Case Name: Mary Emma Key TORREY v. SIMON-TORREY, INC.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1974-04-29
Citations: 307 So. 2d 569
Docket Number: No. 54199
Parties: Mary Emma Key TORREY v. SIMON-TORREY, INC.
Judges: BARHAM, J., dissents with reasons.
Reporter: Southern Reporter, Second Series
Volume: 307
Pages: 569–581

Head Matter:
Mary Emma Key TORREY v. SIMON-TORREY, INC.
No. 54199.
Supreme Court of Louisiana.
April 29, 1974.
On Rehearing Dec. 2, 1974.
Leon E. Roy, Jr., Cicero C. Sessions, Sessions, Fishman, Rosenson, Snellings & Boisfontaine, New Orleans, for defendant-applicant.
William O. Bonin, Landry, Watkins, Cousin & Bonin, New Iberia, for plaintiff-respondent.

Opinion:
MARCUS, Justice.
Mary Emma Key Torrey, as surviving spouse in community of John Torrey, instituted executory proceedings to foreclose against the property owned by Simon-Tor-rey, Inc. Plaintiff claimed failure of the defendant to pay the amounts due on eight vendor's lien and special mortgage promissory notes, aggregating the sum of $14,555.20, with interest thereon at the rate' of 5% per annum from October 1, 1955. After seizure of the property, Simon-Tor-rey, Inc. sought an injunction to arrest the seizure and sale of its property. It was granted a temporary restraining order, and a rule nisi issued.
A subsequent plea of estoppel was filed by Simon-Torrey, Inc., and it also petitioned the court for a declaratory judgment seeking a complete discharge and ex- tinguishment of said notes by tender and deposit in the registry of the court of $4,555.20, representing the alleged remitted and reduced value of the notes sued upon.
At the trial of this matter, Simon-Tor-rey, Inc. sought to introduce parol evidence as proof of the remission of this debt. Objection was made. The evidence was allowed subject to the objection.
The trial court rendered judgment in favor of plaintiff on four of the notes (Nos. 22, 26, 30 and 34) but granted a preliminary injunction as to the other four notes (Nos. 38, 42, 46 and 50) based upon a finding of prematurity. Defendant's plea of estoppel was denied.
Simon-Torrey, Inc. appealed and also asserted a plea of prescription a's to note No. 22. The Court of Appeal affirmed in regard to the enforcement of notes numbered 26, 30 and 34, but reversed and amended to allow the enforcement of notes numbered 38, 42, 46 and 50. The enforcement of note No. 22 was disallowed as being prescribed. La.App., 284 So.2d 130. Simon-Torrey, Inc. applied to this Court for a writ of review which was granted. We affirm the judgment of the Court of Appeal.
The primary issue concerns the effect to be given an agreement entered into by Warren M. Simon, John Torrey and Simon-Torrey, Inc. resulting from a tax settlement with the Internal Revenue Service in 1959. It was this agreement and its resulting changes on the books of Simon-Torrey, Inc. which is claimed by the defendant to constitute a remission of the face value of the mortgage notes herein sued upon.
Warren M. Simon and John Torrey were the sole partners in a creamery business. On October 1, 1955, Simon and Torrey transferred the partnership assets (which included the real estate subject to the present foreclosure proceedings) to the newly formed corporation, Simon-Torrey, Inc. The form of the transfer was by notarial act. The recited consideration was $256,746.71 which was represented in part by fifty promissory notes. Torrey received twenty-five even-numbered notes, and Simon received twenty-five odd-numbered notes. The Torrey notes were in the face amount of $1,819.40 each, whereas, the Simon notes were for $7,277.60 each. All notes provided for interest at the rate of 5% per annum from date until paid. The notes were further secured by a special mortgage and vendor's lien on the property herein foreclosed upon. The face value of the notes received by each partner was in keeping with their proportionate interest in the former partnership of Simon and Tor-rey in which Simon owned 80%, and Tor-rey owned 20%.
In 1958, the Internal Revenue Service (hereinafter referred to as IRS) questioned the aforesaid transfer of partnership assets by the partners to defendant corporation. An attorney was retained to represent the individual partners, the partnership and the corporation in this matter. It appears that the primary complaint of the IRS was that the debt-capital ratio of Simon-Torrey, Inc. created a "thin" corporation. This would have resulted in serious tax consequences. Negotiations followed, and a settlement was worked out in which Simon-Torrey, Inc. was accepted as a corporate entity. Among other things, it was required that the sales price of the property transferred and the notes payable by the corporation to Simon and Torrey be reduced by $100,000.00. Also, accrued interest as well as future interest was disallowed.
The evidence is clear that the settlement was accepted by all of the parties. In regard to Simon-Torrey, Inc., this is indicated by a resolution of the Board of Directors approving the tax settlement which specifically included a reduction in the sale price of the assets sold by Simon and Tor-rey to the corporation by the sum of $100,000.00 and a corresponding reduction of the promissory notes held by Simon and Torrey as part of the consideration they received for the sale of said assets. In accordance therewith, the books and records of the corporation, Simon-Torrey, Inc., as well as its financial statements, were changed to reflect the agreed-upon modifications.
Although the resolution of Simon-Tor-rey, Inc. authorized the execution of appropriate instruments to carry into effect the said tax settlement, no agreements were in fact confected, and the face value of the notes remained unchanged in spite of the decrease in the value of these notes on the books of the corporation.
Simon-Torrey, Inc. urges that the reduction in the purchase price and the amount due on the notes held by Simon and Tor-rey, as a result of the tax settlement with IRS and the subsequent resolution of the corporation and the changes on its books and financial statements in accordance therewith, constitutes clear and convincing evidence that all parties agreed that the purchase price, as well as the amount due on the notes, would be reduced by $100,000.00 and interest would be remitted. Accordingly, it contends the parol evidence introduced at trial was admissible to show this subsequent agreement in regard to remission of the face value of the notes.
Plaintiff, Mrs. Torrey, as surviving spouse in community of John Torrey, and owner of one-half of the notes held by Torrey at the time of his death, contends that, under the well-established rule of Article 2276 of the Civil Code, parol evidence cannot be admitted to alter the provisions of an authentic act of sale and mortgage of land by showing a reduction of the purchase price recited therein. Since Simon-Torrey, Inc. did not allege the existence of a competent written agreement modifying the act of sale to the corporation, it is plaintiff's position that parol evidence cannot be considered in support of its defense to this foreclosure proceeding.
At the outset, it must be observed that parole evidence is not admissible to vary the terms of the written sale agreement of October 1, 1955. This sale, being one involving immovables was required to be in writing under the provisions of Article 2275 of the Civil Code. Article 2276 forbids the introduction of parol evidence "against or beyond what is contained in the acts, nor on what may have been said before, or at the time of making them, or since."
No claim is made that there was fraud, error, mistake or ambiguity in the contract of October 1, 1955 for which the notes here in question were issued. Simon-Tor-rey, Inc. relies upon a subsequent agreement.
The landmark case of Salley v. Louviere, 183 La. 92, 162 So. 811 (1935) recites the conditions under which a written contract may be varied by parol evidence:
"Article 2276 of the Civil Code declares that parol evidence shall not be admitted against or beyond what is contained in a written contract, nor on what may have been said before, or at the time of making the contract, or since. This article of the Code is not to be construed so as to forbid the proving by parol evidence of a subsequent agreement modifying or abrogating a written contract of a character which the law does not require to be in writing. It is true that the article says that parol evidence shall not be admitted to prove what may have been said by the parties to a written contract, before or at the time of making the contract, or since. But the meaning is that parol evidence as to what the parties to a written contract may have said at any time shall not be admitted for the purpose of proving that they had an ante cedent or a contemporaneous agreement contrary to that which was reduced to writing. The words 'or since' have reference to the phrase 'what may have been said,' and not to what may have been agreed to, since the making of the written contract. It is well settled.that this article of the Civil Code does not forbid the proving by parol evidence of a subsequent agreement to modify or to revoke a written agreement. Commandeur v. Russell, 5 Mart. (N.S.) 456, 459; Boulig-ny v. Urquhart, 4 La. 29; Knox v. Liddell, 5 Rob. 111, 112; Jamison v. Lud-low, 3 La.Ann. 492, 493; Leeds & Co. v. Fassman, 17 La.Ann. 32; Cain v. Pullen, 34 La.Ann. 511, 517; Cary v. Richardson, 35 La.Ann. 505, 510; Story v. Hope Insurance Co., 37 La.Ann. 254, 258." (Emphasis ours)
Later cases of this Court, as well as the courts of appeal, explain that the ruling in Salley v. Louviere, allowing proof by parol- evidence of a subsequent agreement to modify or to revoke a written agreement, is not applicable to a case in which the agreement is one required by law to be in writing. DiCristina v. Weiser, 215 La. 1115, 42 So.2d 868 (1949); Davidson v. Midstates Oil Corporation, 211 La. 882, 31 So.2d 7 (1947); Arkansas Louisiana Gas Co. v. R. O. Roy & Co., 196 La. 121, 198 So. 768 (1940); Conklin v. Caffal, 189 La. 301, 179 So. 434 (1938); In re Industrial Homestead Ass'n., 198 So. 528 (La.App.1940).
We are not unmindful that there are some cases to the contrary; however, we consider the sounder view is that expressed in the above cited cases.
We, therefore, conclude that the parol evidence adduced was not admissible to show a new, independent and subsequent agreement of this contract of sale, required by Article 2275 of the Civil Code to be in writing.
However, even assuming that the parol evidence was admissible to prove a subsequent agreement in this case, we do not find the evidence sufficiently establishes that the parties ever intended to reduce or remit the debt incurred by the corporation in its acquisition of the partnership assets. Rather, we are convinced that the entries made in the books of the corporation, as well as the other corporate action showing a decrease in the purchase price of the assets acquired and the notes payable to Simon and Torrey, were done to. comply with the tax settlement with IRS and did not reflect • the intention of the parties to remit or reduce the debt between the corporation and the holders of the notes. In other words, it was done for tax purposes only. This conclusion is supported by subsequent events following the tax settlement with IRS. Eight notes were paid Mr. Torrey prior to his death in the exact principal amount shown to be due on the face of the notes even though admittedly no interest payment was made. Additionally, there was introduced into evidence several memoranda written by Mr. Simon, president of defendant corporation, all of which were written subsequent to the death of Mr. Torrey in 1966, which memo-randa clearly indicate that at least at that time, subsequent to the death of Mr. Tor-rey, there was no understanding that the value of the notes had been reduced.
Defendant corporation asserted an alternative plea of estoppel to preclude plaintiff's collection of the full face value of the notes, plus interest. Initially, if the evidence is incompetent to establish an agreement to vary the provisions of a sale of land, then it is likewise incompetent to defeat plaintiff's right of recovery under the terms of said sale agreement. If we were to hold otherwise, it would allow defendant to do indirectly that which it cannot do legally and directly. In any event, we are unable to see where Mrs. Torrey was unjustly enriched. She is only collecting that to which she is legally entitled. Her deceased husband transferred to defendant corporation his interest in certain assets for a fixed consideration, part of which is represented by the notes herein sued upon. Further, we have found no written agreement or subsequent verbal agreement on the part of plaintiff or her deceased husband to remit or reduce the amount due on said notes. Reference is made to the fact that the executor of the succession of John Torrey sold the stock in the corporation to the corporation for $15,543.00 and that this stock would not have had any value had the purchase price and notes payable not been reduced on the books of the corporation. Thus, it is argued that Mrs. Torrey was enriched to the detriment of the other stockholders. This issue is not involved in the instant foreclosure proceedings. The true value of the stock, the terms of any obligation of the corporation to purchase the stock of a deceased stockholder, etc. were not explored during the trial of this matter. While this might well be the subject of future litigation, it is not at issue in this foreclosure proceeding. Thus, we conclude defendant has failed to establish its plea of estoppel.
The Court of Appeal held that note No. 22 had prescribed. This note was issued on October 1, 1955 and was made payable on or before eleven years after date. It matured on October 1, 1966, and the prescription of five years began to run against the note from that date (Article 3540 C.C.). However, on December 2, 1966, a tender was made by letter which served as an acknowledgment of the debt and thereby interrupted the running of prescription. This extended the life of the note until December 2, 1971 when the note .prescribed. Further, there was no effective renunciation of the accrued prescription by defendant debtor. Accordingly, the Court of Appeal was correct in its ruling that note No. 22 had prescribed.
Finally, Simon-Torrey, Inc. challenges that portion of the Court of Appeal judgment which reversed and amended the judgment of the trial court so as to allow enforcement of notes Nos. 38, 42, 46 and 50. It is urged that these notes could not be enforced due to the absence of an acceleration clause in either the credit sale or the promissory notes paraphed thereto. There is no substance to this contention. The credit sale does contain an acceleration clause. Further, the presence of an acceleration clause in the act of credit sale alone to which the notes are paraphed is sufficient. Gaines v. Bonnabel, 168 La. 262, 121 So. 764 (1929). Thus, the indebtedness secured by the mortgage herein became immediately due and payable as a result of non-payment as required in the act of credit sale. This constituted a breach of one of the covenants upon which acceleration was conditioned.
For the reasons assigned, the judgment of the Court of Appeal is affirmed.
BARHAM, J., dissents with reasons.
TATE, J., joins in Mr. Justice BAR-HAM's dissent and assigns additional reasons.
CALOGERO, J., dissents.
. Simon-Torrey, Inc. was subsequently named R.V.C. Inc. For the purpose of this opinion, it will be referred to as Simon-Torrey, Ine.
. Parlor City Lumber Co. v. Sandel, 186 La. 982, 173 So. 737 (1937); Investors Homestead Ass'n. v. Anglada, 193 La. 596, 192 So. 69 (1939); Tholl Oil Co. v. Miller, 197 La. 976, 3 So.2d 97 (1941).