Land and Offshore Co. v. Martin
| Decision Date | 15 May 1985 |
| Docket Number | No. 84-418,84-418 |
| Citation | 469 So.2d 1177 |
| Parties | The LAND AND OFFSHORE COMPANY, Plaintiff-Appellee, v. James MARTIN, et al., Defendants-Appellants. |
| Court | Court of Appeal of Louisiana — District of US |
Onebane, Donohoe, Bernard, Torian, Diaz, McNamara, Abell, John G. Torian, II, Lafayette, Edwards, Stefanski and Barousse, Russell K. Zaunbrecher, Crowley, for defendant-appellant.
Perrin, Landry, deLaunay and Durand by Gerald C. deLaunay, Lafayette, for plaintiff-appellee.
Mouton, Roy, Carmouche, Bivins, Judice & Henke, John A. Bivins, Lafayette, for defendant-appellee.
D. Rex English, Lafayette, for defendant-appellee-appellant.
Before GUIDRY, FORET and KNOLL, JJ.
This is a suit for breach of contractual warranties and obligations. Pursuant to the sale of their stock in The Land and Offshore Company to plaintiff, LOC, defendants, F.W. Chapman, III; H.C. Harris, Jr.; James H. Martin; and Percy Lormand, Sr., executed written agreements on August 25, 1981 and September 11, 1981. In these agreements, defendants undertook certain obligations, extended a number of contractual warranties to LOC, and agreed to indemnify LOC for certain losses including losses from the breach of the contractual warranties. Plaintiff filed suit alleging that defendants had breached a number of these warranties and had failed to indemnify it. Trial was originally set for August 17, 1983, but was not held. F.W. Chapman, III, the only defendant present on that day, entered into an agreement with plaintiff that he would stipulate that he was liable to plaintiff for $750,000. Subsequently, the other defendants filed exceptions of no cause of action claiming that the agreement between plaintiff and defendant, Chapman, was a settlement and that, as obligors in solido with Chapman, they had been released. The trial court overruled these exceptions. After trial on the merits, the trial court found that the defendants had breached a number of contractual warranties and rendered judgment for plaintiff in the amount of $1,146,785.60. Defendants appealed and plaintiff answered the appeal.
This appeal presents us with a number of issues:
(1) Was the agreement between plaintiff and defendant, Chapman, by which Chapman agreed to stipulate that he was liable for a certain amount a settlement or compromise which effected a release of Chapman's co-obligors?
(2) Did the court err when it allowed the introduction of parol evidence?
(3) Did the trial court err in finding that defendants had breached a number of contractual obligations and warranties?
(4) Was it proper for the trial court to grant special damages in excess of the amount prayed for by plaintiff?
(5) Did the trial court err either in awarding interest to plaintiff or in limiting its award by granting only post-judgment interest?
Defendants, F.W. Chapman, III; H.C. Harris, Jr.; James H. Martin; and Percy Lormand, Sr., were all stockholders of The Land and Offshore Company. During the first part of 1981, the company was losing a considerable amount of money (more than $450,000 from January 1, 1981, to June 30, 1981). A $4,000,000 loan was coming due, and defendants, concerned about personal liability and corporate bankruptcy, were eager to sell the company. After one attempt to sell the company fell through, defendants contacted the "Platt Group" which consisted of George Platt, Robert Gist, and Roland Perrin. In a series of hurried negotiations, defendants and the Platt Group reached an agreement on the sale of the company. It was agreed that defendants would sell their stock to LOC, a corporation owned by the members of the Platt Group. The agreement between plaintiff corporation and defendants was set forth in a series of documents that were executed on August 25, 1981, and September 11, 1981. As part of the sale agreement, defendants extended a number of warranties and undertook a number of obligations.
Article 2.3 of the sale agreement contained perhaps the most general warranty extended by defendants. In Article 2.3 defendants warranted that there were "no fixed or contingent liabilities ... of Company (Land and Offshore Company) as of the date of (the) Company's Latest Balance Sheet other than those reflected on either the Company's Latest Balance Sheet, the notes thereto or in this Agreement, or in one or more of the Exhibits to this Agreement." Defendants also warranted that an insurance loss fund maintained with Gray and Company would be fully funded as of the September 11, 1981 closing date (Art. 2.15 of the agreement). Additionally, defendants warranted that a portion of their accounts receivable was collectible and promised to pay any amounts not collected within ninety days through the use of reasonable efforts. Defendants agreed to indemnify plaintiff for a number of claims which were pending against the company prior to the closing date and agreed to give plaintiff irrevocable letters of credit to secure these obligations (indemnity agreement). Defendants also agreed to purchase certain assets from LOC including an airplane and an office building located in Gueydan, Louisiana.
The lower court found that the defendants had made the assets of The Land and Offshore Company look much better than the actual financial condition of the company at the time of the sale, and that, consequently, defendants had violated a number of their contractual warranties. The court also found that LOC was entitled to indemnification for the money it had paid on a number of the claims pending against Land and Offshore at the time of the sale. The court also ordered defendants to buy the airplane and office building in Gueydan and to indemnify plaintiff for interest paid on the financing of the office building. In all, the court awarded plaintiff a total of $1,146,758.60.
The trial court denied the exceptions of no cause of action in which defendants, Harris, Martin, and Lormand, had urged that they had been released by plaintiff's failure to reserve its rights against them in the agreement entered into by plaintiff with defendant, F.W. Chapman, III. The court held that the agreement was not a settlement or compromise as contended by the defendants, but a confession of judgment.
We agree with the trial court that the stipulation entered into by Chapman was not a settlement or compromise. The agreement provided, in pertinent part "That at the trial of this matter it will be stipulated by the same F.W. Chapman, III, that the sum of Seven Hundred and Fifty Thousand ($750,000) Dollars will be taken as proven by the plaintiffs as against the said F.W. Chapman, III."
The agreement further provided:
"That a judgment will be signed as to said amount after October 3, 1983, and not prior thereto, and made executory at said time."
LSA-C.C. Article 2203 1 provides that the remission or conventional discharge in favor of one of the debtors in solido, discharges all the others, unless the creditor has expressly reserved his right against the latter. The agreement entered into by Chapman and plaintiff was neither a remission nor a conventional discharge. It did not release or discharge Chapman. It only provided that at the trial a stipulation would be entered that the sum of $750,000 would be taken as proven against Chapman. Furthermore, at one point in the agreement, this sum is referred to as only a minimum amount. Since this agreement did not operate to discharge or in any way release defendant, Chapman, the other obligors were not released.
Defendant stockholders contend that the trial court erred when it allowed parol evidence. Although LSA-C.C. Art. 2276 prohibits parol evidence "against or beyond" what is contained in a written act, this prohibition has not been interpreted by our courts as an absolute prohibition against parol evidence in a suit on a written contract.
One exception to the parol evidence rule allows the admission of parol evidence to show fraud, misrepresentation, or error. Gulf States Finance Corporation v. Airline Auto Sales, Inc., 248 La. 591, 181 So.2d 36 (1965); Mitchell v. Clark, 448 So.2d 681 (La.1984). Plaintiff alleged in its petition that certain misrepresentations were made by defendant stockholders. These misrepresentations included the listing of certain equipment on the books of the company that were not in the possession of the company at the time of the closing and that the defendant stockholders failed to reveal certain lawsuits which were pending against The Land and Offshore Company. These allegations were sufficient to allege fraud, misrepresentation, or, at the very least, mutual error. See Shapar, Inc. v. Cliff's Wholesale Pizza Products, Inc., 428 So.2d 1033 (La.App. 1 Cir.1983).
In interpreting contractual provisions about which there exists some doubt, a court must seek the true intention of the parties, even if to do so necessitates a departure from the literal meaning of the terms of the agreement. Monsur v. Chaddick, 274 So.2d 499 (La.App. 3 Cir.1973). There existed some doubt as to the meaning of several of the stipulations of the contract, and parol evidence was admissible to explore the true intentions of the parties in this regard. Although we agree with defendant stockholders that in large part the contract spoke for itself, unfortunately for defendants, in most cases what the clear language of the contract showed was that defendants had breached their contractual obligations.
We will proceed with a detailed consideration of the obligations breached by defendants. For this purpose, we will take the liberty of quoting from the trial judge's excellent written reasons for judgment:
"I. The Gueydan Office Building
On November 11, 1983, the defendants stipulated to their obligation of purchasing the Gueydan Office Building. It has come to the Court's attention that the defendants will not comply with this agreement unless the plaintiff...
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