Cross Gates, Inc. v. Rouses Enters., L. L.C.

Citation: 267 So. 3d 1164Docket: NUMBER 2018 CA 0465

Court: Louisiana Court of Appeal; December 11, 2018; Louisiana; State Appellate Court

Lead Opinion SummaryLead Opinion Original

EnglishEspañolSimplified EnglishEspañol Fácil

A lessor, Cross Gates, Inc., appeals a trial court's decision that did not hold the lessee, Rouse's Enterprises, L.L.C., fully liable for damages to a grocery store property. The lease, originally executed in 1984 with The Great Atlantic, Pacific Tea Company, Inc. (A. P.), had an initial term that commenced in 1986 and allowed for four five-year renewals. A. P. later assigned its lease to Rouse's in 2007. Rouse's closed the store and removed fixtures after acquiring the lease but notified Cross Gates in 2010 that it would not renew the lease set to expire in 2011. Cross Gates subsequently sued Rouse's for extensive damages incurred during its tenancy, totaling $399,583.50, including claims for HVAC system replacement, ceiling tiles, and flooring. The trial court rejected claims related to the HVAC system, ceiling tiles, and flooring but awarded $14,040 for other damages. Cross Gates appeals, arguing the trial court misinterpreted the lease by not holding Rouse's accountable for HVAC repairs, as specified in the lease agreement.

The trial court made several errors in awarding damages related to property repairs. It failed to grant replacement-cost damages for removed light fixtures, ceiling tiles (which cost $22,000 to replace), and VCT flooring, awarding only $3,000 for subfloor repairs instead. Additionally, the court abused its discretion by awarding only $7,500 for repairing molded sheetrock and rusted metal studs, and it denied compensation for necessary interior painting, which totaled $15,500. 

Cross Gates contends that the court also erred by not compensating for the HVAC system replacement costs. After Rouse's closed the grocery store, they ceased operating the HVAC system for over three years, which Cross Gates claims rendered it inoperable. Under Louisiana Civil Code articles 2683, 2686, 2687, and 2692, the lessee (Rouse's) is obligated to maintain the leased property and is liable for damages resulting from their negligence. The lease stipulates that Rouse's is responsible for all necessary repairs, including those to the HVAC system, and must return the premises in good condition, accounting for reasonable wear and tear. 

Testimony from Louis "Pat" Giles Miramon, former president of Cross Gates, and HVAC expert Richard Mark Nunnelly indicated that prolonged inactivity could lead to significant deterioration of the HVAC system. The determination of whether damages resulted from tenant negligence or normal wear and tear is a factual issue subject to review for manifest error on appeal.

Mr. Nunnelly testified that while parts of a malfunctioning HVAC system could be replaced, a thorough evaluation would be necessary to determine what was operational. He estimated this assessment would take several days and cost a few thousand dollars. In his experience with similar HVAC systems that had not been used for two to three years, he typically recommended replacement over repair, especially for units over 15-18 years old, due to high replacement costs and the inefficiency of adding refrigerant to nearly 20-year-old systems. Nunnelly admitted he had not inspected the specific inoperable system in question and lacked information on its maintenance history.

Dolly Miramon, assistant manager of Cross Gates, stated that the owner of Slidell Refrigeration advised that repair costs would be excessive and suggested replacement, although she could not confirm if a repair evaluation had been conducted. 

In the case of Urban Management Corporation v. Ford Motor Credit Company, a claim against a lessee for damage to an air conditioning system was dismissed due to insufficient evidence linking the lessee's actions to the damage. The current trial court found that the 26-year-old HVAC system was beyond its expected lifespan, ruling that Cross Gates could not recover replacement costs, as evidence was inconclusive regarding whether the system's inoperability was due to lack of use or age. Consequently, the court upheld the decision that the HVAC system needed replacement due to age rather than negligence by Rouse's.

Cross Gates challenged the trial court's partial damage award for removed light fixtures and sought compensation for damage to ceiling tiles and VCT flooring. The record confirmed that Rouse's removed 248 light fixtures from the grocery store in 2009 for use in another location.

At trial, two invoices from Cross Gates' lighting company were presented: one for the installation of 250 new 8-foot light fixtures to replace 248 removed fixtures, and another for 367 fixtures, including removal of remaining original 4-foot fixtures. The goal of damage awards is to restore the plaintiff to their pre-accident state, with courts exercising discretion based on case-specific facts. Louisiana courts typically assess property damage using three approaches: cost of restoration if repairable, difference in value before and after the damage, or cost of new replacement minus depreciation if repair costs exceed property value.

Ms. Miramon testified that Cross Gates sought half of the $77,967.96 quoted in the second invoice, as only half of the original fixtures were removed. The decision to remove the remaining fixtures was based on their outdated condition and a new lessee's request for 8-foot fixtures, as stipulated in the lease. Ms. Miramon was unsure of the replacement cost for the 248 removed fixtures, while Mr. Bixenman valued each old fixture between $0 and $5. The trial court awarded $1,240.00 based on this valuation and an additional $2,300.00 for wiring repairs, which was deemed not an abuse of discretion.

Regarding ceiling tiles, Ms. Miramon testified that Rouse's failure to run air conditioning caused significant moisture damage, warping the tiles and resulting in the need for complete replacement. An invoice from Brockhaus, Co. Inc. for $22,000.00 was presented for this work. Mr. Bixenman acknowledged that ceiling tiles typically last around 20 years and might be worthless if resold but still held value in place.

Rouse's failure to operate the HVAC system resulted in the warping of ceiling tiles; however, the trial court determined that these tiles were beyond their expected useful life and therefore did not award compensation to Cross Gates for the damage. The court found no abuse of discretion in this decision, as Cross Gates had no legal right to recover damages. The applicable measure of damages, as established in Cenac v. Duplantis Moving, Storage Company, Inc., is replacement cost less depreciation. Given that the ceiling tiles were deemed to have a useful life of 20 years, their replacement cost was entirely depreciated, leading to a recovery amount of zero.

Regarding the VCT flooring, Rouse's caused damage by removing fixtures and gouging the two existing layers of flooring. Cross Gates claimed that this damage necessitated the removal of both layers and repair of the concrete subfloor before new flooring could be installed. Evidence presented included existing defects unrelated to Rouse's actions, such as discoloration from cleaning products. Although the new lessee required new VCT flooring, it was noted that installation could have occurred over the existing layers if not for Rouse's damage. Testimony indicated that while a third layer could be added if the previous layers were stable, manufacturers typically do not recommend stacking more than two layers.

The trial court found that Cross Gates was obligated by the lease to repair and replace the flooring and determined that removal of the existing flooring was necessary due to normal wear and tear, regardless of Rouse's damage. Consequently, the court did not err in denying Cross Gates compensation for the flooring replacement costs, as the new flooring was mandated by the new lessee, and expenses would have been incurred even without Rouse's actions.

Ms. Miramon proposed that instead of replacing all flooring, decorative tiles could be added for the new lessee, but Cross Gates failed to provide evidence that this option was considered or acceptable. Consequently, the trial court rightly rejected Cross Gates' claim for new flooring costs. Although damage from Rouse's prevented simply adding a third layer of flooring, Mr. Bixenman's testimony supported the impracticality of such an action. The court's decision was further justified as Cross Gates was mandated to install new VCT flooring for the lessee.

In a separate issue, Cross Gates contested the trial court's decision not to award costs for painting. However, the court did not abuse its discretion given the evidence presented. Special damages must have a "ready market value," and the plaintiff must prove damages with legal certainty. Ms. Miramon's personal, uncorroborated estimate of $15,500 for repairs and painting was insufficient. The court awarded $7,500 for repairs to sheetrock and metal studs but denied the painting costs. Ms. Miramon could not specify how much of the $8,000 requested for painting related to outside work and admitted her lack of contemporaneous evidence supporting the total claim. Moreover, it was established that Rouse's bore no responsibility for exterior painting, as Cross Gates was responsible for all repairs and maintenance of the leased premises under the lease agreement.

Ms. Miramon submitted an invoice from D Management for painting work, which she admitted was prepared specifically for the lawsuit. Evidence at trial questioned whether the painting was necessitated by damage from Rouse or was instead part of the new lessee's design preferences. Consequently, the court found no abuse of discretion in denying Cross Gates damages for the painting. 

The lease for the premises allowed for various retail uses, excluding prescription drugs. The Asset Purchase Agreement between A. P/Sav-A-Center and Rouse's defined "inventory" as items sold at retail from the leased premises. Rouse's acquired several leases from A. P/Sav-A-Center but chose not to operate two stores, including the one leased by Cross Gates, due to unprofitability concerns. Rouse's arranged for the closure of these stores, including selling down inventory.

Cross Gates initially sought $77,967 for light fixture replacements but reduced the claim at trial. Evidence showed that the HVAC units replaced were on the roof, and the metal studs referenced were part of the building's framing. Witness testimony established direct evidence, while other facts were inferred from circumstantial evidence. Mr. Miramon's deposition was introduced posthumously as he represented Cross Gates and owned Miramon Construction, which built the store. He indicated that ceilings generally last indefinitely.

The removal of old light fixtures was requested by the new lessee, making it an expense attributed to their demands. Additionally, while Ms. Miramon presented a $15,500 invoice from D Management, checks from Cross Gates to D Management did not reconcile with this amount, as they were for other unrelated repair work. The appeal costs were assigned to Cross Gates, and the court's decision was affirmed.