Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not *

be published and is not precedent except under the limited circumstances set forth in 5TH CIR.

R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 08-30650

SCHWEGMANN FAMILY TRUST NO. 2

Plaintiff-Appellee

v.

JOHN HANCOCK LIFE INSURANCE COMPANY, formerly known as

John Hancock Mutual Life Insurance Company

Third Party Defendant-Appellee

v.

TOYS R US INC., its subsidiaries & affiliates

 Defendant-Appellant

Appeal from the United States District Court 

for the Eastern District of Louisiana

USDC No. 2:06-CV-2478

Before JOLLY, SMITH, and BENAVIDES, Circuit Judges .

PER CURIAM:*

Defendant-Appellant Toys “R” Us – Delaware, Inc., formerly known as

Toys “R” Us, Inc., (“Toys”) appeals the district court’s grant of summary

United States Court of Appeals

Fifth Circuit

F I L E D

August 11, 2009

Charles R. Fulbruge III

Clerk
No. 08-30650

 Schwegmann is a Louisiana trust and Toys is a Delaware corporation. This case was 1

brought pursuant to the district court’s diversity jurisdiction. 28 U.S.C. § 1332.

2

judgment in favor of Appellee, Schwegmann Family Trust No. 2

(“Schwegmann”), enforcing the terms of the lease entered into between

Schwegmann and Toys. The district court held that the lease specifically

addressed the circumstances at issue—concerning the effects of Hurricane

Katrina on the leased property—and thus held the contrary provisions contained

in the Louisiana Civil Code were inapplicable. For the following reasons, the

judgment of the district court is affirmed. 

I.

In 1992, Toys entered into a twenty-five year land lease with Schwegmann

for property located in the eastern section of New Orleans, Louisiana. Pursuant

to the lease, Toys constructed a building on the leased property from which it

operated a toy store. On August 29, 2005, Hurricane Katrina struck the area,

damaging the store located on the leased property and the surrounding area.

Toys cleared out the contents of the building and discontinued payment of rent.

On May 11, 2006, Schwegmann sued Toys in district court to enforce the

lease and collect past due rent. Toys answered, filed a counterclaim for 1

Schwegmann’s failure to maintain its lease obligations, and then filed a third

party demand against John Hancock Mutual Insurance Company (“John

Hancock”), Schwegmann’s mortgagee. On May 16, 2007, Schwegmann filed a

motion for summary judgment seeking enforcement of the terms of the lease. On

June 12, 2007, Toys filed a cross-motion for summary judgment seeking to

dissolve the lease pursuant to Louisiana Civil Code Article 2715. On March 17,

2008, the district court granted Schwegmann’s motion and denied Toys’

cross-motion, holding that the terms of the lease, rather than Article 2715,

control the parties’ obligations. The district court’s order decided the issue of

liability only, leaving open the extent and amount of any damages. The
No. 08-30650

3

judgment was certified for interlocutory appeal and further trial court

proceedings were stayed pending appeal. Toys now appeals the order of the

district court granting summary judgment in favor of Schwegmann. 

II. 

This Court reviews a district court’s grant of summary judgment de novo,

applying the same standards as the district court. Strong v. Univ. Healthcare

Sys., L.L.C., 482 F.3d 802, 805 (5th Cir. 2007). Summary judgment is proper if

the record reflects “that there is no genuine issue as to any material fact and

that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c).

In deciding whether a genuine issue of material fact exists, this Court must

draw all reasonable inferences in favor of the responding party. Little v. Liquid

Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam).

III.

Toys argues that the lease agreement, governed by Louisiana law, should

be dissolved pursuant to Louisiana Civil Code Article 2715 (“Article 2715”),

which provides, in pertinent part, that where the thing leased is “partially

destroyed, lost, or expropriated, or its use is otherwise substantially impaired,”

and the impairment “was caused by circumstances external to the leased thing,

the lessee is entitled to a dissolution of the lease.” La. Civ. Code art. 2715. Toys

asserts that as result of Hurricane Katrina the leased property was

“substantially impaired,” and thus they are entitled to terminate the lease under

Article 2715. Schwegmann counters that because the rules of the Civil Code

only become applicable for filling any gaps in a contract, they are inapplicable

here because the lease agreement had a provision addressing the responsibilities

of the parties in the event a “fire or other casualty” damaged or destroyed the

property. 

Under Louisiana law, the rules of the Civil Code “become applicable for

filling any gaps in the parties’ agreement and for determining its overall validity
No. 08-30650

4

and effectiveness.” La. Civ. Code art. 2668 cmt. (e). In Tassin v. Slidell Mini

Storage, Inc., 396 So. 2d 1261 (La. 1981), the Louisiana Supreme Court

explained the role of the rules in the Civil Code when interpreting contracts:

[T]he codal articles and statutes defining the rights and obliations

(sic) of lessors and lessees are not prohibitory laws which are

unalterable by contractual agreement, but are simply intended to

regulate the relationship between lessor and lessee when there is no

contractual stipulation imposed in the lease. . . . Our jurisprudence

is that the usual warranties and obligations imposed under the

codal articles and statutes dealing with lease may be waived or

otherwise provided for by contractual agreement of the parties as

long as such waiver or renunciation does not affect the rights of

others and is not contrary to the public good.

Tassin, 396 So. 2d at 1264. “In other words, the lease contract itself is the law

between the parties; it defines their respective rights and obligations so long as

the agreement does not affect the rights of others and is not contrary to the

public good.” Carriere v. Bank of La., 702 So. 2d 648, 666 (La. 1996); see also

Cerniglia v. Napoli, 517 So. 2d 1209, 1211 (La. Ct. App. 1987) (“[A]rticle [2697]

is applicable only where there is no lease agreement to the contrary. In the

present case the parties by adopting the fire clause clearly intended to avoid

automatic termination of the lease in the event of destruction of the premises by

a fire.” (citation omitted)). 

Therefore, if the lease agreement “waive[s] or otherwise provide[s] for” the

situation covered by Article 2715, then the lease provision, and not Article 2715,

should apply. Article 2715 provides: 

If, without the fault of the lessee, the thing is partially

destroyed, lost, or expropriated, or its use is otherwise substantially

impaired, the lessee may, according to the circumstances of both

parties, obtain a diminution of the rent or dissolution of the lease,

whichever is more appropriate under the circumstances. If the

lessor was at fault, the lessee may also demand damages. 
No. 08-30650

 The “Demised Premises” is defined in § 1.01 of the lease as the “Tenants Parcel and 2

the Improvements” erected thereon. 

5

If the impairment of the use of the leased thing was caused by

circumstances external to the leased thing, the lessee is entitled to

a dissolution of the lease, but is not entitled to diminution of the

rent.

La. Civ. Code art. 2715. Schwegmann contends that § 12.02 of the lease covers

the situation here, and obviates the need to look to the codal provisions. Section

12.02 states that:

In the event the whole or any part of the Demised Premises shall, 2

during the Lease Term, be damaged or destroyed by fire or other

casualty . . . Tenant shall . . . commence and proceed with due

diligence to repair, restore and/or rebuild the Demised Premises, or

portions thereof, substantially to their condition and character

immediately prior to such damage . . . .

The question posed here is whether § 12.02 of the lease provides for the situation

at issue because Hurricane Katrina was a “casualty” that “damaged” the leased

property. If § 12.02 does cover the instant situation, then the lease provision

trumps Article 2715 and Schwegmann is entitled to continuation of the lease

while Toys is obligated to repair the leased property as specified in § 12.02. 

Schwegmann Family Trust No.2 v. KFC National Management Co., No.

06-2447, 2007 WL 60971 (E.D. La. Jan. 5, 2007), which involved a substantially

similar lease between KFC and Schwegmann, is instructive. In that case, KFC,

like Toys, contended that its leased properties were “substantially impaired such

that the properties were no longer fit for the express intended use of operating

a Kentucky Fried Chicken restaurant” due to the effects of Hurricane Katrina

and sought dissolution of its lease with Schwegmann via Article 2715 of the

Louisiana Civil Code. Schwegmann v. KFC, 2007 WL 60971, at *2. The KFC

lease contained a “destruction of premises” provision which provided that “[i]f
No. 08-30650

6

the building upon the demised premises be damaged or rendered untenantable

by fire or other casualty . . . Tenant shall . . . repair or replace said building.” Id.

at *3. The district court held that the lease provision addressed the rights and

obligations of the parties in the event that the leased property was damaged by

a casualty, and encompassed the effects on the property that occurred as a result

of Hurricane Katrina. Therefore, the court held that Article 2715 did not apply

and KFC was bound by the terms of the lease to repair or replace the building

and continue the lease. Id. at *3–4. 

Toys argues that even if the lease provides for a situation in which the

premises are destroyed, it does not provide for a situation in which the use of the

premises are “substantially impaired.” Toys submitted an affidavit and report

from a local demographer stating that the area around the store location at issue

is no longer commercially viable because of decreased population and slow

rebuilding in the area. Toys asserts that these changes to the business climate

of the area are a “substantial impairment” that is not covered by § 12.02 of the

lease. 

 Despite Toys’ contentions, we hold that the lease is not silent as to the

impairment alleged by Toys. First, § 12.02 of the lease addresses situations in

which “the whole or any part of the Demised Premises” is “damaged or

destroyed” by a “fire or other casualty.” Under the Louisiana Civil Code, the

words of a contract must be given their generally prevailing meaning. La. Civ.

Code art. 2047. Hurricane Katrina was a casualty that damaged or destroyed

the leased property in part. The ordinary meaning of the verb “damage” is “[t]o

do or cause damage to; to hurt, harm, injure; now commonly to injure (a thing)

so as to lessen or destroy its value.” Oxford English Dictionary (2d ed. 1989).

The verb “impair” means “[t]o make worse, less valuable, or weaker; to lessen

injuriously; to damage, injure.” Id. There is substantial overlap between the

two concepts. Thus, the effects of Hurricane Katrina on the leased property,
No. 08-30650

7

including injuries which lessened its value, are squarely addressed by the lease

and the lease should govern the rights of the parties. See Tassin, 396 So. 2d at

1269 (holding that “obligations imposed under the codal articles and statutes

dealing with lease may be waived or otherwise provided for by contractual

agreement”). Second, as in Schwegmann v. KFC, the lease “reflects that the

parties did consider circumstances in which damage to the properties could

make continuation of the lease no longer viable.” 2007 WL 60971, at *4. Section

12.01 of the lease provides for termination of the lease if the property is

destroyed or damaged in excess of a certain specified amount “during the last

five (5) years of the Lease Term or during any renewal period.” The damage

here occurred prior to that five-year mark and, therefore, the provisions of

§12.02 requiring repair and continuation of the lease, rather than termination

provisions of § 12.01, apply. 

Even if the lease did not address the impairment complained of by Toys—

and thus Article 2715 governed—dissolution of the lease would still not be

warranted because the “thing leased” has not been “substantially impaired”

within the meaning of the statute. In Meadowcrest Professional Building

Partnership v. Toursarkissian, a Louisiana court rejected the contention that

negative changes in the business climate after Hurricane Katrina constituted a

substantial impairment to a commercial lease under Article 2715. 1 So. 3d 555,

556 (La. Ct. App. 2008). The court stated that: 

[E]ven accepting defendant’s assertion about the negative business

climate as true, this is not the type of situation to which Art. 2715

applies. To rule otherwise would be to make the enforceability of

leases dependent on the vagaries of the marketplace, and this we

decline to do.

Id.; see also Schwegmann v. KFC, 2007 WL 60971, at *4 (noting that

“changed economic and demographic conditions [in the surrounding

neighborhood] do not make the leased land, itself, unsuitable for a retail
No. 08-30650

8

business”). Therefore, under Louisiana law, the impairment complained

of by Toys does not constitute a substantial impairment and Toys is not

entitled to dissolution of the lease under Article 2715. 

IV.

Based on the foregoing analysis, the judgment of the district court

is AFFIRMED.