317 So.3d 809
La. Ct. App.2021Background
- In 1991 Leisure Recreation & Entertainment, Inc. (Leisure) executed a $1.6M promissory note with First Guaranty Bank containing a tiered interest schedule: years 1–5 at 6.5%, years 6–10 at 7.5%, and years 11–30 to be at the Citibank prime rate either floating (minimum one year) or fixed (1–5 years) at Leisure's option; floor 4%, ceiling 12%.
- Leisure made payments under a 7.5% fixed rate through year 10 and the bank continued charging 7.5% from year 11 onward; Leisure alleges the note required prime-based interest in year 11 and thereafter.
- Leisure sued for declaratory relief on October 7, 2013, seeking re‑calculation of the unpaid balance and recovery of alleged overpayments; parties entered a consent order in 2015 reserving Leisure’s right to reclaim disputed payments.
- On initial appeal (Leisure I) this court construed the note to require use of the prime rate for years 11–30 and found factual disputes about whether the bank demanded Leisure exercise its rate option; the matter was remanded.
- On remand the trial court granted summary judgment for Leisure, ordered the bank to refund post‑2015 payments, and denied the bank’s voluntary‑payment and prescription defenses; the bank appealed.
- This panel held that the bank proved the voluntary payment defense as to amounts paid before suit (Dec. 31, 2001–Oct. 7, 2013), reversed the trial court on those points, limited Leisure’s recovery to overcharges occurring after the filing of suit, and remanded to quantify the post‑suit overcharge.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the voluntary payment doctrine bars recovery of payments made before Leisure filed suit | Leisure: payments were made under a mistaken belief and under circumstances (managerial disruption, lack of records) that negate voluntary‑payment estoppel | Bank: Leisure had full knowledge of the loan terms (authorized agent signed note), received payment notices, and voluntarily paid fixed monthly amounts for years 11–24 | Held: Bank proved voluntary payment by preponderance; Leisure cannot recover amounts paid from Dec. 31, 2001 to Oct. 7, 2013 |
| Whether the promissory note requires use of the prime rate for years 11–30 regardless of whether borrower exercised the option | Leisure: note permits selection but the prime structure applies and the bank had to demand choice before selecting an alternate | Bank: note creates an option that Leisure had to timely exercise; failure to exercise left 7.5% in effect | Held (as decided in Leisure I and reiterated): note provides for prime‑based interest for years 11–30; borrower may elect floating or fixed prime terms, with mechanics of choice unresolved in some particulars |
| Whether the bank waived or relinquished any right to select the prime structure so that the choice reverted to Leisure | Leisure: bank disclaimed any right to choose and thus option returned to Leisure | Bank: it never intentionally relinquished a right it believed belonged to Leisure | Held: Court pretermitted full waiver analysis because its ruling on voluntary payment and prime‑rate application controlled; reversed trial court’s finding that choice reverted to Leisure |
| Whether prescription (statute of limitations) barred Leisure’s claims | Leisure: timing of option, ambiguity about when choice must be made, and factual disputes about when prescription began | Bank: claims arising from installments became prescribed five years after each installment due (La. C.C. art. 3498) | Held: Court deemed prescription issue moot as to amounts before suit because voluntary‑payment ruling disposed of pre‑suit recovery; prescription not addressed on merits for post‑suit amounts |
Key Cases Cited
- New Orleans & N. E. R. Co. v. Louisiana Const. & Imp. Co., 33 So. 51 (La. 1902) (establishes the voluntary payment doctrine)
- DLJ of Louisiana No. 1 v. Green Thumb, Inc., 376 So. 2d 121 (La. 1979) (voluntary payment doctrine and its limited exceptions)
- Bickham v. Washington Bank & Trust Co., 515 So. 2d 457 (La. App. 1st Cir. 1987) (debtor barred from recovering voluntarily paid excess interest)
- Babin v. Winn‑Dixie Louisiana, Inc., 764 So. 2d 37 (La. 2000) (summary judgment burden shifting principles)
- Womack Bros., Inc. v. Equipment Rental Services, Inc., 399 So. 2d 661 (La. App. 1st Cir. 1981) (party asserting affirmative defenses bears burden of proof)