Elder Offshore Lsgn, et al v. Safe Haven Ent Inc

United States Court of Appeals
Fifth Circuit
F I L E D
December 1, 2004
Charles R. Fulbruge III
Clerk
In the
United States Court of Appeals
for the Fifth Circuit
_______________
m 04-30219
Summary Calendar
_______________
ELDER OFFSHORE LEASING, INC.,
Plaintiff-
Intervenor Defendant-
Appellee,
VERSUS
BOLIVARIAN REPUBLIC OF VENEZUELA,
Intervenor Plaintiff-
Appellant,
VERSUS
SAFE HAVEN ENTERPRISES, INC., ET AL.,
Defendants.
_________________________
Appeal from the United States District Court
for the Western District of Louisiana
m 02-CV-1685
m 02-CV-2517
m 02-CV-1274
_________________________

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2
Before, DAVIS, SMITH, and DENNIS, Circuit
Judges.
JERRY E. SMITH, Circuit Judge:*
The Bolivarian Republic of Venezuela
(“Venezuela”) brings this interlocutory appeal
challenging the district court’s determination
that title to disputed property never passed
from Elder Offshore Leasing, Inc. (”Elder”).
Because the contractual provision on which
Venezuela relies is not operative in the current
dispute, title never passed, and we affirm.
I.
Requiring new living quarters for the Simon
Bolivar Naval Base on Isla de Aves,1 Ven-
ezuela contracted to have new living quarters,
or “modules,” constructed for the base. To
build the modules (three-story dormitory-type
structures with work areas, residential
quarters, recreations areas, kitchens, and a
rooftop heliport), Venezuela contracted with
Totalmar, a Venezuelan corporation, which in
turn contracted with Elder to procure and re-
furbish the modules. The Venezuela/Totalmar
contract provided that Totalmar would
prepare the island site and purchase, transport,
and install the modules, while under the Total-
mar/Elder contract, Elder would procure the
modules and renovate them to Venezuela’s
specifications.
Although Venezuela paid Totalmar, Total-
mar failed to pay Elder for all its work, so El-
der did not pay its subcontractors.
Consequently, multiple civil actions were insti-
tuted in Louisiana (where the construction was
taking place). Elder sued Safe Haven En-
terprises (“Safe Haven”), which is alleged by
Elder to be a joint venturer with Elder in the
construction of the modules. Safe Haven re-
sponded by filing a lien against the modules
and sued to enforce that lien. Safe Haven’s
case was removed to federal court and consol-
idated with Elder’s original action against Safe
Haven. At that point, numerous subcon-
tractors and lienholders intervened in the fed-
eral action, as did Venezuela.
Venezuela claims that title to the modules
has passed to it under the Elder/Totalmar con-
tract and that sovereign immunity protects the
property from attachment. The Totalmar/El-
der contract provides that title passes on the
earliest occurrence of any three possibilities:
“(a) appropriation of the Work or any part
thereof to the Order; or (b) payment for the
Work; or (c) delivery of the Work by Contrac-
tor at the specified delivery point.” Because
neither party contends that payment was made
or that delivery occurred,2 the sole issue is the
meaning and application of “appropriation of
the Work or any part thereof to the Order.”
* Pursuant to 5TH CIR. R. 47.5, the court has de-
termined that this opinion should not be published
and is not precedent except under the limited cir-
cumstances set forth in 5TH CIR. R. 47.5.4.
1 Isla de Aves is Venezuela’s furthest outpost in
the Caribbean Sea. The naval base is used for hy-
drographic, cartological, and meteorological pur-
poses, and Venezuela needs the modules to main-
tain its presence on the island and therefore
continue to claim sovereignty over it.
2 Although the modules were eventually moved
to Isla de Aves, we operate under the legal fiction
that they remain at their manufacturing location in
Louisiana. Pursuant to a Joint Stipulation entered
into by Elder, Venezuela, and the other lienholders,
Venezuela posted a cash bond in exchange for
immediate possession. By the terms of the Joint
Stipulation, the cash bonds will pay to Elder and
the lienholders unless the court rules that Ven-
ezuela is the owner of the modules and sovereign
immunity protects them from seizure.

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3
At a bench trial, the district court adjudi-
cated the current ownership of the modules
and reserved the disposition of the remaining
claims for another day. On considering the ev-
idence and arguments of counsel, the court
held that, under the operative contractual pro-
visions, title never passed to Venezuela, but
remained with Elder. In its oral ruling, the
court reasoned that the disputed contractual
provision exists to protect the seller, and
therefore the court disagreed with Venezuela’s
reading of the contract. The ruling was certi-
fied for appeal under Federal Rule of Civil
Procedure 54(b). See Kelly v. Lee’s Old
Fashioned Hamburgers, Inc., 908 F.2d 1218,
1220 (5th Cir. 1990) (per curiam) (en banc).
II.
We review the interpretation of a contract,
which is a conclusion of law, de novo. See
City of New Orleans v. Mun. Admin. Servs.,
Inc., 376 F.3d 501, 506 (5th Cir. 2004). This
dispute is governed by the terms of the con-
tractSSspecifically, the above-described “ap-
propriate the Work . . . to the Order” provi-
sion. It is our responsibility to attach meaning
to this phrase as intended by the parties.3
Luckily, some of the terms within the pro-
vision are defined by the contract. “Work” is
defined as “the goods, services and/or equip-
ment and documentation to be provided under
the contract . . . .” “Order” is not specifically
defined, but it is plain from the contract that it
refers to Totalmar’s order for the modules.4 It
is not apparent from the plain meaning of the
contract, however, what the parties intended
by agreeing that title passes on appropriation
of the work to the order. We therefore look
to interpretive guides outside the text of the
contract.
Venezuela calls our attention to cases in
which this court and others interpreted a sim-
ilar phrase, i.e., “appropriate goods to the con-
tract.” Although Venezuela contends that this
difference in phrasing is insignificant, it is in
fact quite illuminating. In the cases cited,5 the
goods at issue were fungible, and the contracts
called for the sale of a specified quantity of
those goods.
For example, in Mitsubishi, 735 F.2d at
165, we held that “when goods to be deliv-
ered by the seller to the buyer become segre-
gated from other goods or appropriated to the
contract so that the objects to be sold are
readily identifiable, the same becomes
executed, and at that time title to the goods
passes to the buyer” (emphasis added).
Therefore, the phrases “appropriating goods to
a contract” and “appropriating work to an
order” indicate the physical segregation,
setting aside, or other identification of a subset
of goods apart from a greater stock. Such an
act, and the accompanying passage of title per
contract, allow a seller to complete
3 See Reliant Energy Servs., Inc. v. Enron Can-
ada Corp., 349 F.3d 816, 822 (5th Cir. 2003)
(“‘When interpreting a contract, the question is
what was the parties’ intent, [because] courts are
compelled to give effect to the parties’ intentions’”
(quoting Pennzoil Co. v. FERC, 645 F.2d 360, 388
(5th Cir. May 1981))).
4 The parties do not dispute this.
5 See, e.g., Mitsubishi Int’l Corp. v. Clark Pipe
& Supply Co., 735 F.2d 160, 165 (5th Cir. 1984);
Edgewood Co. v. Falkenhagen, 92 So. 703 (La.
1922); Collector of Revenue v. J.L. Richardson
Co., 247 So. 2d 151, 156 (La. App. 4th Cir.
1971); Texas Hay Ass’n v. Angleton State Bank,
291 S.W. 846 (Tex. Comm’n App. 1927).

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performance of a contract so as to be able to
demand performance by the buyer or at least
to pass risk of loss to the buyer.
It is obvious, from the context of the cases
relied on by Venezuela, that this provision is
not helpful to its case. Here, the “work” to be
appropriated is not of the fungible nature that
usually causes the seller to seek protection by
allowing it to pass title and risk by identifying
the goods to be sold. It is unreasonable to be-
lieve that Elder intended to agree to yield title
to the modules, piece by piece, irrespective of
payment, by utilizing a contractual provision
that historically has been used to protect
sellers.
This interpretation is bolstered further by
the International Commercial Terms, or “Inco-
terms,” which the parties agreed would apply
to the contract where not in conflict with its
express conditions. The Incoterms are a set of
international rules for the interpretation of
trade terms, published by the International
Chamber of Commerce.
The only use of the phrase “appropriated to
the contract” by the Incoterms indicates that a
seller in an FOB contract6 may choose to pass
title to goods, by clearly setting them aside or
identifying them where the specified vessel of
shipment fails to arrive or is otherwise unable
to accept shipment. That is, the seller can shift
risk and title by taking affirmative steps to
identify the specific, fungible goods it intends
to sell. The Incoterms, therefore, indicate that
the disputed contractual phrase exists to
protect the seller by allowing it to shift risk at
its prerogative by performing certain steps.
This interpretation makes the most sense and
is in accord with that given by the courts in the
cases cited by Venezuela.
Venezuela counters that Elder purchased
used modules, brought them to the construc-
tion site, and thereby appropriated them to the
contract. Subsequently, according to Vene-
zuela, with the addition of each item Elder in-
stalled in the modules, those items too were
appropriated to the order.
Unfortunately, Venezuela cannot point to
any case in which this piece-by-piece formula-
tion of appropriating work to an order has
been applied. Instead, provisions of the sort at
issue here are unanimously used in the context
of fungible goods. The disputed provision
therefore is of no moment here7 and could not
have effected passage of title.
The interpretation reached by the district
court was therefore correct. Title to the mod-
ules never passed from Elder.
AFFIRMED.
6 An “FOB” contract is one in which the buyer
assumes risk of loss upon the seller’s shipment of
the contracted-for goods.
7 The inclusion of this inapplicable provision
could be explained if the contract used was adopted
from a previous contract dealing with an entirely
different set of facts. Although the evidentiary
record is not illuminating as to the provenance of
the contract, Venezuela suggested, at oral argument
in the district court, that the form used as the basis
for this contract came from a previous transaction
in which Elder was involved. If true, this would
lend even further credence to the notion that the
“appropriate work to the order” provision is not
applicable here.

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