Villenurve et al v. New River Shopping Center, LLC

Filing 20

RULING granting New Rivers' 6 MOTION to Dismiss Pursuant to Federal Rule 12(b)(6) without prejudice. Signed by Judge Shelly D. Dick on 03/16/2016. (ELW)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

VIVIAN GONZALES VILLENURVE, ET AL.

CIVIL ACTION

VERSUS

15-517-SDD-SCR

NEW RIVER SHOPPING CENTER, LLC

RULING
Before the Court is a Motion to Dismiss1 pursuant to Federal Rule 12(b)(6) of the
Federal Rules of Civil Procedure by New River Shopping Center, LLC. (“New River”).
The Motion is opposed by Plaintiffs, Vivian Gonzales Villenurve and Margaret Gonzales
Kernan, as Trustees of the Lester Gonzales Family Trust.2 For the reasons which follow,
the Motion shall be GRANTED.
I.

FRCP 12(b)(6)
In considering a Rule 12(b)(6) Motion to Dismiss, the court must evaluate whether

the complaint meets the legal standard for pleading found in Rule 8 of the Federal Rules
of Civil Procedure, which requires “a short and plain statement of the claim showing that
the pleader is entitled to relief.” The Fifth Circuit instructs that:
The complaint (1) on its face (2) must contain enough factual matter (taken
as true) (3) to raise a reasonable hope or expectation (4) that discovery will
reveal relevant evidence of each element of a claim.3

1

Rec. Doc. 6.
Rec. Doc. 10.
3
Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 257 (5th Cir. 2009) (quoting Bell Atlantic Corp. v Twombly,
550 U.S. 554, 127 S.Ct. 1955 (2007) (emphasis added). 
2

1

When deciding a Rule 12(b)(6) motion to dismiss, “[t]he ‘court accepts all wellpleaded facts as true, viewing them in the light most favorable to the plaintiff.’”4 The Court
may consider “the complaint, its proper attachments, documents incorporated into the
complaint by reference, and matters of which a court may take judicial notice.”5 “To
survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead ‘enough facts to state
a claim to relief that is plausible on its face.’”6 In Twombly, the United States Supreme
Court set forth the basic criteria necessary for a complaint to survive a Rule 12(b)(6)
motion to dismiss. “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does
not need detailed factual allegations, a plaintiff’s obligation to provide the grounds of his
entitlement to relief requires more than labels and conclusions, and a formulaic recitation
of the elements of a cause of action will not do.”7 “To survive dismissal, a plaintiff must
plead enough facts to state a claim to relief that is plausible on its face. A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable”.8
II.

PROCEDURAL POSTURE AND FACTUAL BACKGROUND
This Court has subject matter jurisdiction over this action under 28 U.S.C. § 1332.9

Plaintiffs seeks a declaratory judgment declaring that a lease entered into between New
River’s predecessor-in-interest and American Bank and Trust Company, as the former

4

In re Katrina Canal Breaches Litigation, 495 F.3d 191, 205 (5th Cir. 2007)(quoting Martin v. Eby Constr.
Co. v. Dallas Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)).
5
Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 763 (5th Cir. 2011).
6
In re Katrina Canal Breaches Litigation, 495 F.3d at 205 (quoting Martin v. Eby Constr. Co. v. Dallas Area
Rapid Transit, 369 F.3d at 467).
7
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations and brackets
omitted)(hereinafter Twombly).
8
Thompson v. City of Waco, Texas, 764 F.3d 500, 502-503 (5th Cir. 2014).
9
Suit was instituted in State Court for the 23rd Judicial District Court, Parish of Ascension, and timely
removed pursuant to 28 U.S.C. §§ 1332, 1441, and 1446. Sitting in diversity, the Court applies the
substantive law of the State of Louisiana.

2

trustee of the Trust, “came to an end by its own terms on March 31, 2014”.10 Plaintiffs
seek to invalidate and/or reform the lease renewal options on the grounds of failure of or
inadequate consideration, error, or insufficient security.
Plaintiffs are the sole remaining income beneficiaries, the sole principle
beneficiaries, and the present named trustees of the Lester Gonzales Family Trust
(“Trust”). At issue in this case is the lease of certain real property held by the Trust. In
1976, American Bank and Trust Company (“American Bank”), then Trustee of the Trust,
entered into a lease agreement with Memphis Apartments, Inc. (“Memphis”). The lease
agreement provided for an annual rental of $8,400.00, payable in equal monthly
installments of $700.00 for a primary term of thirty-seven (37) years and eight (8)
months.11 The lease granted the lessee “the right, privilege and option to extend this lease
for five periods of ten years each on all of the same terms and conditions as contained
herein with the exception of the rental”.12 The lease provided that the annual rental would
increase $450.00 upon each validly exercised option to extend the lease.13 On December
19, 2013, New River, the assignee of the lease14, timely notified the Plaintiffs that it was
exercising the first ten year option to extend the lease.
III.

LAW AND ANALYSIS
A lease is “a synallagmatic contract by which one party, the lessor, binds himself

to give to the other party, the lessee, the use and enjoyment of a thing for a term in

10

Rec. Doc. 1-2.
The primary lease term commenced on August 1, 1976 and ended on March 31, 2014. Rec. Doc. 1-2,
¶¶ 4, 5.
12
Rec. Doc. 1-2, ¶ 6.
13
Id.
14
Rec. Doc. 1-2, ¶ 8, 9. Plaintiffs do not allege that New River is not a lawful assignee of the lease, nor is
there any allegation that the lease is non-assignable. La. Civ. Code art. 2711 provides that “The transfer
of the leased thing does not terminate the lease, unless the contrary had been agreed between the lessor
and the lessee.”
11

3

exchange for a rent that the lessee binds himself to pay.”15 Louisiana Civil Code article
2676 provides that “rent shall be fixed by the parties in a sum either certain or
determinable through a method agreed by them.” The subject lease fixed rent in a sum
certain. Civil Code article 2678 provides that “[t]he lease shall be for a term. Its duration
may be agreed to by the parties or supplied by law. The term may be fixed or
indeterminate.” The lease in this case specified a term agreed to by the Parties.
Accordingly, as to the salient provisions at issue herein, the subject lease complies with
Louisiana law.
A.

Insufficient Consideration

Defendant avers that Plaintiffs cannot recover for an alleged “bad deal.” In the
absence of a vice of consent, Louisiana courts are unwilling to relieve a party of a bad
bargain. In Bergquist v. Fernandez, the court concluded that the function of the court is
to interpret the contract, and in the absence of a vice of consent “we cannot undermine a
contract simply because it was a bad deal for one of the parties.”16 Additionally, in Tahoe
Corp. v. P & G Gathering Sys., Inc., the court stated that “[t]he law is quite clear, however,
that equity cannot take the place of contracts legally entered; courts have no authority to
relieve a litigant of a bad bargain.”17
Plaintiffs counter that they are not merely seeking to be freed from a “bad deal”,
rather, they have a cause of action because “[t]he rent is insufficient to support the
extension of the lease.”18 Plaintiffs rely on Daigle v. Vanderpool19 which held that lease

15

La. Civ. Code art. 2668.
Bergquist v. Fernandez, 535 So. 2d 827, 829 (La. App. 2d Cir. 1988).
17
Tahoe Corp. v. P & G Gathering Sys. Inc., 506 So. 2d 1336, 1345 (La. App. 2d Cir. 1987).
18
Rec. Doc. No. 10, p. 7.
19
Daigle v. Vanderpool, 858 So.2d 552 (La. App. 1 Cir. 2003).
16

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“consideration of one dollar for a ten-year term is certainly not serious consideration”.20
Plaintiffs argue that Daigle controls because “there is no doubt that $8,850.00 a year for
the first ten (10) year extension … and any subsequent term of the extension is invalid
for lack of serious consideration.”21
While consideration for a lease “must be serious and must not be out of all
proportion with the value of the thing”22, the rationale of Daigle and its progeny are
inapplicable to this case. The Daigle Court reasoned that:
Under our law, consideration for a lease must be serious and must not be
out of all proportion with the value of the thing. This is a general principle of
the civil law, as old as the civil law itself, and it is different from the common
law, under which the slightest consideration is sufficient to support any
obligation. Murray v. Barnhart, 117 La. 1023, 1030, 42 So. 489, 491 (1906).
The consideration of one dollar per year by itself is not a serious
consideration as rent. Myers v. Burke, 189 So. 482, 483 (La. App. 1st
Cir.1939). Therefore, the consideration of one dollar for a ten-year term is
certainly not serious consideration.23

In the seminal case of Murray v. Barnhart, the Louisiana Supreme Court explained
that where the consideration is a mere nominal or trifling amount, such as $1 for a ten
year term, “the presumption is that the parties did not intend that the trifle named should
ever be paid at all, and the situation is looked upon as being as if no amount has been
named.”24 The consideration specified in the subject lease is not a mere trifling amount
such that it can be viewed as a disguised donation or gratuity that is simply termed a
“lease”.

20

Daigle, 858 So.2d at 557. 
Rec. Doc. No. 10, p. 7.
22
Daigle, 858 So.2d at 557.
23
Id. 
24
Murray v. Barnhart, 42 So. 489, 491 (La. 1906). See also, Northeast Louisiana Detachment of Marine
Corps League v. City of Monroe, 253 So.2d 107 (La.App.2d 1971), writ denied (invalidating a lease which
provided for a $1 rental for insufficient consideration).
21

5

Plaintiffs allege that the rental amount in the primary term was “disproportionate
(too little) to the value of the property” and “unequitable” and that the “mere four hundred
and fifty dollar [increase] per ten year extension . . . coming to fruition 38 years later
[renders] the Lease virtually worthless”.25

Assuming the allegations true, Plaintiffs’

Petition fails to state a plausible claim that the rent is “out of all proportion with the value
of the thing”. While an extension term rental of $8,850.00 per year may be unequitable, it
is not an amount which on its face is so trifling as to lead to the conclusion that “the parties
did not intend that the trifle named should ever be paid at all, and the situation is looked
upon as being as if no amount has been named.”26
Recognizing that rental amount due during the extension term is a function of the
rent paid in the primary term27, Plaintiffs make the conclusory allegation that the rent paid
under the primary term was disproportionate to the value of the property leased. Plaintiffs
offer no facts in support of this conclusory allegation and notably the Plaintiffs accepted
what they now argue was “disproportionate” rent for 37 years and 8 months. The plaintiffs’
complaint lacks factual content which would enable this Court to draw a reasonable
inference that the consideration is “out of all proportion with the value of the thing leased.”
B.

Vice of Consent - Error

Unless the trust instrument provides otherwise, a trustee may enter into leases of
trust property, either as lessor or lessee, for such periods and with such provisions as are
reasonable, whether or not the term of the lease exceeds the term of the trust.28 Plaintiffs

25

Rec. Doc. 1-2, ¶ 13, 14.
Note 24, supra.
27
The lease provides that “[u]pon each validly exercised option to extend the [lease] the yearly rent would
increase Four Hundred and Fifty ($450.00) Dollars.” Rec. Doc. 1-2, Lease ¶ 6. 
28
La. R.S. 9:2118.
26

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allege in their Petition that the original trustee/lessor (American Bank) committed error, in
that it fixed the amount of the rent due for both the primary term of the original lease and
the extensions available under the lease in an amount disproportionate to the value of the
property.29
In Louisiana, consent to a contract may be vitiated by error, fraud, or duress.30
“Error vitiates consent only when it concerns a cause without which the obligation would
not have been incurred and that cause was known or should have been known to the
other party.”31 “[E]rror, which vitiates consent, can manifest itself in two ways: mutually,
i.e., both parties are mistaken, or unilaterally, i.e., only one party is mistaken. However,
in both situations, the error for which relief may be granted (1) must affect the cause of
the obligation, and (2) the other party must know or should have known ‘the matter
affected by error was the cause of the obligation for the party in error’”.32 “The
jurisprudence ... establishes that a contract may be invalidated for unilateral error as to a
fact which was a principal cause for making the contract, where the other party knew or
should have known it was the principal cause.”33
In this case, Plaintiffs plead unilateral error by American Bank, the lessor.34 “When
only one party is in error, that is, when the error is unilateral, there is theoretically no
meeting of the minds, but granting relief to the party in error will unjustly injure the interest

29

Rec. Doc. 1-2, ¶13.
La. Civ. Code art. 1948.
31
La. Civ. Code art. 1949.
32
Peironnet v. Matador Resources Co., 144 So.3d 791, 807 (2013).
33
Id.
34
Rec. Doc. 1-2, ¶13. Plaintiffs seek reformation of the contract insofar as they “seek an equitable increase
in the rent associated with the extension clauses”. “[R]eformation . . . is only available upon mutual error
for the explicit purpose of reforming an instrument to reflect the true intent of both parties. Peironnet 144
So.3d at 809. Accordingly, the Court evaluates the Plaintiffs’ claim as one for rescission on the grounds of
unilateral error.
30

7

of the other party if he is innocent of the error. Louisiana courts have often refused relief
for unilateral error for this reason.”35 Plaintiffs fail to allege any facts which plausibly
suggest that the lessee “knew or should have known that the matter affected by the error
was the reason or principal cause why the party in error made the contract.”36 The Petition
is devoid of facts which support the conclusion that the lessee knew or should have known
that the rent payable during the extension terms (the matter affected by the error) was the
reason or principal cause why American Bank, as trustee, in error made the lease.
“It is not the province of the court to alter by construction or to make new contracts
for the parties. The duty of the court is confined to the interpretation of the agreements
the parties have made for themselves, and, in the absence of any ground for denying
enforcement, to give effect to the agreements as made.” 37
Plaintiffs maintain that they are losing profit and asset value in connection with a
Trust established by their grandparents for the sole purpose of Plaintiffs’ benefit.38
Nevertheless, “[c]ourts are not created to relieve men of their bad bargains made. Where
a clause of a contract is clear and unambiguous, ‘the letter of it should not be disregarded
under the pretext of pursuing the spirit’.”39 The allegations of the Plaintiff’s complaint fail
to state a plausible claim for reformation or rescission on the grounds of error.

35

Peironnet 144 So.3d at 807-808 (internal citations omitted).
Id.
37
Peironnet 144 So. 3d at 808, citing, Texas Co. v. State Mineral Bd., 44 So.2d 841, 844–45 (1950);
Moriarty v. Weiss, 198 So. 643, 656 (1940); Wiley v. Davis, 115 So. 280, 281 (1927); Blakesley v. Ransonet,
105 So. 354, 356 (1925).
38
Rec. Doc. 1-2, ¶18.
39
Scoggin v. Bagley, 368 So.2d 763, 767-68 (La. App. 2nd Cir. 1979).
36

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C.

Louisiana Civil Code Article 1783

Citing Louisiana Civil Code article 178340, Plaintiffs attempt to equate the obligation
to pay rent with security given to insure an obligation. Plaintiffs’ reliance on Civil Code
article 1783 is misplaced. Article 1783 speaks to the sufficiency of security interests.
Specifically, when an “obligor has given the promised security but it later fails or becomes
insufficient, as when pledged shares of stock significantly decrease in value, or when
mortgaged property is partially destroyed so that its deteriorated value is no longer
proportioned to the amount of the secured obligation.”41 Rent is not the security for an
underlying obligation. Rather, the payment of rent is the obligation itself.42 The Plaintiffs
fail to a state a claim under Civil Code article 1783 for which relief can be granted.
D.

Prescription

Defendant contends that the Plaintiffs’ claims have prescribed. The Court does not
reach the issue of prescription because the Plaintiffs have failed to state a claim for which
relief can be granted and, accordingly, the Court GRANTS New Rivers’ Motion to
Dismiss43 pursuant to FRCP Rule 12(b)(6) without prejudice.
Signed in Baton Rouge, Louisiana, on March 16, 2016.

S

JUDGE SHELLY D. DICK
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

40

“When the obligation is subject to a term and the obligor fails to furnish the promised security, or the
security furnished becomes insufficient, the obligee may require that the obligor, at his option, either perform
the obligation immediately or furnish sufficient security. The oblige may take all lawful measures to preserve
his right. La. Civ. Code Art. 1783.
41
5 La. Civ. L. Treatise, Law of Obligations § 6.11 (2d ed.).
42
Rec. Doc. No. 6-1, p. 11.
43
Rec. Doc. 6.

9