Opinion
2015 CA 0818 C/W 2015 CA 0819
04-15-2016
CHARLES L. CIOLINO AND GERTRUDE K. CIOLINO v. FIRST GUARANTY BANK AND CAPITAL ONE, N.A.
Duncan S. Kemp Hammond, Louisiana Attorneys for Plaintiffs Charles L Ciolino and Gertrude Ciolino, Pal Owens, Joseph Perricane, Diane Muscarello, Nicky Muscarello, Mary Dibenedetto, Michael Perricane Daniel Lund Edward L. Fenasci New Orleans, Louisiana Attorneys for 3rd Party Plaintiff/Appellant First Guaranty Bank Brad P. Scott Thomas J. Lutkewitte Conor T. Lutkewitte New Orleans, Louisiana Attorneys for 3rd Party Plaintiff/Appellant Capital One, N.A. Glen R. Galbraith Hammond, Louisiana Attorney for 3rd Party Defendants/Appellees Debra Lewis and Billie Lynn Garrett Semmes Paul J. Mayronne Sam J. Collett Bailey D. Morse Covington, Louisiana Attorneys for 3rd Party Defendant/Appellee J.J. Hammond, L.L.C.
APPEALED FROM THE TWENTY-FIRST JUDICIAL DISTRICT COURT IN AND FOR THE PARISH OF TANGIPAHOA STATE OF LOUISIANA
DOCKET NUMBERS 2010-3104 AND 2010-3465 HONORABLE WAYNE RAY CHUTZ, JUDGE Duncan S. Kemp
Hammond, Louisiana Attorneys for Plaintiffs
Charles L Ciolino and Gertrude Ciolino,
Pal Owens, Joseph Perricane, Diane
Muscarello, Nicky Muscarello, Mary
Dibenedetto, Michael Perricane Daniel Lund
Edward L. Fenasci
New Orleans, Louisiana Attorneys for 3rd Party Plaintiff/Appellant
First Guaranty Bank Brad P. Scott
Thomas J. Lutkewitte
Conor T. Lutkewitte
New Orleans, Louisiana Attorneys for 3rd Party Plaintiff/Appellant
Capital One, N.A. Glen R. Galbraith
Hammond, Louisiana Attorney for 3rd Party Defendants/Appellees
Debra Lewis and Billie Lynn Garrett Semmes Paul J. Mayronne
Sam J. Collett
Bailey D. Morse
Covington, Louisiana Attorneys for 3rd Party Defendant/Appellee
J.J. Hammond, L.L.C. BEFORE: McDONALD, HIGGINBOTHAM, and THERIOT, JJ. McDONALD, J.
In this appeal, two banks challenge the grant of summary judgment against them dismissing their contribution claims against assignees under a lease agreement. The banks also challenge the denial of their motions for partial summary judgment. We reverse in part, affirm in part, and remand.
FACTS AND PROCEDURAL HISTORY
This case involves a fifty-year lease of property used as a motel parking lot in Tangipahoa Parish (the Lease). The ownership of the leased property, and the Lease itself, have been transferred multiple times since the Lease's inception on October 1, 1973, and which will expire on September 30, 2023. In 2010, after the adjacent motel closed, Vimal, L.L.C., the current lessee, discontinued Lease payments to Charles and Gertrude Ciolino, the current parking lot owners and lessors. The Ciolinos filed suit against First Guaranty Bank and Capital One Bank, N.A., f/k/a Hibernia National Bank, (sometimes, "Banks"), in their capacities as former Lease assignees, for the unpaid Lease payments accruing after February 2010. The Banks answered the suit and filed third-party demands against later Lease assignees on the basis that the latter were solidarily liable with the Banks for any judgment rendered against the Banks on the Ciolinos' main demand. Some of the later Lease assignees answered the Banks' third-party demands and filed cross claims against co-third-party defendants.
In October 2012, the trial court rendered summary judgment against the Banks for all past and future Lease payments to the Ciolinos. The Banks appealed the adverse judgment. On appeal, this Court affirmed, noting that, although the Banks had previously assigned their rights under the Lease, that divestiture of their rights did not terminate their obligations under the Lease because there was no express release from the lessors. Ciolino v. First Guaranty Bank, 12-2079, 2080 (La. App. 1 Cir. 10/30/13), 133 So.3d 686, 692, writs denied, 13-2753, 13-2756 (La. 2/14/14), 132 So.3d 963 (Ciolino I). Notably, the Ciolino I court found:
The uncontested facts establish that ... the [Lease] was transferred to the [Banks] by an assignment wherein the [Banks] agreed they were bound "to perform all of the conditions and obligations of said [Lease] in the respective proportions thereof as though original lessees under the [Lease]." The [Banks] thereafter transferred the [Lease] to another
assignee; however, pursuant to the terms of the [Lease] and Louisiana Civil Code articles 1821 and 1886, the [Banks] remained liable for the performance of all obligations under the [Lease], including the payment of rent. Neither the original lessors nor the Ciolinos ever released the [Banks] from that liability. ... Under these circumstances, the Ciolinos have the right to collect rent from the [Banks] in accordance with the terms and conditions of the [Lease].132 So.3d at 695-696.
And, rejecting the Banks' argument that the Ciolinos were required to mitigate their damages by first seeking recovery from Vimal, L.L.C., rather than from the Banks, the Ciolino I court concluded:
Under the terms of the lease and [LSA-C.C. art.] 1821, the banks, to the extent of their respective shares of the obligation, and the current lessee [Vimal, L.L.C.] are solidary obligors for the rent. The law of mitigation of damages does not require that an obligee pursue recovery from one particular solidary obligor in preference to another. Rather, the Ciolinos have the right to enforce the lease against all parties liable thereunder. See La. Civ. Code. arts. 1795, 1800.9
Ciolino I, 133 So.3d at 698.9 Any satisfaction of the rental obligation by the Banks will give rise to statutory rights of contribution from other solidary obligors under the lease, including the current lessee. See La. Civ.Code art. 1804.
The Banks then filed motions for partial summary judgment against three of the third-party defendants, Debra Gaye Garrett Levis, Billie Lynn Garrett Semmes, (sometimes, collectively, "Garretts") and J.J. Hammond, L.L.C. The Banks sought judgment against these third-party defendants as Lease assignees for their virile portion of all sums the Banks paid and for future payments and specific performance owed under the October 2012 judgment. The Garretts filed cross motions for summary judgment seeking dismissal of the Banks' claims against them. J.J. Hammond opposed the Banks' motion. After a hearing, the trial court took the matter under advisement, and on December 15, 2014, signed a judgment: (1) denying the Banks' motions for partial summary judgment, (2) granting the Garretts' motions for summary judgment, (3) dismissing the Banks' claims against the Garretts with prejudice, and (4) dismissing the Garretts' third-party claims as moot and without prejudice.
The Banks appeal from the adverse judgment contending the trial court erred in denying their motions for partial summary judgment and in granting the Garretts' motions for summary judgment. We review the denial of the Banks' motions as part of our review of the final judgment granting the Garretts' motions. See Moore v. Murphy Oil USA, Inc., 15-0096 (La. App. 1 Cir. 12/23/15), ___So.3d___, ___.
At the outset, we commend counsel for their thorough and well-argued appellate briefs, which we found quite helpful in the resolution of the issues on appeal.
EFFECT OF CIOLINO I
We first address the effect of Ciolino I on the issues to be decided in this appeal. As set forth above, the Ciolino I court stated that the Banks were solidarity liable with Vimal, L.L.C. for Lease payments to the Ciolinos, and, in a footnote, indicated that the Banks would have "rights of contribution from other solidary obligors under the [Lease.]." Notably, Vimal, L.L.C. is not a party to this appeal, and Ciolino I did not specifically state that the Garretts or J.J. Hammond, LLC, who are parties to this appeal, were solidary obligors with the Banks. The issue before the Ciolino I court was whether the Banks were liable to the Ciolinos under the Lease, and the opinion does not indicate that the Court analyzed the language of the Banks' assignment to Associated Purchasing or of any later assignment to determine whether solidary liability existed. Accordingly, the Ciolino I court's statement regarding solidarity is dictum, is not binding as precedent on the Garretts or J.J. Hammond, L.L.C, and does not preclude a later determination whether or not these parties are solidary obligors with the Banks to the Ciolinos. See LSA-C.C. art. 1796 ("Solidarity of obligation shall not be presumed. A solidary obligation arises from a clear expression of the parties' intent or from the law.") Also see Succession of Lauga, 624 So.2d 1156, 1164 (La. 1993); Blank v. Sid Richardson Carbon & Gas. Co., 06-0356 (La. App. 1 Cir. 9/1/06), 2006 WL 2534940 (Kuhn, J., concurring) (unpublished), writ denied, 06-2389 (La. 12/8/06), 943 So.2d 1098.
SUMMARY JUDGMENT
Summary judgment shall be granted when the pleadings, depositions, answers to interrogatories, and admissions, together with the affidavits, if any, admitted for purposes of the motion for summary judgment, show there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law. See LSA- C.C.P. art. 966(B)(2). When a court interprets a contract, a motion for summary judgment is a proper procedural vehicle to present the question to the court. Carter v. BRMAP, 591 So.2d 1184, 1188 (La. App. 1 Cir. 1991). Whether a contract is ambiguous or not is a question of law. Id. If a court determines as a matter of law that a contract is ambiguous, then extrinsic evidence may be used to determine the true intent of the parties, and determining the intent of the parties becomes, in part, a question of fact. In this posture, the granting of a summary judgment is appropriate only if there is no genuine issue as to material fact. See LSA-C.C.P. art. 966(B); Id. Appellate courts review evidence de novo under the same criteria that govern the trial court's determination of whether a summary judgment is appropriate. Ciolino I, 133 So.3d at 691.
The trial court signed the summary judgment on December 15, 2014 and it is therefore governed by the version of LSA-C.C.P. art. 966 in effect after its amendment by 2014 La. Acts No. 187. Although LSA-C.C.P. art. 966 was also later amended by 2015 La. Acts No. 422, the provisions of Act 422 do not apply to any motion for summary judgment pending adjudication or appeal on the effective date of the act, January 1, 2016. See 2105 La. Acts No. 422, §2. --------
It is undisputed that, when the Lease was first executed in 1973, the original lessee was bound by the Lease to pay rent to the original lessors. It is also undisputed that, when the Banks acquired their rights to the Lease in 1977, they were also bound to pay the rent, because they agreed that they were "binding themselves to perform all of the conditions and obligations of said [L]ease in the respective proportions thereof as though original lessees under the Lease ... ." The issue on appeal is whether the Banks' later assignment of the Lease in a 1977 Credit Sale of Leasehold Interest (the Credit Sale) to the next assignee, Associates Purchasing Company, Partnership II (Associates Purchasing), likewise transferred the Banks' obligation to pay the rent. The trial court determined it did not. In reasons for judgment, the trial court agreed with the Garretts' contention that the Credit Sale "was not a sale of the lease, but instead a sale of the 'leasehold rights', which conveyed the right of possession and various obligations[,] including payment of the monthly note, but did not obligate Associates [Purchasing] to pay the rent due the lessor under the original lease." (Emphasis added.)
Based on our de novo review of the evidence, we conclude the trial court erred in granting summary judgment in favor of the Garretts, because the meaning of the term "leasehold estate" as used in the Credit Sale is ambiguous, and there are disputed material factual issues as to what rights and obligations were transferred by the Banks to Associates Purchasing in 1977. For these same reasons, we also conclude the trial court correctly denied summary judgment in favor of the Banks.
ASSIGNMENT OF THE "LEASEHOLD ESTATE"
In the Credit Sale, the Banks assigned, among other assets, "all of [their] interest in and to the leasehold estate[] created by and existing pursuant to the [Lease]." (R144-45) The Garretts claim that Carriere v. Bank of Louisiana, 95-3058 (La. 12/13/96), 702 So.2d 648 (on rehearing), is authority for concluding that the use of the term "leasehold estate" in the Credit Sale only transferred the right to occupy the leased premises but did not obligate Associates Purchasing to pay rent to the Ciolinos under the Lease.
In Carriere, 702 So.2d at 666, the Supreme Court stated "it has ... been long established in Louisiana that the right of occupancy, use and enjoyment possessed by a lessee by virtue of a lease may be severed from the lessee's obligation to pay rents under the lease." And, in interpreting the mortgage contract at issue in that case, the Carriere court held that the use of the phrase "that leasehold estate created and existing by virtue of a Ground Lease," in the description of that which a lessee mortgaged, created a mortgage only of the lessee's "right of occupancy, use and enjoyment" and not a mortgage of the ground lease itself. Id at 670-71. Thus, when the Carriere mortgagee purchased the lessee's mortgage collateral at a sheriff's sale after foreclosure, the mortgagee acquired ownership of only the building and other constructions on the leased premises and the debtor/lessee's right of occupancy, use and enjoyment under the lease with the lessor. Id. at 671. The obligation to pay the lessor rent under the lease remained with the original lessee and the lessor could not recover rent under the lease from the leasehold mortgagee. Id. at 671.
We agree with the Garretts that the language in the Credit Sale is very similar to that interpreted by the Carriere court. However, Carriere does not stand for the broad proposition that any transfer involving a "leasehold estate" indisputably means that only the lessee's right of occupancy, use, and enjoyment under the lease is involved and that his obligation to pay rent under the lease is not. Carriere involved a unique contractual arrangement whereby the lessor and the lessee amended the subject lease to allow the lessee's mortgagee to intervene. Id. at 663. Under express terms of the lease amendment, in the event of the lessee's breach of the lease, the mortgagee was given the option to step into the shoes of the lessee and perform the lessee's lease obligation or to foreclose on the lessee's mortgaged collateral and not perform the lessee's lease obligations. Id. at 663-64. Because the mortgagee chose to foreclose rather than step into the lessee's shoes, the mortgagee was not obligated to pay rent to the lessor. Id. at 671. The lease amendment specifically provided that the mortgagee would not be liable for the lessee's obligations unless it stepped into the lessee's shoes, terms to which the lessor in Carriere clearly agreed.
In this case, the Garretts argue that when the Banks assigned the Lease to Associates Purchasing, they agreed in the Credit Sale that there would be no personal liability, but only an obligation in rem. However, the provision upon which the Garretts rely does not pertain to the Lease. When the Banks assigned the Lease to Associates Purchasing in the Credit Sale, Associates Purchasing executed a promissory note to the Banks for the purchase price of all assets transferred, and the Banks reserved a mortgage on the assets to secure payment of the note. In the Credit Sale, the Banks agreed that they, or any future holder(s) of the note, would enforce payment "of any obligation contained in this mortgage or in the note secured hereby, solely from the property mortgaged herein ... and ... no deficiency ... shall ever be asserted against any of the makers ... or their assigns, or in any manner realized upon the personal liability of any of the makers." (Emphasis added.) Thus, the Credit Sale's in rem clause only deals with the promissory note and mortgage that were part of the Credit Sale and has no effect on any of the assets mortgaged in the transaction, including the Lease. The Garretts' contrary position is without merit.
Other than the above in rem wording and the use of the term "leasehold estate," the Garretts have pointed to no other language in the Banks' Credit Sale to Associates Purchasing that demonstrates an intent to limit Associates Purchasing's liability as did the language in the Carriere lease and mortgage. The Carriere court found the mortgagee did not owe rents because of numerous express qualifications in the specific lease and mortgage. Absent any reference by the Garretts to similar provisions in the Credit Sale, we decline to find that the Banks' assignment of all of their interest in the "leasehold estate[] created by and existing pursuant to the [Lease]" indisputably proves the Banks' intent, or the Ciolinos agreement, to relieve Associates Purchasing of the obligation to pay rent. Rather, we note that the term "leasehold estate" is a common law term that is not defined in the provisions of Louisiana Civil Code Title IX, "Lease." Under Louisiana law, the general rule is that a lease binds the lessee to pay rent and an assignment of an unexpired lease transfers the obligation to pay the rent to the assignee. See LSA-C.C. art. 2668; Carriere, 702 So.2d at 667, n.10 (quoting Walker v. Dohan, 39 La. Ann. 743, 2 So. 381, 382 (1887)); also see Michael H. Rubin & S. Jess Sperry, Lease Financing in Louisiana, 59 La.L.Rev. 846, 866 (1999).
Further, the summary judgment evidence supports a finding that the intent of the Credit Sale was indeed to transfer the obligation to pay rent, because Associates Purchasing and later assignees performed this obligation by paying the rent under the Lease for over 20 years, from 1977 until 2010. In his affidavit, Charles A. Ciolino, current lessor, testified that his parents were the original owner/lessors from 1977 through 1987, when they donated the leased property to him and his wife. In his deposition, Mr. Ciolino also stated that the Lease payments were always received by his father and then by him until February 2010, when Vimal, L.L.C. stopped paying. For example, Philip Gagnon, an Associates Purchasing representative, testified in his deposition that, at least through his involvement in the late 1970s, Associates Purchasing paid the Lease payments to the Ciolinos, as well as the taxes and insurance on the leased property. From 1980 through 1988, the Lease was transferred several times until acquired by William C. Garrett, the Garretts' father in 1988 (as part of a receivership conveyance), and reacquired by him in 1994 (via a sheriff's sale), and by his succession in 2001 (via a dation en paiement). Debra Gaye Garrett Levis testified that she and her sister, Billie Lynn Garrett Semmes, and their father's succession before them, the Succession of William C. Garrett, paid the Lease payments to the Ciolinos. After Mr. Garrett died in 1999, his succession paid the Lease payments to the Ciolinos, as well as the insurance and taxes on the leased property, until the Lease was assigned to J.J. Hammond, L.L.C., in December of 2001. In that 2001 assignment, the Garretts and their father's succession sold their "Leasehold Interest" (identified therein as the Lease and adjacent motel property) to JJ. Hammonds, L.L.C., and represented that they were "current on their rent payments under the Lease and [were] not in default with respect to any other obligations under the Lease ... ." And, from December 2001 through October 2005, J.J. Hammonds, L.L.C., as Lease assignee, paid the rent due under the Lease to the Ciolinos, until it then assigned the Lease to a subsequent assignee.
In reviewing the above extrinsic evidence, we conclude that the assignees' consistent payment of the rent under the Lease for over 20 years, including the Garretts' act of making such payments, creates a disputed factual issue as to their true intent as assignees of the Lease. Although they now claim that the Banks' transfer of the "leasehold estate" to Associates Purchasing relieved Associates Purchasing and later assignees of the obligation to pay the Lease rent, their acts suggest otherwise - that is, it is at least disputed whether or not their true intent under the Lease was to assume all of the rights and obligations under the Lease, including the payment of the rent. We note the Garretts' claim in brief that their father paid the rent, not because he was obligated to do so, but to avoid eviction from the leased premises. Such an assertion merely adds to the uncertainty of the parties' intent and further demonstrates that summary judgment was inappropriate in this case.
In sum, we have reviewed the summary judgment evidence de novo and determine that summary judgment is not appropriate for either the Garretts or for the Banks. The inclusion of the term "leasehold estate" in the Banks' Credit Sale to Associates Purchasing renders that assignment ambiguous, and the extrinsic evidence submitted by the parties does not indisputably establish the true intent embodied in that assignment.
CONCLUSION
For the above reasons, we reverse the December 15, 2014 judgment insofar as it: (1) granted the motions for summary judgment filed by Debra Gaye Garrett Levis and by Billie Lynn Garrett Semmes, (2) dismissed the claims of First Guaranty Bank and Capital One Bank, N.A. against Ms. Levis and Ms. Semmes with prejudice, and (3) dismissed the third-party claims of Debra Gaye Garrett Levis and by Billie Lynn Garrett Semmes as moot. We affirm the judgment insofar as it denied the motions for summary judgment filed by First Guaranty Bank and Capital One Bank, N.A. Costs of this appeal are assessed equally to Debra Gaye Garrett Levis, Billie Lynn Garrett Semmes, First Guaranty Bank, and Capital One Bank, N.A. This matter is remanded for further proceedings consistent with this opinion.
REVERSED IN PART; AFFIRMED IN PART; REMANDED.