First National Bank of Commerce v. Dufrene
1988 WL 35547, 525 So. 2d 298, 1988 La. App. LEXIS 886 (1988)
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Rule of Law:
For the legal defense of compensation (set-off) to apply, both mutual obligations must be liquidated and presently due. A debt is not 'presently due' if its payment is contingent upon meeting prerequisites, such as following specific withdrawal procedures outlined in a cooperative's bylaws.
Facts:
- Kim Dufrene, owner of Dufrene Super Market, was a member-stockholder in the Louisiana Grocers’ Co-Operative, Inc. (Co-op).
- Dufrene maintained a 'members' buying deposit' with the Co-op, which had a balance of $9,954.00.
- The Co-op's bylaws stipulated that a member had to follow certain procedures, including giving notice, to withdraw funds from their buying deposit.
- Dufrene was separately indebted to the Co-op for $3,100.00 in accounts receivable for goods purchased.
- The Co-op assigned its accounts receivable, including Dufrene's debt, to the First National Bank of Commerce (Bank) as security for loans.
- After the Co-op filed for bankruptcy, the Bank notified Dufrene of the assignment and demanded payment.
- Dufrene did not give notice of his withdrawal from the Co-op, as required by the bylaws, until after he had received notification of the assignment from the Bank.
Procedural Posture:
- First National Bank of Commerce (Bank) filed suit against Kim Dufrene in a Louisiana trial court to collect on a $3,100 account receivable.
- Dufrene asserted the affirmative defense of compensation (set-off), arguing the debt should be extinguished by his larger 'members' buying deposit' held by the assignor, the Co-op.
- The trial court rendered judgment in favor of the Bank for $3,100, finding that Dufrene was not entitled to set-off.
- Dufrene, as appellant, appealed the trial court's judgment to the Court of Appeal of Louisiana, First Circuit.
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Issue:
Does a member's buying deposit in a cooperative, which is only returnable upon the member's withdrawal according to specific bylaws, qualify as a 'liquidated and presently due' debt that can be used to set-off a separate debt the member owes to the cooperative?
Opinions:
Majority - Carter, Judge
No. A member's buying deposit does not qualify as a 'liquidated and presently due' debt for the purposes of set-off where its return is conditioned on prerequisites that have not yet been met. The court affirmed the trial court's decision, holding that Dufrene was not entitled to compensation for three primary reasons. First, under Louisiana Civil Code art. 1893, compensation requires both debts to be 'liquidated and presently due.' Dufrene's deposit was not presently due because he had not met the bylaw's prerequisites for withdrawal at the time he received notice of the assignment. Second, the 'members’ buying deposit' was not a current liability of the Co-op but rather a form of member's equity, akin to an investment or operating capital, making it unsuitable for set-off. Third, under LSA-C.C. art. 1894, compensation is precluded for an obligation to return a thing given in deposit or loan for use, and the court characterized the buying deposit as such.
Analysis:
This decision clarifies the 'presently due' requirement for the defense of compensation under Louisiana law, establishing that a debt subject to conditions precedent is not immediately demandable. It distinguishes between a simple, demandable debt and a member's capital contribution or equity, which is subject to corporate rules. This precedent is significant for commercial transactions involving entities like cooperatives, as it protects operating capital from being used by members to offset their own separate debts before fulfilling the required conditions for capital return. The ruling reinforces that the right to compensation is not absolute and depends on the immediate, unconditional nature of both debts.
