Miller, Hiersche, Martens & Hayward, P.C. v. Bent Tree Nat. Bank

• Decision Date: 01 February 1995
• Docket Number: No. 05-94-01001-CV,05-94-01001-CV
• Citation: 894 S.W.2d 828
• Court: Texas Court of Appeals
• Parties: 26 UCC Rep.Serv.2d 593 MILLER, HIERSCHE, MARTENS & HAYWARD, P.C., et al., Appellants, v. BENT TREE NATIONAL BANK, Appellee.

Page 828

894 S.W.2d 828

26 UCC Rep.Serv.2d 593

MILLER, HIERSCHE, MARTENS & HAYWARD, P.C., et al., Appellants, v. BENT TREE NATIONAL BANK, Appellee.

No. 05-94-01001-CV.

Court of Appeals of Texas Dallas.

Feb. 1, 1995.

Wayne R. Miller, Wayne R. Miller, P.C., Dallas, for appellants.

Charles A. Gall, James W. Bowen, Jenkens & Gilchrist, Dallas, for appellee.

Before OVARD, BARBER and DEVANY, JJ.

OPINION

DEVANY, Justice.

Miller, Hiersche, Martens & Hayward, P.C., Sherwood Blount, Jr., and Parkway Realtors, Inc. f/k/a Sherwood Blount and Company Realtors appeal the trial court's summary judgment permitting appellee Bent Tree National Bank to foreclose on collateral to satisfy a debt owed by Parkway Realtors. In two points of error, appellants contend that the trial court erred in granting Bent Tree's summary judgment motion and in denying appellants' summary judgment motion. We overrule appellants' points of error. We affirm the trial court's summary judgment.

The predecessor to Parkway Realtors, Inc. executed a note for $675,000 payable to Bent Tree National Bank on March 31, 1988. The note was guaranteed by Sherwood Blount, Jr. On that same date, the maker of the note executed a security agreement whereby the maker granted a security interest to Bent Tree in certain shares of certificated securities. Simultaneously, Blount executed a hypothecation agreement wherein he granted a security interest to Bent Tree in those securities. Bent Tree took possession of those certificates.

The note matured on October 3, 1988, but was not paid. The statute of limitations on the note ran on October 3, 1992. On February 17, 1994, Bent Tree gave notice to Blount and others of its intent to foreclose on the certificates. On March 3, 1994, Miller, Hiersche, Martens & Hayward, P.C. notified Bent Tree that it had obtained a subsequent nonpossessory security interest in the certificates to guarantee an account receivable from Blount and that, pursuant to said security interest agreement, it had foreclosed on the certificates. Bent Tree filed a lawsuit the next day to determine its rights in the certificates in its possession.

The question raised in this appeal concerns the right of a collateral holder to foreclose on its collateral after the statute of limitations has run on the underlying debt. The trial court below granted summary judgment in favor of Bent Tree. Appellants, the Miller partnership, Blount, and Parkway Realtors, present two points of error. First, they complain that the trial court erred in granting Bent Tree's Motion for Summary Judgment. Second, the trial court erred in failing to grant their motion for summary judgment. The parties agree that resolving the question of whether a collateral holder may foreclose on its collateral after the running of the statute of limitations is dispositive of this appeal.

Our review of the law of this state indicates that historically the defense of limitations may not be interposed by one not in the position of the debtor. Columbia Ave. Sav. Fund v. Strawn, 93 Tex. 48, 53 S.W. 342, 342-43 (1899). The defense is a personal privilege which may be asserted or waived at the election of the debtor or those in privity. There is a series of cases which support this historically accepted premise. See Kiel v. Staber, 116 S.W.2d 809, 811 (Tex.Civ.App.--Amarillo 1938, writ ref'd); Johnson v. Snaman, 76 S.W.2d 824, 828 (Tex.Civ.App.--Austin 1934, writ ref'd); Fenstermaker v. City of San Antonio, 283 S.W. 883, 884 (Tex.Civ.App.--San Antonio 1926), aff'd, 290 S.W. 532 (Tex.Comm'n App.1927, judgm't adopted); Stewart v. Tolar & Daniel, 250 S.W. 274, 276 (Tex.Civ.App.--Beaumont 1923, no writ); Raley v. D. Sullivan Co., 159 S.W. 99, 102 (Tex.Civ.App.--San Antonio 1913), rev'd on other grounds, 207 S.W. 906 (Tex.Comm'n App.1919).

In 1929, the Waco Court of Civil Appeals of Texas, stated:

The fact that an action for recovery of a debt is barred by the statute of limitation does not destroy the debt. The bar affects the remedy only. The right of the creditor to receive payment continues after the bar, and will support a new promise of payment or justify the sale of pledged property by the pledgee under power either express or implied, and the application of the proceeds of such sale to the discharge of such debt. In such cases the debtor cannot enjoin the sale without tendering payment of the debt, notwithstanding such bar. Goldfrank, Frank & Co. v. Young, 64 Tex. 432, 434, 437; W.B. King & Co. v. T.B. & Ins. Co., 58 Tex. 669, 673, 674; Hudson v. Wilkinson, 61 Tex. 606, 609; Fievel v. Zuber, 67 Tex. 275, 279, 3 S.W. 273; Tombler v. Palestine Ice Co., 17 Tex.Civ.App. 596, 43 S.W. 896, 898 (writ refused); Brinkerhoff v. Goree, 35 Tex.Civ.App. 142, 79 S.W. 592, 503.

Central Nat'l. Bank v. Latham & Co., 22 S.W.2d 765, 768 (Tex.Civ.App.--Waco 1929, writ ref'd).

In 1971, the Waco Court of Civil Appeals restated the foregoing as follows:

The preliminary general rules applicable here were outlined by Chief Justice [Gallagher] in Central Nat. Bank v. Latham: (1) the fact that an action for recovery of a debt is barred by limitation does not destroy the debt, and the creditor's right to receive payment continues after the bar; and (2) the right of the holder of collateral security to recover in a suit on the collateral obligation is not affected by the fact the principal obligation is barred.

Gallaher v. American-Amicable Life Ins. Co., 462 S.W.2d 626, 628 (Tex.Civ.App.--Waco 1971, writ ref'd n.r.e.).

We note that section 16.035(b) of the Texas Civil Practice and Remedies Code provides:

A sale of real property under a power of sale in a mortgage or deed of trust that secures a lien debt must be made not later than four years after the day the cause of action accrues.

TEX.CIV.PRAC. & REM.CODE ANN. § 16.035(b) (Vernon...