I-20 Self Storage, LLC v. Big Stuff Storage, L.L.C.

Judgment rendered January 11, 2023.
Application for rehearing may be filed
within the delay allowed by Art. 2166,
La. C.C.P.

No. 54,814-CA

COURT OF APPEAL
SECOND CIRCUIT
STATE OF LOUISIANA

*****

I-20 SELF STORAGE, LLC Plaintiff-Appellant

versus

BIG STUFF STORAGE, L.L.C. Defendant-Appellee

*****

Appealed from the
Fourth Judicial District Court for the
Parish of Ouachita, Louisiana
Trial Court No. 19-2252

Honorable Daniel Ellender, Judge

*****

HUDSON, POTTS & BERNSTEIN, LLP Counsel for Appellant
By: G. Adam Cossey
Jason R. Smith

NELSON, ZENTNER, SARTOR Counsel for Appellees,
& SNELLINGS Big Stuff Storage, LLC,
By: George M. Snellings, IV & Jere C. Spence
Allison M. Jarrell

*****

Before PITMAN, STEPHENS, and MARCOTTE, JJ.

PITMAN, J.

Plaintiff I-20 Self Storage, LLC, appeals the judgment of the trial

court dismissing its suit to rescind a sale of a self-storage property on the

basis of fraud or error against Defendants, Big Stuff Storage, L.L.C., and its

member, Jere Spence. For the following reasons, we affirm.

FACTS

The following facts are gleaned from the record and the transcript of

the trial held on November 29 and 30, 2021.

Plaintiff wanted an investment and observed Defendants’ storage

business, which was advertised for sale by DB Real Estate agent Deanna

Norman. Spence had previously been a real estate agent with her agency.

Plaintiff, through its Member/Manager Marlin S. Jones, made an

appointment to tour the property.

Spence was present at the initial visit and provided Jones with an

occupancy analysis report, a master list of all tenants and an email that he

wrote stating that the miscellaneous expenses of the building included the

cost of energy, a dumpster, property taxes, insurance and flood insurance.

He informed Jones that there were 266 units total, of which 132 were vacant

at that time, and that the actual rent generated per month, if all units were

occupied, was $12,205.

Jones asked for records to verify the income, but the records and

accounts for the property were combined with that of another storage

business Spence owned and were not available. Spence stated that there

were no traditional “books” for the business and that all documents were

created from information contained in QuickStor, a software program for

self-storage businesses.

Spence and Jones began negotiating a price for the property. Spence

hoped to sell it for over $1 million. Norman requested the “rent rolls” from

Spence to document the property’s occupancy and monthly income, which

she would then convey to Jones. Spence provided her with the information

in April, July and October 2018, which was based on data he recorded in

QuickStor. Spence informed Jones that the information he provided might

not be accurate because he had allowed discounts on some of the units. He

did not think the discounts were significant enough to disclose unless and

until Plaintiff became a serious buyer.1 Spence stated that the income

generated was approximately $11,000 to $12,000 for the time period of

October through December 2018.

In November 2018, Spence provided Jones with an updated

occupancy analysis report that showed an increase in tenants after the rent

roll provided five days earlier. This report increased the amount of

incoming rent to $12,705 per month. After appraisals were conducted,

Spence lowered his price to $910,000, and Plaintiff agreed to that contract.

Prior to closing, Jones learned that flood insurance would be more

than $5,000 rather than the $1,800 that Spence had reported paying. This

amount was greater because the insurance provided to Spence covered only

the office of the property and none of the storage units. The bank financing

the purchase required flood insurance on the entire property. Jones was

going to renege on the sale, but Spence offered to lower the price to

$870,000. Jones agreed to the purchase price reduction, and the sale of the

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Norman testified that she never had any reason to question the information
Spence provided regarding whether the rent prices listed were accurate, whether the list
included tenants from the other location or that it included tenants who were not actually
paying their rent. She stated that had she known of inaccuracies, she would have had to
disclose that information to Plaintiff.
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property took place on January 7, 2019. The document by which Plaintiff

obtained title is entitled “Sale of Property,” and Defendants conveyed “the

following described property” found in Exhibit A attached to the document.

Exhibit A is a list of 12 lots, with their legal descriptions, situated at 711 N.

11th Street, West Monroe, Louisiana.

The act of sale of property also states that the sale is “As is, Where is”

and contains the following disclaimer language:

Vendor hereby disclaims any warranty, guaranty or
representation, oral or written, past, present or future, of,
as to, or concerning, (i) the nature and condition of the
Property, including the suitability thereof for any and all
activities and uses which Vendee may elect to conduct
thereon; (ii) the existence of any environmental hazards or
conditions thereon (including the presence of asbestos) or
compliance with all applicable laws, rules or regulations; and
(iii) the compliance of the Property or its operations with any
laws, ordinances or regulations of any governmental or other
body. The sale of the Property Is made on an “AS IS,”
“WHERE IS” basis, and Vendee expressly acknowledges
that, except as to title to the Property, Vendor makes no
warranty or representation express or implied, or arising by
operation of law, including but not limited to any warranty
of condition, habitability, merchantability or fitness for a
particular purpose, in respect of the Property.
Vendee agrees that Vendor, except as to warranty of title, shall
not be responsible or liable to Vendee for any construction
defect, errors, omissions or on account of any other conditions
affecting the Property, as Vendee is purchasing the Property AS
IS, WHERE IS and WITH ALL DEFECTS AND VICES,
WHETHER LATENT OR APPARENT, KNOWN OR
UNKNOWN. Except as to the warranty of title, Vendee hereby
fully releases Vendor, its employees, officers, directors,
partners, representatives and agents from any and all claims that
it may now have or hereafter acquire against Vendor, its
employees, officers, directors, partners, representatives and
agents for any cost, loss, liability, damage, expense, demand,
action or cause of action arising from or related to any
construction defects, errors, omissions, or other conditions
affecting the Property.
Vendee further acknowledges and agrees that this release shall
be given full force and effect, according to each of its expressed
terms and provisions, including, but not limited to, those
relating to unknown and unsuspected claims, damages and
causes of action. Vendee expressly waives the warranty of
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fitness and warranty against redhibitory vices imposed by La.
Civ. Code Ann. arts 2475, 2524 or any other applicable state or
federal law. Vendee further waives any rights it may have in
redhibition or to a reduction in or restitution of purchase price
and revenues and/or costs pursuant to La. Civ. Code Ann. arts
2520 to 2548 inclusive, in connection with the purchase of the
Property. Vendee expressly acknowledges such waivers and
Vendee's express exercise of its rights to waive warranty
pursuant to Louisiana Civil Code Article 2548.
Vendee acknowledges and declares that neither the Vendor
nor any party, whomsoever, acting for (sic) purporting to
act in any capacity whatsoever on behalf of Vendor has
made any direct, indirect, explicit or implicit statement,
representation or declaration whether by written or oral
statement or otherwise, and upon which the Vendee has
relied, concerning the existence or nonexistence of any
quality, characteristic or condition of the property herein
conveyed. Vendee has had full, complete and unlimited
access to the property herein conveyed for all tests and
inspections which Vendee, in Vendee’s sole discretion,
deems necessary for the protection of Vendee’s interests.
Vendee further acknowledges that the “AS IS WHERE IS”
clause has been taken into consideration in the course of
negotiating the price of the Property. (Emphasis added.)

After Jones began operating the business, he became aware that the

documents provided by Spence were not accurate reflections of the tenant

occupancy rates or of the rent amounts. In the first month, total collections,

including rents recorded before Jones took over, were only $2,863. Jones

found that despite securing 28 new tenants since purchasing the property, the

average rental income for the first six months was only $5,066.84, which

was 60 percent lower than the rent revenue confirmed by Norman and

Spence. Further, Jones discovered that some tenants were given a discount

on their rent, and almost half of the tenants were not paying at all, even

though Spence provided documents showing them as current, long-term

tenants. Jones and his son attempted to contact these tenants and discovered

that many of them listed as current on the rent roll had either moved out

months or years prior to the sale or had never rented at all. They checked all

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of the units and found that 65 of them, or 49.6 percent of the rent roll, were

empty, even though they were listed on the rent roll as occupied units.

Jones also found in QuickStor that each time Norman requested an

updated rent roll from Spence, he entered large numbers of “cash” payments,

without corresponding deposits, for tenants who were not actually renting.

In fact, the same day Jones asked for documentation of the $12,500 in

claimed monthly rent, Spence made 41 entries for “cash” rental payments

totaling $6,656 that were not actually received. None of these payments

could be documented as actually having been paid or deposited.

Jones hired James E. Albritton, Jr., CPA, an independent appraiser, to

conduct an informal audit of the business.2 Albritton determined that the

occupancy analysis report overstated the actual rent by $44,788 on an

annualized basis. He also compared the time period of January 7, 2019,

through June 30, 2019, to that of the same dates in 2018 and found that the

rental income had been overstated by $93,369.92.

Once Jones discovered the discrepancies between the information

provided by Spence and the actual occupancy and rental income per month

generated by the storage business, he filed suit on behalf of his limited

liability company against the seller Big Stuff Storage, L.L.C., but later

amended to add Spence as a defendant. His petition references and attaches

the occupancy analysis report, the master list of all tenants and other

documents Spence prepared and provided to him during the negotiation

process. He alleged that the fact that Spence provided him with a

documented representation of the occupancy of the storage property

2
Albritton did not testify at trial.
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“unequivocally demonstrates that Spence understood the materiality of that

fact-the number of tenants currently renting from the storage property.” He

also alleged that Spence understood that Jones intended to continue

operating the storage property after his purchase and that he understood the

materiality of the fact of the net income brought in by the property. He

sought to rescind the sale of the property because of error or mistake of fact,

or, in the alternative, nullity caused by intentional, fraudulent

misrepresentation of fact.

Defendants responded by denying all allegations and stating that the

sale of property was the best and only legal evidence of the contents.

Further, Defendants denied any and all allegations that tended to “alter,

limit, vary, modify or extend the terms and provisions of the document.”

Defendants also pled as Plaintiffs in Reconvention and asked for

damages for having to defend the “frivolous lawsuit,” which required them

to unnecessarily expend time, expenses and attorney fees. They claimed that

the sale was made with an “As Is, Where Is” disclaimer and that the

Plaintiff/Defendant in Reconvention was in bad faith in prosecuting the suit

against them.

At trial, Plaintiff presented all the evidence of the circumstances

leading up to the sale of the property, the negotiations, the documentation

provided, his discoveries of discrepancies and the evidence of how he had

been defrauded or misled prior to purchase of the property.

Spence testified that he and his wife bought the property for $750,000.

In 2016, a flood damaged the property, and he received $123,000 from the

insurance company for repairs. He also contributed $150,000 of his own

money to the reclamation of the property. He built an office building and
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two storage buildings. When he first listed the property for sale, the

purchase price was over $1 million, which he thought was fair because the

property appraised for $1.16 million in June 2017.

Defendants’ attorney asked Spence to explain the differences between

the three rent rolls and the amount of rent each claimed to be garnering.

Spence stated that the roll that claimed $12,000 showed “potential rent in a

perfect world if everyone came in on the 1st and paid, which rarely happens

in rental property[.]” Spence also testified that he had noted certain property

that should have been removed from the list and that would have resulted in

a reduction of rent. He stated that he had no reason to dispute what the

numbers were and that Jones had not asked for rent rolls for eight months

out of the year. He testified that the business of storage rental was volatile

and that rent fluctuated from month to month. He denied that he ever tried

to inflate the rent rolls and claimed that Jones never asked about individual

tenants or their payment rates. He further explained that his computer

system had been down due to the flood and as a result of the post-flood

construction. He was working on bringing his data up-to-date, and there was

no intent to defraud.

Spence also stated he never guaranteed orally or in writing that the

rent rolls would bring in around $11,000 - $12,000 per month; however, he

also testified that $11-12,000 per month would be with 50 percent

occupancy. He testified that prior to the flood, the property was 92 percent

occupied and that it produced up to $20,000 per month. Further, he testified

that he never did anything improper or deceitful and never misrepresented

anything in any way.

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After the bench trial, the trial court took the case under advisement

and issued an oral ruling and reasons for judgment in open court on

December 16, 2021, denying and dismissing all of Plaintiff’s claims against

Defendants.

The trial court’s oral reasons for judgment state that the main issue to

be decided was whether Defendants intentionally misrepresented a factual

component of this sale significant enough to deter Plaintiff from completing

the sale. It reviewed the evidence presented at trial in detail and found that

Plaintiff proved that the rent rolls overstated the rent rates actually being

charged, that they included tenants who were not actually paying and that

half of the tenants listed were not actually renting when Plaintiff purchased

the property. It concluded, however, that this could have been the result of

sloppy bookkeeping or negligence rather than a purposeful intent to deceive.

It further found both Plaintiff and Defendants to be credible. It stated that

Defendants did not intentionally misrepresent something with the intent to

obtain an unjust advantage over Plaintiff.

The trial court further found that Plaintiff acquired the property for

significantly less than the appraised value, and there was no representation

in the purchase agreement or in the cash deed that there was any guarantee

as to the longevity of any of the renters. Although it did find that there was

sufficient information to cause Plaintiff to be concerned and suspicious, it

did not find evidence of fraud. On that basis, it denied the fraud claim. It

did not issue any specific findings or rulings on the claim for rescission due

to error, although it did dismiss all of Plaintiff’s claims against Defendants.

The trial court also denied and dismissed all of Defendants’ claims as

Plaintiffs in Reconvention for damages due to the filing of a frivolous
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lawsuit, stating that Plaintiff’s good-faith belief that the law and evidence

supported its claim resulted in a dismissal of the claim. It required all parties

to pay their own costs and attorney fees.

Plaintiff appeals.

DISCUSSION

Fraud

Plaintiff argues that it was manifestly erroneous for the trial court to

find it had not proven fraud as a cause for rescission of the contract of sale.

It asserts that it provided proof the rent rolls grossly overstated the rental

rates for more than 30 percent of the tenants. It contends that Spence’s

intentional acts of entering non-existent cash payments when the rent rolls

were processed made it appear that rent would still be collected even when

the tenants did not exist. It argues that it showed through tax returns and

financial records that Spence’s claims of profitability were false and that the

business was losing hundreds of thousands of dollars up until the day of

closing. It asserts that although a trial court has discretion in determination

of the facts, it must have some evidence upon which to base its ruling; and,

in this case, it does not.

Plaintiff points out that the trial court’s reasons for judgment cited the

fact that the sale was part of an ongoing transaction and that the property

was purchased for “significantly less than the appraised value.” However, it

argues that the reliance on appraised value is logically flawed and manifestly

erroneous because the appraisal was based on the same false information it

had been provided, and the appraisal is irrelevant to the fraud perpetrated

upon it by Defendants. It contends that if a party agrees to purchase based

on false information, the requisite consent is vitiated.
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Defendants answer, claiming that the self-storage business has a great

amount of variability because tenants sign a month-to-month contract and

can leave at any time. Rent fluctuates month to month and is volatile. Some

tenants pay a few months in advance, while some may not pay at all.

Defendants argue that Plaintiff had plenty of time to investigate the

business. They allege that the property was sold “as is,” and Plaintiff bought

exactly what he saw — the physical property. There was never a warranty

of future collections or revenues, nor were there guarantees that the rent rolls

Spence presented to Plaintiff indicated what Plaintiff could expect in the

future. They contend that they never told anyone that the property would

bring in $11,000 to $12,000 per month after closing. Plaintiff’s appraisal,

which was performed prior to closing, showed that the effective gross

income was below the amount shown on the rent rolls, but Plaintiff

purchased the property anyway.

Defendants further argue that Plaintiff did not meet its burden of proof

that they committed fraud or misrepresented information in an effort to gain

an unjust advantage over it. They contend that the trial court made a

reasonable evaluation of credibility and inference of the facts. They argue

this court is precluded from setting aside the trial court’s finding unless it is

clearly wrong in light of the record reviewed in its entirety.

La. C.C. art. 1953 defines fraud as a misrepresentation or a

suppression of the truth made with the intention either to obtain an unjust

advantage for one party or to cause a loss or inconvenience to the other. The

elements of a fraud claim are (1) a misrepresentation, suppression or

omission of true information; (2) the intent to obtain some unjust advantage

or to cause some damage or inconvenience to another; and (3) the error
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induced by the fraudulent act must relate to a circumstance substantially

influencing the victim’s consent. Aymond v. Citizens Progressive Bank,

52,623 (La. App. 2 Cir. 6/26/19), 277 So. 3d 477, writ denied, 19-1200 (La.

10/15/19), 280 So. 3d 602.

Fraud does not vitiate consent when the party against whom the fraud

was directed could have ascertained the truth without difficulty,

inconvenience, or special skill. La. C.C. art. 1954. However, this exception

is not applicable when a relation of confidence has reasonably induced a

party to rely on the other’s assertions or representations. Id.

The trial court’s findings with respect to a claim of fraud are subject

to the manifest error standard of review. Clay v. Washington, 51,065 (La.

App. 2 Cir. 1/11/17), 211 So. 3d 1266. To reverse a fact finder’s

determination, the appellate court must find from the record that a

reasonable factual basis does not exist for the finding of the trial court and

that the record establishes that the finding is clearly wrong. Stobart v. State

Dep’t of Transp. & Dev., 617 So. 2d 880 (La. 1993).

When there is a conflict in testimony, reasonable evaluations of

credibility and reasonable inferences of fact should not be disturbed on

review. Rosell v. ESCO, 549 So. 2d 840 (La. 1989). The fact finder’s choice

between two conflicting, but permissible, views of the evidence cannot be

manifestly erroneous. Stobart, supra.

While a cause of action for intentional fraudulent misrepresentation as

to past or present facts exists in Louisiana, an action for fraud cannot be

predicated on unfulfilled promises or statements as to future events.

Watermeier v. Mansueto, 562 So. 2d 920 (La. App. 5 Cir. 1990). In

Mansueto, the Watermeiers bought a wine business from Mansueto after
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only receiving documents estimating the viability of the business and that

bore no warranty or guarantee of correctness. They did not hire any

accountants or other consultants to verify the information the seller

provided. The document was entitled, “Approximate Analysis and Pro

Forma Study, Wine Cellar Liquor Store.”

Based on the documentation they had been provided, and without

doing any further investigation, the Watermeiers bought The Wine Cellar.

The business did well the first month, but profits steadily declined.

Eventually the Watermeiers went out of business, had to sell or donate their

inventory, and sued the seller and a real estate agent. They alleged they had

been fraudulently induced to buy the business by the false figures furnished

by the Mansuetos. They sought recovery of the purchase price of the

business, damages for loss of income and mental suffering, and recovery of

expenses, including attorney fees and interest.

The trial court rendered judgment in favor of Mansueto, found that he

was not the cause-in-fact of the Watermeiers’ losses and dismissed their suit.

It found that the statements given to the Watermeiers were simply estimates

and that there were no warranties or guarantees. It also found that other

financial data was available for their analysis of whether they were making a

wise and realistic investment.

The appellate court noted that a finding of fraud is only a threshold

matter, and the central issue was whether the fraud on Mansueto’s part was

the cause of the Watermeiers’ financial losses. The court affirmed the

judgment of the trial court and found that although the seller took advantage

of the buyers’ naivete, they failed to investigate fully and failed even to

perceive obvious omissions in the information provided to them.
12

Although the Mansueto case is instructive on the issue of the

application of fraud and La. C.C. arts. 1953 and 1954, it can be distinguished

from the instant case in that the plaintiffs in Mansueto were buying a

business as well as a premises; in the case at bar, the act of sale, and all

negotiations, concerned only the sale of the physical property described in

Exhibit A. Although Jones asked for certain financial information at

Spence’s disposal and intended to use the property as a storage property, the

“Sale of Property” document specifically states that the sale is made on an

“as is, where is” basis. The same paragraph states that, except as to title to

the property, Spence makes “no warranty or representation express or

implied,” including, but not limited to, any warranty of condition,

habitability, merchantability or fitness for a particular purpose, in respect of

the property. The sale did not include any language to indicate that Plaintiff

was buying the business of Big Stuff Storage, L.L.C., and it made no

guarantees that the storage property would generate a specific amount of

money for the buyer.

During the ongoing negotiations between the parties, Spence provided

information requested of him; and even though the figures presented might

have been maximized or estimates, the trial court found no fraudulent intent

and found the discrepancies to be a result of sloppy bookkeeping. Jones did

not investigate further when he could have done so during the negotiations,

and Spence continued to lower the price of the property until Jones was

satisfied with the price and signed the document conveying the property to

him with all of the disclaimers of warranty contained therein.

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Because a reasonable factual basis exists for the finding of the trial

court and that finding is not clearly wrong, there was no fraud and there is

no manifest error in the judgment of the trial court.

This assignment of error is without merit.

Rescission

Although the trial court dismissed without reasons all of Plaintiff’s

claims against Defendants, Plaintiff claims it was error for the court to

dismiss its claim for rescission of the contract based on error of cause. It

argues that a de novo review of the record is necessary to address this error

of omission by the trial court.

Defendants argue that when the trial court made credibility

determinations and findings of fact related to the fraud issue, the rescission

issue was subsumed into those findings by the court. For that reason, the

dismissal of all claims by the trial court could be based on the same set of

facts and evidence presented earlier at trial.

La. C.C. art. 1949 states that error vitiates consent only when it

concerns a cause without which the obligation would not have been incurred

and that cause was known or should have been known to the other party.

Error which vitiates consent can manifest itself in two ways: mutually,

i.e., both parties are mistaken, or unilaterally, i.e., only one party is

mistaken. Peironnet v. Matador Res. Co., 12-2292 (La. 6/28/13), 144 So. 3d

791. However, in both situations, the error for which relief may be granted

(1) must affect the cause of the obligation, and (2) the other party must know

or should have known “the matter affected by error was the cause of the

obligation for the party in error; that is, that it was the reason he consented to

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bind himself.” Id. See La. C.C. art. 1949, Revision Comments-1984, cmts.

(b) & (c) (West 2012).

Error may concern a cause when it bears on the nature of the contract,

or the thing that is the contractual object or a substantial quality of that thing,

or the person or the qualities of the other party, or the law, or any other

circumstance that the parties regarded, or should in good faith have

regarded, as a cause of the obligation. La. C.C. art. 1950.

It is not the province of the court to alter by construction or to make

new contracts for the parties. Peironnet, supra. The duty of the court is

confined to the interpretation of the agreements the parties have made for

themselves, and, in the absence of any ground for denying enforcement, to

give effect to the agreements as made. Peironnet, citing Texas Co. v. State

Mineral Bd., 216 La. 742, 751, 44 So. 2d 841 (La.1950).

In the case at bar, Plaintiff argues it was induced to enter into the

contract of sale of the property because Defendants led it to believe that it

could successfully operate the storage unit property profitably. Plaintiff,

seeking rescission of the contract on the basis of error of cause, had to prove

that the error bore on the nature of the contract or the thing that is the

contractual object or a substantial quality of that thing. It was unable to

prove it is entitled to rescission of the sale of the property. The property was

advertised as the sale of physical property, comprising several lots, all

located in a certain place. Defendants did not advertise that they were

selling the name or business but, instead, were selling only the property.

The document by which the property was conveyed contained the legal

description of the property and many statements limiting the warranties

15

provided, including that the seller made no warranty of the property for

fitness for any particular purpose.

The unilateral error made by Plaintiff was one that could have been

easily determined by due diligence prior to the sale. Plaintiff saw the

property, negotiated for a very long time, was granted concessions in regard

to the price of the property and signed the contract by which the property

was conveyed to it. It was only after the sale was complete that Plaintiff

discovered it was not reasonable to rely on Defendants’ documents.

Defendants did not induce Plaintiff to buy the property through fraud, but by

lowering the price to an amount it deemed fair. Plaintiff sought to buy the

property with storage units already in place, and that is what it was sold.

There was no error in the cause of the contract, and the trial court did not err

when it dismissed all of Plaintiff’s claims.

This assignment of error is without merit.

CONCLUSION

The judgment of the trial court in favor of Defendants, Big Stuff

Storage, L.L.C., and Jere Spence, and against Plaintiff, I-20 Self Storage,

LLC, is affirmed. Costs of this appeal are assessed to I-20 Self Storage,

LLC.

AFFIRMED.

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