Iles Medical Testing, LLC v. Rrf Properties, LLC

NOT DESIGNATED FOR PUBLICATION

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

23-139

ILES MEDICAL TESTING, LLC

VERSUS

RRF PROPERTIES, LLC

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APPEAL FROM THE
LAKE CHARLES CITY COURT
PARISH OF CALCASIEU, NO. 21-1674
HONORABLE JAMIE B. BICE, CITY COURT JUDGE

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D. KENT SAVOIE
JUDGE

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Court composed of D. Kent Savoie, Van H. Kyzar, and Sharon Darville Wilson,
Judges.

AFFIRMED.

Skipper M. Drost
Drost Law Firm, LLC
411 Clarence Street
Lake Charles, LA 70601
(337) 436-4546
COUNSEL FOR DEFENDANT/APPELLANT:
RRF Properties, LLC

Brad Guillory
Christopher S. LaCombe
Guillory Hargrave & LaCombe, LLC
940 Ryan Street
Lake Charles, LA 70601
(337) 433-5297
COUNSEL FOR PLAINTIFF/APPELLEE:
Iles Medical Testing, LLC

SAVOIE, Judge.

Defendant, RRF Properties, LLC (“RRF”), appeals a city court judgment

awarding Plaintiff, Iles Medical Testing, LLC (“Iles Medical”), with $50,000.00 in

damages and $12,500.00 in attorney fees as a result of RRF’s bad faith termination

of a lease agreement with Iles and its failure to reimburse Iles for improvements

made to the leased building. For the following reasons, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

RRF, which is owned solely by Dr. Rita Rae Fontenot (“Dr. Fontenot”),

leased a 5,000 square foot building located at 3729 Ryan Street in Lake Charles

(“the building”) to Iles Medical, which is owned solely by Dorothy Isles (“Ms.

Iles”), pursuant to a lease agreement effective August 1, 2020. The three-year

lease contemplated rent at $3,000.00 per month, as well as a $3,000.00 security

deposit. At the time the lease was signed, the building was in poor condition, and

Iles Medical made improvements and repairs in an effort to begin its business

operations. Iles Medical provides drug testing, occupational health, and DNA

services, as well as TWIC enrollment services.

Hurricane Laura made landfall in Lake Charles on August 27, 2020. The

building sustained damages, and, according to the parties, a renovation company

gutted the building several days after the storm. Dr. Fontenot and Ms. Iles

regularly communicated about the building via text messages. On September 22,

2020, Ms. Iles sent a text to Dr. Fontenot asking what she should do regarding rent

payments. Dr. Fontenot responded with a text, which stated in part:

I appreciate you even asking[,] but I will not hold you to lease
payments when you are not in a building.

Technically with the disaster I could just void the lease but I would
not do that to you and leave you in the cold. . . . We will rebuild.”

On January 26, 2021, Dr. Fontenot sent a text to Ms. Iles stating that she

“finally got insurance money coming now so the whole building is on track to be

finished[]” and that she was meeting with a contractor that afternoon to “get them

working on this primary job[.]”

On February 3, 2021, Ms. Iles sent a text message to Dr. Fontenot informing

her that a Fed Ex package addressed to RRF had been delivered, and Dr. Fontenot

indicated that it might be her insurance check. On February 4, 2021, Dr. Fontenot

texted Ms. Iles saying she received the Fed Ex envelope with the insurance check

and asked Ms. Iles to meet with her at Rikenjacks, which is a business that was

across the street from the building.

Dr. Fontenot, Ms. Iles, and Ms. Iles’s husband met at Rikenjacks on

February 4, 2021. Dr. Fontenot indicated that the purpose of the meeting was to

renegotiate the lease due to insufficient insurance proceeds and her contractor

threatening to quit. According to Ms. Iles, Dr. Fontenot informed her that the

insurance proceeds were not what she had expected and that she wanted to increase

the monthly rent to $5,000.00 per month. Also according to Ms. Iles, repairs on

the building were progressing well, although at a slow pace, the walls had been

installed, and some of the ceiling was still missing. Also according to Ms. Iles, Dr.

Fontenot was making upgrades to the building, such as recessed lighting, and Dr.

Fontenot had included her in decision making concerning the choice of flooring,

paint, and cabinets.

On February 17, 2021, Dr. Fontenot sent a text message to Ms. Iles asking

what she had decided after the meeting. Ms. Iles responded, “Nothing’s changed,

our only option at this point is to move forward.” Dr. Fontenot then stated via text

message:

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Then we have to renegotiate the lease to $5000/month[.] . . .
Otherwise I have an offer somebody wants to buy the building and I
would rather just wash my hands of the whole thing and sell it, but [if]
I have to continue to sink money into it, [t]hen I need to know that I
will at least have a decent [f]air market lease.

Ms. Iles responded and refused to agree to the proposed rent increase or

lease renegotiation, stating:

We’ve waited all this time . . . at your request. We had the
opportunity to get another location but we had to miss out . . . . [W]e
initially chose to lease the building when it was unable to lease for fair
market value. [W]e then took a chance and invested money that
ultimately allowed the building to later appraise for more money after
the hurricane.

Dr. Fontenot sent a text message in response stating, “Well I’ll have to

terminate the lease[,] and then I’ll just return the money you invested out of respect

for you[.] Her text messages further stated:

It’s not fair to me to not renegotiate to fair market value. You are
getting a new building . . . [.]

....

. . . I am having to pay for a loan [o]n this building with no help
from SBA or anyone including insurance. So at least I need a lease
with fair market value[.] Not pre-storm value [b]ecause this is not
going to be a pre-storm building when it finally does get complete[.]
All of the lighting is changed and all of the HVAC is changed to
brand spanking new and all of the new flooring in over half of the
building is changed[.] And the roof itself is over $55,000[.] This is
not your pre-storm building[.] All of the ceiling is changed[.] It’s a
completely new building[.]

....

. . . [Y]ou only put [$]20,000 more into the building which I
will be refunding if this lease is not renegotiated and is terminated. . . .

....

You were getting a new building. I deserve fair market value. . . . We
either renegotiate this lease or, [a]ccording to the terms of the current
lease, I have the right to terminate it.

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On March 1, 2021, Dr. Fontenot, on behalf of RRF, sent a letter to Iles

Medical regarding the building. The letter states in part: “In accordance with

Paragraph 17 [of the lease], the above referenced property is so badly damaged that

I have determined the necessary repairs and improvements cannot be completed in

a reasonable timeframe and at a reasonable expense. Accordingly, I am exercising

my right to terminate the lease.”

Paragraph 17 of the lease states:

17. DAMAGE TO PROPERTY

If the premises be damaged by fire or other casualty, it shall be
repaired by Lessor to the amount of insurance collected; in the case
that with reasonable diligence it cannot be repaired for the insurance
collected within thirty (30) days from the occurrence of such damage,
the rent shall be adjusted from the time of the damage until the repairs
are made; if the building cannot be made fit for occupancy in
accordance with the above within (60) days, then Lessee shall have
the option of terminating this lease. Notwithstanding the foregoing
should Lessor determine in its sole discretion that the leased premises
are completely destroyed or so badly damaged that repairs cannot be
completed within a reasonable amount of time or at a reasonable
expense Lessor may terminate the lease and tenant shall be released
from any further obligation.

After terminating the lease with Iles Medical, RRF then leased the building

to PARI, LLC. They signed a Lease Agreement with Option to Purchase on March

24, 2021. This lease has a term of 120 months and establishes rent at $4,000.00

per month.

According to Ms. Iles, commercial property was not readily available after

RRF terminated the lease, but on April 29, 2021, it was able to lease property from

Lake Charles Center, LLC for $5,300.00 per month and a $5,000.00 security

deposit.

On September 22, 2021, Iles Medical filed a Petition for Damages against

RRF in Lake Charles City Court. Therein, Iles Medical sought reimbursement for

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the improvements it had made to the building prior to Hurricane Laura, which Dr.

Fontenot had previously promised to pay given the termination of the lease. Iles

Medical also sought damages under La.Civ.Code art. 1997 for RRF’s bad faith

failure to fulfill its obligations under the lease, despite RRF’s promises to Iles

Medical for over six months following Hurricane Laura that Iles would eventually

be able to utilize the building as contemplated by the lease. Iles Medical also

sought attorney fees as contemplated by the lease with RRF.

A bench trial was held November 2, 2022. Dr. Fontenot and Ms. Iles were

the only witnesses called to testify. The following evidence was also accepted into

the record: the August 2020 lease between RRF and Iles medical; text messages

between Dr. Fontenot and Ms. Iles; the March 1, 2021 letter from RRF terminating

the lease with Iles Medical; RRF’s answers to interrogatories; emails between

realtor Richman Reinauer and Ms. Iles; an itemization of Iles Medical’s building

improvement expenses and attached receipts; the lease between RRF and PARI,

LLC; and the lease between Iles Medical and Lake Charles Center, LLC.

After hearing testimony and evidence and considering post-trial briefing, the

city court rendered judgment against RRF, and in favor of Iles Medical, for

$50,000.00, which is the city court’s jurisdictional limit, as well as $12,500.00 in

attorney fees, and interest from the date of jurisdictional demand. See La.Code

Civ.P. arts. 4841, 4843(H).

The city court’s written reasons for ruling indicate that the damages awarded

includes $18,571.86 for improvements Iles Medical made to the building, as well

as the difference in the increased rent ($2,000.00) for twenty-seven months as

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damages for RRF’s bad faith termination of the lease.1 The city court’s written

reasons for ruling also awarded attorney fees as contemplated by the lease, finding

that attorney fees in the amount of 25% of the damages awarded ($12,500.00) was

reasonable when considering “the record, the evidence presented, and the work

performed through trial and post-trial[.]”

RRF appeals. It asserts generally as its sole assignment of error that “[t]he

trial court erred in granting judgment in favor of ILES MEDICAL TESTING, LLC,

Lessee/Appellee.” In its brief, RRF suggests that Iles sought reimbursement for

minor cosmetic changes or alterations it made to the building, when the lease

required Iles to assume those expenses. RRF also suggests that it had legal and

contractual authority to, in its sole discretion, terminate the lease under Paragraph

17.

ANALYSIS

As set forth in Stobart v. State through Department of Transportation and

Development, 617 So.2d 880, 882 (La.1993):

A court of appeal may not set aside a trial court’s or a jury’s
finding of fact in the absence of “manifest error” or unless it is
“clearly wrong.” Rosell v. ESCO, 549 So.2d 840 (La.1989). This court
has announced a two-part test for the reversal of a factfinder’s
determinations:

1) The appellate court must find from the record that a
reasonable factual basis does not exist for the finding of the
trial court, and

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The city court stated that Iles Medical:

[I]ncurred an increase in monthly lease payments from $3,000 per month to over
$5,000 per month at the new location. The term of the original lease with RRF[]
was August 1, 2020[,] to July 31, 2023. The new lease that [Iles Medical] signed
with Lake Charles Center, LLC[] began on April 29, 2021. [Iles Medical] is
entitled to receive the difference in lease payments, or $2,000 per month, from
RRF in consequential damages for the period May 1, 2021[,] through July 31,
2023, or twenty-seven (27) months.

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2) the appellate court must further determine that the record
establishes that the finding is clearly wrong (manifestly
erroneous).

Louisiana Civil Code Article 2695 states in part as follows:

In the absence of contrary agreement, upon termination of the
lease, the rights and obligations of the parties with regard to
attachments, additions, or other improvements made to the leased
thing by the lessee are as follows:

....

(2) If the lessee does not remove the improvements, the lessor
may:

(a) Appropriate ownership of the improvements by reimbursing
the lessee for their costs or for the enhanced value of the leased thing
whichever is less; or

(b) Demand that the lessee remove the improvements within a
reasonable time and restore the leased thing to its former condition. If
the lessee fails to do so, the lessor may remove the improvements and
restore the leased thing to its former condition at the expense of the
lessee or appropriate ownership of the improvements without any
obligation of reimbursement to the lessee. Appropriation of the
improvement by the lessor may only be accomplished by providing
additional notice by certified mail to the lessee after expiration of the
time given the lessee to remove the improvements.

On appeal, RRF suggests that “[t]he Lessee made minor cosmetic changes or

alterations to the leased premises[, and] [t]he money damages claimed by Lessee

were actually made pursuant to [P]aragraph 8 of the lease agreement and therefore

made at the expense of Lessee.”2 While RRF suggests in its brief that this was

established by “uncontested testimony at trial,” it does not cite this court to any

testimony or evidence in the record regarding this issue, discuss any of the

itemized reimbursements awarded by the city court, or otherwise provide any

2
Paragraph 8 of the lease, entitled “Installation of Fixtures,” states in part: “Lessee shall
have the right at Lessee’s expense to make minor cosmetic changes to their portion of the leased
premises as it relates to carpet, equipment, internal partitions, or paint but not without express
consent of the landlord which shall not be unreasonably withheld.”

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additional argument concerning the city court’s award of Iles Medical’s

improvement expenses.

A review of the record reflects that Iles Medical elicited extensive testimony

from Ms. Iles regarding claimed improvement expenses totaling $21,254.01 and

submitted supporting documentation and receipts into the record. In addition, the

city court requested post-trial briefing from the parties on this issue. Ultimately,

the city court awarded $18,571.86 of the claimed expenses, stating in its written

reasons for ruling:

The testimony and evidence are clear and concise on the
question of repayment of improvements made by Iles to Fontenot’s
building. Fontenot’s own text messages (P-2) clearly demonstrate that
she agreed to reimburse Iles for the cost of the improvements that
were made to the building. This [c]ourt, however, has carefully
reviewed the receipts and the itemization that Iles offered (P-7), and
believes that [Iles Medical] is entitled to a portion of those
expenditures[.]”

We cannot say that the city court’s award of building improvement expenses

was manifestly erroneous.

RRF also suggests on appeal that it “had the legal and contractual authority,

in [its] sole discretion, to determine that the leased premises were completely

destroyed, or so badly damaged, that repairs could not be completed within a

reasonable amount of time or at a reasonable expense.” While it does not cite this

court to any supporting testimony or evidence in the record, RRF suggests in its

brief that it had obtained a loan to make repairs to the building prior to the

hurricane, and, after the hurricane, it was unable to collect sufficient insurance

funds to restore the building, and the building could not be repaired timely.

Therefore, according to RRF, it contacted a realtor in an effort to sell the building,

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and located a potential buyer who ultimately entered into a lease with the option to

purchase.

With regard to the evidence, the city court stated in its written reasons for

ruling:

This court is at a loss regarding the accuracy of facts
surrounding Fontenot’s pre-hurricane bank loan, as it was not offered
into evidence by Fontenot. . . . No contractor repair estimates from
Fontenot’s contractor after the hurricane. No testimony from
Fontenot’s contractor. No evidence whatsoever, either entered into the
record or via witness testimony.

In concluding that RRF impermissibly terminated the lease with Iles

Medical in bad faith, the city court stated as follows:

This [c]ourt believes that [RRF] did, in fact, breach the lease
agreement with [Iles Medical]. As the testimony and evidence
demonstrated, Fontenot agreed not to terminate the lease with [Iles
Medical] after the hurricane. [Iles Medical] relied on Fontenot’s
representation and assurances and did not seek another building to get
their business going after Hurricane Laura. It is clear to this [c]ourt
that Fontenot was never happy with the terms of the lease between
[Iles Medical] and RRF. The evidence demonstrates as far back as
June of 2020, Fontenot was communicating with her realtor,
complaining that she felt $3,000 per month was not enough money.
This [c]ourt believes that Fontenot terminated the lease in bad faith,
only after she was able to secure a new “tenant/buyer” for the
building.

After reviewing the record, including the text messages between the parties

prior to the March 2021 letter terminating the lease, we cannot say that the city

court was manifestly erroneous in concluding that RRF impermissibly terminated

its lease with Iles Medical.

DECREE

For the reasons set forth above, the city court’s judgment in favor of Iles

Medical Test, LLC and against RRF Properties, LLC is hereby affirmed. Costs of

this appeal are assessed to Appellant, RRF Properties, LLC.

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AFFIRMED.

This opinion is NOT DESIGNATED FOR PUBLICATION. Uniform Rules—
Courts of Appeal, Rule 2–16.3

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