Leisure Recreation & Entertainment, Inc. v. First Guaranty Bank

FOR IMMEDIATE NEWS RELEASE NEWS RELEASE #013
FROM: CLERK OF SUPREME COURT OF LOUISIANA
The Opinions handed down on the 25th day of March, 2022 are as follows:
BY Crichton, J.:
2021-C-00838 LEISURE RECREATION & ENTERTAINMENT, INC. VS. FIRST
GUARANTY BANK (Parish of East Baton Rouge)
REVERSED AND REMANDED. SEE OPINION.
Retired Judge Madeline Jasmine appointed Justice ad hoc sitting for
Hughes, J., recused in case number 2021-C-00838 only.
Retired Chief Justice Bernette Joshua Johnson appointed Justice ad hoc
sitting for Crain, J., recused in case number 2021-C-00838 only.
Johnson, J., concurs in part, dissents in part and assigns reasons.
Jasmine, J., concurs in part, dissents in part and assigns reasons.

1
S
UPREME COURT OF LOUISIANA
No
. 2021-C-00838
L
EISURE RECREATION & ENTERTAINMENT, INC.
VS.
FIRST GUARANTY BANK
O
n Writ of Certiorari to the Court of Appeal, First Circuit, Parish of East Baton
Rouge
CRICHTON, J.*
Th
is summary judgment matter arises out of a petition for declaratory
judgment seeking declaration, inter alia, that defendant First Guaranty Bank (the
“Bank”) applied an incorrect interest rate and thus miscalculated the principal owed
on a certain Promissory Note executed by borrower-petitioner Leisure Recreation &
Entertainment, Inc. (“Leisure”) in favor of the Bank on December 31, 1991 (the
“Note”). We granted Leisure’s writ application to determine whether the court of
appeal erred in applying the “voluntary payment doctrine” to hold that Leisure is
estopped from recovering payments voluntarily made, regardless of whether owed.
We additionally review whether the court of appeal erred in determining the Note
presented an alternative obligation as to the Prime Rate interest structure for years
11 through 30 of its repayment, whether it erred in imposing its own interest rate
structure during that period, and whether the Bank’s prescription arguments preclude
Leisure’s recovery of any interest paid and not due between December 31, 2001 and
October 7, 2013.
Finding the “voluntary payment doctrine” contravenes the Louisiana Civil
Code, we reverse the court of appeal insofar as it (1) reversed the portion of the
*Retired Judge Madeline Jasmine appointed Justice ad hoc sitting for Hughes, J., recused. Retired
Chief Justice Bernette Joshua Johnson appointed Justice ad hoc sitting for Crain, J., recused.
03/25/22

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district court’s judgment denying the motion for summary judgment filed by the
Bank as to the voluntary payment affirmative defense, see La. C.C. art. 2299; (2)
dismissed Leisure’s claim for declaratory relief as to the interest it volun tary paid
the Bank between December 31, 2001 and October 7, 2013; and (3) rendered
judgment ordering the Bank to repay Leisure “any overcharge of interest in excess
of the prime rate that Leisure has paid on the [Note] since the filing of its suit on
October 7, 2013, together with interest thereon from the date of judicial demand until
paid.”
Finding that the Note sets forth an “alternative obligation” as defined in La.
C.C. art. 1808,
1 we reverse the court of appeal insofar as it (1) reversed the distric t
court decree that Leisure was entitled to select the Prime Rate structure pursuant to
La. C.C. art. 1810;
2 and (2) reversed the district court’s declaration that Leisure paid
all indebtedness owed to the Bank on the Note as of June 28, 2015, and is owed
return of all amounts paid thereafter.
We remand to the court of appeal for consideration of the Bank’s arguments
on appeal that were pretermitted by the court of appeal opinion and are not in conflict
with the foregoing disposition and to render judgment in accordance herewith.
FACTS AND PROCEDURAL HISTORY
The underlying dispute centers on the terms of a commercial loan agreement,
that certain Borrowing Agreement dated December 31, 1991 (the “Borrowing
Agreement”), by which the Bank agreed to extend a revolving line of credit in the
amount of $1,600,000 to Leisure. In connection with the Borrowing Agreement,
Leisure executed the Note and promised therein to repay the principal amount

1 La. C.C. art. 1808 provides: “An obligation is alternative when an obligor is bound to render only
one of two or more items of performance.”
2 La. C.C. art. 1810 provides: “When the party who has the choice does not exercise it after a
demand to do so, the other party may choose the item of performance.”

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borrowed in monthly inst allments over a 30-year period, with interest accruing as
follows:
Years 1-5, the simple interest rate shall be fixed at 6.5% per annum;
years 6-10, the simple interest rate s hall be fixed at 7.5% annum; and
years 11-30, the simple interest rate shall be at the Citibank Prime,
floating for minimum of one year or fixed for a period of not less than
one year, nor more than five years at option of [Leisure] with floor
and ceiling as shown above.3
(Emphasis added.) In a section entitled “Repayment Provisions,” the Note provides
repayment will be made in 360 monthly payments as follows:
12 equal monthly payments of $8,817.35 beginning 1/31/92, then 48
equal payments of $10,127.73 beginning 1/31/93, then 60 equal
monthly payments of $11,075.28 beginning 1/31/97, then 239 monthly
payments beginning Jan. 31, 2002 on a 20 year amortization in
accordance with the prevailing interest rates as described in Section
3 in the Borrowing Agreem ent, then one final payment of the unpaid
principal & accrued interest due December 31, 2021.
(Emphasis added.) Section 3 of the Borrowing Agreement provides that interest will
accrue at a 6.5% fixed interest rate for years one through five , a 7.5% fixed rate in
years six through ten, “then Citibank Prime, floating for a minimum of one year or
fixed for a period of not less than one year nor more than five years at the option of
[Leisure] with a floor of 4% and a ceiling of 12%.”
From December 31, 1991 to December 31, 2001, Leisure made monthly
payments in accordance with the terms of the Note and the Borrowing Agreement,
with interest accruing at 6.5% for years one through five and at 7.5% in years six
through ten. Despite the Note’s terms that in “years 11-30, the simple interest rate
shall be at the Citibank Prime,” the Bank continued to charge Leisure interest at the
7.5% rate in effect for years six through ten. It is undisputed the 7.5% rate exceeds
the Prime Rate, on average, over the applicable period.
In May 2013, Leisure ’s officers became aware that the Bank was not
calculating interest at the Prime Rate and contacted the Bank to ascertain more

3 The floor and ceiling rates provided in the Note are 4% and 12%, respectively.

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information. The Bank sent a letter on May 24, 2013, stating “[t]he Prime Rate is
currently 3.25% an d, accordingly, should [Leisure] make an election, under the
terms of the note, the rate today would be the stated floor of 4%.” That letter
requested Leisure to notify the Bank in writing of its election, if any, as to the rate
terms described in the Note ’s provision that Leisure may elect “CitiBank Prime,
floating for a minimum of one year, or fixed for a period of not less than one year,
nor more than five years.” By letter dated July 15, 2013, however, the Bank advised
Leisure of a change in its position on the matter: namely, that Leisure failed to
exercise its “option” to apply any Prime Rate interest terms after year ten and, as
such, the 7.5% interest rate remained applicable for the last 20 years of the loan.
Following the Bank’s refusal to apply a Prime Rate interest structure, Leisure
filed a petition for declaratory judgment, asserting that the Bank miscalculated the
interest owed on the Note for years 11 through 30 and that Leisure is entitled to
assert a defense to the Note’s payment.4 Leisure sought declaration that the Note and
Borrowing Agreement required the Bank to calculate interest by using the Prime
Rate beginning in year 11 of the loan and thereafter, i.e. as of January 1, 2002, and
Leisure is entitled to a corrected computation of principal owed applying the Prime
Rate. At the time of its petition, Leisure asserted the principal balance owed on the
loan was overstated by approximately $425,000.
The Bank filed peremptory exceptions of no cause of action and prescription,
an answer and affirmative defenses and argued, inter alia, that Leisure’s petition

4 Leisure makes clear in its briefs to the lower courts that it strategically chose to file a petition for
declaratory judgment in lieu of stopping payments because the loan agreements provided the Bank
certain rights in the event of Leisure’s failure to make payments, including the right to accelerate
the maturity of the Note. Leisure also indicates it anticipated the Bank would assert prescription
as to some of the payments made more than five years prior to its petition under La. C.C. art. 3498
(prescription of five ye ars applicable to actions on promissory notes) and accordingly sought
declaration that Leisure is entitled to a defense against the Bank’s demands on the Note to ensure
applicability of La. C.C.P. art. 424 (“a prescribed obligation arising under Louisiana law may be
used as a defense if it is incidental to, or connected with, the obligation sought to be enforced by
the plaintiff”), discussed infra.

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fails to state a cause of action because it does not allege Leisure “exercised the
option” to adjust the interest rate to the Prime Rate for years 11 through 30 , that it
further failed to allege such adjustment was required of the Bank without Leisure’s
consent, and that the option expired upon the passage of a reasonable time. Since 11
years had passed between the date the interest rate “option” was available to Leisure
and the prescriptive period applicable to actions on promissory notes is five years
under La. C.C. art. 3498, the Bank argued Leisure’s suit was prescribed.
Because Leisure would make its last uncontested payment on June 28, 2015
– i.e. as of that date, Leisure believed it had repaid the principal borrowed if applying
its chosen Prime Rate structure – Leisure filed a Motion to Permit Deposit of
Disputed Funds on June 15, 2015 . Leisure asserted that if unable to deposit the
disputed funds it would otherwise be “for ced to risk breaching its agreement with
[the Bank] in order to protect the integrity of its lawsuit.” Following an expedited
hearing and relevant to Leisure’s arguments as to whether its claims prescribed, the
parties entered into a consent order by which they agreed Leisure would continue to
make the disputed monthly payments with the following reservation of its rights:
[A]ll payments hereafter made by [Leisure] shall be understood to be
made under protest and with express reservation of [Leisure’s] righ t
to continue to assert any “defense” to the demanded payment of those
disputed amounts.
***
Solely to the extent necessary to effectuate this Order and for no other
purpose, [the Bank] renounces any right that it may otherwise have
to assert that the making of a disputed payment prejudiced or altered
[Leisure’s] rights. Accordingly, the making of any disputed payments
to [the Bank] shall not be deemed to constitute an acknowledgement,
waiver, or other similar alteration of [Leisure’s] or [the Bank’s] legal
position. Nor shall the making of any disputed payment preclude
[Leisure] from affirmatively recovering that payment if the Court
ultimately determines that [the Bank] has computed interest illegally
or incorrectly or otherwise caused [Leisure] to overpay. It is expressly
understood that such disputed payments shall not in any way
prejudice, affect, or impact [Leisure’s] right to continue to assert that

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a claim or defense is a “defense” to those payments within the
meaning of Louisiana Code of Civil Procedure article 424.5
(Emphasis added.)
In September 2015, Leisure filed a motion for summary judgment, arguing
therein that the disputed interest rate provision required the Bank to calculate interest
using the Prime Rate for all payments made since January 2002. Leisure took the
position that the Note did not set forth an “option” to apply a Prime Rate but required
application of the Prime Rate at a structure determined by Leisure – i.e. as to whether
the Prime Rate applied would be floating (adjusted daily), for periods of one year or
more, or fixed for one-to-five year periods. Leisure asserted that applying a one-year
fixed Prime Rate would render the Note completely repaid as of June 28, 2015.
The Bank opposed Leisure’s motion for summary judgment and filed a cross-
motion seeking summary judgment against Leisure. According to the Bank, the Note
created a one-time “option” for Leisure to convert the Note from a 7.5% rate to the
Prime Rate at the beginning of year 11. Because Leisure failed to invoke the Prime
Rate option, the Bank argued, the option expired and the interest rate became
permanently fixed at 7.5%. In conjunction with its summary judgment filing, the
Bank also again raised peremptory exceptions of no cause of action and prescription
that it had filed in response to Leisure’s petition.6
The district court overruled the Bank’s exceptions of no cause of action and
prescription but denied Leisure’s motion for summary judgment and granted the
Bank’s motion for summary judgment. Leisure appealed to the court of appeal,
which held that the Note required the Prime Rate to apply in years 11 through 30.
See Leisure Recreation & Ent., Inc. v. First Guar. Bank, 2016-978 (La. 1st Ct. App.

5 See Note 4, supra.
6 The hearing on the exceptions was originally continued indefinitely pursuant an unopposed
motion filed by Leisure.

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8/17/17), 2017 WL 3573998 (“Leisure I”). Rejecting the Bank’s option theory, the
court provided:
The Note's interest provision is not an option contract because it is not
an offer for which the Bank is bound for a specified period of time and
which Leisure may accept within that time. The Bank has not cited any
cases holding that a provision in a note allowing a choice of a period of
time to fix an interest rate is an option contract. The Note's interest
provision is more similar to an alternative obligation because for
years 11–30, Leisure could choose to pay interest at a floating rate or
at a fixed rate for a definite period of time.

Id. at 5 (emphasis added).
Having recognized that the choice of Prime Rate terms for years 11 through
30 was an alternative obligation, the court of appeal observed it was unclear which
party had the option to choose. Id . at 11 -12. Specifically, the court noted that the
Bank had originally requested Leisure to submit a written election of Prime Rate
structure by its letter dated May 24, 2013, but that the Bank altered its position in its
letter dated July 15, 2013. Id. Observing the contradictory nature of these positions,
the court of appeal remanded because “a genuine issue of material fact exists as to
whether the Bank made a demand upon Leisure to exercise its choice pursuant to La.
C.C. art. 1810, and, if so, because Leisure failed to choose, which interest rate and
term the Bank would choose to apply.” Id. at 10.
7 After setting forth various theories
as to the applicable prescriptive period to this case, the court of appeal ultimately
denied the Bank’s writ as to its exception of prescription “on showing made.” Id. at
10. This Court denied writs. Leisure Recreation & Ent., Inc. v. First Guar. Bank ,
2017-1567 (La. 11/17/17), 229 So. 3d 932.
On remand, the district court granted the Bank leave to file an Amended
Answer and Affirmative Defenses and Reconventional Demand. The Bank thereby

7 Then-Judge Crain concurred, stating that for years 11- 30 he interpreted the Note “to provide
interest at the applicable prime rate, floating for at least one year, with Leisure having the optio n
at each year end to fix the rate for a period of not less than one year, nor more than five years.” He
agreed mixed issues of fact and law prevented summary judgment and cited cases applying the
voluntary payment doctrine.

8

added the affirmative defense of equitable estoppel and asserted that at the very least
all of Leisure’s claims related to payments due between December 31, 2001 and
October 31, 2008 are prescribed and should be dismissed. On reconventional
demand, the Bank sought declaratory judgment that, inter alia, Leisure’s option had
prescribed, the Bank detrimentally relied on Leisure’s continued payments at 7.5%
interest rate, and the Bank is entitled to retain all payments received until Leisure
exercises the option or is entitled to retain all prior payments due to Leisure’s
conduct. Leisure answered.
After further discovery, Leisure filed a second motion for summary judgment
on August 30, 2018, asserting it is entitled to judgment (1) holding that there is no
genuine issue of material fact that the choice of Prime Rate structure has reverted to
Leisure, which has selected a permissible Prime Rate format (a fixed, one-year Prime
Rate); (2) holding that, in accordance with the Prime Rate structure selected by
Leisure, there is no genuine issue of material fact that Leisure paid the amounts owed
under the Note in full as of June 28, 2015; (3) ordering the Bank to return to Leisure
all Note payments made by Leisure since June 28, 2015, together with judicial
interest at the legal rate from the time of each protested payment; and (4) awarding
Leisure all such other legal and equitable relief to which it is entitled based upon the
evidence presented.
The attachments to Leisure’s motion included the Bank’s responses to
multiple interrogatories in which Leisure requested the Bank to indicate its chosen
Prime Rate structure for years 11 through 30. In each instance the Bank refused to
select a Prime Rate structure. For example, when asked what Prime Rate structure
the Bank would elect if it had acquired the right to choose, the Bank responded:
[The Bank] objects to [Leisure’s interrogatory] on the basis that the
language “acquired the right” is vague, ambiguous, and requires a legal
conclusion. Subject to the foregoing objection, [the Bank] at all times
has alleged that it was incumbent upon Leisure to elect the

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appropriate interest rate pursuant to the option clause contained in
the borrowing agreements.

(Emphasis added.) Leisure additionally attached an email to the Bank’s counsel,
dated March 13, 2018, wherein Leisure again requested that the Bank select a Prime
Rate, stating “[w]e accordingly ask that [the Bank] please indicate what, if [the
Bank] had the option to select a prime rate structure, that prime rate structure
would be .” (Emphasis in the original.) Leisure asserted that the Bank failed to
respond to its email in the five months between that email and its summary judgment
motion. Regardless of whether the Bank had the choice pursuant to its prior demand
letter, Leisure argued, the choice reverted to Leisure after its demand and the Bank’s
foregoing failure to make a selection. See La C.C. art. 1810 (“When the party who
has the choice does not exercise it after a demand to do so, the other par ty may
choose the item of performance.”).
Leisure further expressly stated its election to use a fixed, one-year Prime Rate
and attached an affidavit of its Chief Financial Officer, Bonnie Bush, to which she
attached a schedule calculating the principal payoff applying a fixed one-year Prime
Rate beginning January 1, 2002, and updating the Prime Rate as of January 1 of each
year thereafter. The affidavit concludes that the Note’s principal was repaid as of
June 28, 2015. In accordance with this evidence, Leisure sought declaration that all
protested payments made thereafter were not owed.
On November 14, 2018, the Bank filed a second motion for summary
judgment and peremptory exception of prescription. Because Leisure continued to
voluntarily make payments under the 7.5% interest rate from 2002-2015, the Bank
asserted, Leisure is estopped in accordance with the voluntary payment doctrine
from recovering such payments or arguing that such payments were improperly
made. See New Orleans & N.E.R. Co. v. La. Const. & Imp. Co., 33 So. 51 (La. 1902)
(“It is an established rule of law that if a party, with a full knowledge of the facts,

10

voluntarily pays a demand unjustly made on him and attempted to be enforced by
legal proceedings, he cannot recover back the money, as paid by compulsion, unless
there be fraud in the party enforcing the claim and a know ledge that the claim is
unjust.”). Further, the Bank asserted Leisure’s cause of action is prescribed insofar
as it relates to payments made before October 7, 2008, because Leisure waited until
October 7, 2013 to file suit. See La. C.C. art. 3498 (“Actions on instruments, whether
negotiable or not, and on promissory notes, whether negotiable or not, are subject to
a liberative prescription of five years;” and “[t]his prescription commences to run
from the day payment is exigible.”).
The district court granted summary judgment in favor of Leisure, denied the
Bank’s motion for summary judgment, and overruled the Bank’s peremptory
exception of prescription. The court held, inter alia, that (1) Leisure’s selection of a
one-year fixed Prime Rate structure should be applied because the Bank repeatedly
disclaimed any right to choose; (2) the Bank failed to identify specific facts or
competent evidence as to how its affirmative defense s precluded summary
judgment; (3) the Bank failed to meet its burden of proving that any part of Leisure’s
claim had prescribed; and (4) Leisure mistakenly believed that the N ote was being
amortized such that the voluntary payment doctrine did not apply to estop Leisure
from recovering any overpayments it made. In granting summary judgment in favor
of Leisure, the district court found that there is no genuine issue of material fact that
Leisure paid all indebtedness owed to the Bank on the Note as of June 28, 2015, and
ordered the Bank to return all sums received from Leisure thereafter, together with
legal interest from the date of judicial demand until paid. The Bank filed a motion
for new trial, which the district court denied.
The Bank appealed, and the court of appeal rever sed. Leisure Recreation &
Ent., Inc. v. First Guar. Bank, 2019-1698 (La. 1st Ct. App. 2/11/21), 317 So.3d 809
(“Leisure II”). The court held the Bank was entitled to summary judgment as to its

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voluntary payment affirmative defense. Id. In rejecting that any evidence presented
by Leisure in opposition to the Bank’s motion would create a genuine issue of fact
as to whether the payments on the N ote were knowing and, thus, “voluntary,” the
court of appeal found that Leisure could be deemed to have knowledge that the
interest charged was not in accordance with the terms of the Note and Borrowing
Agreement by imputing the knowledge of its former chief financial officer who
executed the loan agreements in 1991. Id. at 822-823. The court reversed the district
court ruling insofar as it ordered the Bank to return all payments made after June 28,
2015, but it also rendered judgment ordering the Bank to return all interest payments
owed in excess of the applicable Prime Rate following the filing of Leisure’s suit.
Id.
Notably, the court of appeal pretermitted discussion of the Bank’s exception
of prescription and whether the Bank waived its right to choose under La. C.C. art.
1810 or whether the right reverted to Leisure and instead held that the applicable
Prime Rate structure to be applied is as follows: “for years 11-30, the prime rate shall
be floating for at least one year, and Leisure has the option at the end of each year
to fix the prime rate for a period of not less than one year, nor more than five
years.” Id. at 824-825.
We granted Leisure’s application for supervisory writs. Leisure Recreation &
Ent., Inc. v. First Guar. Bank, 2021-00838 (La. 10/19/21), 326 So. 3d 1223.
DISCUSSION
Though there are numerous issues before the Court, the primary issue is
whether the “voluntary payment doctrine” first espoused in New Orleans & N.E.R.
Co. v. La. Const. & Imp. Co. , 33 So. 51 (La. 1902), is contrary to the Civil Code.
We find the express and plain language of La. C.C. art. 2299 rejects the application
of this doctrine and accordingly reverse the court of appeal ruling insofar as it held
Leisure is precluded from recovering payments voluntarily made, whether made

12

knowingly or by mistake. We next address whether the applicable interest rate for
years 11 through 30 under the Note may be determined on summary judgment and,
if so, the rate to be applied. We find the Note sets forth an alternative obligation for
the applicable period and that the choice of the interest rate terms either remained
with or reverted to Leisure such that Leisure’s selection of a one -year fixed Prime
Rate interest rate, to be adjusted each year on January 1 from 2002 until the Note
was repaid, applies. We next address wh ether Leisure’s claims for payments made
between December 31, 2001 and October 7, 2008, prescribed. Finding that the
Bank’s prescription arguments, if applicable, do not preclude Leisure’s claims for
overpayment, we find the summary judgment in favor of L eisure declaring that all
payments made after June 28, 2015, is proper.
Summary Judgment - Standard of Review
This matter arises in the context of a motion for summary judgment, a
procedure favored by law and designed to secure the just, speedy, and inexpe nsive
determination of legal actions. La. C.C.P. art. 966(A)(2); but see La. C.C.P. art. 969
(prohibiting summary judgment in certain actions). “Appellate courts review
summary judgments de novo under the same criteria that govern the district court's
consideration of whether summary judgment is appropriate.” Elliott v. Cont'l Cas.
Co., 2006–1505, p. 10 (La. 2/22/07), 949 So. 2d 1247, 1253. Where the facts are
undisputed and the matter presents a purely legal question, summary judgment is
appropriate. See Bernard v. Ellis, 2011-2377 (La. 7/2/12), 111 So. 3d 995, 1002.
Payment of a Thing Not Owed
We must first address whether the court of appeal erred in finding that
Leisure’s knowledge, if any, precludes it from recovering payments made under the
Note pursuant to the “voluntary payment doctrine.” This Court first described the
common law voluntary payment doctrine in New Orleans & N. E. R. Co. v. La.
Const. & Imp. Co., as “an established rule of law that if a party, with a full knowledge

13

of the facts, voluntarily pays a demand unjustly made on him and attempted to be
enforced by legal proc eedings, he cannot recover back the money.” 33 So. 51, 55
(1902). The New Orleans & N.E.R. case appears to be the first and last time that this
Court has expressly endorsed the voluntary payment doctrine,8 and we find that this
common law estoppel doctrine is in direct conflict with the current Civil Code.
As with the interpretation of any statute, the only question is the expressed
intent of the legislature. M.J. Farms, Ltd. v. Exxon Mobil Corp. , 2007-2371 (La.
7/1/08), 998 So. 2d 16, 26- 27. It is well -settled that “[t]he starting point in the
interpretation of any statute is the language of the statute itself.” Id. at 27.
Accordingly, “[w]hen the law is clear and unambiguous and its application does not
lead to absurd consequences, the law shall be applie d as written and no further
interpretation may be made in search of the intent of the legislature.” La. C.C. art. 9.
Making no mention of voluntary payments, Louisiana Civil Code article 2299
provides:
A person who has received a payment or a thing not ow ed to him is
bound to restore it to the person from whom he received it.
This article applies regardless of whether the person who pays money or delivers a
thing not owed does so knowingly or by mistake. Forvendel v. State Farm Mut. Auto.
Ins. Co., 2017-2074 (La. 6/27/18), 251 So. 3d 362, 366. Comment (d) to the article
supports this interpretation in its annotation that “a person who knowingly or through
error has paid or delivered a thing not owed may reclaim it from the person who
received it.” La. C.C. art. 2299, cmt (d) (emphasis added).
The knowledge exception applied by the court of appeal pursuant to the
voluntary payment doctrine is thus contrary to the express mandates of La. C.C. art.

8 In a 1969 case, several defe ndants before this Court argued for the application of the voluntary
payment doctrine. See Whitehall Oil Co. v. Boagni , 229 So. 2d 702, 705 (La. 1969). Rather than
reaffirm the doctrine, this Court referred to it only as a “principle said to exist in our l aw.” Id. at
703. The Court ultimately did not rule on the continued viability of the doctrine, instead finding
that, assuming such a doctrine existed, it would not apply to the facts at issue. Id. at 705.

14

2299, which the Legislature notably adopted after New Orleans & N. E. R., supra.9
There is no place in Louisiana law for a common law estoppel doctrine that addresses
a subject already encompassed within positive law of the Civil Code. See Duckworth
v. La. Farm Bureau Mut. Ins. Co., 2011-2835 (La. 11/2/12), 125 So. 3d 1057, 1064
(“[A]s the solemn expression of the legislative will, if an enactment provides a
solution to a particular situation, then no jurisprudence, usage, equity or doctrine can
prevail over the legislation.”); Donelon v. Shilling , 2019-514 (L a. 4/27/20)
(“Equitable remedies are only available in the absence of legislation and custom.”).
Stated simply, there is no knowledge exception to La. C.C. art. 2299’s directive that
a person receiving a payment or delivery of a thing not owed must return it.
Jurisprudence superseded by legislation does not support diverging from the Civil
Code’s plain language.
10
For the foregoing reasons, we find the court of appeal erred in applying the
voluntary payment doctrine to preclude judgment in favor of Leisure.11

9 Until the adoption of La. C.C. art. 2299 in 1995, the voluntary payment doctrine was arguably
compatible with the Civil Code, as former La. C.C. art. 2302 (1870) provided a claim for payment
of a thing not owed was available to someone “who has paid through mistake.” Implicit in this rule
is that the payor has knowledge that the payment made is not owed. When the Civil Code articles
were revised in 1995, the redactors observed that the “mistake” prerequisite “has no counterpart
in the French Civil Code or in the Louisiana Civil Code of 1808” and according ly had been
suppressed.
10 Even assuming, arguendo, that the voluntary payment doctrine is not superseded by La. C.C.
art. 2299, adoption of the court of appeal’s “deemed knowledge” ruling would immunize creditors
who send incorrect payment due notices where, as here, the debtor’s only source of knowledge as
to the inaccuracy of those notices are the indebtedness agreements. Once paid, the court of appeal
would find that the debtor had “full knowledge of the facts” in such cases, which could effectively
burden a borrower to perform a separate calculation of each amortized payment on a note to
determine its correctness or else be deemed to “voluntarily” and “knowingly” have made any
overpayments. Such a ruling would suggest a Louisiana creditor has no liabilit y for sending an
inaccurate invoice with improper charges and fees if the debtor thereafter makes payment , even
though the amount is not due, and is accordingly a questionable jurisprudential doctrine to adopt.
Regardless of whether we agree with this policy of providing de facto immunity to creditors that
send incorrect bills to their consumers, it is not the law for the reasons set forth abov e. See La.
C.C. art. 2299.
11 In its brief to the court of appeal, the Bank did not raise any of the remaining affirmative defenses
loosely referenced in its motion for summary judgment.

15

The Note’s Alternative Obligation and Leisure’s Choice
Having found that the court of appeal erroneously ruled Leisure is estopped
from collecting all payments made to the Bank that were not due, we next address
whether Leisure overpaid under the te rms of the Note. As a preliminary issue, we
must clarify whether the court of appeal in Leisure I correctly held that Leisure’s
right to choose among interest rate terms is an alternative obligation, not an option
contract.
“An option is a contract whereby the parties agree that the offeror is bound
by his offer for a specified period of time and that the offeree may accept within that
time.” La. C.C. art. 1933 (emphasis added) . By contrast, “[a]n obligation
is alternative when an obligor is bound to render only one of two or more items of
performance.” La. C.C. art. 1808. Thus, while an option must be exercised within a
specified period of time in order to create an agreement binding the parties to the
optional terms, an alternative obligation is present where a binding agreement exists
in which one of two or more alternative terms will apply.
The pertinent language in the Note provided that in years 11 through 30, “the
simple interest rate shall be at the Citibank Prime, floating for minimum of one year
or fixed for a period of not less than one year, nor more than five years at the option
of [Leisure].” (Emphasis added.) An examination of this language makes clear that
the parties did not enter into an option contract simply because t he word “option”
was used. When reconciled with the term “shall,” the words “at the option” indicate
a choice between alternative terms for the interest rate (i.e., floating for a minimum
of one year or fixed for a period of one to five years). Further, there is nothing in the
Note that provides “a specified period of time” within which Leisure must elect to
accept offered terms as contemplated in La. C.C. art. 1933’s definition of option
contracts. The Note thus sets forth interest payment obligations in the alternative
under La. C.C. art. 1808.

16

Review of the Note’s repayment schedule further supports this interpretation.
See La. C.C. art. 2050 (“Each provision in a contract must be interpreted in light of
the other provisions so that each is given the meaning suggested by the contract as a
whole.”); John Bailey Contractor, Inc. v. State Dept. of Transp. And Dev. , 439 So.
2d 1055, 1058 (La. 1983) (“A cardinal rule in the construction of contracts it that the
contract must be viewed as a whole and, if possible, practical effect given to all its
parts.”). Specifically, after setting forth repayment amounts for years one through
ten, the Note provides for repayment of principal by “ 239 monthly payments
beginning Jan. 31, 2002 on a 20 year amortization in accordance with the prevailing
interest rates as described in Section 3 in the Borrowing Agreement, then one final
payment of the unpaid principal & accrued interest due December 31, 2021.” Again,
Section 3 of the Borrowing Agreement in turn provides interest will accrue at a 6.5%
fixed interest rate for years one through five, at a 7.5% fixed rate in years six through
ten, “then Citibank Prime, floating for a minimum of one year or fixed for a period
of not less than one year nor more than five years at the option of [Leisure] with a
floor of 4% and a ceiling of 12%.” Reviewing the terms of the repayment schedule
in context of Section 3 of the Borrowing Agreement, this reference to “the prevailing
interest rates” indicates the Citibank Prime Rate in ac cordance with the alternative
rate terms set forth in the interest provisions of Borrowing Agreement and the Note.
To interpret this provision otherwise would render the term “prevailing”
meaningless.
Not only does the use of the word “option,” in the co ntext of the remaining
terms of the agreements, indicate a choice of alternative obligations under La. C.C.
art. 1808 and not an option contract as defined by La. C.C. art. 1933, but the Bank
also fails to point to any language in the Note that would direct the 7.5% interest rate
to apply in years 11 through 30. Indeed, the Note does not contemplate that this or
any interest rate other than the Prime Rate will apply during that period.

17

Finding that the Note set forth an alternative obligation, we next addr ess
whether Leisure or the Bank had the right to choose. Absent an implied or express
contractual provision to the contrary, the Civil Code provides that the default choice
as to an alternative obligation belongs to the obligor. La. C.C. art. 1809 (“When an
obligation is alternative, the choice of the item of performance belongs to the obligor
unless it has been expressly or impliedly granted to the obligee.”). In this case, then,
both default law and the Note provide Leisure with the choice, at least init ially, as
to which interest rate terms will apply.
While the choice was given to Leisure by contract, “[w]hen the party who has
the choice does not exercise it after a demand to do so, the other party may choose
the item of performance.” La. C.C. art. 1810 (emphasis added). With respect to
whether a choice or demand was so made, the record reflects that the Bank advised
Leisure, by letter dated May 24, 2013, to select a Prime Rate structure pursuant to
the Note. As the court of appeal in Leisure I recognized, however, the Bank sent a
second letter weeks later, on July 15, 2013, contradicting this request by setting forth
its altered position that the a pplicable rate for years 11 through 30 is 7.5% due to
Leisure’s failure to exercise the option to a pply a Prime Rate. In light of the
ambiguity highlighted by the court of appeal in Leisure I as to whether the Bank
made a demand under La. C.C. art. 1810 such that the choice reverted to the Bank ,
Leisure presented uncontroverted evidence that it made multiple demands on the
Bank to make a choice thereafter and the Bank refused to make a choice.
We therefore need not determine here whether the Bank’s change in position
either revoked the prior demand or – as Leisure argued – waived the Bank’s right to
demand. The choice of Prime Rate structure may have never reverted to the Bank,
in which case the choice belongs to Leisure. Alternatively, the choice may have
reverted to the Bank in 2013, but because the Bank refused to make a determination
in response to Leisure’s La. C.C. art. 1810 demand, the choice has reverted back to

18

Leisure. Thus, in either potential scenario, the choice of Prime Rate iteration now
belongs to Leisure.12
The Bank’s argument that Leisure should not be able to benefit from choosing
the best interest rate with the benefit of hindsight is unsupported by law. Instead of
eliminating the alternative obligation, La. C.C. art. 1810 puts the onus on the party
who does not have the choice to make a demand and to force or accelerate the
election. Stated simply, Leisure would not have had the benefit of hindsight
complained of by the Bank if the Bank had made a demand in 2002. There is no
practical reason for which the Bank could not have identified by now its chosen
Prime Rate structure, subject to any necessary qualifications, but the Bank has
instead repeatedly failed to avail itself of its rights under La. C.C. art. 1810.
For the foregoing reasons, we find that summary judgment in favor of Leisure
declaring that Leisure was entitled to select the Prime Rate interest structure under
the Note is proper.
Leisure’s Choice as to Prime Rate Structure
Having recognized Leisure has the right to choose the Prime Rate structure,
we review whether the structure selected may now be applied. In its second motion
for summary judgment, Leisure expressly stated that if it has the choice, it would
apply a one-year fixed Prime Rate with the rate being adjusted each year on January

12 Implicit in our holding is that the Bank must indicate its choice w ithin a reasonable time
following an Article 1810 demand. To hold that the party with the choice has an indefinite period
of time would thwart the purpose of La. C.C. art. 1810 – i.e., to prevent the party having the choice
from holding up the selection. Nor does anything in La. C.C. art. 1810 indicate that the choice
must be made immediately upon demand. Accordingly, we find that the choice must be made
within a reasonable time , which will necessarily depend on the applicable facts relevant to the
alternative obligation. On remand from Leisure I , Leisure made multiple demands on the Bank,
but several months passed without the Bank making a selection of Prime Rate structure before
Leisure filed its motion for summary judgment. In the context of repayment of a loan with monthly
installments, such period of time clearly exceeds a reasonable period of time for making the
selection called upon by La. C.C. art. 1810. See also La. C.C. art. 1810, cmt (c) (“The demand
upon the party who has the choice must, of course, be seasonably made, that is, neither before any
condition prior to performance has been met, nor before arrival of a term if any. According to
circumstances, the obligor may be allowed a reasonable delay to make his choice after notice has
been given.”).

19

1 according to the prevailing Prime Rate at that time. We find this choice to be in
accord with t he alternative obligation terms set forth in the Note, which again
provide that the rate shall be the Citibank Prime Rate “floating for minimum of one
year or fixed for a period of not less than one year, nor more than five years.” See
La. C.C. art. 2057 (“In case of doubt that cannot be otherwise resolved, a contract
must be interpreted against the obligee and in favor of the obligor of a partic ular
obligation.”). The Note’s interest provision clearly provides that the rate chosen may
be fixed for one to five years or floating for at least one year. Implicit in the fact that
there are twenty years in the applicable period (years 11 through 30) , and that the
interest provision permits the party choosing to select terms as low as one year , is
the requirement that the party choosing must elect a new rate at the expiration of the
term originally chosen, which again Leisure has done.
13
In sum, no genuine issue of material fact precludes summary judgment
declaring that the choice as to the applicable Prime Rate terms in years 11 through
30 either remained with or reverted to Leisure. Accordingly, summary judgment
may be rendered declarin g that Leisure’s choice, a fixed one -year Prime Rate,
applies beginning in year 11 and until the Note is repaid in full.
Prescription
While Leisure presented uncontroverted evidence that the Note was repaid as
of June 28, 2015 if its selected Prime Rate structure is applied, we must determine
whether prescription precludes Leisure’s recovery of overpayments made between
December 31, 2001 and October 7, 2008 before we can conclude that Leisure is
owed return of all overpayments made. In opposing the Bank’s exception of

13 We note that the interpretation of the court of appeal in Leisure II that the rate must be floating
for the first year is contrary to the clear language of the contract, which again provides that the
Prime Rate shall be “floating for minimum of one year or fixed for a period of not less than one
year, nor more than five years.” (Emphasis added.) There is no directive in the Note that the Prime
Rate has to be floating for any period of time. Instead, the rate must either be floating for a
minimum of one year or fixed for a period of one to five years.

20

prescription and motion for summary judgment, Leisure makes various arguments
as to why its claims had not prescribed despite La. C.C. art. 3498’s directive that
actions on promissory notes prescribe five years from the date payment is exig ible.
La. C.C. art. 3498 (“ Actions on instruments, whether negotiable or not, and on
promissory notes, whether negotiable or not, are subject to a liberative prescription
of five years. This prescription commences to run from the day payment is
exigible.”).
14 Even assuming its claims have prescribed, Leisure alternatively asserts
that it has a right to assert its prescribed claims as a “defense” under La. C.C.P. art.
424, which provides, in pertinent part: “[A] prescribed obligation arising under
Louisiana law may be used as a defense if it is incidental to, or connected with, the
obligation sought to be enforced by the plaintiff. ” Thus, Leisure argues, even a
prescribed claim related to the Note can be asserted to avoid an equivalent obligation
under the Note.
Under the narrow facts before us, we agree. During litigation of this matter ,
Leisure sought declaration by the district court that it “is entitled to assert a defense
to the Note’s payment.” Believing the Note repaid as of June 28, 2015, Leisure
requested the district court to permit the deposit of all disputed Note payments in the
registry of the court, pending final resolution and further orders relative to the
disposition of the deposited funds, in an effort to preserve its rights to defend against
the Bank’s collection of those payments under La. C.C.P. art. 424. If the district
court denied this request, Leisure may have been required to choose between
maintaining its rights under La. C.C.P. art. 424 by continuing to make payments
thereafter or to stop making payments and risk acceleration of the Note.

14 Leisure does not dispute the application of La. C.C. art. 3498 to its petition for declaratory
judgment despite the lack of jurisprudence from this Court holding that a debtor’s action to collect
funds overpaid on a promissory note pursuant to La. C.C. art. 2299 is an “action on . . . [a]
promissory note[],” presumably because Leisure previously argued that its petition is an action on
a promissory note in relation to an exception of improper venue filed by the Bank.

21

Instead, Leisure and the Bank entered into the consent order whereby the Bank
agreed, among other things, that Leisure’s disputed payments “shall not in any way
prejudice, affect, or impact [Leisure’s] right to continue to asser t that a claim or
defense is a ‘defense’ to those payments within the meaning of Louisiana Code of
Civil Procedure article 424. ” (Emphasis added.) The parties further stipulated that
Leisure’s making of disputed payments would not preclude Leisure “ from
affirmatively recovering that payment if the Court ultimately determines that [the
Bank] has computed interest illegally or incorrectly or otherwise caused [Leisure] to
overpay.” (Emphasis a dded.) Most importantly, perhaps, the Bank expressly
“renounce[d] any right that it may otherwise have to assert that the making of a
disputed payment prejudiced or altered [Leisure’s] rights.” (Emphasis added.)
While La. C.C. P. art. 424 may not have permitted Leisure to recover
prescribed payments in a petition for declaratory judgment alone ,15 the Bank’s
consent to Leisure’s recovery of payments made and agreement that such payment
would not prejudice Leisure’s ability to recover these payments is cle arly a
renouncement of its prescription arguments, assuming – as the Bank argues –
prescription had accrued. See La. C.C. art. 3449 (“ Prescription may
be renounced only after it has accrued.”). We therefore find Leisure can recover the
payments it made after June 28, 2015, regardless of whether they prescribed.16
For the foregoing reasons, we find the district court properly overruled the
Bank’s peremptory exception of prescription and denied its motion for summary
judgment to the extent it relied upon the argument that Leisure could not reclaim any

15 Though we need not reach the issue here, the Bank’s reconventional demand may have rendered
La. C.C. art. 424 applicable after the consent order was entered into.
16 We need not and do not address the merits of either party’s arguments with respec t to the
applicable prescriptive period and when it commenced to run in this case. Because it is the Bank’s
position that prescription had accrued, we find in such instance that the Bank renounced any right
to prejudice Leisure’s claims.

22

overpayments made between December 31, 2001 and October 7, 2013 because they
were prescribed.
CONCLUSION
Finding the “voluntary payment doctrine” contravenes the Louisiana Civil
Code, we reverse the court of appea l insofar as it (1) reversed the portion of the
district court’s judgment denying the motion for summary judgment filed by the
Bank as to the voluntary payment affirmative defense, see La. C.C. art. 2299; (2)
dismissed Leisure’s claim for declaratory relief as to the interest it voluntary paid
the Bank between December 31, 2001 and October 7, 2013; and (3) rendered
judgment ordering the Bank to repay Leisure “any overcharge of interest in excess
of the prime rate that Leisure has paid on the [Note] sin ce the filing of its suit on
October 7, 2013, together with interest thereon from the date of judicial demand until
paid.”
Finding that the Note sets forth an “alternative obligation” as defined in La.
C.C. art. 1808, we reverse the court of appeal insof ar as it (1) reversed the district
court decree that Leisure was entitled to select the Prime Rate structure pursuant to
La. C.C. art. 1810; and (2) reversed the district court’s declaration that Leisure paid
all indebtedness owed to the Bank on the Note a s of June 28, 2015, and is owed
return of all amounts paid thereafter.
We remand to the court of appeal for consideration of the Bank’s arguments
on appeal that were pretermitted by the court of appeal opinion and are not in conflict
with the foregoing disposition and to render judgment in accordance herewith.
REVERSED AND REMANDED.

S
UPREME COURT OF LOUISIANA
No
. 2021-C-00838
L
EISURE RECREATION & ENTERTAINMENT, INC.
VS.
FIRST GUARANTY BANK
O
n Writ of Certiorari to the Court of Appeal, First Circuit, Parish of East Baton
Rouge
Joh
nson, J., concurs in part and dissents in part and assigns reasons:
I
concur with the majority and its well-reasoned opinion, including its rulings
that the voluntary payment doctrine contravene the Louisiana Civil Code and that
the interest provision at issue is an alternative obligation, not an option. I dissent in
part only with respect to the remand of this matter to the court of appeal for issues
pretermitted by the court of appeal opinion. I would not remand to the court of appeal
and instead would reverse and render in favor of Leisure.
The only issues raised on appeal that were not resolved by this Court’s opinion
are: whether the district court erred in ordering the Bank to return to Leisure all
amounts paid after June 28, 2015, and whether the district court erred in awarding
judicial interest thereon to Leisure. There are several reasons for which I would
reject the Bank’s appeal on these issues. First, the Code of Civil Procedure makes
clear that a litigant is not bound by the relief requested in his original petition. See
La. C.C.P. art. 862 (“[A] final judgment shall grant the relief to which the party in
whose favor it is rendered is entitled, even if the party has not demanded such relief
in his pleadings and the latter contain no prayer for general and equitable relief.”).
Second, the Bank’s argument also ignores the 2015 Consent Order, in which
the Bank stipulated that Leisure could continue to make payments without impairing
its rights to obtain a refund of those payments. Specifically, the order states: “Nor
03/25/22

shall the making of any disputed payment preclude [Leisure] from affirmatively
recovering that payment if the Court ultimately determines that [the Bank] has
computed interest illegally or incorrectly or otherwise caused [Leisure] to overpay.”
Third, Leisure did request dam ages and interest in its motion for summary
judgment and presented uncontroverted evidence in support. The issue was thus
added to Leisure’s suit and tried with the Bank’s consent. See La. C.C.P. art. 1154
(“When issues not raised by the pleadings are tried by express or implied consent of
the parties, they shall be treated in all respects as if they had been raised by the
pleading.”).
Finally, the Bank’s argument that Leisure cannot recover interest because its
suit does not “sound in tort” overlooks that interest is not limited to claimants with
tort claims. See C.C. art. 2000 (“ When the object of the performance is a sum of
money, damages for delay in performance are measured by the interest on that sum
from the time it is due, at the rate agreed by the parties or, in the absence of
agreement, at the rate of legal interest as fixed by R.S. 9:3500. The obligee may
recover these damages without having to prove any loss, and whatever loss he may
have suffered he can recover no more.”); see also La. C.C.P. art. 1921 (“The court
shall award interest in the judgment as prayed for or as provided by law.”).
For the foregoing reasons, I would find that Leisure is entitled to a return of
its overpaid funds as well as legal interest and would reverse and render summar y
judgment in accordance with the majority ruling’s findings and the additional
findings set forth herein.

S
UPREME COURT OF LOUISIANA
No
. 2021-C-00838
L
EISURE RECREATION & ENTERTAINMENT, INC.
VS.
FIRST GUARANTY BANK
O
n Writ of Certiorari to the Court of Appeal, First Circuit, Parish of East Baton
Rouge
Ja
smine, J., concurs in part and dissents in part and assigns reasons:
I
dissent in part because I would find that remand is unnecessary. In my view,
the Court’s ruling addresses each of the issues on appeal such that judgment in favor
of Leisure may be rendered. In all other respects, I concur for reasons assigned by
the majority.
03/25/22