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LOWELL EBERT AND SUZETTE REEVES EBERT v. GARY HOWELL
While I concur in the result reached by the majority, and the reasons set forth, I write separately to address a line of cases relied upon by the trial court in reaching the decision being affirmed by the majority opinion. In its combined judgment and reasons for judgment, the trial court stated as follows:
Generally, unexercised option rights, including the right to purchase, terminate with the original lease and are not carried over when a lease is a reconducted. Davis v Elmer, App. 1 Cir.2015, 166 So.3d 1082, 2014-1298 (La.App. 1 Cir. 3/12/15).
Here, the subject lease was offered into evidence as proof of the agreement between the parties, and as such, it is valid and enforceable. It provides for a term of two years, from April 15, 2019 until March 14, 2021. When the Eberts continued to occupy the house a week after the term expired, i.e., March 20, 2021, it became a month-to-month lease by operation of law. “A lease with a fixed term is reconducted if, after the expiration of the term, and without notice to vacate or terminate or other opposition by the lessor or the lessee, the lessee remains in possession ․ (2) For one week in the case of other leases with a fixed term that is longer than a week[.]” La.Civ.Code art. 2721. Also, “[t]he term of a reconducted nonagricultural lease is: (1) From month to month in the case of a lease whose term is a month or longer[.]” La.Civ.Code art. 2723. However, a reconductive [sic] lease, does not include an onerous provision such as an option to purchase for once the original lease is terminated, all unexercised option rights are extinguished. Landau v. Groves, 397 So.2d 866 (La.App. 4 Cir. 1981), Snedegar v. Noel Estate, Inc., 438 So.2d 677 (La.App. 2 Cir.1983), writ denied, 442 So.2d 459 (La.1983), Williams v. Bass, 37,156 (La.App. 2 Cir. 5/14/03), 847 So.2d 80, 83; Davis v. Elmer, 2014-1298 (La.App. 1 Cir. 3/12/15), 166 So.3d 1082, 1086. In other words, once the original lease is terminated, as with reconduction, all unexercised option rights are likewise terminated. This is so because the lease and option to purchase are a part of the same initial contract and are inseparable. Amand v Zerangue, 389 So.2d 804 (La.App. 3 Cir. 1980); Smith Enterprises, Inc. v Borne, 245 So.2d 9 (La.App. 1 Cir. 1971). It follows that the existence of the option rights are dependent upon the original lease being in full force and in effect at the time they are sought to be exercised. Additionally, an option agreement which is part of a lease having a definite term (as in the instant case), is necessarily limited to the term of the lease. Snedegar v. Noel Estate, Inc., 438 So.2d 677 (La.App. 2 Cir.1983), writ denied, 442 So.2d 459 (La.1983). Therefore, upon reconduction of the subject lease on March 20, 2021, the Eberts’ tenancy converted to a month to month basis without a definite term, therefore, the Eberts’ unexercised option to purchase terminated.
The Eberts argue that the parties “modified” the original lease when they agreed to continue it “through COVID-19,” thus reviving the option to purchase. This court demurs. The initial lease agreement terminated and a month-to-month reconductive [sic] lease began in mid-March of 2021. The discussion between Ms. Ebert and Mr. Howell to “modify” the contract “through COVID-19” came too little too late.
While the cited case law seems to support the legal conclusion that the option to purchase terminated solely because of the expiration of the initial term of the original written lease, and would in no event survive a reconduction of the lease, a deep dive into the substance of these cases reveals the flaw in that rationale.
The trial court, in its reasons for judgment, cites Davis v. Elmer, 14-1298 (La.App. 1 Cir. 3/12/15), 166 So.3d 1082, as support for the proposition that an option to purchase within a lease does not survive the initial lease term, even if the lease is reconducted. That was not an issue in Davis, and any mention thereof is dicta at best.
The opinion in Davis cites Williams v. Bass, 37,156 (La.App. 2 Cir. 5/14/03), 847 So.2d 80, 83, for the proposition that “[g]enerally, unexercised option rights, including the right to purchase, terminate with the original lease and are not carried over when a lease is a [sic] reconducted.” Id. at 1085 n.4. However, a reading of Williams shows that it was solely an eviction case, where no option was at issue and any mention thereof was also dicta, as a discussion of option rights was not germane to the result. In Williams, the second circuit, citing Roussel v. Dalche, 158 La. 742, 104 So. 637 (1925), correctly held that the summary proceeding for eviction involved the single issue of whether the owner was entitled to possession of the premises. An occupant cannot defeat an owner's “right to summary action for eviction by injecting therein issues foreign to the one issue involved, and thereby, converting the summary proceeding into an ordinary proceeding.” Vicknair v. Watson-Pitchford, Inc., 348 So.2d 695, 696 (La.App. 1 Cir. 1977). The only issue in Williams was whether the rent was paid, and the issue of an option was only interjected following the hearing on the eviction. Thus, the option issue could not be considered, and any pontification about an option expiring with the term of the original lease was simply dicta, as it was in Davis.
The opinion in Williams then cites Landau v. Groves, 397 So.2d 866 (La.App. 4 Cir. 1981), as further support for the proposition that the expiration of the initial term of a lease containing an option to purchase cancels the option as a matter of law, apparently without regard to the language of the option agreement itself. However, Landau is not on point either and does not stand for the proposition for which it is cited. There, the eviction had already occurred for nonpayment of the lease rentals before the tenants attempted to exercise the option. So naturally, the option terminated when the lease was terminated by eviction. The court in Landau held:
The lease and option to purchase are a part of the same contract and are inseparable. It therefore follows that the existence of the option rights are dependent upon the lease being in full force and in effect at the time they are sought to be exercised. Once the lease is terminated, as in this instance by eviction, all unexercised option rights are extinguished.
We conclude that if the Landaus desired to preserve their option rights under the lease they would have had to perfect a devolutive appeal to prevent its cancellation becoming finally adjudicated. This they failed to do. Reaching this result we obviate the need to consider the effect of nonpayment or tender of performance by plaintiffs on the option clause until after the landlord filed the rule for eviction.
Id. at 868 (footnote omitted).
Williams also cites Smith Enterprises, Inc. v. Borne, 245 So.2d 9 (La.App. 1 Cir.), writ refused, 258 La. 574, 247 So.2d 393 (1971), but it, likewise, does not support the proposition that simply because the initial term of the original lease has expired, the options to purchase contained therein have also expired. In Smith, the plaintiff attempted to exercise an option to purchase contained in the lease agreement during the term of the lease. The holding in Smith, 245 So.2d at 11, supports the opposite: “We are also of the opinion that the lease and option to purchase, being part of the same agreement, are inseparable and that, so long as the lease is in full force and effect, so must be the option.” The court found that the plaintiff was entitled to specific performance of the option to purchase.
Finally, we reach the source case cited for the proposition that an option to purchase within a lease expires automatically with the expiration of the initial term of the lease, Kinberger v. Drouet, 149 La. 986, 989, 90 So. 367, 368 (1922). However, a clear reading of the opinion establishes that Kineberger contains no such pronouncement of law. There, the plaintiff attempted to exercise an option to purchase that was contained within a lease with a five-year term, by notifying the defendant lessor in writing that he desired to execute the option and purchase the property at the agreed upon price of $50.00 per acre cash. The defendant refused to accept the attempt to exercise the option. The supreme court held in favor of the plaintiff, finding the option, which had no independent term but was within the lease, which itself had a five-year term, was valid and enforceable. As held by the court, “This option was expressly accepted by plaintiff by authentic act, duly recorded in the parish of Rapides on November 26, 1917, or over 30 days before the term fixed for its expiration, December 31, 1917.” Id. at 371–72. The lease with option to purchase was valid for five years, and the plaintiff attempted to exercise the option within that time period. The case did not involve a reconducted lease, and nowhere therein does the supreme court hold that an option to purchase expires as a matter of law when the initial term of the lease expires.
Certainly, if a lease and an included option to purchase are co-terminus, the expiration of the lease coincides with the termination of the option. However, if the option to purchase is valid for the life of the lease, and the lease is still valid because of reconduction, the option to purchase is still a valid, exercisable option.
The interpretation of law as espoused in Davis and the cases cited therein that also appear on the surface to support that interpretation, i.e., that an option to purchase expires simply because of the expiration of the initial term of a lease, is flawed at the least and entirely wrong at best.
Having so stated, I agree with the outcome reached by the majority, as I also agree with the outcome reached by the trial court, but I do so by applying the tried-and-true rule of law as to the interpretation of contracts in general. Louisiana Civil Code Article 2046 provides that “[w]hen 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.” The lease in question states, as to the option to purchase, that the “Tenant may exercise this Option by giving Landlord notice at any time throughout the initial term of the foregoing lease (the ‘Option Term’).” (Emphasis added.) This provision is clear and unambiguous. The option expired at the end of the initial term of the lease on March 14, 2021. It is undisputed that the Ebert's did not attempt to exercise the option until 2022. By that time, the option had expired by its own terms, although the lease itself was still in force and effect by reconduction.
Contrary to Davis and the other cases discussed, had the option here simply stated that the tenant may exercise the option by giving the landlord notice at any time throughout the existence or the term of the lease, it would have remained valid and exercisable when the term of the lease was extended to a month to month basis through reconduction. It is solely the use of the words “initial term” in the option contract at hand that doomed the Eberts’ ability to exercise the option when they attempted to do so.
KYZAR, J., concurring with additional reasons.
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Docket No: 23-588
Decided: March 06, 2024
Court: Court of Appeal of Louisiana, Third Circuit.
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FindLaw’s Learn About the Law features thousands of informational articles to help you understand your options. And if you’re ready to hire an attorney, find one in your area who can help.
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