Opinion
No. E2002-00481-COA-R3-CV.
Filed November 26, 2002.
Appeal from the Chancery Court for Hawkins County; No. PC 3442; Thomas R. Frierson, II, Chancellor.
Vacated; Case Remanded.
Wade W. Massie and Tariq A. Zaidi, Bristol, Virginia, for the appellants, Woodrow Franklin and Maudie Franklin.
Thomas A. Peters, Kingsport, Tennessee, for the appellees, Alice Clark and David Scruggs, co-executors of the Estate of Margaret S. Murphy, deceased.
Charles D. Susano, Jr., J., delivered the opinion of the court, in which Houston M. Goddard, P.J., and Herschel P. Franks, J., joined.
OPINION
This is a claim against an estate. The claimants seek to recover on a $100,000 promissory note signed by the decedent as an accommodation maker. Following a bench trial at which the court, acting under the authority of the Dead Man's Statute, Tenn. Code Ann. § 24-1-203 (2001), sustained the estate's objection to testimony, the trial court ruled that the claim against the estate is barred by the applicable statute of limitations. We vacate the trial court's judgment and remand for further proceedings.
Tenn. Code Ann. § 24-1-203 provides as follows:
In actions or proceedings by or against executors, administrators, or guardians, in which judgments may be rendered for or against them, neither party shall be allowed to testify against the other as to any transaction with or statement by the testator, intestate, or ward, unless called to testify thereto by the opposite party. If a corporation is a party, this disqualification shall extend to its officers of every grade and its directors.
I.
On September 20, 1990, the decedent, Margaret S. Murphy, signed a promissory note for her nephew, Bert Smith, III, and his then-wife, Kay Smith, in connection with a loan of $100,000 made by the claimants to the Smiths. The Smiths also signed the note, which was dated September 20, 1990. The note recites a due date of October 11, 1990 — 21 days after its execution. The evidence reflects that the Smiths intended to pay the obligation with the proceeds from a shortly-anticipated sale of livestock.
The Smiths are now divorced.
As pertinent to the matters on appeal, the note contains the following provision:
Each party to this note hereby waives demand, protest, presentment and notice of dishonor and they do further assent and agree that the holder hereof may, by agreement with any one or more of the parties hereto before, on or after maturity extend the time of payment of this note, in whole or in part and from time to time, without in any wise affecting the liability otherwise imposed upon them by the terms of this note and by law.
(Emphasis added).
The Smiths failed to make any payments on the note. However, on numerous occasions between the due date and the filing of the subject claim on May 7, 2001, Mr. Smith acknowledged the validity of the debt and promised to pay same.
II.
The trial court concluded that the evidence failed to establish that the decedent acknowledged an obligation to the claimants or issued a new promise to pay the obligation evidenced by the note, at any time subsequent to the note's due date. The trial court also found that there was no evidence that the decedent was aware that Mr. Smith, subsequent to the due date of the note, had acknowledged the debt or promised to pay it. Finally, the trial court held that the claim against Mrs. Murphy's estate was not timely filed.
III.
On appeal, the claimants essentially raise three issues: first, whether the trial court erroneously excluded, under the Dead Man's Statute, the testimony of the claimant Maudie Franklin tending to establish that the decedent had acknowledged and promised to pay the note after it became due; second, whether the doctrines of estoppel or revival could be used to overcome the estate's defense of the statute of limitations; and third, whether extensions of the due date under the terms of the note had prevented the statute of limitations from running.
IV.
In this non-jury case, our review is de novo upon the record of the proceedings below. However, that record comes to us with a presumption that the trial court's factual findings are correct. Tenn.R.App.P. 13(d). We must honor that presumption unless we find that the evidence preponderates against those findings. Union Carbide Corp. v. Huddleston , 854 S.W.2d 87, 91 (Tenn. 1993). The trial court's conclusions of law, however, are not accorded the same deference and we review them de novo with no presumption of correctness. Campbell v. Florida Steel Corp. , 919 S.W.2d 26, 35 (Tenn. 1996).
V.
We find that the trial court correctly concluded that the claimant, Maudie Franklin, was barred from testifying as to conversations with the decedent under the Dead Man's Statute. That statute, Tenn. Code Ann. § 24-1-203, provides, in pertinent part, as follows:
In actions or proceedings by or against executors, administrators, or guardians, in which judgments may be rendered for or against them, neither party shall be allowed to testify against the other as to any transaction with or statement by the testator, intestate, or ward, unless called to testify thereto by the opposite party. . . .
The instant action is a claim against the executors of an estate. The claimant Maudie Franklin is obviously a party to this action. She was asked questions by her own counsel pertaining to a conversation she had with the decedent. The thrust of Mrs. Franklin's testimony is that the decedent had acknowledged and promised to pay the note at a time after it was due and within six years of the filing of the subject claim. Though the Dead Man's Statute must be construed strictly in favor of permitting the admission of otherwise admissible evidence, its bar must be upheld when a party raises it to prevent a living opposing party from testifying about legally operative speech that the opposing party attributes to the decedent. Haynes v. Cumberland Builders, Inc. , 546 S.W.2d 228, 230-31 (Tenn.Ct.App. 1976). That is precisely the situation presented to the trial court and now before us on this appeal.
The claimants argue that the Dead Man's Statute does not apply to the subject testimony because the testimony does not pertain to the formation of a contract, but rather to the defense of the statute of limitations. The claimants point out, as if significant to the resolution of this issue, that there is no dispute as to the validity of the underlying debt. We find the claimants' assertions unpersuasive on this issue. The language of the statute does not limit its reach only to statements regarding the validity of the underlying transaction that is the subject of the dispute. Rather, the statute applies to all testimony by a party that could affect the size of the estate. Clearly, the subject testimony seeks that end. It seeks to establish that the decedent, by her own conduct, has effectively precluded the estate from relying upon the statute of limitations defense.
VI.
On this appeal, the estate relies on the statute of limitations as its exclusive defense. The claimants seek to avoid the bar of the statute by relying on the equitable theories of revival and estoppel. They further assert that under the terms of the subject note, the parties to the note had agreed that any one of them could agree to "extend the time of payment of [the] note" and that such an extension would be binding upon the other makers, including the decedent. The claimants argue that the due date of the note was extended by agreement between the claimant Woodrow Franklin and the defendant Mr. Smith, and that their claim against the estate was filed well within the applicable statute of limitations. See Tenn. Code Ann. § 47-3-118(a) (2001).
Tenn. Code App. § 47-3-118(a) provides as follows:
Except as provided in subsection (e), an action to enforce the obligation of a party to pay a note payable at a definite time must be commenced within six (6) years after the due date or dates stated in the note or, if a due date is accelerated, within six (6) years after the accelerated due date.
This court holds that the theories of estoppel and revival have no application to the claim against the estate. We agree the note provides for extensions in the due date; but the alleged extensions agreed to between Mr. Franklin and Mr. Smith, while important to the resolution of this claim against the estate, are not so because of estoppel or revival.
In order for the statute of limitations to be extended under a theory of revival, the debtor must acknowledge the validity of the underlying debt and make an unconditional promise to pay. Ingram v. Earthman , 993 S.W.2d 611, 638 (Tenn.Ct.App. 1998). While the claimants have made a persuasive argument that Mr. Smith revived this debt by his conversations with Mr. Franklin with respect to Mr. Smith's liability, the only evidence proffered by the claimants as to revival by the decedent was not admissible under the Dead Man's Statute. In other words, while Mr. Smith may have revived the debt as to himself, there is simply no conduct on the part of the decedent to revive the debt as to her and hence her estate.
Furthermore, the record before us presents this court with no evidence to support the claimants' claim that the estate is estopped from asserting the statute of limitations as a defense. For estoppel to apply, the decedent must have made representations to one of the claimants. See Ingram , 993 S.W.2d at 640. The record does not reflect any such admissible representations by the decedent. Estoppel simply does not apply to the facts involved in this claim against the estate.
VII.
The extensions arguably agreed to between Mr. Smith and Mr. Franklin are not without significance in this case. Under Tennessee law, an extension on a note extends the statute of limitations to six years from the note's due date as extended, regardless of whether the maker gives the payee new consideration. Bowman v. Rector , 59 S.W. 389, 396-97 (Tenn.Ch.App. 1900) overruled on other grounds by Commerce Union Bank v. Burger-in-a-Pouch, Inc. , 657 S.W.2d 88, 90 (Tenn. 1983). To hold otherwise would be to allow the maker to receive the benefit of the extension while depriving the payee of his or her full opportunity under the law to enforce the note. Id . However, it is unclear to this court whether the claimants raised this precise issue at trial, and if so, whether the trial court squarely addressed it. In its memorandum opinion, the trial court concluded as follows:
Though Mr. Smith, in fact, may have made sufficient promises to repay the debt within the original limitation of actions period, [Claimants] have failed to establish whether such an agreement was made with the knowledge of Ms. Murphy and as to whether any valuable consideration existed for said extension of time of payment.
These remarks by the trial court seem to indicate that the court either did not take into account the legal consequences of the terms of the note or, as may well be the case, that the claimants did not call the court's attention to those terms. Issues not raised at trial cannot be considered by this court on appeal. Simpson v. Frontier Cmty. Credit Union , 810 S.W.2d 147-153 (Tenn. 1991); see also Clement v. Nichols , 186 Tenn. 235, 237, 209 S.W.2d 23, 24 (1948) (explaining that going beyond the issues presented to the trial court would exceed the Court of Appeals' exclusively appellate jurisdiction). Thus, the question for us is whether this issue of contract law was properly raised or addressed in the trial court. About this matter, we have some doubt.
From the trial transcript, it seems quite possible that Mr. Franklin offered Mr. Smith an extension on the note. The following is an excerpt from the direct examination of Mr. Franklin:
Q. Now it's been, it's been ten years since this note was made. Why have you waited so long to bring a claim?
A. Well, because [Mr. Smith] kept telling me he was going to start paying me, and just I didn't push them too bad. Didn't want to take it to Court either, you know.
Q. Did you go along with Bert's request for more time?
A. Yeah.
Q. Was that on the strength of his promises that he would pay you?
A. Yeah.
It is not clear from the record whether this testimony demonstrates that the claimants granted Mr. Smith an extension on the note. Furthermore, it is not clear whether the claimants offered this testimony to prove, under the terms of the note, that there had been an extension or whether this evidence was offered solely for the purpose of supporting their theories of common law revival and estoppel. We have already held that there is no evidence that the estate is precluded from raising the statute of limitations based upon any actions or representations of the decedent. However, any conversations between the claimants and Mr. Smith bearing on the subject of an extension would be relevant to the issue of the statute of limitations as to the estate. This is because we hold, as a matter of law, that, under the terms of this note, if one of the claimants granted Mr. Smith such an extension — regardless of whether the decedent ever received notice of this action — the last extended due date would serve as the point from which to measure the six year statute of limitations. This is the clear import of the language of the note pertaining to extensions.
The judgment below is hereby vacated. This case is remanded to the trial court. See Tenn. Code Ann. § 27-3-128 (2000). On remand, the parties shall be afforded an opportunity to put on proof as to whether the claimants or either of them granted an extension under the terms of the note. If the due date of the note was extended, such an extension would have been binding on the decedent under the terms of the note and hence is binding on her estate. If the claimants' claim was filed within six years of the last extended due date, it would be timely filed. Costs on appeal are taxed to the Estate of Margaret S. Murphy.
Tenn. Code Ann. § 27-3-128 provides as follows:
The court shall also, in all cases, where, in its opinion, complete justice cannot be had by reason of some defect in the record, want of proper parties, or oversight without culpable negligence, remand the cause to the court below for further proceedings, with proper directions to effectuate the objects of the order, and upon such terms as may be deemed right.