MIDSTATES RESOURCES v. FARMERS AERIAL SPRAYING SER., Civil A. No. 5:95-CV-043-C.

• Decision Date: 09 February 1996
• Docket Number: Civil A. No. 5:95-CV-043-C.
• Citation: 914 F. Supp. 1424
• Parties: MIDSTATES RESOURCES CORP., Plaintiff, v. FARMERS AERIAL SPRAYING SERVICE, INC., a/k/a Farmers Aerial Spraying, a/k/a Farmer Aerial Spraying, Inc.; Kenneth D. Russell; and Sherry A. Russell, Defendants.
• Court: U.S. District Court — Northern District of Texas

914 F. Supp. 1424

MIDSTATES RESOURCES CORP., Plaintiff, v. FARMERS AERIAL SPRAYING SERVICE, INC., a/k/a Farmers Aerial Spraying, a/k/a Farmer Aerial Spraying, Inc.; Kenneth D. Russell; and Sherry A. Russell, Defendants.

Civil A. No. 5:95-CV-043-C.

United States District Court, N.D. Texas, Lubbock Division.

February 9, 1996.

Roger S. Cox and Franklin Scott Flow, Amarillo, TX, for plaintiff.

Larry Wayne McEachern, Lubbock, TX, for defendants.

OPINION

CUMMINGS, District Judge.

Plaintiff Midstates Resources Corp. ("Midstates") has sued defendants Farmers Aerial Spraying Services, Inc., a/k/a Farmers Aerial Spraying, a/k/a Farmer Aerial Spraying, Inc. ("FASS"), Kenneth D. Russell, and Sherry Russell to recover on certain defaulted notes, security agreements, and guaranties. The defendants admit that they both made and defaulted on these obligations. Defendants' sole defense to this suit is limitations. As all material facts are undisputed, both Midstates and defendants as a group have each moved for summary judgment. This opinion disposes of both motions.

Defendants' limitations defense rests on two issues that the Court must decide. The first issue is whether 12 U.S.C. § 1821(d)(14) superseded and nullified a provision of 28 U.S.C. § 2415(a). The provision in question causes the accrual of contract actions' limitations periods to restart when debtors acknowledge or partially pay debts otherwise barred by limitations.¹ The Court finds that section 1821 did not supersede this provision. The second issue the Court must decide is whether the defendants acknowledged their debts sufficiently to restart the running of the expired limitations periods barring actions on the debts. The Court finds that the defendants did sufficiently acknowledge their debts to restart the limitations period.

I. FACTS

The material facts of this case are undisputed.² In 1987, FASS executed three promissory notes payable to First State Bank of Bovina. Security agreements collateralized each note, and Kenneth Russell and Sherry Russell also individually guaranteed the notes. As the details of these obligations are undisputed, the Court will not recite them here. The details may be found in the appendix to this opinion.

In October of 1987, First State Bank of Bovina was declared insolvent. FDIC Receiver was appointed receiver of the bank. FDIC Receiver subsequently assigned, transferred, and conveyed the notes to FDIC Corporate. FDIC Corporate in turn assigned, transferred, and conveyed the notes to Midstates Resources Corp.

Defendants defaulted on all of their obligations. The original limitations periods for all of the debts had run by the date Midstates filed suit. However, in February of 1992, Larry McEachern contacted the FDIC by letter on behalf of all defendants. Stipulated Facts ¶ 48. This letter is important, because it restarted the limitations periods running again, which is one of the chief issues in this case.

II. STATUTES

The first issue raised by the parties concerns the relationship between two limitations statutes, each of which ostensibly applies to Midstates's contract actions. The first statute is 28 U.S.C. § 2415(a), which broadly purports to apply to every contract action brought by the United States, including the FDIC and its assignees. FDIC v. Bledsoe, 989 F.2d 805, 810-11 (5th Cir.1993). This statute was promulgated in 1966 and places a six-year limitations period on covered contract actions. The second statute is 12 U.S.C. § 1821(d)(14), which also applies to contract actions brought by the FDIC or its assignees. Id. This statute was promulgated in 1989 and was intended to clarify exactly when the six-year limitations period applicable to contract actions begins to run, Jackson v. Thweatt, 883 S.W.2d 171, 177 n. 7 (Tex. 1994), an issue which had become a point of conflict among the federal circuits. Jackson, 883 S.W.2d at 173 n. 3. Both parties admit that 1821(d)(14) controls the date on which the limitations period begins to run.

The parties' disagreement pertains to the applicability of a provision in section 2415(a) which restarts the accrual of otherwise expired limitations periods on contract claims when breaching parties either acknowledge or partially pay their debts. Section 1821(d)(14) has no such provision. Midstates argues that since section 2415(a)'s provision does not contradict the later-enacted section 1821(d)(14), the provision is applicable. Defendants argue that section 1821(d)(14) wholly supersedes section 2415(a), and, accordingly, none of section 2415(a)'s provisions apply to matters covered by section 1821(d)(14). The parties have not identified, and the Court could not find, any cases directly addressing this issue. Consequently, the Court will treat this issue as one of first impression.³

This issue is one of statutory construction. Two statutes, one broad (section 2415(a)) and one narrow (section 1821(d)(14)), each purport to cover the instant transaction. The general issue is whether the later-promulgated narrow statute, 12 U.S.C. § 1821(d), was intended to completely replace the formerly promulgated broad statute, 28 U.S.C. § 2415. If section 1821(d) were intended to completely replace section 2415(a), then section 2415(a) has no application to matters covered by section 1821(d)(14). If section 1821 were not intended to wholly supersede section 2415, then section 1821(d)(14) should be read harmoniously with the broad statute when possible.

While no court has directly decided whether section 2415's acknowledgment provision applies to matters also covered by section 1821(d)(14), the Fifth Circuit has explained that section 1821(d)(14) controls only when one of its specific statutory "rules" conflicts with one of section 2415's general statutory rules. Resolution Trust Corp. v. Seale, 13 F.3d 850, 854 (5th Cir.1994). The Seale court was careful to use the word "rule" instead of statute. One statute can contain many rules. Therefore, "rules" indicate the narrow principles contained within a statute as opposed to a statute as a whole. In other words, the Seale court concluded that section 1821(d)(14) did not completely supersede section 2415(a). The Texas Supreme Court reached this same conclusion. Jackson v. Thweatt, 883 S.W.2d 171, 177 (Tex.1994) (explaining that Section 1821(d)(14) does "not create an entirely new limitations scheme, but rather merely clarifies and amends existing law under 28 U.S.C. § 2415(a)").

Section 2415's acknowledgment provision does not conflict with any provision of section 1821(d)(14). Consequently, the Court holds that 2415's acknowledgment provision applies to matters also covered by section 1821(d)(14). Since the acknowledgment provision applies, the Court must now turn to the summary judgment evidence and determine if, as a matter of law, defendants acknowledged their debts in a way sufficient to restart the limitations period under section 2415(a).

III. ACKNOWLEDGMENT

Section 2415 provides that a limitations period will begin running anew if the debtor sufficiently acknowledges or partially pays his debt. 28 U.S.C. § 2415(a). Midstates alleges that five pieces of evidence support the restarting of the limitations periods for defendants' debts. The Court considers one piece of evidence, the Settlement Letter from McEachern, to be an acknowledgment sufficient to restart the running of the limitations period. As this evidence is dispositive, it will be the only piece of evidence discussed.⁴

Accordingly, the Court turns its attention first to the law of acknowledgment. An acknowledgment is sufficient under section 2415(a) to restart the running of a limitations period when the debtor both recognizes and promises to pay the debt. A promise to pay does not have to be explicit. The Second Circuit identified one way in which a party can imply a promise to pay: "It is very generally held that an acknowledgment that a sum of money is actually due, if made without any accompanying denial of willingness, justifies the inference of a promise to pay." U.S. v. Blusal Meats, 817 F.2d 1007 (2d Cir.1987) (citing 1A A. Corbin Corbin on Contracts § 216 (1963)).

With this law in mind, the Court must now turn its attention to the facts at hand. All material facts are undisputed. When no underlying facts are disputed, the sufficiency of a letter's acknowledgment of a debt to restart a limitations period running is a question of law for the court to decide. See Forry v. Department of Natural Resources, 889 S.W.2d 838, 843 (Mo.Ct.App.1994); Williams v. Markt, 742 S.W.2d 577, 579 (Mo. Ct.App.1987); McFadin v. Haggard, 398 S.W.2d 638, 640 (Tex.Civ.App. — San Antonio, 1966, no writ); Friedman v. Worthy Fabrics, 347 S.W.2d 639, 640-41 (Tex.Civ.App. — El Paso 1960, no writ). In any event, this case is set for a bench trial, and the Court is the proper entity to make this determination.

This letter is a request that the FDIC begin settlement negotiations concerning the debts owed by FASS. The parties stipulate that Larry McEachern was a duly authorized agent representing all defendants. The letter states that the debts are outstanding, which the Court holds is a sufficient acknowledgment of the debts. See U.S. v. Culver, 958 F.2d 39, 41 (4th Cir.1991) (correspondence requesting a compromise on a debt was an acknowledgment of the debt); Federal Deposit Ins. Corp. v. Cardona, 723 F.2d 132, 137 (1st Cir.1983) (listing a debt on an estate tax return was a sufficient acknowledgment). The letter does not express an unwillingness to pay the debts, and the absence of such an expression justifies an inference of a promise to pay. U.S. v. Blusal Meats, 817 F.2d 1007, 1010 (2d Cir.1987). The letter does express an inability to pay, but this does not constitute an unwillingness to pay. See U.S. v. Culver, 958 F.2d 39, 41 (4th Cir.1991). The Court holds that the letter restarted all relevant limitations periods running, and consequently, the suit is not time-barred.

Consequent...