Simpson v. Yarborough

I find myself unable to agree with the majority opinion, and respectfully enter my dissent, although I am not unaware of the implication of approval by the Supreme Court of the holding in Welch v. Beall, Tex.Civ.App. 153 S.W.2d 338, arising from the action taken in refusing the application for writ of error for want of merit.

The decisions cited in Welch v. Beall do not, in my opinion, provide any support for the holding there announced. Brinker v. First Nat. Bank, Tex.Com.App., 37 S.W.2d 136, involves an attempt of a defendant to escape liability on the theory that he was secondarily liable only on the note, and that a renewal of the note without his consent operated to release him from liability on the note. The statute of limitations was obviously not involved. The suit was brought within less than four years, and limitations was not set up as a defense. Commercial Inv. Co. v. Graves, Tex.Civ.App. 132 S.W.2d 439, writ refused, does not even purport to go further than to hold that a surety may by a waiver contained in the note agree that the note may be extended without notice to and without the further agreement of the surety. The rules governing this class of cases are fully discussed in Brinker v. First Nat. Bank, supra. But the case now before us, and the case before the court in Welch v. Beall, involve other and entirely different rules of law.

It is undisputed that the note in the present suit was more than four years past due when suit was filed, unless the due date was extended by some act binding upon the makers of the note. Let us see whether that was done.

In Tsesmelis v. Sinton State Bank, Tex.Com.App., 53 S.W.2d 461, 462, 85 A.L.R. 319, it is said: "To support a contention that the payment of a negotiable instrument has been extended, there must exist all the elements essential to the execution of a contract (6 Tex.Jur. p. 826), and the agreement for the extension must be for a definite time and mutually bind the parties, payor and payee, the one to forbear suit during the time of extension, and the other his right to pay the debt before the end of that time."

Now what have the parties agreed to in the case before us? We quote the language of the note: "It is agreed by the makers that this note may be extended without notice from time to time at the option of the holder."

As I interpret this provision, it either means what it says, or it means nothing. In no case would the note be due before the due date set out in it. But, by the unilateral act of the holder, the due date might be extended, from time to time, to any later date or dates. If the agreement is binding, it means that the holder could postpone the due date for another year, and then for still another year, and so on, whether the maker of the note agreed to it or not. In such case, the maker of the note would have no right to pay the note until the holder should decide no longer to extend the due date. To me it seems clear that such an agreement is lacking in both mutuality and consideration, and that it is unenforcible for any purpose. It is the converse of the situation described in Austin Real Estate Abstract Co. v. Bahn,87 Tex. 582, 29 S.W. 646, 30 S.W. 430, where the Supreme Court says: "Here the creditor agrees to extend for one week, and the debtor agrees to pay within the week. He does not agree that he will not pay until the end of the week, or that in case he does pay he will pay interest for the entire period of the extension. Hence there was no consideration for the promise of the creditor. * * * It was the right of the company to pay at any time, notwithstanding Fain's promise, and hence there was no consideration to support that promise."

It clearly appears from such cases as Novosad v. Svrcek, 129 Tex. 34,102 S.W.2d 393, that the tests laid down in Tsesmelis vs. Sinton State Bank and in Austin Real Estate Abstract Co. v. Bahn are the same tests that are to be applied in determining whether a renewal or extension agreement is sufficient to toll the statute of limitation.

In the case before us the debtor says to the creditor by the agreement in the note, if it means what it says, "You may extend the due date of this note from time to time, and upon the due date, as you may finally have extended it, I will pay to you the debt with interest to the due date, thus extended." The creditor, however, does not bind himself to extend the note. In fact, he makes no agreement at all, with reference to extensions, at the time the note is executed.

But if it should be held that the agreement for extensions is not void for want of consideration and lack of mutuality, then the true situation is that the holder of the note has in his hands, as a practical matter, a demand obligation from and after the original due date set out in the note. In other words, the note is actually payable on demand from and after its due date. The holder may extend for one day, or one week, or one year, and then repeat the process as many times as he likes, and he and he alone may fix the date when the note shall be paid. He may bring suit within one day after the note is due, if it is not paid, or, by extending it from time to time, whether the maker agrees or not, he may elect when he shall call for payment of the note. The familiar rule is that limitation upon a demand obligation runs from its date, or if the obligation be payable on demand after a fixed date, then limitation runs from the fixed date.

As I see it, the holding in Welch v. Beall is completely at variance with the many holdings of our Supreme Court which announce the requirements of a valid extension of a note. I cannot believe that the Supreme Court intended to overrule those numerous decisions by the device of refusing an application for writ of error with the notation, "For want of merit".