Ball Marketing Enterprise v. Rainbow Tomato Co.
1976 La. App. LEXIS 4865, 340 So. 2d 700 (1976)
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Rule of Law:
Under Louisiana law, a contract of suretyship cannot be presumed and must be explicitly expressed with an absolute intent to be bound. A promise to 'take steps to assure payment' by a debtor, rather than a direct promise to pay the debt oneself, is insufficient to create a legally enforceable suretyship obligation.
Facts:
- Ball Marketing Enterprise supplied fuel oil to Rainbow Tomato Company from December 1975 through January 1976.
- As of January 22, 1976, Rainbow Tomato owed Ball Marketing $8,408.40 for these deliveries.
- On that date, Hyman Katz, the Chairman of the Board of Plant Industries, Inc., sent a letter to Ball Marketing concerning Rainbow Tomato's debt.
- The letter stated that Plant Industries 'will take such steps as are necessary to assure payment to you by Rainbow of amounts due for past and future deliveries of fuel oil'.
- Ball Marketing continued to deliver fuel oil to Rainbow Tomato after receiving the letter.
- Rainbow Tomato's total debt on its open account with Ball Marketing subsequently grew to $11,069.78, which Rainbow failed to pay.
Procedural Posture:
- Ball Marketing Enterprise sued Rainbow Tomato Company (the debtor) and Plant Industries, Inc. (the alleged surety) in a Louisiana trial court to recover payment on an open account.
- The trial court entered a default judgment against both Rainbow Tomato and Plant Industries, finding them 'jointly and solidarity' liable for the debt of $11,069.78.
- Only the defendant Plant Industries, Inc. appealed the trial court's judgment to the Court of Appeal of Louisiana, Third Circuit.
- Rainbow Tomato Company did not appeal the judgment against it.
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Issue:
Does a letter stating that one company will 'take such steps as are necessary to assure payment to you by' another company constitute an express and absolute promise to pay the debt, thereby creating a contract of suretyship under Louisiana law?
Opinions:
Majority - Culpepper, Judge
No, a letter stating a company will 'take such steps as are necessary to assure payment' by a debtor does not create a contract of suretyship. Louisiana Civil Code Article 3039 requires that suretyship must be expressed and cannot be presumed. The contract must contain an absolute expression of intent to be bound for the debt of another. The language in Plant Industries' letter, which assures payment 'by Rainbow', clearly contemplates that the original debtor, Rainbow, will be the one paying, not Plant. This phrasing falls short of the absolute promise required to bind Plant as a surety. The court reasoned that this vague statement of support is analogous to precedents where similar assurances were found insufficient. Furthermore, the special rule that suretyship cannot be presumed overrides general contract principles that might construe ambiguous language against the drafter. Finally, Plant's failure to answer a request for admission asking if the letter was a 'continuing guaranty' is not a legal admission, as requests for admission apply to uncontroverted facts, not the core controverted legal issue of a case.
Analysis:
This decision reinforces the stringent requirements for creating a suretyship agreement under Louisiana's civil law tradition. The court's strict interpretation of LSA-C.C. Article 3039 serves as a strong protection for parties against inadvertently becoming guarantors of another's debt through ambiguous language. By prioritizing the specific code article on suretyship over general rules of contract interpretation, the ruling clarifies that any ambiguity will be resolved against the finding of a suretyship. This precedent guides future creditors to obtain explicit, unequivocal promises of payment, rather than relying on letters of comfort or vague assurances, when seeking a third-party guarantee.
