Thomson v. Sunny Ridge Village Partnership, 17775
| Citation | 118 Idaho 330,796 P.2d 539 |
| Decision Date | 08 August 1990 |
| Docket Number | No. 17775,17775 |
| Parties | B.J. THOMSON, Plaintiff-Appellant, v. SUNNY RIDGE VILLAGE PARTNERSHIP, an Idaho partnership; Gordon Leishman, an individual, Defendants, and Edward J. McNelis, an individual, Defendant-Respondent. |
| Court | Idaho Court of Appeals |
Ringert, Clark, Harrington, Reid, Christenson & Kaufman, Boise, for appellant. Laura E. Burri argued.
DeMeyer & DeMeyer, Middleton, for respondent. Virginia R. DeMeyer argued.
SUBSTITUTE OPINION
The Court's prior opinion dated December 6, 1989, is hereby withdrawn.
*
This appeal comes to us from a judgment dismissing an action on a promissory note. The primary issue is whether the time period prescribed in a statute of limitation is extended with respect to one obligor on the note as a result of partial payments made by a co-maker after the note has gone into default. We also must decide whether the obligor in this case consented to, or ratified, payments causing an extension of the limitation period, or whether the obligor is bound by the payments under agency principles. For reasons stated below, we hold that the limitation period was not extended. Accordingly, we affirm the judgment of dismissal and award attorney fees on appeal to the respondent.
The relevant facts are as follows. In 1980, B.J. Thomson of Boise allowed her accountant, Robert Overstreet, to arrange some investment opportunities for her. After Thomson was repaid on her first loan to one of the accountant's clients, he asked her if she would be willing to lend money to another client, Gordon Leishman. Leishman was attempting to finance a low-income housing project in Nampa, to be known as Sunny Ridge Village. The accountant arranged for Thomson to lend Leishman $47,000 on an unsecured note, due and payable on August 21, 1981. The loan was made to the "Sunny Ridge Village Partnership," but no partnership entity was ever formed. Leishman's bank manager, Edward McNelis, co-signed the note. All the payments were made by Leishman to the accountant, and then passed on to Thomson.
On August 22, 1981, one day after the note came due, it remained unpaid. The accountant assured Thomson that full payment would be made, and Leishman did make small payments through November of 1983. However, the note was continuously in default. Leishman departed the state in 1986, leaving $10,391.99 unpaid on the note. In 1987, Thomson filed this suit, naming as defendants the so-called Sunny Ridge Village Partnership as well as Leishman and McNelis individually. The purported partnership and Leishman filed no answer; a default judgment was entered against them. A bench trial was held on Thomson's claim against McNelis. Upon the conclusion of Thomson's case-in-chief, the district court granted a motion for involuntary dismissal on the ground that Thomson was barred by the five-year statutory period of limitation from bringing this action against McNelis. See I.C. § 5-216. This appeal followed.
We preface our analysis by noting that an involuntary dismissal during a bench trial, under I.R.C.P. 41(b), presents mixed questions of law and fact. We uphold factual findings made by the district court in granting the motion for involuntary dismissal, unless the findings are clearly erroneous. We review freely the court's conclusions of law. Staggie v. Idaho Falls Consolidated Hospitals, Inc., 110 Idaho 349, 715 P.2d 1019 (Ct.App.1986).
The first issue raised by Thomson is whether the partial payments made by Leishman after the note was in default caused the limitation period to be extended as to McNelis. The district court concluded that they did not. We agree. A limitation period begins to run upon the accrual of the cause of action. Singleton v. Pichon, 102 Idaho 588, 590, 635 P.2d 254, 256 (1981). A cause of action against the obligor on a note accrues, in the case of a time instrument, on the day after maturity. I.C. § 28-3-122(1)(a). The limitation period can be extended by an obligor who makes a partial payment after the note is due. Such partial payment is deemed equivalent to a new promise by the obligor to satisfy the debt. I.C. § 5-238. In this case, however, the partial payments were not made by McNelis, the obligor in question; rather they were made by Leishman, a co-maker of the note.
Along with a majority of states, Idaho follows what is known as the American rule concerning payments by co-makers. The American rule provides that a partial payment by one of several debtors binds only the person making the payment and does not operate to take the debt out of a statute of limitation with regard to any other debtor. Mahas v. Kasiska, 47 Idaho 179, 276 P. 315 (1928). In Mahas, the court reasoned that because I.C. § 5-238 treats a payment of interest as the equivalent of a new promise, and because a promise binds only the person making it, so too a partial payment should extend a statutory period of limitation only as to the person who makes the payment. Id. at 185, 276 P. at 317.
Thomson suggests that the Mahas court confused a promise to pay with the payment itself. We are not persuaded. The nexus between a payment and a new written promise is explicit in I.C. § 5-238. Thomson also asserts that a payment should not be equated with a promise because a payment by one debtor benefits all debtors, while an individually renewed promise does not. It is true, of course, that all debtors potentially benefit from any payment reducing a debt; but it would be conceptually unsound to convert such a passive benefit into an active agency among the debtors, authorizing one debtor to make a new contract for all of them. If such authority were postulated as a matter of law, one party to a contract, acting alone, could alter the liabilities of others by extending the contract's legal effect beyond the time on which all the parties formerly had agreed. See generally 51 AM.JUR.2d. Limitation of Actions § 384. Consequently, we are not persuaded to abandon the American rule as expressed in Mahas.
There is, of course, a well-recognized family of exceptions to the rule. These exceptions are triggered when a non-paying co-debtor directs or requests that the payment be made; authorizes or consents to the payment; or ratifies such payment. See, e.g. Mobile Discount Corp. v. Price, 99 Nev. 19, 656 P.2d 851 (1983). Here, Thomson asserts that McNelis knew of, and consented to, Leishman's late partial payments. However, the district court determined that Thomson failed to make a prima facie showing of such knowledge or consent. Thomson has conceded that there was no actual partnership between Leishman and McNelis. It is also clear from the record that Thomson was unable to prove McNelis knew of Leishman's payments. Neither is there evidence of acts by McNelis that might indicate ratification. In the absence of any such showing, we conclude that the exceptions to Mahas and the American rule were not...
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