Opinion ID: 750719
Heading Depth: 3
Heading Rank: 1

Heading: Release or Discharge of Debt

Text: 13 It is well established in Texas that the mere communicated intent to forgive, without some further action by the creditor or debtor, cannot be the basis of a debt release or discharge. The general principle is that without additional consideration, a debtor's part-payment of a liquidated debt does not constitute an accord and satisfaction, even if the creditor and debtor agree that the debt is thereby discharged. See Jenkins v. Henry C. Beck Co., 449 S.W.2d 454, 455 (Tex.1969) (setting out the requirements of accord and satisfaction); Jeanes v. Hamby, 685 S.W.2d 695, 697 (Tex.App.--Dallas 1984, writ ref'd n.r.e) (holding that the payee of a note who had obtained a judgment against guarantors did not release the judgment by executing a release in exchange for a part-payment of the judgment); Mathis v. Bill De La Garza & Associates, 778 S.W.2d 105, 107 (Tex.App.--Texarkana 1989, no writ) (holding that the mere payment and acceptance of a sum of money less than the amount of an undisputed indebtedness does not constitute an accord and satisfaction.) (emphasis in original); 1 Tex.Jur.3d Accord and Satisfaction § 11 (1993). 14 While consideration is not necessary for a debt to be discharged by gift from the creditor to the debtor, here appellees did not claim below (in their final amended complaint or in the pretrial order) that New MeraBank (or the RTC) had made any gift to them, and the district court made no finding or conclusion that there had been any gift. Nor would the evidence sustain any such finding. The person claiming that a gift was made must prove the gift by clear and convincing evidence. Dorman v. Arnold, 932 S.W.2d 225, 227 (Tex.App.Texarkana, 1996, n.w.h.). To constitute a gift inter vivos there must not only be a donative intention, but also a complete stripping of the donor of all dominion or control over the thing given. Peterson v. Weiner, 71 S.W.2d 544, 546 (Tex.Civ.App.San Antonio, 1934, writ ref'd) (no gift of note or debt represented thereby from holder to maker where former retains note). 7 Here there was plainly no complete stripping of New MeraBank of all dominion or control over the judgment debt. Although the 1099A forms do refer to Promissory Note & Guaranty Agreement, the promissory note and guaranty agreement on which the judgment was based were retained by New MeraBank (until transferred to Firstrust) and were not destroyed, endorsed, or marked canceled, released, discharged (or paid), or the like, and no express transfer or release of the note or guaranty was ever executed or delivered. The judgment is not mentioned in the 1099A forms. No purported transfer (other than to Firstrust), satisfaction, discharge, cancellation, or release of the judgment has ever been executed or delivered or noted in the records of the court entering the judgment or elsewhere. 8 15 There is no evidence that appellees gave consideration in exchange for a debt forgiveness, or that New MeraBank (or the RTC) in any way divested itself of control or title to the note and guaranty and outstanding judgment by issuing the 1099A forms and writing off the debt. While the issuance of a 1099A form may reflect an intent in some sense to forgive the debt, it does not on its own have the legal effect of releasing or discharging the debt. 16 The fact that the New MeraBank subsequently wrote off the debt on its books (a fact never communicated to appellees) is even less significant than the 1099A forms. A write-off is merely an accounting practice or convention for reducing to zero the value of an asset as shown on a balance sheet. See A Dictionary of Accounting 343 (R. Hussey ed., 1995) (defining write-off). A bad debt that has been written off may still be recovered in the future and written back on the books again. Id. at 39 (defining bad debt recovered). Thus, writing off a bad debt merely reflects the creditor's determination at the time that none of the debt is then either collectible or has any likelihood of ever becoming so, or that any collection expenses will likely exceed receipts, but it does not constitute a legally effective discharge or release of the indebtedness and it does not imply that the creditor intends to thereby legally divest himself of ownership of the debt or to legally preclude any further efforts to collect. 17 Since there was neither an accord and satisfaction nor a completed gift, it would be anomalous for us to uphold the district court's finding that the RTC released the debt without receiving any payment or relinquishing title to or control over the note, guaranty, or judgment. To hold otherwise would be a dramatic departure from settled Texas law.