Texas Supreme Court Holds That Contractual Clauses That Waive The Statute Of Limitations May Be Enforceable

Originally published by David Fowler Johnson.

In Godoy v. Wells Fargo Bank, N.A., a bank sued a guarantor to recover on a deficiency following a foreclosure sale. No. 18-0071, 2019 Tex. LEXIS 443 (Tex. May 10, 2019). The defendant guarantor alleged that any such claim was barred by the two-year statute of limitations. The lender argued that the guarantor waived the statute-of-limitations defense had been waived by provisions in the loan documents. The guarantor argued that a statute-of-limitations defense can only be waived if the language in the waiver is specific and for a defined period of time, and claimed that the waiver was indefinite and void as against public policy because it allowed the lender to bring suit at any time in the future. The lender argued that, by signing a broad waiver of all defenses, a party can waive all statute-of-limitations defenses indefinitely.

Regarding waivers of a statute of limitations defense, the Texas Supreme Court held:

In Simpson v. McDonald, we stated: “It appears to be well settled that an agreement in advance to waive or not plead the statutes of limitation is void as against public policy.” Since Simpson was decided, courts of appeals have built upon its holding to require that a waiver of a statute of limitations is void unless the waiver is “specific and for a reasonable time.” Indeed, the requirement that in order to be enforceable the statute-of-limitations waiver must be “specific” and “only for a reasonable time” was already understood to be part of the law at the time Simpson was decided.… Blanket pre-dispute waivers of all statutes of limitation are unenforceable, but waivers of a particular limitations period for a defined and reasonable amount of time may be enforced.

Id. The Court ruled that the clause in the case was sufficiently specific and was for a reasonable time and ruled for the lender.

Interesting Note: Fiduciaries are often in the position of a lender. For example, a trustee may make a loan to a beneficiary of a trust. Sometimes the trustee has to collect on that debt when the borrower defaults, and that fight can revolve around the statute of limitations. Indeed, a trustee never wants to sue its beneficiary for any reason, and delay is often present in these circumstances. For example, recently, a court of appeals held that the statute of limitations did not apply to bar a trustee’s claim on a promissory note under the facts of that case. DeRoeck v. DHM Ventures, LLC, No. 03-15-00713-CV,  2019 Tex. App. LEXIS 4721 (Tex. App.—Austin June 7, 2019, no pet. history). The Godoy opinion arms a trustee with one more tool. A trustee can have the note, guaranty agreement, or other similar document expressly state that the borrower waives the defense of the statute of limitations for a certain period of time (negotiate notes have a six year statute of limitations in Texas, and potentially, a waiver clause could extent that to eight years).

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

from Texas Bar Today http://bit.ly/2x44eOg
via Abogado Aly Website