Aronson v. Aronson

Filed 8/30/07 Aronson v. Aronson CA4/3

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

Appeal from a judgment of the Superior Court of Orange County, Eleanor M. Palk, Temporary Judge. (Pursuant to Cal. Const., art VI, 21.) Reversed with directions.

Quest Law Firm and Robert C. Robinson for Defendants and Appellants.

John L. Dodd & Associates, John L. Dodd and Gerard McCusker for Plaintiff and Respondent.

* * *

Defendants Edwin and Beverly Aronson appeal from a judgment awarding their adult daughter, plaintiff Susan Aronson, damages of $61,584 for money she loaned them.[1] Because plaintiffs action was barred by the statute of limitations, we reverse the judgment.

FACTS

On April 6, 2005, plaintiff filed a complaint against defendants alleging causes of action for money due and for money lent. In the first cause of action, which the parties characterize as a breach of contract claim, she alleged that from 1988 through approximately May, 1995, [she] loaned approximately $40,000.00 to Defendants, which loan bore interest at the rate of 12% per annum or the maximum rate permitted by law if such was lesser than 12% per annum. She further alleged that although defendants had made some payments over time, [o]n or about July 1, 2003, Defendants breached their agreement to pay Plaintiff by ceasing to make any payments; the remaining balance owed was approximately $100,000. The second cause of action for money lent alleged defendants had within the last two years acknowledged their indebtedness to plaintiff of approximately $100,000. Defendants answer raised, inter alia, affirmative defenses based on the statute of limitations and usury.

The case was tried without a jury. At trial both parties introduced as exhibits their respective accounts of numerous loans and payments made over the course of time, with plaintiffs records showing the loans started in December 1983 while defendants date the first loan at February 1988. Although the parties reconstructions differ in many respects, both reveal a very sporadic repayment record by defendants, with months going by where defendants made no payments at all, punctuated by single months or blocks of months where they made payments of widely varying dollar amounts. Edwin testified plaintiff loaned defendants money virtually any time [they] asked for it, and defendants paid her back based on [their] ability to pay. On rare occasions, when defendants needed money, they would take money out of plaintiffs bank account.

In April 1992, the parties agreed defendants owed plaintiff $20,480; defendants suggested plaintiff contact an individual at a mortgage company for advice. The advisor prepared alternate plans for defendants to repay plaintiff at 10 percent annual interest with monthly payments made over 5 years, 7 years or 10 years. Defendants chose the 10-year plan and made four payments of $271 each in April through July of 1992, but could not afford to keep up the payments. Plaintiff agreed to reduce the amount of the payments, and defendants did not pay much the rest of that year.

Over the years plaintiff had counted on Beverly to keep track of the loans. But Beverly did not start keeping track of the loans until 1995.

On July 13, 1995, defendants handwrote, signed and dated the following note to their son: Dear Mike, [] Your sister has been most generous with us over the years. We owe her $40,000.00. We have been paying it off slowly. So, if we die, Susan is to be paid. She has first right of refusal to buy our house for $40,000. It could be sold Susan gets the first $40,000 [and] then any balance will be divided between you two. The $40,000 figure was derived by agreement between defendants and plaintiff.

Plaintiff continued to lend defendants money. She made her last loan to them in December 1999.[2]

After April 1, 2002, defendants stopped making payments due to a blow-up between plaintiff and Beverly. On May 13, 2002, plaintiff handwrote the following note: Dear Mother, [] Within the next 30 days please return in full all the money you & Dad owe me. Within the next 15 days, please provide me with a written accounting of all you borrowed, payments, and 1% per month calculated in as we previously agreed, so I can compare it with records. [] Love, Susan. Beverly asked plaintiff a few times to hold off, then resumed making payments in January 2003, but ceased in July 2003 when instructed by Edwin not to pay due to discussions of a lawsuit. Defendants last payment was made on July 1, 2003.

Less than two years after that last payment, on April 6, 2005, plaintiff filed her complaint. In rendering its oral ruling, the court noted the difficulty of reconstructing all the loans and payments, particularly because the parties themselves had difficulty recalling what loans were made and what payments were made and [u]p until a certain point kept no records and did not seem concerned about the transfer of money back and forth. The court did find that in 1992, the parties were in agreement that some sort of interest should be paid at ten percent simple interest, and then in mid-July of 1995, there was an understanding that $40,000 was a reasonable sum owing to plaintiff. The court noted the parties appeared to be in agreement on the loans and payments made after 1995. The court expressly found there were no statute of limitations or usury problems.

In its statement of decision, the court found: 1. Defendants and plaintiff acknowledged on July 13, 1995 that as of that date defendants owed the sum of $40,000 to plaintiff. [] 2. After July 13, 1995 and to 1999, plaintiff made further loans to defendants in the sum of $6,285. [] 3. Defendants paid off the sum of $18,300 to plaintiff from 1995 to 2003. [] 4. The first cause of action for breach of contract is not barred by the Statute of Limitations based on the following: [] Loans by plaintiff to defendants were all oral and made at different times and in different amounts and did not reflect a date for any of the loans to be repaid. The last payment was July 1, 2003. The complaint was filed April 6, 2003 [sic], less than two years from the date of the last payment. The complaint was therefore filed within two years of the accrual of action and is not barred by the two year Statute of Limitations for oral contracts. [] 5. The second cause of action for common count is not barred by the Statute of Limitations, based on the following: [] The Statute of Limitations did not commence while defendants were making payments. Plaintiff did not make a demand for a specific sum on May 13, 2002, and none of the parties knew what amount was owed. The two year Statute of Limitations did not begin to run until defendants repudiated the loans after the last payment on July 1, 2003. The complaint was filed April 6, 2003 [sic], less than two years after the accrual of the action and is not barred by the Statute of Limitations. [] 6. Plaintiff did not violate the Usury Law, based on the following: The parties agreed to interest of ten percent (10%) per annum. There was testimony that none of the parties understood the difference between compound and simple interest and interest was never applied to any calculations. The court ordered judgment against defendants ordering them to pay plaintiff damages of $61,584, consisting of $46,285 in principal plus $33,599 in interest at an annual rate of 10 percent, less $18,300 in payments made by defendants.

DISCUSSION

Defendants contend the statute of limitations bars plaintiffs action because both her causes of action accrued when each loan was made. Alternatively, they contend the causes of action accrued when plaintiff demanded payment on May 13, 2002. Defendants further contend the payments they made in 2003 did not toll the running of the statute of limitations.

We review the courts factual findings for substantial evidence. (Robertson v. FleetwoodTravel Trailers of California, Inc. (2006) 144 Cal.App.4th 785, 798.) But [w]hen the decisive facts are undisputed, we are confronted with a question of law and are not bound by the findings of the trial court. (Ghirardo v. Antonioli (1994) 8 Cal.4th 791, 799.)

Here, it is undisputed there was no written agreement or promissory note evidencing the loans, and plaintiff made her final loan to defendants in 1999 and demanded full payment in May 2002. The parties further agree that the two-year statute of limitations for oral contracts or obligations applies to both of plaintiffs causes of action. (Code Civ. Proc.,  339.)

We must first determine when each cause of action accrued for purposes of the statute of limitations. (Code Civ. Proc.,  312 [civil actions must be commenced within the prescribed limitations period after the cause of action shall have accrued].) Defendants contend that when no time is specified for repayment of a loan, it is payable on demand, and the statute of limitations begins to run when the loan is made. This has unquestionably been the law of California for more than a century. (Dorland v. Dorland (1884) 66 Cal. 189, 190 [No time being specified within which [the loan] was to be repaid, the presumption of law is that it was to be repaid on demand; and, that being so, the statute of limitations commenced to run from the time of the loan].) For purposes of the statute of limitations, loans payable on demand are deemed payable at their inception, and the statute begins to run from such time. (Buffington v. Ohmert (1967) 253 Cal.App.2d 254, 256.) This is true for a breach of contract cause of action (Carrasco v. Greco Canning Co. (1943) 58 Cal.App.2d 673, 675-676) and for a common count claim for money lent (Tabata v. Murane (1944) 24 Cal.2d 221, 226). The rationale is that where a right has fully accrued, except for some demand to be made as a condition precedent to legal relief, which the claimant can at any time make, if he so chooses, the cause of action has accrued for the purpose of setting the statute of limitations running. (Citations.)[] Otherwise, . . . he might indefinitely prolong his right to enforce his claim or right by neglecting to make the demand until it suited his convenience so to do. (Taketa v. State Board of Equialization (1951) 104 Cal.App.2d 455, 460.)

Plaintiff disputes defendants contention the loan was payable on demand. Rather, according to plaintiff, the court impliedly found the loan was meant to be paid over time since defendants had generally made monthly payments (without demand by [plaintiff]). Relying on Davis v. Hosford (1937) 18 Cal.App.2d 664 and Fuller v. White (1948) 33 Cal.2d 236, plaintiff argues that, where a loan contract specifies no precise date for full repayment, the full amount is [not] invariably payable on demand as a matter of law. But the Davis and Fuller cases involved loans payable upon the borrowers attaining the financial ability to satisfy the debt. (Davis v. Hosford, supra, 18 Cal.App.2d at p. 665; Fuller v. White, supra, 33 Cal.2d at p. 237.) And here, plaintiff never contended repayment of the loan was conditioned upon defendants becoming financially able to pay. Nor did she allege in her complaint that defendants are now able to pay the debt, a necessary averment if the loan were payable only when defendants could afford to pay. (Horacek v. Smith (1948) 33 Cal.2d 186, 191; Van Buskirk v. Kuhns (1913) 164 Cal. 472, 475-476.) Instead, plaintiff proffers, as the contractual term for the time of performance, the vague phrase to be paid over time a phrase that specifies no due date, time limitation, or condition precedent to trigger maturity of the loan and therefore defines no time whatsoever for full payment of the debt. This phrase is not sufficiently definite to constitute an essential term of a binding contract. (Weddington Productions, Inc. v. Flick (1998) 60 Cal.App.4th 793, 811.) We conclude the loan was payable on demand and the trial court did not find otherwise.[3]

Plaintiff argues substantial evidence showed that after making her May 2002 demand, she agreed to with[draw] her request for an immediate accounting and payment in full. But plaintiff cites no authority for the proposition that withdrawing a demand, in and of itself, tolls the statute of limitations or commences a new limitations period. In any case, the court made no finding that plaintiff withdrew her demand.

What the court did find, as noted in its statement of decision, was that the statute of limitations did not run while defendants were making payments and only commenced to run upon defendants last payment. It is true that a partial payment made on a promissory note, before expiration of the statute of limitations, starts the running of a new limitations period. Code of Civil Procedure section 360 (section 360) provides: No acknowledgement or promise is sufficient evidence of a new or continuing contract, by which to take the case out of the operation of this title [on time of commencing civil actions], unless the same is contained in some writing, signed by the party to be charged thereby, provided that any payment on account of principal or interest due on a promissory note made by the party to be charged shall be deemed a sufficient acknowledgment or promise of a continuing contract to stop, from time to time as any such payment is made, the running of the time within which an action may be commenced upon the principal sum or upon any installment of principal or interest due on such note, and to start the running of a new period of time, but no such payment of itself shall revive a cause of action once barred. (Italics added.) In other words, no writing is required to prove an acknowledgment [of a continuing contract] by part payment on a promissory note. (Eilke v. Rice (1955) 45 Cal.2d 66, 73 (Eilke).) Here, there was no promissory note.

Plaintiff nevertheless relies on James De Nicholas Associates, Inc. v. Heritage Constr. Corp. (1970)5 Cal.App.3d 421, 426, where the Court of Appeal stated in a breach of oral contract case that [t]he most . . . the part payment herein alleged could do would be to make the two-year statute run from [the date of the partial payment]. But this statement was dictum. The issue actually addressed by the court was whether the partial payment justified the application of the four year statute of limitations to the oral contract, as opposed to the two year limitations period, a question the court answered in the negative. (Ibid.) Moreover, although the James De Nicholas court cited Eilke, supra, 45 Cal.2d 66,for the proposition that a part payment may extend the statute of limitations on an oral contract, the Eilke decision did not involve an oral contract. The question in Eilke was whether partial payment on a promissory note was a sufficient acknowledgment of a continuing debt to extend the statute of limitations for an additional limitation period pursuant to section 360. Eilke did not address the application of section 360 to oral contracts.

The Eilke court discussed at length the history of section 360 and its amendment in 1947. Prior to 1947, section 360 made no reference to part payment or its sufficiency to acknowledge a continuing or new debt. The 1947 amendment of section 360, however, exempted partial payments on a promissory note from the general requirement of a writing to acknowledge a continuing debt. (Eilke, supra, 45 Cal.2d at pp. 70-74.) As explained in Eilke, prior to the 1947 amendment, the state of the law on the adequacy of a mere act of partial payment as sufficient evidence of an acknowledgement of a continuing debt had been stated in Clunin v. First Federal Trust Co. (1922) 189 Cal. 248, 253-254: [N]o writing is sufficient as an acknowledgment under section 360, unless it contains some reference to a debt, which, either of itself or with the aid of permissible evidence of extrinsic facts in explanation, amounts to an admission that there is a debt existing to the creditor to whom the writing is sent which the debtor is liable to pay and willing to pay. The checks introduced in evidence do not come up to this standard since they contain no reference whatever to any debt, or any language which can be said to be uncertain in its meaning and subject to explanation by the aid of extrinsic circumstances so as to be made to refer to a debt. (Ibid.) The Eilke court stated the pre-1947 rule drawn from Clunin and like cases thusly: Prior to the 1947 amendment . . . section 360 required not only a writing to prove the act of acknowledgment or part payment but also that the writing directly evidence the new promise or admit or refer to the debt and the payment from which a new promise may be inferred. (Eilke, supra, 45 Cal.2d at p. 72.) The Eilke court also concluded the [pre-1947] California rule was totally at variance with the great majority of decisions in other jurisdictions where part payment transactions were excluded from the category of acknowledgments requiring a writing. (Ibid.)

The variance between the law of California and the general rule in other jurisdictions was remedied [w]ithin specified limits by the 1947 amendment. (Eilke, supra, 45 Cal.2d at pp. 72-73.) The first part of the amendment expressly excepts any part payment of principal or interest on a promissory note from the operation of the title. Part payment is deemed to be a sufficient acknowledgment of a continuing contract to take the case out of the statute of limitations. By express language the amendment is restricted to continuing contracts; that is, contracts against which the statute has not run at the time of the acknowledgment. Thus the amendment adopts the distinction between continuing and new contracts long recognized in this state. The acknowledgment of a debt already barred by the statute gives rise to a new contract and a new cause of action dating from the acknowledgment. [Citations.] The acknowledgement of a debt before the statute has run, however, does not create a new obligation as of the time of the acknowledgment; it merely continues the original obligation through a new statutory period. (Id. at p. 73, italics added.)

Thus the 1947 amendment created a specific and precise exception for partial payments on promissory notes. The limitation of the 1947 exception is not surprising. After all, a promissory note already is a writing signed by the party to be charged which directly evidences the creation of the debt; the act of payment was deemed sufficient to acknowledge the continued existence of the debt. Importantly for the instant case, the 1947 amendment did not affect the then existing rule with regard to acknowledgments of continuing or new debts not represented by a promissory note. The act of part payment on debts not represented by a promissory note continued to be insufficient to acknowledge the continued or new debt and thereby extend the statute of limitations.

Here, the last written acknowledgment of defendants debt was the letter of July 13, 1995, thereby extending the statute on the then existing debt to July 13, 1997. Payments made after July 13, 1995 did not revive any of the debt incurred before July 13, 1995, and as of July 13, 1997, the statute of limitations had run on all of the debt incurred before July 13, 1995. Plaintiff made additional loan advances after July 13, 1995, with the last loan advance on December 27, 1999. There was no evidence of any written acknowledgments of the debts created by any of these advances sufficient to meet the requirements of section 360. Thus, the statute of limitations on these post-July 1995 advances expired two years after each advance. The last advance being on December 27, 1999, the latest the statute of limitations could have expired on any of the post-1995 advances was December 27, 2001. The complaint was not filed until more than three years later and thus is time barred.

Plaintiffs contention that she was entitled to waive defendants breach until after July 1, 2003, when the parties openly disputed the debt is without merit. Plaintiff relies on cases involving the doctrine of anticipatory breach which allows the nonbreaching party to a bilateral contract to suspend performance, terminate the contract, and sue for the breach, or, at the election of the nonbreaching party, to await complete performance before suing. (See, e.g., Romano v. Rockwell Internat., Inc. (1996) 14 Cal.4th 479, 486 [limitations period applicable to wrongful termination claim begins to run upon actual termination, rather than when the employee is informed unequivocally that discharge is inevitable].) But the doctrine of anticipatory breach has no application to a unilateral contract, or to a bilateral contract made unilateral by the promisees full performance. (Cobb v. Pacific Mutual Life Ins. Co. (1935) 4 Cal.2d 565, 573; Maudlin v. Pacific Decision Sciences Corp. (2006) 137 Cal.App.4th 1001, 1018.) Further, as we have discussed, the statute of limitations on a loan of money payable on demand commences to run when the loan is made, not when the debtor breaches by failing to pay. For purposes of the statute of limitations, it simply does not matter when the demand loan is breached. The clock starts running the instant the loan is made. Moreover, the creditor cannot waive the debtors statute of limitations defense. Waiver is the voluntary relinquishment of a known right. The creditor cannot relinquish the debtors right, for that surely would not be voluntary from the debtors viewpoint. If plaintiff could waive the defense, the statute of limitations would never be a defense.

Finally plaintiff, with minimal argument, mentions estoppel to plead the statute of limitations as an example of a way the statute of limitations may be postponed or tolled by other means than section 360. Plaintiff never argued in the trial court that defendants were estopped to plead the statute. Nor is there any evidence suggesting such an estoppel. The only evidence relied upon by plaintiff in support of her estoppel argument is plaintiffs agreement to suspend payments temporarily some time in 2002. But as we have seen, the statute had already run in December 2001. Defendants request to suspend payments after the statute had already run can hardly be a representation upon which plaintiff relied in failing to bring her action before the statute had run.

Because we conclude plaintiffs action was barred by the statute of limitations, we do not discuss defendants contention plaintiff charged them a usurious interest rate.

DISPOSITION

The judgment is reversed with directions to enter judgment in favor of defendants. Defendants shall recover their costs on appeal.

IKOLA, J.

WE CONCUR:

OLEARY, ACTING P. J.

ARONSON, J.

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[1] Where necessary for purposes of clarity and without intending any disrespect, we refer to the parties by their first names. We note the parties are not related to Justice Richard M. Aronson of this court.

[2] For convenience we sometimes refer to all the loans collectively as the loan, with the last disbursement made in 1999.

[3] As noted, plaintiff made a written demand for payment on May 13, 2002. But the making of the actual demand does not affect the accrual of the action for statute of limitation purposes. [W]here the obligation is simply to pay money on demand, no reasonable or other time is added to the limitation period. The demand is not viewed as a condition but merely as an indication of the immediate maturity of the debt. Hence the statute begins to run at the inception of the agreement, when the obligation was incurred. (3 Witkin, Cal. Procedure (4th ed. 1996) Actions, 496, p. 627.) In other words, on May 13, 2002, plaintiff told defendants she now wanted to be repaid, but the communication of her desire did not start the running of the statute of limitation. The statute started to run, at the latest, when the last loan advance was made on December 27, 1999. And even if the statute did not begin to run until the written demand was made, the complaint was still filed more than two years later, on April 6, 2005.

At oral argument plaintiff argued for the first time that the loan was not payable on demand because the parties agreed in April 1992 to amortize the loan over a ten-year period. But even under that interpretation of the evidence, the amount owed by defendants as of April 1992 would have been due in full on or before April 2002, one month before the May 2002 formal demand, and more than two years before the complaint was filed.