Schroeder v. Lacy

600 So. 2d 146, 1992 La. App. LEXIS 1544, 1992 WL 109711
CourtLouisiana Court of Appeal
DecidedMay 20, 1992
DocketNo. 90-1278
StatusPublished

This text of 600 So. 2d 146 (Schroeder v. Lacy) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schroeder v. Lacy, 600 So. 2d 146, 1992 La. App. LEXIS 1544, 1992 WL 109711 (La. Ct. App. 1992).

Opinion

GUIDRY, JUDGE.

This is a suit to enforce a personal guarantee of a corporate debt. Royce Schroeder, president of OFI Testing Equipment, Incorporated (OFI), sued defendant, James Lacy, president and sole shareholder of SAFF, Incorporated (SAFF), to enforce Lacy’s personal guarantee to Schroeder of unpaid invoices owed by SAFF to OFI. The trial court found Lacy’s personal guarantee to be valid and enforceable, but it refused to award Schroeder any monetary amount because of insufficient evidence in the record to prove the amount owed. Essentially, the trial court held that plaintiff failed to carry his burden of proof because he failed to offer evidence of the debt actually secured by Lacy’s personal guarantee, i.e., the unpaid invoices. Plaintiff appealed. Defendant answered the appeal urging that any amount which may be found owing should be set off by unpaid commissions owed by OFI to SAFF resulting from OFI’s breach of an alleged exclusive distributorship agreement.

FACTS

Plaintiff, Royce Schroeder, is president of and owns 23% of the stock of OFI, a Texas corporation headquartered in Houston. The company is controlled by its majority shareholder, W.S. Shamban and Company (Shamban), a Delaware corporation with offices in California, which owns 51% of the OFI stock.' OFI is in the business of manufacturing and marketing oilfield equipment and chemicals. In 1983, OFI and SAFF entered into an oral agreement making SAFF a distributor of OFI’s products in Louisiana. SAFF was to receive the products from OFI at a “Dealer Price”, 20% below “Customer Price”, to allow for SAFF’s profit margin. The distributorship agreement was never reduced to writing. Lacy and Pam Dufour, the salesperson employed by SAFF, testified that it was their understanding that SAFF was to be the exclusive distributor of OFI products in Louisiana. Schroeder testified that no exclusive distributorship was ever offered to SAFF and that OFI policy was to not enter into such arrangements. The trial court found that no exclusive distributorship agreement was intended or existed.

The relationship between OFI and SAFF proceeded smoothly until the spring of 1984, when SAFF’s account with OFI became seriously delinquent. SAFF had begun to delay payment on outstanding invoices and its outstanding account balance became larger. At about the same time, Lacy and Dufour discovered, allegedly for the first time, that other distributors in Louisiana were selling OFI products. On May 24, 1984, Lacy wrote Schroeder requesting that their distributorship agreement be reduced to writing. Schroeder did not reply to this request.

In August 1984, SAFF’s account balance with OFI had increased and SAFF was 90 to 120 days behind on its payments to OFI. Shamban ordered Schroeder to withhold further shipments of products to SAFF until such time as its account became current. When notified of this, Dufour and Lacy contacted Schroeder and eventually negotiated an agreement satisfactory to Shamban which would allow shipments to continue. The agreement involved a personal guarantee by Schroeder to Shamban contained in his September 17, 1984 letter which read, “I will personally guarantee any OFITE invoices that are unpaid beyond 90 days from the date of invoice effective December 31, 1984”. This letter also related that Lacy had agreed to have the SAFF account within 90 day terms by December 31, 1984 and within 60 day terms by March 31,1985. In return for Schroeder’s guarantee to Shamban, Lacy, by letter to Schroeder dated October 11,1984, promised “I personally guarantee to you, Royce Schroeder, any [148]*148OFITE invoices that are unpaid by SAFF beyond 90 days from the date of invoice effective December 31, 1984”. Lacy’s personal guarantee also expressly incorporated the substance of Schroeder’s prior letter of guarantee to Shamban. Lacy agreed to guarantee the payment of the outstanding invoices to Schroeder in the event that Schroeder was called upon by Shamban under the terms of his guarantee to satisfy the debt. The parties also agreed to new billing procedures. After September 24, 1984, OFI was to bill SAFF’s customers directly for new orders and credit SAFF’s account for the 20% commission upon payment to OFI by the customers. Pursuant to the agreement, after that date, no new invoices were generated from OFI to SAFF. The arrangement continued under these new terms for two weeks when OFI once again discontinued shipments to SAFF.

Following discontinuance of further shipments, OFI filed suit against SAFF and WAPRE International, Incorporated (WAPRE), another corporation owned by Lacy which marketed oilfield equipment to international purchasers. The purpose of that suit was to collect on the corporations’ delinquent accounts with OFI and resulted in a consent judgment dated October 2, 1986 in favor of OFI for $37,598.47 with interest from judicial demand until paid, plus 10% attorney’s fees on principal and interest, subject to a credit in favor of SAFF and WAPRE in the amount of $4,273.25. SAFF and WAPRE were expressly bound in solido by the judgment.

Following entry of the consent judgment, Shamban required Schroeder to execute a demand promissory note in payment of his personal guarantee pursuant to the September 17, 1984 letter. The note was in the amount of $41,185.74 plus 10% interest and an attorney’s fees provision. Thereafter, Schroeder filed this suit against Lacy to enforce Lacy’s personal guarantee to Schroeder contained in the October 11, 1984 letter.

The trial court, in written reasons for judgment dated January 22, 1990, determined that both guarantees were valid and that the Lacy guarantee encompassed all OFI invoices unpaid beyond 90 days by SAFF which were written prior to September 18, 1984, the effective date of the aforementioned new billing procedures. The status of any invoice was to be determined as of December 31, 1984, the date upon which the guarantee became effective. Thus, the trial court reasoned that the invoices written prior to September 18, 1984, which remained unpaid on December 31, 1984, were covered by the Lacy personal guarantee since more than 90 days had elapsed since that date. The court did not, in its written reasons, make a specific monetary award to Schroeder, choosing instead to rule on the award issue at a later date after further examination of the record. In addition, the court made a factual determination that Schroeder did not promise and that OFI and SAFF did not enter into an exclusive distributorship agreement and, therefore, defendant’s claim of set off was unfounded.

In reasons for judgment dated April 20, 1990, the court determined that no invoices were in the record which fit the requirements of Lacy’s personal guarantee to Schroeder. Accordingly, it interpreted the suretyship agreement strictly in favor of the surety in finding no evidence in the record to accurately calculate an award to Schroeder. Judgment dismissing plaintiff's claim at his cost was then rendered.

On appeal, plaintiff urges that, even though he did not enter into evidence actual invoices covered by the guarantee, he nevertheless proved the existence of the underlying obligation by other sufficient competent evidence. Specifically, Schroeder asserts that the trial court erred in not finding that the consent judgment was an accurate reflection of the amount due on the qualifying overdue invoices. He also asserts that the demand note and the affidavit of Andrew Martin, the assistant secretary of Shamban, were sufficiently corroborative of the judgment for the court to make an award based on the net amount of the consent judgment.

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Bluebook (online)
600 So. 2d 146, 1992 La. App. LEXIS 1544, 1992 WL 109711, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schroeder-v-lacy-lactapp-1992.