Opinion
No. 00-3096, SECTION "R" (1).
January 18, 2001.
ORDER AND REASONS
Before the Court are cross motions for summary judgment by defendants, Joseph F. Wegmann and Susan W. Collins, and by plaintiff, Motiva Enterprises. For reasons stated below, the Court grants plaintiff's motion for summary judgment and denies defendants' motion.
I. Background
The material facts of this case are not contested by the parties. On May 25, 1967, Shell Oil Company and Joseph F. Wegmann, Jr. entered into a lease agreement of immovable property located at 4400 Clearview Parkway in Metairie, Louisiana, whereby Wegmann would lease this property to Shell. Plaintiff, Motiva, is the assignee of Shell's interest in the lease, while defendants, Joseph F. Wegmann III and Susan W. Collins, are successors-in-interest to the original lease. This lease provided an option to buy the property for the price of $175,000, at any point during the contract. In 1967, when the contract was entered, the property was appraised at a value of $105,600. Shell later improved the property with a functioning gasoline station.
Plaintiff exercised the purchase option by sending letters to defendants dated May 1, 2000 and October 11, 2000, asserting that plaintiff wished to exercise Shell's option under the lease to purchase the property for $175,000. On August 20, 2000, the property was appraised at the price of $595,000. The appraisal was conducted without considering the improvement of the gas station. Plaintiff disputes the accuracy of this appraisal but does not dispute that the value of the property today is in excess of twice the option value, or greater than $350,000. Defendants argue that because the fair market value of the property today is more than twice the option price, the purchase provision should be annulled due to lesion beyond moiety.
II. Discussion
A. Summary Judgment Standard
Summary judgment is appropriate when there are no genuine issues as to any material facts, and the moving party is entitled to judgment as a matter of law. See FED. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 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), abrogated on other grounds by Little v. Liquid Air Corp., 37 F.3d 1069 (5th Cir. 1994) ( 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 for 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).
Lesion
The dispositive issue here is whether the proper time as of which to value the property in a lesion case is when an option was granted or when the option is exercised. Plaintiffs contend that the court must compare the value of the property at the time the option was granted in 1967 with the option price, i.e. $105,600 to $175,000. Defendant claims that the court must compare the value of the property at the time the option is to be exercised with the option price, i.e. $595,000 to $175,000.
The rescission of a sale for lesion beyond moiety may occur "when the price is less than one half of the fair market value of the immovable." LA. CIV. CODE art. 2589. Article 2590 of the Louisiana Civil Code provides that when a sale is preceded by an option contract, the property is valued as of the time of the option contract in determining whether a sale is subject to the defense of lesion. Article 2590 provides:
The immovable [property] must be evaluated according to the state in which it was at the time of the sale. If the sale was preceded by an option contract, or by a contract to sell, the property must be evaluated in the state in which it was at the time of that contract.
LA. CIV. CODE art. 2590 (1993).
It is true that in Lakeside Dairies v. Gregersen, the Louisiana Supreme Court held that when the defense of lesion beyond moiety is raised, the true value of the property is determined as of the date the option was exercised, not the date of the lease contract. 46 So.2d 752, 757 (La. 1950); see also Ronaldson Puckett v. Bynum, 48 So. 152 (La. 1908); see also Alluvial City Farrastead Assoc. Inc. v. Kimbrough, 186 So.2d 698, 702 (La.App. 4th Cir. 1966) (comparing the fair market value of the property at the time the option is exercised with the exercise price when considering the defense of lesion of moiety). At the time of the Lakeside decision, however, the text of Article 2590 did not address valuation of the immovable under an option contract. Article 2590 read:
To ascertain whether there is lesion beyond moiety, the immovable must be estimated according to the state in which it was, and the value which it had at the time of the sale.
LA. Civ. CODE art. 2590 (1870). The Lakeside court reasoned that "a mere purchase option, on being granted, contains no elements of a sale;" therefore the grantee has no enforceable rights until he exercises the option. Lakeside, 46 So.2d at 757.
The Court finds that the amendment of Article 2590 evidences the Legislature's clear intent that courts must value property as of the time of the option contract, not the sale contract, when a party exercises an option to buy, and the seller raises the defense of lesion. Thus, Lakeside is no longer good law on the issue of the date of valuation for lesion purposes.
Now that the Court has determined when the property must be evaluated, it must determine whether the defense of lesion beyond moiety applies. Proof of lesion beyond moiety must be with reasonable certainly; there must be clear and exceedingly strong evidence that the price given is less that one-half the value of the land. See Hemenway Furniture Co., Inc. v. Corbett, 126 So.2d 666, 671 (La.App. 3d Cir. 1961). In order for the defense to apply, the Court must find that the value of the property in question at the time the option was granted was equal to or greater than $350,000, or twice the price contained in the option. The parties do not dispute that the lease containing the purchase option was executed on May 25, 1967. The purchase price contained in this lease was $175,000. ( See Styslinger Aff. Ex. A.) In March of 1967, two months prior to the execution of the lease, the property was appraised for $105,600. ( See id. at Ex. H.) Two years later, the appraisal was updated and the property plus an additional parcel of land was appraised at $148,300. ( See id.) Therefore, the Court finds that there is no dispute that the option price was not less than one half the value of the property at the time plaintiff granted the option, and the defense of lesion beyond moiety does not apply.
Because the Court has found that the defense of lesion beyond moiety does not apply, plaintiff is entitled to specific performance of the contract entitling it to purchase the land for $175,000. See LA. CIV. CODE, art. 2623 (giving either party to a contract to sell the right to demand specific performance).
III. Conclusion
For the foregoing reasons, the Court grants plaintiff's motion for summary judgment and denies defendants' motion for summary judgment.
New Orleans, Louisiana, this 18th day of January, 2001.