Procrastinators’ Programs
Sales and Leases: A 2013 Update
Marie A. Moore
Sher Garner
Course Number: 0200131218
1 Hour of CLE
December 18, 2013
1:20 pm – 2:20 pm
SM
MARIE A. MOORE is a Member of Sher Garner Cahill Richter Klein & Hilbert, L.L.C.
and practices in its real estate and transactional group. She negotiates and advises clients
on construction contracts, real estate development contracts, leases, lending issues and
loan agreements, and insurance requirements in contracts. She is the Vice Chair of the
Leasing Group of the ABA’s Real Property, Trust and Estate Section, Co-Chair of the
Section’s Corporate Sponsorship Committee, a member of the Section’s Diversity
Committee, and the Last Word editor of Probate & Property magazine. She is also a
Fellow in the American College of Real Estate Lawyers and a member of its Insurance
and Leasing Committees, the Chair of the Urban Land Institute, Louisiana District
Council, and the co-founder of New Orleans CREW. Marie has also been named one of
Louisiana’s Best Lawyers and one of the 25 Best Woman Lawyers in Louisiana. She has
published frequently in Probate & Property magazine and the Retail Law Strategist. Ms.
Moore speaks annually for the New Orleans Bar Association on Recent Developments in
Sales and Leases and has presented on lease and insurance issues for the Louisiana Bar
Association, International Council of Shopping Centers Law Conference, and American
Bar Association’s Real Property Trust and Estate Section’s Spring Symposia. She can be
reached at 909 Poydras Street, Suite 2800, New Orleans, Louisiana 70112, (504) 2992108 (telephone), (504) 299-2308 (facsimile), [email protected].
SALES AND LEASES: A 2013 UPDATE
Marie A. Moore
Sher Garner Cahill Richter Klein & Hilbert, L.L.C.
909 Poydras Street, 28th Floor
New Orleans, Louisiana 70112
The Louisiana legislature was quiet this year with respect to sales and leases. However,
the cases decided during 2013 were very interesting, particularly with respect to landlord
remedies and fraud and bad faith in property transfers. The cases also deal with a variety of
other issues, some of which are instructive and all of which remind us of principles of law that
we apply every day.
A.
1.
LEASE CASES OF INTEREST
Landlord Remedies.
Duhon v. Briley, 2012-1137 (La. App. 4 Cir. 5/23/13), 117 So.3d 253. Tenants (who were
planning to operate a sports bar in the downstairs leased premises and a reception hall in
separately leased upstairs leased premises) filed a wrongful eviction and conversion suit against
Landlord, and Landlord sued Tenants for property damage. Tenants leased the space for 2 years
and had to perform renovations on the space to begin operations. After less than a year,
Landlord changed the locks on the space, and Tenants filed suit claiming wrongful eviction. The
trial court awarded the Tenants $175,722.99 ($78,625.09 for expenses, $22,917.00 for lost
contents, $57,180.90 in lost wages (profits), $7,000 for deposit returns, and $10,000 for mental
anguish) plus legal interest. It awarded Landlord $8,306.13 plus legal interest for repairs. The
Landlord appealed claiming that the trial court had focused on the wrongful eviction when the
evidence showed that the Tenants intended to abandon and that the damages were excessive.
Landlord claimed that he reasonably believed that Tenants were going to abandon and that he
was justified in retaking possession. He claimed that the Tenants had told him that if he didn’t
waive the rent while a termite issue was being repaired, they’d move out. He asserted that a
neighbor then called and told him his Tenants were moving – when he arrived, he observed that
his air conditioning units were missing and a U-Haul truck was being used to move Tenants’
property out of the space. He also pointed out that Tenants had not paid the June rent or renewed
their liquor license. On the other hand, Tenants asserted that they had not vacated, they had until
the 5th to pay the rent, they were only moving tables because of a wedding reception, and they
could not obtain a liquor license because of the termites. Both parties agreed that Tenants had
not told Landlord that they were leaving and that after the lock-out, one of Tenants’
representatives requested entrance, but Landlord denied the entrance. The appellate court
therefore refused to disturb the trial court’s finding of no justification for the self-help eviction.
The appellate court also refused to find an abuse of discretion in the loss of contents and
expenses awarded, but it found that that (i) with respect to the $57,180.90 in lost wages (profits)
the court had erred by failing to consider that the expenses were far greater than the income, so
the award of lost income was overturned, and (ii) the deposit award was $1,000 greater than the
$6,000 deposit set out in the Lease. The court upheld the award for mental anguish and
inconvenience – the appellate court observed that the trial court had not awarded disguised
punitive damages but had instead tried to determine the value of the mental anguish, humiliation,
and embarrassment caused by the Landlord’s having wrongfully deprived the Tenants of their
property – even though there was no expert evidence of these damages.
Johnson v. Pueblo Viejo, Inc., 47,586 (La. App. 2 Cir. 4/10/13), 2013 WL 1442255. Landlords
brought an action against restaurant Tenants for unpaid rents, reimbursements for repairs, and
insurance premiums. The trial court held that the Tenants had taken the space “as is” and were
responsible for the repairs. The trial court awarded the Landlord rent for the remaining 16
months of the term (after Tenants stopped paying), amounts due for performing repairs, and
amounts paid by Landlord to provide insurance to cover the insurance that the Tenant was
required to maintain but had failed to maintain. The appellate court affirmed the trial court’s
awards and awarded $2,000 as the Landlord’s attorneys’ fees for defense of the appeal.
Southpark Community Hospital, LLC v. Southpark Acquisition Co., 2013-59 (La. App. 3 Cir.
10/30/13), WL 5813179. In 2007, Broussard as landlord leased a hospital to Southpark for 20
years for the operation of a hospital in accordance with law. Various physicians guaranteed the
lease obligations in their ownership percentages. The hospital was in financial trouble from the
start, and in March 2009, Broussard notified Southpark that it had failed to pay March 2009 rent
and if this rent was not paid in 10 days, Broussard would pursue its default remedies – the letter
also notified Southpark that it was in default under a September 15, 2008, $361,000 promissory
note and that the entire note was due. Southpark did not have the money to pay these debts, and
it sent cash call letters to the guarantors but the full amount due was not provided. The hospital
then closed. Broussard filed a lawsuit seeking a declaratory judgment that Southpark had
abandoned or was abandoning the hospital, seeking seizure of the hospital property through
sequestration (rather than cancellation), and accelerating all future rent due under the Lease –
aggregating $6,120,513. The trial court granted the sequestration and appointed a custodian and
receiver for the property. The main issue at this point was Southpark’s claim for future rent.
The appellate court recognized the rule, which the Louisiana Supreme Court explained in
Richard v. Broussard, 495 So.2d 1291 (La. 1986), that if a tenant breaches the lease, the
landlord has the mutually exclusive right to cancel the lease and recover accrued rents or to
enforce the lease and recover accrued rent and future accelerated rent (if the lease provides for
accelerated rent). If the landlord elects to cancel the lease, it is not entitled to future rent.
Attempts to circumvent these rules in the lease are unenforceable, so if a contract permits the
landlord to disturb the tenant’s possession and recover future rent, this provision will not be
given effect. The trial court held and the appellate court agreed that in this case Southpark did
not abandon the premises, but was actually evicted by the landlord’s seizure of the hospital and
its obtaining of an order appointing a custodian since these actions denied the tenant peaceful
possession of the property, so the Landlord had no right to future rent. Landlord had also sent an
email to Southpark telling it that Southpark has no further authority to be on the leased premises,
even to access the medical records of its former patients. Interestingly, the court dredged out
Henry v. Rose Merchantile & Mfg. Co. v. Stearns, 154 La. 946, 98 So. 429 (1923), a case in
which the landlord seized the property in the rented warehouse then stored the seized property in
the warehouse, for the principle that a landlord that takes possession of the leased property (in
that case by storing property seized by landlord in it) evicts the tenant and forfeits further rent.
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GE Commercial Finance Business Property Corp. v. Louisiana Hospital Center, 2013-0029 (La.
App. 1 Cir. 9/13/13), 2013 WL 5015902. Hammond Area Economic and Industrial
Development District (“HAEIDD”) was the owner of property pursuant to an economic
development bond lease. The bond tenant (“LHC”) defaulted on the bonds and the lease, and
HAEIDD accelerated the rent. It then entered into a Memorandum of Agreement (“MOU”) with
the new tenants (“Brunos”) granting them the right to lease the property – the Brunos paid a
nonrefundable fee of $145,000 to HAEIDD for its option. HAEIDD then entered into a lease of
the property with them. The Brunos later claimed that HAEIDD had accelerated the rent under
the LHC lease and that this was contrary to HAEIDD’s statements to it that the LHC lease had
terminated – the LHC lease never terminated, and the Brunos were entitled to return of their
$145,000. The trial court granted summary judgment in favor of HAEIDD, but the appellate
court reversed and found that there was a genuine issue of material fact as to whether the Brunos
were induced to enter into the lease by misrepresentations on the part of HAEIDD.
Apex Realty, LLC, v. Vidrine’s of Gonzales, LLC, 12-530 (La. App. 5 Cir. 3/13/13), 112 So.3d
301. Apex, the purchaser of property, took a default judgment against Vidrine’s, the tenant, for
breach of an unrecorded lease (actually a sublease, but the then owner and prime tenant were
Shoney’s affiliates) entered into under the prior owner. Apex claimed that Vidrine’s had failed
to pay rent and property taxes for several months – the checks for some of these months had been
returned as NSF. This appeal arises from a default judgment in favor of Apex. Vidrine’s argues
that because the sublease was not recorded and the Act of Sale from the prior owner did not
mention the sublease, Apex, the current owner, has no right to enforce the lease. The appellate
court observed that an unrecorded lease can be acknowledged and affirmed by the actions of the
purchaser, and in this case it was affirmed by Apex by its acceptance of rent for 3 years before
this default. Consequently, Apex had the right to enforce the Lease. Vidrine’s then claims that
Apex did not give proper notice of default because the notice was mailed to an address that was
different from the one set out in the Lease. The appellate court rejected this argument since it
observed that Vidrine’s lease did not require that any notice be given to Vidrine’s. It therefore
upheld the award to Apex of the judgment for past due rent.
Beebe’s on the Lake, LLC v. Skansi, 2012-0672 (La. App. 4 Cir. 4/17/13), 115 So.3d 630. In
2007, Beebe’s leased the ground floor of a building on Pontchartrain Blvd. for the operation of a
jazz club and restaurant. In January 2009, Beebe’s announced a closing for a 2-week vacation
then never re-opened. On February 5, 2009, Landlord tacked a notice of eviction on the door of
the premises and formally evicted Beebe’s three weeks later. On February 10, 2009, Tenant filed
suit claiming wrongful eviction, breach of the lease, trespass, conversion, and intentional torts –
Landlord had not given Tenant 30 days’ prior notice before the eviction. After trial on the
merits, the trial court found that the termination of the lease and eviction of Tenant was proper
by reason of abandonment, and the appellate court agreed.
Tenant had been late in paying its rent, and on January 6, 2009, the power to the building was
turned off by reason of Tenant’s non-payment of the utility charges (Landlord’s office was on
the second floor, so he noticed it immediately). Tenant then asked for permission to enter and
remove food from the freezer and posted the sign stating that it was closing for 2 weeks (Tenant
says that it did not ask permission to remove the food because it didn’t need permission). When
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Landlord returned to the building the next morning, he found that the locks had been changed
(Tenant claims that it did not change the locks). On January 10, 2009, Landlord received an
email from Tenant saying that Tenant needed to close to avert bankruptcy, that he would pay the
past due amount, and that Tenant was willing to sell its equipment to the new tenant (Landlord
said the equipment was already there when the premises were leased to Tenant). Landlord took
this as notice of abandonment, and later in January, met with Tenant and a new partner about
signing a new lease. When Landlord did not immediately agree, Tenant took the position that his
old lease was still in effect. The appellate court upheld the trial court’s finding of fact that the
thirty (30) day notice required in the lease was not required because Tenant had abandoned the
space as shown in the January 10, 2009 email. The court held that this email terminated the
Lease. The court also upheld Landlord’s taking of musical equipment belonging to a third
person located on the premises – the court held that the landlord’s lien extended to this third
party equipment.
2.
Tenant Self-Help.
727 Toulouse, L.L.C. v. Bistro at the Maison de Ville, L.L.C., 2012-1014 (La. App. 4 Cir.
8/21/13), 122 So.3d 1152. Tenant alleged that Landlord breached the terms of its lease by
removing the HVAC units serving the tenant’s premises from adjoining property. Landlord
discovered that the HVAC units were in an alley and were on a platform attached to the
neighboring property – they were not on the leased property – and told Tenant to relocate them
so that Landlord could renovate the neighboring property. Tenant did not do so. When Landlord
removed the HVAC equipment in accordance with its many notices to Tenant, Tenant stopped
paying rent, but continued to assert that it had the right to occupy and operate the leased space.
Landlord then filed suit to evict Tenant, and Tenant defended on the ground that it had the right
to stop paying rent under La. Civ. Code. art. 2715. The trial court granted summary judgment in
favor of Landlord and the appellate court agreed. It observed that article 2715 states that if the
thing is partially destroyed or its use is otherwise substantially impaired, the tenant may obtain a
diminution of the rent or dissolution of the lease, whichever is more appropriate under the
circumstances. Tenant claims that it was entitled to a complete rent abatement. The court stated
that a landlord has no legal obligation to provide air conditioning, but that regardless of the law
on this point or whether the lease imposed these obligations on this Landlord, the Tenant had no
right to stop its rent – article 2715 did not give it the right to unilaterally diminish its rent
payments through “self help.”
3.
Eviction of Public Assistance/Public Housing Tenants.
Sauer v. Johnson, 2012-0197 (La. App. 4 Cir. 12/13/12), 106 So.3d 724. On October 31, 2011,
Landlord sent Tenant (who received Section 8 voucher assistance) notice to vacate stating that
the lease was a month-to-month lease and she wanted Tenant to vacate her apartment by the end
of the November. Tenant did not vacate. In response to Landlord’s eviction action, Tenant filed
an exception of lis pendens claiming that on November 30, 2011, she had filed a Fair Housing
Act claiming that discrimination. The trial court overruled Tenant’s exception and that the
landlord was entitled to possession for any reason once the lease had terminated by the 30 day
notice of non-renewal. The Tenant in this case claimed that a neighbor’s barking dog had killed
her cat, that she had various mental disorders, and that she was being stalked. She had asked the
4
Landlord to install bars and an alarm on the property. The Landlord didn’t want bars on the
windows of its property, and no evidence showed that she was aware of the Tenant’s mental
disorders until after she gave the notice to vacate. The appellate court upheld the trial court’s
overruling of the Tenant’s exception of lis pendens because a judgment of discrimination would
not be res judicata in the Landlord’s eviction proceeding. It also observed that when a month-tomonth lease has terminated, the Landlord may demand possession of the property without giving
any reason. The court also held that under the Housing Assistance Payments (HAP) contract
with HANO, the initial lease term had ended in March 2011, and the fact that the tenant
remained on the premises after this termination date created only a month to month lease, not a
fixed extension term as that term is used in the HAP contract (the HAP contract prohibits
termination during the initial or an extension term without good cause).
River Garden Apartments v. Robinson, 2012-0938 (La. App. 4 Cir. 1/23/13), 108 So.3d 352.
Robinson rented a public housing apartment from a Landlord that was acting as agent or
instrument of the Housing Authority of New Orleans (HANO). Landlord received several
complaints and at least one letter claiming that Robinson was disturbing another tenant’s
peaceful possession. For this reason, Landlord sent Robinson a notice to vacate, citing her
apartment as a meeting place for persons selling narcotics and stating that it was terminating her
lease due to criminal activities by members of her household and those under her control. At
trial, Landlord’s representative said that Robinson was not being evicted for engaging in criminal
activities herself – she was being evicted because she invited or allowed persons to participate in
criminal activities while in her residence. Security stated that there were a lot of suspicious
people around the apartment and he spent a good bit of time watching the apartment. A neighbor
(Officer Aranda) testified that he asked Robinson’s son and brother to stop smoking marijuana
around the apartment. The trial court found that the eviction was justified. The appellate court
found that Landlord had not given proper prior notice or given the administrative hearing that is
required under 24 C.F.R. § 966.51(a)(2) if the grievance involves criminal activity, but that
Robinson was not harmed or prejudiced by this failure (she had received a notice to vacate and
she and her counsel had met with Landlord informally before the eviction – she was also
represented by counsel at the eviction proceeding). The court also held that she was afforded
due process and that the eviction was justified by the evidence.
Guste Homes Resident Management Corp. v. Thomas, 2012-1493 (La. App. 4 Cir. 5/29/13), 116
So.3d 987. Criminal activity will not justify a public housing eviction unless it threatens the
health, safety, or peaceful enjoyment of the premises by other residents or staff. A tenant’s
misdemeanor theft of $2,500 of goods from near the locker room at the New Orleans Arena did
not justify his eviction.
Housing Authority of New Orleans v. King, 2012-1372 (La. App. 4 Cir. 6/12/13), 119 So.3d 839.
HANO’s eviction of Tenant under the “one-strike rule” was overturned by the appellate court.
Landlord claimed that Tenant had been stopped by the police for a seatbelt infraction and was
charged with interfering with a police investigation, battery on a police officer, resisting arrest,
and threats to a police officer, but in the eviction, HANO offered no testimony or evidence –
only arguments of counsel. The police report was not authenticated or introduced into evidence.
The trial court therefore erred in relying on this report and in evicting Tenant.
5
4.
Unpermitted Assignment/Landlord Not Estopped.
Kano Investments, L.L.C. v. Kojis Construction, L.L.C., 2012-1269 (La. App. 3 Cir. 3/6/13), 113
So.3d 1113. Original owner (Shelton) signed a lease with Tenant (Kojis) for the operation of an
Anytime Fitness fitness club. Kojis subleased the premises to Three Monkeys. On November
22, 2011, Kano acquired the property from Shelton and received an assignment of the lease to
Kojis. On November 30, 2011, Kojis signed a consent to assignment between Kojis as landlord,
Three Monkeys as tenant, and Chad Laviolette as subtenant (an Anytime Fitness franchisee). In
February 2012, Kano filed suit for a declaratory judgment that Kojis violated the lease by failing
to obtain written permission to sublet or assign and that the Lease should be cancelled. The trial
court found that there were no issues as to Kojis’ lease violation. The Lease permitted
assignment with Landlord’s consent (no reasonableness language) and stated that an assignment
without consent would be a default. The court refused to admit evidence of the parties’
negotiations because the words of the Lease were clear. Because Tenant (Kojis) did not obtain
the consent of Landlord (Kano) to its assignment of the Lease, the Lease was violated – and on
rehearing, the court found that the payment and acceptance of rent for three months did not estop
Landlord from asserting its breach of lease claim (the court observed that the Lease stated that
Landlord’s failure to exercise its rights promptly did not operate to forfeit these rights). Kojis
then sought to recover the amounts it had spent improving the space, and the court held that
under La. Civ. Code art. 2695, there were questions of fact as to whether Kano had asked Kojis
to remove the improvements as required under the lease accessions clause (art. 2695), and the
court remanded to the trial court to determine whether Kano was obligated to reimburse Kojis for
the improvements.
5.
Tenant’s Responsibility With Respect to Common Areas.
Honore v. Family Dollar Stores of Louisiana, Inc., 2013-93 (La. App. 3 Cir. 6/12/13), 115 So.3d
1234. In this case, a third party (Honore) was injured when she stepped into a hole in a shopping
center while visiting Family Dollar, a tenant. She sued the center and Family Dollar alleging that
it had a duty to remedy the condition of the parking lot or to warn its customers of the condition
of the parking lot. The trial court granted summary judgment in favor of Family Dollar on the
ground under the Lease, Landlord, not Tenant, had the obligation to repair the parking lot. The
fact that Tenant (Family Dollar) had the right under the lease to perform at Landlord’s expense
duties that Landlord failed to perform did not impose a duty on Family Dollar to do so, even
though Family Dollar’s employees apparently knew of the condition and asked the Landlord to
remedy it (an employee allegedly told Honore when it happened that he’d been asking the
Landlord to fix the lot). The appellate court affirmed (one judge dissented stating that there is an
issue of fact as to whether the landlord or the tenant had actual custody and guard of the parking
lot).
6.
Right of First Refusal to Buy.
Royal Oldsmobile Co. v. Heisler Properties, L.L.C., 12-608 (La. App. 5 Cir. 5/16/13), 119 So.3d
84. Royal leased land from its owner. The lease was recorded and gave Royal a right of first
refusal to buy the leased land should its owners receive a bona fide offer to buy that they desired
to accept – certain intra-family transfers would not trigger the right of first refusal. The lease
6
term began in 1977, when the land was owned 50% by Frank Dimitri and 50% by Joseph Dimitri
(“Joseph”). The appeal was based on whether the transfer of Joseph’s 50% interest triggered the
right of first refusal. It seems that when Joseph died in 2003, his widow and succession sold the
50% interest and other properties to an apparent relative, and she sold all of the properties she
had acquired to Heisler, a third party, on the same day. Royal was not given notice and an
opportunity to purchase. Heisler notified Royal of the transfer in March 2004, when he told
Royal to start making rent payments to him. Royal responded with a letter notifying Heisler that
it desired to exercise its right of first refusal, then it filed suit against Heisler and other
defendants. During the pendency of the suit, Heisler sold half of its 50% interest to Mr. Klein.
The trial court ruled that although after Heisler’s purchase of the property, Royal had failed to
pay the right amount of rent, Royal was still entitled to specific performance of right of first
refusal. The appellate court upheld the trial court’s decision. It agreed with the trial court that
Royal’s default after Heisler’s purchase did not deprive it of its right of first refusal because that
right had been triggered by Heisler’s purchase, which occurred before the default. A right of
first refusal is a suspensive condition, and upon the occurrence of this suspensive condition,
Royal immediately gained the right to buy the land it leased. Also because a copy of Heisler’s
offer was never delivered to Royal (no statement of the amount paid was delivered), Royal’s 30day exercise period did not start. The court also rejected Heisler’s argument that the right of first
refusal did not apply because it had bought other properties in addition to the Royal property.
7.
Landlord’s Obligation to Improve the Property.
Silwad Two, L.L.C. v. I Zenith, Inc., 2012-0282 (La App. 1 Cir. 12/21/12), 111 So.3d 405.
Zenith leased a convenience store to Silwad, and Silwad signed a petition to enforce by specific
performance or damage Zenith’s breach of an obligation to perform renovations. The question
was whether the lease required Zenith to install gas pumps. This was apparently a judgment of
default, and the question is whether Silwad presented sufficient proof of its claims for the default
judgment to stand. The lease was introduced into evidence, and it said that if the in-ground
gasoline storage tanks were declared in need of removal by the appropriate governmental
authority, Zenith would remove and replace the tanks at its expense, but in the event of tank
removal, Silwad would repave and area above the tanks and re-install pumps, pump islands, and
other items made necessary. The lease expressly said that Zenith would provide a canopy and
card readers at its expense. However, there were no gas pumps on the property, and the trial
court agreed that Zenith had no obligation to provide gas pumps. Although the trial court
provided an alternative of damages in the amount of the lost profits, since there was no
obligation to install pumps, lost profits should not have been assessed. It also amended the
award of attorneys’ fees to Silwad to $1,500 from $8,500.
Graci v. Palazzo, 12-853 (La. App. 5 Cir. 5/30/13), 119 So.3d 741. After Katrina, Tenant
asserted that the lease required the Landlord to repair Tenant’s retail unit to its pre-hurricane
condition. Landlord gutted the space and performed minimal repairs, but Tenant wanted
Landlord to restore the tanning salon improvements originally installed by Tenant. Tenant
stopped paying rent because the repairs were not completed – the lease provided that rent would
abate from the date of the casualty until the date repairs were completed, and Landlord had
Tenant evicted for non-payment of rent on March 14, 2007. The trial court rendered judgment in
favor of Tenant for the estimated cost of its build out, $5,250 for lost rental payments, and
7
$20,000 for mental anguish – it made no award for lost profits. Apparently, Landlord received
some flood insurance payments based on the Tenant’s improvements but applied these sums to
its loan. The appellate court upheld the awards made by the trial court. It found that the
Landlord was required to insure the entire building and that this included Tenant’s build out
against casualty loss and that it breached the lease by failing to perform this restoration.
8.
No Implied Use Obligation.
Sapir v. Yum! Brands, Inc., 2012-0824 (La. App. 4 Cir. 12/5/12), 106 So.3d 646. Sapir leased to
Taco Bell the right to use a piece of property near the corner of Tulane and Broad Street to ease
traffic and for parking for the customers using the Taco Bell restaurant next door. As a result of
Hurricane Katrina, the Taco Bell restaurant was damaged, Taco Bell decided not to re-open, and
it notified Sapir of its intention to terminate the lease. Sapir filed suit to enforce the lease. In a
settlement, Taco Bell agreed to continue to make the lease payments. Sapir asserts that it was its
understanding that after the settlement Taco Bell would make efforts to re-open its restaurant.
An assignee of Taco Bell started operating a parking lot on the property. Sapir sued claiming
that the lease required a Taco Bell restaurant and only a Taco Bell restaurant on the property.
However, the trial court granted Taco Bell summary judgment on this issue because no provision
of the lease required there to be a Taco Bell on the property or restricted use of the property to
parking in connection with a Taco Bell only and the lease permitted Taco Bell to assign so long
as the monthly rent payments continued. The appellate court affirmed.
9.
Prescription on Lease Malpractice (But Really, Read the Lease).
Williams v. CDY Development Corp., 48,359 (La. App. 2 Cir. 8/7/13), 2013 WL 4008916.
Office space tenant sued her lawyer for malpractice claiming she had wanted a 4 year lease but
the lawyer drafted a lease for 24 months with an option for an additional 24 months. She also
filed a disciplinary complaint. Plaintiff’s co-tenant had wanted a 24 month lease with an option
to extend for 24 months instead, he was the primary contact with the attorney, and that’s the way
the document was drafted. The Plaintiff signed the lease. The option to extend was not
exercised. The attorney filed an exception of prescription and/or preemption. The co-tenant
testified that the Plaintiff understood that the term was 2 years with an option to extend for 2
years when the lease was executed. Although Plaintiff claimed that the multiple references to 24
months in the lease confused her and that she did not read or understand the lease when she
signed it, the trial and appellate courts agreed that she had knowledge of the term when she
signed the lease – and certainly had a duty of inquiry – so the grant of the peremptory exception
was affirmed.
10.
Landlord Repair Obligations/Premises Liability.
Pratt v. Landings at Barksdale, 2013 WL 5376012 (W.D. La. 2013). Airman Pratt moved his
family out of a dwelling that had sustained roof damage from a tree branch falling on the
property. He then claimed that toxic mold had damaged his family. He also claimed that the
landlord had defamed him in an email to Airman Pratt’s CO in which the landlord asked for his
address because Airman Pratt had abandoned the premises and the landlord needed to send him a
demand letter for money owned. The court held that Airman Pratt had failed to show sufficient
8
causation with respect to the toxic mold claim (the family had pre-existing well-documented
respiratory problems). It dismissed that claim by summary judgment, and also dismissed by
summary judgment Airman Pratt’s defamation claim (the court observed that Airman Pratt had
indeed never given formal notice that he was moving out and terminating the lease as required in
the lease).
Falcone v. Touro Infirmary, 2013-0015 (La. App. 4 Cir. 11/6/13), 2013 WL 5946588. Touro
leased space in its hospital to Specialty Hospital of New Orleans (“SHONO”), an independently
owned long-term acute care hospital within the Touro building. As a result of Katrina, SHONO
and Touro lost power, the temperature rose, and Mr. Falcone expired in the SHONO unit
allegedly by reason of the heat. Mr. Falcone’s relatives (Plaintiffs) sued SHONO and Touro, as
its landlord. The jury found that Touro was not negligent. The appellate court stated that Touro
owed SHONO patients a duty to provide adequate ventilation, and that Touro had breached that
duty (based on a bench trial in another case arising out of the death of another SHONO patient
after Katrina). The question was whether Touro had permitted an unreasonably dangerous
condition that was not open and obvious to exist on its premises. The court observed that there
was conflicting testimony as to whether Touro’s premises were unreasonably dangerous, but that
since the jurors had weighed the conflicting testimony and found no breach of duty by Touro, the
jury may have determined either than the heat did not rise to the level of an unreasonably
dangerous condition or that they perceived it as an open and obvious hazard. Plaintiffs claimed
that the Lease required Touro to provide air conditioning even during periods of external power
failure, but the language of the Lease simply made Touro responsible for maintenance and
repairs associated with the ventilation and air conditioning. A separate Service Agreement
required Touro to provide “adequate” emergency power and emergency electrical service in
accordance with applicable safety requirements and as customarily maintained in an acute care
facility. The court found that there was sufficient testimony to permit the jury to conclude that
adequate emergency power was provided and that this obligation did not encompass providing
the SHONO unit with air conditioning when Touro itself was on emergency backup power. It
therefore affirmed the jury’s verdict.
Cennett v. Arceneaux, 12-706 (La. App. 5 Cir. 5/23/13), 119 So.3d 670. Apartment complex
tenants sued Arceneaux, the owner, for their exposure to raw sewage and sewage contaminated
soil coming up through the manhole covers and bathroom fixtures. Arceneaux asserted that the
trial court erred in its judgment against him because tenants did not show an unreasonably
dangerous defect on the property, his actions were not the cause of the damages (if any), and that
awards of damages and for mental distress were erroneous in the absence of physical damage.
The tenants relied on La. Civ. Code art. 2696 – the landlord’s warranty that the thing is suitable
for the purposes for which it was leased and that it is free of vices and defects that prevent its use
for that purpose. Arceneaux testified, among other things, that he had received no complaints
from the tenants – testimony that the trial court decided was not credible. The appellate court
upheld the trial court’s awards in favor of the tenants, including an affirmation of the trial court’s
award of damages for mental anguish caused by generally disgusting conditions.
9
11.
Tenant’s Damage to the Property.
Maloney Sept. L.L.C. v. Home Depot U.S.A., Inc., 2013 WL 3367198 (E.D. La. 2013). The court
granted summary judgment ordering Home Depot to remove an above grade concrete slab it had
installed and restore the underlying asphalt at the end of the term. It found that these were
repairs necessary to maintain the leased premises in good condition and repair.
12.
Sequestration.
Grantt Guillory Enterprises, Inc. v. Quebedeaux, 2012-931 (La. App. 3 Cir. 2/6/13), 110 So.3d
182. Landlord sequestered Tenant’s property, and Tenant claimed that the correct procedures
were not followed. Landlord alleged in its verified petition that amounts were owed, that it had a
lessor’s lien on all moveable property, and that a writ of sequestration was necessary to protect
Landlord’s rights. However, the appellate court found that these allegations were adequate for a
writ of sequestration. The appellate court held that the Sheriff inventoried the property and that
the sequestered property was properly turned over to Landlord as keeper, that Landlord properly
sold the live crawfish and other perishable in the prescribed manner and applied the net profits
toward the rent owed by Tenant, and that the fact that the Sheriff was Landlord’s was not
asserted at trial and did not taint the proceedings.
13.
Co-Owner as Landlord.
Brown v. Brown, 48,274 (La. App. 2 Cir. 8/7/13), 121 So.3d 1242. Plaintiff Ms. Brown sought
to evict her former brother-in-law, Carl Brown, from a home she co-owns with her former
husband, Charles Brown. Some years before, Charles had asked Plaintiff if his brother could
occupy the house and help care for his ailing father who lived across the street – Carl was to pay
Plaintiff $150 a month as rent for her half interest. By the time of the eviction though, Carl had
lived in the house for 7 years, it was in disrepair, and when she visited the house, Plaintiff found
11 people living in the 2- bedroom house. Carl and Charles testified that Carl did not agree to
pay rent and had never paid rent to Ms. Brown, the house had always been in terrible condition,
and that the only reason he’d moved in (in 2008 he claimed) was to keep the house from being
vandalized. The court held in favor of Carl and Charles. The appellate court reversed (Carl did
not file an appellate brief), finding that the consent of all co-owners is required for the lease or
encumbrance of property held in indivision, and that by seeking Carl’s eviction, Plaintiff showed
that she no longer consented. Her only burden of proof was to show that she owned the home in
indivision and that she no longer consented to Charles’ encumbrance of the property (by letting
Carl occupy it).
14.
Lease Expired – Who Owns the Improvements?
Wilson v. Louisiana, 2012 WL 6554018 (E.D. La. 2012). A metal structure was erected by a
tenant, then sold by that tenant to a successor tenant. The improvements were assessed
separately from the remainder of the property. After all leases terminated and the successor
vacated the property, no taxes were paid on the improvement, and Wilson purchased the
improvement at tax sale. Wilson didn’t pay the taxes either, and his interest in the property was
adjudicated to St. John the Baptist Parish in 2008. In 2010, Wilson filed a proceeding to quiet
10
his tax title to the structure. The landowners told him that the tax sale was a mistake and should
be cancelled. The landowners also sent correspondence to the assessor stating that the structure
had been damaged by a fire and was the property of the landowners since it was turned over to
the landowners when the lease ended. Without giving notice to Wilson, the assessor’s office told
the tax commission to cancel the assessment because the property had been destroyed by fire and
was the property of the landowners. Wilson challenged the ownership, and testimony indicated
that the structure was not in fact damaged by the fire. Wilson’s suit proceeded, with Wilson
claiming the cancellation had deprived him of a real and substantive right in the structure and
that his due process rights had been violated. The court held that the property had been
adjudicated to the Parish for Wilson’s non-payment of taxes, and title was vested in the Parish,
not Wilson. Although Wilson could have redeemed the property, as of the date of the court’s
decision, he had not done so. Consequently, he did not have a protectable property interest when
the tax sale was cancelled. However, it’s clear that if a tenant makes improvements on their
property, then at the termination of the lease, they need to check the tax records and clear up any
separate assessments.
15.
Tenant Restoration Obligations.
Succession of Sigur v. Herritzy, 2013-0398 (La. App. 4 Cir. 9/18/13), 2013 WL 5274246. In
2000, Landlord sued the Tenant health club operator for damage to commercial premises in
Chalmette, Louisiana. Landlord also claimed that Tenant had orally agreed to extend the lease,
but instead vacated without notice. Tenants denied having agreed to extend the lease, and
claimed that at the beginning of the term, Tenants had to perform extensive repairs and changes
to turn the property from a nightclub into a health club and that any damage was caused by
vandals. Landlord had photos that it alleged reflected the condition of the premises on the day
after Tenants moved out, along with repair invoices and estimates. The trial court believed the
Landlord and awarded damages for repair costs to the Landlord, and the appellate court affirmed.
The courts found that the leases were in effect and governed the parties’ obligations even though
their fixed terms had expired at the time Tenants moved out – notwithstanding the provisions
stating that the leases would not reconduct, the parties had agreed that the parties would remain
on the premises following the expiration, leading to month-to-month continuation of the or a new
lease under the same terms, each with the same result. The lease required that the Tenant keep
the premises in the same good repair as when received, decay and wear and tear excepted.
Tenant did not produce evidence that the premises were not in good condition when received,
and Landlord produced evidence that repairs and other work were needed to place the premises
in good condition after Tenant had vacated – the court observed that the Landlord did not have to
show that it actually performed the work.
State v. Louisiana Land and Exploration Company, 2012-0884 (La. 1/30/13), 110 So.3d 1038. If
a lease does not contain a provision requiring the lessee to restore the leased property to its
original condition, then it is governed by La. Civ. Code art. 2683(3), which provides that the
lessee has an obligation to return the property in the condition in which it was delivered to it
“except for normal wear and tear.” The lessor under a mineral lease claimed that the mineral
lease tenant violated this provision. It also made claims under the Mineral Code. Of course, the
mineral lessee cited Terrebonne Parish School Bd. v. Castex Energy, Inc., 2004-0968 (La.
1/9/05, 893 So.2d 789, for the proposition that the Mineral Code imposes no obligation to restore
11
the surface unless there is evidence that the lessee exercised its right unreasonably or
excessively. In this case, the mineral lessee agreed to fund the most feasible remediation under
La. R.S. 30:29, and the trial court decided that the only damages to which the lessors were
entitled was the amount necessary and to be deposited into the registry of the court for the agreed
remediation plan since the mineral lease was silent on the lessee’s restoration obligations. The
mineral lessee claimed that La. R.S. 30:26 is a substantive cap on damages resulting from a tort
or the implied restoration obligations under a mineral lease. The trial court granted partial
summary judgment in favor of the mineral lessee on this issue, but the appellate court reversed
this judgment and found that additional proceedings were necessary on the obligations of the
service companies working for the mineral lessees.
The Louisiana Supreme Court recognized that La. R.S. 30:29 does not deprive a landowner of its
substantive right to pursue a judicial remedy or receive a judicial award for private claims if it
has claims under the Civil Code lease articles or the Mineral Code, it affirmed the judgment of
the court of appeal, and it remanded the case to the trial court for further proceedings.
Wagoner v. Chevron USA, Inc., 48,119 (La. App. 2 Cir. 7/24/13), 121 So.3d 727. The mineral
servitude owners assigned their rights to sue for damages to the surface owners that acquired the
property after the mineral lessees caused the environmental damage. The surface owners had
sued previously without the express assignment, but their suit was dismissed under the
subsequent purchaser rule as explained by the Louisiana Supreme Court in Eagle Pipe & Supply
Inc. v. Amerada Hess Corp., 2010-2267 (La. 10/25/11), 79 So.3d 246. The surface owners
sought to amend their petition to assert that they had acquired the rights by express assignment,
and the appellate court found that the amendment should be permitted since the suit was not
barred by res judicata or lis pendens because the surface owners are appearing in a different
capacity.
B.
1.
SALE CASES OF INTEREST
Disclosure Form – Fill It Out Completely and Correctly.
Stutts v. Melton, 2013-C-0557 (La. 10/15/13), 2013 WL 5788757. Melton built a new residential
home in Walker, Louisiana, completing it in December 2004. He and his wife then lived in the
house for about 9 months before selling it to the Stutts. The Residential Property Disclosure
form provided by the Meltons under the Residential Property Disclosure Act, La. R.S. 9:3196 et
seq. (the “RPDA”) stated that there were no known defects in the roof; however, the Meltons had
previously discovered color bleeding in the walls due to a defect in the roof, and entered into a
settlement agreement with the roofing manufacturer with money paid to replace the roof. Of
course, the Meltons did not replace the roof – instead they cleaned the color bleeding on the
walls and driveway and installed gutters to prevent further color bleeding. Sometime after the
sale (but more than a year after the home was completed and occupied), the Stutts noticed color
bleeding by reason of defective roofing materials and contacted the manufacturer, who told them
that their sellers had already received the warranty money to replace the roof. The Stutts sued
the Meltons, claiming fraud and seeking a new roof or the amount received by the Meltons in the
settlement, plus the cost for additional related repairs, legal interest, and attorneys’ fees. The
Meltons claimed that the New Home Warranty Act, La. R.S. 9:3141 et seq. (the “NHWA”)
12
provided the only remedy for the buyers, and that since more than a year had passed since the
date on which the home was first occupied, they had no liability to the Stutts. The trial court
found in favor of the Stutts, but the Court of Appeal reversed this decision and held that the
NHWA governed and the Stutts had not filed within the NHWA thirty days after the NHWA
warranty period as required in the NHWA.
The Louisiana Supreme Court reversed the Court of Appeal and held that the fact that the home
had been occupied by the builder gave the buyers remedies under the RPDA – the Stutts were
not restricted to NHWA claims, but could recover from the Meltons for lying on the Residential
Property Disclosure form. The RPDA does not apply to transfers of residential real property that
has never been occupied, but the Meltons in this case delivered a Residential Property Disclosure
form because it is required when the builder has lived in the home. The Court made it clear that
although the form itself does not create a warranty (La. R.S. 9:3198(D)), a willful
misrepresentation does create liability. It found that the Meltons had knowingly misrepresented
that the home had a roof free from defects, then covered up the defect, committing fraud. Even
though the Stutts did not seek rescission of the sale, the court found that the Stutts could have
sought rescission and were therefore entitled to attorneys’ fees under the fraud article, La. Civ.
Code art. 1958, and although the Stutts did not seek rescission case, under the redhibition article
permitting rescission, La. Civ. Code art. 2545. This attorneys’ fees ruling is new law:
Although we have long held that attorney fees are not awarded unless authorized by
statute or contract, this case is distinguishable in that the fraud articles do not address an
award for damages at all where rescission of the contract is not sought. Thus, we resort
to equity in determining what sort of damages are awardable in this case. We find that in
mandating that a fraudulent party be liable for attorney fees in Article 1958, the
legislature was attempting to punish the fraud, regardless of whether rescission is sought.
Further, when the Stutts purchased this home, they were misled to believe that they were
purchasing a new roof with a lengthy warranty and no known defects. In seeking the
costs of a new roof, they are essentially asking for rescission of the contract as to the
roof. In addition, the comparable articles on redhibition also award attorney fees where
the seller “declares the thing has a quality that he knows it does not have ...” Accordingly,
the Meltons are liable for damages for their fraud even though the Stutts are only seeking
a new roof, and these damages include attorney fees.
Id. at 10. Interestingly, Justice Weimer concurred on the ground that it was not necessary to
resort to equity to reach this decision.
In re Hollander, 2013 WL 5476864 (E.D. La. Sept. 27, 2013); In re Hollander, No. 04-14550,
2013 WL 5965741 (Bankr. E.D. La. Nov. 7, 2013). The Hollanders (sellers) failed to disclose
fully the extent of prior repairs to the home to the purchasers in the disclosure form. In the first
decision (which followed several other decisions and remands), the Eastern District of Louisiana
remanded the matter to the Bankruptcy Court because it found that the Bankruptcy Court had
failed to properly evaluate whether state law fraud was present, although it observed that a
finding of intent to harm was not required to cause a claim to be nondischargable under
bankruptcy law. On this remand, the Bankruptcy Court found that the Hollanders’ omission was
either purposeful or with reckless disregard (in any event, knowing), but that the sellers did not
13
intend to cause loss to the buyers. The court cited Melton and observed that the Hollanders
discovered a defect in their home prior to listing it for sale, took substantial measures to remedy
the defect, and justifiably believed that it has been cured. However, the Hollanders did not
describe these prior repairs on their disclosure form – not to hide them, but because they believed
they had been corrected. Consequently, the Hollanders, unlike the Meltons, did not act
fraudulently under Louisiana state law, so an award of attorneys’ fees was not justified.
2.
Public Records Doctrine Yields to Fraud (and Bad Faith).
Longleaf Investments, L.L.C. v. Tolintino, 47,545 (La. App. 2d Cir. 12/5/12), 108 So.3d 157. On
December 6, 2005, Tolintino (Property Owner) and Longleaf entered into a purchase agreement
(the “Purchase Agreement”) with Young, a managing member of Longleaf, for certain property
in Bossier Parish (the “Property”), pursuant to which Tolintino was to retain one-half of the
minerals in certain parts of the Property. On January 17, 2006, Tolintino conveyed a portion of
the Property to Yolanda Williams (“Yolanda”, the daughter of Alvin Williams, Tolintino’s friend
and sometime chauffeur) and Zishun Moore (“Zishun”, Alvin Williams’ minor son) by quitclaim
deed (“Quitclaim 1”) for $1,800. Quitclaim 1 was recorded on January 24, 2006, and the
Purchase Agreement was recorded in February 22, 2006. On May 12, Tolintino conveyed
additional portions of the Property to Zishun by quitclaim deed (“Quitclaim 2”) for a stated price
of $12,000 (Tolintino later testified that the real price was $1,200 and that she received this
amount, while Alvin Williams testified that he paid $12,000 but provided no proof). Tolintino
later conveyed the Property to Longleaf after Longleaf sued for specific performance.
Longleaf then filed suit to quiet title asking that Quitclaim 1 and Quitclaim 2 be stricken from
the record as clouds on title, and the trial court nullified Quitclaim 2 because it was recorded
after the Purchase Agreement and Quitclaim 1 because it found that Tolintino and Alvin
Williams had conspired to defraud Longleaf and that it would be “unconscionable” to permit
these deeds to be considered valid.
Tolintino and Alvin Williams (on behalf of his children) appealed, claiming that under the public
records doctrine, the court erred in denying it ownership of the property conveyed in Quitclaim
1. Not surprisingly, the appellate court agreed with the trial court and invalidated Quitclaim 1 on
the ground of bad faith or fraud. In reaching this conclusion, the court had to explain its
deviation from the public records doctrine. It recognized that “[t]he primary purpose of the
public records doctrine is the protection of third persons from unrecorded interests.” 108 So.3d
at 160. However, the public records doctrine “does not create rights but rather denies the effect
of certain rights unless they are recorded” and is therefore “a negative doctrine.” Id. A third
party purchaser can rely on the public records only if he or she is not participating in a fraud or
acting in bad faith. Id. Fraud can be shown by a preponderance of the evidence – and this
evidence may be circumstantial. In this case, the court upheld the trial court’s factual
determination that Alvin Williams had knowledge of Longleaf’s purchase agreement and
conspired with Tolintino to avoid honoring the Longleaf Purchase Agreement by fraudulently
conveying the Property through Quitclaim 1 and Quitclaim 2 (although Longleaf didn’t allege
fraud or bad faith, the trial court viewed the totality of the facts alleged as showing fraud and bad
faith).
14
3.
Fraud and Purchase Agreements.
Benton v. Clay, 48,245 (La. App. 2 Cir. 8/7/13), 2013 WL 4008615. In this case, Mr. Clay and
Ms. Benton (a lifelong friend of Mr. Clay’s wife) agreed to purchase a tract of land in Union
Parish, Louisiana together, and they submitted the winning bid for the property when it was sold
at auction (the oral agreement to purchase together was reached to keep them from bidding
against each other). The evidence conflicted on what happened next. Mr. Clay made
arrangements to borrow money, and Ms. Benton received sufficient funds from her retirement
account, but at closing, only Mr. and Mrs. Clay appeared and purchased the property – Ms.
Benton was left out. After learning that Mr. and Mrs. Clay had purchased the property without
her, Ms. Benton went to the seller, and the seller told her that Mr. Clay had given them the
impression that she had no money to go forward with the acquisition. The seller then called Mr.
Clay, who was nonresponsive. Ms. Benton filed suit against the Clays seeking to have the
property re-conveyed to seller so that it could be conveyed to her. She also sought damages.
The Clays added the closing agent as a defendant (legal malpractice) and asserted claims against
the title company and Ms. Benton.
The trial court found that Mr. Clay knowingly and intentionally misrepresented to seller that Ms.
Benton did not have the funds to purchase the property, that Mr. Clay breached his oral
agreement to buy the property in co-ownership with Ms. Benton through bad faith and fraud, that
Ms. Benton had justifiably relied on this agreement to her detriment, and that Ms. Benton was
entitled to specific performance, damages, and attorneys’ fees.
The court recited the law on fraud and observed that it must only be proved by a preponderance
of the evidence, which may be circumstantial evidence. Intent to default and loss or damage
must be shown. It may be predicated on “promises made with the intention not to perform at the
time the promise is made.” Decision at 7. Similarly, intentional misrepresentation is a
misrepresentation of a material fact made with intent to deceive and causing justifiable reliance
with resulting injury. Id at 8. “Bad faith” means the conscious doing of a wrong for dishonest or
morally questionable motives – in the case of a contract, an obligor’s intentional and malicious
failure to perform his obligations is bad faith. Id. The appellate court found that the record
supported the trial court’s factual findings of fraud – that Mr. Clay had breached his oral
agreement to buy the property together with Ms. Benton. However, the court reversed the
portion of the judgment granting attorneys fees to Ms. Benton – a result that might have been
different had Stutts v. Melton been decided before this case.
Interestingly, the closing agent provided an assignment of rights by Ms. Benton to Mr. Clay as
part of the closing documents, but this document was never signed. Because the Clays did not
file their malpractice action against the closing agent until 2011 – more than 3 years after the
closing – the court agreed with the agent that the claim was barred by prescription.
4.
Fraudulent Conveyance.
Succession of Bennett v. Succession of Dowdy, 13- 322 (La. App. 5 Cir 10/30/13), 2013 WL
5850232. Effie and her brother Donald purchased a house in Jefferson Parish. Effie and Donald
are now deceased, and a person purporting to be the administratrix of both successions filed suit
15
to have the house put in the name of Effie’s succession only. The trial judge found that Donald
made no mortgage, insurance, or other payments on the house, and that he was merely an
accommodation party, but that the authentic sale document could not be varied by parol evidence
by persons not party to the act. The appellate court agreed that Effie’s succession had not
established a prima facie case showing that Donald’s appearance in the sale was a simulation
(this action was the confirmation of a preliminary default, but a prima facie showing was
necessary). In refusing to clear up this title issue by a default judgment, the court noted that
there was no showing the assets and liabilities of Donald’s succession or whether there were
creditors or others interested in Donald’s succession that would be adversely affected by the
removal of this property from the succession. Although 3 of Donald’s 4 heirs ostensibly
renounced their interests in the property (the fourth didn’t respond when asked), creditors could
still be harmed. So, to clear title of property owned in indivision by two deceased co-owners, it
appears that both successions must be opened, and clear authority by one succession to abandon
its interest to the other succession must be shown. This result also hinged on the fact that the
administratrix was the Effie’s heir (the daughter of the man with whom Effie had lived for 30
years).
5.
Closing Attorney Liability for Involvement in Fraud.
In re Jones, 2012-B-1700 (La. 1/25/13), 106 So.3d 1019. This is a disciplinary action against
Mr. Jones, an attorney that shared office space with Mr. Trahant, a real estate closing lawyer, and
that assisted Mr. Trahant by providing title examinations and notarial services for some of Mr.
Trahant’s many closings. The Office of Disciplinary Counsel (ODC) based this action on a
number of transactions closed by Mr. Jones.
In two instances, Mr. Jones notarized various acts of donation and succession documents
notwithstanding the fact that he was not present when the documents were signed although in
one case some of the signatures were forged, then filed them and did nothing when heirs later
filed suit alleging the forgeries. The disciplinary committee and court found that Mr. Jones did
indeed violate Rules 8.4(c) and 8.4(d), first by improperly notarizing and attesting that the forged
signatures, then by failing to remedy the problem when suit was filed by the heirs. The court
also found a violation of Rule 1.3 in that Mr. Jones did not exercise proper diligence, then failed
to correct the matter. However, Rules 3.3(a)(1) and 3.3(a)(3) were not violated in that filing
false documents in the public records is not filing them with a court.
In another matter, Mr. Jones assisted in a title examination and notarized all documents in
connection with a loan transaction that was fraudulent in that a party inserted into a transaction
“flipped” houses for an inflated price and created fraudulent mortgage verifications to support
the categorization of an inflated mortgage amount as a “refinance” (Mr. Jones appears to have
been a director and incorporator of the “flipping” entity) (violation of Rules 8.4(a) and 8(c)).
The court found Mr. Jones did violate Rules 1.3 and 8.4(c) because he “signed and notarized
loan closing documents that he knew or clearly should have known contained false information”
thereby facilitating a fraud. However, he did not violate Rule 8.4 in that his actions were not
prejudicial to the administration of justice.
16
In yet another matter, Mr. Jones failed to file succession documents or obtain a judgment of
possession until months after he notarized an affidavit falsely stating that the seller had a perfect
right to convey merchantable title and failed to take remedial action when he became aware that
two of the decedent’s children has not been included in the judgment of possession or other
succession documents. By this action, he violated Rules 1.3, 3.3(a)(1), 3.3(a)(3), 8.4(a) and
8.4(c).
The Louisiana Supreme Court observed that suspension is the baseline penalty when an attorney
knowingly and intentionally violates duties owed to his clients, the legal system, and the legal
profession – and actually causes harm to his clients and the profession. The court therefore
upheld the Disciplinary Board’s serious sanction of suspension from the practice of law for 2
years.
In re Trahant, 2012-B-1435 (La. 12/14/12), 108 So.3d 67. This is the disciplinary action against
Mr. Trahant. This disciplinary action is based on some of the same matters that formed the basis
for Mr. Jones’ disciplinary proceedings. Mr. Trahant’s stamped signature appears on the title
policy in the house flipping and other matters. His staff also prepared the settlement statements
in these matters, and the legal fees were paid to his offices.
Mr. Trahant argued that all claims against him had prescribed, but the disciplinary board and
court rejected this argument. The court held that the complaints were lodged against Mr. Trahant
in 2002 and 2004, less than 10 years after the alleged misconduct that took place in 2000. In
addition, Mr. Trahant was not negligent, and both the passage of 10 years and negligence are
necessary for the charges to have prescribed.
The court observed that although none of the evidence showed direct dishonesty, fraud, deceit, or
misrepresentation on the part of Mr. Trahant, Mr. Trahant “abdicated his professional
responsibilities to others in his law office, which in turn facilitated a pattern of fraudulent of real
estate closings.” Id. at 74. As a consequence, he violated Rules 1.5(f)(6), 5.1, and 5.3.
The court then agreed with the Disciplinary Board that Mr. Trahant had knowingly and
intentionally violated his duties to his clients and his profession and that this misconduct had
caused harm, so the baseline sanction of suspension was proper. However, he showed remorse,
so his suspension was for 6 months, with one year of supervisory probation. Interestingly,
Justice Knoll dissented with respect to the suspension since he viewed Mr. Trahant’s conduct as
mere negligence in failing to supervise his staff.
6.
More Closing Malpractice Claims.
Trailer Outlet, Inc. v. Dutel, 2012-2127 (La. App. 1 Cir 9/19/13), 2013 WL 5309927. Trailer
Outlet, represented by Dutel & Dutel (“Dutel”), bought a trailer business from IMS in 2001. As
part of the transaction, Remtac, an entity that was an affiliate of the Trailer Outlet’s owners,
acquired the property on which the business was operated from Hampton Life Insurance
Company (the then owner of that property), paying part of the purchase price by a note and
mortgage in favor of Hampton. The act of sale of the movable property and intangibles to
Trailer Outlet recited that the consideration for the sale was the same as the consideration
17
described in the real property sale and mortgage – the price paid for the movables was not
separately recognized. In 2003, Remtac executed a dation in paiement in favor of Hampton
transferring the real estate to Hampton. IMS then filed a lawsuit against the purchaser of the
business seeking rescission of the sale, and Dutel represented Trailer Outlet in this suit. In 2005,
Trailer Outlet changed lawyers and sued Dutel asserting that the firm was negligent in permitting
execution of the sale documents, the dation en paiement without an indemnification by the
mortgage holder, and in failing to understand the risk that IMS might be considered to be a
beneficiary of the consideration paid to Hampton by Remtac. Dutel claimed that these claims
had prescribed and been preempted. The trial court found that Dutel had not intentionally or
fraudulently suppressed any facts, and that the preemptive period was not was not interrupted.
Because Dutel represented Trailer Outlet in the IMS lawsuit, it thought that this suit was
unjustified and defended that suit on that ground. The fact that Dutel did not inform Trailer
Outlet in the course of this defense that it had performed substandard work in connection with
the original sale or the dation was not fraud, and Trailer Outlet’s claims against Dutel were
barred by preemption. This decision was probably influenced by the fact that the Trailer Outlet
principals went back and forth on the allocation of the consideration and wanted to take the
maximum deduction they could take on the movables, and they also took an active role in the
dation documentation.
Gibsland Bank & Trust Co. v. Kitchens, Benton, Kitchens & Black, 47,763 (La. App. 2 Cir.
5/15/13), 114 So.3d 529. On July 31, 2008, the closing attorney rendered a title opinion to
Gibsland Bank that failed to list a 1999 judicial mortgage (this judgment named the owner as
Oaktree rather than Oaketree). On July 31, 2009, Gibsland Bank notified the attorney that the
holder of the judicial mortgage had filed suit to satisfy its 1999 judgment and demanded that the
attorney cure the situation. In 2010, the appellate court found that the judicial mortgage holder’s
lien was superior to that of Gibsland Bank and that both the judicial mortgage and the partial
release of it should have been discovered by a proper title search. Gibsland Bank then filed this
malpractice action on April 11, 2011. The law firm filed an exception of one-year prescription
under La. R.S. 9:5605, claiming that Gibsland Bank’s letter of July 31, 2009 was evidence of the
date on which the bank became aware of the error. In response, the bank claimed that damages
were not suffered until August 11, 2010, the date on which the appellate court made its adverse
ruling against the bank (overturning the trial court’s ruling in the bank’s favor). The appellate
court observed that in Jenkins v. Starns, 11-1170 (La. 01/24/12), 85 So.3d 612, the Louisiana
Supreme Court held that contra non valentem cannot apply to suspend the commencement of the
one or three-year preemptive periods set out in La. R.S. 9:5605, and that the trial courts had erred
in applying this rule to suspend the running of these preemptive periods in a malpractice case. In
Gibsland Bank, the appellate court found that the one-year preemptive period began to run in
July 2009, the date on which Gibsland Bank had actual knowledge of the facts on which the
malpractice claim was based – all as shown by its July 31, 2009 letter. The malpractice action
filed in April 2011 was therefore prescribed.
7.
Is it a Sale by Boundary or by the Acre?
Takewell v. Masters, 48,111 (La. App. 2 Cir. 6/26/13), 117 So.3d 301. The purchase agreement
described the property as “7 acres in perfect location for grocery store, storage buildings-officesduplexes-or just build the home of your dreams.” The cash sale deed signed at closing described
18
of NE 1/4) of Section 25, Township 18 North, Range 1 East, Ouachita Parish, lying South of the
Dixie Overland Highway, comprising a total of 10 acres, more or less”, less and except a
particularly described one-acre tract of land and a particularly described two-acre tract of land.
After the closing, to find the physical boundaries of the overgrown property, the buyers hired a
surveyor and determined that the tract contained only about 5.96 acres, almost 15% less than
what was promised. The buyers then filed suit for a rebate of a portion of the purchase price and
attorneys’ fees under the purchase price.
The question presented to the court was whether this sale was a lump price sale governed by La.
Civ. Code art. 2494 (for which a reduction would be permitted if the shortage is more than
1/20th) or a sale per aversionem (Latin for “boundary”) under La. Civ Code art. 2495 (for which
no reduction would be permitted). The court described the 1993 amendments to these articles
and the reason for them, concluding that even before this amendment, boundary descriptions
always trumped stated amounts of land. It recognized that “The amendment approves and
continues the jurisprudential tendency to find sales by boundary whenever possible.” 117 So.3d
at 305. Because the boundaries of the property described in the cash sale were easily
ascertainable, the court found that the sale was a sale by boundary of “a certain and limited
body” of property – a sale per aversionem – and that the buyers were not entitled to a diminution
in the purchase price notwithstanding the fact that the sale also stated inaccurate acreage. This
result was probably influenced by the fact that the buyers apparently did not care enough about
the acreage they bought to get a survey before the sale.
8.
Zoning Issues.
Phillips’ Bar & Restaurant, Inc. v. City of New Orleans, 212-CA-1396 (La. App. 4 Cir. 4/24/13),
116 So.3d 92. Phillips’ Bar and Restaurant on Maple Street (well, actually 733 Cherokee Street)
on Lot 1-A sought to use the vacant lot next door , Lot 2-A zoned RD-2, 2-family residential, as
a patio for the sale of food and drink in accordance with its use of the adjoining building. The
building is on Lot 1-A, and the owners hold an ABO license for that lot only – the adjoining
vacant Lot 2-A was never issued a license. Both lots are zoned RD-2, 2-family residential,
though Lot 1-A has acquired legal non-conforming status as a bar and restaurant. The
neighborhood association had earlier objected to improvements to the building on Lot 1-A, and it
also objected to the use of Lot 2-A as an accessory patio bar. In 2000, the City also objected to
the installation of a patio, fence, and other improvements on Lot 2-A without a permit and
obtained a preliminary injunction; however, the City did not set the matter for trial or obtain a
permanent injunction. In 2007, the owners sought declaratory relief that the 2000 City suit was
abandoned and is considered never to have been filed, and that they now have a vested property
right to use Lot 2-A in connection with their legal non-conforming use of Lot 1-A. The City and
neighborhood association opposed this suit and sought injunctions. The owners showed that the
patio, like the main bar and restaurant building, was open for business at least 4 hours a day, 5
days a week, and that both before and after the 2008 injunction, the patio was used by patrons of
the bar and restaurant for the consumption of food and beverages and special events, although
alcoholic beverages were not actually sold on the patio. The owners now prohibit the patrons
from consuming alcohol on the patio.
19
The court explained that zoning is designed to confine certain classes of buildings and uses to
certain locations without undue hardship on the property owners, and “to reduce or eliminate the
adverse effects of one type of land use on another by segregating different uses into different
zoning districts.” 116 So.3d at 100. It cited the Louisiana Supreme Court in City of New
Orleans v. Elms, 566 So.2d 626, 629 (La. 1990) for the fact that the “principal regulation which
has been utilized to carry out the purposes of zoning is the exclusion of commercial uses from
residential uses.” 116 So.3d at 101. However, non-conforming use status protects uses that were
legally established before the enactment of a restrictive zoning regulation, and a governing
authority may also lose the right to prohibit a given non-conforming use through prescription. Id
at 102, citing La. R.S. 9:5625. The person claiming prescription has the burden of showing that
the Parish knew about the non-conforming use – by written notice – to start the prescriptive
period. The opponent then needs to show that the non-conforming use ceased by abandonment
or discontinuance.
In this case, the appellate court affirmed the trial court’s decision permanently enjoining the
owners of Phillips’ from using the patio as a bar and restaurant. The court observed that the
owners had not posted signs regarding the use of the patio and that intermittent use for smoking
and cell phone use did not create a non-conforming use. It also held that the patio was not used
frequently enough for special events to qualify as a reception facility. Although the record did
indicate that the patio was open, like the restaurant for the minimum hours set out in the zoning
ordinance, and that before the 2008 preliminary injunction, the patrons were regularly allowed to
consume beverages on the patio and it played host to numerous social gatherings, there was no
evidence that the hours were posted. Also, the preliminary injunction issued in 2000 did not toll
the running of prescription under La. R.S. 9:5625 because it was fatally defective – it did not
describe the actions being enjoined. Id. at 108. Even if this injunction had contained the
appropriate language, it would not have tolled the running of prescription because the City
abandoned the action in 2003 – a suit that has been abandoned cannot toll the running of
prescription.
The appellate court however recognize that owners of Phillips’ do have substantial rights with
respect to Lot 2-A – without the non-conforming use status. It observed that the owner of Lot 1A is permitted to sell alcohol for consumption on or off its premises under its liquor license, and
the CZO does not prohibit the owner of an RD-2 property (the patio) from allowing its guests to
consume food or alcoholic beverages on its property. It quoted Article 4, Section 4.5.1 of the
CZO as defining a RD-2 district as two-family developments in smaller lots in older, more
densely populated areas, mixed with recreational facilities and accessory uses as are customary
in the residential surroundings. The consumption of alcohol is not prohibited in this district. For
that reason, the court removed the prohibition on the sale of food or alcohol at Lot 1-A for
consumption on Lot 2-A from the trial court’s injunction.
Moretco, Inc. v. Plaquemines Parish Council, 2012-CA-0430 (La. App. 4 Cir. 3/6/13), 112 So.3d
287. Moretco, a prospective purchaser, sought an injunction against the Parish Council’s
adoption of a moratorium against permits for any building or work that exceeded $30,000
without special permission of the Council. Moretco wanted to acquire property near the Orleans
Parish line and near Behrman Highway to develop a Wal-Mart-anchored shopping center.
Moretco had participated in meetings with the parish officials concerning the proposed
20
development before the adoption of this moratorium, and after Moretco applied for a building
and construction permit, the Council adopted a new moratorium virtually identical to the first
except that certain studies and impacts were added to the list of conditions that a permit applicant
was required to satisfy, then amended its zoning ordinance to provide that no retail establishment
with a floor area in excess of 25,000 would be permitted in certain districts except as a Planned
Unit Development, subject to the approval of the Parish Council. Moretco claimed that the
ordinances were unconstitutionally vague, the retroactive application of the ordinances to
Moretco would violate Moretco’s constitutional rights, and the passage of the ordinances was an
arbitrary and capricious abuse of power that was motivated by racial bias on the part of
Councilman Hinkley (evidence had indicated that he had said that he did not like Walmart and he
did not want “those people” from Orleans Parish and Behrman Highway coming into the area).
The trial court refused to grant the injunction requested by Moretco, and the appellate court
upheld this decision. It held that Moretco had not met its burden of showing that the ordinances
were fatally vague – Moretco was required to show that the ordinances lacked any standard to
guide the Council. Also, Moretco could have presented the project to the Parish Council or
asked the Council for clarification, but chose not to do so (evidence indicated that Moretco felt
that these actions would have been futile). The court also held that applying for a permit does
not create any vested rights on the part of the applicant – ordinances passed after the application
will always affect the issuance of the permit without due process considerations. The situation
changes only after the application has been granted and the permit has been issued. Finally, the
court found that Moretco had failed to show that the ordinance was solely motivated by racial
bias – it agreed with the trial court that a presumption of validity is attached to all zoning
ordinances and that a challenger has an “extraordinary” burden of providing that an ordinance is
invalid. Id. at 294. In this case, Moretco did not prove that the ordinance was motivated by
racial bias or an arbitrary or capricious abuse of power because there were legitimate reasons for
the ordinance in that the Parish Council was concerned about legitimate problems potentially
caused by a large development, problems like traffic and drainage problems, the opposition of
neighbors, and the harm to smaller businesses. Also, the court felt that Moretco’s action was
premature in that the zoning classification of the property had not changed and no action had
been taken by the Council with respect to this particular proposed development.
9.
Broker Issues.
TEC Realtors, Inc. v. Paglia Holdings, LLC, 2012 CA 1684 (La. App. 1 Cir. 4/26/13), 2013 WL
1792827. Owners sent Broker an email in December 2006 saying they were willing to extend a
listing agreement expiring in March 2007 through the end of June 2007, but when the house had
not sold by the end of March, the Broker asked that the Owners reduce the price, and the Owners
and Broker did not sign an extension. In April 2007, the house sold, and the Broker wanted its
commission. The court did not agree. The court held that the email did not extend the listing
contract by itself, and a writing would have been required (particularly since all parties acted as
if the listing agreement had terminated in March). The court also found that the Broker was not
the procuring cause and had not “quoted” the property to the eventual buyer since the Broker’s
only acts with respect to this buyer were placing a sign in front of the property and listing it on
the MLS during the contract period (the buyer was also a broker, lived down the street, and had
tried to buy the home before the listing agreement was signed).
21
10.
No Error in Cause.
Smith v. Sonnier, 12-1408 (La. App. 3 Cir. 4/17/13), 110 So.3d 1285. Buyer bought 2 acres of
property in Jennings, Louisiana for use as a landfill. For 40 years before the sale, the seller had
used the property as a landfill with no permit (and no knowledge that he needed one). Seller
knew that buyer was buying the property to use as a disposal site, but buyer did not attempt to
obtain a permit or inquire as to the legality of the seller’s use. Several months after the sale, the
LDEQ visited the property after receiving a complaint, and the LDEQ demanded that the buyer
stop dumping on the property and that the property had to be cleaned and closed out. Buyer
sought rescission of the sale for failure of cause. The court found in favor of the seller. The
thing, the price, and the consent were satisfied, so the sale was perfected. Buyer also relied on
three cases in which courts had permitted rescission of sales of property that had been designated
as wetlands based on errors of fact that vitiated consent. The court decided that the difference in
this case was that the prohibition of the use of the property as a landfill was not present at the
time of sale – in fact, there was no evidence that a permit was required for the operation of the
landfill at the time of the sale. The permit was required only upon the LDEQ’s visit months
later.
11.
Tax Sales.
Brookewood Investments Co., L.L.C. v. Sixty-Three Twenty-Four Chef Menteur Highway L.L.C.,
2012-1205 (La. App. 4 Cir. 5/15/13), 116 So.3d 899; Brookewood Investments Co., L.L.C. v.
Sixty-Three Twenty-Four Chef Menteur Highway L.L.C., 2012-1205 (La. App. 4 Cir. 1/16/13),
108 So.3d 329. Brookewood acquired the property in a tax sale in 2003. The tax deed was
recorded in April 2004. The prior owner (allegedly) claimed that the tax sale should be annulled
because the City had assessed the property in an erroneous name and failed to provide the
requisite notice to the owner of record (the assessment records listed Morreale as owner, but
pursuant to an act of contribution, the property had been transferred to Sixty-Three Twenty-Four
Chef Menteur Highway, L.L.C. (“Sixty Three”). Brookewood then filed a demand against the
City and its tax collector demanding that the City reimburse it if the tax sale was declared a
nullity. The trial court then nullified the tax sale and ordered the owner of record to pay the
taxes, costs and 10% interest. It also held that the City was not obligated to reimburse
Brookewood – the owner of record was the party required to make that reimbursement.
In the first appeal, the appellate court determined that the trial court erred only in failing to
declare the tax sale an “absolute” nullity – it held that a tax purchaser takes the property at its
own risk and “assumes the risk of all legalities and irregularities in the proceedings of which, as
they are open to his inspection, he is presumed to have notice.” 108 So.3d at 335.
Brookewood’s only recourse for the $1,617,698.20 owed to Brookewood was its judgment
against Sixty-Three. The court did recognize the law that the judgment annulling the tax sale
could not be executed until the tax debtor paid the tax purchaser the amount paid for the property
at tax sale.
The Louisiana Supreme Court then remanded the matter to the appellate court for
reconsideration in Brookewood Investments Co., L.L.C. v. Sixty-Three Twenty-Four Chef
22
Menteur Highway L.L.C., 13-0369 (La. 4/1/14) for reconsideration under Smitko v. Gulf South
Shrimp, Inc., 11-2556 (La. 7/2/12). The appellate court found that Smitko did not address the
question who is obligated to reimburse the tax purchaser following a failed tax sale (Smitko was
based on a holding that the failure to give notice of a tax sale to a record owner is a violation of
due process and renders the sale void, so the time for seeking to annul the sale set out in La. R.S.
47:2228 does not apply to this action), so it did not change the appellate court’s prior decision.
The new statute La. R.S. 47:2153C(1), which provides that if the address of the actual owner is
reasonably ascertainable but there was no notice to the record owner, then the tax collector was
required to cancel the sale and refund the sale price to the purchaser, was a substantive change in
the law and would not be applied prospectively.
Mooring Tax Asset Group, L.L.C. v. James, 2013-0607 (La. App. 4 Cir. 11/6/13), 2013 WL
5946655. Mooring bought property in a tax sale, but after this sale, the prior owners sold the
property to James. The sale to Mooring was declared an absolute nullity by reason of lack of
sufficient pre-sale notice and advertisement. Mooring sought to recover from James under
Brookewood. However, the court held that Brookewood does not require a third-party purchaser
from a tax purchaser – a party that was not the record property owner or the debtor at the time of
the sale – to reimburse the tax purchaser for its tax sale expenditures. The court did observe that
the statutes delay the effect of an annulled tax sale judgment until the tax debtor reimburses the
tax purchaser for its costs. Interestingly, in this case, because the third party that had acquired
the property was not the party owing the reimbursement, the majority of the court ruled that the
annulment was effective immediately and the Tax Deed to Mooring had to be cancelled
immediately, presumably leaving Mooring with a simple claim for damages against the original
owners. Judge Belsome dissented on the ground that the appellate court was not following the
plain language of the Louisiana constitution requiring that a judgment annulling a tax sale not be
effective until the taxes, costs, and interest were paid.
Additional tax sale cases: Allied Tax Fund, L.L.C. v. Chin Hong Bow & Co., Inc., 2012-0371
(La. App. 4 Cir. 2/15/13), 2013 WL 587480 (the identity of the purchaser at a 2002 tax sale was
reasonably ascertainable since the tax collector had executed a tax deed stating the knowledge
and address, and failure to give written notice of a subsequent tax sale caused a 2003 tax sale to
be void); Levier, LLC v. Thomas, 2013-472 (La. App. 3 Cir. 11/6/13), 2013 WL 5927494
(failure to give notice of sale to the mortgagee rendered the sale void); Cititax Group, L.L.C. v.
Gibert, 2012-0633, 2012-0634 (La. App. 4 Cir. 12/19/12), 108 So.3d 229 (a typo in the tax sale
notice stating 38 Newcomb Blvd. rather than 30 Newcomb Blvd., which was the address stated
in the owner’s acquisition, and the lack of a signature on the certified letter return receipt
rendered the tax sale void); Okpalobi v. LeBorne II, L.L.C., 2012-0804 (La. App. 4 Cir. 12/5/12),
106 So.3d 640 (the tax sale was valid because the notice was delivered to the address of the tax
debtor as reflected in the public records – the tax debtor did not properly change this address by
sending a letter to the City and obtain proof that the letter had been received, although the court
left open whether a change of address by proper procedures would have changed this result and it
noted that if the notice is returned “undeliverable” the tax collector must take additional steps).
23
12.
Adverse Possession.
Domangue v. Castex Energy 1995, L.P., 918 F.Supp.2d 566 (E.D. La. 2013). In this case,
submerged marshland (Unit 2) was owned by various persons in division (according to the tax
assessor and public records) by reason of inheritance over the years. Plaintiff, who had
purchased from one of the co-owners, claimed that she had acquired a 20% interest in Unit 2 by
acquisitive prescription. The Lirette Family disputed Plaintiff’s claim and asserted that it owned
the 20%. Plaintiff asserted that she had been assured by her estate and title attorney that she
owned the percentage that she believed she owned based on a recorded judgment of possession,
and that since 10 years had passed since this judgment of possession, she had acquired the
property interest. She also claimed that she had possessed the a larger parcel of property that
included Unit 2 for 30 years based on the good faith purchase of the property with her husband,
her construction of a home on the property, and her recordation of a survey of the property.
Castex claimed that Plaintiff could not establish 30 years possession since she identifies acts of
possession starting only in 1986 and in any event, she did not construct on or fence Unit 2.
Because Unit 2 is submerged marshlands, the court held that the acts of possession that Plaintiff
must show are different from those that a possessor must show for woodland or farmland denied
summary judgment on the issue of the sufficiency of the Plaintiff’s possession. It also observed
that the Plaintiff acquired just title, but that to benefit from the 10-year prescriptive period, the
Plaintiff had to show that she had possessed the Property in good faith – Plaintiff had this
burden. A genuine issue of fact was raised because Plaintiff did not pay taxes on the entire
property or take action to determine that she was the sole owner until the present suit. Summary
judgment was therefore not appropriate. The court also observed that although an owner in
indivision cannot acquire by prescription against its co-owners without demonstrating the intent
to possess as the sole owner by overt acts sufficient to give notice to his co-owner, but that in this
case Plaintiff appeared to be disputing only ownership of a 20% interest against the other
possible owner of this 20% interest – but that the issues of fact as to what property Plaintiff’s
husband, one of the co-owners of the other 80% interest, owned and whether Plaintiff was
asserting any ownership in the remaining 80% interest were sufficient to avoid summary
judgment.
C.
MISCELLANEOUS
An Eminent Domain Case of National Interest.
U.S. v. 0.073 Acres of Land, More or Less, 705 F.3d 540 (5th Cir. 2013). This is a case arising
out of the taking of the strip of property and 14 townhomes (out of 58 townhomes in the
development) on that property in Mariner’s Cove Development near Lake Pontchartrain and the
17th Street Canal. The Mariner’s Cove Townhomes Association (“MCTA”) sought to recover
for the loss of assessments from these 14 townhomes, and claimed that it had an interest in these
townhomes based on the rights and obligations conferred under the recorded declaration of
townhome servitudes, covenants, and restrictions (the “Declaration”). The appellate court
decided that MCTA’s right to collect assessments was not a compensable property right under
Louisiana law or the federal takings clause. The court recognized that the right to collect
assessments is a building restriction and an affirmative covenant and incorporeal intangible
under Louisiana law. However, it decided that the obligation to pay assessments was
24
functionally contractual under the federal takings law and as a consequence, was not
compensable.
To reach this result, the court had to distinguish Adaman Mutual Water Co. v. U.S., 278 F.2d 842
(9th Cir. 1960) – a case in which the owners of certain parcels of property benefitted from and
paid for a single system that pumped and distributed underground water and shared the cost by
means of a stock subscription agreement that created an equitable servitude. In Adaman, the 9th
Circuit decided that the landowners remaining after the taking of 8.3% of the land area served by
the pumping system had the right to compensation since the remaining area would be subject to
increased assessments. Apparently, the assessment for the pumping system had more of a direct
connection with a tangible property right (the pumping system was necessary to use the property
for agricultural purposes – it was payment in exchange for use of a natural resource) than the
assessments of the MCTA.
25
12/16/2013
2013 Procrastinators’ Program
December 18, 2013
New Orleans, LA
Marie A. Moore, Esq.
Sher Garner Cahill Richter Klein & Hilbert
Hilbert, L
L.L.C.
LC
909 Poydras Street, Suite 2800
New Orleans, LA
(504) 299-2108 – Telephone
(504) 299-2308 – Facsimile
[email protected]
1
12/16/2013
A. LEASE CASES OF INTEREST
1. Landlord Remedies.
Duhon v. Briley, 2012-1137 (La. App. 4 Cir. 5/23/13), 117 So.3d 253.
Landlord changed the locks on the space, and Tenants filed suit claiming
wrongful eviction. The trial court awarded the Tenants $175,722.99
($78,625.09 for expenses, $22,917.00 for lost contents, $57,180.90 in lost
wages (profits),
( fit ) $7,000
$7 000 for
f
d
deposit
it returns,
t
and
d $10,000
$10 000 for
f
mental
t l
anguish) plus legal interest.
The court upheld the award for mental anguish and inconvenience – the
appellate court observed that the trial court had not awarded disguised
punitive damages but had instead tried to determine the value of the
mental anguish, humiliation, and embarrassment caused by the Landlord’s
having wrongfully deprived the Tenants of their property – even though
there was no expert evidence of these damages.
2
2
12/16/2013
Johnson v. Pueblo Viejo, Inc., 47,586 (La. App. 2
Cir. 4/10/13), 2013 WL 1442255. The trial court
awarded the Landlord rent for the remaining 16
months of the term (after Tenants stopped paying),
amounts due for performing repairs, and amounts
paid by Landlord to provide insurance to cover the
insurance that the Tenant was required to maintain
but had failed to maintain. The appellate court
affirmed the trial court’s awards and awarded $2,000
as the Landlord’s attorneys’ fees for defense of the
appeal.
appeal
3
3
12/16/2013
Southpark Community Hospital, LLC v. Southpark Acquisition Co., 2013-59 (La.
App. 3 Cir. 10/30/13), WL 5813179. Broussard filed a lawsuit seeking a declaratory
judgment that Southpark had abandoned or was abandoning the hospital, seeking
seizure of the hospital property through sequestration (rather than cancellation),
and accelerating all future rent due under the Lease – aggregating $6,120,513.
The trial court granted the sequestration and appointed a custodian and receiver for
the property. The main issue at this point was Southpark’s claim for future rent.
The appellate court recognized the rule, which the Louisiana Supreme Court
explained in Richard v. Broussard, 495 So.2d 1291 (La. 1986), that if a tenant
b
breaches
h
th lease,
the
l
th landlord
the
l dl d has
h
th mutually
the
t ll exclusive
l i
rights
i ht to
t cancell the
th
lease and recover accrued rents or to enforce the lease and recover accrued rent
and future accelerated rent (if the lease provides for accelerated rent). If the
landlord elects to cancel the lease, it is not entitled to future rent. Attempts to
circumvent these rules in the lease are unenforceable, so if a contract permits the
landlord to disturb the tenant’s possession and recover future rent, this provision will
given effect. The trial court held and the appellate
pp
court agreed
g
that in this
not be g
case Southpark did not abandon the premises, but was actually evicted by the
landlord’s seizure of the hospital and its obtaining of an order appointing a
custodian since these actions denied the tenant peaceful possession of the
property, so the Landlord had no right to future rent.
4
4
12/16/2013
GE Commercial Finance Business Property Corp. v. Louisiana Hospital
Center, 2013-0029 (La. App. 1 Cir. 9/13/13), 2013 WL 5015902.
Hammond Area Economic and Industrial Development District
(“HAEIDD”) was the owner of property pursuant to an economic
development bond lease. The bond tenant (“LHC”) defaulted on the
bonds and the lease, and HAEIDD accelerated the rent. It then entered
into a Memorandum of Agreement (“MOU”) with the new tenants
(“Brunos”) granting them the right to lease the property – the Brunos
paid a nonrefundable fee of $145,000
$145 000 to HAEIDD for its option.
option
HAEIDD then entered into a lease of the property with them. The
Brunos later claimed that HAEIDD had accelerated the rent under the
LHC lease and that this was contrary to HAEIDD’s statements to it that
the LHC lease had terminated – the lease had in fact never terminated.
The appellate court reversed and found that there was a genuine issue
of material fact as to whether the Brunos were induced to enter into the
lease by misrepresentations on the part of HAEIDD.
5
5
12/16/2013
Apex Realty, LLC, v. Vidrine’s of Gonzales, LLC,
12-530 (La. App. 5 Cir. 3/13/13), 112 So.3d 301.
The appellate court observed that an unrecorded
lease can be acknowledged and affirmed by the
actions of the purchaser, and in this case it was
affirmed by Apex by its acceptance of rent for 3
years before this default. Consequently, Apex had
the right to enforce the Lease. Vidrine’s lease did
not require that any notice be given to Vidrine’s. It
therefore upheld the award to Apex of the
judgment for past due rent.
6
6
12/16/2013
Beebe’s on the Lake, LLC v. Skansi, 2012-0672 (La. App. 4 Cir.
4/17/13), 115 So.3d 630. After trial on the merits, the trial court found
that the termination of the lease and eviction of Tenant was proper by
reason of abandonment, and the appellate court agreed.
On January 10, 2009, Landlord received an email from Tenant saying
that Tenant needed to close to avert bankruptcy, that he would pay the
past due amount, and that Tenant was willing to sell its equipment to
the new tenant (Landlord said the equipment was already there when
the premises were leased to Tenant). The appellate court upheld the
trial court’s finding of fact that the thirty (30) day notice required in the
lease was not required because Tenant had abandoned the space as
shown in the January 10, 2009 email. The court held that this email
terminated the Lease. The court also upheld Landlord’s taking of
musical
i l equipment
i
t belonging
b l
i to
t a third
thi d person located
l
t d on the
th premises
i
– the court held that the landlord’s lien extended to this third party
equipment.
7
7
12/16/2013
2. Tenant Self-Help.
727 Toulouse, L.L.C. v. Bistro at the Maison de Ville,
L.L.C., 2012-1014 (La. App. 4 Cir. 8/21/13), 122 So.3d
1152. The court stated that a landlord has no legal
obligation to provide air conditioning, but that regardless of
the law on this point or whether the lease imposed these
obligations on this Landlord, the Tenant had no right to stop
its rent – article 2715 did not give it the right to unilaterally
stop or diminish its rent payments through “self help.”
8
8
12/16/2013
3.
Eviction of Public Assistance/Public Housing Tenants.
Sauer v. Johnson, 2012-0197 (La. App. 4 Cir. 12/13/12), 106 So.3d 724. On
October 31, 2011, Landlord sent Tenant (who received Section 8 voucher
assistance) notice to vacate stating that the lease was a month-to-month lease
and she wanted Tenant to vacate her apartment by the end of November.
Tenant filed an exception of lis pendens claiming that on November 30, 2011,
she had filed a Fair Housing Act claiming that discrimination.
The appellate court upheld the trial court’s overruling of the Tenant’s exception
of lis pendens because a judgment of discrimination would not be res judicata
in the Landlord’s eviction proceeding. It also observed that when a month-tomonth lease has terminated, the Landlord may demand possession of the
property without giving any reason. The court also held that under the Housing
Assistance Payments (HAP) contract with HANO,
HANO the initial lease term had
ended in March 2011, and the fact that the tenant remained on the premises
after this termination date created only a month to month lease, and a real
extension term as that term is used in the HAP contract (the HAP contract
prohibits termination during the initial or an extension term without good cause).
9
9
12/16/2013
River Garden Apartments v. Robinson, 2012-0938 (La. App. 4 Cir. 1/23/13), 108 So.3d 352.
Landlord sent Robinson a notice to vacate, citing her apartment as a meeting place for persons
selling narcotics and stating that it was terminating her lease due to criminal activities by
members of her household and those under her control. At trial, Landlord’s representative said
g evicted for engaging
g g g in criminal activities herself – she was being
g
that Robinson was not being
evicted because she invited or allowed persons to participate in criminal activities while in her
residence.
The appellate court found that Landlord had not given proper prior notice or given the
administrative hearing that is required under 24 C.F.R. § 966.51(a)(2) if the grievance involves
criminal activity, but that Robinson was not harmed or prejudiced by this failure (she had
received a notice to vacate and she and her counsel had met with Landlord informally before
the eviction – she was also represented by counsel at the eviction proceeding).
proceeding) The court also
held that she was afforded due process and that the eviction was justified by the evidence.
Guste Homes Resident Management Corp. v. Thomas, 2012-1493 (La. App. 4 Cir. 5/29/13),
116 So.3d 987. Criminal activity will not justify a public housing eviction unless it threatens the
health, safety, or peaceful enjoyment of the premises by other residents or staff.
g Authorityy of New Orleans v. King,
g 2012-1372 ((La. App.
pp 4 Cir. 6/12/13),
) 119 So.3d 839.
Housing
Landlord claimed that Tenant had been stopped by the police for a seatbelt infraction and was
charged with interfering with a police investigation, battery on a police officer, resisting arrest,
and threats to a police officer, but in the eviction, HANO offered no testimony or evidence –
only arguments of counsel. The police report was not authenticated or introduced into
evidence. The trial court therefore erred in relying on this report and in evicting Tenant.
10
10
12/16/2013
4. Unpermitted Assignment/Landlord Not Estopped.
Kano Investments, L.L.C. v. Kojis Construction, L.L.C., 2012-1269 (La.
A
App.
3 Cir.
Ci 3/6/13),
3/6/13) 113 So.3d
S 3d 1113.
1113
Because Tenant (Kojis) did not obtain the consent of Landlord (Kano)
to its assignment of the Lease, the Lease was violated – and on
rehearing, the court found that the payment and acceptance of rent for
three months did not estop Landlord from asserting its breach of lease
claim (the court observed that the Lease stated that Landlord’s failure
to exercise its rights promptly did not operate to forfeit these rights).
Kojis then sought to recover the amounts it had spent improving the
space, and the court held that under La. Civ. Code art. 2695, there
were questions of fact as to whether Kano had asked Kojis to remove
the improvements as required under the lease accessions clause (art.
2695), and the court remanded to the trial court to determine whether
Kano was obligated to reimburse Kojis for the improvements.
11
11
12/16/2013
5. Tenant’s Responsibility With Respect to Common
Areas.
Honore v. Family Dollar Stores of Louisiana, Inc., 2013-93
(La. App. 3 Cir. 6/12/13), 115 So.3d 1234. In this case, a
third party (Honore) was injured when she stepped into a
hole in a shopping center while visiting Family Dollar, a
tenant The fact that Tenant (Family Dollar) had the right
tenant.
under the lease to perform at Landlord’s expense duties
that Landlord failed to perform did not impose a duty on
Family Dollar to do so, even though Family Dollar’s
employees apparently knew of the condition and asked the
Landlord to remedy it (an employee allegedly told Honore
when it happened that he’d been asking the Landlord to fix
the lot).
12
12
12/16/2013
6. Right of First Refusal to Buy.
Royal Oldsmobile Co. v. Heisler Properties, L.L.C., 12-608 (La. App. 5
Cir 5/16/13),
Cir.
5/16/13) 119 So.3d
So 3d 84.
84 The lease was recorded and gave Royal a
right of first refusal to buy the leased land should its owners receive a
bona fide offer to buy that they desired to accept – certain intra-family
transfers would not trigger the right of first refusal.
It agreed with the trial court that Royal
Royal’s
s default after Heisler
Heisler’s
s purchase
did not deprive it of its right of first refusal because that right had been
triggered by Heisler’s purchase, which occurred before the default. A
right of first refusal is a suspensive condition, and upon the occurrence
of this suspensive condition, Royal immediately gained the right to buy
the land it leased. Also because a copy of Heisler’s offer was never
delivered to Royal (no statement of the amount paid was delivered),
delivered)
Royal’s 30-day exercise period did not start.
13
13
12/16/2013
7.
Landlord’s Obligation to Improve the Property.
Silwad Two, L.L.C. v. I Zenith, Inc., 2012-0282 (La App. 1 Cir. 12/21/12), 111 So.3d 405.
The question was whether the lease required Landlord to install gas pumps. The lease
g
gasoline storage
g
g tanks
was introduced into evidence,, and it said that if the in-ground
were declared in need of removal by the appropriate governmental authority, Landlord
would remove and replace the tanks at its expense, but in the event of tank removal,
Tenant would repave and area above the tanks and re-install pumps, pump islands, and
other items made necessary. However, there were no gas pumps on the property, and
the trial court agreed that Landlord had no obligation to provide gas pumps.
Graci v.
v Palazzo,
Palazzo 12-853
12 853 (La.
(La App.
App 5 Cir.
Cir 5/30/13),
5/30/13) 119 So.3d
So 3d 741.
741 After Katrina,
Katrina Tenant
asserted that the lease required the Landlord to repair Tenant’s retail unit to its prehurricane condition. Landlord gutted the space and performed minimal repairs, but
Tenant wanted Landlord to restore the tanning salon improvements originally installed by
Tenant. Tenant stopped paying rent because the repairs were not completed – the lease
provided that rent would abate from the date of the casualty until the date repairs were
completed, and Landlord had Tenant evicted for non-payment of rent on March 14, 2007.
The trial court rendered judgment in favor of Tenant for the estimated cost of its build out,
out
$5,250 for lost rental payments, and $20,000 for mental anguish – it made no award for
lost profits. The appellate court upheld the awards made by the trial court. It found that
the Landlord was required to insure the entire building – including Tenant’s build out -against casualty loss and that it breached the lease by failing to perform this restoration.
14
14
12/16/2013
8. No Implied Use Obligation.
Sapir
p v. Yum! Brands,, Inc.,, 2012-0824 ((La. App.
pp 4 Cir.
12/5/12), 106 So.3d 646. Sapir sued claiming that the lease
required a Taco Bell restaurant and only a Taco Bell
restaurant use the leased property (the property was used
for parking and access). However, the trial court granted
Taco Bell summary judgment on this issue because no
provision of the lease required there to be a Taco Bell on
the property or restricted use of the property to parking or
access in connection with a Taco Bell only. The court also
considered the fact that the lease permitted Taco Bell to
assign
i so long
l
as the
th monthly
thl rentt payments
t continued.
ti
d
15
15
12/16/2013
9. Prescription on Lease Malpractice (But Really, Read the Lease).
Williams v. CDY Development Corp., 48,359 (La. App. 2 Cir. 8/7/13),
2013 WL 4008916.
4008916
Office space tenant sued her lawyer for
malpractice claiming she had wanted a 4 year lease but the lawyer
drafted a lease for 24 months with an option for an additional 24
months – the suit was filed after the lease was not renewed. She also
filed a disciplinary complaint. Plaintiff’s co-tenant had wanted a 24
month lease with an option to extend for 24 months instead, he was the
primary contact with the attorney, and that’s the way the document was
drafted. The Plaintiff signed the lease. The attorney filed an exception
of prescription and/or preemption. The co-tenant testified that the
Plaintiff understood that the term was 2 years with an option to extend
for 2 years when the lease was executed. Although Plaintiff claimed
that
a the
e multiple
u p e references
e e e ces to
o 24 months
o s in the
e lease
ease co
confused
used her
e a
and
d
that she did not read or understand the lease when she signed it, the
trial and appellate courts agreed that she had knowledge of the term
when she signed the lease – and certainly had a duty of inquiry – so
the grant of the peremptory exception was affirmed.
16
16
12/16/2013
10. Landlord Repair Obligations/Premises Liability.
Falcone v. Touro Infirmary, 2013-0015 (La. App. 4 Cir. 11/6/13), 2013 WL 5946588.
Touro leased space in its hospital to Specialty Hospital of New Orleans (“SHONO”),
an independently
i d
d tl owned
d long-term
l
t
acute
t care hospital
h
it l within
ithi the
th Touro
T
b ildi
building.
A
As
a result of Katrina, SHONO and Touro lost power, the temperature rose, and Mr.
Falcone expired in the SHONO unit allegedly by reason of the heat. The jury found
that Touro was not negligent. The appellate court stated that Touro owed SHONO
patients a duty to provide adequate ventilation, and that Touro had breached that
duty (based on a bench trial in another case arising out of the death of another
SHONO p
patient after Katrina).
) The q
question was whether Touro had p
permitted an
unreasonably dangerous condition that was not open and obvious to exist on its
premises. The court observed that there was conflicting testimony as to whether
Touro’s premises were unreasonably dangerous, but that since the jurors had
weighed the conflicting testimony and found no breach of duty by Touro, the jury
may have determined either than the heat did not rise to the level of an
unreasonably dangerous condition or that they perceived it as an open and obvious
hazard The court found that there was sufficient testimony to permit the jury to
hazard.
conclude that adequate emergency power was provided and that this obligation did
not encompass providing the SHONO unit with air conditioning when Touro itself
was on emergency backup power. It therefore affirmed the jury’s verdict (although
reluctantly).
17
17
12/16/2013
Cennett v. Arceneaux, 12-706 (La. App. 5 Cir. 5/23/13),
119 So.3d 670.
Apartment
p
complex
p
tenants sued
Arceneaux, the owner, for their exposure to raw sewage
and sewage contaminated soil coming up through the
manhole covers and bathroom fixtures. The tenants relied
on La. Civ. Code art. 2696 – the landlord’s warranty that
the thing is suitable for the purposes for which it was
leased and that it is free of vices and defects that prevent
its use for that purpose. The appellate court upheld the
trial court’s awards in favor of the tenants, including an
affirmation of the trial court’s award of damages for mental
anguish
i h caused
d by
b generally
ll disgusting
di
ti conditions.
diti
18
18
12/16/2013
12. Sequestration.
Grantt Guilloryy Enterprises,
p
, Inc. v. Quebedeaux,, 2012-931
(La. App. 3 Cir. 2/6/13), 110 So.3d 182.
Landlord
sequestered Tenant’s property, and Tenant claimed that
the correct procedures were not followed. The appellate
court held that the Sheriff inventoried the property and that
the sequestered property was properly turned over to
Landlord as keeper, that Landlord properly sold the live
crawfish and other perishable items in the prescribed
manner and applied the net profits toward the rent owed by
Tenant. It also observed that the fact that the Sheriff was
L dl d’ was nott asserted
Landlord’s
t d att trial
t i l and
d did nott taint
t i t the
th
proceedings.
19
19
12/16/2013
13. Co-Owner as Landlord.
Brown v.
v Brown,
Brown 48,274
48 274 (La.
(La App.
App 2 Cir.
Cir 8/7/13),
8/7/13) 121 So.3d
So 3d
1242. Plaintiff Ms. Brown sought to evict her former
brother-in-law, Carl Brown, from a home she co-owned with
her former husband, Charles Brown. The court held in
favor of Carl and Charles. The appellate court reversed
(Carl did not file an appellate brief),
brief) finding that the consent
of all co-owners is required for the lease or encumbrance of
property held in indivision, and that by seeking Carl’s
eviction, Plaintiff showed that she no longer consented.
Her only burden of proof was to show that she owned the
home in indivision and that she no longer consented to
Charles’ encumbrance of the property (by letting Carl
occupy it).
20
20
12/16/2013
14. Lease Expired – Who Owns the Improvements?
Wilson v. Louisiana, 2012 WL 6554018 (E.D. La. 2012). A metal
structure was erected by a tenant,
tenant then sold by that tenant to a
successor tenant. The improvements were assessed separately from
the remainder of the property. After all leases terminated and the
successor vacated the property, no taxes were paid on the
improvement, and Wilson purchased the improvement at tax sale.
Wilson didn’t pay the taxes either, and his interest in the property was
adjudicated to St. John the Baptist Parish in 2008. The court held that
the property had been adjudicated to the Parish for Wilson’s nonpayment of taxes, and title was vested in the Parish, not Wilson.
Although Wilson could have redeemed the property, as of the date of
the court’s decision, he had not done so. Consequently, he did not
have
a eap
protectable
o ec ab e p
property
ope y interest
e es when
e the
e tax
a sa
sale
e was
as ca
cancelled.
ce ed
However, it’s clear that if a tenant makes improvements on an owner’s
property, then at the termination of the lease, the owner needs to check
the tax records and clear up any separate assessments (and separate
ownership).
21
21
12/16/2013
15. Tenant Restoration Obligations.
Succession of Sigur v. Herritzy, 2013-0398 (La. App. 4 Cir. 9/18/13), 2013
WL 5274246.
5274246 In
I 2000,
2000 Landlord
L dl d sued
d the
th Tenant
T
t health
h lth club
l b operator
t for
f
damage to commercial premises in Chalmette, Louisiana. Landlord also
claimed that Tenant had orally agreed to extend the lease, but instead
vacated without notice. The trial court believed the Landlord and awarded
damages for repair costs to the Landlord, and the appellate court affirmed.
The courts found that the leases were in effect and governed the parties’
obligations even though their fixed terms had expired at the time Tenants
moved out – notwithstanding the provisions stating that the leases would
not reconduct, the parties had agreed that the parties would remain on the
premises following the expiration, leading to month-to-month continuation
of the or a month-to-month new lease under the same terms, each with the
same result. Landlord produced evidence that repairs and other work
were needed to place the premises in good condition after Tenant had
vacated – the court observed that the Landlord did not have to show that it
actually performed the work.
22
22
12/16/2013
State v. Louisiana Land and Exploration Company, 2012-0884 (La. 1/30/13), 110 So.3d
1038. If a lease does not contain a provision requiring the lessee to restore the leased
property to its original condition, then it is governed by La. Civ. Code art. 2683(3), which
provides that the lessee has an obligation to return the property in the condition in which
it was delivered
d li
d to
t it “except
“
t for
f normall wear and
d tear.”
t
” The
Th lessor
l
under
d a mineral
i
l lease
l
claimed that the mineral lease tenant violated this provision.
The Louisiana Supreme Court recognized that La. R.S. 30:29 does not deprive a
landowner of its substantive right to pursue a judicial remedy or receive a judicial award
for private claims if it has claims under the Civil Code lease articles or the Mineral Code,
g
of the court of appeal,
pp
and it remanded the case to the trial court
it affirmed the jjudgment
for further proceedings.
Wagoner v. Chevron USA, Inc., 48,119 (La. App. 2 Cir. 7/24/13), 121 So.3d 727. The
mineral servitude owners assigned their rights to sue for damages to the surface owners
that acquired the property after the mineral lessees caused the environmental damage.
The surface owners had sued previously without the express assignment, but their suit
was dismissed under the subsequent purchaser rule as explained by the Louisiana
Supreme Court in Eagle Pipe & Supply Inc. v. Amerada Hess Corp., 2010-2267 (La.
10/25/11), 79 So.3d 246. The appellate court found that the amendment should be
permitted since the suit was not barred by res judicata or lis pendens because the
surface owners are appearing in a different capacity.
23
23
12/16/2013
B.
SALE CASES OF INTEREST
1.
Disclosure Form – Fill It Out Completely and Correctly.
Stutts v.
v Melton,
Melton 2013-C-0557
2013 C 0557 (La.
(La 10/15/13),
10/15/13) 2013 WL 5788757.
5788757 Melton built a new
residential home in Walker, Louisiana, completing it in December 2004. He and his wife
then lived in the house for about 9 months before selling it to the Stutts. The Residential
Property Disclosure form provided by the Meltons under the Residential Property
Disclosure Act, La. R.S. 9:3196 et seq. (the “RPDA”) stated that there were no known
defects in the roof; however, the Meltons had previously discovered color bleeding in the
walls due to a defect in the roof, and entered into a settlement agreement with the roofing
manufacturer with money paid to replace the roof. Of course, the Meltons did not replace
the roof – instead they cleaned the color bleeding off the walls and driveway and installed
gutters to prevent further color bleeding. Sometime after the sale (but more than a year
after the home was completed and occupied), the Stutts noticed color bleeding by reason
of defective roofing materials and contacted the manufacturer, who told them that their
sellers had already received the warranty money to replace the roof. The Stutts sued the
Meltons. The Meltons claimed that the New Home Warranty Act, La. R.S. 9:3141 et seq.
(the “NHWA”) provided the only remedy for the buyers, and that since more than a year
had passed since the date on which the home was first occupied,
occupied they had no liability to
the Stutts. The trial court found in favor of the Stutts, but the Court of Appeal reversed
this decision and held that the NHWA governed and the Stutts had not filed within the
NHWA thirty days after the NHWA warranty period as required in the NHWA.
24
24
12/16/2013
The Louisiana Supreme Court reversed the Court of Appeal and held
that the fact that the home had been occupied by the builder gave the
buyers remedies under the RPDA – the Stutts were not restricted to
NHWA claims, but could recover from the Meltons for lying on the
Residential Property Disclosure form. The RPDA does not apply to
transfers of residential real property that has never been occupied, but
the Meltons in this case delivered a Residential Property Disclosure
form because it is required when the builder has lived in the home. The
Court made it clear that although the form itself does not create a
warranty (La. R.S. 9:3198(D)), a willful misrepresentation does create
liability. Even though the Stutts did not seek rescission of the sale, the
Court found that the Stutts could have sought rescission and were
therefore entitled to attorneys’ fees under the fraud article, La. Civ.
Code art. 1958 and the the redhibition article permitting rescission, La.
Civ. Code art. 2545.
25
25
12/16/2013
This attorneys’ fees ruling is new law. The court explained:
Although
Alth
h we have
h
l
long
h ld that
held
th t attorney
tt
f
fees
are nott awarded
d d unless
l
authorized by statute or contract, this case is distinguishable in that the
fraud articles do not address an award for damages at all where rescission
of the contract is not sought. Thus, we resort to equity in determining what
sort of damages are awardable in this case. We find that in mandating that
a fraudulent party be liable for attorney fees in Article 1958, the legislature
was attempting
tt
ti
t punish
to
i h the
th fraud,
f d regardless
dl
off whether
h th rescission
i i
i
is
sought. Further, when the Stutts purchased this home, they were misled to
believe that they were purchasing a new roof with a lengthy warranty and
no known defects. In seeking the costs of a new roof, they are essentially
asking for rescission of the contract as to the roof. In addition, the
comparable articles on redhibition also award attorney fees where the
seller “declares the thing has a quality that he knows it does not have ...”
Accordingly, the Meltons are liable for damages for their fraud even though
the Stutts are only seeking a new roof, and these damages include
attorney fees.
26
26
12/16/2013
In re Hollander, 2013 WL 5476864 (E.D. La. Sept. 27, 2013); In re
Hollander, No. 04-14550, 2013 WL 5965741 (Bankr. E.D. La. Nov.
7 2013).
7,
2013) The
Th Hollanders
H ll d
( ll ) failed
(sellers)
f il d to
t disclose
di l
f ll the
fully
th extent
t t
of prior repairs to the home to the purchasers in the disclosure form.
On this remand, the Bankruptcy Court found that the Hollanders’
omission was either purposeful or with reckless disregard (in any
event, knowing), but that the sellers did not intend to cause loss to
the buyers.
buyers
The court cited Melton and observed that the
Hollanders discovered a defect in their home prior to listing it for
sale, took substantial measures to remedy the defect, and justifiably
believed that it has been cured. However, the Hollanders did not
describe these prior repairs on their disclosure form – not to hide
them, but because they believed they had been corrected.
Consequently, the Hollanders, unlike the Meltons, did not act
fraudulently under Louisiana state law, so an award of attorneys’
fees was not justified.
27
27
12/16/2013
2.
Public Records Doctrine Yields to Fraud (and Bad Faith).
Longleaf Investments, L.L.C. v. Tolintino, 47,545 (La. App. 2d Cir. 12/5/12), 108 So.3d
157. On December 6, 2005, Tolintino (Property Owner) and Longleaf entered into a
purchase agreement (the “Purchase
Purchase Agreement
Agreement”)) with Young,
Young a managing member of
Longleaf, for certain property in Bossier Parish (the “Property”). On January 17, 2006,
Tolintino conveyed a portion of the Property to Yolanda Williams (“Yolanda”, the daughter
of Alvin Williams, Tolintino’s friend and sometime chauffeur) and Zishun Moore (“Zishun”,
Alvin Williams’ minor son) by quitclaim deed (“Quitclaim 1”) for $1,800. Quitclaim 1 was
recorded on January 24, 2006, and the Purchase Agreement was recorded in February
22, 2006. On May 12, Tolintino conveyed additional portions of the Property to Zishun by
quitclaim deed ((“Quitclaim
Quitclaim 2
2”)) for a stated price of $12,000
$12 000 (Tolintino later testified that
the real price was $1,200 and that she received this amount, while Alvin Williams testified
that he paid $12,000 but provided no proof). Tolintino later conveyed the Property to
Longleaf after Longleaf sued for specific performance.
Tolintino and Alvin Williams (on behalf of his children) appealed, claiming that under the
public records doctrine, the court erred in denying it ownership of the property conveyed
i Quitclaim
in
Q i l i 1.
1 Not
N surprisingly,
i i l the
h appellate
ll
court agreed
d with
i h the
h trial
i l court and
d
invalidated Quitclaim 1 on the ground of bad faith or fraud. The court had to explain its
deviation from the public records doctrine. A third party purchaser can rely on the public
records only if he or she is not participating in a fraud or acting in bad faith.
28
28
12/16/2013
3.
Fraud and Purchase Agreements.
Benton v. Clay, 48,245 (La. App. 2 Cir. 8/7/13), 2013 WL 4008615. Mr. Clay and Ms. Benton (a
lifelong friend of Mr. Clay’s wife) agreed to purchase a tract of land in Union Parish, Louisiana
together, and they submitted the winning bid for the property when it was sold at auction (the
orall agreementt to
t purchase
h
t
together
th was reached
h d to
t keep
k
th
them
f
from
biddi
bidding
against
i t each
h
other). The evidence conflicted on what happened next. Mr. Clay made arrangements to
borrow money, and Ms. Benton received sufficient funds from her retirement account, but at
closing, only Mr. and Mrs. Clay appeared and purchased the property – Ms. Benton was left
out. Ms. Benton filed suit against the Clays seeking to have the property re-conveyed to seller
so that it could be conveyed to her.
Th trial
The
t i l courtt found
f
d that
th t Mr.
M Clay
Cl knowingly
k
i l and
d intentionally
i t ti
ll misrepresented
i
t d to
t seller
ll that
th t Ms.
M
Benton did not have the funds to purchase the property, that Mr. Clay breached his oral
agreement to buy the property in co-ownership with Ms. Benton through bad faith and fraud,
that Ms. Benton had justifiably relied on this agreement to her detriment, and that Ms. Benton
was entitled to specific performance, damages, and attorneys’ fees.
Intent to default may be predicated on “promises made with the intention not to perform at the
time the promise is made.
made ” The appellate court found that the record supported the trial court
court’s
s
factual findings of fraud – that Mr. Clay had breached his oral agreement to buy the property
together with Ms. Benton. However, the court reversed the portion of the judgment granting
attorneys fees to Ms. Benton – a result that might have been different had Stutts v. Melton
been decided before this case.
29
29
12/16/2013
4.
Fraudulent Conveyance.
Succession of Bennett v. Succession of Dowdy, 13- 322 (La. App. 5 Cir
10/30/13), 2013 WL 5850232. Effie and her brother Donald purchased a house
in Jefferson Parish. Effie and Donald are now deceased, and a person
purporting to be the administratrix of both successions filed suit to have the
house put in the name of Effie’s succession only. The appellate court agreed
that Effie’s succession had not established a prima facie case showing that
Donald’s appearance in the sale was a simulation (this action was the
y default, but a prima facie showing
g was
confirmation of a preliminary
necessary). The court noted that there was no showing the assets and
liabilities of Donald’s succession or whether there were creditors or others
interested in Donald’s succession that would be adversely affected by the
removal of this property from the succession. Although 3 of Donald’s 4 heirs
ostensibly renounced their interests in the property (the fourth didn’t respond
when asked), creditors could still be harmed. So, to clear title of property
owned
d in
i indivision
i di i i
b two
by
t
d
deceased
d co-owners, it appears that
th t both
b th
successions must be opened, and clear authority by one succession to
abandon its interest to the other succession must be shown.
30
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12/16/2013
5.
Closing Attorney Liability for Involvement in Fraud.
In re Jones, 2012-B-1700 (La. 1/25/13), 106 So.3d 1019. This is a disciplinary action against
Mr. Jones, an attorney that shared office space with Mr. Trahant, a real estate closing lawyer,
and that assisted Mr. Trahant by providing title examinations and notarial services for some of
M Trahant’s
Mr.
T h t’ many closings.
l i
Mr. Jones notarized various acts of donation and succession documents notwithstanding the
fact that he was not present when the documents were signed although in one case some of
the signatures were forged, then filed them and did nothing when heirs later filed suit alleging
the forgeries. Mr. Jones did indeed violate Rules 8.4(c) and 8.4(d), first by improperly
notarizing and attesting that the forged signatures, then by failing to remedy the problem when
suitit was filed
fil d by
b the
th heirs.
h i
Th courtt also
The
l found
f
d a violation
i l ti off Rule
R l 1.3
1 3 in
i that
th t Mr.
M Jones
J
did nott
exercise proper diligence, then failed to correct the matter. However, Rules 3.3(a)(1) and
3.3(a)(3) were not violated in that filing false documents in the public records is not filing them
with a court.
In another matter, Mr. Jones assisted in a title examination and notarized all documents in
connection with a loan transaction that was fraudulent in that a party inserted into a transaction
flipped houses for an inflated price and created fraudulent mortgage verifications to support
“flipped”
the categorization of an inflated mortgage amount as a “refinance”. The court found Mr. Jones
violated Rules 1.3 and 8.4(c) because he “signed and notarized loan closing documents that he
knew or clearly should have known contained false information” thereby facilitating a fraud.
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12/16/2013
In yet another matter, Mr. Jones failed to file succession
documents or obtain a judgment of possession until months after
he notarized an affidavit falsely stating that the seller had a
perfect right to convey merchantable title and failed to take
remedial action when he became aware that two of the
decedent’s children has not been included in the judgment of
possession. By this action, he violated Rules 1.3, 3.3(a)(1),
3.3(a)(3), 8.4(a) and 8.4(c).
The Louisiana Supreme Court observed that suspension is the
baseline penalty when an attorney knowingly and intentionally
violates duties owed to his clients, the legal system, and the
legal profession – and actually causes harm to his clients and
the profession. The court therefore upheld the Disciplinary
Board’s serious sanction of suspension from the practice of law
for 2 years.
32
32
12/16/2013
In re Trahant, 2012-B-1435 (La. 12/14/12), 108 So.3d 67. This is the
disciplinary action against Mr. Trahant. Based on some of the same
matters that formed the basis for Mr. Jones’ disciplinary
p
y p
proceedings.
g
Mr. Trahant’s stamped signature appears on the title policy in the
house flipping and other matters. His staff also prepared the settlement
statements in these matters, and the legal fees were paid to his offices.
The court observed that although none of the evidence showed direct
dishonesty, fraud, deceit, or misrepresentation on the part of Mr.
Trahant, Mr. Trahant “abdicated his professional responsibilities to
others in his law office, which in turn facilitated a pattern of fraudulent of
real estate closings.” Id. at 74. As a consequence, he violated Rules
1.5(f)(6), 5.1, and 5.3.
the baseline sanction of suspension was proper. However, he showed
remorse, so his suspension was for 6 months, with one year of
supervisory probation.
33
33
12/16/2013
6.
More Closing Malpractice Claims.
Trailer Outlet, Inc. v. Dutel, 2012-2127 (La. App. 1 Cir 9/19/13), 2013 WL 5309927. Trailer
Outlet, represented by Dutel & Dutel (“Dutel”), bought a trailer business from IMS in 2001. As
part of the transaction,, Remtac,, an entity
p
y that was an affiliate of the Trailer Outlet’s owners,,
acquired the property on which the business was operated from Hampton Life Insurance
Company (the then owner of that property), paying part of the purchase price by a note and
mortgage in favor of Hampton. The act of sale of the movable property and intangibles to
Trailer Outlet recited that the consideration for the sale was the same as the consideration
described in the real property sale and mortgage – the price paid for the movables was not
separately recognized. In 2003, Remtac executed a dation in paiement in favor of Hampton.
MS then filed a lawsuit against the purchaser of the business seeking rescission of the sale,
and Dutel represented Trailer Outlet in this suit.
suit In 2005,
2005 Trailer Outlet changed lawyers and
sued Dutel asserting that the firm was negligent in permitting execution of the sale documents
and the dation en paiement without an indemnification by the mortgage holder, and in failing to
understand the risk that IMS might be considered to be a beneficiary of the consideration paid
to Hampton by Remtac. Dutel claimed that these claims had prescribed and been preempted.
The trial court found that Dutel had not intentionally or fraudulently suppressed any facts, and
that the preemptive period was not was not interrupted.
interrupted Because Dutel represented Trailer
Outlet in the IMS lawsuit, it thought that this suit was unjustified and defended that suit on that
ground. The fact that Dutel did not inform Trailer Outlet in the course of this defense that it had
performed substandard work in connection with the original sale or the dation was not fraud,
and Trailer Outlet’s claims against Dutel were barred by preemption.
34
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12/16/2013
Gibsland Bank & Trust Co. v. Kitchens, Benton, Kitchens & Black, 47,763 (La.
App. 2 Cir. 5/15/13), 114 So.3d 529. On July 31, 2008, the closing attorney
rendered a title opinion to Gibsland Bank that failed to list a 1999 judicial
g g ((this jjudgment
g
named the owner as Oaktree rather than Oaketree).
)
mortgage
On July 31, 2009, Gibsland Bank notified the attorney that the holder of the
judicial mortgage had filed suit to satisfy its 1999 judgment and demanded that
the attorney cure the situation. In 2010, the appellate court found that the
judicial mortgage holder’s lien was superior to that of Gibsland Bank and that
both the judicial mortgage and the partial release of it should have been
discovered by a proper title search. Gibsland Bank then filed this malpractice
action on April 11, 2011. The law firm filed an exception of one-year
prescription under La. R.S. 9:5605, claiming that Gibsland Bank’s letter of July
31, 2009 was evidence of the date on which the bank became aware of the
error. In response, the bank claimed that damages were not suffered until
August 11, 2010, the date on which the appellate court made its adverse ruling
against the bank (overturning the trial court’s ruling in the bank’s favor). The
appellate
ll t courtt found
f
d that
th t the
th one-year preemptive
ti period
i d began
b
t run in
to
i July
J l
2009, the date on which Gibsland Bank had actual knowledge of the facts on
which the malpractice claim was based – all as shown by its July 31, 2009
letter. The malpractice action filed in April 2011 was therefore prescribed.
35
35
12/16/2013
7.
Is it a Sale by Boundary or by the Acre?
Takewell v. Masters, 48,111 (La. App. 2 Cir. 6/26/13), 117 So.3d 301. The purchase
agreement described the property as “7 acres in perfect location for grocery store,
storage
t
b ildi
buildings-offices-duplexes-or
ffi
d l
j t build
just
b ild the
th home
h
off your dreams.”
d
” The
Th cash
h sale
l
deed signed at closing described the property as “All that portion of the East one half of
the Northwest quarter (E 1/2 of NW 1/4 of NE 1/4) of Section 25, Township 18 North,
Range 1 East, Ouachita Parish, lying South of the Dixie Overland Highway, comprising a
total of 10 acres, more or less”, less and except a particularly described one-acre tract of
land and a particularly described two-acre tract of land. After the closing, to find the
physical boundaries of the overgrown property, the buyers hired a surveyor and
d t
determined
i d that
th t the
th tract
t t contained
t i d only
l about
b t 5.96
5 96 acres, almost
l
t 15% less
l
th
than
what
h t
was promised. The buyers then filed suit for a rebate of a portion of the purchase price
and attorneys’ fees under the purchase price.
The question presented to the court was whether this sale was a lump price sale
governed by La. Civ. Code art. 2494 (for which a reduction would be permitted if the
g was more than 1/20th)) or a sale p
per aversionem ((Latin for “boundary”)
y ) under
shortage
La. Civ Code art. 2495 (for which no reduction would be permitted). Because the
boundaries of the property described in the cash sale were easily ascertainable, the court
found that the sale was a sale by boundary of “a certain and limited body” of property – a
sale per aversionem – and that the buyers were not entitled to a diminution in the
purchase price notwithstanding the fact that the sale also stated inaccurate acreage.
36
36
12/16/2013
8.
Zoning Issues.
Phillips’ Bar & Restaurant, Inc. v. City of New Orleans, 212-CA-1396 (La. App. 4 Cir. 4/24/13), 116
So.3d 92. Phillips’ Bar and Restaurant on Maple Street (well, actually 733 Cherokee Street) on Lot 1A sought to use the vacant lot next door , Lot 2-A zoned RD-2, 2-family residential, as a patio for the
sale of food and drink in accordance with its use of the adjoining building.
building Lot 1
1-A
A has acquired legal
non-conforming status as a bar and restaurant. The neighborhood association had earlier objected to
improvements to the building on Lot 1-A, and it also objected to the use of Lot 2-A as an accessory
patio bar. The owners sought declaratory relief that the 2000 City suit was abandoned and was
considered never to have been filed, and that they now have a vested property right to use Lot 2-A in
connection with their legal non-conforming use of Lot 1-A. The City and neighborhood association
opposed this suit and sought injunctions.
The appellate
Th
ll t courtt affirmed
ffi
d the
th trial
t i l court’s
t’ decision
d i i
permanently
tl enjoining
j i i
th owners off Phillips’
the
Philli ’
from using the patio as a bar and restaurant. The court observed that the owners had not posted
signs regarding the use of the patio and that intermittent use for smoking and cell phone use did not
create a non-conforming use.
The appellate court however recognize that owners of Phillips’ do have substantial rights with respect
to Lot 2-A – without the non-conforming use status. It observed that the owner of Lot 1-A is permitted
p
on or off its p
premises under its liquor
q
license,, and the CZO does not
to sell alcohol for consumption
prohibit the owner of an RD-2 property (the patio) from allowing its guests to consume food or
alcoholic beverages on its property. For that reason, the court removed from the trial court’s injunction
the prohibition on the sale of food or alcohol at Lot 1-A for consumption on Lot 2-A.
37
37
12/16/2013
Moretco, Inc. v. Plaquemines Parish Council, 2012-CA-0430 (La. App. 4 Cir. 3/6/13), 112 So.3d
287. Moretco, a prospective purchaser, sought an injunction against the Parish Council’s
adoption of a moratorium against permits for any building or work that exceeded $30,000
without special permission of the Council. Moretco wanted to acquire property near the
g
y to develop
p a Wal-Mart-anchored shopping
pp g
Orleans Parish line and near Behrman Highway
center. Moretco had participated in meetings with the parish officials concerning the proposed
development before the adoption of this moratorium. After Moretco applied for a building and
construction permit, the Council adopted a new moratorium virtually identical to the first except
that certain studies and impacts were added to the list of conditions that a permit applicant was
required to satisfy, then amended its zoning ordinance to provide that no retail establishment
with a floor area in excess of 25,000 would be permitted in certain districts except as a Planned
Unit Development, subject to the approval of the Parish Council. Moretco claimed that the
ordinances were unconstitutionally vague,
vague the retroactive application of the ordinances to
Moretco would violate Moretco’s constitutional rights, and the passage of the ordinances was
an arbitrary and capricious abuse of power that was motivated by racial bias on the part of
Councilman Hinkley (evidence had indicated that he had said that he did not like Walmart and
he did not want “those people” from Orleans Parish and Behrman Highway coming into the
area).
grant the injunction
j
requested
q
by
y Moretco, and the appellate
pp
court
The trial court refused to g
upheld this decision. It held that Moretco had not met its burden of showing that the
ordinances were fatally vague – Moretco was required to show that the ordinances lacked any
standard to guide the Council. The court also held that applying for a permit does not create
any vested rights on the part of the applicant – ordinances passed after the application will
always affect the issuance of the permit without due process considerations. The situation
38
changes only after the application has been granted and the permit has been issued.
38
12/16/2013
10. No Error in Cause.
Smith v. Sonnier, 12-1408 (La. App. 3 Cir. 4/17/13), 110 So.3d 1285.
Buyer bought 2 acres of property in Jennings,
Jennings Louisiana for use as a
landfill. For 40 years before the sale, the seller had used the property as a
landfill with no permit (and no knowledge that he needed one). Seller
knew that buyer was buying the property to use as a disposal site, but
buyer did not attempt to obtain a permit or inquire as to the legality of the
seller’s use. Several months after the sale, the LDEQ visited the property
after receiving a complaint.
complaint The LDEQ then demanded that the buyer stop
dumping on the property and that the property be cleaned and closed out.
Buyer sought rescission of the sale for failure of cause.
The court found in favor of the seller. The thing, the price, and the consent
were satisfied, so the sale was p
perfected. The p
prohibition of the use of the
property as a landfill was not present at the time of sale – in fact, there was
no evidence that a permit was required for the operation of the landfill at
the time of the sale. The permit was required only upon the LDEQ’s visit
months later.
39
39
12/16/2013
11.
Tax Sales.
Brookewood Investments Co., L.L.C. v. Sixty-Three Twenty-Four Chef Menteur Highway L.L.C., 20121205 (La. App. 4 Cir. 5/15/13), 116 So.3d 899; Brookewood Investments Co., L.L.C. v. Sixty-Three
Twenty-Four Chef Menteur Highway L.L.C., 2012-1205 (La. App. 4 Cir. 1/16/13), 108 So.3d 329.
Brookewood acquired the property in a tax sale in 2003.
2003 The tax deed was recorded in April 2004.
2004
The (alleged) prior owner claimed that the tax sale should be annulled because the City had assessed
the property in an erroneous name and failed to provide the requisite notice to the owner of record (the
assessment records listed Morreale as owner, but pursuant to an act of contribution, the property had
been transferred to Sixty-Three Twenty-Four Chef Menteur Highway, L.L.C. (“Sixty Three”).
Brookewood then filed a demand against the City and its tax collector demanding that the City
reimburse it if the tax sale was declared a nullity. The trial court then nullified the tax sale and ordered
the owner of record to pay the taxes, costs and 10% interest. It also held that the City was not
obligated to reimburse Brookewood.
Brookewood
Brookewood’s only recourse for the $1,617,698.20 owed to Brookewood was its judgment against
Sixty-Three. The court did recognize the law that the judgment annulling the tax sale could not be
executed until the tax debtor paid the tax purchaser the amount paid for the property at tax sale.
Brookewood Investments Co., L.L.C. v. Sixty-Three Twenty-Four Chef Menteur Highway L.L.C., 13p, Inc.,, 11-2556
0369 ((La. 4/1/14)) was a reconsideration of the case under Smitko v. Gulf South Shrimp,
(La. 7/2/12). The new statute La. R.S. 47:2153C(1), which provides that if the address of the actual
owner is reasonably ascertainable but there no notice was given to the record owner, then the tax
collector was required to cancel the sale and refund the sale price to the purchaser, was a substantive
change in the law and would not be applied prospectively only.
40
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12/16/2013
Mooring Tax Asset Group, L.L.C. v. James, 2013-0607 (La. App.
4 Cir. 11/6/13), 2013 WL 5946655. Mooring bought property in a
tax sale, but after this sale, the prior owners sold the property to
James The sale to Mooring was declared an absolute nullity by
James.
reason of lack of sufficient pre-sale notice and advertisement.
Mooring sought to recover from James under Brookewood.
However, the court held that Brookewood does not require a
third-party purchaser from a tax purchaser – a party that was not
the record property owner or the debtor at the time of the sale –
to reimburse the tax purchaser for its tax sale expenditures.
Because the third party that had acquired the property was not
the party owing the reimbursement, the majority of the court
ruled that the annulment was effective immediately and the Tax
g had to be cancelled immediately,
y, p
presumably
y
Deed to Mooring
leaving Mooring with a simple claim for damages against the
original owners.
41
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12/16/2013
C.
MISCELLANEOUS
An Eminent Domain Case of National Interest.
U.S.
U
S v.
v 0.073
0 073 Acres of Land,
Land More or Less,
Less 705 F.3d
F 3d 540 (5th Cir.
Cir 2013).
2013) This is a case arising
out of the taking of the strip of property and 14 townhomes (out of 58 townhomes in the
development) on that property in Mariner’s Cove Development near Lake Pontchartrain and the
17th Street Canal. The Mariner’s Cove Townhomes Association (“MCTA”) sought to recover for
the loss of assessments from these 14 townhomes, and claimed that it had an interest in these
townhomes based on the rights and obligations conferred under the recorded declaration of
townhome servitudes, covenants, and restrictions (the “Declaration”). The appellate court
decided that MCTA’s right to collect assessments was not a compensable property right under
Louisiana law or the federal takings clause.
To reach this result, the court had to distinguish Adaman Mutual Water Co. v. U.S., 278 F.2d
842 (9th Cir. 1960) – a case in which the owners of certain parcels of property benefitted from
and paid for a single system that pumped and distributed underground water. In Adaman, the
9th Circuit decided that the landowners remaining after the taking of 8.3% of the land area
served by the pumping system had the right to compensation since the remaining area would
be subject to increased assessments. Apparently, the assessment for the pumping system had
more of a direct connection with a tangible property right (the pumping system was necessary
to use the property for agricultural purposes – it was payment in exchange for use of a natural
resource) than the assessments of the MCTA.
42
42