Case Name: FIRST NATIONAL BANK OF CROWLEY v. GREEN GARDEN PROCESSING COMPANY, INC., et al.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1980-02-15
Citations: 387 So. 2d 1070
Docket Number: No. 64974
Parties: FIRST NATIONAL BANK OF CROWLEY v. GREEN GARDEN PROCESSING COMPANY, INC., et al.
Judges: SUMMERS, C. J., dissents.
Reporter: Southern Reporter, Second Series
Volume: 387
Pages: 1070–1081

Head Matter:
FIRST NATIONAL BANK OF CROWLEY v. GREEN GARDEN PROCESSING COMPANY, INC., et al.
No. 64974.
Supreme Court of Louisiana.
Feb. 15, 1980.
Rehearing Denied April 7, 1980.
Kenneth 0. Privat, Privat & Regan, Crowley, for defendant-applicant.
Homer Ed Barousse, Jr., Edward, Stefan-ski & Barousse, Crowley, for plaintiffs-respondents.

Opinion:
MARCUS, Justice.
The First National Bank of Crowley (Bank) instituted this action against Green Garden Processing Company, Inc. (Green Garden) to recover $95,528.12, representing the balance due on a promissory note executed by Green Garden, and for recognition of a collateral mortgage given by Green Garden to the Bank as security for the payment of said indebtedness. Also made party defendants were James B. Blackburn, John R. Leeper and Pierre Jules Maraist, who had executed separate continuing guaranties in the amount of $86,350.00 each.
After suit was filed, one of the guarantors, Leeper, received a discharge in bankruptcy and another, Blackburn, settled with the Bank for $33,000.00. The Bank then proceeded to trial before a jury on its claim against the remaining guarantor, Maraist, and to confirm a judgment of default against Green Garden. A verdict was re turned by the jury in favor of the Bank and against Maraist for $33,000.00 which verdict was subsequently made the judgment of the court. The trial judge rendered a default judgment in favor of the Bank and against Green Garden in the amount of $75,062.66 plus attorney fees of $18,765.66. The judgment also recognized the collateral mortgage held by the Bank. The Bank appealed the judgment against Maraist. The court of appeal amended the judgment to increase the award to the Bank against Maraist to the sum of $57,566.66 plus $12,-510.44-as attorney fees and to make his liability in solido with Green Garden. On application of Maraist, we granted certiora-ri to review the correctness of this decision.
As surety for loans made by the Bank to Green Garden, three shareholders or prospective shareholders of the corporation, James B. Blackburn, John R. Leeper and Pierre Jules Maraist, signed separate but identical documents labeled "Continuing Guaranty." Each guaranty was limited in amount to $86,350.00 plus interest and attorney fees. When Green Garden failed to pay, the Bank filed suit to recover the indebtedness. After suit was filed, Leeper received a discharge in bankruptcy and Blackburn settled with the Bank for $33,-000.00.
The sole issue presented for our consideration is the effect of the release of Blackburn on Maraist's liability under the continuing guaranty agreement.
The agreement signed by Maraist is styled a "Continuing Guaranty." By this contract, he guaranteed the payment of Green Garden's indebtedness to the Bank. We consider the contract to be equivalent to a contract of suretyship. See Brock v. First State Bank & Trust Company, 187 La. 766, 175 So. 569 (1937); Citizens' Bank & Trust Company v. Barthet, 177 La. 652, 148 So. 906 (1933). Accordingly, where the contract is silent, we may look to the provisions of the civil code governing the contract of suretyship to resolve differences between the parties. Where, however, the contract is not silent, the parties are bound by its contents, as agreements legally entered into have the effect of laws on those who have formed them. La.Civ.Code art. 1901; Louisiana Nat'l Leasing Corp. v. Family Pools, Inc., 345 So.2d 480 (La.1977).
Concerning the Bank's right to release sureties, the Continuing Guaranty provides:
The Bank may, one or more times in its judgment grant extensions, take and surrender securities, accept compositions, release or discharge indorsers, guarantors or other parties, grant releases and discharges generally, make changes of any sort whatever in the terms of the contract or manner of doing business with the debtor and with other parties and •securities in relation thereto without notice to the undersigned, such notice being hereby specifically waived. [Emphasis added.]
We consider this provision to give the Bank the right to release sureties as it deems appropriate without affecting its right to full recovery from Maraist of Green Garden's debts up to the dollar limit set in the contract. Because Blackburn is not a party before this court, we need not decide at this time whether, by this provision and by the Bank's release of Blackburn, Maraist lost the right to seek contribution from him. We are concerned here only with the relationship between the creditor and the surety and not the relationship between the several sureties.
Maraist contends another clause of the contract mandates his discharge. That provision states:
I agree upon demand at any time, to pay to said Bank, its transferees or assigns, the full amount of said indebtedness up to the amount of this guaranty, plus all interest, attorney fees, other fees, and charges, as above set forth, becoming subrogated in the event of payment in full by me to the claim of said Bank, its transferees or assigns, together with whatever security it or they may hold against said indebtedness.
He argues that, because the Bank can no longer subrogate him to its right to collect from Blackburn, he need not pay.
Maraist misconstrues the agreement. It provides that the Bank shall subrogate him to whatever security it "may hold." The Bank did not obligate itself to continue to hold for his benefit securities that it once may have held. Moreover, in the first of the above quoted provisions, Maraist specifically granted the Bank the right to take and surrender securities and to release and discharge guarantors in its judgment.
In sum, we hold that the release of Blackburn by the Bank did not discharge Ma-raist's liability for the payment in full of Green Garden's indebtedness to the Bank up to the amount of $86,350.00 plus interest and attorney fees.
The trial court rendered judgment against Green Garden in favor of the Bank for $75,062.66 plus $18,765.66 as attorney fees. The court of appeal rendered judgment against Maraist in favor of the Bank for $57,566.66 plus $12,510.44 as attorney fees. This amount is within the limits of the continuing guaranty. Accordingly, we must affirm the judgment of the court of appeal.
DECREE
For the reasons assigned, the judgment of the court of appeal is affirmed.
SUMMERS, C. J., dissents.
DIXON, J., concurs with reasons.
CALOGERO and DENNIS, JJ., dissent and assign reasons.
Honorabie Jesse N. Stone, Jr. served as Justice Ad Hoc in the vacancy created by the resignation of Tate, J.
. 371 So.2d 1294 (La.App. 3d Cir. 1979).
. 373 So.2d 546 (La.1979).
. Each agreement provided as follows:
CONTINUING GUARANTY
BEFORE ME, the undersigned Notary Public, and in the presence of the undersigned witnesses personally came and appeared:
who do by these presents in CONSIDERATION OF THE FIRST NATIONAL BANK of Crowley, Crowley, Louisiana, at my (our) request, giving or extending terms of credit to
GREEN GARDEN PROCESSING COMPANY, INC.
POINT BLUE, EVANGELINE PARISH, LA. 70586
hereinafter called "debtor." I hereby give this continuing guaranty to the said First National Bank of Crowley, Crowley, Louisiana, hereinafter called "Bank" its transferees or assigns, for the payment in full, of any indebtedness, direct or
contingent whether secured or unsecured, of said debtor to said Bank up to the amount of--EIGHTY SIX THOUSAND THREE HUNDRED FIFTY AND NO CENTS -DOLLARS,
(S 86.350.00 \ plus all interest, attorney fees, other fees, and charges of whatsoever nature and kind, whether due or to become due and whether now existing or hereafter arising. The Bank may, one or more times in its judgment grant extensions, take and surrender securities, accept compositions, release or discharge indorsers, guarantors or other parties, grant releases and discharges generally, make changes of any sort whatever in the terms of the contract or manner of doing business with the debtor and with other parties and securities in relation thereto without notice to the undersigned, such notice being hereby specifically waived. The Bank may, without any notice to or consent of the undersigned, also apply all monies received from the debtor and others, or from securities, as it may think best, without in any way being required to marshal securities or assets, and any such application of monies shall not in any way alter, affect, limit or lessen the liability of the undersigned under this Guaranty. The Bank shall not be bound to exhaust its recourse against the debtor or other persons or upon the securities it may hold before being entitled to payment from the undersigned of the amount hereby guaranteed. I do furthermore bind and obligate myself, my heirs and assigns, in solido with said debtor, for payment of the said indebtedness precisely as if the same had been contracted and was due or owing by me in person, hereby agreeing to and binding myself, my heirs and assigns, by all terms and conditions contained in any note or notes signed or to be signed by said debtor, making myself a party thereto, hereby waiving all notice including notice of any such indebtedness and of demand, presentment, protest or notice of demand or non-payment and of notice and all pleas of discussion and division and I agree upon demand at any time, to pay to said Bank, its transferees or assigns, the full amount of said indebtedness up to the amount of this guaranty, plus all interest, attorney fees, other fees, and charges, as above set forth, becoming subrogated in the event of payment in full by me to the claim of said Bank, its transferees or assigns, together with whatever security it or they may hold against said indebtedness.
IN THE EVENT this Continuing Guaranty is executed by more than one individual, it is understood and agreed that each individual shall be bound by all of the provisions of this continuing guaranty and for the payment in full of the entire amount stated above, plus all interest, attorney fees, other fees, and charges of whatever nature and kind in the same manner as if each individual were the only person executing this continuing guaranty. It is understood and agreed that this continuing guaranty does not supersede nor cancel pre-existing guaranty or guaranties given by any of the undersigned on behalf of the borrower named above but to the contrary shall be in addition thereto.
IT IS EXPRESSLY AGREED that this continuing guaranty is absolute and complete, and that acceptance and notice of acceptance thereof by the Bank are therefore unnecessary and they are hereby expressly waived, and the same shall continue in force until written notice of its discontinuance shall be delivered to one of the executive officers of the said Bank, but such discontinuance shall not affect my liability on any debts and/or obligations of the debtor then existing, whether matured or not, nor the liability of any other party in the premises.
THUS DONE, READ AND SIGNED before the witnesses and Notary hereinafter undersigned this 4 day of_JUNE_, 1975 .
WITNESSES:
Notary Public
. La.Civ.Code art. 1901 provides:
Agreements legally entered into have the effect of laws on those who have formed them.
They can not be revoked, unless by mutual consent of the parties, or for causes acknowledged by law.
They must be performed with good faith.
. La.Civ.Code art. 3058 provides:
When several persons have been sureties for the same debtor and the same debt, the surety who has satisfied the debt, has his remedy against the other sureties in proportion to the share of each; but this remedy takes place only, when such person has paid in consequence of a lawsuit instituted against him.
. This figure represents the amount owed to the Bank, including interest, at the time of the trial. It includes a credit for the amount the Bank received in return for its release of Blackburn ($33,000.00). See La.Civ.Code art. 2206.
. We recognize that the judgment of the court of appeal is less than the amount of the judgment against Green Garden and less than the limits of the continuing guaranty. However, we cannot increase the award because the Bank did not appeal. Boswell v. Roy O. Martin Lumber Co., 363 So.2d 506 (La.1978); Jordan v. Travelers Ins. Co., 257 La. 995, 245 So.2d 151 (1971); Polizzi v. Lotz, 240 La. 734, 125 So.2d 146 (1960).