Opinion
Civil Action No: 01-970 Section: "R"
November 30, 2001
ORDER AND REASONS
Before the Court are defendants' motions for summary judgment. For the following reasons the Court grants defendants' motions.
I. Background
On or about June 25, 1987, defendant John M. Poole and his brother, W. Wallace Poole, Jr. entered into a lease with Madisonville Boatyard, Ltd., a Louisiana limited partnership, which acted through its managing partner, Richard A. Fields. The lease covered a piece of land the Poole's co-owned in Madisonville, Louisiana. The lease term provides:
The first year's rent shall be $550 for March, April, May, increasing to $750 per month for the next 9 months of June 1987 through February 1988, with an option to renew for an additional year for $1000 per month from March 1988 through February 1989.
. . .
Options to Renew:
Each time a lease option is executed an additional year's option is automatically granted and the rent for the additional year will be computed based on the Consumer Price Index. Options to renew are not assignable. Pl.'s Ex. A.
Some years after the lease was created, John Poole acquired sole ownership of the property. Then, on March 15, 2001, in anticipation of the sale of the property covered in the lease, Poole sent plaintiff notice that the lease would be terminated as of June 30, 2001. Mattingly of Florida, L.L.C. ("Mattingly"), intervener-defendant, acquired the property from Poole by an Act of Transfer dated March 21, 2001, and recorded in the public records of the Parish of St. Tammany on April 9, 2001. The plaintiff has refused to vacate the property and currently remains in possession of it.
The defendants now move for summary judgment on the grounds that the putative lease between Madisonville and Poole is a perpetual lease and is therefore void as contrary to Louisiana public policy. Plaintiff contends that the terms of the renewal option are ambiguous and that parol evidence should be admitted to determine the intent of the parties who drafted the lease. Plaintiff contends that the parties did not intend the lease to be perpetual, but rather, that it would last until Madisonville's managing partner, Mr. Fields, retired.
II. Discussion
A. Legal Standard
Summary judgment is appropriate when there are no genuine issues as to any material facts, and the moving party is enlitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106 S.Ct. 2548, 2552 (1986). A court must be satisfied that no reasonable trier of fact could find for the nonmoving party or, in other words, "that the evidence favoring the nonmoving party is insufficient to enable a reasonable jury to return a verdict in her favor." Lavespere v. Niagara Mach. Tool Works, Inc., 910 F.2d 167, 178 (5th Cir. 1990) ( citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2511 (1986)). The moving party bears the burden of establishing that there are no genuine issues of material fact.
If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record contains insufficient proof concerning an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325, 106 S.Ct. at 2554; see also Lavespere, 910 F.2d at 178. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See Celotex, 477 U.S. at 324, 106 S.Ct. at 2553. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue exists for trial. See Id. at 325, 106 S.Ct. at 2553-54; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1996).
B. Perpetual Lease
Louisiana law provides that a lease must be for "a certain time," otherwise it is void as against public policy. See La. Civ. Code art. 2674 ("To let out a thing is a contract by which one of the parties binds himself to grant to the other the enjoyment of a thing during a certain time, for a certain stipulated price which the other binds himself to pay him."); see also Liner v. LaCroix, 588 So.2d 404 (La.App. 2nd Cir. 1991); Bristo v. Christine Oil Gas Co., 71 So. 521 (La. 1916). The purpose of the statute, whose source is Code Napoleon of 1804, Article 1709, is to prohibit leases in perpetuity. See Lemke v. Amidon, 542 So.2d 563, 565 (La.App. 1st Cir. 1989). It is not necessary that the lease be expressed in specific time periods, because it may be tied to the continuation of a given condition. See Id. at 567. However, a lease that grants an unlimited "option to renew" is a perpetual lease. As the Louisiana Supreme Court held in Bristo, "[t]o recognize that the [lessee] has the right, without any obligation, to hold the [lessor's] land under a perpetual lease or option, would take the property out of commerce, and would be violative of the doctrine of ownership. . . [A] contract purporting to give a perpetual option to hold land . . . is null." 71 So. at 522.
Plaintiff admitted in its complaint that "the Lease confers upon the lessee the right to continuously renew the Lease by exercising the options, which was the intention of the original drafts of the Lease." (Pl.'s Cmplt. at XI.). Additionally, in its prayer for relief, plaintiff asked the Court to declare that lease contains "unlimited options to renew." (Pl.'s Cmplt. at 8A.). Now, somewhat disingenuously, plaintiff argues that the lease is not perpetual because it was intended to last until Madisonville's managing partner, Mr. Fields, retired. ( See Pl.'s Mem. in Opp. to Sum. Judg. 4). There is nothing in the language of the lease to indicate that its duration was so limited. Moreover, in Liner v. Lacroix, supra, the court rejected a similar argument to find that a lease with the same type of option terms as are at issue here gave "the lessee-partnership the unbridled option to maintain the lease as long as it desired." Liner, 588 So.2d at 405. Although the lower court found that the lease had a maximum term of the life of one of the partners of the partnership-lessee, the Liner court emphasized that, as here, the lessee was the partnership, not the partner, and was not so limited:
The pertinent provision of the lease in Liner provided:
LESSEE shall have the option to renew this lease under the same terms and conditions at the end of the first year and annually thereafter by giving LESSOR written notice of their intent to renew at least thirty (30) days prior to the end of the lease; provided however that LESSOR must consent to each renewal.
Liner, 588 So.2d at 404.
"The lessee in the instant case is a juridical person, a partnership, the personality of which is distinct from that of its partners. LSA-C.C. Art. 24. Accordingly, even though the constituent members of the partnership may change or die, a partnership can continue to exist ad infinitum. LSA-C.C. Arts. 2826-27.
Liner, 588 So.2d at 406.
Here, the Poole-Madisonville lease was contracted with the Madisonville partnership, which has a separate existence from its partner, and the lease contains no language terminating it on Mr. Fields' retirement. Further, the "Options to Renew" provision provides that each time an option is exercised, an additional year's option is "automatically granted." ( See Pl.'s Ex. A). There is no limit to the number of times the automatic option may be exercised. Accordingly, the explicit language in the lease clearly gives plaintiff an unlimited option to renew, thereby taking this immovable property out of commerce indefinitely. See id. Therefore, the Court finds that the lease is "violative of the doctrine of ownership" and void as against public policy. Id. ( quoting Bristo, 71 So. at 522).
C. Parol Evidence
When the words of a contract are clear, unambiguous, and lead to no absurd consequences, the contract is interpreted by the court as a matter of law. See La. Civ. Code art. 2046. Only if the Court determines that a contract is ambiguous may parol evidence be used to determine the intent of the parties. See McDuffe v. Riverwood Int'l Corp., 660 So.2d 158, 160 (La.App. 2nd Cir. 1995) ("[W]hen the terms of a written contract are susceptible to more than one interpretation, or where there is uncertainty or ambiguity as to its provisions, or the intent of the parties cannot be ascertained from the language employed, extrinsic evidence is admissible to clarify the ambiguity or show the parties' intent.").
Plaintiff suggests that the lease is ambiguous and therefore, the Court should look to parol evidence to determine the intention of the parties who drafted the lease. First, plaintiff argues that lease is ambiguous because the option clause is entitled "Options to Renew", rather than "Option to Renew". ( See Pl.'s Mem. in Opp. to Sum. Judg. 6). The pluralization, according to plaintiff, indicates an ambiguity as to the parties' intention to have more than one option renewal. ( See id.). Second, plaintiff contends that the lease is ambiguous as to the method for exercising the option. ( See id.). The Court finds that both arguments fail to indicate ambiguity. The first contention is unsuccessful because the pluralization of "Options" in the title indicates that the option will be available at the end of each year's term, indicating multiple options, nothing more. As for the plaintiff's second contention, ambiguity as to the method for exercising the option is irrelevant to the issue of the duration of the lease. Therefore, in the absence of ambiguous terms in the lease, the Court finds that parol evidence is not admissible to clarify the intentions of the parties.
In light of the Court's finding that the contract is unambiguous and void, the Court need not address defendants' public records argument.
III. Conclusion
In sum, the Court finds that there is no genuine issue of material fact as to whether the lease grants plaintiff an unlimited option to renew and is therefore a perpetual lease, which is violative of Louisiana law. For the foregoing reasons, the Court GRANTS defendants' motion for summary judgment.