Summary
summarizing the Louisiana Supreme Court's holding in Bloom v. Southern Amusement Co., 81 So.2d 763 (La. 1955) and finding that when a lease is not terminated, "a lessor's right to damages in the event the lessee fails to make repairs does not accrue until the property is restored to the owner at the expiration of the lease"
Summary of this case from Cella III, LLC v. Jefferson Par. Hosp. Dist. #2 (In re Cella III, LLC)Opinion
Civil Action No: 03-3343 Section: "J" (2).
January 4, 2005
Before the Court is a Motion to Dismiss Pursuant to FED. R. CIV. PRO. 12(b) (6) for Failure to State a Claim Upon which Relief can be Granted; Alternatively, Motion for Judgment on the Pleadings Pursuant to F.R.C.P. 12(c). The motion is opposed by Plaintiff. After considering the motion, opposition and applicable law, the Court finds that Defendant's Motion to Dismiss Pursuant to FED. R. CIV. PRO. 12(b) (6) should be granted.
Rec. Doc. 10.
Rec. Doc. 22.
BACKGROUND
On August 8, 1997, Defendant purchased two rental companies, Buckner Rental Service and Industrial Equipment Rentals. The purchase of the companies included an assumption of leases on various properties owned by Plaintiff. There are four leased properties at issue in this matter, which are located in Lafayette, New Iberia, Morgan City and Houma.Each of the leases provide for a five year term, after which Defendant may exercise an option to renew the leases for two additional five-year terms, and thereafter exercise its right to purchase any or all of the properties. In 2003, the four leases came up for renewal. During negotiations pertaining to the rate of the lease renewal, representatives of Plaintiff visited the facilities and took photographs. Ultimately, the four leases were renewed in 2003 for the second five year term.
Motion to Dismiss, pp. 2-4. Rec. Doc. 10.
On October 31, 2003, Plaintiff filed suit in state court and served Defendant with a petition for breach of lease for failure to properly maintain the leased premises. On November 26, 2003, the case was removed to this court. Although Plaintiff does not seek dissolution of the lease, Plaintiff requests damages for the costs it might incur to repair the facilities. Defendant asserts that Plaintiff cannot seek damages for failing to maintain the leased property without also seeking dissolution. Plaintiff alleges that under the terms of the lease, Plaintiff may obtain "damages including, but not limited to the cost of restoring and repairing each property, attorney's fees and all costs incurred in this litigation," even though dissolution is not sought.
Notice of Removal, Petition for Breach of Lease. Rec. Doc. 1.
Motion to Dismiss. Rec. Doc. 10.
Opposition to Motion to Dismiss. Rec. Doc. 22.
APPLICABLE LAW
As noted by the Fifth Circuit Court of Appeals, the standard of review of a dismissal for failure to state a claim upon which relief may be granted is well established. The court "must accept all well pleaded averments are true and view them in the light most favorable to the plaintiff. [The court] will not go outside the pleadings and . . . cannot uphold the dismissal `unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Similarly, when deciding a motion for judgment on the pleadings, a court must look only at the pleadings and accept all allegations in them as true. "When material outside the pleadings is considered, however, the court will generally exercise its discretion to treat the motion as one for summary judgment. The court will then evaluate such extra-pleading materials as to determine whether a genuine issue of material fact exists."DISCUSSION
Title IX of the Louisiana Civil Code sets out the law pertaining to lease in Louisiana, however, the obligations imposed under the Civil Code pertaining to leases may be waived or altered by agreement between the parties. Paragraph five of the lease provides that "[t]he Lessee shall maintain the foundation, roof and the exterior walls and all items incidental to operation of the building. The Lessee shall make no alterations or improvements without the written consent of the Lessor." The Civil Code articles pertinent to the present matter provide the following:
The lessee is bound:
1. To enjoy the thing leased as a good administrator, according to the use for which it was intended by the lease.
2. To pay the rent at the terms agreed on.
LA. CIV. CODE art. 2710 (2004).
. . .
The lessee is bound to cause all necessary repairs to be made which it is incumbent on lessees to make, unless the contrary hath been stipulated.
LA. CIV. CODE art. 2715 (2004).
. . .
The neglect of the lessor or lessee to fulfill his engagements, may also give cause for a dissolution of the lease, in the manner expressed concerning contracts in general, except that the judge can not order delay of the dissolution.
LA. CIV. CODE art. 2729 (2004).
It is undisputed that Defendant has timely paid rent on the properties. Consequently, the real issue in this case is whether the lessor has acted as a prudent administrator and, if not, whether Plaintiff has a right to collect damages while the lease is still in effect.
As stated above, when deciding a motion under either 12(b) or 12(c), the court is to accept all averments in the complaint as true and view them in the light most favorable to the Plaintiff. In Paragraphs VIII, X, XII, and XIV of the petition, Plaintiff alleges that Defendant "has breached the terms of the lease by causing damage to the property and/or failing to maintain the property." Consequently, for the purposes of this motion, the court must find that Defendant is in breach of the lease for failing to act as a prudent administrator. Thus, the question now becomes whether Plaintiff has a right to collect damages while the lease is still in effect, without seeking dissolution.
Arguing that Plaintiff cannot collect monetary damages while the lease is still in effect, Defendant cites the Louisiana Supreme Court case of Bloom v. Southern Amusement Co. In Bloom, the plaintiff-lessor alleged that defendant-lessee violated a provision of the lease that required the lessee to "keep the theatre modernized" and "keep up-to-date fixtures therein at all times." The plaintiff did not seek dissolution of the lease, which had more than three years remaining before expiration. Finding no jurisprudence on the issue, the Supreme Court phrased the question as follows: "Have the damages which plaintiff here seeks to recover accrued?" Finding no Louisiana jurisprudence on the issue, the court turned to French commentators and authorities.
Bloom v. Southern Amusement Co., 81 So. 2d 763 (La. 1955).
Id. at 764.
The court explained that some of the commentators "suggest that in cases in which the damage to the property is reparable, the court should either cancel the lease with damages, order the lessee to pay money damages immediately, or force the lessee to repair the property." While other authorities
Id. at 766.
contend that the lessor should not be allowed to maintain an action solely for money damages before expiration of the lease, except in cases where the damage to the leased property is of the type which cannot be repaired during the existence of the lease. They support this view by pointing out that, if the lessor could actually collect damages during the lease term for injury to the leased property which might be repaired during the remainder of the lease term, the lessor would be enriched at the expense of the lessee, whereas the lessee would still be under the obligation to maintain the property.
Id.
Additionally, the court noted that a third point of view exists that "although the obligation on the part of the lessee to make repairs exists during the whole term of the lease, the lessor's right to damages in the event the lessee fails to make repairs does not accrue until the property is restored to the owner at the expiration of the lease." Adopting the third viewpoint, the court noted that the cost of remodeling the building had not been incurred by the lessor and that if the lessor were permitted to recover the cost during the existence of the lease, there would be no assurance that such repairs would ever be made. The court found that since the lessor was not seeking dissolution of the lease, the action was premature because the damages have not actually accrued.
Id.
Id.
Id.
Therefore, according to the Louisiana Supreme Court, a lessor's right to damages in the event the lessee fails to make repairs does not accrue until the property is restored to the owner at the expiration of the lease. Consequently, in the present matter, the Court finds that Plaintiff's right to damages has not accrued. Accordingly,
IT IS ORDERED that Defendant's Motion to Dismiss Pursuant to FED. R. CIV. PRO. 12(b) (6) for Failure to State a Claim Upon which Relief can be Granted; Alternatively, Motion for Judgment on the Pleadings Pursuant to F.R.C.P. 12(c) should be and hereby is GRANTED; IT IS FURTHER ORDERED that this matter is DISMISSED WITHOUT PREJUDICE to re-file suit seeking dissolution and or recision of the leases.