O'MALLEY v. Frazier

• Decision Date: 12 July 2002
• Docket Number: No. 86,620.,86,620.
• Citation: 49 P.3d 438,274 Kan. 84
• Parties: PHILLIP O'MALLEY, Appellant/Cross-Appellees, v. RONALD L. FRAZIER and KATHRYN A. FRAZIER, Appellees/Cross-Appellants.
• Court: Kansas Supreme Court

274 Kan. 84

49 P.3d 438

PHILLIP O'MALLEY, Appellant/Cross-Appellees, v. RONALD L. FRAZIER and KATHRYN A. FRAZIER, Appellees/Cross-Appellants.

No. 86,620.

Supreme Court of Kansas.

Opinion filed July 12, 2002.

Kevin F. Mitchelson, of Wheeler & Mitchelson, Chartered, of Pittsburg, argued the cause, and John H. Mitchelson, Darron C. Farha, and Jason P. Wiske, of the same firm were with him on the briefs for appellants/cross-appellees.

Mark S. Gunnison, of Payne & Jones, Chartered, of Overland Park, argued the cause, and Robin E. Scully, II, of the same firm, was with him on the briefs for appellees/cross-appellants.

The opinion of the court was delivered by

LARSON, J.:

This appeal raises the question of whether a conditional payment can be made on a promissory note barred by the statue of limitations and revive the obligation to pay the principal amount but not the interest thereon.

When the makers delivered a partial payment on the principal of a time-barred promissory note, they indicated an intent to repay the balance of the principal only. The payee sued to collect the remaining principal and interest on the note. The makers defended by asserting the statute of limitations. On cross-motions for summary judgment, the district court revived the principal by applying the provisions of K.S.A. 60-520(a) but not the outstanding interest. The parties cross-appealed. The Court of Appeals held that under K.S.A. 60-520(a), the makers' part payment revived the entire promissory note, both principal and interest. O'Malley v. Frazier, 29 Kan. App.2d 947, 34 P.3d 478 (2001). We granted the makers' petition for review.

Although both parties suggest there were controverted facts, any disputed facts, however resolved, would not affect the judgment and do not present a genuine issue of material fact. See Bergstrom v. Noah, 266 Kan. 847, 872, 974 P.2d 531 (1999). The trial court found the following facts to be undisputed, which we set forth along with the proceedings and rulings in the trial court and the Court of Appeals prior to our consideration of this appeal.

On May 24, 1984, Kathryn and Ronald Frazier entered into a promissory note with Phillip O'Malley in the amount of $27,000 at 14% interest, due in full in 90 days. The Fraziers did not repay the note according to its terms; however, they did make interest payments from time to time until September 9, 1987.

Ronald Frazier had conversations with O'Malley in which he always expressed his intent to repay, when he could, the $27,000 principal amount of the debt. Frazier never indicated an intent to pay any interest. O'Malley admitted in a deposition that Ronald Frazier always said: "I'm going to pay you the principal, but I can't pay you the interest."

On January 24, 2000, almost 13 years after their last payment, Ronald Frazier delivered a $5,000 check to O'Malley. The check was written and signed by Kathryn Frazier. When Ronald Frazier delivered the check, he stated to O'Malley that he would try to raise the money and try to pay the balance of the principal at some time in the future.

A few months later, Ronald Frazier offered to pay O'Malley the remaining $22,000 in exchange for a release acknowledging no further obligation on the debt. O'Malley refused and initiated this action. It is undisputed that by the time the Fraziers paid the $5,000 to O'Malley, the applicable limitation period for any action upon any agreement, contract, or promise in writing had expired. K.S.A. 60-511. It is also undisputed that O'Malley sued the Fraziers within 5 years of the $5,000 payment.

Our appeal centers on the interpretation of K.S.A. 60-520(a), which states:

"(a) Effect. 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."

The trial court concluded that the Fraziers' part payment on the promissory note was an acknowledgment of a present existing obligation to pay the principal of the note, but they had consistently denied any intention or obligation to pay interest. The court granted summary judgment to O'Malley as to the remaining principal of $22,000, but granted summary judgment to the Fraziers in ruling that no interest prior to the date of the judgment was owing. O'Malley appealed and the Fraziers' cross-appealed.

The Court of Appeals reversed that portion of the district court's decision granting summary judgment to the Fraziers and held their part payment revived both the principal and interest on the promissory note. The Court of Appeals reasoned:

"Under the plain language of the statute, part payment by the debtor will toll the statute of limitations. Any of the three means mentioned in the statute— payment, acknowledgment, or promise—starts anew the period of limitations which would have been applicable had an action been brought on the original debt or claim. See Morton v. Leslie, 150 Kan. 213, 215, 92 P.2d 90 (1939) (citing G.S. 1935, 60-312, the predecessor of K.S.A. 60-520[a]). The statute provides no means for reviving one part of the debt and not another. When the statute is clear, it must be applied without judicial construction. Kilner v. State Farm Mut. Auto. Ins. Co., 252 Kan. 675, 682, 847 P.2d 1292 (1993).

"The district court, in support of its decision, cited Golden Rule Oil Co. v. Liebst, 153 Kan. 123, 109 P.2d 95 (1941). In Golden Rule, the court refused to revive the note by relying on the identical predecessor to K.S.A. 60-520. However, the critical distinction between the facts in Golden Rule and the instant case was that the debtor in Golden Rule did not make a part payment on the debt.

"The Golden Rule court was scrutinizing the text of letters written by the debtor to see if they operated as an `acknowledgment' in removing the limitations bar. 153 Kan. at 124. Part payment does not require such scrutiny as it speaks for itself. See Fisher v. Pendleton, 184 Kan. 322, 336 P.2d 472 (1959); accord Hustead v. Bendix Corp., 233 Kan. 870, 666 P.2d 1175 (1983).

"In Hustead, the court made it clear that part payment and acknowledgment are distinct means to revive a time-barred claim under K.S.A. 60-520. The court pointed out that pursuant to K.S.A. 60-520, a part payment is an executed acknowledgment that requires no writing to establish it and has the effect of tolling the statute of limitations. 233 Kan. at 877." 29 Kan. App.2d 947, 949, 34 P.3d 478 (2001).

Our review of the interpretation of K.S.A. 60-520(a) is plenary. See Hamilton v. State Farm Fire & Cas. Co., 263 Kan. 875, 879, 953 P.2d 1027 (1998).

"It is a fundamental rule of statutory construction, to which all other rules are subordinate, that the intent of the legislature governs if that intent can be ascertained. [Citation omitted.] The legislature is presumed to have expressed its intent through the language of the statutory scheme it enacted.... [W]hen a statute is plain and unambiguous, the appellate courts will not speculate as to the legislative intent behind it and will not read such a statute so as to add something not readily found in the statute. [Citation omitted.]" In re Marriage of Killman, 264 Kan. 33, 42-43, 955 P.2d 1228 (1998).

The language of K.S.A. 60-520(a) concerning lifting the limitations bar after a part payment provides little guidance as to the legislative intent to be applied in this situation. The statute states that when any part of the principal or interest shall have been paid, an action may be brought in such case within the period prescribed for the same. Clearly this is an alternative form of acknowledgment of the debt, but the statute does not indicate whether the payor can qualify or limit the effect of the part payment with the resulting revival of some portion of the debt and not another. We do not have the means of ascertaining legislative intent when this language has remained virtually unchanged since becoming territory law in 1858. See Terr. L. 1858, ch. 11 § 24; G.S. 1868, ch. 80, § 24; G.S. 1949, 60-312; and L. 1963, ch. 303, 60-520.

In the long history of judicial interpretation of this language, we have not located a set of facts precisely on point where a debtor acknowledged the obligation to pay only the principal of a debt when making a part payment. However, there is a common thread of general rules that run throughout the cases. Typical of the type of language used by this court are the prouncements in Elmore v. Fanning, 85 Kan. 501, 504, 117 Pac. 1019 (1911), where it was held that when a comaker delivers a payment to the payee of his comaker's money and as agent for his comaker, it does not extend the statute of limitations as to himself. The Elmore opinion stated:

"A payment, to toll the statute, must be made under such circumstances as to amount to an acknowledgment of an existing liability. (Shanks v. Louthan, 79 Kan. 363, 365, 99 Pac. 613.) Such acknowledgment must be distinct, unequivocal, and without qualification (Durban v. Knowles, 66 Kan. 397, 71 Pac. 829), and it must be made by the obligor against whom the statute is sought to be tolled, or by someone at his direction (Good v. Ehrlich, 67 Kan. 94, 72 Pac. 545)." 85 Kan. at 504.

The requirement that the acknowledgment must be without doubt or misunderstanding is repeated in another historical authority in this state, Dassler's Kansas Civil Code, Annot. ch. 4, § 120 (2d ed. 1931), which states:

"Section 23 of the Civil Code [forerunner of our current statute] provides that in any case founded on contract, when any part of the principal or interest shall have been paid, an action may be brought in such case within the period prescribed for the same after payment. The payment to avoid

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