It has long been the law in Texas that an agreement to waive or not plead the statute of limitations was void as against public policy. See Simpson v. McDonald, 179 S.W.2d 239 (Tex. 1944). Texas courts that have interpreted Simpson have allowed contractual waivers of the statute of limitations if the waiver is “specific and for a reasonable time.” See, e.g., Am. Alloy Steel, Inc. v. Armoco, Inc., 777 S.W.2d 173, 177 (Tex. App. – Houston [14th Dist.] 1989, no writ). Sounds clear cut doesn’t it? However, the Supreme Court of Texas in Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443 (May 10, 2019) muddied the waters up and a more detailed analysis is now required.
Godoy guaranteed a loan and Wachovia nka Wells Fargo foreclosed on the loan secured by real property in Texas. The guaranty contained a section entitled “Guarantor’s Waivers” that waived any and all rights or defenses by reason of (A) any “one action” or “anti-deficiency” law” that would prevent Wells Fargo from bringing a deficiency suit. The Guaranty also had a savings clause that stated that if any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy. Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443, *2 (May 10, 2019). The guaranty did not contain any language that set out a specific and for a reasonable time on the statute of limitations waiver.
Wells Fargo filed suit three and one-half years after the foreclosure and Godoy replied that Wells Fargo’s claim was barred by the Texas Property Code Section 51.003 two-year statute of limitations to bring an action for a deficiency. Godoy moved for summary judgment based on the two-year statute of limitations and Wells Fargo filed a partial motion for summary judgment claiming that Godoy waived section 51.003’s two-year statute of limitation when he signed the guaranty agreement. The trial court denied Godoy’s motion and granted Wells Fargo’s motion who then moved for and received a final summary judgment on its deficiency claim. The court of appeals affirmed.
The Supreme Court of Texas reaffirmed the principles of Simpson v. McDonald as modified by the various courts to include that a pre-suit contractual waiver of the statute of limitations may be effective if it is specific and for a reasonable time.Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443, *12-13 (May 10, 2019). The Supreme Court then clarified that Simpson was not an absolute bar on contractual waivers of statutes of limitations. Citing to Am. Alloy Steel, Inc. v. Armoco, Inc., the Texas Supreme Court held that blanket pre-dispute waivers of all statutes of limitations are unenforceable, but waivers of a particular limitations period for a defined and reasonable amount of time may be enforced. Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443, *13 (May 10, 2019). But how to get there when the guaranty did not contain any language specifying a defined and reasonable amount of time?
To overcome that hurdle, the Supreme Court of Texas waved its magic wand and held that the two-year anti-deficiency statute was waived by Section (A) of the guaranty but it was enforceable because the law (but not the contract or guaranty) provided a reasonable four-year statute of limitations that applied to suits on a debt. When read with the savings clause of the guaranty, the Supreme Court of Texas held that Section (A) was effectively an an agreement to move the two-year anti-deficiency statute of limitations to the four-year statute of limitations period to collect a debt and affirmed the Court of Appeals on that sole point. Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443, *1-19 (May 10, 2019). It was a key fact that the lawsuit was filed before the four-year debt statute of limitations period had expired.
Creative lawyers are going to have a field day with this opinion and trial courts (unfortunately) will be grappling with this decision for the foreseeable future. Despite the lack of any language in the guaranty contract providing a specific and reasonable time on the pre-suit waiver of the statute of limitations, contracts can now be opened up based on a savings clause and any law on the books to backstop the claim. There is also no reason why this analysis could not be applied to other contractual provisions that contain the same apparent lack of clarity as long as there is a good savings clause. There was really no reason at all for the Supreme Court of Texas to reach this result as the legislature had made it pretty clear that deficiency claims had to be brought within two-years.
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