Keota Mills & Elevator v. Gamble

• Decision Date: 06 December 2010
• Docket Number: No. 103,149.,103,149.
• Citation: 243 P.3d 1156,2010 OK 12
• Court: Oklahoma Supreme Court
• Parties: KEOTA MILLS & ELEVATOR, Appellant/Plaintiff, v. Othel GAMBLE, Jr., Appellee/Defendant.

243 P.3d 1156 2010 OK 12 KEOTA MILLS & ELEVATOR, Appellant/Plaintiff, v. Othel GAMBLE, Jr., Appellee/Defendant. No. 103,149. Supreme Court of Oklahoma. Feb. 16, 2010. Rehearing Denied Dec. 6, 2010.

APPEAL FROM THE DISTRICT COURT OF LEFLORE COUNTY; Honorable Danita G. Williams, Trial Judge

¶ 0 The appellant/plaintiff, Keota Mills (Keota), brought an action against the appellee/defendant, Othel Gamble, Jr. (Gamble), to recover from an alleged default on a promissory note executed in 1989. Gamble argued that the suit was time-barred by the five year limitation period of 12 O.S.1981 § 95, which was in effect when the note was executed. Keota insisted that the six year limitation period of 12A O.S. Supp.1992 § 3-118(a), which became effective January 1, 1992, was applicable. The parties stipulated to the issue and the facts. The trial court determined that the action was untimely, and Keota appealed. We hold that under the stipulated facts, payments made on the note for the years 1999 through 2001, which were intended to apply towards the balance of the note, extended the limitations period pursuant to 12 O.S.2001 § 101. Consequently, the action which was brought within threemonths of the last payment in 2001, was timely under either statute.

TRIAL COURT REVERSED; CAUSE REMANDED FOR PROCEEDINGS CONSISTENT WITH OUR PRONOUNCEMENT.

Marc L. Bovos, Poteau, OK, for Plaintiff/Appellant.

Douglas W. Sanders, Poteau, OK, for Defendant/Appellee.

KAUGER, J.:

¶ 1 This cause concerns an attempt to recover on a defaulted promissory note. The dispositive question presented is whether partial payment on the note extended the time within which to bring an action. The parties stipulated that the issue was whether the suit was time-barred by the five year limitation period of 12 O.S.1981 § 95,¹ which was in effect in 1989 when the note was executed, or the six year limitation period of the Uniform Commercial Code (UCC) 12A O.S. Supp.1992 § 3-118(a),² which became effective January 1, 1992.

¶ 2 However, reliance on only these statutes fails to take into consideration 12 O.S.2001 § 101,³ which has remained unchanged since its enactment in 1910 and which, pursuant to 12A O.S.2001 § 103,⁴ supplements the UCC. Section 101 provides, in effect, that partial payment extends the time within which to bring an action in any case founded on contract. Therefore, we hold that the action was timely because it was brought within three months of the last partial payment in 2001.

FACTS

¶ 3 The plaintiff/appellant Keota Mills and Elevator (Keota) entered into a promissorynote based on an open account balance with the defendant/appellee Othel Gamble, Jr., (Gamble) on January 6, 1989. The principal sum of the loan was $100,000.00, and the interest rate was 15% per annum until paid for a total of $115,000.00. The note also included a provision for attorney fees not in excess of 15% of the unpaid debt after default. The loan was for one year, and it was secured by 300 acres of spring spinach and the 1989 soybean crops.

¶ 4 The parties have stipulated that Gamble made sporadic payments on the note on the following dates, in the following amounts:

⁵

2/1/1990	$20,000.00	5/10/2000	$2,000.00
3/05/1991	$20,000.00	6/12/2000	$2,000.00
10/18/1996	$25,000.00	7/5/2000	$2,000.00
5/11/1999	$ 2,000.00	8/25/2000	$2,000.00
6/10/1999	$ 2,000.00	10/10/2000	$2,000.00
7/7/1999	$ 2,000.00	11/22/2000	$2,000.00
8/24/1999	$ 2,000.00	3/29/2001	$2,000.00
4/11/2000	$ 2,000.00	5/22/2001	$2,000.00
6/13/2001	$2,000.00

¶ 5 On September 28, 2001, three months after the last payment, Keota filed a lawsuit alleging that Gamble had defaulted on the note. Gamble responded with an answer and counter-claim, arguing, alternatively, that: 1) the payments did not toll the applicable statute of limitations; 2) if the limitations period had been tolled, there was an oral novation; and 3) in the absence of a novation, Keota, instead, owed Gamble.

¶ 6 On October 3, 2005, the parties stipulated that the threshold legal issue in this matter was which statute of limitations controlled-the five years under 12 O.S.1981 § 95,⁶ which was in effect when the note was executed, or the six years under 12A O.S. Supp.1992 § 3-118(a), which did not become effective until January 1, 1992.⁷

¶ 7 The trial court held a hearing on November 17, 2005. It issued an order on January 6, 2006, determining that the action was time-barred by 12 O.S.1981 § 95.⁸ Keota appealed on March 14, 2006, and the cause was assigned to this office on September 21, 2009.

¶ 8 THE PAYMENTS MADE ON THE NOTE EXTENDED THE LIMITATIONS PERIOD.

¶ 9 The parties have stipulated to the facts and issues in an apparent attempt to narrow the question before the Court. However, they also stipulated that the debtor continued to make payments on the note from 1999 until 2001. The clear implication of this stipulation is that such payments were voluntary and were to apply to the balance due on the note. We construe a petition in error in its entirety,⁹ and we cannot ignore applicable, controlling law.¹⁰ Rules of pleadingboth at trial and at appellate levels have been liberalized to allow the court to focus attention on the substantive merits of the dispute rather than upon procedural niceties.¹¹ Certainly, whether the continuation of payments serves to toll or revive the statute of limitations is within the merits of the dispute and the issues raised and argued on appeal regardless of the parties' attempt at narrowing the issue by stipulation.

¶ 10 Since 1910, the general rule of law is that voluntary, partial payments made on a contractual debt extends or revives the statute of limitations. Title 12 O.S.2001 § 101, which was enacted in 1910 and has remained unchanged since, provides:

In any case founded on contract, when any part of the principal or interest shall have been paid, or an acknowledgment of an existing liability, debt or claim, or any promise to pay the same shall have been made, an action may be brought in such case within the period prescribed for the same, after such payment, acknowledgment or promise; but such acknowledgment or promise must be in writing, signed by the party to be charged thereby.

¶ 11 Section 101 was borrowed from the 1889 statutes of the State of Kansas. The Kansas Supreme Court in Good v. Ehrlich, 67 Kan. 94, 72 P. 545, 546 (1903) addressed its version of the statute by acknowledging that pursuant to the common law and the statute, partial payment tolled the limitations period because it was an acknowledgment of an existing liability at the time the payment was made.¹²

¶ 12 This Court, in Berry v. Oklahoma State Bank, 1915 OK 590, 50 Okla. 484, 151 P. 210, applied the Kansas Court's rationale when it reviewed an action brought on behalf of a bank to recover on a defaulted note. The debtor alleged that the statute of limitations had expired, claiming the note was due more than five years prior to the filing of the suit. The bank had alleged that interest payments had been paid by the debtor, thereby tolling the statute of limitations. Although the Court did not specifically address the language of § 101, it did rely on the Good Kansas case which had recognized that a partial payment, if made as part of the obligation by the debtor or someone at the debtor's direction, and under such circumstances amounted to an acknowledgment of an existing liability, extended or tolled the limitation period.¹³

¶ 13 Since 1915, this Court has had numerous opportunities to discuss and apply this statutorily codified, common law rule. In 1918, the Court recognized in Ross v. Lee, 1918 OK 222, ¶ 3, 68 Okla. 125, 172 P. 444, a case involving a promissory mortgage note, that it was well settled that when credit is made with the consent of and by agreement with the debtor, it will constitute payment and interrupt the statute of limitations. In Eichman v. Culver, 1934 OK 526, ¶ 11, 169 Okla. 495, 37 P.2d 640, the Court in an action on a promissory note held that partial payment by the debtor, in order to toll the statute of limitations must be voluntary, and made by the debtor or someone authorized on the debtor's behalf. The Court noted that the reason for this rule was because the partial payment constituted an acknowledgment of the existing debt.

¶ 14 In First State Bank of Loco v. Lucas, 1934 OK 340, ¶ 8, 168 Okla. 406, 33 P.2d 622, the Court held that in order for a partial payment to revive a debt barred by the statute of limitations, it must be made under circumstances warranting a clear inference that the debtor recognized the debt as an existing liability and indicating a willingness or at least an obligation to pay towards the balance. In other words, where the circumstances and events surrounding the partial payment clearly infer that the payment made was voluntary and intended to be made on the indebtedness, the limitation period is extended or revived.¹⁴

¶ 15 This partial payment rule has also been recognized in other states as well. In Johnson v. Johnson, 81 Mo. 331 (1884), the Supreme Court of Missouri, addressing the limitation period on a suit brought to foreclose a mortgage recognized that: 1) the running of the statute of limitations is suspended and its bar overcome by evidence of partial payment; and 2) partial payment on a note, after the bar of the statute has become complete will revive the cause of action upon it. Similarly, in Wadley v. Ward, 99 Ark. 212, 137 S.W. 808, 809 (1911), the Supreme Court of Arkansas, when addressing the limitations period on a defaulted mortgage stated:

It is well settled that, as against the debtor, partial payments made by him to his creditor will stop the running of the statute of limitations, and mark the time from which the statute then begins to run; and the general rule is that the partial payment of a debt, which will prevent the statute of limitations from running against it, will also prevent the statute from running against the remedy on the security....¹⁵

¶ 16 We have also recognized the partial...