Latter v. State
1993 WL 225527, 621 So. 2d 1159, 1993 La. App. LEXIS 2444 (1993)
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Rule of Law:
Under Louisiana law, when a lease requires periodic rent payments and lacks an acceleration clause, each payment is considered a separate, conjunctive obligation. The three-year prescriptive period for an action to recover arrearages of rent begins to run for each individual installment on the date it becomes due and exigible.
Facts:
- On June 15, 1981, Stanford Latter and Robert L. Yuspeh submitted a bid to lease their property to the State of Louisiana.
- On September 1, 1981, Latter, Yuspeh, and the State executed a five-year lease for the property, with the term commencing November 1, 1981, and ending October 31, 1986.
- The lease required the State to pay a total of $552,499.80 in sixty equal monthly installments of $9,208.33, with the first payment due on November 1, 1981.
- The lease did not contain an acceleration clause that would make all future payments due upon a default on one installment.
- The State of Louisiana began occupancy of the leased premises on July 15, 1982.
- The State did not pay any rent or utilities for the period between the lease commencement on November 1, 1981, and its occupancy on July 15, 1982.
Procedural Posture:
- On November 18, 1985, Stanford Latter and Robert L. Yuspeh (petitioners) filed a suit for declaratory judgment in a Louisiana trial court against the State of Louisiana to recover past-due rent and utilities.
- The State of Louisiana filed an answer and later reurged a peremptory exception raising the objection of prescription, arguing the action was time-barred.
- After a hearing, the trial court sustained the State's peremptory exception of prescription, dismissing the petitioners' suit.
- Latter and Yuspeh (appellants) appealed the trial court's judgment to the Louisiana Court of Appeal, First Circuit, with the State of Louisiana as the appellee.
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Issue:
Does the three-year prescriptive period for an action to recover unpaid rent installments begin to run separately for each installment as it becomes due, rather than from the end of the lease term, when the lease lacks an acceleration clause?
Opinions:
Majority - Pitcher, Judge
Yes. The three-year prescriptive period for unpaid rent installments begins to run separately for each installment as it becomes due. The court determined the lease created a 'conjunctive obligation' under LSA-C.C. art. 1807, where each monthly rent payment is a distinct obligation that can be separately enforced. Citing the official comment to that article, the court noted that when rent is paid periodically and the lease lacks an acceleration clause, prescription starts to run separately for each payment from the date it is exigible. Therefore, because Latter and Yuspeh filed suit on November 18, 1985, any claims for rent due before November 18, 1982—which included all payments from November 1981 to July 1982—were barred by the three-year prescription.
Analysis:
This decision solidifies the application of prescription to installment contracts like leases in Louisiana civil law. It underscores that each installment payment creates a separate cause of action with its own prescriptive period, absent a contractual provision to the contrary. The ruling serves as a crucial reminder for lessors and other creditors that they must act diligently to enforce their rights for each missed payment, as they cannot wait until the end of the contract term to sue for early defaults. This case strongly incentivizes the inclusion of acceleration clauses in credit and lease agreements to preserve the creditor's ability to sue for the entire outstanding balance upon a single default.
