Court Opinion

ID: 1082316
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:57:42.921661+00
Date Added: 2024-06-11T15:10:41.995571
License: Public Domain

C.A. HOBBS, JR., INC,             )
                                  )
      Plaintiff/Appellee,         )    Appeal No.
                                  )    01-A-01-9506-CV-00236
v.                                )
                                  )    Montgomery Circuit
DAVID BRAINARD,                   )    No. C9-772
SUSAN B. REYES and                )
CAROL B. HAM,                     )

      Defendants/Appellants.
                                  )
                                  )
                                                      FILED
                                                        Nov. 3, 1995

                                                      Cecil Crowson, Jr.
                COURT OF APPEALS OF TENNESSEE          Appellate Court Clerk

                 MIDDLE SECTION AT NASHVILLE

     APPEAL FROM THE CIRCUIT COURT FOR MONTGOMERY COUNTY

                  AT CLARKSVILLE, TENNESSEE

            THE HONORABLE JAMES E. WALTON, JUDGE

ROBERT H. MOYER
Rudolph, Ross & Fendley
107 North Third Street
P. O. Box 925
Clarksville, Tennessee 37041-0925
     ATTORNEY FOR PLAINTIFF/APPELLEE

V. MICHAEL FOX
Bruce, Weathers, Corley Dughmand & Lyle
First American Center, 20th Floor
315 Deadrick Street
Nashville, Tennessee 37238-2075
     ATTORNEY FOR DEFENDANTS/APPELLANTS

                        REVERSED AND REMANDED

                                          SAMUEL L. LEWIS, JUDGE
                           O   P I N I O N

       This is an appeal by defendants/appellants from the trial

court's order granting plaintiff/appellee's motion for summary

judgment   and   the   resulting   judgment   entered   in   favor   of

plaintiff/appellee, C.A. Hobbs, Jr., Inc. ("Hobbs").

       The facts out of which this matter arose are as follows.

On or about 9 February 1981, Dr. Clara Brainard Wagner, appellants'

mother, executed a promissory note in the principal sum of forty-

three thousand seven hundred ninety-one dollars ($43,791.00).        The

note accrued interest at seven percent and was payable on demand to

the order of Hobbs.

       On or about 26 March 1984, appellants entered into a

contract with Hobbs in which they assumed the indebtedness of the

promissory note.    The pertinent portion of the agreement provides

as follows:

       Brainard, Reyes and Ham will unconditionally assume
       the indebtedness evidenced by a promissory note in
       the amount of $43,791.00, dated February 9, 1981
       plus accrued interest from February 9, 1981 made by
       their mother, Clara Brainard, to C.A. Hobbs, Jr.,
       Inc., with the understanding that they will pay
       this indebtedness from the first proceeds received
       from the syndication of a 48 unit apartment complex
       in Pembroke, Kentucky which is anticipated to be
       syndicated in March of 1984.     Unavailability of
       funds from the syndication of the Pembroke,
       Kentucky property or inability to syndicate said
       property shall not relieve them from liability on
       said note; however Hobbs will not demand payment of
       said note within a period of 1 year from date
       hereof or the settlement of the Estate of Clara
       Brainard, whichever shall first occur.        After
       demand, Brainard, Reyes and Ham waive protest and
       dishonor and agree to pay a reasonable attorney fee
       if said note is placed in the hands of an attorney
       for collection.

       It is without question that the promissory note at issue is

a demand note.     Tennessee law requires a party to bring an action

to collect on a demand note within ten years of the date of

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execution.       Jenkins v. DeWar, 112 Tenn. 684, 685-86, 82 S.W. 470,

470 (1904); Tenn. Code Ann. § 28-3-109(c)(1980). In this case, the

statute ran on 9 February 1991, ten years after the execution of

the note on 9 February 1981.

          In Hall v. Skidmore, 171 S.W.2d 274, 275 (Tenn. 1943), the

Tennessee Supreme Court set forth the rule that an acknowledgment

of a debt does not toll the statute of limitations unless:

          [It is] "coupled with an expression of a willing-
          ness to pay." Such an expression might be implied
          from words or acts of the debtor, but, in whatever
          form it is to be found, it must amount to the
          recognition of a continuing obligation. In other
          words, the acknowledgment of the debt will be
          construed as a "willingness to pay" when the facts
          and circumstances surrounding the parties indicate
          an intention on the part of the debtor to
          revitalize the original promise. . . .

Hall, 171 S.W.2d at 275 (citing 34 Am. Jur., P. 235 and cases

cited).    In 1979, the Tennessee Supreme Court addressed the issue

presented in Hall once again.            Graves v. Sawyer, 588 S.W.2d 542

(Tenn. 1979).      As in Hall, the court had to decide whether payments

of interest on a promissory note tolled the statue of limitations.

Id.    The Hall court applied the rule quoted above and concluded

that payments of principal and interest alone did not constitute a

willingness to pay.          Hall, 171 S.W.2d at 275-76.          In Graves, the

court restated the rule in Hall, but then criticized it for being

"entirely too harsh."         Graves, 588 S.W.2d at 544.        As a result, the

court held that, absent evidence to contrary, "the affirmative act

of a debtor in making a voluntary, unconditional payment on a debt,

or    interest    due   on   a   debt,   is   such   an   act   that   implies   'a

willingness to pay.'" Note, however, that the Graves court did not

overturn the rule set forth in Hall.                 Instead, the Graves court

overruled the conclusion reached by the Hall court.               See Id.   Thus,

it still remains the law of this state that the maker of a note or

his agent must acknowledge the existence of the debt and express

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a willingness to pay the debt in order to toll the statute of

limitations.   See Spearman v. Stucki, 1986 WL 6315, at *2 (Tenn.

App. 1986); Farmers & Merchants Bank v. Templeton, 646 S.W.2d 920,

923 (Tenn. App. 1982).

       In the instant case, Dr. Wagner executed the promissory note

on 9 February 1981.   There was a subsequent promise to pay the 1981

debt, but it was not made by the original maker of the note or the

maker's agent.    Under the contract, the appellants assumed the

obligations contained in the 1981 note.    The contract was not an

acknowledgement of appellants' existing indebtedness.    Rather, it

was an assumption of the indebtedness of another by appellants.

       The statute of limitations "confers a positive right."

Stanley v. McKinzer, 75 Tenn. 454, 457 (1881).      When appellants

assumed the obligation to pay the promissory note, they also

assumed the positive right conferred by the statute of limitations

on the original note.

       Had appellants executed a new note, the outcome would be

different.

       It is the law in Tennessee that execution of a new
       note acknowledging existing indebtedness waives the
       limitations period with respect to that indebted-
       ness, so that a new limitations period begins to
       run from the time of the renewed note.

Union Planters Nat'l Bank v. Markowitz, 468 F. Supp. 529, 532 (W.D.

Tenn. 1979).   Only a maker of a note can remove an already existing

note from the statute of limitations by expressing a willingness to

pay without the execution of a new note.

       Had the parties intended the statute of limitations to

recommence in 1984, when they entered into the contract, they could

have executed a new note to replace or renew the original note.

                                  4
Appellants did not execute a new promissory note for the debt

assumed on 26 March 1984 nor did the parties contemplate that

appellants would execute such a note.         The fact that the parties

chose not to do so indicates that they did not intend the 1984

contract to have the effect of a new note.

          Paragraphs three, four, and eight of the contract evidence

the parties' intent to not create a new note.            Paragraph three

states that appellants were to execute a promissory note payable to

Hobbs in consideration for the construction of a home by Hobbs for

appellants.        Paragraph eight lists "a promissory note" among

several    other    documents   which   the   parties   were   to   execute

subsequent to the contract.       In contrast, paragraph four of the

contract, which is the basis of the instant suit, makes no mention

of the execution of a new promissory note.

          The agreement entered into by the parties on 26 March 1984

was a contract.        Under the terms of the contract, appellants

assumed the obligations of the promissory note that Dr. Wagner had

executed on 9 February 1981.       Appellants assumed nothing more or

nothing less than the obligations and the corresponding rights

relating to the note.      One of the rights relating to the note was

the applicable statute of limitations which ran on 9 February 1991.

          Because appellants were not parties to the 1981 note, this

court cannot construe their subsequent agreement of 26 March 1984

as a willingness to pay their existing debt.        The execution of the

contract was not the type of expression which the law recognizes as

taking a note out of the original statute of limitations.

          The statute of limitations on the promissory note ran on 9

February 1991, ten years after Dr. Wagner executed the note.

Therefore, we are of the opinion that the trial court erred as a

                                    5
matter of law in holding that the 1984 contract extended the

statute of limitations on the note until March 26, 1994.

          It, therefore, results that the judgment of the trial court

is reversed, and the cause is remanded to the trial court for any

further necessary proceedings.

          Costs on appeal are taxed to the plaintiff/appellee, C.A.

Hobbs, Jr., Inc.

                                   __________________________________
                                   SAMUEL L. LEWIS, JUDGE

CONCUR:

__________________________________
HENRY F. TODD, P.J., M.S.

__________________________________
BEN H. CANTRELL, J.

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