Cowley Corp. v. Shreveport Packing Co., Inc. of Kansas
| Decision Date | 24 October 1983 |
| Docket Number | No. 15598-CA,15598-CA |
| Citation | 440 So.2d 1345 |
| Parties | The COWLEY CORPORATION, Plaintiff-Appellee, v. SHREVEPORT PACKING COMPANY, INC. OF KANSAS, Defendant-Appellant. |
| Court | Court of Appeal of Louisiana — District of US |
William M. Comegys, III, Shreveport, for plaintiff-appellee.
Nelson & Achee by James S. Denhollem and Harry R. Nelson, Shreveport, for defendant-appellant.
Before HALL, FRED W. JONES, Jr., and NORRIS, JJ.
In this suit on a promissory note, Shreveport Packing Company, Inc., of Kansas ("Shreveport Packing") suspensively appeals a judgment awarding the Cowley Corporation ("Cowley") $42,487.49 as the principal balance due, with interest, attorneys' fees and costs. Cowley has answered the appeal requesting that the amount of the judgment be increased to the original amount sued for. We affirm.
By authentic act dated May 31, 1971, Shreveport Packing Corporation conveyed to Shreveport Packing Company, Inc. of Kansas, certain property which it had previously operated as a "packing house". The sale was for $650,000 represented by one promissory note of even date with the Act of Sale made payable to "BEARER" at the principal banking house of the First National Bank of Shreveport, bearing interest at 8% per annum upon unpaid principal and payable in 120 successive monthly installments of $7,886.45 with each payment to be applied first to interest and then to principal with the payments commencing July 15, 1971 and being due on the same calendar day of each successive month thereafter until fully paid. This note was secured by a vendor's lien and mortgage on the conveyed property.
Cowley Corporation became the holder and owner of this note. Immediately after the execution of the documents pertaining to the sale, the note was placed with First National Bank of Shreveport for collection. Relying solely on the provisions of the "date note", the bank applied the initial ten payments by computing interest on the amount due on the principal balance of the note according to the number of days that had elapsed from the date of the previous payment. The figure which resulted was paid as interest then the remaining portion of the payment was applied to principal.
In May, 1972, either Richard Rock, president of Shreveport Packing or Gilbert Shanley, a partner in the accounting firm of Heard, McElroy and Vestal, accountants for all parties at the time, furnished an amortization schedule to the bank. The bank then contacted Les Cowley, who was president of Cowley at the time about utilizing the amortization schedule to allocate payments to interest and principal. Upon being informed that the terms of the schedule (the number of payments, the rate of interest, the amount of the payments, and the initial principal amount due) were identical to the terms of the note, Mr. Cowley informed the bank that he would agree to the bank's using the amortization schedule as a convenient guide for allocating interest and principal, thereby dispensing with the monthly necessity of computing interest due and principal. It is noteworthy that at this point no payments had been missed with the exception of the first payment which by agreement had been delayed 14 days. All other payments had been made within a few days of the due date. In confirmation of these instructions, J. Hugh Watson, the president of First National Bank, wrote a letter to Mr. Cowley which stated in part:
As you know, when we received the first ten payments of $7,886.45 each from Shreveport Packing Company, Inc., we deducted interest first and applied the balance to principal. Now that we have an amortization schedule, which you have approved, we have reallocated the application of the payments.
We had credited the first ten payments as follows:
Interest $ 45,155.83
Principal 33,708.67
Unpaid principal balance after
April, 1972 payment 616,291.33
The amortization schedule reflects that the allocation of these ten payments should have been:
Interest $ 42,248.23
Principal 36,616.27
Principal balance 613,383.73
The May payment has been applied in accordance with the amortization schedule, leaving unpaid principal of $609,586.50 which is the amount reflected by the enclosed copy of our credit to your account.
The basic difference in the bank's computation and the computation per the amortization schedule at this point resulted from the first payment reflected on the note being due 45 days rather than 30 days from the date of the note and the fact that this payment was not actually made until July 29, 1971, some 14 days after it was actually due. Additionally, several of the first ten payments were either made or credited a day or two late. The bank's date note method of computation had taken into account these late payments in computing interest due whereas the amortization schedule presumes that all payments are made timely.
Subsequent to this turn of events, Mr. Cowley consented to extensions of time for payment of the following installments: August 15, 1972; November 15, 1972; December 15, 1972; December 15, 1973; November 15, 1974; December 15, 1974 and June 15, 1974. Between the date on which the note was executed and the date of the final payment actually made by Shreveport Packing in June, 1981, the following payments were made to "catch up" the missed payments: September 12, 1977 (2 extra payments); November 15, 1979 (1 extra payment); January 8, 1980 (1 extra payment); March 12, 1980 (1 extra payment); July 11, 1980 (1 extra payment); November 13, 1980 (1 extra payment).
From May, 1972 until December, 1979 the bank continued to allocate interest and principal as per the amortization schedule. Tax returns on behalf of both parties were filed based on allocations of interest furnished by the bank. In December, 1979, Cowley instructed the bank to correct its books to reflect balances derived from the allocation of interest and principal according to the strict terms of the note and to allocate any further payments in the same fashion. This resulted in a principal balance of $206,807.78 as of December 12, 1979, which differed from the principal balance reflected by the bank in November, 1979 of $167,625.17 based on the amortization schedule. Cowley then reported the additional interest income on its May, 1980 tax return resulting in an increased tax of $12,000.
By check dated June 8, 1981, Shreveport Packing forwarded $7,857.81 as the 120th installment. This was the amount provided for the 120th payment on the amortization schedule rather than the amount provided for in the note. On the check was the following notation: "Cowley payment # 120--final payment on $650,000 loan according to amortization schedule." The bank received and deposited this check to the Cowley account, apparently without informing Cowley of the notation on the check.
Shortly thereafter, Cowley again informed Shreveport Packing that a principal balance remained due on the note. Shreveport Packing disputed this, the parties attempted to negotiate their differences to no avail, and this suit was filed on August 21, 1981. At trial, Cowley contended that because the note was a "date note" and certain payments were not made timely, that there was an unpaid principal balance of $48,790.85 as of June 15, 1981. This sum was the figure which resulted when the payments of interest and principal on the note were computed utilizing the "date note method." Conversely, Shreveport Packing contended at trial that Cowley granted "moratoriums" on the payment of certain monthly installments, which were to be without liability for additional interest attributable to the delayed payments. In reality, Shreveport Packing's real contention was that from the outset the extent of its obligation under the note was to pay 120 installments in the amount called for, which regardless of when made, would be allocated to interest and principal pursuant and numerically corresponding to the amortization schedule in the possession of the bank. Additionally, it was contended that the debt had been extinguished by accord and satisfaction or by compromise.
In written reasons for judgment, the trial court found the note in question to be a "date note." It further found that Cowley's instruction to the bank in May, 1972, had the legal effect of authorizing the bank to receive payments from Shreveport Packing to be credited according to the amortization schedule provided the payment was received within a reasonable period of time following the due date and that by allowing the bank to alter the principal balance due Cowley agreed to "give" Shreveport Packing $2,907.60. The trial court heard the testimony of Mr. Cowley and Mr. Rock and rejected Rock's contention that any extensions or "moratoriums" were to be without additional interest accruing because of the delays. It was the court's finding that all Cowley agreed to do was to allow the missing of certain payments without foreclosure and to accept these payments at a later date. The court further found that Cowley never intended to forgive any interest accruing after May, 1972, but that the actions of Cowley at the time served to solve the problems of accrued interest because of the lateness of the first payment and three other payments prior to that time. The court rejected the contention that the 120th payment constituted an accord and satisfaction.
After arriving at the above findings, the court arrived at the balance due on the note according to the following method of calculation:
(1) After applying the May 1972 payment the principal balance due was $609,586.50.
(2) The dates of receipts of payments as shown by the bank records would be used to credit all payments on the note.
(3) If payment by defendant was made within five (5) days following the due date, it should be treated as if paid timely on the...
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