Tullier v. Tanson Enterprises, Inc.

• Decision Date: 29 January 1979
• Docket Number: No. 62636,62636
• Citation: 367 So.2d 773
• Parties: Warren J. TULLIER, Sr., et al., Plaintiffs-Appellees-Respondents, v. TANSON ENTERPRISES, INC., Defendant-Appellant-Relator.
• Court: Louisiana Supreme Court

Page 773

367 So.2d 773

Warren J. TULLIER, Sr., et al., Plaintiffs-Appellees-Respondents, v. TANSON ENTERPRISES, INC., Defendant-Appellant-Relator.

No. 62636.

Supreme Court of Louisiana.

Jan. 29, 1979.

Leon Gary, Jr., Gary & Field, Baton Rouge, for defendant-appellant-relator.

A. J. Spedale, Spedale, Sanders, Pennington & Grimley, Baton Rouge, for plaintiffs-appellees-respondents.

TATE, Justice.

The issue before us is whether a tenant is required to continue to maintain leased premises as a shopping center, where the long-term lease itself contains no clause expressly requiring the premises to be so used, but riders attached to the lease indicate that the parties foresaw at the time of its confection that at least the initial use would be for a shopping center.

The issue arose in litigation whereby the owners of the premises sought to cancel the lease upon certain contentions of default. Ultimately, the court of appeal denied cancellation, but it agreed with the trial court that the lease intended that the property be used for shopping center purposes. 359 So.2d 654 (La.App. 1st Cir. 1978). Upon the application of the tenant ("Tanson"), we granted certiorari, 362 So.2d 578 (1978), in order to decide the issue stated in the initial paragraph of this opinion.

Background Facts

The details of the lease will be set forth more fully below. By way of background, the following are some of its relevant provisions:

The lease of 20 acres of vacant ground had been executed in 1958 for a term of 25 years, with the tenant being given the right to renew it successively for a total of 99 years in all. The tenant's obligations under the lease and its renewals were to pay a fixed monthly rental and to pay all expenses (taxes, etc.) of the property.

The tenant was given the right to assign or sublet without consent of the landlord-owner, to construct buildings and other improvements on the land, or to demolish any so built (provided a building of equal value was constructed to replace it). The buildings constructed by the tenant were to become the property of the landlord-owner.

The plaintiff-landlords are the widow and heirs of the original lessor. Through a series of assignments, the present defendant tenant ("Tanson") now holds the ground lease.

A shopping center with two buildings and a large parking lot was constructed by Tanson's predecessor tenants on about ten acres of the tract, soon after the lease was executed in 1958. The present tenant, Tanson, has held the lease since 1963.

However, before the present litigation, Tanson lost its two major tenants (which operated retail outlets in the two buildings under two separate subleases). The buildings, especially one of them, had then fallen into disrepair.

Due to a decline in the neighborhood, Tanson was unable to secure subtenants to operate retail stores on the leased premises. It therefore planned, upon repairing the buildings, to do so for the purpose of renting them for warehouse or storage facilities.

The plaintiff-landlords rely upon a rider to the lease in their contention that the buildings must be repaired to conform with the initially intended use of the lease premises for a shopping center, despite the absence of a clause in the lease expressly providing this to be the purpose of the lease. The previous courts agreed with this contention and held that the intention of the parties to the lease was to utilize the premises for a shopping center (only).

The primary significance of this holding in the present litigation is that it determines the extent and nature of the required repairs to the two buildings on the premises: Must they be restored to be fit for occupancy and use by retail outlets in a shopping center, although the neighborhood will no longer support a shopping center? Or, instead, may they be repaired to serve as warehouses, for which subtenants may be secured on the present rental market?

Applicable Legal Principles

The Louisiana Civil Code provides that a tenant is required to utilize the property leased as a good administrator and according to the use for which it was intended by the lease. Article 2710(1) (1870). The landlord-owner may obtain the dissolution of the lease if the tenant makes another use of the premises than that for which it was intended. Article 2711 (1870).

The lease itself may expressly provide the purpose for which the premises are leased and for restrictions on the use of the leased premises. Reilley v. Kroll, 197 La. 790, 2 So.2d 214 (1941). However, in determining the "intended use" under the lease, the courts may, in the absence of express lease provision, look to the surrounding circumstances, such as the nature, situation and previous use of the property. New Orleans and Carrollton R.R. v. Darms, 39 La.Ann. 766, 2 So. 230 (1887); Comment, The Louisiana Law of Lease, 39 Tul.L.Rev. 798, 856-59 (1965); Planiol, Civil Law Treatise, Vol. 2, No. 1691 (LSLI Translation; 1959).

In his occupancy of the property the tenant is obligated not to use the premises for a purpose inconsistent with that contemplated by the parties at the time they confected the lease. Caffin v. Scott, 7 Rob. 205 (La.1844).

Relying upon these principles, the plaintiff-landlords point out that, at the initiation of the lease, the parties contemplated that the property (or at least a substantial portion of it) would be used as a shopping center. They thus contend that the initially intended use of (part of) the property is the Only use contemplated by the parties.

This contention might be forceful, were we concerned with a lease shown to have been intended to confer some advantage to the landlord by continued operation of the premises as a shopping center. However, the present lease construed as a whole, to the contrary, shows that the tenant was intended to have free use of the leased premises for whatever lawful purpose it desired, nor does it reflect that within the contemplation of the parties any restriction upon such use by the tenant was contemplated by the parties:

The Present Lease

In 1958, the late Benjamin Tullier and his wife leased a vacant 20-acre tract of land to the original tenant. Through a series of assignments Tanson, the present defendant-tenant, acquired all lessee rights (and became subject to all lessee obligations) under the lease.

The tenant's principal obligation under the lease was to pay a fixed monthly rental of $750 and all taxes and other expenses of the property. The lease was renewable for up to 99 years.

Under the terms of the lease, the tenant was afforded the right to make at its own expense any improvements, alterations, or additions to the premises as it desired, which were to become the property of the landlord. (Art. 15.) The tenant was also given the right to demolish any structures so built, providing that it constructed a new building of equal or greater value. (Art. 15.) The tenant also agreed to keep in good repair the roof, exterior and interior, and appurtenances (including sidewalks) of any buildings thereafter placed upon the premises. (Art. 11.)

The landlord also agreed to deliver the premises to the tenant "free of liens, encumbrances, and violations of laws, ordinances, and regulations relating to the use, occupation and/or construction of improvements on the demised premises." (Art. 8.)

The lease also granted the tenant the "full and complete right to assign the whole of this lease or any part thereof or to sublet the whole or any portion of the demised premises." (Art. 22.)

The only provision restricting the use of the premises is that set forth in Article 7 of the lease: "The premises hereby demised shall not be used for any unlawful purpose during the term of the lease." The lease does not contain any covenant requiring the tenant to either continuously use or continuously occupy any part of the leased premises.

Thus, the provisions of the lease as a whole grant the tenant the virtually unrestricted right to use or alter or sublease or assign the premises as he wills. During the initial or extended (up to 99 years) terms of the lease, the tenant's principal obligation, aside from paying the taxes and expenses of the property, was principally to pay the fixed monthly rental of $750 and to keep in repair any buildings that within his discretion he had built upon the property (or to replace them with buildings of equal value if in his discretion he demolished them).

Nevertheless, the plaintiff-landlords, in urging that the two buildings on the premises must be kept in repair for chain-store occupancy purposes, rely upon two riders executed in connection with the construction of One of the buildings (on an acre of the 20-acre tract) and upon two zoning clauses, as showing an intention to restrict the use of the premises to a shopping center.

The intermediate court essentially agreed with this contention.

Did the Riders and Zoning Clauses Restrict the Intended Use of the Premises?

In finding that the lease implicitly required the use of the property as a shopping center, the court of appeal relied solely on Riders C and D, which respectively conditioned the effectiveness of the lease upon the tenant's consummation of a sublease with a chain store, and required the tenant to build a building "designed for chain store occupancy," and on the fact that during the term of the lease that is, from the time the buildings were built until their abandonment by the subtenants they were used as chain stores.

This conclusion fails to give sufficient weight to all the circumstances...