Summary of a Recent
Judicial Development in
Farm Credit

Corporate Farming President Personally
Liable on Note

Alfred N. Milam
National AgLaw Center Graduate Assistant

Summary of Decision

In First South Farm Credit, ACA v. Gailliard Farms, Inc., 880 So. 2d 223 (La. Ct. App. 2004), the Louisiana Court of Appeal held that the president of a corporate farming operation who signed a promissory note in both his capacity as corporate president and in his individual capacity was personally liable on the note.

Background

Defendant Joseph Patten Brown Jr. (Brown) signed a promissory note in both his individual capacity and as president of Gailliard Farms, Inc. (Gailliard). Plaintiff First South Farm Credit (First South) was the holder of the note. See id. at 224. Gailliard defaulted on its loan and First South brought an action to recover the amount owed. See id. Brown claimed an agreement he entered into with First South prior to executing the promissory note released him from personal liability. See id. The trial court held that Brown was personally liable on the note. See id. Brown appealed to the Louisiana Court of Appeal. See id.

Arguments

Brown argued that he was released from liability under the previous agreement and that "he had no reluctance or reservations about signing the . . . [promissory] note . . . because of his prior agreement to eliminate his personal liability." Id.

Analysis and Holding

The court rejected Brown's argument. See id. It stated that

Brown, by his signature, in his individual capacity, is bound by the four corners of the promissory note. The . . . loan package contained the entire agreement. If a previous agreement to release personal liability did exist, the . . . promissory note supersedes it. So finding, we do not need to discuss whether the purported, handwritten release from liability signed by Brown . . . was valid.

Id.

The case was decided on August 18, 2004; this summary was posted Apr. 8, 2005.