United States Court of Appeals,
Fifth Circuit.
No. 95-30451.
Leon CHASTANT, Plaintiff-Appellee,
v.
HEADRICK OUTDOOR INC., Defendant-Appellant.
April 18, 1996.
Appeal from the United States District Court for the Western
District of Louisiana.
Before LAY*, HIGGINBOTHAM and STEWART, Circuit Judges.
STEWART, Circuit Judge:
Headrick Outdoor, Inc. ("Headrick"), an outdoor advertising
company, leased property from Chastant. When Headrick broke its
habit of paying rent on the anniversary month of the leases, and
payment was delayed for three successive years, Chastant served
notice of default. Headrick appeals from the lower court's finding
that Chastant had properly dissolved the leases when Headrick
failed to timely pay rent. Finding no errors, we AFFIRM.
FACTS
Headrick, a company incorporated in Mississippi, leased the
property on which its two billboards are located from plaintiff
Chastant. Both billboards are located in Lafayette, Louisiana.
One billboard is on Ambassador Caffery Parkway, and the other
billboard is on Kaliste Saloom Road. Though the leases were
executed on separate, identical lease forms, the Ambassador Caffery
*
Circuit Judge of the Eighth Circuit, sitting by
designation.
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lease was agreed upon on October 7, 1985, and the Kaliste Saloom
lease was dated January 14, 1986. The forms provided for annual
rentals, but did not indicate when those rentals were to be paid.
In the first several years of the leases, Headrick habitually
paid in the anniversary month for a given lease: it would
typically render its Ambassador Caffery rental payments every
October and its Kaliste Saloom payments every January. Headrick's
Chief Financial Officer, Milton Ray Cole, testified that Headrick
paid in this manner, not out of a legal obligation to do so, but
"as a matter of administering its business in good faith."
Headrick claims that financial difficulties in the early 1990's
forced it to pay after the anniversary month. For the lease rights
to the Ambassador Caffery location, the 1990 rental check was dated
November 21, 1990. The next year, 1991, the check was dated March
6, 1992. Headrick tried to pay for the term ending in 1992 with a
check dated March 11, 1993. Similarly, with the Kaliste Saloom
location, the rental checks were dated after the January
anniversary: February 20, 1991; March 6, 1992; and March 25,
1993.
One month prior to paying the 1991 Kaliste Saloom rent,
Headrick sent a letter explaining that it was facing some temporary
financial difficulties and would be sending rent checks one month
later than usual. The following year, in January of 1992, Chastant
sent a letter to Headrick stating that rent was due in October and
January respectively, and asking for timely payment; additionally,
there was some testimony that Chastant had orally objected to the
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late payments several times in the first three years of this
decade. Finally, on March 23, 1993, Chastant sent a letter stating
that because Headrick was in default for failure to pay the leases
on time, he was canceling the leases and asking that the signs be
removed within 10 days of receipt of the letter. At the same time,
Chastant returned the two checks that Headrick had tendered for
payment of the leases.
DISCUSSION
Standard of Review
The standard of review for contract interpretation is de
novo, but if the interpretation of the contract turns on the
consideration of extrinsic evidence, such as evidence of the intent
of the parties, the standard of review is clearly erroneous.
National Union Fire Ins. Co. of Pittsburgh, Pa. v. Circle, Inc.,
915 F.2d 986 (5th Cir.1990).
Applicable Law
Louisiana law governs the resolution of this diversity
dispute. While a contract of lease is governed by certain rules,
it is also subject to the rules of other conventional obligations.
LA.CIV.C. art. 2668. Thus, the interpretation of a contract of
lease, as with any other conventional obligation, is the
determination of the common intent of the parties. See LA.CIV.CODE
art. 2045. When the words of a contract are clear and explicit and
lead to no absurd consequences, no further interpretation may be
made in search of the parties' intent. LA.CIV.CODE art. 2046.
However, there are times when the common intent of the parties
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cannot be gleaned from an otherwise binding contract because the
contract made no provision for the particular situation at issue.
Where this is the case, it must be assumed that the parties
intended to bind themselves to whatever the law, equity, or usage
regards as implied in a contract of that kind or necessary for the
contract to achieve its purpose. LA.CIV.CODE art. 2054.
The billboard leases at issue in the case sub judice did not
provide for when rent was due, though the leases themselves
contained the three essential elements: the thing, the price, and
the consent (see LA.CIV.CODE art. 2670). Based on the authority of
article 2054, the trial court looked to the behavior of the parties
themselves to imply a due date. Examining Headrick's own records,
and the testimony of Headrick's representative that Headrick's
longstanding practice was to pay in the month of the anniversary of
the lease, the court concluded that the appropriate due date was
the month of the lease anniversary. A careful review of the record
shows that this finding is not clearly erroneous.
In addition to the gap filling provision of article 2054, the
Civil Code further provides that a lessee may be expelled from the
property if he fails to pay the rent when it becomes due.
LA.CIV.CODE art. 2712. Thus, since rental payments were late on
both leases, Chastant had a right to terminate them when he sent
the March 23 letter placing Headrick in default and giving him ten
days to vacate the premises. As the lower court found, the March
23 letter fulfilled the procedural requirement that, upon default,
the lessor shall cause written notice to vacate the premises to be
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delivered to the lessee, and that such notice shall allow no less
than five days from the date of delivery to vacate. See LA.CIV.CODE
PROC. art. 4701; see also, LA.CIV.CODE art. 2686 (requiring notice
of termination when the parties have failed to agree upon the
duration of a lease).
Headrick argues that equity demands that the leases not be
regarded as terminated because lease cancellation is not favored in
Louisiana and a lease will be dissolved only when a lessor proves
clear entitlement to dissolution, citing Housing Authority of Town
of Lake Providence v. Burks, 486 So.2d 1068 (La.App.2d Cir.1986).
Moreover, Headrick argues, because of this disfavor, the right to
lease cancellation is subject to judicial control, and in the
absence of a specific agreement, Headrick should only have been
required to pay at a reasonable time during the lease, citing
Ergon, Inc., v. Allen, 593 So.2d 438, 440 (La.App.2d Cir.1992).
While it is true that, in Louisiana, a lessor's unilateral
termination of a lease has been disfavored since the Civil Code of
1808,1 it is also true that it has long been the law in Louisiana
that a lessee may be expelled from the property if he fails to pay
the rent when it becomes due.2
Louisiana courts are vested with discretion under certain
circumstances to decline to grant a lessor cancellation of a lease
although such right appears to be otherwise available to him.
1
LA.CIV.C.ANN. art. 2689 (legal notice required before a
lessor can evict a tenant from a house or room) (West compiled
ed., 1972).
2
LA.CIV.C.ANN. art. 2712 (West compiled ed., 1972).
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Ergon, 592 So.2d at 440. A court may choose to exercise such
discretion if a lessee has made a good faith error and acted
reasonably to correct it: for example, where rent was late due to
faulty mail delivery, or where the lease failed to indicate the
place for payment (but payment was otherwise timely), or where the
third party check tendered as rent was returned for insufficient
funds. Id. (citations omitted). Additionally, a court may decline
to grant cancellation of a lease to the lessor where the lessee
justifiably retained a portion of the rent because the lessor had
failed to make required repairs. Plunkett v. D. & L. Family
Pharmacy, Inc., 562 So.2d 1048 (La.App. 3d Cir.1990); KPW
Associates v. S.S. Kresge Co., 535 So.2d 1173 (La.App.2d Cir.1988),
writ denied 537 So.2d 1167 (La.1989).
In addition to these instances in which the court may
exercise its discretion to deny dissolution of the lease, the
landlord's right to eviction for nonpayment of rent is vitiated if
he fails to give proper notice. Versailles Arms Apartments v.
Pete, 545 So.2d 1193 (La.App. 4th Cir.1989). His right to eviction
for late payment is also vitiated if he customarily accepts late
rental payments, id., though the estoppel effect of whatever custom
of accepting late rental payments is destroyed when the lessor
notifies the lessee that the rent must be thereafter paid promptly.
Farmers Gas Co., Inc. v. LaHaye, 195 So.2d 329, 330 (La.App. 3d
Cir.1967). And even where the lessor gives proper notice of
eviction, if he accepts a late rental payment after the date of the
notice of eviction, he has waived his right to immediate eviction
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and must send a new notice. Housing Authority v. Burks, 486 So.2d
at 1069; West End Landing, Inc. v. Board of Levee Comm'rs of the
Orleans Levee Dist., 299 So.2d 418 (La.App. 4th Cir.1974).
Chastant established that he was not in the habit of accepting
late payments, he served Headrick with proper notice of default and
eviction, and he did not accept any late payments after serving
notice. Thus, the lower court's holding that Headrick properly
terminated both leases is AFFIRMED.
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