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Gerstenecker v. Gerstenecker

Supreme Court of Alabama

May 19, 2017

Julie Gerstenecker
v.
Janice Gerstenecker

         Appeal from Jefferson Circuit Court (CV-15-904654)

          PARKER, Justice.

         Julie Gerstenecker appeals a judgment entered by the Jefferson Circuit Court ("the trial court") in favor of Janice Gerstenecker.

         Facts and Procedural History

         As of September 2014, Julie, who at that time was married to Adam Gerstenecker, Janice's son, owed approximately $78, 000 on two student loans she had borrowed to fund her education. Janice testified that Julie "was upset about" "the amount of interest that she owed on her student loans" and that Janice "decided that [she] would offer [Julie] an interest-free loan to pay off those student loans." Janice testified that she had a discussion with Julie and Adam about the possibility of lending Julie the money to repay her student loans. According to Janice, Janice agreed to repay Julie's student loans and Julie agreed to repay Janice by "pay[ing] [Janice] $700 a month until [Julie and Adam's child] turned one. And then the payments would rise to $1, 000." Janice testified that the terms of the agreement between her and Julie were not reduced to writing. Adam also testified at trial; his testimony supports the events as testified to by Janice.

         Julie testified that she had never borrowed money from Janice and that she does not recall Janice telling her that Janice would lend her money to repay her student loans.

         On September 15, 2014, Julie sent Janice an e-mail informing Janice of Julie's student-loan lenders and the amount of indebtedness she owed each of them. Julie's e-mail indicated that Julie owed Department of Education FedLoan Servicing ("FedLoan Servicing") $72, 124.04 and that she owed Sallie Mae $6, 319.98. On September 16, 2014, Janice mailed checks in the amount of Julie's indebtedness to FedLoan Servicing and Sallie Mae.

         Janice testified that, after she repaid Julie's student loans, she received four payments from Julie on the interest-free loan Janice alleges she made to Julie. Janice testified that, on October 6, 2014, Adam gave her a check in the amount of $700 "for loan repayment." Janice testified that, on October 31, 2014, Julie gave her a check in the amount of $530. Janice explained that the amount of the October 31, 2014, check was $530, instead of $700, because Julie and Adam had bought Janice and her husband a sound bar for their television. The cost of the sound bar was deducted from the $700, leaving $530. Julie testified that she had no recollection or explanation as to why she wrote the October 31, 2014, check to Janice. Janice testified that, on November 22, 2014, she received a check in the amount of $700 "for Julie's repayment of the loan." Janice testified that Julie gave her a check on December 29, 2014, in the amount of $227. Janice explained that the amount of the December 29, 2014, check was $227, instead of $700, because Janice reimbursed Julie for items Julie had purchased on Janice's behalf in the amount of $473. Julie testified that she had no recollection or explanation as to why she wrote the December 29, 2014, check to Janice. Adam testified that each of the checks were given to Janice for repayment of the loan Janice made to Julie. Janice testified that, since receiving the December 29, 2014, check, she has not received any further payments on the loan from Julie.

         On January 7, 2015, Julie sent Adam an e-mail discussing the terms of their pending divorce. In their e-mail exchange, Adam indicated that the monthly repayment amount under the agreement between Janice and Julie would be decreased from $700 to $500.

         On December 3, 2015, Janice sued Julie alleging that Julie had breached their agreement and requesting $78, 444 in damages, an amount that Janice alleged was equal to the amount of the outstanding debt Julie allegedly owed Janice.[1] On December 17, 2015, Julie filed an answer; Julie did not assert any affirmative defenses. On September 5, 2016, at 11:27 p.m., Julie filed an amended answer asserting the Statute of Frauds as an affirmative defense. On the next day, September 6, 2016, the trial court conducted a bench trial.

         On September 13, 2016, the trial court entered an order in favor of Janice. The trial court essentially held that Julie had waived the Statute of Frauds affirmative defense by failing to plead it in her initial response. The trial court also held that, even if Julie had not waived the Statute of Frauds affirmative defense, the Statute of Frauds was not applicable "because the evidence submitted at trial showed that, without dispute, the contract made the subject of this lawsuit was no longer executory because [Janice] had fully performed her part of the bargain." The trial court further held that Janice had "proven her case, " and it entered a judgment against Julie "in the amount of $75, 644.00 (the outstanding balance testified to without dispute)."

         Standard of Review

         "Because the trial court heard ore tenus evidence during the bench trial, the ore tenus standard of review applies. Our ore tenus standard of review is well settled. '"When a judge in a nonjury case hears oral testimony, a judgment based on findings of fact based on that testimony will be presumed correct and will not be disturbed on appeal except for a plain and palpable error."' Smith v. Muchia, 854 So.2d 85, 92 (Ala. 2003) (quoting Allstate Ins. Co. v. Skelton, 675 So.2d 377, 379 (Ala. 1996)).

"'"The ore tenus rule is grounded upon the principle that when the trial court hears oral testimony it has an opportunity to evaluate the demeanor and credibility of witnesses." Hall v. Mazzone, 486 So.2d 408, 410 (Ala. 1986). The rule applies to "disputed issues of fact, " whether the dispute is based entirely upon oral testimony or upon a combination of oral testimony and documentary evidence. Born v. Clark, 662 So.2d 669, 672 (Ala. 1995). The ore tenus standard of review, succinctly stated, is as follows:
"'"[W]here the evidence has been [presented] ore tenus, a presumption of correctness attends the trial court's conclusion on issues of fact, and this Court will not disturb the trial court's conclusion unless it is clearly erroneous and against the great weight of the evidence, but will affirm the judgment if, under any reasonable aspect, it is supported by credible evidence."'
"Reed v. Board of Trs. for Alabama State Univ., 778 So.2d 791, 795 (Ala. 2000) (quoting Raidt v. Crane, 342 So.2d 358, 360 (Ala. 1977)). However, 'that presumption [of correctness] has no application when the trial court is shown to have improperly applied the law to the facts.' Ex parte Board of Zoning Adjustment of Mobile, 636 So.2d 415, 417 (Ala. 1994)."

Kennedy v. Boles Invs., Inc., 53 So.3d 60, 67-68 (Ala. 2010).

         Discussion

         First, Julie argues that the trial court exceeded its discretion in holding that she waived the affirmative defense of the Statute of Frauds. Julie does not dispute that she failed to raise the Statute of Frauds as an affirmative defense until the eve of trial, literally at the 11th hour. Julie argues, however, that the issue of the Statute of Frauds was tried by the implied consent of the parties and that her answer was, thus, effectively amended under Rule 15(b), Ala. R. Civ. P., to assert that affirmative defense.

         In Adams v. Tractor & Equipment Co., 180 So.3d 860, 867 (Ala. 2015), this Court set forth the following concerning the waiver of the affirmative defense of the Statute of Frauds:

"The Statute of Frauds is included in the list of affirmative defenses in Rule 8(c), Ala. R. Civ. P., and that rule requires that such a defense be specially pleaded. See Wallace v. Alabama Ass'n of Classified Sch. Emps., 463 So.2d 135, 136 (Ala. 1984). However, although it is generally true that a party's failure to assert an affirmative defense in its answer works as a waiver of that defense, that rule is subject to certain exceptions."

         In Tounzen v. Southern United Fire Insurance Co., 701 So.2d 1148, 1150 (Ala. Civ. App. 1997), the Court of Civil Appeals stated that "Rule 15(b)[, Ala. R. Civ. P., ] is an exception to the rule that an affirmative defense is waived if it is not specifically pleaded. Mid-South Credit Collection v.McCleskey, 587 ...


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