Placid Refining Co. v. Privette

• Decision Date: 15 January 1988
• Docket Number: No. 86,86
• Citation: 523 So.2d 865
• Parties: PLACID REFINING COMPANY v. W.R. "Dick" PRIVETTE and Samuel F. Eakin. CA 1077. 523 So.2d 865
• Court: Court of Appeal of Louisiana — District of US

Page 865

523 So.2d 865

PLACID REFINING COMPANY v. W.R. "Dick" PRIVETTE and Samuel F. Eakin.

No. 86 CA 1077.

523 So.2d 865

Court of Appeal of Louisiana First Circuit.

Jan. 15, 1988.

On Rehearing March 24, 1988.

Writ Denied May 13, 1988.

S. Daniel Meeks, New Orleans, for plaintiff-appellee Placid Refining co.

Donald L. Beckner, Baton Rouge, for defendant-appellant Guy L. Deano, Jr., Testamentary Executor of the Succession of William Richard Privette, Jr.

Before LOTTINGER, WATKINS, CARTER and ALFORD, JJ., and CHIASSON ^*, J. Pro Tem.

WATKINS, Judge.

This is an appeal from the granting of a summary judgment in favor of Placid Refining Company (Placid) against the succession of the now deceased William Richard Privette, Jr. Since we find a genuine issue of material fact, we reverse.

FACTS

This is a collection suit filed by Placid against Privette, and Samuel Eakin. The action arose out of the failure of Intracoastal Oil Company of New Roads, Inc. (Intracoastal) to pay a debt owed to Placid for purchases of refined petroleum products which debt was allegedly guaranteed by Privette and Eakin.

Intracoastal requested a credit account with Placid and pursuant to that request Intracoastal completed a credit application. The credit application specifically requested a $150,000 credit limit. As a condition to extending such credit, Placid required both Privette and Eakin to execute a continuing guaranty which read as follows:

TO THE PLACID REFINING COMPANY

Please sell and deliver to INTRACOASTAL OIL COMPANY OF NEW ROADS, INC. 900 East Park Ave. of Houma, Louisiana 70360, on your usual credit terms, such goods, wares and merchandise as he, from time to time, may select, and in consideration thereof I hereby guarantee and hold myself personally responsible for the payment at maturity of the purchase price of all such goods, wares and merchandise sold and delivered whether evidenced by open account, acceptance, note or otherwise. I hereby waive notice of acceptance hereof amount of sale, dates of shipment or delivery, notice of default in payment and legal proceedings against the purchaser.

This is intended to be a continuing guarantee applying to all sales, made by you to said Intracoastal Oil Co. of New Roads, Inc. from March 17, 1983 until same is revoked by me in writing.

Witness my hand and seal this 24th day of March 1983.

/s/ W.R. (Dick) Privette

W.R. (Dick) Privette

/s/ Samuel F. Eakin

Samuel F. Eakin

Notary Public

/s/ David S. Bell

The continuing guaranty set forth above was signed by both Privette, and Eakin on March 24, 1983, and contained no limits. The Affidavit testimony of Privette and Eakin states that their intention was to limit the continuing guaranty to $150,000. Their testimony is supported by that of Placid's credit manager, J.D. Langford. Mr. Langford's deposition testimony stated that it was Placid's intention that the credit extended to Intracoastal be approximately $150,000. It was also Mr. Langford's understanding that the agreement between Privette and Placid was represented by the request for credit, the continuing guaranty and the credit authorization form which was not submitted into evidence.

After approval of credit, Placid sent Intracoastal credit cards which could be used at any time to make purchases. Any person in possession of the card could obtain products from Placid.

A short time after receiving credit from Placid, Intracoastal was placed in judicial Receivership on the petition of Sylvia R. Roberts, who was appointed Receiver on April 8, 1983.

From April 8, 1983 until service was terminated, Sylvia Roberts made purchases from Placid using the credit card issued to Intracoastal.

On April 9, 1983, Mr. Privette called Placid to notify Placid of his revocation of the continuing guaranty and to request that they extend no more credit to Intracoastal based on that guarantee. The testimony of Mr. Langford clearly indicates that Placid did receive such notification and that Mr. Privette was assured that credit was being terminated immediately through their computer.

Notwithstanding, the notification to cease credit, additional purchases were made from April 9 until Placid ceased credit on April 15, 1983.

Placid originally instituted suit on August 10, 1983, in the United States District Court for the Eastern District of Louisiana. The complaint against Messrs. Privette and Eakin sought recovery for the entire balance then due from Intracoastal, including attorney's fees. The action was ultimately dismissed, after judgment in favor of Placid, for lack of subject matter jurisdiction.

Thereafter, Placid reinstituted litigation in the 18th Judicial District Court, Parish of West Baton Rouge. It was subsequently transferred to the 19th Judicial District Court in and for the Parish of East Baton Rouge, on May 8, 1985.

During the pendency of the litigation Mr. Privette died, and Mr. Guy L. Deano, Jr., Testamentary Executor of the estate of Mr. Privette, substituted himself as party defendant.

On May 8, 1986 Placid filed a motion for summary judgment seeking judgment against Messrs. Privette and Eakin for all sales from Placid to Intracoastal without limitation as to amount. These sales included those made to Intracoastal after Mr. Privette orally revoked his guaranty and requested that credit be terminated. The motion for summary judgment was later dismissed as to Eakin.

On June 13, 1986, after a hearing on the matter, the trial court granted summary judgment in favor of Placid and against Privette in the amount of $354,563.39, plus interest from date of judicial demand. The court found that the continuing guaranty was not ambiguous and had no limitation. Furthermore, the court determined that both Mr. Privette and Mr. Eakin were solidarily liable on the continuing guaranty. The court also held that the oral cancellation of credit by Mr. Privette was not effective over a specific provision in the guaranty agreement providing for written revocation. Finally, the court held that Mr. Privette was not liable for attorney's fees. On July 8, 1986, Mr. Privette filed a devolutive appeal from that judgment.

The appellant sets forth three assignments of error to the court. The first is whether the trial court erred in failing to find that there was a genuine issue of material fact on the question of whether the continuing guaranty was to be for an unlimited amount. Second, whether Messrs. Privette and Eakin were liable in solido, and finally, whether Mr. Privette's oral cancellation of his guaranty was an effective revocation. The question of attorney's fees has not been raised on appeal.

Parol Evidence

Before reaching the question of whether there is a genuine issue of material fact we must decide what evidence may be considered in interpreting a contract between parties. The trial judge failed to state whether he considered parol evidence in making his interpretation of the contract, however his statement that the contract was unambiguous leads us to believe that no parol evidence was considered. Therefore, the first question is whether parol evidence may be admitted in this case to interpret the guaranty agreement, which is admittedly unambiguous.

The law provides that suretyship cannot be presumed. An agreement to become a surety must be expressed, and must be construed within the limits intended by the parties to the agreement. See LSA-C.C. art. 3039. The Louisiana Supreme Court has stated the following with respect to contracts of guaranty:

Contracts of guaranty or suretyship are subject to same rules of interpretation as contracts in general; citing American Bank & Trust Co. v. Blue Bird Restaurant & Lounge, Inc., 279 So.2d 720 (La.App. 1st Cir.1973), aff'd, 290 So.2d 302 (La.1974). Agreements legally entered into have the effect of laws on those who formed them and must be performed with good faith. Former La.Civ.Code art. 1901. Courts are bound to give legal effect to all such contracts according to the true intent of the parties, and this intent is to be determined by the words of the contract when these are clear and explicit and lead to no absurd consequences.

Ferrell v. South Central Bell, 403 So.2d 698, 700 (La.1981).

"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." Land and Offshore Co. v. Martin, 469 So.2d 1177, 1181 (La. App. 3d Cir.1985).

A well established exception to the parol evidence rule provides that: "Between the parties to an instrument, parol evidence is admissible 'to show fraud, mistake, illegality, want or failure of consideration, to explain an ambiguity when such explanation is not inconsistent with the written terms, or to show that the writing is only a part of an entire oral contract between the parties.' " Scafidi v. Johnson, 420 So.2d 1113, 1115 (La.1982), quoting Gulf States Finance Corporation v. Airline Auto Sales, Inc., 248 La. 591, 181 So.2d 36 (1965). See also Dixie Campers, Inc. v. Vesely Company, 398 So.2d 1087, (La.1981); Tauzin v. Claitor, 417 So.2d 1304 (La.App. 1st Cir.1982), writ denied, 422 So.2d 423 (La.1982); Mitchell v. Clark, 448 So.2d 681 (La.1984).

The need for such a rule is never so clear than in cases where the contract does not represent the true intent of the parties. "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." Land and Offshore Co., supra; citing Monsur v. Chaddick, 274 So.2d 499 (La.App. 3d Cir.1973). In such cases, the law is never so inflexible as to bind parties to a contract which neither intended.

Applying these principles of contract law, we conclude that a mistake may have been made in the drafting of the contract and...