Lobell v. Rosenberg

• Decision Date: 14 October 2015
• Docket Number: No. 2015–C–0247.,2015–C–0247.
• Citation: 186 So.3d 83
• Parties: Kenneth H. LOBELL, et al. v. Cindy Ann ROSENBERG, et al.
• Court: Louisiana Supreme Court

186 So.3d 83

Kenneth H. LOBELL, et al.

v.Cindy Ann ROSENBERG, et al.

No. 2015–C–0247.

Supreme Court of Louisiana.

Oct. 14, 2015.

Herman, Herman, Katz & Cotlar, LLC, Brian David Katz, Herbert Adolph Cade ; Phelps Dunbar, LLP, Harry Allan Rosenberg, for Applicant.

Adams and Reese, LLP, Louis Charles LaCour, Jr., Ronald Jeffery Sholes ; Alvendia, Kelly & Demarest, LLC, Roderick Alvendia ; Matthew Louis Pepper, for Respondent.

PER CURIAM.

In this matter, we are called upon to determine whether the lessors properly terminated a lease. For the reasons that follow, we find the district court was correct in finding the lease was terminated, and the court of appeal erred in disturbing the district court's judgment.

FACTS AND PROCEDURAL HISTORY

By agreement dated January 25, 1957, Simon and Herman H. Rosenberg leased property located at 2025 Canal Street in New Orleans to Eagle Enterprises, Inc. for a term of sixty years, to expire on May 31, 2017. The lease, hereinafter referred to as the "1957 lease," provided:

TWENTY–SEVENTH: Time shall be of essence respecting the payment of rent and all other obligations assumed by the Lessee hereunder; and if a default shall be made by Lessee in the payment of any rent herein provided for on the day the same becomes due and payable, and such default shall continue thirty (30) days (after notice thereof in writing by Lessor, or his agents or attorneys to Lessee), or in case of any default in relation to liens as hereinbefore provided shall continue thirty (30) days after written notice, or if Lessee shall fail to pay any of the taxes or assessments herein provided for, or in case of the sale or forfeiture of the premises, or any part thereof, during the demised term, for the nonpayment of any taxes or assessments, or in case Lessee shall fail to keep insured any building or buildings or improvements which may at any time hereafter be on premises as herein provided for, or fail to spend insurance money as herein provided for, or fail to rebuild as herein provided; or in the event of the bankruptcy, receivership or insolvency of Lessee, then in any or either of such events, it shall and may be lawful for the Lessor, at his option, at or after the expiration of thirty (30) days' previous notice in writing either to declare the rent for the whole unexpired term due and exigible or to declare this lease terminated and enter the premises, and the buildings and improvements thereon, or any part thereof, either with or without process of law to re-enter and take possession thereof, Lessee hereby waiving any demand for possession of premises and any and all buildings and improvements then situated thereon; provided, however, that if the default is one which cannot be cured within the said thirty (30) day period, Lessee shall be entitled to a reasonable time following the giving of such notice in which to cure or remedy the default, provided further, that upon receipt of said notice Lessee shall start upon and promptly and diligently proceed with the curing or remedying thereof. And Lessee agrees that on termination of demised term at such election of Lessor, or in any other way, Lessee will surrender and deliver up premises and property, peaceable to the Lessor, his agents or attorneys, immediately upon the termination of demised term; and if Lessee, its agents, attorneys and tenants shall hold premises or any part thereof one day after the same should be surrendered according to the terms of this Lease, they shall be deemed guilty of forcible detainer of premises, under the statute, and shall be subject to eviction and removal, forcibly or otherwise, with or without process of law ....

In 1997, after other transfers and assignments of the original lease, E.E.W. Properties, Ltd., an intermediate lessee, transferred and assigned its leasehold interest to Kenneth Lobell. Mr. Lobell then executed a "Consent and Agreement" with the heirs of Simon and Herman Rosenberg (collectively referred to as the "Rosenbergs") in which Mr. Lobell acknowledged the assignment of the terms of the 1957 lease.

The lease documents, including the 1957 lease and the "Consent and Agreement," required Mr. Lobell to pay stipulated rent; pay all ad valorem taxes on the property; maintain insurance coverage in the amount of $2.6 million, with insurance payable to lessors; place insurance proceeds in a trust with lessors to be used for repair of the building; repair any damages within six months from the date of casualty loss; and keep improvements in a state of good repair.

The property was flooded in the aftermath of Hurricane Katrina. Following the hurricane, the parties disputed the disbursement and use of insurance proceeds, the payment of rent, and repairs to the building. On December 28, 2007, the Rosenbergs, through counsel, sent Mr. Lobell a default letter terminating the lease. The letter stated:

This is to notify you that you are in default under the lease in that:

(1) No rent has been paid since August 29, 2005;

(2) The ad valorem taxes on the premises have not been paid;

(3) The building is uninsured; and

(4) The obligations of the lessee to apply insurance proceeds to the repair of the improvements and to repair the improvements to the condition in which they were prior to Hurricane Katrina have not been satisfied.

My clients are electing to terminate the lease.

Mr. Lobell responded the next day and tendered a partial payment of past due rents. The Rosenbergs refused to accept the partial payment. On February 12, 2008, more than one month after the December 2007 default letter, the Rosenbergs sent Mr. Lobell a supplementary letter. The supplementary letter detailed Mr. Lobell's failure to maintain adequate insurance on the property:

Mr. Lobell is in default because he has not provided insurance in compliance with these provisions of the Lease and/or alternatively the Consent, and he does not currently maintain insurance that complies with these requirements.

I have asked you to provide all evidence of insurance from 2005 forward. You have provided only proof of current liability insurance; and have not provided proof of either fire and extended coverage and/or hazard insurance.

* * *

Mr. Lobell remains in default until the improvements are insured.

In addition, the February 12 letter details Mr. Lobell's failure to place the insurance proceeds in a trust and to use them to repair the building in violation of the lease documents:

Rather than using those insurance proceeds for the repair and restoration of the improvements, the proceeds were used to pay off Mr. Lobell's existing loan. Contrary to the assertion in yours of February 1, 2008, the receipt and disbursement of insurance proceeds is relevant under one of more of the above-cited provisions.

On behalf of the owners, I reiterate my request for an accounting of insurance proceeds that were paid in connection with Katrina claims, for copies of contracts for all work done on the building post-Katrina, and for a list of expenses incurred in connection with Mr. Lobell's alleged efforts. If Mr. Lobell has in fact applied insurance proceeds to "repairing the building to a state in which it can be re-rented," as you assert, then evidence of his expenditures should be readily available.

Mr. Lobell is in default because the insurance proceeds have not, to any significant degree, been used for the repair and restoration of the improvements.

Finally, the February 12 letter detailed Mr. Lobell's failure to repair or rebuild the damage within six months of the loss, keep the building in good repair, and pay ad valorem taxes.

On May 29, 2008, the Rosenbergs served Mr. Lobell with a notice to vacate due to the non-payment of rent and other lease violations, including failure to maintain hazard insurance, to provide proof of insurance, to place insurance proceeds in trust, to restore the building within six months of damage, and to pay ad valorem taxes.

Subsequently, Mr. Lobell filed a petition for writ of possession and a possessory action against the Rosenbergs,¹ alleging damages arising out of the Rosenbergs' failure to allow him time to cure the default pursuant to the 1957 lease provisions, anticipatory breach of contract, and wrongful eviction during the lease term. The Rosenbergs responded by filing an incidental demand against Mr. Lobell, alleging he breached the lease and consent agreement by failing to pay rent and taxes, maintain $2.6 million in hazard insurance, place insurance proceeds in trust, spend the insurance proceeds for the purpose of repairing the building and improvements, and keep improvements in good repair.²

Following a trial on the merits, the district court rendered judgment in favor of the Rosenbergs and dismissed Mr. Lobell's claims. The court terminated the lease of the property and rendered a money judgment in favor of the Rosenbergs in the amount of $3,647,127.81.

In its reasons for judgment, the district court specifically rejected Mr. Lobell's argument that the Rosenbergs did not afford him sufficient opportunity to cure the breach. The district court stated:

The Court further finds that Mr. Lobell has failed to establish that [the Rosenbergs] breached the lease by failing to allow him thirty (30) days to cure the default. Although Mr. Lobell attempted to tender rent in January 2008 and paid and/or protested ad valorem taxes due, those were not the only defaults. The letters of December 28, 2007, January 31, 2008, and February 12, 2008 all made demand for the insurance proceeds to restore the building. It was undisputed that the insurance proceeds were not placed in trust and that the building was not put in the same condition as it was at the time of the loss.

The district court went on to find Mr. Lobell breached the lease by failing to comply with several obligations under the lease:

Pursuant to the Lease and Consent and Agreement (which supplemented the terms of the lease), rent was set at $2,0833.33 per month from June 1, 1982 to May 31, 2017; lessee was

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