The Colorado Court of Appeals issued its opinion in Vessels v. Hickerson on February 16, 2012.
Promissory Note—Partial Payment Doctrine—Laches—Statute of Limitations.
In this action brought to recover on a promissory note, plaintiff Thomas J. Vessels, acting as personal representative of the estate of his deceased mother, Mary Walsh Vessels, appealed the trial court’s judgment in favor of defendant Alva J. Hickerson. The judgment was reversed and the case was remanded.
In a promissory note dated April 13, 1989, Hickerson promised to pay plaintiff’s father’s company, Vessels Oil & Gas Company (VOGC), $386,063 to settle an outstanding debt. By its terms, the note was due in full in ten years, on April 12, 1999, and was to be paid in monthly installments of $5,103.75. The note was secured by Hickerson’s royalty interest in an oil and gas lease located in Louisiana. Under the terms of the note, Hickerson agreed to make payments to VOGC from “cash or other proceeds” generated by his royalty interest in the Louisiana oil and gas lease, and Hickerson assigned his royalty interest to VOGC. Thereafter, the operators of the Louisiana oil and gas well made payments on the note directly to VOGC, bypassing Hickerson entirely. Between 1989 and 2009, the well operators, on behalf of Hickerson, made partial payments on the note; however, these payments often were insufficient to cover the amount due under the note’s monthly installment plan.
Eventually, VOGC assigned the note, and the estate of the deceased note holder (Vessels) sued Hickerson for the remaining amount due on the note. Although the trial court found that the lawsuit was timely filed pursuant to the statute of limitations, the court dismissed with prejudice all of Vessels’s claims and entered judgment in favor of Hickerson based on laches.
On appeal, Vessels contended that the trial court erred, as a matter of law, in ruling that laches is available as a defense to his legal claim under the note filed within the statutory limitations period. Under the partial payment doctrine, every time a debtor makes a partial payment, the debtor is acknowledging the existence of the debt for which the law implies a new promise to pay, thus starting the limitations period anew. Here, the fact that Hickerson did not personally make the payments on the note was immaterial, because he had authorized the well operators to make payments on his behalf. Therefore, the well operators’ partial payments were sufficient to invoke the partial payment doctrine. Because the applicable statute of limitations was extended by the partial payment doctrine, not by equitable tolling principles, and the claim was filed within the period of the applicable statute of limitations, the trial court erred in ruling that the equitable defense of laches was applicable to bar Vessels’s claim to recover on a promissory note. The judgment was reversed and the case was remanded for entry of judgment in favor of Vessels and for a determination of Vessels’s reasonable attorney fees as allowed under the terms of the promissory note.