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Cross Gates, Inc. v. Rouses Enterprises, L.L.C.

Court of Appeals of Louisiana, First Circuit

December 12, 2018


          On appeal from the Twenty-Second Judicial District Court In and for the Parish of St. Tammany State of Louisiana Docket No. 2012-12949 Honorable Richard A. Swartz, Judge Presiding

          Ross F. Lagarde Counsel for Slidell, LA Plaintiff/Appellant Cross Gates, Inc.

          Loretta G. Mince Jeanette A. Donnelly New Orleans, LA Counsel for Defendant/Appellee Rouses Enterprises, LLC


          GUIDRY, J.

         In this appeal, a lessor contests the trial court's failure to hold the lessee liable for all the damages claimed by the lessor. For the following reasons, we affirm.


         Cross Gates, Inc. is a Louisiana corporation that developed several properties in and around the city of Slidell, including a shopping center at the intersection of Gause Boulevard and Military Road. The first building in the shopping center was designed by and constructed for The Great Atlantic & Pacific Tea Company, Inc. (commonly referred to as simply "A&P"), which leased the building to be constructed for the operation of a supermarket.[1] Although the lease was executed in 1984, the initial twenty-year term of the lease would not commence until the earlier of the date on which A&P opened the store for business or sixty days after possession of the premises was delivered to A&P. According to a "Confirmation of Lease Term Agreement," executed by Cross Gates and A&P on June 20, 1986, the initial term of the lease commenced on May 8, 1986, and ended on May 31, 2006. The lease also provided for up to four renewal periods of five years each, with the first renewal period commencing on June 1, 2006, and ending on May 31, 2011.

         During the initial term of the lease, Superfresh/Sav-A-Center, Inc., a subsidiary of A&P (collectively "A&P/Sav-A-Center"), took over the lease in the 1990s and renovated/rebranded the grocery store by changing the flooring and layout and added a kitchen and bakery. The lease was subsequently renewed for the first of the four renewal periods provided for in the lease. More than a year after renewing the lease, A&P/Sav-A-Center notified Cross Gates that it had assigned its interest in the renewed lease to Rouse's Enterprises, L.L.C., effective November 1, 2007. In addition to acquiring A&P/Sav-A-Center's interest in the Cross Gates lease, Rouse's also purchased all of the assets of the grocery store, excluding inventory.[2] Shortly after acquiring the lease, Rouse's closed the grocery store and removed fixtures and equipment from the store, which it either sold or incorporated into other stores.[3]

         By a letter dated October 25, 2010, Rouse's notified Cross Gates that it did not intend to renew the assigned lease, which was due to expire on May 31, 2011. After the expiration of the lease, Cross Gates sued Rouse's, claiming that Rouse's had caused extensive damage to the leased premises after taking over the lease and alleging that Rouse's action were in breach of the lease and its obligations as a lessee. The matter eventually proceeded to a trial on the merits, at which Cross Gates sought to recover the following expenses that it had incurred in renovating and repairing the grocery store formerly leased to Rouse's:

Sheetrock and paint = $ 15, 500.00
Replacement of ceiling tiles = $ 22, 000.00
Replacement of flooring = $ 65, 100.00
Replacement of HVAC system = $258, 000.00
Replacement of light fixtures = $ 38, 983.50 [4]
Total costs = $399, 583.50

         Following the trial and after considering post-trial briefing by the parties, the trial court rendered judgment rejecting Cross Gates' claims related to the HVAC system, the ceiling tiles, and replacement flooring, but awarded Cross Gates partial compensation related to the light fixtures, sheetrock, rusted metal studs, [5] and for repairing the concrete subfloor of the building. Accordingly, the trial court signed a judgment on November 20, 2017, in favor of Cross Gates and against Rouse's, in the amount of $14, 040.00, plus legal interest. Cross Gates devolutively appeals that judgment.


         1. The trial court erred as a matter of law when it misinterpreted the lease agreement and failed to award any damages to Cross Gates for replacement of the HVAC system, where paragraph 12A of the lease specifies that Tenant [Rouses] is responsible for "repairs and replacements to the heating, ventilating and air conditioning [HVAC] systems located therein," and paragraph 12B, which addresses the Landlord's responsibility, excludes any mention of the HVAC system.

         2. The trial court erred in failing to award replacement-cost damages for the light fixtures, ceiling tiles, and VCT flooring, instead awarding damages based on the actual current value of the light fixtures that had been removed, and awarding no damages for the ceiling tiles, which cost $22, 000 to replace, and no damages for the replacement of the VCT flooring, other than $3, 000 for repair to the gouges in the subfloor.

         3. The trial court abused its discretion in awarding only $7, 500 for the repair of molded sheetrock and the removal and replacement of rusted metal studs, and in refusing to award any damages for the interior painting that was required; the sheetrock, rusted metal studs, and paint cost Cross Gates $15, 500.


         HVAC System

         In its first assignment of error, Cross Gates challenges the trial court's failure to award any compensation for the cost it incurred in replacing the HVAC system. The record reveals that shortly after acquiring the lease to the store, Rouse's discontinued the grocery store being operated on the premises and closed up the building. Upon closing the store, Rouse's stopped running the HVAC system in the building for the remainder of the term of the lease. Cross ...

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