Huntley v. Bortolussi, 93-CV-1341.
| Decision Date | 07 December 1995 |
| Docket Number | No. 93-CV-1341.,93-CV-1341. |
| Court | D.C. Court of Appeals |
| Parties | James B. HUNTLEY, Appellant, v. Hugo BORTOLUSSI, Appellee. |
Richard B. Treanor, for appellant.
Clifford E. Barnes, for appellee.
Before FERREN, SCHWELB, and REID, Associate Judges.
Appellee Hugo Bortolussi filed a complaint for failure to pay a promissory note against appellants James B. Huntley and his wife Emily C. Huntley.1 The trial judge granted summary judgment for appellee; in doing so he concluded that the twelve year statute of limitations was applicable to appellee's action rather than the three year statute. We disagree and hold that the expiration of the three year period barred appellee's claim. We therefore reverse.
On September 21, 1979, appellant and his wife borrowed $5,000 from appellee. They executed a promissory note, which was not sealed, and promised to repay the indebtedness within ninety days. Simultaneously, they executed a deed of trust on property located in the District of Columbia. The deed of trust secured the loan.2 Payment was not made on the note within ninety days.
On May 21, 1982, appellant and his wife signed a notarized document which extended the time for payment of the loan to September 21, 1982. Again, payment was not made. Years passed by with no action on the note by either party. Finally, on July 17, 1992, appellee filed suit on the note seeking $23,923.00 in principal and interest. His complaint did not mention the deed of trust, but described the note as one "under seal." In his answer to the complaint, appellant maintained that the statute of limitations barred the complaint. Both parties moved for summary judgment.
The trial court ruled in favor of appellee as a matter of law, and concluded that: As authority for its ruling, the trial court cited Cafritz Constr. Co. v. Mudrick, 61 App.D.C. 189, 190, 59 F.2d 864, 865 (1932). We disagree with the trial court's ruling and hold that on the facts of this case, the three year statute of limitations applied. Therefore, appellee's action, filed approximately ten years after the execution of the extension of the note, is barred by the statute of limitations.
It is indisputable that the promissory note, as extended on May 21, 1982, matured on September 21, 1982. Under D.C.Code § 12-301 (1981), an action on a note is governed by a three year statute of limitations, unless it constitutes "an instrument under seal" within the purview of § 12-301(6). Since appellee filed suit approximately ten years after the note matured, his action would be barred if the three year limitation statute were held applicable. However, appellee maintains that the note at issue is a sealed instrument even though neither the original note or the 1982 extension was sealed. He insists that the note, extension and deed of trust must be read together. He maintains that because the deed of trust has the word "seal" by his name, the promissory note is a sealed instrument, and his action is timely.
Appellant argues that appellee sued on the note, and that neither the note nor the extension is sealed. Further appellant argues, appellee may no longer rely on the deed of trust because it does not exist due to the sale of the property. Therefore, the three year statute of limitations is applicable, and appellee's action is barred.
We first examine the documents at issue. The September 21, 1979, note is a simple promissory note. It is clearly not sealed. The September 21, 1979, deed of trust is notarized and bears the word "seal" next to appellee's name, but there is no independent covenant or promise to pay the $5,000 indebtedness. There is an acknowledgment of the money owed in the first "whereas" clause.3 In addition, the second "whereas" clause expresses a "desire" of the makers of the underlying note "to secure prompt payment of the debt...." The May 21, 1982, notarized document is a simple extension that does not even record the dollar amount of the indebtedness on its face.4
We turn next to the trial court's conclusion that this case is governed by Cafritz Constr. Co., supra, 61 App.D.C. at 191. Cafritz did not involve a question concerning the applicability of a three or twelve year limitation period. Rather, it concerned an acceleration clause in a deed of trust which controlled the time for full payment on a promissory note in the event that a default occurred and a sale of the property securing the note left a deficiency, or a remaining sum to be paid, under the note. In Cafritz, both the promissory note and the deed of trust, which secured the note, were executed simultaneously. Since the note had not matured at the time the property was sold and the deficiency following the sale was obvious, the question for the court centered on the intention of the parties concerning when full payment should be made after a default, sale and resulting deficiency. Under those circumstances, the court held that the parties intended the note and the deed of trust to be read as one instrument. Since the deed of trust contained an acceleration clause relating to the note, the court concluded that the remaining sum on the note was immediately due. The facts of appellant's case are different and Cafritz is not controlling.
Directly applicable, however, is Hoffman v. Sheahin, 73 App.D.C. 374, 121 F.2d 861 (1941) which involved a statute of limitations' question.5 The court concluded that the three year limitation period was applicable. In doing so, the court made clear the necessity of finding in the deed of trust under seal more than an acknowledgment of the indebtedness on the notes to invoke the longer period of limitation. Rather, there must be an "independent undertaking" reflected in the deed of trust. As the court put it: "It is true the deed under seal acknowledged the existence of the indebtedness on the notes, but this is held insufficient to constitute an independent undertaking for purposes of rendering a personal judgment, as distinguished from one for foreclosure." Id. at 376-77, 121 F.2d at 864.6
Assuming that the 1979 deed of trust under seal at issue in this case has continuing validity despite the sale of the underlying property, it does not help appellee's cause because it does not contain an independent undertaking or covenant to pay the indebtedness. Appellee insists that both the first and second "whereas" clauses contain a covenant to pay, and directs our attention to Holcomb v. Webley, 185 Va. 150, 37 S.E.2d 762 (1946). Holcomb involved the applicable statute of limitations governing eleven notes secured by a deed of trust upon property owned by the maker of the notes. The property was sold and the holder of the notes sued to collect the deficiency. The court held that since the deed of trust was under seal, contained no acceleration clause, and included a covenant to pay the debt, an action would lie with respect to the notes which did not mature before the expiration of the ten year limitation period applicable to sealed instruments.
Holcomb must be read in light of the "whereas" clauses contained in the September 21, 1979, deed of trust under seal. The first "whereas" clause, on its face, is a mere acknowledgment. The second "whereas" clause simply expresses a "desire" of appellants to secure the note with property identified in the deed of trust. The language in these two "whereas" clauses differs remarkably from that contained in the deed of trust at issue in Holcomb. That language consisted of an actual covenant which stated: "The said parties of the first part hereby waive the benefit of their homestead exemption as to the debt secured by this deed and bind themselves, their heirs or assigns, to pay off said debt promptly when it becomes due and payable." 37 S.E.2d at 764.
Our conclusion that the language in the September 21, 1979, deed of trust under seal is an acknowledgment and not a covenant is supported by the companion case to Hoffman, Brice v. Walker, ...
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