First Am. Bank, N.A. v. Woods

734 S.W.2d 622 (Tenn. Ct. App. 1987)

 

RULE:

It is a well recognized legal principle that the statute of limitations is for the benefit of individuals, and not to secure general objects of policy; hence a statute of limitations may be waived by express contract or by necessary implications, or its benefits may be lost by conduct invoking the established principles of estoppel in pais.

FACTS:

In early 1968, Chester B. Atkins and others owned property at 3813 Nolensville Road in Nashville, Tennessee. The Guarantors had a franchise to operate a Minnie Pearl restaurant. They approached the owners of the Nolensville Road property and asked them to build a Minnie Pearl restaurant building on the property and lease it to them for fifteen years. Mr. Atkins agreed and acquired the interests of the other owners in the property. He then transferred title to First American as Trustee for his daughter. The Guarantors desired that the lease be between the Trustee and their corporation, Chicken System of America, Inc., (Chicken System). The Trustee agreed to lease to Chicken System if the Guarantors would personally guarantee the lease. This was agreeable, and the lease between Chicken System and the Trustee was executed on May 28, 1968. The guarantors executed personal guarantees for a lease to their franchise from the lessor. Eventually, the lessee attempted to assign the lease without the lessor's permission. The insurance on the property lapsed, rent went unpaid, and the lessor, after various legal maneuverings sued the guarantors. The trial court granted the guarantors' motion for summary judgment finding that the statute of limitations had already run. The lessor appealed the decision.

ISSUE:

Did defendant guarantors on behalf of grantees waive the statute of limitation by entering into an agreement with their grantor so that he would file a breach action against a third-party?

ANSWER:

Yes

CONCLUSION:

Under Tenn. Code Ann. § 28-3-109(a)(3), the lessor was required to bring suit within six years. The lessor brought suit on September 30, 1969, against the guarantors, the lessee and the attempted assignee. On January 12, 1970, the lessor took a voluntary nonsuit as to all parties. The guarantors agreed by the letter that if the lessor would exhaust its remedies against the attempted assignee before filing suit against them on their guaranty, the lessor would not waive or prejudice any and all rights as lessor against them. Thus the January 11, 1971 letter signed by the guarantors waived the statute of limitations by necessary implication, and the Court held that the guarantors could not assert it as a defense. 

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