Lowry v. Mills

682 So. 2d 802, 96 La.App. 3 Cir. 332, 1996 La. App. LEXIS 2380, 1996 WL 577451
CourtLouisiana Court of Appeal
DecidedOctober 9, 1996
DocketNo. 96-332
StatusPublished
Cited by1 cases

This text of 682 So. 2d 802 (Lowry v. Mills) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lowry v. Mills, 682 So. 2d 802, 96 La.App. 3 Cir. 332, 1996 La. App. LEXIS 2380, 1996 WL 577451 (La. Ct. App. 1996).

Opinions

hYELVERTON, Judge.

Summary judgment was granted dismissing a claim on the basis of prescription. William P. Mills III wrote a check to Ruffin T. Lowry on September 16,1985, for $15,000. Mills testified by deposition that the purpose of the check was to pay a personal obligation incurred in 1983. Lowry never cashed the check. Lowry sued Mills in 1994 for the $15,000. Mills moved for summary judgment on the basis of prescription of 10 years. The trial court granted summary judgment and dismissed the suit. Lowry appealed. We reverse and remand. The giving of the check was anj^aeknowledgment. Whether it was also a novation is an unresolved factual [803]*803dispute. Summary judgment was inappropriate.

SUMMARY JUDGMENT FACTS

Sometime in early 1983, Lowry and Mills entered into a verbal agreement whereby Mills promised to purchase from Lowry 50% of Lowry’s interest in a sand and gravel business. Although neither party can recall the exact date of the agreement, both admit two essential points: (1) the existence of a verbal agreement, and (2) the perfection of the agreement before the venture incorporated. Lowry incorporated the sand and gravel business on April 8, 1983, and named it the General Sand Co., Inc. The corporation later dissolved on May 23, 1985. Before entering into the 1983 sand and gravel verbal agreement, the parties had an ongoing business relationship. They co-owned real estate and jointly participated in oil and gas ventures.

On September 16,1985, Mills wrote Lowry a check for $15,000. This was more than two years after perfection of the verbal agreement and several months after dissolution of the corporation. Lowry never cashed the check. Both parties admit that the $15,000 cheek corresponded exactly to Mills’ liability resulting from the 1983 verbal agreement. As to what the issuance of the check was to accomplish, the parties have conflicting explanations. No written evidence exists to verify the circumstances surrounding the cheek issuance; nor does the check itself contain a written notation as to its purpose.

Lowry claims that Mills issued the check to acknowledge the $15,000 debt that he owed on the sand and gravel venture. In his affidavit, Lowry states, “The | acheck was never intended to be cashed, but only to acknowledge the obligation to pay the $15,000.” The parties “had other things going on,” in addition to the 1983 agreement, that might involve a future accounting between them. For this reason, according to Lowry, he simply put the check in a drawer without ever cashing it. Contradicting Lowry’s explanation, Mills claims that he issued the check to extinguish his liability and that he repeatedly requested the plaintiff to cash it.

On February 25,1994, Lowry filed this suit to enforce the agreement. The suit was filed more than ten years after the 1983 verbal agreement and more than five years after Mills issued the check. However, the suit was filed within ten years from the September 16, 1985 check issuance. Subsequently filing a motion for summary judgment, Mills argued that as a matter of law the action on the contract as well as the cheek is prescribed. The trial judge granted Mills’ motion for summary judgment.

ARGUMENTS

Lowry argues that the ten-year prescriptive period applicable to the personal action was interrupted by Mills’ $15,000 cheek issued on September 16, 1985. In effect, the check (he argues) served as an acknowledgment under La.Civ.Code art. 3464: “Prescription is interrupted when one acknowledges the right of the person against whom he had commenced to prescribe.” The effect of an interruption is governed by La.Civ. Code art. 3466: “If prescription is interrupted, the time that has run is not counted. Prescription commences to run anew from the last day of interruption.” Thus, according to the Civil Code, the approximate two and one-half year's that had accrued from the date of the oral agreement in early 1983 to Lthe date of the check in September 1985 would have been erased. The ten-year prescriptive period would begin anew from September 16, 1985, the cheek date. Therefore, the February 25, 1994 filing date is timely, and the action is not barred.

Mills argues that the check, a negotiable instrument, accomplished a substitution of his underlying obligation to buy 50% of Low-ry’s interest in the venture. Thus, the ten-year prescriptive period applicable to the 1983 oral contract was not interrupted. And the five-year prescriptive period applicable to negotiable instruments began accruing on September 16, 1985, the date of the check. Both actions, on the contract and on the negotiable instrument, were barred when the plaintiff filed suit in 1994.

OPINION

In this case, summary judgment is improper because the parties dispute a mate[804]*804rial fact regarding the significance of the $15,000 cheek and the action is not prescribed as a matter of law. When considering the correctness of summary judgment, appellate courts review de novo the trial judge’s findings of fact as well as law. Schroeder v. Board of Sup’rs, 591 So.2d 342 (La.1991). The trial judge in this ease found that the $15,000 check dated September 16, 1985, constituted an acknowledgment of the debt as well as a substitution of the underlying contractual obligation. Relying on Louisiana Health Service v. McNamara, 561 So.2d 712 (La.1990), the lower court seemed to conclude that the parties to a contract will always accomplish an objective novation anytime the debtor issues a check. Apparently, this novation occurs regardless of the circumstances surrounding the issuance of the check or the intentions of the parties. Once the lower court ^determined that a substitution occurred, it held that the original prescriptive period of ten years could not be interrupted. In other words, the more than two years preceding the acknowledgment (the issuance of the cheek) would not be erased, and the counting of the ten-year prescriptive period applicable to the contract would begin in 1983, the date of the oral agreement, instead of 1985 when the check was issued.

The lower court’s holding did not take into account the codal requirements for determining if a novation had occurred. Furthermore, the McNamara ease does not dictate that the check be automatically considered a substitution or “implicit novation.” McNamara, 561 So.2d 712. In McNamara, the supreme court first noted that in “an ordinary case” an acknowledgment does interrupt the prescriptive period thereby canceling the time that has already run. Id. The court went on to state:

In some cases, however, the debtor not only acknowledges the existence of the debt, but he also substitutes a new obligation with a longer prescriptive period in place of the original obligation.... Our courts have generally interpreted acknowledgment by notes or checks to constitute implicit novations of the obligations whenever this interpretation is favorable to the creditor. Id. at 719. (Emphasis added). If it is determined that an implicit novation will benefit the creditor, then the proper prescriptive period after an acknowledgment is “the longer of either the original prescriptive period or that applicable to a substituted obligation.” Id.
Unlike the several cases that the McNamara

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Bluebook (online)
682 So. 2d 802, 96 La.App. 3 Cir. 332, 1996 La. App. LEXIS 2380, 1996 WL 577451, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lowry-v-mills-lactapp-1996.