Louisiana Bank & Trust Co. v. Boutte

• Citation: 298 So.2d 884
• Decision Date: 28 June 1974
• Docket Number: No. 4596,4596
• Court: Court of Appeal of Louisiana — District of US
• Parties: LOUISIANA BANK & TRUST COMPANY, Plaintiff-Appellee, v. Mrs. Jewel B. BOUTTE et al., Defendants-Appellants.

Page 884

298 So.2d 884

LOUISIANA BANK & TRUST COMPANY, Plaintiff-Appellee, v. Mrs. Jewel B. BOUTTE et al., Defendants-Appellants.

No. 4596.

Court of Appeal of Louisiana, Third Circuit.

June 28, 1974.

Rehearing Denied Sept. 4, 1974.

Donald J. Tate of Tate & Tate, Mamou, for defendants- appellants.

Reggie & Harrington by Oscar W. Boswell, II, Crowley, and Edwards, Stefanski & Barousse by Homer E. Barousse, Jr., Crowley, for plaintiff-appellee.

Before FRUGE , DOMENGEAUX, and WATSON, JJ.

FRUGE , Judge.

This action arises out of a suit instituted by plaintiff against several signatories to a continuing guaranty executed in plaintiff's favor on May 18, 1962. Subsequent to this date, and prior to institution of this suit, a compromise agreement hereinafter referred to, was entered into by and between plaintiff and certain signatories to the above continuing guaranty. Defendant relied upon said agreement, as well as other defenses, to preclude personal liability. The liability of defendant signatory, Matthew L. Hanagriff, however, was proved to the satisfaction of the lower court and judgment was rendered against him in the amount of $50,000. From this adjudication, defendant, Hanagriff, has appealed. We amend and affirm.

Parenthetically, this suit is one of several which this court has dealt with concerning the demise of the Rex Rice Company, Inc., and circumstances arising out of its failure. See Louisiana Bank & Trust Co. v. Roanoke Rice Co-Op., 247 So.2d 632 (La.App.3rd Cir. 1971); Security Bank & Trust Co. v. Roanoke Rice Co-Op., 298 So.2d 883 (La.App.3rd Cir. 1974), consolidated with Louisiana Bank & Trust Co. v. Roanoke Rice Co-Op., 298 So.2d 868 (La.App.3rd Cir. 1974).

The problems presented by this lawsuit derive from an instrument confected on May 18, 1962, in which Jack R. Smith, Matthew L. Hanagriff, Hattie F. Broussard, and Mrs. Jewel B. Boutte executed a guaranty in favor of plaintiff bank for credit which plaintiff extended to Rex Rice Company, Inc. (hereinafter 'Rex Rice'), up to the amount of $200,000. Among other conditions therein contained, these parties obligated themselves in solido, in addition to their status as surety, ti secure the indebtedness of Rex Rice.

The following issues are raised on appeal for our determination.

1. Is the continuing guaranty instrument subject to the prescriptive period provided by Louisiana Civil Code Article 3540?

2. Did the compromise agreement, effected between the other defendant signatories and plaintiff, release the principal obligor, Rex Rice, yet contain a valid reservation of rights against defendant Hanagriff?

3. Was sufficient evidence presented by plaintiff as to an indebtedness due and owing by defendant in this matter?

4. Was the trial court correct in its assessment of the amount due by defendant under the facts and legal undertakings of the parties hereto?

5. Are damages and attorney's fees legally due defendant by reason of the wrongful issuance and maintenance of a writ of resident attachment of defendant's property?

An understanding of the issues raised requires a knowledge of the following facts. Defendant, Hanagriff, was a director and stockholder of Rex Rice Company, Inc., and the other guarantors, who signed the instrument in question, were officers, directors, and/or stockholders of Rex Rice. While the signatories to the continuing guaranty involved herein also signed two other subsequent continuing guaranties, defendant, Hanagriff, signed only the continuing guaranty of May 18, 1962.

Subsequent to the institution of suit on March 25, 1969, all other defendant signatories to these proceedings were released as a result of a compromise agreement signed in December, 1969, involving numerous parties. As a consequence of this settlement, plaintiff bank received substantially all of the assets belonging to Jack Smith, Jewel B. Boutte, and Hattie F. Broussard, the other signatories of the continuing guaranty agreement in question. The compromise agreement contained a specific reservation of the rights of plaintiff bank to proceed against defendant, Hanagriff, under the continuing guaranty provisions.

Defendant, Hanagriff, has challenged the trial court's determination of the legal effect to be given the stipulation of solidarity contained in the guaranty agreement. It is defendant's contention that the release of Rex Rice, the principal debtor, had the legal effect of releasing him, and that the words of 'solidary obligation' were merely inadvertently included.

Under La.C.C. Art. 2205 'The remission or even conventional discharge granted to a principal debtor, discharges the sureties.' However, under La.C.C. Art. 2203, 'The remission or conventional discharge in favor of one of the codebtors in solido, discharges all the others, unless the creditor has expressly reserved his rights against the latter. In the latter case, he cannot claim the debt without making a deduction of the part of him to whom he has made the remission.' Under these two authorities, if the defendant was merely a surety, the release of the principal debtor would have had the effect of releasing him. However, if actually a debtor in solido, defendant would not be discharged by reason of the specific reservation by the creditor of his rights to proceed against him.

The continuing guaranty herein sued upon contains an express stipulation of liability in solido. (La.C.C. Art. 2093.) Under the Louisiana jurisprudence, 'A contract of guaranty in this state is equivalent to a contract of surety.' See Brock v. First State Bank & Trust Company, 187 La. 776, 175 So. 569, 570 (1937). With the aforesaid in mind, the remaining question involves the effect to be accorded the stipulation of liability in solido.

Defendant asserts impairment of the subrogation rights of the surety who has bound himself in solido as a predicate for relieving him of the legal effect of his solidary engagement. Under defendant's position, the solidarily bound surety is unable to utilize the provisions of La.C.C. Arts. 2161 and 3061, which provide for subrogation to the creditor's rights to the full extent of the surety's payment of the debt and for the surety's discharge when the creditor has acted so as to have prejudiced the subrogation rights, mortgages, and privileges which would have operated in favor of the surety. Defendant asks for relief for '. . . the surety who has inadvertently stipulated solidarity with the principal debtor. . ..'

We have found La.C.C. Art. 3045 to be in point and controlling, where, as here, the surety has bound himself in solido. Under this article, '. . . the effects of his engagement are to be regulated by the same principles which have been established for debtors in solido.' La.C.C. Art. 2203, providing for the reservation of rights against the solidary co-debtor, has application to the facts of this case. As such, defendant is bound by the legal agreement (the continuing guaranty) entered into with plaintiff, as this agreement has the effect of law between the parties. (La.C.C. Art. 1901.)

On the question of prescription, defendant has relied upon La.C.C. Art. 3540, which provides:

'Actions on bills of exchange, notes payable to order or bearer, except bank notes, those on all effects negotiable or transferable by indorsement or...