Opinion
No. 57689-5-I.
May 7, 2007.
Appeal from a judgment of the Superior Court for King County, No. 04-2-30514-4, James D. Cayce, J., entered January 3, 2006.
Affirmed by unpublished opinion per Coleman, J., concurred in by Schindler, A.C.J., and Cox, J.
James and Carol Guettler borrowed money from Louis and Helen Christen over a number of years. Loan agreements were originally made orally, but the parties executed a written agreement in 1995, documenting the "status" of their loans at that time. More money was loaned after 1995 under oral agreements. After the Guettlers made no payments for three years and got separated, the Christens sued to recover the total amount owed. The trial court entered judgment for the Christens and James appeals, arguing that the trial court applied the wrong statute of limitations and that the debts were time barred. Even if the trial court applied the wrong statute of limitations and the statutory period had run, the Guettlers' payments in 2002 revived the entire debt. Therefore, the Christens' claim is not time barred, and we affirm the trial court's judgment.
For ease of reference, the opinion will refer to the parties by the first names when referring to them individually. No disrespect is intended.
FACTS
The Christens provided substantial amounts of money to their daughter, Carol, and her husband, James. The Guettlers were married in 1984, and the Christens provided money for the Guettlers to buy a house and other investment properties and cover other everyday expenses. Between 1983 and 1995, the Christens provided money to the Guettlers on an informal basis. During this time, the Guettlers orally agreed to pay a variable interest rate, depending on the rate the Christens received from the money market account.
In 1995, the Guettlers signed a document, acknowledging the total debt and changing the interest rate from variable to fixed:
Personal Note
As of Jan. 1, 1995, the status of our loan(s) from Helen Louis Christen stands at $ 163,565.00. Interest is at 8%, compounded annually.
The Guettlers made occasional payments over the next four years, and the Christens loaned $ 28,230 more by oral agreement to the Christens between 1995 and 2002. As of October 1999, the new oral loans, the written acknowledgment, and the accumulated interest totaled $ 207,556.
The Guettlers made no payments between October 1999 and December 2002. In January 2000, the Christens orally agreed to reduce the interest rate from 8 percent to 6 percent. In December 2002, the Guettlers made two payments of $ 20 and $ 1,000.
The Christens sued the Guettlers to recover the debt balance in 2004, after the Guettlers separated and were in the process of getting divorced. The trial court granted the Christens' motion for default against the Guettlers, but it was vacated as to James but not to Carol. Carol filed an answer requesting the court grant a judgment in favor of her parents.
James asks us to take judicial notice of his dissolution decree, but the decree does not affect any of the issues that we must consider in this case. Accordingly, judicial notice is unnecessary.
James moved for summary judgment based on the statute of limitations, but the trial court denied the motion. The case proceeded to a bench trial on a documentary record, with both parties stipulating to the record previously presented on summary judgment. The trial court found that the 1995 document had all the elements of a written contract and was therefore subject to a six-year statute of limitations. The trial court found that the additional funds loaned to the Guettlers after 1995 were subject to the three-year statute of limitations for oral contracts. The trial court concluded that the Guettlers' payments in 2002 revived the entire debt because they were "made under such circumstances that showed the Guettler community owed the full amount of the loans[.]" The trial court entered judgment in favor of the Christens for $ 329,189. James timely appealed.
STANDARD OF REVIEW
James asks us to review de novo the trial court's findings and conclusions because the trial was based entirely on a documentary record. The Christens argue that under In re Marriage of Rideout, 150 Wn.2d 337, 77 P.3d 1174 (2003), the documentary evidence raised disputed issues and required the trial court to make credibility determinations, and therefore, the findings should be reviewed for substantial evidence. The parties do not dispute that we should review the trial court's legal conclusions de novo.
In general, where a trial court has not seen or heard testimony requiring it to make credibility determinations, an appellate court reviews a documentary record de novo. Rideout, 150 Wn.2d at 350. But where competing documentary evidence must be weighed, a reviewing court applies a substantial evidence standard. Rideout, 150 Wn.2d at 351.
In making appealed finding of fact 11, the trial court was required to weigh credibility when determining whether the December 2002 payments acknowledged the total debt. Helen first stated in a declaration that each time Carol made a payment, she would acknowledge the total debt. In a later deposition, Helen testified that she could not remember a time when Carol acknowledged the total debt when making a payment. Carol stated in a declaration that she told her mother to apply a December 2002 payment to the total debt.
Although James urges us to apply de novo review to the trial court's findings of fact, he acknowledges this conflict in the documentary evidence.
As discussed . . . Finding of Fact 11 was not based on conflicting evidence or a credibility determination, but based on [Carol Guettler's] conclusory statement in a declaration that is refuted by Ms. Christen's sworn deposition testimony. This court can determine whether Finding of Fact 11 is supported by the record regardless of the standard of review.
Reply Brief of Appellant, at 4. Because James acknowledges a conflict in the evidence supporting finding of fact 11, we review that finding for substantial evidence.
ANALYSIS
The 1995 Document
In his brief, James argues that the 1995 document was not a written contract because it lacks two essential elements of a contract: an express promise to pay and consideration. The Christens argue that the document's implied promise to pay is sufficient to establish that essential element and that James cannot raise the consideration issue here because he failed to raise it below.
Written contracts have a six-year statute of limitations in Washington. RCW 4.16.040(1) (requiring commencement within six years of action "upon a contract in writing, or liability express or implied arising out of a written agreement"). "The essential elements of any contract which must be set forth in writing are 'the subject matter of the contract, the parties, the promise, the terms and conditions, and (in some but not all jurisdictions) the price or consideration.'" Kloss v. Honeywell, 77 Wn. App. 294, 298, 890 P.2d 480 (1995) (quoting Family Med. Bldg., Inc. v. Dep't of Soc. Health Servs., 104 Wn.2d 105, 108, 702 P.2d 459 (1985)). As a result of RCW 4.16.040(1)'s broad definition including implied liability arising out of a written agreement, "what is normally regarded as a necessary element of a written contract need not be expressly addressed if it is implicit in the writing, and the fact that the obligation is implicit in the writing does not cause the contract to be 'partly oral' for statute of limitations purposes." Kloss, 77 Wn. App. at 299.
Promise to Pay
James asserts that the word "loan" in the 1995 document does not sufficiently imply a promise to pay, relying on National Bank of Commerce v. Preston, 16 Wn. App. 678, 558 P.2d 1372 (1977), and therefore, the document lacks an essential element of a contract.
In National Bank of Commerce, Harvey Rendsland was ill and Nona Preston managed his financial affairs. Preston filled out four of Rendsland's checks, designating herself as the payee. Two of the check stubs had the notation "loan," one had the notation "loan (house)," and one had no notation. More than three but less than six years after Rendsland died, Rendsland's executor sued Preston, claiming the four checks were loans to her that had not been repaid. The court affirmed the dismissal of the suit on summary judgment because the action was barred by the three-year statute of limitations for oral contracts:
A borrower's promise to repay loaned funds is, of course, an essential element of a loan agreement. The check stub that does not contain any notation clearly lacks a promise by Preston to repay Rendsland. The check stubs with the notations "loan" and "loan (house)" do not contain the necessary promissory language either. Plaintiff cites In re Estate of Larson, 71 Wn.2d 349, 428 P.2d 558 (1967), as authority for the proposition that "loan" establishes Preston's promise to repay Rendsland. Dictum in Larson, a case dealing with the forgiveness of a debt, states that the words "As Loan" on the face of a check are unequivocal and are evidence supporting a finding that the drawer of the check made a loan to the payee. Larson is not applicable to this situation. The language on Rendsland's check stubs may be evidence of some loan, but it does not constitute a written promise by Preston to repay Rendsland. When "as loan" appears on the face of a check, the drawer has ordered that a specified amount of money be paid to the payee "as loan." This is substantially different from the solitary presence of "loan" on a check stub, which is equivocal. Parol evidence is necessary to indicate whether the check is for a loan from the drawer (Rendsland) to the payee (Preston), for the repayment of a loan from Preston to Rendsland, or for a transaction relating to a loan involving a third party.
Admission of parol evidence is necessary to make the otherwise inert word "loan" functional. This would be more than clearing up ambiguity in a term of a contract. It would be adding a material term to the contents of the writing and this is impermissible. Griffin v. Lear, [ 123 Wash. 191, 212 P. 271 (1923)].
In the absence of the essential promise to repay, the checks and check stubs are merely orders of payment and not written loan agreements. Since parol evidence is necessary to establish an essential term of the agreement, the contract is partly oral and the 3-year statute of limitations applies.
Nat'l Bank of Commerce, 16 Wn. App. at 680-81. The facts of National Bank of Commerce are distinguishable from this case because, here, the document makes clear that "loan" refers to money loaned from the Christens to the Guettlers. The reference to an interest rate further supports the implication that the Guettlers promised to pay back the debt because there would be no reason to calculate interest if the debt would not be paid back. National Bank of Commerce does not stand for the proposition that use of the word "loan" cannot imply a promise to pay. The court there examined the context of the agreement to determine whether "loan" functioned as a promise to pay on those facts. We conclude that on the facts of this case, the context in which the 1995 document used the word "loan" sufficiently implies a promise to pay.
Consideration
James also argues that the 1995 document lacks consideration and that a document unsupported by consideration is not a contract. The Christens claim that promissory notes do not require consideration and that the 1995 document could be considered either a promissory note or a written contract.
The Christens also argue that James did not raise the consideration issue below and, thus, we should refuse to review it here. See RAP 2.5(a) ("The appellate court may refuse to review any claim of error which was not raised in the trial court."). James's briefing does not address whether he raised the consideration issue below. When asked at oral argument, James argued that the issue was raised below, but counsel could not identify where in the record this issue was raised or how the issue had been framed there.
It is clear that for a contract to be enforceable, it must be supported by consideration. King v. Riveland, 125 Wn.2d 500, 886 P.2d 160 (1994). A promise to pay a preexisting debt is not consideration because it is not bargained for, in that the promise is not sought by the creditor in exchange for his or her performance. Restatement (Second) of Contracts § 71.
Our examination of the record reveals that James did reference the lack of consideration issue below, although not in his trial brief or his summary judgment motion. In a posttrial brief filed before the trial court had entered judgment, James argued that the 1995 document lacks consideration because it does not contain a statement of consideration — for example, the document does not state that fixing the interest rate is consideration or state the terms of repayment as consideration. These consideration arguments in the posttrial brief are not supported by citations to authority and are not the same consideration arguments raised in James's brief here. On appeal, James argues that the 1995 document lacks consideration because it merely memorializes an old agreement without any new consideration, and he cites authority to support this argument.
James did not raise the same lack of consideration before the trial court that he raises here, given that the argument below had a different focus and did not bring to the trial court's attention authority stating that a written contract modifying an earlier contract must be supported by new consideration. We therefore need not, under RAP 2.5(a), further consider this argument.
But even if the 1995 document is not a written contract because it lacks consideration, we still affirm the trial court's judgment because of the 2002 repayments. Regardless of whether a six-year or three-year statute of limitations applied to the 1995 document, to the extent that any of the loans were time barred, the 2002 repayments revived the entire debt as addressed below. 2002 Payments
Because of this disposition, we need not determine whether the 1995 document is a promissory note and, as such, not required to be supported by consideration.
Assuming the 1995 document is not a written contract, then a three-year statute of limitations began running on the loan agreement in 1995 and was renewed with each payment made on the loan. James acknowledges that the oral agreement was renewed with Carol's October 1999 payment, but argues that because she did not make any more payments between October 1999 and October 2002, the statute of limitations expired in October 2002.
The Christens argue that regardless of which statute of limitations applies, payments Carol made in December 2002 revived the entire debt. The trial court found that:
Both prior to and subsequent to January 1, 1995, a number of conversations were held between Helen Christen and Carol Guettler in which Ms. Guettler acknowledged to Helen Christen that the Guettlers owed the full amount of the loans, that they would pay the full amount of the loans, and that each payment was to be a payment toward the balance on the loans. The payments referred to in paragraph 10 above [which include the December 2002 payments] were made under the circumstances created by these conversations.
Finding of fact 11. James does not dispute that Carol made payments in December 2002, but appeals finding of fact 11 on the ground that these payments were not made in circumstances demonstrating a clear and unequivocal intention to acknowledge liability for the whole debt and, therefore, did not revive it.
A time-barred debt is not revived by part payment unless the circumstances show a clear and unequivocal intention on the part of the obligor to revive the entire debt. Grissom v. Bull, 195 Wash. 97, 99, 79 P.2d 971 (1938). James argues that there is no evidence in the record to support the trial court's finding that Carol intended to pay toward the whole debt in December 2002.
Carol made two payments to the Christens in December 2002. Regarding the first payment, Carol spent $ 20 to buy a birthday present on behalf of the Christens and told Helen to apply that amount toward the loan. Regarding the second payment, the Christens had provided $ 1,500 as an advance to Carol for a business expense, and Carol paid back $ 1,000 two days later. James argues that the Christens did not establish that these payments were made in relation to the entire debt and that the trial court's finding that the payments applied to the whole debt are not supported by the evidence.
Carol stated in a declaration that she acknowledged the entire debt to her parents "on many occasion[s] (I do not recall the precise dates)." She also stated, "[I]t was my mother's understanding and certainly my understanding that each payment was to be applied to the entire debt[.]" Helen stated in a declaration that Carol acknowledged the entire debt every time she made a payment and that she also acknowledged that each payment was made to reduce the total debt. In a deposition, however, when asked how often Carol would acknowledge the whole debt, Helen testified that Carol did not acknowledge the whole debt every time she made a payment and she could not remember a specific time when Carol did acknowledge the whole debt.
James argues that Helen's deposition should control because it contradicts declaration testimony. Even if Helen's declaration is not considered, however, there is sufficient evidence in the record — Carol's testimony about a general understanding that payments applied to the whole debt and Helen's testimony that Carol told her to take the $ 20 payment "off our loan" — to support the trial court's finding.
Helen also testified in that deposition, however, that Carol told her to take the $ 20 birthday money "off our loan." James argues that this vague statement does not distinguish between money loaned before 1995 and money loaned afterward. Because of this vagueness, James argues that it is unclear whether "our loan" referred to the entire debt. We conclude, however, that — coupled with Carol and Helen's testimony about the general understanding that each payment applied to the whole debt — Carol's reference to "our loan" is sufficient evidence from which the trial court could find that this payment was intended to apply to the entire debt. The fact that Carol did not distinguish between pre-and post-1995 loans further supports the testimony about their general understanding that the loans were treated as a whole and that payments were made toward the whole debt.
The circumstances surrounding the second December 2002 payment are less clear as to its application to the whole debt, but it is unnecessary for us to determine whether that payment was intended to revive because the first December 2002 payment was clearly intended to revive. Thus, because we conclude that there is sufficient evidence in the record from which the trial court could find that Carol intended at least one of the December 2002 payments to apply to the entire debt, we affirm the trial court's conclusion that the entire debt was revived and was not time barred when the Christens filed this lawsuit in 2004.
For the foregoing reasons, we affirm.