Ciolino v. First Guaranty Bank

133 So. 3d 686, 2013 WL 8129639
CourtLouisiana Court of Appeal
DecidedOctober 30, 2013
DocketNos. 2012 CA 2079, 2012 CA 2080
StatusPublished
Cited by13 cases

This text of 133 So. 3d 686 (Ciolino v. First Guaranty Bank) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ciolino v. First Guaranty Bank, 133 So. 3d 686, 2013 WL 8129639 (La. Ct. App. 2013).

Opinions

CRAIN, J.

12In this suit to enforce a lease, the defendants, First Guaranty Bank and Capital One, N.A., appeal a partial summary judgment rendered in favor of the plaintiffs, Charles A. Ciolino and Gertrude K. Ciolino. We affirm.

FACTS AND PROCEDURAL HISTORY

The property at issue was leased by Mike and Rose Ciolino to M.D. Evans pursuant to a lease agreement dated September 7, 1973. The lease contained a fifty-year term that will expire on September 30, 2023. A summary of the lease was recorded in the public land records on December 10, 1973. Using the lease as security, the original lessee secured financing from First Guaranty Bank and Hibernia National Bank in New Orleans to improve the property as a parking lot for a motel facility located on an adjacent tract being developed by the same party.1 Both the lease and the property have been the subject of transfers over the last four decades, and the rights and obligations that flow from those transfers form the crux of the issues presented by this appeal.

The lease permitted assignments but provided that in “the event that Lessee should assign this Lease, Lessee shall not be personally released from any responsibilities contained in this lease but shall remain completely liable for all of the terms and conditions hereof.” On January 5, 1977, the original lessee executed a dation en paiement that included an assignment of the lease to the banks. In connection with that transaction, the original lessee and the banks executed an act of assignment dated February 20, 1977, whereby First Guaranty acquired a three-fifths interest in the lease and | ¡¡Hibernia acquired a two-fifths interest. The banks agreed that they were “binding themselves to perform all of the conditions and obligations of said lease in the respective proportions thereof as though original lessees under the lease.” Mike and Rose Ciolino appeared as intervenors in that assignment to consent to the transaction and to expressly release the original lessee from any further liability under the lease. Approximately seven months later, the banks transferred the lease to another assignee on September 14, 1977. Mike and Rose Ciolino did not appear in that act and did not consent or agree to the transfer.

On December 30, 1987, Mike and Rose Ciolino donated the property to their son, Charles Ciolino, and his wife, Gertrude, by an act of donation that was recorded in the public land records shortly after it was signed. Charles and Gertrude Ciolino received rental payments pursuant to the lease until February of 2010 when they [689]*689received a letter forwarded on behalf of the current lessee advising that it would be unable to continue to honor its lease obligations due to the decline of the business on the adjacent tract. The motel subsequently closed, and the building is now abandoned.

Charles and Gertrude Ciolino (collectively, the “Ciolinos”) filed suit against the banks for the unpaid rent accruing after February of 2010 based upon allegations that the banks remain liable for the rental obligation pursuant to the assumption of liability in the act of assignment whereby they acquired the lease. After the banks filed answers denying any liability and asserting third-party demands against subsequent assignees of the lease, the Ciolinos moved for a partial summary judgment against the banks for the unpaid rent accruing through the date of the motion and for an order requiring the banks to comply with all terms and conditions of the lease, including the payment of future rent. The motion was supported by the |4CioIinos’ affidavits and related documents establishing the history of the relevant transactions involving the lease and the property and the default of the rental obligation.

The banks countered that the Ciolinos had released them from liability in an act of acknowledgment signed by the Ciolinos on December 3, 2001 in connection with another assignment of the lease. In that document, the Ciolinos confirmed information about the status of the lease and the holders of the lease at that time, referred to in the document as the “Current Lessees.” The banks assert that the following statement in that act constituted a novation that released them from liability under the lease:

The Original/Current Lessors are the only persons with any interest in the Lease and there are no other persons (including firms, corporations, associations or any other legal entities) that have any right or interest in the Lease, other than the Current Lessees.

An officer of First Guaranty, Stanley M. Dameran, signed the act of acknowledgment on behalf of that bank, who appeared as an intervenor to consent to the transfer and acknowledge the separate ownership of the improvements on the property. Dameran’s affidavit offered in opposition to the motion for summary judgment provided that “First Guaranty Bank’s only intent [in executing the document] was to acknowledge that it previously had an interest in the property at issue, and that First Guaranty Bank no longer had any interest in said property and no longer held any security interest in the property.” 2

The banks also argued that the Ciolinos never acquired any rights in the lease and therefore lacked contractual privity with the banks. Although | sthe banks recognized that the Ciolinos acquired the property subject to the lease through the act of donation, the banks argued that the lease was a personal right that was not transferred by the donation because it was silent as to the lease. Finally, the banks argued that the Ciolinos failed to mitigate their damages by not re-leasing the property.

The Ciolinos responded by asserting that the act of acknowledgment did not contain any language establishing a “clear [690]*690and unequivocal” release of the banks by a novation. As to their privity of contract, the Ciolinos argued that the language of act of donation was sufficiently broad to include their vendors’ interest in the lease. Alternatively, the Ciolinos maintained that the lease was a heritable right and presented evidence that Charles Ciolino was the only heir of Mike Ciolino, one of the original lessors, who died in 1996. In response to the claim that they failed to mitigate their damages, the Ciolinos asserted that the condition of the property, a parking lot serving a vacant motel on adjacent property, limits the market for releasing it, and that the banks did not meet their burden of proof for that defense.

After taking the matter under advisement, the trial court issued written reasons for judgment finding that the language in the act of acknowledgment was not a novation because “[o]ne would be constrained to conclude the cited language evidenced an intent to release any prior lessee from any obligation created under the 1973 lease.” Noting that the 1977 assignment whereby the banks acquired their interest in the lease contained specific language releasing the original lessee from any further liability under the lease, the trial court observed, “Surely, two sophisticated financial lending institutions which had previously entered into an Assignment specifically releasing a lessee would have included similar specific language [in the act Rof acknowledgment] if their intent was to be released from any contractual obligations as lessees from the 1973 lease.” The trial court found no merit in the lack of privity argument and did not address the defense of failure to mitigate damages.

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Cite This Page — Counsel Stack

Bluebook (online)
133 So. 3d 686, 2013 WL 8129639, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ciolino-v-first-guaranty-bank-lactapp-2013.