Ferrell v. South Central Bell Tel. Co.

• Decision Date: 08 September 1981
• Docket Number: No. 81-C-0163,81-C-0163
• Citation: 403 So.2d 698
• Parties: David M. FERRELL v. SOUTH CENTRAL BELL TELEPHONE CO.
• Court: Louisiana Supreme Court

Page 698

403 So.2d 698

David M. FERRELL v. SOUTH CENTRAL BELL TELEPHONE CO.

No. 81-C-0163.

Supreme Court of Louisiana.

Sept. 8, 1981.

E. Drew McKinnis and Joseph E. Juban of McKinnis, Juban & Bevan, Baton Rouge, for plaintiff-applicant.

Pamela A. Prestridge of Breazeale, Sachse & Wilson, Baton Rouge, for defendant-respondent.

MARCUS, Justice.

Great River Funding Company was organized in January of 1975. The company sought telephone service from South Central Bell Telephone Company at a certain location. Bell informed Great River that it would have to deposit $300 with Bell or obtain a letter of guaranty. David M. Ferrell, who at the time was an officer and stockholder of the company as well as being its landlord, signed an unlimited contract of guaranty in which he guaranteed to Bell the payment by Great River of all of its charges for telecommunications. Subsequently, Bell issued five credit cards to Great River on the telephone number at its service location. The last three cards were issued in December of 1975. Great River was current on all charges prior to January 1976 but due to the company's history of delinquent payments, NSF checks and large telephone expenses, Bell requested $1,000 deposit from Great River on January 19, 1976. William T. Hunter, organizer and operator of Great River, asked for an extension to pay the deposit, stating that the situation looked brighter for the company and that Mr. Ferrell was personally responsible for the account. Bell granted a ninety-day extension to pay the deposit. Thereafter, Bell received several payments by checks, some of which were returned marked NSF. Payments were also received to cover the NSF checks. The last payment on the account ($533.53) was received on April 12, 1976. When no further payments were made, Bell found it necessary to temporarily interrupt service on May 12, 1976. Service was completely disconnected on May 21. At the time service was terminated, Bell's records showed that Great River owed $2,404.24 but due to a time lag in recording charges for long distance calls and the return of an NSF check, this amount increased to $4,807.28 of which $1,836.69 represented credit card calls.

In June 1976, a Bell representative phoned Mr. Ferrell informing him of Great River's delinquent account and advising him that his personal phone service would be terminated if he failed to pay the bill. On August 23, 1976, he was sent formal notice that Great River owed $4,807.28 and that this amount would be transferred to his account and be reflected on his next telephone bill. On September 17, 1976, Mr. Ferrell filed suit seeking a declaratory judgment decreeing that the contract of guaranty be null and void and that he owed nothing to Bell in connection with said contract. Bell filed an answer to the petition and incorporated in its answer a reconventional demand against Ferrell for the sum of $4,807.28. The trial judge, finding that the contract was a "valid unlimited contract of guaranty," rendered judgment in favor of Bell and against Ferrell on the principal demand, dismissing Ferrell's suit at his cost, and in favor of Bell on its reconventional demand and against Ferrell in the sum of $4,807.28 together with legal interest thereon from September 17, 1976 until paid and all costs. Ferrell appealed. The judgment of the trial court was affirmed by the court of appeal. ¹ On Ferrell's application, we granted certiorari to review the correctness of that decision. ²

On January 22, 1975, Mr. Ferrell signed the following document entitled "UNLIMITED CONTRACT OF GUARANTY":

WITNESSETH: That, whereas South Central Bell Telephone Company, hereinafter called "Telephone Company", as a condition to furnishing the above named Applicant, at the above stated service location, telecommunications, has requested Applicant to establish credit by making a cash deposit with the Telephone Company to secure payment for telecommunications or in lieu of a deposit at this time, to furnish a satisfactory guarantor for payment of charges for telecommunications; NOW, THEREFORE, the undersigned GUARANTOR, residing at the address shown above, in consideration of the Telephone Company furnishing the Applicant telecommunications without requiring a deposit at this time, hereby absolutely and unconditionally GUARANTEES to the Telephone Company the PAYMENT BY APPLICANT OF ALL CHARGES FOR TELECOMMUNICATIONS, for which Applicant may now be liable or for which Applicant may in the future become liable.

Guarantor covenants and agrees that, if Applicant at any time shall be in default in the payment of the charges for said telecommunications, the undersigned Guarantor will pay all outstanding charges at the Telephone Company's business office designated below. In the event Guarantor defaults in making payment...