Court Opinion

ID: 2908964
Source: CourtListenerOpinion
Date Created: 2015-09-10 03:49:33.235711+00
Date Added: 2024-06-11T15:21:11.667073
License: Public Domain

Suzanne McElwee and Hulan Dwight McElwee v. Estate of Howard E Joham, et al

IN THE
TENTH COURT OF APPEALS
 

No. 10-98-045-CV

     SUZANNE McELWEE AND
     HULAN DWIGHT McELWEE,
                                                                              Appellants
     v.

     ESTATE OF HOWARD E. JOHAM, ET AL,
                                                                              Appellees
 

From the 272nd District Court
Brazos County, Texas
Trial Court # 42948-272
                                                                                                                
   
O P I N I O N
                                                                                                                
   
      This was a dispute between a daughter and her father; now it is with his estate.  He made a
loan to her and her husband to purchase real property.  The loan agreement was never reduced
to writing.  She now asserts the statute of frauds because repayment of the loan was not to be
performed within one year, and the statute of limitations because it was more than four years
after she stopped making payments on the loan before he sued her.  Because the father had
fully performed under the contract, the statute of frauds is not applicable.  Because she
resumed payments under an oral modification of the loan and did not cease making payments
pursuant to the oral modification until shortly before her father sued her for payment, the
statute of limitations is not applicable.  Thus the judgment of the trial court awarding the
father’s executor judgment for the note balance and interest will be affirmed.
THE HISTORY
      In the early 1980's Howard E. Joham orally agreed to loan his daughter Suzanne and son-in-law, Tom Alan Garney, $41,000 to purchase real property.  The loan was made, but the
agreement was never reduced to writing.  Payments were made on the loan by Suzanne and
Tom until their divorce in 1991.  Suzanne received the real property in the divorce.  Suzanne
was ordered to pay “the balance due, including principal and interest, on any indebtedness of
the parties to Howard Joham.”  Neither the divorce decree nor the special warranty deed
executed the same day as the divorce decree indicated that the property was pledged as security
for the loan.  Payments on the loan temporarily ceased at the time of the divorce.
      Suzanne married Dwight McElwee.  The monthly payment and the interest rate were
orally modified and payments resumed in October 1993.  Payments of the modified amount
continued until February 1995.  In March 1995, with the assistance of Tom, Howard filed a
corrected special warranty deed to replace the one signed on the date of the divorce decree.  It
referenced the loan.
      Suzanne and Dwight sued Tom and Howard to clear their title to the real property of the
lien placed on it by the corrected special warranty deed.  Howard counterclaimed for the
balance on the loan and unpaid interest.
      A judgment removed the lien and ordered the lis pendens cleared.  It also awarded
Howard judgment for the balance of the note and unpaid interest.  The only complaints raised
on appeal attack the judgment as to the award for the note balance and interest.
COMPLAINTS ON APPEAL
      Suzanne and Dwight raise two complaints on appeal.  First, they complain that because
Howard did not bring suit within four years of the first default on the loan agreement, that the
four year statute of limitations had run before Howard sued, thus barring his ability to recover
in this suit.  Second, they complain that because the loan agreement by its terms could not be
performed within one year that it was barred by the statute of frauds.  We will address the
issues in reverse order.
STATUTE OF FRAUDS
      The statute of frauds provides that if by the terms of an agreement it cannot be performed
within one year from the date of the agreement that it must be in writing and signed by the
party against whom it is sought to be enforced.  This rule is codified in the Business and
Commerce Code as follows:
§ 26.01. Promise or Agreement Must Be in Writing
      (a)  A promise or agreement described in Subsection (b) of this section is not enforceable
unless the promise or agreement, or a memorandum of it, is
 
(1)in writing;  and
 
(2)signed by the person to be charged with the promise or agreement or by
someone lawfully authorized to sign for him.
 
      (b)  Subsection (a) of this section applies to:
 
***
(6)an agreement which is not to be performed within one year from the date of
making the agreement;

Tex. Bus. & Comm. Code Ann. § 26.01 (Vernon 1987).
      However, courts have crafted various exceptions to the application of the statute when
enforcement would allow the very fraud that was sought to be prevented.  One exception to the
application is when one party has fully performed under the contract and the only thing
remaining is performance by the other party.  Frey v. Pearson, 168 S.W.2d 886, 889 (Tex.
Civ. App.—Waco 1943, no writ).  This exception has specifically been applied to an
agreement to loan money requiring payments to be made over a period greater than one year. 
Estate of Kaiser v. Gifford, 692 S.W.2d 525 (Tex. App.—Houston [1st Dist.] 1985, writ ref’d
n.r.e.).
      Having advanced the loan proceeds, Howard had fully performed his part of the contract. 
The only performance remaining was for Suzanne to repay the obligation.  Thus the statute of
frauds does not apply.  Suzanne’s second issue is overruled.
STATUTE OF LIMITATIONS
      The statute of limitation for an action on debt is four years.  Tex. Civ. Prac. & Rem.
Code Ann. § 16.004(a)(3) (Vernon Supp. 2000).  When the contract calls for periodic
payments, a cause of action for nonpayment accrues at the end of each period until the contract
is complete.  Townewest Homeowners Ass’n, Inc. v. Warner Communication Inc., 826 S.W.2d
638, 640 (Tex. App.—Houston [14th Dist.] 1992, no writ).  Therefore, the limitations period
begins to run as to each payment on the date it is due and not paid.  Id.  Loan payments
initially ceased in 1991.
      However, in this situation the effect of the modification of the loan agreement and the
resumption of loan payments at a different amount than originally agreed must be considered. 
The agreement was modified.  The amount of the monthly payments and the rate of interest
was changed in 1993.  Payments under the revised agreement were made until February of
1995.  Suit was brought in March of 1997, well within the four year limitations period.
      The effect of these actions was to create a new agreement, binding the parties to a new
contract, from which this cause of action arose when the loan was defaulted upon in March
1995 and ultimately repudiated.  The limitations period did not begin to run until that time and
suit was brought within the limitations period of four years.
      That this is the law cannot be disputed.  In 1931, the Commission of Appeals summarized
the applicable law as follows:
Where the parties to a promissory note, which is past due but is unbarred by
limitation, and which by its terms bears interest until paid, mutually agree to an
extension of the time of payment of the note to a future date, a new contract, based
upon a new consideration deemed valuable in law, arises between the parties.  By
such an agreement, each of the parties becomes obligated to the other in respects not
comprehended by the contract arising from the note.  The payee impliedly promises to
surrender his present right to demand immediate payment of the indebtedness
represented by the note, and to forego suit during the extension period; the payor
impliedly promises to pay said indebtedness on the new maturity date, together with
interest up to that date, in any event, at the rate provided in the note.  Each of these
new promises constitutes the consideration for the other, and a binding contract,
embodying the terms of the note, as modified by the new agreement, results.  Benson
v. Phipps, 87 Tex. 578, 29 S.W. 1061, 47 Am. St. Rep. 128.  In such a case, we
understand the rule to be that, despite the fact that said agreement is oral, the existing
right of action, which accrued to the creditor under the note, is relinquished, and that
another right of action for the debt does not accrue to him until the new promise of the
debtor to pay is breached.  Limitation does not commence to run against an action to
enforce the debtor's new promise to pay, until the time for performance of the new
promise arrives.  Heisch v. Adams, 81 Tex. 94, 16 S.W. 790; Port Arthur Rice Mill
Co. v. Beaumont Rice Mills, 105 Tex. 514, 143 S.W. 926, 148 S.W. 283, 150 S.W.
884, 152 S.W. 629.
 
The foregoing legal principles are applicable to the present case.  The words of
the agreement of January, 1927, were that the "note" was to be "carried another
year."  This language clearly imports a purpose to extend the time of payment of the
indebtedness evidenced by the note to January 1, 1928.  From this extension
agreement, constituting as it does a new contract binding the respective parties to new
engagements, the cause of action declared on arose.  This cause of action has never
become barred by limitation; therefore Article 5539 of the statutes does not apply.

McNeill v. Simpson, 39 S.W.2d 835, 835-836 (Tex. Comm’n. App. 1931, opinion aff’d).  See
also Hoarel Sign Co. v. Dominion Equity Corp., 910 S.W.2d 140, 144-145 (Tex.
App.—Amarillo 1995, writ denied).
      Howard’s claim for payment of the debt was not barred by the statute of limitations. 
Suzanne’s first issue is overruled.
CONCLUSION
      Having overruled both issues raised on appeal by Suzanne and Dwight McElwee, the
judgment in favor of James R. Joham, Independent Executor of the Estate of Howard E.
Joham, is affirmed.

                                                                   TOM GRAY
                                                                   Justice

Before Chief Justice Davis,
      Justice Vance and
      Justice Gray
Affirmed
Opinion delivered and filed January 26, 2000
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