Bonura v. Christiana Bros. Poultry Co. of Gretna, Inc.
336 So. 2d 881 (1976)
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Rule of Law:
A continuing guaranty is an accessory obligation that remains enforceable as long as the underlying principal debt has not prescribed, and it can only be revoked according to its specified terms. However, under Louisiana Civil Code Article 3037, a surety cannot be held to more onerous conditions than the principal debtor, rendering a provision for attorney's fees in a guaranty unenforceable if the principal debt does not also provide for them.
Facts:
- In 1961, brothers Nicholas, Anthony, and Joseph Christiana executed a continuing guaranty for their company, Christiana Bros. Poultry Co. of Gretna, Inc., in favor of their supplier, Felix Bonura Company, Inc. (Bonura Co.).
- The guaranty agreement stipulated that it would remain in full force and effect until Bonura Co. received "written notice of revocation" from the guarantors.
- In 1967, Joseph Christiana left the Gretna-based business to run a separate corporation in Baton Rouge. He later testified that he gave verbal notice of revocation to an officer of Bonura Co., but he never provided written notice.
- Bonura Co. continued to supply poultry to Christiana Bros. on an open account for the next several years.
- Between November 1972 and August 1973, Christiana Bros. incurred a significant debt on its open account with Bonura Co.
- By August 7, 1973, the outstanding balance on the open account reached $67,809.73.
- On August 23, 1973, Anthony Christiana, as president of Christiana Bros., assigned all of the company's accounts receivable to Bonura Co. in an effort to reduce the outstanding debt.
Procedural Posture:
- Felix Bonura and Bonura Co. filed suit in the district court against Christiana Bros., Anthony Christiana, Nicholas Christiana, and Joseph Christiana to recover $67,809.73 on an open account pursuant to the continuing guaranty agreement.
- Plaintiffs also sued the State of Louisiana's Collector of Revenue, seeking to recover funds the state had collected from Christiana Bros.' accounts receivable.
- The trial court rendered judgment in favor of the plaintiffs and against the defendants for the full amount of the debt plus 25% attorney's fees.
- The trial court also rendered judgment against the State Department of Revenue, ordering it to remit $11,933.71 in collected funds to the plaintiffs.
- Defendant Joseph Christiana and the State of Louisiana appealed the trial court's judgment to the Court of Appeal of Louisiana, Fourth Circuit.
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Issue:
Is a continuing guaranty that requires written notice for revocation unenforceable due to a 12-year period between its execution and the incurrence of debt, and is a surety discharged from an attorney's fee provision in the guaranty if the principal obligation does not contain a similar provision?
Opinions:
Majority - Boutall, J.
No, the guaranty remains enforceable, but the surety is discharged from the attorney's fee provision. A continuing guaranty is a contract of suretyship, which is an accessory obligation whose enforceability is tied to the prescriptive period of the principal debt, not the date the guaranty was signed. Since the underlying open account debt had not prescribed, the guaranty remained effective. The contract's unambiguous terms required written notice of revocation, which Joseph Christiana failed to provide; his alleged verbal notice was insufficient. However, Louisiana Civil Code Article 3037 states that a suretyship cannot be contracted under more onerous conditions than the principal obligation. Because the open account sales to Christiana Bros. did not include a provision for attorney's fees, enforcing such a provision against the guarantor would impose a more onerous condition, and is therefore disallowed.
Dissenting - Lemmon, J.
No, the guaranty was not enforceable. The dissenting opinion argues that a continuing guaranty is not a completed contract but rather a divisible and continuing offer to become a surety for future debts. Such an offer is only open for a reasonable period of time and expires or is tacitly revoked by a significant change in circumstances. Joseph Christiana's departure from the company years before the debt was incurred constituted such a change, meaning his 1961 offer was no longer subject to acceptance in 1972-73. Therefore, Bonura Co. could not have reasonably relied on the guaranty when extending credit, and Joseph Christiana should not be held liable.
Analysis:
This decision solidifies the treatment of a continuing guaranty under Louisiana law as a durable accessory contract rather than a series of revocable offers, emphasizing strict adherence to contractual revocation terms. It significantly reinforces the protective principle of Louisiana Civil Code Article 3037, which limits a surety's obligations to be no more burdensome than those of the principal debtor. This precedent ensures that creditors cannot use guaranty agreements to impose additional liabilities, such as attorney's fees, on a surety that were not part of the original underlying transaction, thereby maintaining a balance of fairness in suretyship law.
