241 Holdings, LLC v. 241 Enterprises, LLC

241 HOLDINGS, LLC * NO. 2021-CA-0011

VERSUS *
COURT OF APPEAL
241 ENTERPRISES, LLC *
FOURTH CIRCUIT
*
STATE OF LOUISIANA
*******

APPEAL FROM
CIVIL DISTRICT COURT, ORLEANS PARISH
NO. 2020-06554, DIVISION “M”
Honorable Paulette R. Irons, Judge
******
Judge Joy Cossich Lobrano
******
(Court composed of Judge Joy Cossich Lobrano, Judge Regina Bartholomew-
Woods, Judge Paula A. Brown)

Thomas M. Beh
Michael L. Mancuso
ELKINS, P.L.C.
201 St. Charles Avenue, Suite 4400
New Orleans, LA 70170

COUNSEL FOR PLAINTIFF/APPELLANT

Timothy R. Richardson
Richardson Law Group
P.O. Box 310
Madisonville, LA 70447

Leonard L. Levenson
Christian W. Helmke
Colleen Boyle Gannon
LEONARD L. LEVENSON & ASSOCIATES
650 Poydras Street, Suite 2750
New Orleans, LA 70130

COUNSEL FOR DEFENDANT/APPELLEE

REVERSED

DECEMBER 15, 2021

JCL This is a commercial eviction case. Plaintiff/appellant, 241 Holdings, LLC

RBW (“Lessor”), appeals the September 30, 2020 judgment of the district court, which

PAB denied Lessor’s rule for eviction against defendant/appellee, 241 Enterprises, LLC

(“Lessee”). For the reasons that follow, we reverse the judgment.

The premises at issue is a commercial property on Bourbon Street in New

Orleans (the “Premises”), which operated a bar. On January 5, 2010, Lessor and

Lessee entered into a Triple Net Lease (the “Lease”) of the Premises for a term of

twenty (20) years, wherein during the period in dispute, Lessee would pay to

Lessor rent of $35,700.00 per month along with certain costs of property taxes and

insurance.

Article XXVIII of the Lease provides that the Lessee shall be in breach of

the Lease if:

(1) Lessee fails to pay Lessor Rent or any other amount
due by Lessee under this Lease, and Lessee continues to
fail to do so for ten (10) calendar days after written notice
of said default…

1

Article XXVIII also sets forth Lessor’s remedies, in the event of Lessee’s

breach of the Lease, including Lessor’s right to:

(a) Cancel this Lease, effective immediately as of any
date Lessor may select, without, however, waiving
Lessor’s right to collect all installments of Rent,
Advances, and all other amounts due and owing for the
period up to the time Lessor regains occupancy of the
Leased Premises…1

It is undisputed that, following the onset of the COVID-19 pandemic, Lessee

did not pay Lessor the full amount of the rent for the months of April, May, June,

July, August, and September 2020. Lessee attempted to tender a partial payment in

June 2020, which Lessor refused to accept. Pursuant to the Lease, Lessor provided

notices of default to Lessee dated June 9, 2020, June 26, 2020, and July 8, 2020.

On August 5, 2020, Lessor filed a Petition for Eviction and for Damages for

Breach of Lease, alleging it was entitled to possession of the Premises, past due

rent, interest, late fees, liquidated damages, attorney’s fees, costs, and other

amounts due under the Lease. On September 1, 2020, Lessee filed dilatory

exceptions of improper cumulation of actions and unauthorized use of a summary

proceeding, seeking separate trials for the rule for eviction and an ordinary

1
The other remedies set forth in Article XXVIII include Lessor’s right to:

(b) Declare all Rent for the whole unexpired term of this Lease to
at once become immediately due and payable, and thus at once
demand and sue for the entire Rent for the whole unexpired Term
of this Lease;

(c) Proceed one or more times for past due installments of Rent or
outstanding Advances without prejudicing its right to proceed later
for remaining installments of Rent and/or outstanding Advances or
to exercise any other remedy; and/or

(d) Have recourse to any other remedy to which Lessor may be
entitled by law, with Lessee to remain responsible for any and all
damages or losses suffered by Lessor.

2

proceeding on Lessor’s claim for damages. On the same date, Lessee filed an

answer with affirmative defenses and reconventional demand, alleging, in pertinent

part, Lessee’s inability to pay rent due to lack of income from a pandemic-related

business interruption. Lessee also claimed that Lessor breached the Lease by

failing to obtain insurance, which would have covered the loss of rent and provided

Lessee a credit toward its rental obligations from such insurance proceeds. Lessee

argued that Lessor was liable for damages and attorney’s fees for wrongful

termination of the Lease.

The disputed portion of the Lease reads as follows:

ARTICLE XI.
LESSOR’S PROPERTY INSURANCE

Throughout the Term, Lessor will maintain (i) fire, flood and
special extended coverage (“all risk”) insurance on the buildings
and improvements on the Leased Premises but not more coverage
than the cost of replacement of the building and contents and loss or
[sic] Rentals for one year unless agreed to by Lessee, and (ii)
liability (the premiums for the insurance described in (i) and (ii) are,
collectively, “Lessor’s Insurance Premiums.[”] For the year in which
this Lease commences and the year in which it terminates, Lessor’s
Insurance Premiums will be prorated according to the length of time
that this Lease is in effect for that year. Lessor shall arrange for said
insurance to be financed and provide Lessee with the amount due
each finance period which shall be paid by Lessee. Lessee shall
have the benefit and be named as an additional insured on all
insurance providing coverage for Lessee’s property or improvements.
To the extent that business interruption insurance coverage is
purchased, Lessee shall be entitled to a reduction of Rent for the
amount of insurance received by Lessor under any such provision.
Lessee is permitted to utilize the insurance currently procured or to be
procured by Lessor and pay Lessor’s Insurance Premiums in
installments. … Notwithstanding anything herein to the contrary,
upon written notice by Lessee to Lessor, Lessee shall maintain and
pay the Insurance from a carrier of its choosing required herein and
shall give Lessor the same notices and certificates of insurance as
required in Article X above.

3

(Emphasis added).

The parties do not contest that Lessor procured fire, flood, and special

extended coverage. For the period in dispute, Lessor obtained and was issued a

commercial property insurance policy (the “Policy”) listing Lessor as a named

insured. Pursuant to the Lease, Lessor passed along the cost of the property

insurance to Lessee. Lessor represents that, in the wake of the COVID-19

pandemic, it made a claim for business interruption under this Policy, which the

insurer denied under a “microorganism exclusion.”

On September 10, 2020, the district court held a hearing at which it granted

Lessee’s exceptions and ordered a separate trial of the claims for damages. Thus,

on September 10, 2020, the hearing proceeded on the rule for eviction only. The

district court denied the eviction from the bench and gave oral reasons, finding that

the Lease required Lessor to maintain “all risk”2 insurance on the premises; the

district court found the term “all risk” rendered the Lease ambiguous such that the

Lease must be construed against Lessor as its drafter.3 Thus, the district court

reasoned, Lessor was required to purchase insurance that would have covered loss

2
Louisiana cases define an “all risk” property insurance policy as “one where all risks are
covered unless clearly and specifically excluded.” Widder v. Louisiana Citizens Prop. Ins. Corp.,
11-0196, p. 4 (La. App. 4 Cir. 8/10/11), 82 So.3d 294, 296 (citing Morgan v. Auto Club Family
Ins. Co., 04-1562, p. 4 (La. App. 3 Cir. 4/6/05), 899 So.2d 135, 137; Dawson Farms, L.L.C. v.
Millers Mut. Fire Ins. Co., 34,801, p. 3 (La. App. 2 Cir. 8/1/01), 794 So.2d 949, 951). The
Louisiana Civil Law Treatise also refers to the all risk property insurance policy as a
“comprehensive form” “in which there is a general statement of coverage, followed by specific
exclusions of various kinds of property damage.” William Shelby McKenzie & H. Alston
Johnson, III, Insurance Law & Practice, § 10:10, 15 La. Civ. L. Treatise (4th ed.). In contrast,
another type of property insurance policy – a “broad form” or “named risk” policy – provides a
specific outline or list of the coverages provided, “one after the other.” Id.
3
“In case of doubt that cannot be otherwise resolved, a provision in a contract must be
interpreted against the party who furnished its text.” La. C.C. 2056; see Pollard v. Schiff, 13-
1682, p. 10 (La. App. 4 Cir. 2/4/15), 161 So.3d 48, 55 (holding that, under Louisiana law,
ambiguous clauses are construed against the drafter).

4

of rent due to business interruption stemming from the COVID-19 pandemic.

Thus, according to the district court, Lessor breached its duty to purchase “all risk”

insurance coverage. On September 30, 2020, the district court rendered judgment

denying the rule for eviction. This appeal followed.4

Generally, an appellate court reviews the factual findings of a lower court in

an eviction matter under the manifest error standard of review. Armstrong Airport

Concessions v. K-Squared Rest., LLC, 15-0375, p. 9 (La. App. 4 Cir. 10/28/15),

178 So.3d 1094, 1100 (citations omitted). “Where legal errors of the trial court

have tainted the fact finding process, the verdict below is not reviewed under the

manifest error standard and, if the record is complete, the appellate court may

make a de novo review of the record and determine the preponderance of the

evidence.” Hous. Auth. of New Orleans v. King, 12-1372, p. 5 (La. App. 4 Cir.

6/12/13), 119 So.3d 839, 842.

Additionally, a legal question of contractual interpretation, presented in an

eviction case, is subject to de novo review on appeal. Armstrong, 15-0375, p. 9,

178 So.3d at 1101. Further, when “there is no dispute as to the dispositive facts, the

4
On appeal, Lessor raises the following assignments of error:

1. The Trial Court erred as a matter of law in interpreting the subject
lease as requiring Lessor to provide business interruption coverage
for business impacts from the COVID-19 global pandemic.

2. The Trial Court erred as a matter of law in its interpretation of the
applicable policy of insurance which complied with the
requirements of the applicable lease.

3. The Trial Court erred as a matter of law in denying the requested
eviction when the undisputed evidence presented at the eviction
hearing was that Lessee had failed to pay rent as required by the
applicable lease.

5

issue can be decided as a matter of law and the review is de novo.” Id., 15-0375,

pp. 9-10, 178 So.3d at 1101 (internal quotation omitted). Moreover, “[t]he issue of

whether or not the language of a contract is ambiguous is an issue of law subject to

de novo review on appeal.” French Quarter Realty v. Gambel, 05-0933, p. 3 (La.

App. 4 Cir. 12/28/05), 921 So.2d 1025, 1027 (quotation omitted).

In an eviction proceeding, the lessor has the burden of proving, by a

preponderance of the evidence, a valid lease and that the violation of the lease

provides sufficient grounds for an eviction. Guste Homes Resident Mgmt. Corp. v.

Thomas, 12-1493, p. 5 (La. App. 4 Cir. 5/29/13), 116 So.3d 987, 990. “Under La.

C.C. art. 2704, if the lessee fails to pay rent when due, the lessor may dissolve the

lease and regain possession of the premises.” Nuccio Fam., LLC v. Cooties Corp.,

20-0659, p. 7 (La. App. 4 Cir. 5/12/21), 319 So.3d 926, 931.5 Lessee did not raise

any procedural insufficiency of the eviction proceeding or dispute Lessee’s

nonpayment of the full amount specified in the Lease. Rather, Lessee sought to

defeat cancellation of the Lease by raising Lessor’s purported breach of the Lease

as an affirmative defense.

5
“When a lessee’s right of occupancy has ceased because of … nonpayment of rent, … and the
lessor wishes to obtain possession of the premises, the lessor or his agent shall cause written
notice to vacate the premises to be delivered to the lessee.” La. C.C.P. art. 4701. “A lessee may
waive the notice requirements of this Article by written waiver contained in the lease, in which
case, upon termination of the lessee’s right of occupancy for any reason, the lessor or his agent
may immediately institute eviction proceedings in accordance with Chapter 2 of Title XI of the
Louisiana Code of Civil Procedure.” Id. “[I]f the lessee has waived his right to notice to vacate
by written waiver contained in the lease, and has lost his right of occupancy for any reason, the
lessor or owner, or agent thereof, may cause the lessee or occupant to be cited summarily by a
court of competent jurisdiction to show cause why he should not be ordered to deliver possession
of the premises to the lessor or owner.” La. C.C.P. art. 4731(A).

6

An affirmative defense is a defense that raises a new matter, which assuming

the allegations in the petition are true, will have the effect of defeating a plaintiff’s

demand on its merits. Fin & Feather, LLC v. Plaquemines Par. Gov’t, 16-0256,

pp. 6-7 (La. App. 4 Cir. 9/28/16), 202 So.3d 1028, 1033 (quotations omitted); see

also Rourke v. Cloud, 398 So.2d 57, 59 (La. App. 3d Cir. 1981)(citing La. C.C.P.

art. 1005)(explaining, for example, that a defendant’s right to enforce a contract to

sell was not an affirmative defense to eviction because the contract did not give

defendant a right to possess the property). Affirmative defenses to eviction are

provided in La. C.C.P. art. 4735. This article permits a suspensive appeal to a

defendant who pleads an affirmative defense entitling him to retain possession of

the premises (and otherwise meets the applicable procedural requirements for

suspensive appeal).

A lessee pleading an affirmative defense to eviction “bears the burden of

proof on that defense, which must be established by a preponderance of the

evidence.” Guste Homes Resident Mgmt. Corp. v. Thomas, 20-0110, p. 14 (La.

App. 4 Cir. 7/29/20), 302 So.3d 1181, 1190 (citing Jeanmarie v. Peoples, 09-1059,

p. 6 (La. App. 4 Cir. 3/16/10), 34 So.3d 945, 950; Touro Infirmary v. Marine Med.

Unit, Inc., 96-2506, p. 7, n. 3 (La. App. 4 Cir. 5/21/97), 699 So.2d 90, 93).

According to Lessee’s argument, Lessor failed to procure the insurance the Lease

required. Stated another way, Lessee contends that it would have been able to

fulfill its rental obligations had Lessor maintained insurance, which would have

provided coverage for pandemic-related loss of rent. The district court reached a

7

similar conclusion. In its oral reasons, the district court premised its denial of the

eviction on its finding that the Lease’s requirement for “all risk” insurance was

ambiguous, and construing that provision against Lessor, it found that the Lessor

was required to but failed to obtain said insurance.6

We find that the district court erred as a matter of law in finding that

Lessee’s breach of lease claim defeated Lessor’s claim for possession of the

Premises. Lessee’s breach of lease claim herein, even if true, is not an affirmative

defense to the summary eviction proceeding, which would entitle Lessee to

maintain possession of the Premises. Neither the law nor the Lease affords Lessee

such a remedy. Nothing in the Code of Civil Procedure specifies that a lessor’s

breach of lease negates lessor’s claim for possession based on unpaid rent.

Likewise, no provision of the Lease grants rent-free possession of the subject

Premises as a remedy to Lessee for Lessor’s breach of the Lease.7 Rather, the

6
“Our jurisprudence is well-settled that an appeal is taken from a final judgment and not the
district court’s reasons for judgment; however, an appellate court may consider the reasons for
judgment in determining whether the district court committed legal error.” Roy Anderson Corp.
v. 225 Baronne Complex, L.L.C., 17-1005, p. 6 (La. App. 4 Cir. 7/11/18), 251 So.3d 493, 499
(citing Winfield v. Dih, 01-1357, p. 8 (La. App. 4 Cir. 4/24/02), 816 So.2d 942, 948).
7
“A contract constitutes the law between the parties.” Armstrong, 15-0375, p. 10, 178 So.3d at
1101 (citing La. C.C. art. 1983). “Interpretation of a contract is the determination of the
common intent of the parties.” La. C.C. art. 2045. “Words of art and technical terms must be
given their technical meaning when the contract involves technical matter and words susceptible
of different meanings are to be interpreted as having a meaning that best conforms to the object
of the contract.” Rogers v. Integrated Expl. & Prod., LLC, 18-0425, p. 13 (La. App. 4 Cir.
2/20/19), 265 So.3d 880, 889 (quotation omitted). “When the words of a contract are clear and
explicit and lead to no absurd consequences, no further interpretation may be made in search of
the parties’ intent.” La. C.C. art. 2046. When the language of the contract is unambiguous, the
letter of the clause should not be disregarded under the pretext of pursuing its spirit. La. C.C. art.
2046, comment (b). “The meaning and intent of the parties to a written instrument is ordinarily
determined from the four corners of the instrument, and extrinsic (parol) evidence is inadmissible
either to explain or to contradict the terms thereof.” Gambel, 05-0933, p. 7, 921 So.2d at 1029-30
(citing Ortego v. State, Dept. of Transp. & Dev., 96-1322, p. 7 (La. 2/25/97), 689 So.2d 1358,
1363). “Contracts, subject to interpretation from the instrument’s four corners without the
necessity of extrinsic evidence, are to be interpreted as a matter of law, and the use of extrinsic
evidence is proper only where a contract is ambiguous after examination of the four corners of

8

Lease permits Lessee particular remedies of: a reduction of rent to the extent that

Lessor receives any business interruption insurance proceeds;8 and attorney’s fees

and costs that Lessee incurs in enforcing a claim under the Lease.9 Neither of these

remedies are pertinent, however, in a rule for eviction, and the district court

erroneously conflated Lessee’s breach of contract claims with the rule for

eviction.10

“Eviction procedure of the Code of Civil Procedure is designed to expedite

as quickly as possible determination of right of lessor to be restored to possession

of premises.” Abrimson v. Ethel Kidd Real Est., 04-2085, pp. 3-4 (La. App. 4 Cir.

1/18/06), 926 So.2d 568, 570 (citation omitted). An eviction proceeding serves a

limited function, and Louisiana courts have “pointed out that an action for eviction

is a summary proceeding which only results in recovery of the leased premises.”

the agreement.” Id., 05-0933, p. 7, 921 So.2d at 1030 (citing Richard A. Tonry, P.L.C. ex rel.
Tonry v. Constitution State Service, L.L.C., 02-0536, p. 3 (La. App. 4 Cir. 7/17/02), 822 So.2d
879, 881). While the parties dispute whether the Lease’s “all risk” property insurance clause is
ambiguous, no party argues that the remedies provided under the Lease are ambiguous.
8
Article XI of the Lease provides, in relevant part: “To the extent that business interruption
insurance coverage is purchased, Lessee shall be entitled to a reduction of Rent for the amount of
insurance received by Lessor under any such provision….”
9
Article XXVIII(E) of the Lease provides, in part:

… if an agent or attorney is employed by Lessee to give special
attention to the enforcement or protection of any claim of Lessee
arising from this Lease, Lessor agrees to pay to Lessee, in addition
to all other sums due by Lessor to Lessee, Lessee’s attorneys’ fees,
together with any and all other costs, charges and expenses paid or
incurred by Lessee in connection with the enforcement or
protection of any claim of Lessee arising from this Lease.
10
We acknowledge that “fault of the plaintiff” is an enumerated affirmative defense under La.
C.C.P. art. 1005, and considering the unique facts of this claim, Lessee’s arguments could be
construed as a defense of Lessor fault. However, no evidence was presented that Lessor caused
Lessee’s nonpayment of rent or prevented Lessee from paying rent. Instead, Lessor received no
insurance proceeds, and Lessee’s rent was not reduced under the Lease. The district court erred
to the extent it found Lessor fault in this respect.

9

Lifemark Hosp. of Louisiana, Inc. v. Gulf S. Med. & Surgical Inst., Inc., 03-1122,

p. 3 (La. App. 5 Cir. 1/27/04), 865 So.2d 903, 905 (citing Friedman v. Hofchar,

Inc., 424 So.2d 496, 499 (La. App. 5th Cir. 1982)). “The rule to show cause in an

eviction proceeding is to determine whether or not possession of the property

should be delivered to the lessor, not to determine reconventional demand claims.”

Graci v. Gasper John Palazzo, Jr., L.L.C., 09-0347, p. 6 (La. App. 5 Cir.

12/29/09), 30 So.3d 915, 918. “The adjudication of these claims and any other

relief are determined via an ordinary proceeding.” Id. (citations omitted).

To the extent that Lessee seeks to prevail on its own claims for damages, the

reconventional demand remains pending and nothing in this opinion prevents

Lessee from proceeding with that demand.

Thus, the district court erred in finding that Lessee proved an affirmative

defense entitling it to retain possession of the premises. Consequently, on our de

novo review, we find that Lessor established that it is entitled to a summary

eviction. The validity of the Lease is uncontested, and the evidence that rent was

unpaid is unrefuted. Thus, the district court erred in denying Lessor’s rule for

eviction; therefore, it is reversed.

Accordingly, for the foregoing reasons, the district court’s judgment denying

the rule for eviction is reversed.

REVERSED

10