Warsaw Country Store v. Bryan Ashley Enter., Inc.

378 So.3d 757

55,403 (La.App. 2 Cir. 1/10/23)

WARSAW COUNTRY STORE, LLC, Plaintiff-Appellant

v.BRYAN ASHLEY ENTERPRISES, INC., Defendant-Appellee

No. 55,403-CA

Court of Appeal of Louisiana, Second Circuit.

Judgment Rendered January 10, 2023

Appealed from the Sixth Judicial District Court for the Parish of Madison, Louisiana, Trial Court No. 2019-228, Honorable Laurie R. Brister, Judge

S. DOUGLAS BUSARI & ASSOCIATES, LLC, Tallulah, By: S. Douglas Busari, HARVILLE LAW FIRM, LLC, By: Douglas Lee Harville, Counsel for Appellant COTTON, BOLTON, HOYCHICK & DOUGHTY, LLP, Rayville, By: David Paul Doughty, Counsel for Appellee

Before COX, THOMPSON, and MARCOTTE, JJ.

THOMPSON, J.

₁This complex property dispute arose when the owner of a one-acre parcel of land leased it and the three structures on the property to a lessee, who in turn subleased one of the structures to the sublessee for the continued operation of a bar located in that one particular building. Years later, when the parties could not agree on the monthly rental going forward, the lessee filed for eviction and the payment of past due rent. In response, the sublessee filed a reconventional demand contending the lessee had violated a noncompete agreement by allowing another bar to open operations in one of the other structures on the remainder of the property.

Following a trial on the matter, the trial court found the petition for eviction to be moot, determined that the sublessee had fully satisfied its rental obligation by placing the correct portion of rent in the court registry, and held that the lessee had violated the noncompete agreement and awarded damages pursuant to that violation. This appeal followed. For the following reasons, we affirm the trial court’s judgment in part fixing the rental amount owed by the sublessee to the lessee, and we reverse the trial court’s judgment finding the noncompete agreement enforceable and the awarding of damages.

FACTS AND PROCEDURAL HISTORY

India Plantation Company, Inc. ("India Plantation") owns a one-acre tract of land in Delhi, Madison Parish, Louisiana. The tract of land (the "subject property") included three businesses, a frame building used as a country store, and two mobile structures. One mobile structure is used as a bar and the other as a restaurant. On September 20, 2002, India Plantation ₂leased the entire subject property to Delbert and Dicey Cockerham ("Cockerhams") for a five-year term with a five-year option to renew the lease.

On March 26, 2004, the Cockerhams sold the bar business to Bryan Ashley ("Ashley") of Bryan Ashley Enterprises, Inc. ("Ashley Enterprises") for $144,000. This Buy/Sell Agreement between the Cockerhams and Ashley was for the sale of the goodwill of the bar business and included all of the furniture, fixtures, coolers, signs, inventory, and cooking equipment owned by the Cockerhams that was used for the bar business. As the location of the bar was owned by India Plantation and was leased to Cockerhams, the Buy/Sell Agreement provided that Ashley would have the right to continue to occupy only that portion of the subject property and the structure in which the bar was operating. The Buy/Sell Agreement also included the following noncompete language:

Seller agrees to not compete or be involved in any other similar business within a 15 mile radius of this business except the current business they are involved in, being a restaurant and remain a restaurant, not a lounge which buyer recognizes 3 video poker machines and a country store that sells package beer and groceries. Sellers guarantee and shall remain personally liable for any non-compete with buyer for any new business for a lounge or any new business that may jeopardize buyer’s lounge and a video poker for the duration of buyer’s lease even in the event of a sale of the restaurant.

₃The 2004 Buy/Sell Agreement further states that in the event the sellers violate the noncompete, they will pay all court costs associated with any legal matters.

On March 26, 2004, the Cockerhams entered into a sublease with Ashley and Ashley Enterprises, wherein they leased the bar to Ashley and Ashley Enterprises under the same terms as the Master Lease with the property owner, India Plantation. Ashley Enterprises renamed the bar the "Bayou Moon Bar" and continued operations, including paying the Cockerhams the agreed-upon one-third of the total rental due to India Plantation (as the Ashleys were only leasing one of the three structures on the subject property). Therefore, as of March 26, 2004, Ashley Enterprises owned and operated the Bayou Moon Bar business and sublet the building that housed the bar from the Cockerhams. The Cockerhams continued to lease the remainder of the subject property from India Plantation and run the remaining two businesses on it.

On October 15, 2012, India Plantation and Mrs. Cockerham entered into a new Master Lease (the "2012 Master Lease") for the subject property for a period of five years beginning January 1, 2013 and ending December 31, 2017. The 2012 Master Lease included a rental table, setting forth the amount of yearly rent due for the subject property. It also stated that India Plantation’s prior written ₄consent was required before any portion of the lease could be sublet. Section 5.2 of the 2012 Master Lease stated:

(a) Regardless of LESSOR’S consent, any assignment or subletting shall not (i) be effective without the express written assumption by such assignee or sublessee of the obligations of LESSEE under this lease; (ii) release LESSEE of any obligations hereunder, or (iii) alter the primary liability of LESSEE for the payment of Rent or for the performance of any other obligations to be performed by LESSEE.

(b) Lessor may accept Rent or performance of LESSEE’S obligations from any person other than LESSEE pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of LESSOR’S right to exercise its remedies for LESSEE’S default or Breach.

(c) LESSOR’S consent to any assignment or subletting shall not constitute consent to any subsequent assignment or subletting.

(d) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to LESSOR’S determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any.

The 2012 Master Lease also included an option to extend, which stated that Mrs. Cockerham had the option to extend the term of the lease for an additional five years, ending on December 31, 2022, by notifying India Plantation in writing, no later than six months prior to December 31, 2017, of her ₅decision to exercise the option. Finally, the 2012 Master Lease states:

The terms and conditions of the original lease shall remain the same except for the rental rate which shall be brought to the current market rate. If the market rate cannot be agreed on by the Lessor and Lessee, it shall be determined by an appraiser appointed by the Lessor and an appraiser appointed by the Lessee, and a third appraiser appointed by thefirst two appraisers. The appraisers rental rate agreed on in writing by any of the two of the three appraisers shall be conclusive and binding on the parties to this lease.

On November 16, 2012, India Plantation gave written permission for Mrs. Cockerham to sublease Bayou Moon Bar to Ashley Enterprises "under the same terms and conditions as stated in the master lease dated October 15, 2012 between the Plantation and Dicey Cockerham." On December 6, 2012, Mrs. Cockerham and Ashley Enterprises entered into a sublease of Bayou Moon Bar, under the same terms and conditions as the 2012 Master Lease. The sublease states, "rental shall be for this certain bar area, including parking $1,208.00 per year due by Lessee semiannually January 1^st and July 1^st, prorated accordingly."

The amount of rent charged by Mrs. Cockerham was one-third of what she was charged by India Plantation for the total rent of the entirety of the subject property. The sublease further states, "it is understood and agreed between Lessor and Lessee that Lessee shall have the sole right to renew the 5 year option through December 2017 ₆provided in the original lease. Lessor assigns all rights under that original lease to Bryan Ashley or Ashley Interprises [sic], Inc."

On October 17, 2014, Dicey Cockerham sold the country store business, the Warsaw Country Store ("Warsaw"), operated on the subject property in one of the structures not leased to Ashley Enterprises, to Jessica Allen Sinclair ("Sinclair") for $100,000. The sale states that Sinclair will have "assumed all operating contracts and agreements of the business now currently in effect." Mrs. Cockerham later testified, "well, when I first sold it to her I only sold her the store. But then later I told her she could have the lease and all. I don’t know if we ever signed anything about that or what. But I later, but all I ever sold her was the store."

In April of 2016, Sinclair subleased the restaurant on the subject property to "The Room" to operate a bar, which Ashley Enterprises believed to be in direct competition with Bayou Moon Bar. It sent Sinclair a letter that she was in violation of its sublease for operating a bar.

On May 30, 2017, Ashley Enterprises sent a certified letter to Warsaw and Sinclair, stating that it wished to exercise its right to continue its lease for an additional five years pursuant to the 2012 Master Lease. It copied India ₇Plantation to the letter and enclosed $680, its one-third portion of the rent remaining for 2017.

On October 26, 2017, India Plantation executed a new Master Lease (the "2018 Master Lease") with Sinclair, with the lease term beginning on January 1, 2018 and ending on December 31,...