Vessels v. Hickerson

• Decision Date: 16 February 2012
• Docket Number: No. 11CA0317.,11CA0317.
• Citation: 327 P.3d 277
• Parties: Thomas J. VESSELS, Personal Representative of the Estate of Mary Walsh Vessels, a/k/a Mary W. Vessels, a/k/a Mary Agnes Vessels, a/k/a Mary Vessels, Plaintiff–Appellant, v. Alva J. HICKERSON, a/k/a Al J. Hickerson, Defendant–Appellee.
• Court: Colorado Court of Appeals

327 P.3d 277

Thomas J. VESSELS, Personal Representative of the Estate of Mary Walsh Vessels, a/k/a Mary W. Vessels, a/k/a Mary Agnes Vessels, a/k/a Mary Vessels, Plaintiff–Appellant,

v.Alva J. HICKERSON, a/k/a Al J. Hickerson, Defendant–Appellee.

No. 11CA0317.

Colorado Court of Appeals, Div. VI.

Feb. 16, 2012.

Clifford Beem & Associates, P.C., Clifford L. Beem, William E. Brayshaw, A. Mark Isley, Denver, Colorado, for Plaintiff–Appellant.

Theodore W. Rosen, P.C., Theodore W. Rosen, Denver, Colorado, for Defendant–Appellee.

Opinion by Judge LOEB.

¶ 1 In this action brought to recover on a promissory note, plaintiff, Thomas J. Vessels, acting as personal representative of the estate of his deceased mother, Mary Walsh Vessels, appeals the trial court's judgment in favor of defendant, Alva J. Hickerson. Specifically, Vessels challenges the trial court's ruling that his claim to recover on the note was barred by the equitable defense of laches.

¶ 2 We hold that the trial court erred in ruling that the equitable defense of laches was applicable to bar Vessels's claim to recover on a promissory note, where the claim was filed within the period of the applicable statute of limitations and where the statute of limitations was not tolled by equitable principles, but rather, a new limitations period was started by operation of law under the partial payment doctrine.

¶ 3 Accordingly, we reverse and remand with directions.

I. Background and Procedural History

¶ 4 In a promissory note dated April 13, 1989, Hickerson promised to pay plaintiff's father's company, Vessels Oil & Gas Company (VOGC), $386,063 to settle an outstanding debt. By its terms, the note was due in full ten years later, on April 12, 1999, and was to be paid in monthly installments of $5,103.75, which figure represented the amount necessary to pay the principal in full plus interest over the note's ten-year term.

¶ 5 As part of the settlement agreement, pursuant to an “Act of Mortgage, Pledge and Assignment,” also executed on April 13, 1989, the note was secured by Hickerson's royalty interest in an oil and gas lease located in Louisiana. Under the terms of the note, Hickerson agreed to make payments to VOGC from “cash or other proceeds” generated by his royalty interest in the Louisiana oil and gas lease. In fact, under the terms of the mortgage, Hickerson assigned his royalty interest to VOGC, and, thereafter, the operators of the Louisiana oil and gas well made payments on the note directly to VOGC, bypassing Hickerson entirely. Between 1989 and 2009, the well operators, on behalf of Hickerson, made partial payments on the note, but these payments were often insufficient to cover the amount due under the note's monthly installment plan.

¶ 6 In 1990, VOGC assigned the note to Vessels's father. After he died in 1994, the note passed through his estate to his wife, Mary Vessels. Throughout this time, specifically between 1991 and 2007, Hickerson received no communications, either from the well operators or from the Vesselses, concerning the debt owed under the note.

¶ 7 On February 26, 2007, Mary Vessels, through retained counsel, sent Hickerson a letter demanding payment of the note in full. It is undisputed that, up to this point, the letter was the only demand made on the note since its execution in 1989.

¶ 8 Apparently, the demand letter to Hickerson was unavailing, because on January 7, 2009, Mary Vessels filed this action, asserting four claims for relief against Hickerson: (1) breach of contract under the settlement agreement for nonpayment of the note; (2) default under the promissory note; (3) promissory estoppel; and (4) unjust enrichment. The record is clear that the only relief sought under any of the claims was a judgment for damages for the amount due under the note, plus costs and attorney fees. Soon after filing this action, Mary Vessels died, and her son, Thomas J. Vessels, was substituted as plaintiff in his capacity as the personal representative of her estate.

¶ 9 Before trial, the parties filed cross-motions for summary judgment. As pertinent here, in Hickerson's motion, he argued that Vessels's claims were barred by the applicable six-year statute of limitations, found in section 13–80–103.5, C.R.S.2011. Specifically, he argued that the note matured on April 12, 1999, that Mary Vessels's claim under the note accrued a day later, and that more than six years had passed before she filed suit against him. Further, he argued that the payments made by the well operators between 1989 and 2009 did not trigger the “partial payment doctrine” because he did not personally make the payments.

¶ 10 In a written order, the trial court rejected Hickerson's statute of limitations arguments and ruled that Vessels's claim was timely filed under the six-year statute of limitations set forth in section 13–80–103.5. The court reasoned that, under the partial payment doctrine, it is “well established in Colorado” that every time a debtor makes a partial payment, the debtor is in effect acknowledging the existence of the debt for which the law implies a new promise to pay, thus starting the limitations period anew. The court also ruled that the fact that Hickerson did not personally make the payments on the note was immaterial, because he had authorized the well operators to make payments on his behalf. Therefore, the court ruled that the well operators' partial payments were sufficient to invoke the partial payment doctrine. Thus, the court held that Vessels's claims were timely filed under the statute of limitations, and it denied Hickerson's cross-motion for summary judgment. The court also denied Vessels's cross-motion for summary judgment on grounds not pertinent here, and the case proceeded to trial.

¶ 11 The court held a two-day bench trial, primarily concerning whether the note was a recourse or non-recourse obligation. In an oral ruling, the court made extensive findings of fact and ultimately concluded that the parties intended the note to be a recourse note, meaning that Hickerson could be sued personally and his other assets, apart from the royalty interest in the Louisiana gas and oil well, could be used to satisfy the debt.

¶ 12 After making this ruling, the court considered Hickerson's affirmative defenses under the statute of limitations and the equitable doctrine of laches. The trial court reaffirmed its earlier ruling that Vessels's action under the note was timely filed pursuant to the partial payment doctrine and, therefore, again rejected Hickerson's statute of limitations defense. Regarding Hickerson's defense of laches, the court ruled that, as a matter of law, the defense of laches was unavailable:

I'm not aware of any cases that have ever held that when a claim is brought within a statute of limitations equity might—there might be room for equity to step in and do something about it. If ever there were such a case, this might be it.

....

And I have to say and I probably shouldn't, but I'm going to anyway, that if I had some equitable room in this case, I might, I might be persuaded by the laches argument. This trial demonstrates—because of the delays forced by Plaintiff, everybody who knew about this transaction is either dead or can't remember about it. And that's a reality that I—if I could charge to Plaintiff, I—I might.

This case is a sort of poster child for why we need statutes of limitations and why we need the equitable defense of laches, but I read those cases and I just don't think there's room for—for equity to permit me to do anything with respect to laches. And so for all of those reasons, the two affirmative defenses, I find and conclude were not proved in this case.

¶ 13 Accordingly, the court merged the contract claim into the note claim, and entered judgment in favor of Vessels on the merged claims. In a written order memorializing its oral ruling, the trial court awarded Vessels $720,664.63, which figure represented $335,441.72 in principal plus $385,222.91 in accrued interest through August 31, 2010, plus pre- and post-judgment interest from September 1, 2010. The court also dismissed with prejudice Vessels's “equitable claims” of promissory estoppel and unjust enrichment, “in light of the judgment on the legal claims.”

¶ 14 Thereafter, Hickerson filed a motion for reconsideration under C.R.C.P. 59. In his motion, Hickerson argued that, in Colorado, a court may bar timely filed legal claims under the equitable defense of laches under certain circumstances, and that the court should apply laches in the present case to bar Vessels's legal claims to recover under the note. Hickerson also argued that the court should reconsider its earlier rulings on the statute of limitations, find the partial payment doctrine inapplicable, and bar Vessels's claims as untimely filed. Vessels filed a response to Hickerson's motion, arguing that laches, as an equitable defense, could not apply to timely filed legal claims, and that the partial payment doctrine extended the statute of limitations, such that Vessels's claims were timely filed.

¶ 15 In a lengthy written order, the court first reaffirmed its earlier rulings regarding the statute of limitations, once again concluding that Vessels's claim under the note was not barred under the statute of limitations due to the partial payment doctrine. Hickerson has not appealed the court's ruling on the statute of limitations issue. Accordingly, for the purposes of this appeal, it is undisputed that Vessels's claim against Hickerson for recovery on the promissory note was timely filed under the statute of limitations. However, regarding the equitable defense of laches, the trial court agreed with Hickerson that, as a matter of law, it could apply laches to bar Vessels's timely filed legal claim under the promissory note. Consequently, the court analyzed Hickerson's laches defense on the merits, found the elements of laches were met, and reversed its earlier judgment...