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FIE, LLC v. New Jax Condo Association, Inc.

Court of Appeals of Louisiana, Fourth Circuit

February 21, 2018


         APPEAL FROM CIVIL DISTRICT COURT, ORLEANS PARISH NO. 2012-03078, DIVISION "L-6" Honorable Kern A. Reese, Judge


          Raymond A. Pelleteri, Jr. Alexander R. Saunders PELLETERI & WIEDORN, L.L.C. and Charles L. Stern, Jr. Ryan M. McCabe Elise M. Henry THE STEEG LAW FIRM, L.L.C. COUNSEL FOR DEFENDANT/APPELLANT (NEW JAX CONDO ASSOCIATION, INC.)


          Court composed of Judge Rosemary Ledet, Judge Sandra Cabrina Jenkins, and Judge Regina Bartholomew-Woods


         Following a jury trial, the trial court rendered judgment in favor of FIE, LLC ("FIE") and Iberia Tigers, LLC (collectively, "plaintiffs"), and against New Jax Condominium Association, Inc. ("New Jax") and Lafayette Insurance Company (collectively, "defendants"), in solido, in the amount of $1, 185, 700.00 for the loss of use of plaintiffs' condominium unit. In the first of these consolidated appeals, defendants seek reversal of the trial court's judgment and the dismissal of plaintiffs' claims for loss of use damages. In an answer to defendants' first appeal, plaintiffs seek reversal and remand on the trial court's pre-trial judgment precluding plaintiffs from introducing evidence at trial to support a claim for bad faith damages against Lafayette.

         During the pendency of the first appeal, plaintiffs filed a motion to tax costs of the trial against defendants, which the trial court granted in part, assessing court costs and expert fees in the amount of $49, 862.92 against defendants. Defendants then filed an appeal of the trial court's judgment assessing costs of the trial. This Court ordered that the two appeals be consolidated.

         Based on our review of the record and the applicable law, we affirm the trial court's March 24, 2016 judgment finding defendants jointly liable to plaintiffs for the loss of use damages awarded by the jury. We also affirm the trial court's March 2, 2016 pre-trial judgment challenged by plaintiffs in their answer to the first appeal. Finally, we affirm the trial court's January 6, 2017 judgment assessing costs and expert fees.


         Robert Chris Jordan is the sole member and manager of FIE and Iberia Tigers, LLC ("Iberia Tigers"), through which Mr. Jordan acquires mostly commercial properties for investment purposes. In May 2007, FIE purchased Unit 5-C in the New Jax Brewery building, located at 640 Decatur Street, which is managed and operated by New Jax. FIE later transferred ownership of Unit 5-C ("the condo") to Iberia Tigers. According to Mr. Jordan, the condo was purchased as an investment property and for his personal use to entertain family, friends, or clients during visits to New Orleans.

         Within the first year of acquiring the condo, Mr. Jordan observed water intrusion in areas of the condo directly below the roof of the building. Mr. Jordan reported the water intrusion to Earl Weber, Jr., the President of the Board of New Jax, and requested that repairs be made to the roof to stop the water intrusion.

         In April 2008, finding that New Jax had not yet made successful attempts to repair the roof and stop the water leaks, Mr. Jordan began withholding the monthly condo assessment fees owed by FIE to New Jax.

         In July 2009, New Jax made attempts to discover the source of the water leaks by cutting holes in the ceiling and walls of the condo; during this process, New Jax tarped off the perimeter of the condo with Visqueen plastic sheeting. At that point, Mr. Jordan found the condo uninhabitable and unusable for its intended purpose. Between July 2009 and October 2011, Mr. Jordan corresponded with New Jax by email about ongoing water leaks, damage to furniture, and the presence of black mold growth in the condo;[1] along with each complaint, he constantly sought updates from New Jax on the status of the roof repairs. During that same two year period, New Jax reported several times to Mr. Jordan that attempts were being made to find the source of the water leaks, that roofers were making repairs to the roof, and that the condo was being monitored for further water leaks. However, by 2012, the roof had not been repaired successfully; and, on March 28, 2012, plaintiffs[2] instituted this suit for damages against New Jax.

         In July 2012, plaintiffs hired Greg Fisher, a roofing contractor and consultant, to perform a visual inspection of the roof above the condo and prepare a report of his findings. During his initial inspection, Mr. Fisher observed that limited remedial repair work was being undertaken on the roof, and he recommended that water tests be performed to assess the effectiveness of that work. In October 2012, Mr. Fisher returned for a second visual inspection and he observed that a significant component of the roof-the standing seam metal roofing-had been completely removed and no temporary waterproofing material had been installed to protect the building from the weather. He returned a week later and observed that Visqueen had been installed to cover the portion of the roof that had been removed; however, he did not observe progress in the completion of the repairs. Mr. Fisher discussed his observations with Mike Storms, New Jax's maintenance manager overseeing the roof repairs, and he recommended that New Jax hire a "competent roofer" to perform all necessary roof repairs due to the complex nature of the building's roofing system. Subsequently, by letter dated November 21, 2012, plaintiffs formally requested that New Jax hire a competent roofer to repair the roof.

         In December 2012, New Jax hired Paul Couget to install a new roof over the condo. In January 2013, Mr. Couget submitted an invoice to New Jax for the completed installation of a "standing seam snap lock roof system complete with all necessary trim, flashing, and closures." Despite these repairs, Mr. Jordan continued to find water leaks in the condo, and he reported to New Jax that the condo had sustained further water damage and mold growth during the months that the roof was removed. In April 2013, plaintiffs and New Jax came to an agreement that New Jax would gut the affected areas of the condo but no interior repairs would take place until the recurring leaks were repaired successfully.

         In April 2014, New Jax held an annual Board meeting at which all new Board members were elected. In July 2014, the newly elected Board of New Jax hired a new property management company and a roofing consulting firm, BE-CI, to assess the roof. On August 4, 2014, BE-CI issued a detailed report of its findings and recommendations for necessary repairs. In September 2014, New Jax hired Acadian Waterproofing to complete the repairs outlined in BE-CI's report.

         In May 2015, a hard rain tested the roof repairs and provided confirmation that the roof and water leaks had been repaired successfully. Soon thereafter, repair work began on the interior of the condo. All repairs were complete by September 15, 2015-seventy-five months after Mr. Jordan had first reported that the condo was unusable.


         Plaintiffs filed this suit for damages against New Jax on March 28, 2012. In the original petition, plaintiffs alleged that, since 2009, water leaking from the roof of the New Jax property had caused extensive damage to their condo, making it uninhabitable, as a direct result of New Jax's negligence in failing to maintain and repair the roof.[3] Plaintiffs sought damages for the loss of use of the condo, subsequent rental value, the cost of reconstruction, and the loss of personal enjoyment.

         On March 11, 2013, plaintiffs filed their first supplemental and amended petition alleging further damages as a result of New Jax's "ineffective, negligent effort to repair the exterior roof, "[4] and naming New Jax's liability insurer, Lafayette Insurance Company ("Lafayette"), as a jointly liable defendant. Subsequently, in a third supplemental and amended petition, filed on March 27, 2014, plaintiffs asserted an additional claim against Lafayette for bad faith pursuant to La. R.S. 22:1892, and, after being granted leave to file a fourth supplemental and amended petition on July 7, 2015, plaintiffs added a claim for the recovery of attorney's fees pursuant to La. R.S. 9:1121.104.

         After answering the petition, New Jax filed a reconventional demand against plaintiffs for failure to pay monthly condo assessment fees as required by New Jax's Declaration and By-Laws. New Jax asserted that plaintiffs had failed to pay their monthly condo assessment fee of $1, 418.07 since April 2008. New Jax sought all amounts due, owing, and accruing through the period of proceedings, as well as an acceleration of fees for one year, pursuant to La. R.S. 9:1123.115(A)(1) of the Louisiana Condominium Act. In total, New Jax sought judgment against plaintiffs for $96, 424.74, together with legal interest, attorney's fees, and costs.

         Prior to trial, which was continued from its original setting of September 15, 2014 to March 7, 2016, the parties engaged in protracted motion practice, which narrowed the claims and issues proceeding to trial. At the time of trial, the only claims remaining for adjudication were plaintiffs' claim for loss of use damages and defendants' reconventional demand for unpaid condo assessment fees.

         Following a five-day jury trial, the jury returned the following findings and award on plaintiffs' main demand:

Do you find that New Jax breached its obligation owed to plaintiffs under the contract between the parties? Answer: Yes.
Do you find the defendant New Jax was negligent in the repair process through the common element roof above plaintiffs' Unit 5-C? Answer: Yes.
Do you find that the negligence of New Jax was a legal cause of damage to the plaintiffs? Answer: Yes.
Please state the sum of money that would reasonably compensate plaintiffs for the following: LOSS OF USE. Answer: $1, 185, 700.

         On New Jax's reconventional demand, the jury found plaintiffs owed New Jax condo assessment fees for the period of April 1, 2008 through September 15, 2015, in the amount of $63, 563.15.

         On March 24, 2016, the trial court rendered a final judgment as follows: on the main demand, judgment in favor of plaintiffs and against defendants, in solido, in the amount of $1, 185, 700, with interest from March 28, 2012; on the reconventional demand, judgment in favor of defendants and against plaintiffs in the amount of $63, 563.15, with interest from October 31, 2012; and reserving the parties' claims for attorneys' fees and costs to be determined in later proceedings.

         On March 31, 2016, New Jax filed a motion for new trial or, in the alternative, a motion for remittitur. After hearing arguments on the motion, the trial court rendered judgment on May 23, 2016, denying New Jax's motion for new trial and motion for remittitur.

         Defendants then filed a timely suspensive appeal from the trial court's March 24, 2016 judgment in favor of plaintiffs for loss of use damages and the trial court's May 23, 2016 judgment denying the motion for new trial. After the lodging of the record of this appeal, plaintiffs filed a timely answer to the appeal, seeking reversal of the trial court's March 2, 2016 pre-trial judgment granting Lafayette's motion in limine to preclude plaintiffs from presenting evidence of a bad faith claim under La. R.S. 22:1892(A)(4) at trial.

         While the appeal of the trial court's March 24, 2016 judgment was pending before this Court, plaintiffs filed a motion to tax costs, seeking all of the costs of the trial to be assessed against defendants. On January 6, 2017, the trial court rendered judgment granting, in part, plaintiffs' motion to tax costs and assessing court costs and specified expert fees against defendants in the amount of $49, 862.92. Defendants then timely appealed the trial court's January 6, 2017 judgment.

         The two appeals were consolidated by this Court on its own motion.


         Defendants' Appeal of March 24, 2016 Judgment

         Defendants raise joint assignments of error regarding plaintiffs' claim for loss of use, whether plaintiffs' claim sounds in tort or contract, and prescription. Each defendant also raises separate assignments of error. New Jax assigns error to the trial court's exclusion of trial testimony regarding rental values and to the trial court's pre-trial judgment finding no policy coverage for attorney's fees awarded as damages under its insurance policy with Lafayette. Finally, in its own defense of the judgment, Lafayette asserts policy coverage defenses to its liability for the loss of use damages. We begin our discussion by addressing the joint assignments of error.

         Right to Claim Loss of Use

         In their first assignment of error, defendants argue that the trial court erred, as a matter of law, in allowing plaintiffs, two limited liability companies, to recover damages for loss of use. During pre-trial litigation, this legal issue of plaintiffs' right to claim loss of use was raised by both parties in cross-motions for partial summary judgment.[5] After an initial hearing on the issue, the trial court denied both parties' motions.[6] Subsequently, the parties filed a joint motion for reconsideration of their cross motions for partial summary judgment on this unresolved issue. After a second hearing, the trial court granted plaintiffs' motion for partial summary judgment on the right to claim loss of use and to present evidence of the ready market value of substitute property as the measure of damages for loss of use.[7]

         This Court reviews a trial court's ruling on a motion for summary judgment de novo. Sutherland v. Alma Plantation, L.L.C., 15-1136, p. 4 (La.App. 4 Cir. 5/4/16), 193 So.3d 1178, 1181. "Appellate courts use the 'same criteria that govern the trial court's consideration of whether summary judgment is appropriate.'" Weintraub v. State Farm Fire & Cas. Co., 08-0351, p. 2 (La.App. 4 Cir. 10/29/08), 996 So.2d 1195, 1196-97, quoting Supreme Servs. and Specialty Co., Inc. v. Sonny Greer, Inc., 06-1827, p. 4 (La. 5/22/07), 958 So.2d 634, 638. Pursuant to La. C.C.P. art. 966(B)(2), a motion for summary judgment shall be granted if the motion, memorandum, and supporting documents show that there is no genuine issue as to material fact and that the mover is entitled to judgment as a matter of law.[8] The party moving for summary judgment bears the burden of proof. La. C.C.P. art. 966(C)(2).[9] The adverse party bears the burden to produce factual support sufficient to establish the existence of a genuine issue of material fact or that the mover is not entitled to judgment as a matter of law. Id.

         In addition, when the question before the appellate court is whether the trial court erred in ruling on an issue of law, we conduct a de novo review of the record, giving deference to the trial court's factual findings which will not be disturbed absent manifest error. Wirthman-TAG Constr. Co., L.L.C. v. Hotard, 14-1394, 14-1395, p. 3 (La.App. 4 Cir. 8/19/15), 176 So.3d 429, 432, quoting Wooley v. Lucksinger, 09-0571, 09-0584-86, p. 49 (La. 4/1/11), 61 So.3d 507, 554.

         Defendants argue that the trial court erred in granting plaintiffs' motion for partial summary judgment and allowing plaintiffs to claim loss of use damages, because Louisiana law does not permit corporate entities such as plaintiffs to recover non-pecuniary, non-economic loss of use damages. Defendants assert that corporate entities can suffer only economic damages and, in this case, it is undisputed that plaintiffs did not suffer any economic loss to the entities as a result of the loss of use of the condo. Thus, defendants argue that plaintiffs are not entitled to claim non-pecuniary damages for loss of use as a matter of law.

         In support of their argument, defendants rely primarily on federal jurisprudence. See AT&T Corp. v. Columbia Gulf Transmission Co., (W.D. La. 2008), unpub., 2008 WL 4585439 (holding that a corporate entity is not entitled to recover damages for loss of use when there is no evidence that the corporation suffered lost revenues or profits); Kelly v. Porter, Inc., 687 F.Supp.2d 632, 638 (E.D. La. 2010) (holding that a juridical entity can suffer only economic damage and cannot recover non-pecuniary damages and dismissing plaintiff LLC's claim for loss of use); Walle Corp. v. Rockwell Graphics Sys., Inc., (E.D. La. 1992), 1992 WL 245963, at *5 (holding that a corporation cannot recover inconvenience damages or any non-pecuniary damages). Defendants also cite one Louisiana state case, Whitehead v. American Coachworks, Inc., 02-0027 (La.App. 1 Cir. 12/20/02), 837 So.2d 678, in which the First Circuit reversed a general damages award in favor of the corporate plaintiff for loss of enjoyment and use of a vehicle, mental anguish, and inconvenience.[10] The First Circuit reasoned that "State Farm, a corporation, is incapable of experiencing loss of enjoyment, mental anguish, and inconvenience." Whitehead, 02-0027, p. 6 (La.App. 1 Cir. 12/20/02), 837 So.2d at 682, citing City of New Orleans, 241 So.2d at 10.

         Although federal jurisprudence may be instructive in certain areas where Louisiana law and jurisprudence is silent, we find, in this case, that the trial court correctly interpreted and applied the controlling precedent of Chriss v. Manchester Ins. & Indem. Co., 308 So.2d 803 (La.App. 4th Cir. 1975). In Chriss, this Court held that property owners are entitled to be compensated for the loss of use of their property and distinguished such damages from those awarded for mental anguish. This Court reasoned as follows:

Louisiana courts have allowed recovery of damages for mental anguish in cases involving other torts, such as trespass, assault, and other acts involving the violation of recognized individual rights. These compensatory damages have been awarded whether or not the violation causes pecuniary damage, since such violations self-evidently result in mental anguish.
In negligence cases involving injury to property this court has limited recovery of damages for emotional stress (unaccompanied by physical injury) to those cases where the disturbance causes bodily harm or illness.
Damages are recoverable, however, for loss of normal use of the building.
… Furthermore, damages for loss of use are recoverable whether the property is used for business or personal purposes.
The normal measure of damages for loss of use is the rental value of similar property and perhaps necessary incidental expenses. It is not necessary, however, that a plaintiff actually rent substitute property in order to recover damages due for loss of use. Rental (which accomplishes the substitution of the use of similar property for that of the injured property) does not determine entitlement to damages, but only provides a fair measure of damages in appropriate cases.
The period of compensatory loss of use is the time required to secure the repair of the property in the exercise of proper diligence.

Chriss, 308 So.2d at 805-06 (internal citations omitted).

         As reasoned by this Court in Chriss, there is a distinction between a mental anguish claim allegedly related to property damage and a claim for the loss of use of property. A non-economic loss of use occurs when the owner's normal use of the property is restricted by defendant's acts and, consequently, the owner's rights of ownership are disturbed.

         The ownership of property includes the rights to possess it, use it, enjoy the use of it, and dispose of it. See Eagle Pipe and Supply, Inc. v. Amerada Hess Corp., 10-2267, 10-2272, 10-2275, 10-2279, 10-2289, pp. 10-11 (La. 10/25/11), 79 So.3d 246, 258; Giroir v. Dumesnil, 248 La. 1037, 1050, 184 So.2d 1, 6 (1966). When any of these rights of ownership are disturbed by an injury or damage to the property through the acts of another, the owner of the property obtains a personal right of action against the one causing the damage. Eagle Pipe, 10-2267, pp. 42-43, 79 So.3d at 277; see also, La. C.C. art. 2315 ("Every act whatever of man that causes damage to another obliges him by whose fault it happened to repair it."). In this case, plaintiffs are juridical persons with full rights of ownership in the property at issue. See La. C.C. 479; Ogea v. Merritt, 13-1085, p. 6 (La. 12/10/13), 130 So.3d 888, 894; see also La. R.S. 12:1301. As such, plaintiffs are entitled to bring a claim against defendants for the damage to their property and to their rights of ownership.

         Furthermore, we find the damages claimed for the loss of use of property are compensatory in nature. Compensatory damages are those awarded on the basis of the loss suffered and are designed to replace the loss caused by the wrong or injury.[11] See McGuire v. Kelly, unpub., 10-0562 (La.App. 1 Cir. 1/30/12), 2012 WL 602366, *16. "Compensatory damages are further divided into the broad categories of special damages and general damages. Special damages are those which have a 'ready market value, ' such that the amount of the damages theoretically may be determined with relative certainty." McGee v. A C And S. Inc., 05-1036, p. 3 (La. 7/10/06), 933 So.2d 770, 773. By contrast, general damages include those things which are inherently speculative in nature and cannot be measured definitively in terms of money. Id., 05-1036, pp. 3-4, 933 So.2d at 774. Accordingly, loss of intellectual or physical enjoyment, or other loss of lifestyle, fall into the category of general damages because they are inherently speculative and have no measurable monetary value; however, loss of use of property falls within the category of special damages because it can be measured fairly and to a degree of relative certainty by the rental value of substitute property. See McGee, 05-1036, p. 4, 933 So.2d at 774; Chriss, 308 So.2d at 805-06; see also, Nunez v. St. Bernard Parish Fire Dep't, 519 So.2d 857, 862 (La.App. 4th Cir. 1988). In this case, plaintiffs sought to be compensated for the loss of use of their property, as a result of defendants' negligence, which was measured to a degree of reasonable certainty by the rental value of substitute property.

         In light of the applicable law and jurisprudence, we find no error in the trial court's judgment granting plaintiffs' motion for partial summary judgment and allowing plaintiffs to recover loss of use damages as measured by the rental value of substitute property. Thus, we find no merit in defendants' first assignment of error.

         Tort Claim ...

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