Braxton Lumber Co. v. Lloyd's Inc.

238 W.Va. 177

793 S.E.2d 341

BRAXTON LUMBER CO., INC., Petitioner

v.LLOYD'S INC., Respondent

No. 15–0993

Supreme Court of Appeals of West Virginia.

Submitted: November 1, 2016

Filed: November 9, 2016

Steven L. Thomas, Esq., Charles W. Pace, Jr., Esq., Kay Casto & Chaney PLLC, Charleston, West Virginia, Counsel for the Petitioner.

Debra T. Varner, Esq., Richard R. Marsh, Esq., Michael P. Gruber, Esq., McNeer, Highland, McMunn and Varner, L.C., Clarksburg, West Virginia, Counsel for the Respondent.

Chief Justice Ketchum :

This appeal presents a simple statute of limitations question: Is a lawsuit seeking judgment on a promissory note, which became due in 1999, time-barred by the applicable six-year statute of limitations¹ when the lawsuit was not filed until 2007?

The petitioner and plaintiff below, Braxton Lumber Company, Inc., (Braxton Lumber) did not file its lawsuit within six years of the due date on a promissory note owed to it. However, Braxton Lumber asserts its lawsuit was not time-barred because tolling provisions in two West Virginia statutes extended the time in which it could have filed its lawsuit. The first tolling provision pertains to third-party claims which may be asserted in a pending civil action. The other tolling provision applies to new written promises to pay a debt after it has become due.

The Circuit Court of Braxton County found that neither of these tolling provisions applies to this case. Accordingly, it dismissed Braxton Lumber's lawsuit on the promissory note.

Upon review, we agree that neither of the tolling provisions relied upon by Braxton Lumber tolls the six-year statute of limitations on its lawsuit. Thus, we affirm the circuit court's dismissal of Braxton Lumber's lawsuit against the respondent and defendant below, Lloyd's, Inc.

I. FACTUAL AND PROCEDURAL BACKGROUND

There have been long-standing legal and business disputes between members of the Lloyd family in Braxton County, West Virginia. This case revolves around two brothers (Chuck Lloyd and Greg Lloyd) and their father (Charles Lloyd). In the years leading up to the dispute giving rise to this case, they operated multiple businesses, including Braxton Lumber and Lloyd's, Inc. During this time, Chuck, Greg, and Charles served as Braxton Lumber's board of directors. Separately, Greg owns a hardware store, Lloyd's, Inc. In operating Braxton Lumber, Chuck, Greg, and Charles made business decisions in an informal manner through their daily interactions. As a result, Braxton Lumber; Chuck, Greg, and Charles individually; and Lloyd's, Inc., have been embroiled in litigation since 2004, resulting in not only this appeal, but also a related dispute which formed the basis of our opinion in Lloyd's Inc. v. Lloyd , 225 W.Va. 377, 693 S.E.2d 451 (2010).

From 1996 to 1998, Braxton Lumber made a series of loans to Lloyd's, Inc. Sparse records exist as to when these loans were made, the amount of these loans, or any other loan terms. Central to this appeal is a promissory note, which was issued in January 1998 that states, in part: "LLOYD'S INC., ... promises to pay ... BRAXTON LUMBER CO., INC., ... the sum of ... ($564,000.00) on or before one year after date [January 1, 1999], bearing five percent (5%) interest per annum."

Also in 1998, Charles, as chairman of Braxton Lumber, assigned the promissory note to its two shareholders, Chuck and Greg, in proportion to their ownership in Braxton Lumber's stock. Chuck owns 68% of Braxton Lumber's stock, so he was assigned 68% of the promissory note. Greg was assigned the remaining 32% of the promissory note as owner of Braxton Lumber's remaining shares.

In later litigation, the circuit court found that Braxton Lumber's assignment did not transfer the promissory note's legal title to Chuck because the entire promissory note was not assigned to him. The circuit court's finding was based on West Virginia Code Section 46–3–203(d), which provides "[i]f a transferor purports to transfer less than the entire instrument, negotiation of the instrument does not occur." Thus, according to the circuit court, Braxton Lumber retained the promissory note's legal title, while Chuck held equitable title to 68% of the promissory note.

In 2004, Greg filed claims against Chuck and Charles for civil conspiracy and against Braxton Lumber for waste, conversion, self-dealing, and insider trading regarding the corporation's assets. In response, Chuck filed a third-party complaint² against Lloyd's, Inc., seeking payment on his 68% of the $564,000.00 promissory note, plus interest, which was $408,000.00.³ Chuck's claim in the 2004 lawsuit was resolved on April 4, 2007, with a jury verdict finding that Chuck was not entitled to judgment against Lloyd's, Inc. on the promissory note. The jury also rejected all of Greg's claims against Braxton Lumber, Chuck, and Charles.

On December 26, 2007, eight months after the jury's April 4, 2007, verdict, Braxton Lumber filed this lawsuit against Lloyd's, Inc. In this suit, Braxton Lumber asserted that Lloyd's, Inc. owed it the entire $564,000.00 on the promissory note, plus interest.

On September 9, 2015, after the parties had conducted discovery and presented evidence, the circuit court dismissed Braxton Lumber's lawsuit on the following three grounds: (1) the statute of limitations expired on Braxton Lumber's lawsuit; (2) res judicata ; and (3) collateral estoppel. Braxton Lumber now appeals the circuit court's September 9, 2015, dismissal of its lawsuit against Lloyd's, Inc. seeking payment on the promissory note to this Court.

II. STANDARD OF REVIEW

The circuit court summarily disposed of Braxton Lumber's 2007 lawsuit in two substantially identical orders. In one order, the circuit court granted Lloyd's, Inc.'s motion to dismiss Braxton Lumber's lawsuit. In the other order, the circuit court granted Lloyd's, Inc.'s motion for summary judgment on the same grounds. Because these orders were based on the same grounds, entered on the same date, pertained to the same parties, and had the same effect, i.e. , dismissal of Braxton Lumber's 2007 lawsuit, we treat these two orders as one order for purposes of this appeal. Moreover, both of these orders were entered after the parties had conducted discovery and presented evidence. Thus, we treat the circuit court's action as a grant of summary judgment.⁴

A grant of summary judgment is appropriate when "there is no genuine issue of fact to be tried and inquiry concerning the facts is not desirable to clarify the application of the law."⁵ We review a circuit court's grant of summary judgment de novo .⁶

Thus, our resolution of this case depends on whether a genuine issue of material fact exists which might toll the six-year statute of limitations for Braxton Lumber to file its 2007 lawsuit seeking payment on the promissory note. If no further inquiry concerning the facts is desirable to clarify application of the law, the circuit court's summary judgment of Braxton Lumber's lawsuit is proper.

III. ANALYSIS

West Virginia Code Section 46–3–118(a) clearly provides that "an action to enforce the obligation of a party to pay a [promissory] note ... must be commenced within six years after the due date or dates stated in the note [.]" Neither party disputes that the promissory note became due in January 1999. Thus, Braxton Lumber had until January 2005 to file its lawsuit seeking payment on the promissory note. However, it did not file its lawsuit against Lloyd's, Inc. until nearly three years after the statute of limitations expired—December 2007. Unless a tolling provision applies to this case, extending the time in which Braxton Lumber could have filed its lawsuit against Lloyd's, Inc., it is barred by the six-year statute of limitations.

Braxton Lumber asserts two tolling provisions extended the time in which it could have filed its lawsuit against Lloyds, Inc.: West Virginia Code Section 55–2–21 [1981] (pertaining to third-party complaints) and West Virginia Code Section 55–2–8 [1882] (pertaining to new written promises to pay a debt after it has become due). We examine the parties' arguments on both of these statutes in turn.

A. West Virginia Code Section 55–2–21 [1981]

The 1981 version of West Virginia Code Section 55–2–21 provides:

After a civil action is commenced, the running of any statute of limitation shall be tolled for, and only for, the pendency of that civil action as to any claim which has been or may be asserted therein by ... third-party complaint.... This section shall be deemed to toll the running of any statute of limitation with respect to any claim for which the statute of limitation has not expired on the effective date of this section, but only for so long as the action tolling the statute of limitations is pending. ⁷

Thus, West Virginia Code Section 55–2–21 [1981] tolled the statute of limitations for asserting third-party complaints which have been or may be asserted in a pending civil action.⁸

Braxton Lumber contends West Virginia Code Section 55–2–21 tolled the statute of limitations because it could have sought judgment against Lloyd's, Inc. on the promissory note in a third-party complaint in the 2004 lawsuit. By contrast, Lloyd's, Inc. contends that Braxton Lumber's claim would not have been a proper third-party complaint had it been asserted in the 2004 lawsuit. Rather, Lloyd's, Inc. asserts it is an independent cause of action, which is not tolled under West Virginia Code Section 55–2–21.⁹

To determine whether West Virginia Code Section 55–2–21 applies to this case, we look to West Virginia Rule of Civil Procedure 14(a). Rule 14(a) provides:

[A] defending party, as a third-party plaintiff, may cause a summons and complaint to be served upon a person not a party to the action who is or may be liable to the third-party plaintiff for all or part of the plaintiff's claim against the third-party plaintiff .¹⁰

Braxton Lumber argues that its claim against Lloyd's, Inc. would have been a proper third-party complaint under Rule 14(a)...