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Gardiner Farms, LLC v. Advanced Agriculture, Inc.

Court of Appeals of Louisiana, Third Circuit

December 13, 2017

GARDINER FARMS, LLC
v.
ADVANCED AGRICULTURE, INC.

         APPEAL FROM THE TWENTY-SEVENTH JUDICIAL DISTRICT COURT PARISH OF ST. LANDRY, NO. 12-C-3220-C HONORABLE ALONZO HARRIS, DISTRICT JUDGE

          Stan Gauthier, II, Stan Gauthier, II, A Law Corporation COUNSEL FOR DEFENDANT/PLAINTIFF/APPELLANT: Advanced Agriculture, Inc.

          Leslie J. Schiff Schiff, Scheckman & White COUNSEL FOR PLAINTIFF/DEFENDANT/APPELLEE: Gardiner Farms, LLC

          Court composed of Marc T. Amy, D. Kent Savoie, and Van H. Kyzar, Judges.

          VAN H. KYZAR JUDGE.

         The defendant, Advanced Agriculture, Inc., appeals from a trial court judgment awarding damages for lost income to the plaintiff, Gardiner Farms, LLC, as a result of its failure to use the best farming practices to cultivate sugarcane on property it leased from the plaintiff. For the following reasons, we affirm in part, reverse in part, and render judgment in favor of Advanced Agriculture.

         DISCUSSION OF THE RECORD

         At the outset of this opinion, we begin with a brief discussion of the manner and methods of the cultivation of sugarcane, as gleaned from the trial court record, to aid in understanding the facts of this matter and the law applicable thereto.

         Sugarcane, unlike other annual crops, such as corn, soybeans, and rice, is a perennial. Thus, a single planting of sugarcane may result in yields harvested over multiple years. Additionally, sugarcane is not cultivated from seed like other annuals. Rather, the sugarcane stalk, which is jointed like a bamboo stalk, is broken into sections so that each section contains a joint, known as an "eye, " from which the sugarcane plant grows after being planted. This is similar to growing a plant from a cutting or a potato plant from the eye of a potato. The sugarcane plant which grows from this cutting is known as "plant cane."

         As a perennial, the sugarcane plant is identified as "stubble" after being harvested, depending on the number of years it is in the ground past plant cane. Thus, it is either first stubble, second stubble, third stubble, and so on. However, the yield in tonnage of sugarcane produced from an acre of land decreases with each harvest; thus, a farmer may decide to plow the stubble under and replant with plant cane in order to increase his yield. Additionally, a farmer may use any growth of sugarcane as seed, which is known as seed cane. An acre of seed cane will realize approximately five acres of plant cane. It is in this context that the dispute between the parties arises.

         Gardiner Farms, LLC (Gardiner Farms), a family-owned farm consisting of 689.5 cultivable acres in St. Landry Parish, Louisiana, entered into an agricultural lease with Advanced Agriculture, Inc. (Advanced Agriculture) in July 2002, for the purpose of cultivating sugarcane on its property. Under this five-year lease (referred to hereinafter as the 2002 lease), which commenced on June 1, 2002, and terminated on January 30, 2007, Advanced Agriculture obligated itself "to use the leased premises for the purpose of planting, cultivating and harvesting sugarcane and shall keep the maximum available acreage in cultivation consistent with approved farming practices." It further agreed "to work the land herein leased in a good and farmer-like manner, to commit no waste thereon, to maintain all roads, ditches and drains and to return the land back into the peaceable possession of the LESSOR at the termination of this lease."

         The lease, which was a "cash lease, " required Advanced Agriculture to pay a first-year cash rental of $10, 000.00. For the remaining years of the lease, Advanced Agriculture agreed to pay $65.00 per cultivable acre, provided the cost of sugar remained below twenty-one cents per pound. In the event it exceeded that amount, the lease provided a rising scale by which the cash rental would increase based on each two-tenths of a penny above twenty-one cents per pound of sugar. Accordingly, if the price of sugar was twenty-two or twenty-three cents per pound, the cash rental per cultivable acre would be an additional $1.00 per acre. If the price of sugar was twenty-four cents per pound or greater, the cash rental per cultivable acre would be an additional $1.50 per acre.

         Advanced Agriculture farmed sugarcane on Gardiner Farms' property through the end of the lease, which reconducted through the end of 2009. The rental due on the property after the initial year of $10, 000.00, was $44, 817.50 each year, except in 2007, when Gardiner Farms agreed to reduce the rent that year to $22, 000.00 due to a freeze. Advanced Agriculture paid the following amounts in rent: $10, 000.00 in 2002; $20, 910.00 in 2003; $34, 528.00 in 2004; and $29, 942.00 in 2006; $22, 000.00 in 2007. It paid no rent in 2005 and 2008.

         On September 4, 2009, Raymond Allain, farm overseer and counsel for Gardiner Farms, notified Advanced Agriculture that it was behind in its rent payments to Gardiner Farms. Mr. Allain further requested that Advanced Agriculture provide him with the United States Department of Agriculture Farm Service Agency reports for the 2008 crop year and a report on the acreage in cultivation for the 2009 crop year. Thereafter, the parties negotiated a new one-year lease (referred to hereinafter as the 2009 lease). As part of the negotiations, Gardiner Farms agreed to forgive $88, 753.00 in rental payments; and Advanced Agriculture agreed to make a cash payment of $57, 840.00 and to sign a promissory note in the amount of $36, 930.40, due March 2010, in settlement of all cash rentals past-due under the 2002 lease.

         The 2009 lease, which was a "share lease, " commenced on January 30, 2010, and terminated on January 30, 2011. The lease stated that its terms would reconduct on a year-to-year basis provided that Advanced Agriculture was in full compliance with its terms, but that either party could terminate the lease if notice was provided to the other party no later than December 31st of that year. Under the lease, Advanced Agriculture again obligated itself:

[T]o use the leased premises for the purpose of planting, cultivating and harvesting sugarcane and shall keep the maximum available acreage in cultivation consistent with approved fanning practices. No less than two-thirds (2/3rds) of the cultivable acres shall be keep [sic] in sugar cane each year.

         Rather than a cash rental, the share lease allowed Gardiner Farms to share in the revenue generated from the sugarcane crop harvested by Advanced Agriculture, pursuant to the following terms:

a) The payment of cash of $36.930, 40, the amount due on that certain promissory note of even date with this lease agreement representing past due rent from a prior lease, plus all accrued interest to the date paid. Failure to make the payment of the amount due on this promissory note on or before the due date shall be cause for immediate termination of this lease.
b) Lessee agrees to pay Lessor a rental of fourteen and no/10 (14.0%) percent of the monies paid by the mill for all sugar cane produced, harvested and delivered to the mill from the leased premises, free of all costs and charges to Lessor, except the share of the crop retained by the mill as its charge for processing sugar cane. The rent shall be based on all payments made by the mill from the sale of sugar, molasses, or other products derived from the processing of the sugar cane grown on the leased premises. Lessor shall not share in any hauling or harvesting allowances, nor shall any charges for hauling or harvesting be deducted from the payments made by the mill in the calculation of rental due hereunder. Payment of this rental shall be made directly to the LESSOR by the mill which processes the cane. Should any governmental benefit, price support or incentive payments accrue as a result of cane grown on the leased premises a one-fifth (1 /5th) share shall be paid to Lessor.
c) In addition to the rental per acre provided above, the LESSEE shall pay to LESSOR a sum equal to one-fifth (l/5th) of the payments received for the sale of any soy beans or any other crop grown on the leased premises.
d) The "price per pound" as used in this paragraph shall include all payments made by the mill to LESSEE resulting from the sale of sugar and other byproducts derived from the case delivered by LESSEE to the mill, divided by the number of pounds of raw sugar made from such cane, and it shall include all payments to LESSEE made by government programs for such byproducts. The share rent due hereunder, as provided in section a), above shall be subject to adjustment based on the actual total payments made by the mill, as follows:
1) If the total "price per pound" is in excess of 24 cents, the rental shall be increased to 15.00%;
2) If the total "price per pound" is in excess of 26 cents, the rental shall be increased to 16.00%;
3) If the total "price per pound" is in excess of 28 cents, the rental shall be increased to 17%; and,
4) If the total "price per pound" is in excess of 30 cents, the rental shall be increased to 18%.

         The lease also required Advanced Agriculture "to work the land herein leased in a good and farmer-like manner, to commit no waste thereon, to maintain all roads, ditches and drains and to return the land back into the peaceable possession of Gardiner Farms at the lease's termination.

         During the negotiations for the 2009 lease, Mr. Allain indicated that he was concerned that Advanced Agriculture had no plant cane on the leased property for the 2010 crop year; and he suggested that "[n]o less than one third of the acres should be planted[]" in plant cane that year. At the time, Advanced Agriculture had 59.2 acres of first stubble, 353.3 acres of second stubble, and 110.7 acres of third stubble planted on the leased property. Despite Mr. Allain's suggestion, Advanced Agriculture decided that instead of plowing the stubble under and replanting a large amount of plant cane, it would harvest the first, second, and third stubble already growing.

         At some point prior to December 2010, Mr. Allain verbally informed Advanced Agriculture that Gardiner Farms would not be renewing the lease after learning of Advanced Agriculture's late harvesting schedule. Written notification of this intent was sent by Mr. Allain to Advanced Agriculture on December 20, 2010, but he indicated that he might be willing to renegotiate the lease depending on the final production numbers and the farm's general condition. However, Gardiner Farms entered into a five-year agricultural lease with Patout Brothers Little Valley Plantation, L.L.C. (Patout Brothers), commencing on January 31, 2011.

         Thereafter, on May 6, 2011, the parties entered into a settlement agreement, which allowed Advanced Agriculture limited rights to farm off the sugarcane it had planted on Gardiner Farms' property. The agreement stated:

The terms of this agreement are to be considered a settlement between the parties hereto as to the specific matters listed herein and covered by this agreement, and may not be the subject of future contest between the parties; provided that both parties reserve all other rights with respect to the 2002 lease, the 2009 farm lease, and any other matters concerning their relationship as landlord and tenant.

         The settlement provided that Advanced Agriculture would pay Gardiner Farms all rentals due from the 2010 harvest in accordance with the rent escalation provisions contained in the 2009 lease on or before December 15, 2011. It further provided that Advanced Agriculture would pay all rentals due from the 2011 harvest in accordance with the rent provision contained in Gardiner Farms' 2011 lease with Patout Brothers. That lease provided for a rental of 16% of all amounts received by Patout Brothers from the mill, with an escalation of the rent to 17% if the total price per pound of sugar or other byproducts exceeded twenty-eight cents; 18% if the price per pound exceeded thirty cents; and 20% if the price per pound exceeded thirty-five cents. The settlement further allowed Advanced Agriculture to purchase fifteen acres of Kleentex plant cane and first stubble to use as seed in the 2010 and 2011 crop years, respectively, and Gardiner Farms agreed to purchase the remaining acres of first stubble [1] after the 2011 harvest.

         Thereafter, on June 29, 2012, Gardiner Farms filed suit against Advanced Agriculture, seeking past-due rentals for the 2009 and 2011 crop years and damages in lost revenues for the 2010, 2011, 2012, and 2013 crop years based on Advanced Agriculture's failure to farm its property in a "husband like" manner:

[Particularly because it failed to comply with the specific lease terms regarding planting of sugar cane, namely the following clause contained in both leases:
'LESSEE binds and obligates himself to use the leased premises for the purpose of planting, cultivating and harvesting sugarcane and shall keep the maximum available acreage in cultivation consistent with approved farming practices. "

         Gardiner Farms further sought a preliminary injunction to prevent Advanced Agriculture from cultivating the remaining twenty-two acres of sugarcane on its property.

         In response, Advanced Agriculture filed exceptions of prematurity, vagueness, and ambiguity. Gardiner Farms then filed an amended petition in which it further alleged that it was owed the value of fifteen acres of stubble cane, which Advanced Agriculture was granted the right to harvest as seed cane in the 2012 crop year. Thereafter, Advanced Agriculture answered Gardiner Farms' original petition and reconvened, seeking damages from Gardiner Farms under theories of breach of contract and detrimental reliance. In its first amending and supplemental answer and reconventional demand, Advanced Agriculture alleged that it was owed $29, 632.74 in damages for sugarcane acreage that it produced, subject to a credit of $8, 245.77 paid by Gardiner Farms on December 14, 2012.

         Following a two-day trial on the merits, the trial court took the matter under advisement. Thereafter, it rendered written reasons for judgment, denying Gardiner Farms' claim for back rent for the 2009 crop year under the 2002 lease and awarding it $110, 000.00 in lost income for the 2010, 2011, and 2012 crop years as a result of Advanced Agriculture's failure to use the best farming practices in cultivating sugarcane on its property. A written judgment was rendered by the trial court on November 17, 2016. Subsequently, Gardiner Farms moved for a new trial on the issue of past-due rent under the 2002 lease. After this motion was denied, Advanced Agriculture perfected an appeal from the November 17, 2016 judgment, and Gardiner Farms answered the appeal on the issue of past-due rent.

         On appeal, Advanced Agriculture raises three assignments of error:

         I. The district court erred in holding defendant liable to plaintiff for loss of income in 2010-2012 for defendant's failure to use "best farming practices" that were not required under the lease.

a. The district court erred as a matter of law in disregarding the clear terms of the 2009 lease, overruling defendant's objection to parol evidence to vary the terms of the lease and applying a negligence standard to a breach of contract case.
b. The district court erred as a matter of fact in failing to recognize that defendant complied in all respects with the 2009 lease.
c. The district court erred in holding defendant liable for damages when plaintiff never put defendant in default or offered an opportunity to cure the defects, as required under the lease.
d. As a policy matter, the district court's decision will devastate small to medium sugarcane farmers and damage the sugarcane industry, and must be reversed.
II. The district court's award of damages was unsupported and speculative and must be reversed; or, alternatively, substantially reduced.
III. The district court's decision denying plaintiffs claim for past due rentals under the 2002 lease was ...

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