and Veterans Blvd. and situated on the land

involved in the expropriation. Shell solicited bids for the bulk sale by first

generating an information memorandum describing the market and the assets, and

selecting certain bidders. Shell then made available to the selected bidders a

template of the purchase and sale agreement and an electronic data room where the

bidders could review information regarding the sites – such as environmental

reports and existing leases, and invited the bidders to submit a bid.

The winning bid for the New Orleans area bulk sale came from

LavigneBaker Petroleum, LLC, a Shell wholesaler, in the amount of $37 million.

In December 2007, Shell and LavigneBaker entered into an Asset Purchase and

Sale Agreement for 52 Shell branded retail service stations in the New Orleans

area, including the site involved in the expropriation. In the Asset Purchase and

Sale Agreement, LavigneBaker acknowledged that the agreed upon purchase price

reflected the fact that the site at issue was subject to a public taking. As part of the

sale, LavigneBaker was required to enter into a separate Branding and Product

Purchase Commitment Agreement, wherein it agreed to purchase a minimum

volume of gasoline from Shell for the purchased sites, which it signed in February

2008.

Prior to the sale, in August 2006, the DOTD filed an expropriation lawsuit

against Dr. Daniel, as owner of the land sought to be expropriated, and Shell Oil

Company, as lessee of the land at issue. The DOTD estimated just compensation

for the taking to be $28,255, which it sought to deposit into the registry of the

court. An order of expropriation was signed by the trial court on August 30, 2006.

Thereafter, the parties stipulated that Motiva Enterprises, LLC (“Motiva”) was the

19-CA-32 C/W 19-CA-33 2 proper lessee of the land at issue and that Motiva would be named in place of Shell

Oil Company.

In a separate lawsuit, filed in April 2007 and amended in May 2007, the

DOTD filed an expropriation petition against Motiva seeking to acquire certain

improvements, including a self-illuminated sign, concrete paving and curbing, and

landscaping, allegedly owned by Motiva that were located within a certain right of

way needed for the construction project. The DOTD estimated the just

compensation for these improvements to be $29,510. An order of expropriation

was signed by the trial court on April 4, 2007. On motion of Motiva, the two

lawsuits were consolidated.

On April 13, 2007, the DOTD and Dr. Daniel filed a joint petition indicating

they had reached a settlement in connection with the expropriation, with Dr. Daniel

agreeing to accept $25,350 as a final award of just and adequate compensation for

the expropriated property. A judgment confirming the settlement was signed on

April 19, 2007.

Motiva subsequently filed an answer and reconventional demand. In its

reconventional demand, Motiva alleged it operated a gas station/convenience store

on a portion of the expropriated property. Motiva asserted that it would not be able

to conduct its business from this location in its post-taking condition. Specifically,

Motiva alleged it would not be able to safely operate its dispensing units on the

Causeway Blvd. side of the business, which would greatly impact the continued

operation of the station. Motiva averred it was entitled to be compensated to the

full extent of its economic loss, including lost profits.

Approximately two and one half years later, in March 2010, Motiva

amended its reconventional demand to indicate that it had assigned its interests in

the subject property and improvements to LavigneBaker in February 2008. Motiva

claimed that it assigned its rights at a greatly reduced price due to the diminution in

19-CA-32 C/W 19-CA-33 3 value of the property caused by the expropriation and the anticipated loss of

economic revenue during the construction. As such, Motiva sought damages for

diminution of property value and lost profits caused by the expropriation. In

November 2017, Motiva supplemented its reconventional demand to specifically

claim damages related to its leasehold interest in the subject property, which

Motiva claimed was negatively affected by the expropriation.

The matter proceeded to a jury trial on May 17, 2018. At the end of the third

day of trial, Motiva rested its case. At the beginning of the fourth day of trial, the

DOTD moved for a directed verdict claiming Motiva failed to offer sufficient

evidence for a reasonable juror to determine damages. The DOTD specifically

argued that Motiva did not establish any sales price for the site at issue or the

market value of its leasehold interest and that it failed to offer evidence of actual

lost profits. The trial court granted the motion for directed verdict and dismissed

Motiva’s reconventional demands with prejudice.

In granting a directed verdict, the trial court summarized the case as

presenting two issues: a claim for loss of profits and the effect the expropriation

had on the value of the leasehold. The trial court noted that while there was

evidence of a change in volume at the gas station prior to and after the taking, there

was no testimony or evidence of a dollar value on that change in volume or the

actual costs incurred by Motiva as a result of that change in volume. The trial

court also found Motiva failed to carry its burden of proving damages relating to

its leasehold interest. While it acknowledged testimony regarding Motiva’s belief

the station was worth between $2.5 and $3 million and that Motiva believed it

received a reduced value of $800,000 for the station, the trial court noted that the

sale of the station was part of a bulk sale and that there was no evidence of an

individual sales price or negotiated price for the station. The court observed

Motiva’s value of the property was based on a 10-15 year income stream and not

19-CA-32 C/W 19-CA-33 4 the value of the property immediately before and immediately after the taking as it

reasoned was required under La. R.S. 48:453(B). As such, the trial court

concluded there was no evidence of any accurate value of the loss to Motiva

caused by the expropriation.

A written judgment granting a directed verdict in favor of DOTD and

dismissing Motiva’s reconventional demands with prejudice was signed on August

10, 2018. It is from this judgment that Motiva now appeals.

ISSUE

Motiva argues the trial court erred in granting a directed verdict after it

presented its case. Motiva asserts that in reaching its decision, the trial court

improperly usurped the function of the jury by weighing and interpreting the

evidence. It further contends the trial court erred in concluding that the value

Motiva placed on the station was not a valid measure of damages under La. R.S.

48:453. Motiva maintains that the diminution of sales price for its leasehold

interest as a result of expropriation is a valid measure of damages under La. R.S.

48:453.2

LAW & ANALYSIS A motion for a directed verdict is a procedural device available in jury trials

for the purpose of judicial economy. The motion is appropriately made at the close

of evidence offered by the opposing party and should be granted when, considering

all of the evidence in the light most favorable to the non-mover, it is clear that the

facts and inferences point overwhelmingly in favor of the mover that reasonable

jurors could not reach a contrary verdict. La. C.C.P. art. 1810; Baudy v. Travelers

Indem. Co. of Connecticut, 13-882 (La. App. 5 Cir. 4/9/14); 140 So.3d 125, 131.

2 While the trial court granted a directed verdict on two grounds – failure to prove damages for lost profits from the reduction of the amount of fuel sold at the site and failure to prove damages related to Motiva’s leasehold interest – Motiva only appeals the directed verdict as it relates to damages for the alleged reduced value of its leasehold interest. (See Motiva’s Reply Brief, p.2, “Motiva’s appeal challenges the trial court’s directed verdict as to only one of the claims it brought to trial: its claim for damages due to the diminished sales price it received for its leasehold interest.” Emphasis in original.)

19-CA-32 C/W 19-CA-33 5 The trial court has much discretion in determining whether a directed verdict

should be granted. State, Dept. of Transp. And Development v. Lauricella Land

Co., L.L.C., 10-790 (La. App. 5 Cir. 4/28/11); 65 So.3d 712, 717. The standard of

review on appeal is whether reasonable persons could not reach a contrary verdict

under the evidence submitted. The appellate court must determine if the record

supports the granting of a directed verdict based on a sufficiency of evidence

determination (a question of law), and not a credibility determination (a factual

issue). Id. Furthermore, the reviewing court must consider the propriety of a

directed verdict in light of the substantive law applicable to the claims. Baudy,

supra.

The Louisiana Constitution of 1974, Article I, § 4 provides in pertinent part

that “[p]roperty shall not be taken or damages by the state or its political

subdivisions except for public purposes and with just compensation paid to the

owner or into the court for his benefit . . . . [T]he owner shall be compensated to

the full extent of his loss.” The term “property” includes both tangible property

and intangible property rights, such as a lessee’s leasehold interest. Franklin

Southland Printing Co., Inc. v. New Orleans Aviation Bd., 99-60 (La. App. 5 Cir.

7/27/99); 739 So.2d 977, 981, quoting Packard’s Western Store v. State, D.O.T.D.,

618 So.2d 1166 (La. App. 2d Cir. 1993), writ denied, 629 So.2d 345 (La. 1993).

Thus, a lessee has a constitutional right to just compensation in expropriation

proceedings. Parish of Jefferson v. Powerline, LLC, 14-462 (La. App. 5 Cir.

12/12/13); 131 So.3d 250, 254.

Property is “damaged” when the expropriation diminishes the value of the

tangible property or the intangible property right. Packard’s Western Store, 618

So.2d at 1172. Damage to an intangible property right that occurs before the

tangible property is taken is compensable upon proof that the expropriation caused

the damage. Compensation for the “full extent of loss” requires the property

19-CA-32 C/W 19-CA-33 6 owner to be put in as good of a pecuniary position as the owner would have been

had the property not been damaged. Id.

The measure of damages for expropriated property is provided in La. R.S.

48:453, which in pertinent part provides:

A. The measure of compensation for the property expropriated is determined as of the time the estimated compensation was deposited into the registry of the court, without considering any change in value caused by the proposed improvement for which the property is taken.

B. The measure of damages, if any, to the defendant’s remaining property is determined on a basis of immediately before and immediately after the taking, taking into consideration the effects of the completion of the project in the manner proposed or planned.

C. The owner shall be compensated to the full extent of his loss. The court shall include in its consideration the difference between the rate of interest of any existing mortgage on an owner-occupied residence and the prevailing rate of interest required to secure a mortgage on another owner-occupied residence of equal value.

The burden of proving damages in an expropriation proceeding rests on the party

seeking them, who must prove such damages with legal certainty by a

preponderance of the evidence. Powerline, supra. Speculation, conjecture, mere

possibility or unsupported probability are not sufficient to support an award of

damages for expropriation. Huckaby v. Red River Waterway Com’n, 27,113 (La.

App. 2 Cir. 10/12/95); 663 So.2d 414, 421, writ denied, 95-3007 (La. 3/8/96); 669

So.2d 403.

In this appeal, Motiva argues that it put forth sufficient evidence that its

leasehold interest diminished in value after the expropriation. Specifically, it

points to the testimony of Larry Coburn, a Shell employee who was the project

manager involved in the bulk asset sale, who testified that he thought the site at

issue was worth “anywhere from two and a half to five million dollars,”3 but that

3 When asked his view of the real value of the site, Mr. Coburn testified that he thought the site was worth between $2.5 and $5 million. However, earlier in his testimony, Mr. Coburn testified that “we thought it was valued . . . anywhere between two and half to three million dollars.”

19-CA-32 C/W 19-CA-33 7 Shell only received $800,000 for the site because of the expropriation. He

explained that the uncertainty surrounding the site regarding the impending

construction related to the expropriation and its impact on the ability to use all of

the gas dispensers led to the negotiated reduced valuation of $800,000 for the site.

Although Mr. Coburn was involved in negotiating the bulk sale, he admitted that

he had no input into the valuation of the site at issue for the asset purchase

agreement between Motiva and LavigneBaker. There was no other testimony

relating to the value of Motiva’s leasehold interest.

Upon review, we find a directed verdict was proper in this case as Motiva’s

evidence of its damages for diminished value of its leasehold interest at the time of

the bulk sale was woefully inadequate.

There are various methodologies for determining the value of a leasehold

interest. Most of the Louisiana jurisprudence discusses such value in the context

of a leasehold advantage, which is when a tenant’s contractual rent is less than

what the property would bring on the rental market at the time of the taking. 4

Packard’s Western Store, 618 So.2d at 1176. However, we recognize that the

leasehold advantage rule is not always exclusively determinative of the lessee’s

rights. See State ex rel. Department of Highways v. Cefalu, 233 So.2d 273, 276

(La. App. 1st Cir. 1970), writ refused, 236 So.2d 502 (La. 1970).

In Red River Waterway Com’n v. Fry, 628 So.2d 38, 42 (La. App. 2d Cir.

1993), the Second Circuit noted that various methodologies may be employed to

prove economic loss which may exceed the market value of the property, but

cautioned that the method used to prove the loss must demonstrate by a

4 If the fair market value of the lease is equal to or less than the agreed rental, there is no leasehold advantage and no money is owed to the lessee. If the value of the lease at the time of the taking is greater than the contract rent, the lessee is entitled to the difference. Where a leasehold advantage is due the lessee, it is payable out of the total market value of the property awarded the landowner, if the value of the landowner’s interest is determined on a basis including consideration of the economic value of the lease at the time of the taking. State, through Dept. of Highways v. Maggio, 399 So.2d 716 (La. App. 1st Cir. 1981).

19-CA-32 C/W 19-CA-33 8 preponderance of the evidence that the actual loss was not general, as to all owners

in the area, but was specifically sustained because of the taking from the business

in question. In Fry, the damage award to the lessees was based on expert

testimony, which considered multiple factors in evaluating the value of the

business losses suffered by the lessees, who leased the land at issue and cleared it

for purposes of subleasing it to farmers. Specifically, the lessees’ expert testified

that the expropriation removed the most valuable crop land and left only pasture

land. In determining the lessees’ losses, the expert considered the fact that a

subsequent attempt to farm the remaining land was unsuccessful. The lessees’

expert specifically testified as to the amount the lessees would have continued to

earn per year as income on the property but for the expropriation, which was based

on the income the lessees received in the years immediately prior to the taking.

Various methodologies for valuing a leasehold interest are succinctly

discussed in Eminent Domain: Lessee’s Recovery of Compensation for Taking of

Leasehold Interest, 56 Am. Jur. Proof of Facts 3d 419. Under §16, entitled

“Valuation methodologies,” it is observed that values and damages in

condemnation proceedings are not always susceptible of precise proof; however,

the value “must be arrived at through a recognized method which cannot be

fundamentally unfair and unjust.” It points out that there are three traditional

appraisal methodologies recognized by the courts for arriving at the fair market

value of the expropriated property:

(1) the market data or comparable sales approach which evaluates recent sales of comparable properties in the marketplace; (2) the reproduction cost approach which evaluates the current cost of reproducing the property less depreciation from all sources; and (3) the income or capitalization approach which evaluates the property’s net earning power based upon the capitalization of net income.

19-CA-32 C/W 19-CA-33 9 These three methodologies were used by the expert in State Dept. of Transp. and

Development v. Chachere, 574 So.2d 1306 (La. App. 3d Cir. 1991), in valuing a

lessee’s leasehold interest in two billboards that sat upon land that was

expropriated. Although he appraised the value of the leasehold interest using all

three methodologies, the expert ultimately settled on the market data approach as

the most valid.

In the present case, there was absolutely no evidence of any methodology

used to determine the value of Motiva’s leasehold interest either before or after the

expropriation. Rather, the only evidence of the value of Motiva’s leasehold

interest was a fact witness who thought the property was worth between $2.5-5

million prior to the expropriation, but had no input into the actual valuation of the

site for purposes of the bulk sale. Motiva failed to offer any expert testimony

regarding the value of the lease prior to the expropriation and the value of the lease

after the expropriation based on the accepted methodologies for valuing property in

an expropriation case. Therefore, we find Motiva failed to prove with legal

certainty the diminished value of its leasehold interest resulting from the

expropriation. Based on the evidence presented, we conclude a reasonable juror

could not have reached a contrary result.

DECREE

Accordingly, we find a directed verdict was properly granted in favor of the

DOTD at the conclusion of Motiva’s case.

AFFIRMED

19-CA-32 C/W 19-CA-33 10 SUSAN M. CHEHARDY MARY E. LEGNON

CHIEF JUDGE INTERIM CLERK OF COURT

FREDERICKA H. WICKER CHIEF DEPUTY CLERK JUDE G. GRAVOIS MARC E. JOHNSON ROBERT A. CHAISSON SUSAN BUCHHOLZ STEPHEN J. WINDHORST FIRST DEPUTY CLERK HANS J. LILJEBERG JOHN J. MOLAISON, JR. FIFTH CIRCUIT MELISSA C. LEDET JUDGES 101 DERBIGNY STREET (70053) DIRECTOR OF CENTRAL STAFF POST OFFICE BOX 489 GRETNA, LOUISIANA 70054 (504) 376-1400

(504) 376-1498 FAX www.fifthcircuit.org

NOTICE OF JUDGMENT AND CERTIFICATE OF DELIVERY I CERTIFY THAT A COPY OF THE OPINION IN THE BELOW-NUMBERED MATTER HAS BEEN DELIVERED IN ACCORDANCE WITH UNIFORM RULES - COURT OF APPEAL, RULE 2-16.4 AND 2-16.5 THIS DAY OCTOBER 2, 2019 TO THE TRIAL JUDGE, CLERK OF COURT, COUNSEL OF RECORD AND ALL PARTIES NOT REPRESENTED BY COUNSEL, AS LISTED BELOW:

19-CA-32 C/W 19-CA-33 E-NOTIFIED 24TH JUDICIAL DISTRICT COURT (CLERK) HONORABLE STEPHEN C. GREFER (DISTRICT JUDGE) KELLY B. BECKER (APPELLANT) GREGORY G. D'ANGELO (APPELLEE) KATHRYN Z. GONSKI (APPELLANT) JAMES L. BRADFORD, III (APPELLEE) D. STEPHEN BROUILLETTE, JR. (APPELLEE)

MAILED JONATHAN C. AUGUSTINE (APPELLEE) SARAH L. JOHNSON (APPELLEE) MATTHEW D. SIMONE (APPELLANT) ATTORNEY AT LAW ATTORNEY AT LAW TRINITY A. BROWN (APPELLANT) 1201 CAPITOL ACCESS ROAD 1507 DEMOSTHENES STREET ATTORNEYS AT LAW BATON ROUGE, LA 70802 METAIRIE, LA 70005 701 POYDRAS STREET SUITE 5000 NEW ORLEANS, LA 70139