Judgment rendered November 16, 2022. Application for rehearing may be filed within the delay allowed by Art. 2166, La. C.C.P.
No. 54,778-CA
COURT OF APPEAL SECOND CIRCUIT STATE OF LOUISIANA
*****
745 OLIVE STREET, L.L.C. Plaintiff-Appellee
versus
OPTIMAL WELLNESS, LLC Defendants-Appellants AND SREEDEVI YERRAPRAGADA
Appealed from the First Judicial District Court for the Parish of Caddo, Louisiana Trial Court No. 624,305
Honorable Craig Owen Marcotte, Judge
THOMAS, SOILEAU, JACKSON Counsel for Appellants & COLE, LLP By: Steven E. Soileau Alexandra Morgan Harlow
WIENER, WEISS & MADISON, APC Counsel for Appellee By: Geoffrey D. Westmoreland
Before PITMAN, COX, and ROBINSON, JJ. ROBINSON, J.
Plaintiff, 745 Olive Street, LLC (“Olive Street”), sued Defendants,
Optimal Wellness, LLC (“Optimal Wellness”), lessor, and Dr. Sreedevi
Yerrapragada (“Yerrapragada”), guarantor (collectively, “Defendants”), for
breach of a commercial lease due to Optimal Wellness’s abandonment of the
leased premises, failure to pay rent, and for other amounts accruing and due.
Olive Street moved for summary judgment seeking recovery of
damages for unpaid and accelerated rent and attorney fees, plus interest,
from Defendants. Defendants argued that Olive Street failed to establish
abandonment and was not entitled to accelerated rent because it retook
possession of the leased premises without first providing proper notice to
Optimal Wellness. Olive Street also argued that Yerrapragada was not
personally bound under the Guaranty because it was invalid.
The trial court granted Olive Street’s motion and a written judgment
was signed on March 4, 2021, declaring that Defendants, in solido, owe
Olive Street the full amount of unpaid and accelerated rent, together with
interest thereon at the legal rate from the date of judicial demand until paid,
and reasonable attorney fees. A traversal of request for attorney fees and
costs was filed by Defendants on October 26, 2021, and the court rendered
judgment on November 26, 2021. This appeal followed.
For the following reasons, we AFFIRM.
FACTS AND PROCEDURAL HISTORY
On February 27, 2018, Olive Street and Optimal Wellness entered into
a lease (the “Lease”) of certain office space located at 745 Olive Street,
Suite 109, Shreveport, Louisiana 71104 (the “Premises”), for a term of 40 months (the “Term”) for the operation of a medical clinic, beginning March
1, 2018, and ending June 30, 2021, unless sooner terminated as provided in
the Lease, though no termination method was stated therein. Yerrapragada
executed a personal guaranty in her individual capacity of Optimal
Wellness’s obligations under the Lease (the “Guaranty”). Yerrapragada was
removed as member/manager of Optimal Wellness on June 4, 2018, and was
replaced by Jennifer Dunn.
Optimal Wellness vacated the Premises without notice to Olive Street
in March 2020 and stopped paying rent. Olive Street’s leasing agent and
property manager, Vintage Realty, was informed by maintenance personnel
in early April 2020 that there was a sign on the door stating that Optimal
Wellness was no longer at the Premises, most of the furniture, office
equipment, and decorative items had been removed, and the keys to the
Premises were placed in a bag and left on the reception counter.
On April 21, 2020, Olive Street made written demand on Defendants
for payment of all outstanding amounts due under the Lease, which included
past due and accelerated rent (the “Rent Balance”) and other fees. The
demand letter was mailed to Yerrapragada at 2508 W. Bert Koons Industrial
Loop, No. 400, Shreveport, LA 71118, not to the address provided under the
notice provision in the Lease, 745 Olive Street, Suite 109, Shreveport, LA
71104. The demand letter did not inform Defendants that Olive Street
would be retaking possession of the property. Defendants did not tender any
portion of the amounts demanded in the April 21, 2020, demand letter.
On June 16, 2020, Olive Street filed its Petition for Past Due Rent and
Other Damages against Defendants for breach of the Lease arising out of
2 Optimal Wellness’s abandonment of the premises, failure to pay rent, and
for other amounts accruing and due thereunder. Olive Street sought
recovery from both Optimal Wellness, as the lessee, and Yerrapragada, as
the guarantor of the Lease, of the full Rent Balance, legal interest, attorney
fees, and costs owed to it in accordance with the Lease. On June 30, 2020,
Defendants filed an answer to the Petition, admitting that Optimal Wellness
entered into a lease agreement with Olive Street on or about March 1, 2018,
and that they vacated the Premises in April 2020. Defendants also admitted
that Olive Street is entitled to recover attorney fees incurred in seeking all
amounts due under the Lease from Defendants. Defendants denied the
remainder of Olive Street’s allegations.
In October 2020, Olive Street removed Optimal Wellness’s sign from
the office door and its name from the building directory, rekeyed the
property to a vacancy master, did not reissue the designated parking space,
and listed the property on marketing sites.
Olive Street filed a motion for summary judgment on July 30, 2021,
arguing Optimal Wellness’s breach of the Lease by abandonment and
seeking recovery of damages from Optimal Wellness in the amount of the
Rent Balance, attorney fees, plus interest, and from Yerrapragada as a
solidary obligor pursuant to the Guaranty. In opposition to Olive Street’s
motion, Defendants argued that Olive Street failed to set forth sufficient
facts to establish abandonment and that Olive Street was not entitled to
accelerated rent because Olive Street retook possession of the Premises
without first providing proper notice to Defendants. Optimal Wellness also
3 argued that Yerrapragada was not personally bound under the Guaranty
because it was invalid.
The trial court granted Olive Street’s motion for summary judgment,
finding that Optimal Wellness breached the Lease by abandoning the
Premises. The court also found that Yerrapragada was liable as a solidary
obligor for the amounts owed by Optimal Wellness, noting that by signing
the Guaranty, she “stepped into the shoes of the lessee” under the Lease. A
written final judgment was signed on March 4, 2021, declaring that
Defendants, in solido, owe Olive Street the full Rent Balance, together with
interest thereon at the legal rate from the date of judicial demand until paid
and reasonable attorney fees. A traversal of request for attorney fees and
costs was filed by Defendants on October 26, 2021. The court rendered
judgment as to attorney fees on November 26, 2021.
DISCUSSION
Optimal Wellness argues that the trial court erred in granting Olive
Street’s motion for summary judgment because genuine issues of material
fact remain as to whether: (A) Olive Street made a sufficient showing of
abandonment; (B) Olive Street cancelled the lease by retaking possession of
the property; (C) Olive Street delivered proper notice to Defendants prior to
retaking possession of the property; (D) Yerrapragada signed a valid
contract of guarantee; and (E) Yerrapragada was personally liable for
attorney fees.
Abandonment of Leased Premises
Optimal Wellness argues that Olive Street failed to prove
abandonment, particularly, the specific intent to abandon the property. It
4 urges that issues of material fact remain as to the timing and circumstances
under which Olive Street was notified of Optimal Wellness vacating the
Premises.
The abandonment of property by a tenant to such an extent as to vest
title and control in the landlord involves both an act of abandonment and a
specific intent to abandon. Powell v. Cox, 92 So. 2d 739 (La. App. 2 Cir.
1957). The characteristic element of abandonment is voluntary
relinquishment. Id. La. C.C.P. art. 4731 provides certain indicia of
abandonment to support a lessor’s reasonable belief therein: a cessation of
business activity or residential occupancy; returning keys to the premises;
and removal of equipment, furnishings, or other movables from the
Optimal Wellness’s actions clearly meet all indicia of abandonment.
Its furniture, equipment, and furnishings were removed, its office keys were
left on the counter, and a sign was placed on the door referring to the closing
of its business. There is testimony by Optimal Wellness’s current manager
that it left the Premises because the business was no longer operational due
to the lack of doctors to prescribe medication. The lessor’s realization of the
act of abandonment is irrelevant to a finding of the lessee’s intent.
Optimal Wellness also claims that by contacting Olive Street’s
property manager, Vintage Realty, in an attempt to renegotiate the terms of
the Lease, it negated the specific intent to abandon. However, this
communication occurred prior to the time Optimal Wellness vacated the
Premises and the attempted renegotiation was not pursued. Therefore, there
5 was a specific intent to abandon the property at the time Optimal Wellness
vacated the Premises.
Cancellation of Lease
Optimal Wellness claims that due to Olive Street’s actions in retaking
possession of the Premises, it could not take occupancy during the remaining
term, effectively cancelling the Lease. It relies on the holding in Richard v.
Broussard, 495 So. 2d 1291 (La. 1986), in its assertion that Olive Street is
precluded from claiming accelerated rent payments for the remainder of the
Lease term and may only recover accrued rentals due before cancellation in
October 2020.
In Richard, the lessees paid rent on a building for approximately eight
months before abandoning the property. Id. The lessors immediately began
advertising the property, but were unable to find a new tenant, so they began
occupying the premises for their own business. Id. The trial court rendered
a judgment in favor of the lessors for accelerated rent, costs, and expenses,
with attorney fees in the amount of 25%. Id. The court of appeal affirmed
the ruling with the exception of a remand for the determination of a
reasonable attorney fee. Id. The Louisiana Supreme Court reversed. Id.
The Supreme Court in Richard held that generally, when a lessee
defaults on a lease agreement, the lessor may either: (1) sue to cancel the
lease and recover accrued rentals due; or (2) sue to enforce the lease and
recover both accrued rentals and future accelerated rentals (if the lease
contains an acceleration clause). Id. If the lessor elects to cancel the lease,
the lease is terminated and the lessor is entitled to return into possession, but
forfeits the right to all future rentals. Id. If the lessor elects to enforce the
6 lease, he may obtain a money judgment against the lessee based on the terms
of the lease agreement, but the lease remains in effect and the lessee retains
the right of occupancy for the remainder of the term of the lease. Id.
However, when the lessee breaches the lease by abandoning the premises,
the lessor has the right to take possession of the premises as agent for the
lessee and relet the premises to a third party without canceling the lease or
relieving the lessee of his obligations under the lease contract. Id.
The Richard ruling emphasized the legal effect of the lessor’s reentry
after abandonment by the lessees to utilize the premises in the operation of
their personal business, finding that the lessors did more than simply reenter
the premises for the purposes of reletting to a third party. Id. When the
lessors sued to recover the accelerated rent, the lessees retained the right to
occupy the premises; however, the lessors thereafter usurped that right from
the lessees by occupying the premises themselves to the exclusion of the
lessees. Id. The lessors’ election to occupy the premises for their own
business use effectively terminated the lease, regardless of the lessors’ good
faith motivation or their intent that the lease should continue in effect. Id.
This case is easily distinguishable from Richard. Approximately six
months after Optimal Wellness’s abandonment of the Premises, and
following a demand letter sent by Olive Street in response to the breaches of
the Lease for abandonment and failure to pay rent, Olive Street rekeyed the
locks to a vacancy master, removed Optimal Wellness’s office door sign,
removed its name from the building directory, and advertised for a potential
new tenant. Olive Street did not occupy the premises for their own personal
use to the exclusion of Optimal Wellness. Olive Street merely reentered the
7 premises for the purposes of reletting to a third party and safekeeping of the
property. Optimal Wellness abandoned the property and excluded
themselves by surrendering the keys and never attempting or expressing a
desire to occupy the property thereafter. Olive Street did not usurp any right
of occupancy of Optimal Wellness following the abandonment that would
result in the termination or cancellation of the Lease. Therefore, Optimal
Wellness’s obligations under the Lease and Olive Street’s claim to
accelerated rent payments for the remainder of the Lease were preserved.
In addition, the Lease provides that “in the event of a default by
LESSEE, as set forth above, LESSOR immediately may elect to exercise
any of the following nonexclusive remedies, to wit:
1. Accelerate the rent for the unexpired term of this Lease and declare the same immediately due and payable; 2. Immediately terminate this Lease and proceed to recover all past due rent and other sums due and owing as of the date of termination; 3. Proceed to recover all past due rent and other accrued liabilities only, reserving to LESSOR the right later to proceed for the remaining installments of rent and other sums for which LESSEE may be or become liable as a result of LESSEE's default.”
Optimal Wellness failed to pay Olive Street rent accruing under the Lease
and abandoned the Premises in direct violation of the express terms of the
Lease. As a result of these breaches, Olive Street is entitled to past rent due
as well as accelerated rent for the unexpired term of the Lease pursuant to
the Lease as well.
Notice of Retaking Possession
Optimal Wellness asserts that formal notice is required before a lessor
may retake possession of the property, even if the property was abandoned;
therefore, since the notice provided by Olive Street in the form of a default
8 letter was not provided to the address indicated in the Lease, summary
judgment must be reversed on this fact alone.
In support of its argument, Optimal Wellness cited La. C.C.P. art.
4731(B), which provides as follows:
After the required notice has been given, the lessor or owner, or agent thereof, may lawfully take possession of the premises without further judicial process, upon a reasonable belief that the lessee or occupant has abandoned the premises. Indicia of abandonment include a cessation of business activity or residential occupancy, returning keys to the premises, and removal of equipment, furnishings, or other movables from the premises.
It also cited La. C.C.P. art. 4701 regarding proper notice:
When a lessee’s right of occupancy has ceased because of the termination of the lease by expiration of its term, action by the lessor, nonpayment of rent, or for any other reason, 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. The notice shall allow the lessee not less than five days from the date of its delivery to vacate the leased premises.
Optimal Wellness interpreted the above statutes to mean that there
were certain requirements for a lessor prior to retaking possession,
regardless of the lessee’s abandonment. We disagree with this
interpretation.
La. C.C.P. art. 4731 read in its entirety, and in the context of the Title
for which it is a subpart, Eviction of Tenants and Occupants, concerns the
cessation of a lessee’s right of occupancy due to termination of a lease
where the lessor wishes to obtain possession of the premises. In such an
eviction case, notice to vacate is generally required. La. C.C.P. art. 4703
refers to the notice under this Title being attached to a door of the premises
in the event the premises are abandoned, but again, this requisite notice to
9 vacate is in relation to the eviction process when a lessor wishes to terminate
a lease agreement and regain possession of the property.
In this case, a notice to vacate was not required because: (1) Olive
Street was not terminating the lease to regain occupancy for itself; and (2)
Optimal Wellness had already abandoned the premises, rendering an
instruction to vacate unnecessary. Whether Olive Street’s demand letter sent
to an address different than indicated in the Lease is considered proper
notice to vacate is immaterial.
Validity of Personal Guarantee
Optimal Wellness claims that the trial court erred by finding that the
contract of suretyship executed by Yerrapragada was valid and that Pelican
Supply, Inc. v. J.O.H. Construction Co., Inc., 94-991 (La. App. 5 Cir.
3/28/95), 653 So. 2d 699, was not applicable because this Lease was a
different type of obligation. It argues that Pelican Supply should apply since
this Lease contains the same obligations and is also a contract of suretyship;
and, as in that case, the Guaranty executed by Yerrapragada should be
considered invalid.
In Pelican Supply, a supplier, Pelican, filed suit against J.O.H.
Construction and its vice president, Heidingsfelder, to collect on an unpaid
open account. Id. J.O.H. had an ongoing business relationship with Pelican
and was entering into an additional open account. Id. At the time, the
company was in good financial condition. Id. Heidingsfelder completed the
application on behalf of the company and executed the guaranty in question,
but he had never before personally guaranteed any of J.O.H.’s obligations.
Id. Heidingsfelder testified that he had no intent to obligate himself
10 personally on a credit application for the company and would never have
signed the document if he thought it could be interpreted as a personal
guaranty. Id. Notably, his signature on the guarantee agreement was
followed by the name “J.O.H. Construction Co.” Id.
The Fifth Circuit upheld the trial court’s ruling that Heidingsfelder’s
signature was made in a representative capacity and led to no personal
responsibility of the corporate representative, applying the laws of
suretyship. Id. La. C.C. art. 3035 provides that “suretyship is an accessory
contract by which a person binds himself to a creditor to fulfill the obligation
of another upon the failure of the latter to do so.” Id. Contracts of
suretyship are subject to the same rules of interpretation as contracts in
general. Id. A contract of guaranty is equivalent to a contract of suretyship
and the two terms may be used interchangeably. Fleet Fuel, Inc. v. Mynex,
Inc., 40,683 (La. App. 2 Cir. 3/8/06), 924 So. 2d 480, writ denied, 06-0762
(La. 6/23/06), 930, 977.
In interpreting contractual provisions about which there exists some
doubt, a court must seek the true intention of the parties, even if to do so
necessitates departure from the literal meaning of the terms of the
agreement. Id. Where the personal or representative nature of a signature is
unclear upon examination of the document, parol evidence is admissible to
show the parties’ intent. Id.
As in Pelican Supply, supra, we find that the laws of suretyship apply
to the personal guaranty executed by Yerrapragada. However, we find the
facts in this case to be distinguishable. In Pelican, the contract of guaranty
was ambiguous on its face since Heidingsfelder referenced his representative
11 capacity following his signature, allowing the introduction of parol evidence
as to the intent of the obligor. Here, Yerrapragada executed “Exhibit D” to
the Lease entitled “In Solido Obligation and Guaranty” by signing in her
individual capacity with no reference to being a representative of Optimal
Wellness. Her signature was followed by the designation, “In Solido
Obligor and Guarantor.” Yerrapragada signed the Lease itself on behalf of
Optimal Wellness as Manager, as indicated on the signature page. Also, the
language in the Guaranty clearly establishes Yerrapragada’s individual
obligation by providing that “the undersigned hereby makes himself or itself
a party for the Lease and binds himself or itself in solido with Lessee for the
faithful performance and fulfillment by Lessee … the punctual payment of
all monies due under the Lease and the performance of all other agreements
and obligations of Lessee contained in the Lease[.]”
Courts are bound to give legal effect to all written contracts according
to the true intent of the parties. First South Farm Credit, ACA v. Gailliard
Farms, Inc., 38,731 (La. App. 2 Cir. 8/18/04), 880 So. 2d 223. The intent of
the parties to a written contract which is clear, explicit, and leads to no
absurd consequences must be sought within the four corners of the
instrument and cannot be explained or contradicted by parol evidence. Id.,
citing Bonfanti Marine, Inc. v. Clement, 439 So. 2d 537 (La. App. 1 Cir.
1983). Additionally, signatures are not mere ornaments. Id., citing Tweedel
v. Brasseaux, 433 So. 2d 133 (La. 1983); see also IPS Equip., LLC v.
Cooper, 50,506 (La. App. 2 Cir. 2/24/16), 188 So. 3d 1106. A person who
signs a written agreement is presumed to know its contents and cannot avoid
its obligations by contending that he did not read it, that it was not explained
12 to him, or that he did not understand it. Id., citing Smith v. Leger, 439 So. 2d
1203 (La. App. 1 Cir. 1983); see also Greely v. OAG Properties, LLC,
44,240 (La. App. 2 Cir. 5/13/09), 12 So. 3d 490, writ denied, 09-1282 (La.
9/25/09), 18 So. 3d 77.
The language of the Guaranty and Yerrapragada’s signature thereto is
clear and unambiguous, and any contrary intent cannot be explained by parol
evidence. By her execution of the document, Yerrapragada is presumed to
know and understand its contents and cannot avoid her obligations as a
personal guarantor.
Personal Liability for Attorney Fees
Because the Lease specifically provides for attorney fees, Olive Street
is entitled to an award thereto from Optimal Wellness. See La. C.C. art.
2000; S. Trace Prop. Owner’s Ass’n v. Williams, 52,653 (La. App. 2 Cir.
9/25/19), 280 So. 3d 826, reh’g denied (Nov. 14, 2019).
As previously stated, the Guaranty is valid and Yerrapragada is
personally bound as guarantor in solido with Optimal Wellness as Lessee for
the faithful performance and fulfillment by Lessee of all obligations
contained in the Lease, which includes payment of attorney fees.
CONCLUSION
For the foregoing reasons, this Court finds that there are no genuine
issues of material fact as to Optimal Wellness’s breach of the lease due to its
abandonment of the premises or any retaking of possession by Olive Street,
as well as to the validity of the Guaranty executed by Yerrapragada. We
hereby affirm the trial court’s granting of Olive Street’s motion for summary
judgment declaring Optimal Wellness and Yerrapragada, in solido, owing
13 Olive Street the full Rent Balance, together with interest thereon at the legal
rate from the date of judicial demand until paid, as well as the trial court’s
judgment as to attorney fees. All costs of appeal are to be assessed to
Optimal Wellness and Yerrapragada, in solido.
AFFIRMED.