## In the



# Missouri Court of Appeals Western District

MARY M. HARMS ,

Respondent ,
v. GREGORY R. HARMS ,

Appellant
.            WD 78643 OPINION FILED: MAY 24, 2016

Appeal from the Circuit Court of Benton County, Missouri The Honorable Michael O'Brien Hendrickson , Judge
Before Division Three: Gary D. Witt, P.J., James E. Welsh, Anthony Rex Gabbert, JJ. Gregory R. Harms appeals the circuit court’s judgment in favor of Mary M. Harms on her petition to recov er debts owed to her by Gregory

. 1 Gregory asserts three points on appeal. First, he contends that the circuit court erred in rejecting his statute of limitations defense regarding the $45,000 promissory note beca u se Section 516.110 2 requires a civil action to be commenced within ten years upon any writing and the cause of action accrued upon Gregory’s default on the promissory note on or about June 21, 2002, and suit was not ins tituted within ten years of that
date . Second, Gregory contends that the circuit court erred in rejecting his statute of l imitations

1 Because the parties share the same last name, we refer to them by their first names. No disrespect is intended.

2 All statutory citations are to the Revised Statutes of Missouri 2000, unless otherwise noted.2

defense regarding his promise to pay $15,000 in Count II of Mary’s petition beca use Section
516.120 requires a civil action to be commenced within five years o n any contract, except those mentioned in Section 516.110, and the cause of action here accrued on or before November 30, 2001, and suit was not inst ituted within five years of that date. Third, Gregory contends that the circuit court erred in finding tha t the debt owed to Mary had been reaffirmed in 2011, 2012, and 2013, beca use Section 516.320 requires that no acknowledgment or promise can take a contract out of the operation of the provisions of sections 516.100 to 516.370 unless the same is in a
writin g subscribed to by a party chargeable thereby, and no writing was subscribed to by Gregory to extend the statute of limitations on the debts and any promise, acknowledgement, or
reaffirmation thereof is void. We affirm

. The evidence is uncontested. In 1999 or 2000, Mary loan ed her son, Gregory, $5,000. In 2001, Mary loaned Gregory another $8,000 and $2,000 respectively. Gregory acknowledged these loans at trial and that they had never been repaid. On January 15, 2002, Mary sold Gregory a house for $4 5,000. At that time, Mary obtained a promissory no te from Gregory wherein he agreed to pay the $45,000 back in monthly installments over a span of ten years at a 5% annual
interest rate . The promissory note also provided that Gregory would be obligated t o Mary for attorney fees an d expenses related to collecting on the note. Also at that time , Gregory prepared
an amortization schedule that consolidated the $45,000 loan with the $15,000 in prior loans

. Gregory testified at trial that all of the debt was to be “rolled under one deal” and that the total obligation for that one deal would be $60,000. Mary testified that she agreed to this arrangement and although the amortization schedule called for a 5.25% interest rate, she told Gregory that 5%
was suffic ient.3

After entering the January 15, 2002 agreements, Gregory made only two payments to Mary . These payments totaled approximately $1,000. His last payment was on June 21, 2002. Gregory testified that, although he took a mortgage out on the home he pur chased from Mary approximately seven mon ths after acquiring it , he gave her none of the proceeds. 3 Over the years Mary and Gregory discussed repayment of the loans. Gregory tes tified at trial that , in 2011 , he promised to pay Mary upon the sale of a farm that he had inherited from his father. He testified
that , after the farm sold , however, he did not repay Mary

. On April 23, 2013, Mary filed a petition alleging that Gregory had defaulted on the $45,000 promissory note and that Gregory had defaulted on the $15,000 personal loans under the
terms of the amortization schedule agreement

. She filed a four

- count First Amended Petition on November 6, 2013. The First Amended Petition alleged in Count I that Gregory had defaulted on the $45,000 promissory note, in Count II that he had defaulted on the $15,000 personal loans
under the amortization schedule agreement , in Count III that Gregory promised to pay Mary all
of the debt due when hi s father’s farm sold and in re liance on those representations Mary did not pursue enforcement of the note, and in Count IV that Gregory had defaulted on the terms of the written amortization schedule to pay Mary a total of $60,000 for all of the debt. Gregory ’s

answer to this First Amended Petition , among other things, asserted that Mary’s claims were barred by all applicable statute s of limitations. After hearing evidence, t he circuit court ruled in favor of Mary and found Gregory indebted to Mary in the sum of $75,83 1.90 on the $45,000 promissory note, including interest,

3 Mary testified that , in June of 2002 , she released a deed of trust that she had filed in connection with the promissory note because she was about to undergo heart surgery and did not want Gr egory to have to worry about having a lien on the property if she did not survive the surgery . All parties acknowledged that, in spite of this release, the loan was never forgiven.4

and $24,891.78 on the $15,000 in personal loans, including interest. The court ordered Gregory to p ay $10,000 for attorney fees a nd costs of collection on the promissory note. Gregory appeals.
Our standard of review is set forth in Murphy v. Carron , 536 S.W.2d 30, 32 (Mo. banc 1976). Schollmeyer v. Schollmeyer , 393 S.W.3d 120, 122 (Mo. App. 2013). W e will affirm the
circuit court’ s judgment unless it is unsupported by substantial evidence, it is against the weight of the evidence, or it erroneously declares or applies the law. Id. at 122

- 123. We view the evidence and all reasonable inferences in the light most favor able to the co urt’s judgment. Id. at
123 . We will affirm the judgment if it is correct under any reasonable theory supported by the
evidence. Williams v. State, Dep t. of Social Services, Children’ s Div. , 440 S.W.3d 425, 427 (Mo. banc 2014). “Whether a statute of lim itations applies to a given cause of action is [] reviewed de

novo .” Davison v. Dairy Farmers of America, Inc. , 449 S .W. 3d 81, 83 (Mo. App. 2014). In his first point on appeal, Gregory contends that the circuit court erred in rejecting his
statute of li mitations defense regarding the $45,000 promissory note because Section 516.110 requires a civil action to be commenced within ten years upon any writing and the cause of action accrued upon Gregory’s default on the promissory note on or about June 21, 200 2, and
suit was not ins tituted within ten years of that date. We disagree as we find that the cause of5

action accrued January 1, 2012 , and , therefore, Mary’s claim was timely filed

. 4 Gregor y argues that Hemar Ins. Corp. of America v. Ryerson , 108 S.W.3d 90 (Mo. App. 2003), is dispositive of this case because it holds that a cause of action on a promissory note
accrues when the borr ower first defaults on the note thereby giving the lender the right to accelerate the payments and bring a successful s uit on the note. Gregory contends that, because his last payment was made on June 21, 2002, the cause of action accrued at that time and, because Mary did not file suit until April 23, 2013, ten years had passed and the statute of
limitations barred her c laim. We disagree that Hemar Ins. Corp. of America v. Ryerson ( Hemar I ) stands for this
prop osition as this interpretation was refuted in Ryerson v. Hemar Ins. Corp. of America , 200 S.W.3d 170 (Mo. App. 2006) ( Hemar II ) . In Hemar II , our Eastern Distri ct explained that in
Hemar I it had found that the case involved a promissory note , not a demand note, and the trial

court had in correctly ruled that the cause of action accrued either on the date the first payment of the promissory note was due or the dat e the not e was signed. Ryerson , 200 S.W.3d at 171. Upon remand, the trial court granted the creditor’s (an assignee in that case) motion for summary judgment and assessed damages against the debtor for the principal amount of the loan, pre

judgment interest, and attorney fees. Id. at 172. The debtor appealed arguing that the trial court

4 As a preliminary matter, Mary argues that Gregory waived his statute of limitation defenses by failing to plead the specific statutes upon which he relied, failing to plead sufficient facts to support his defenses , and by failing to plead that the statute of limitations operated to extinguish the cause of action itself and not merely bar the remedy. We find it is unnecessary to examine the sufficiency of Gregory’s pleadings as the record reflects that, even i f deficiently pled, the statute of limitations defenses were tried by consent. Prior to trial , Gregory filed a Motion for Summary Judgment alleging no genuine issue of material fa ct in dispute and entitlement to judgment as a matter of law for the reason that , prior to Mary filing her petition, ten years had passed since Gregory last made a payment to Mary on the loans

. In “Plaintiff’ s Legal Memorandum i n Opposition to Defendant’s Motion for Summary Judgment” Mary directly addressed Gregory’s specific statute of limitation defenses and did not assert that Gregory had failed to properly plead tho se defenses . Mary first contend ed that Gregory failed to adequately plead the statute of limitations after Gregory moved for a directed verdict at trial. Rule 55.33(b).6

erred in granting summary judgment because a genuine issue of material fact remained with regard to when the statute of limitations began to run. Id. The Eastern District disagreed explaining that o ur Supreme Court’s interpretation of Section 516.100 in relatio n to an
in stallment note was

‘ that in suits upon contracts where there is more than one item of damage (installment) the cause of action shall not be deemed to accrue until the last item of damage is sustained (last installment becomes due) so that all damages (installments) may be recovered, and full and complete relief obtained in one action.... ’
Id. at 173 (quoting Sabine v. O.W. Leonard , 322 S.W.2d 831, 838 (Mo. 1959)). It noted that “[i]n
Hemar I , this Court rejected the assertion that the date of Borrower’s first installment payment
del inquency was the date that the statu te of limitations commenced.” Id. at 172. Hemar II

c oncluded: “We find the date that the statute of limitations commences to run on an installment
note is the date the last installment of the note is due.” Id

. Here, the promissory note Gregory si gned was an installment note providing that he would make monthly payments on the first day of each month beginning February 1, 2002 until
the n ote was paid in full. The note further provides that “[i] f, on January 1, 2012 I still owe amounts under this Note, I will pay those amounts in full on that date, which is called the ‘maturity date.’” Although the parties disagree as to whether the note gave Mary the right to accelerate the entire note upon default of monthly payment s, it is clear that Mary never exercised
any right s she may have had to accelerate. She did not file suit until after the n ote’s maturity7

date of January 1, 2012. 5 Therefore, p ursuant to Section 516.110, Mary had ten years from January 1, 2012 to pursue collection on the note. Consequently, Mary’s claim associated with
the $45,000 promissory note , filed April 23, 2013, was timely and the circuit court did not err in rejecting Gregory’s statute of limitations defense regarding that note . Point one is de nied. In his second point on appeal, Gregory contends that the circuit court erred in rejecting
his statute of limitations defense regarding his promise to pay $15,000 in Count II of Mary’s petition beca use Section 516.120 requires a civil action to be commenced within five years on any contract, except those mentioned in Section 516.110, and the cause of action here accrued on or before November 30, 2001, and suit was not inst ituted within five years of that date. We find
that Mary’ s claim was timely filed

. It is undisputed that Mary gave Gregory three loans between 1999 and November 30,
2001 , and that the total amount of those loans was $15,000. At time the loans were given, there were no set terms with regard to repayment. Mary testified at trial that there was no interest attached to the loans and that Gregory was to pay her back as soon as he could. On January 15, 2002, a pproximately a month and a half after the last of the three loans, an agreement was reached with regard to exact terms for repayment of all three loans. Mary and Gregory agreed to consolidate the three loans pursuant to an amortization schedule created by Gregory. The
amorti zation schedule provided that repayment of the loans would be spread over fourteen years

5 If Mary had the option and had chosen to accelerate the n ote and demand payment of the entire note in full prior to the maturity dat e, the cause of ac tion would have accrued at the time she accelerated the note because acceleration causes the last installment payment to be due and owing

. Ryerson , 200 S.W.3d at 173. Gregory contended in oral argument that, where an acceleration provis ion exists, the cause of action must accrue upon default. We disagree as this is only true where the acceleration provision is mandatory. See Casper v. Bell’s Estate , 218 S.W.2d 606, 607 (Mo. 1949). Here, the acceleration provision is clearly not mandat ory as it states that, upon default “the Note Holder may require me to pay immediately the full amount of principal which has not been paid and all the interest that I owe on the account.” (Emphasis added).8

and Mary was to receive interest on the unpaid principal balance throughout that period

. 6 Although neither party signed the printed amortization schedule, both Gregor y and Mary agreed
at trial that , starting January 15, 2002, the amortization schedule was to govern rep ayment of the $15,000 in loans. 7 Gregory made no payments on any of the loans until afte r the amortization
schedule agreement became effective

. 8
On a ppeal, Gregory ignores the amortization schedule agreement and argues that the original three loans totaling $15,000 were “demand notes” that render Mary’s clai ms for repayment barred by Section 516.120 , or any other applicable statute of limitations , because the
cause of action accrued when the money was loaned

. Gregor y asserts that, because the final loan was made November 30, 2001, the cause of action for each loan accrued on or pr ior to that date and, because Mary did not file her claims until Apr il 23, 2013, her claims were filed well beyond
Section 516.120’s five

- year statute of limitations. We disagree and find that, even if the original discussions regarding the $15,000 in loans resulted in three payable on demand obligations , any agreements a ccompanying those obligations were extinguished by the January 15, 2002 ,

6 Although the amortization schedule states that interest was to be at 5 .25 %, Mary testified at trial that she told Gregory that 5% int erest was sufficient. The trial court calculated interest on all claims at 5%.

7 The parties testified that the amortization schedule agreement also included the $4 5,000 Gregory agreed to pay Mary for purchase of the home.

8 We note that the trial court calculated the interest for the unpaid balance of the $15,000 in loans based on the January 15, 2001 amortization agreement and not the original date of each loan.9

amortization schedule agreement

. 9 “Upon the execution of a valid and legal substituted agreement, the original agreement merges into it and is extinguished, and failure to perform the substituted agreement will not revive the old agreement.” Boyd v. Lane , 8 69 S.W.2d 305, 309 (Mo. App. 199 4) (internal quotation marks and citation omitted). “A party who repudiates the contract cannot at the same time set it up as a defense to a liability which he otherwise would

9 Gregory argues in his reply brief that the amortization schedule did not constitute a new promise to pay as there was no new consideration given but, if it did, then the $45,000 promissory note would then be extinguished , along with his obligation to pay at torney fees under that promissory note , because the $45,000 was included in the amortization schedule. We disagree. Here, the trial court found the $45,000 due under the promissory no te and the $15,000 due under the amortization schedule agreement. T hese distinctions are supported by the record as the promissory note and the amortiza tion schedule agreement were ratified nearly simultaneously and, therefo re, it cannot be said that the oral amortization agreement modified or discharged the w ritten promi ssory note. T he amortization agreement was orally discussed and agreed upon but not signed by any party. The promissory note was an unambiguous contract signed by all parties and any oral modification of that contract would be barred by the parole eviden ce rule. Waymire Co. v. Antares Corp. , 975 S.W.2d 243, 247 (Mo. App. 1998). The parole evidence rule prohibits use of oral evidence to contradict or change the terms of a written, unambiguous and complete contract absent fraud, common mistake, accident or erroneous omission. The rule prohibits evidence of contrary agreements made prior to or contemporaneously with the writing but does not prohibit evidence of agreements entered subsequ ent to the contract. I t is presumed that a written contract embodies the entire agreement of the parties, and this is particularly so where it is a promi ssory note which is in dispute. Pacific Carlton Development Corp. v. Barber , 95 S.W.3d 159, 165 (Mo. App. 2003) (internal quotation marks and citations omitted )

. The pa role evidence rule does not apply , however, to the $15,000 in loans as the amortization schedule agreement represented a new or modified oral contract regarding those loans. (Mary testified at trial that Gregory presented the amortization schedule to her in January. Gregory argued orally that the amortization schedule was agreed upon in December because the schedule contains “12/19/01 4:36 AM” in the lower, right hand corner. Mary pointed out at trial that the upper, right hand corner contains the date “ 2002” and the start date listed on the schedule is “Jan 2002.” Because Gregory has never argued that the amortization schedule was agreed upon after he signed the promissory note, these variances are insignificant to this analysis.)10

incur.” Id. 10 Our Supreme Court stated in Berry v. Crouse , 376 S.W. 2d 107 (Mo. 1964): It is now perfectly clear that informal contracts, whether written or oral, can be modified and discharged by a subsequent agre ement, whether written or oral.

... [A]fter these issues have been determined and the court finds, as a fact, the making and the terms of the modifying or discharging agreement, we are no longer interested in the terms of the antecedent contract for purpose s of enforcement of them, in so far as those terms have been nullified by the new agreement.
Id. a t 112 (internal quot ation marks and citation omitted ). “When the parties modify an existing contract they are making a new contract; it is only enforceable if there is mutual assent and
consideration.” Best Buy Builders, Inc. v. Siegel , 409 S.W.3d 562, 565 (Mo. App. 2013) ( internal quotation marks and citation omitted)

. The trial court found that Gregory himself created the amortization schedule and the record suppo rts this conclusion. A ll parties agree that the $15,000 in loans were to be repaid according to the terms of that amortization schedule

. Assuming, arguendo , that the original loans were payable on demand and this amortization schedule was a “new” agr eement ,

c onsideration for this “new” agreement can be found in its terms; full payment was deferred over a period of fourteen years in exchange for 5 % yearly interest on the principal ba lance

. T his agreement was an installment contract and , like the promissory note discussed above in Point

one , the statute of limitations did not begin to run until the last installment was due under the

contract

. According to the amortization schedule, the last installment was due Decem ber, 2015.

10 Section 516.320 s tates that , in actions founded on any contract, no oral acknowledgement or promise t hereafter made shall be evidence of a new or continuing contract that might remove any case from the statutes of limitations set forth in Section 516.100 to 516.370 . Here, t he amortization schedule agreement was not a mere acknowledgment of an existing contract and promise to repay; if not the initial contract, it was an entirely new contract , complete with new consider ation, which nullified any prior agreements. T his new agreement was made prior to the expiration of any potentially applicable statute of limitations set forth in Section 516.100 to 516.370

. A lthough Gregory raises a statute of f rauds defense in Point three with regard to the trial court’s finding that reaffirmations and new promises were made in 2011, 2012, and 2013 regarding the debt, G regory has never contended that the statute of f rauds barred enforcement of the amortization schedule agreement.11

Mary filed her claim on April 23, 2013, prior to the due date of the fina l installment. As h er claim was file d prior t o the expi ration of any possible applicable statute of limitations , t he circuit

court did not err in rejecting Gregory’s statute of limitations defense regarding his promise to pay $15,000 in Count II of Mary’s petition

. 11 Point two is denied. In his third point on appeal, Gregory contends that the circuit court erred in finding tha t the debt owed to Mary was reaffirmed in 2011, 2012, and 2013, because Section 516. 320 requires that no acknowledgment or promise can take a contract out of the operation of the provis ions of sections 516.100 to 516.370 unless same is in a writing subscribed to by a party chargeable thereby, and no writing was subscribed to by Gregory to extend the statute of limitations on the debts and any promise, acknowledgement, or reaffirmation th ereof is void. Given our dispositions in Points one and two above, we need not decide this issue
b ec ause, even if the court found that the debt was reaffirmed and erred in doing so, this would not change the fact that Mary’ s claims were otherwise timely filed

. We conclude that the circuit court did not err in rejecting Gregory’s statute of limitations defense regarding the $45,000 promissory note as the statute of limitations began running on January 1, 2012 , the maturity date of the installment note , and Mary filed her c laim within ten years after that date. Further, we find that the circuit court did not err in rejecting Gregory’s
statute of limitations defense regarding his promise to pay $15,000 in Count II of Mary’s petition
because Mary’s clai m was filed prior to the expiration of the st atute of limitations set forth in

11 Although there is no evidence in the record that the amortization schedule or agreement based on that schedule included an acceleration provision, Gregory did not object to Mary’s petition for payment of the $15,000 on the grounds that her claim was prematurely fi led. Any such claim now would be moot as the final installment date of December, 2015 has now passed. Had there been an acceleration clause, Mary’s filing would have triggered the running of the statute of limitations. See Ryerson , 200 S.W.3d at 173.12

S ection 516.120 . We affirm the circuit court’s judgment.

Anthony Rex Gabbert, Judge

All concur.