Case Title: Boller v. Western Law Associates, P.C.

Citation: 

Docket Number: 

State: wyoming

Court: Wyoming Supreme Court

Date: 1992-04-03T00:00:00Z

Document:
Boller v. Western Law Associates, P.C.1992 WY 35828 P.2d 1184Case Number: 90-84Decided: 04/03/1992Supreme Court of Wyoming
 

Lewis BOLLER and Alice 
Nicholas,

Appellants (Third-Party 
Plaintiffs),

v.

WESTERN LAW ASSOCIATES, 
P.C., John T. Pappas, L.M. Chipley, H. Cody Runyan, and Gregg A. 
Parish,

Appellees 
(Cross-Defendants and Third Party Defendants).

v.

John L. 
VIDAKOVICH,

Appellee 
(Defendant).

 

April 3, 1992. 
Rehearing Denied April 28, 1992.

Appeal from District 
Court of Fremont County, James N. Wolfe, J.

Philip Nicholas 
of Nicholas Law Office, Laramie, and John M. Burman of Corthell and King, 
Laramie, for appellants.

J. Kenneth Barbe 
of Brown & Drew, Casper, for appellees L.M. Chipley and Gregg A. 
Parish.

Patrick J. 
Murphy of Williams, Porter, Day & Neville, Casper, for appellees Western 
Law Associates and John T. Pappas.

Gerald R. Mason 
of Gerald R. Mason, P.C., Pinedale, for appellee H. Cody 
Runyan.

Before 
THOMAS, CARDINE and MACY, JJ., and RAPER and ROONEY, JJ. 
(Retired).

ROONEY, Justice, 
Retired.

[¶1]      This appeal is 
from an order granting appellees' W.R.C.P. 12(b)(6) motion1 to dismiss appellants' third-party 
complaints for failure to state a claim upon which relief could be granted. The 
claims contained in the original and amended complaints against appellants have 
been settled and are not involved in this appeal.

[¶2]      We 
affirm.

[¶3]      Although the 
appeal is predicated on issues relative to presentation of elements of 
negligence in the third-party complaints sufficient to withstand the motion to 
dismiss, we need not address such issues since we agree with appellee Runyan's 
contention that appellants' third-party claims are barred by the statute of 
limitations.

[¶4]      Appellants were 
two of the directors of the Yellowstone State Bank. The Bank was closed November 
1, 1985, and the Federal Deposit Insurance Corporation was appointed receiver of 
the bank for the purpose of liquidating its assets. In the process of doing so, 
it filed suit against the directors of the bank alleging that the failure of the 
bank was caused by specified actions and inactions of the directors contrary to 
their duties with reference to approving loan transactions.

[¶5]      Appellants 
responded in separate third-party complaints against appellees that, among other 
things, their actions or inactions were a result of negligence on the part of 
appellees consisting of appellees' failure to furnish proper legal advice and 
guidance to appellants.

[¶6]      Wyo. Stat. § 
1-3-107 (1988) provides in pertinent part:

"(a) A cause of action 
arising from an act, error or omission in the rendering of licensed or certified 
professional or health care services shall be brought within the greater of the 
following times:

"(i) Within two (2) years 
of the date of the alleged act, error or omission, except that a cause of action 
may be instituted not more than two (2) years after discovery of the alleged 
act, error or omission, if the claimant can establish that the alleged act, 
error or omission was:

"(A) Not reasonably 
discoverable within a two (2) year period; or

"(B) That the claimant 
failed to discover the alleged act, error or omission within the two (2) year 
period despite the exercise of due diligence."

[¶7]      Appellee Runyan 
appropriately argues:

"The First Amended 
Complaint reveals that the 20 specific loans upon which losses were taken and 
which in turn resulted in the cause of action against appellants occurred 
between February 28, 1983 and August 21, 1985. It stands to reason, then, that 
any act, error or omission which caused the making of one of those loans would 
have occurred before August 21, 1985. Two years from that date would have been 
August 21, 1987. Another date that the Court might consider, which date is 
undisputed, is that the bank was closed on November 1, 1985, two years from that 
date, of course, being November 1, 1987. The Third Party Complaints were filed 
on August 14, 1989. Without any questions or even dispute, more than two years 
elapsed after any alleged act, error or omission which generated any of those 
loan losses."

[¶8]      In their 
third-party complaints, appellants recite that they "recently discovered the 
negligent conduct," subject of the claim against appellees, and they now contend 
that the exceptions contained in Wyo. Stat. § 1-3-107 prevent the running of the 
statute of limitations. The fact of "discovery" is not determinative for this 
purpose. The question is whether or not the acts, errors or omissions 
constituting negligence by appellants were "reasonably discoverable within a two 
(2) year period" and whether or not "due diligence" was exercised by appellants 
to discover the acts, errors or omissions within the two year 
period.

[¶9]      "Wyoming is a 
`discovery' state, which means that the statute of limitations is not triggered 
until the plaintiff knows or has reason to know the existence of the 
cause of action." Mills v. Garlow, 768 P.2d 554, 555 (Wyo. 1989) (emphasis 
added).

[¶10]   When the bank was closed on 
November 1, 1985, "due diligence" on the part of appellants would certainly 
require a determination as to the reason for the closure, and if appellees' 
negligence was a contributing reason for the closure, as appellants now contend, 
the claim against appellees would mature at that time. If the closure was a 
result of appellees' negligence, as now contended by appellants, such was 
definitely "reasonably discoverable" at the time of the closure or within a few 
months thereafter. Appellants had reason to know of the existence of their 
potential claim for relief against appellees when the bank was 
closed.

[¶11]   Appellants also argue that the 
statute of limitations issue should not be considered on appeal inasmuch as it 
was not presented to the district court. We consider this argument together with 
a procedural issue (not argued by appellants) relative to whether or not a 
statute of limitations defense can be considered under a W.R.C.P. 12(b)(6) 
motion to dismiss for failure to state a claim upon which relief can be 
granted.

[¶12]   W.R.C.P. 8 provides in pertinent 
part:

"(c) Affirmative 
defenses. - In pleading to a preceding pleading, a party shall set forth 
affirmatively * * * statute of limitations * * *."

[¶13]   However, we have long held that if 
the defense appears on the face of the complaint, the complaint is subject to a 
demurrer. Bonnifield v. Price, 1 Wyo. 172 (1874); Cowhick v. Shingle, 5 Wyo. 87, 
37 P. 689 (1894); Columbia Savings & Loan Ass'n v. Clause, 13 Wyo. 166, 78 P. 708 (1904); Union Stockyards National Bank of South Omaha, Neb. v. Maika, 16 
Wyo. 141, 92 P. 619 (1907); Horse Creek Conservation District v. Lincoln Land 
Company, 54 Wyo. 320, 92 P.2d 572 (1939). See also Upton v. McLaughlin, 105 U.S. 640, 26 L. Ed. 1197 (1881). The obvious reason for so holding is that a complaint 
which, on its face, is out of time cannot logically state a claim for which 
relief would be proper.

[¶14]   The same reason exists when the 
complaint is challenged by the demurrer's successor, a motion to dismiss for 
failure to state a claim upon which relief can be granted, i.e., by a W.R.C.P. 
12(b)(6) motion.

"In a number of 
jurisdictions where motion practice has been adopted and a motion to dismiss the 
complaint takes the place of a demurrer raising the issue of no cause of action, 
the courts have adopted the rule that if on the facts stated in the complaint, 
the action would be barred by limitations, the complaint may be dismissed on 
motion. It has also been held that the total effect of the various provisions of 
the Federal Rules of Civil Procedure, and similar state rules of practice, is to 
permit the defense of limitations to be raised by a motion to dismiss, where it 
appears from the complaint that the action is barred."

51 AM.JUR.2D 
Limitation of Actions § 468 (1970).

[¶15]   The answers, counterclaims, cross 
claims and initial third-party claims separately filed by appellant Boller and 
appellant Nicholas reflect on their faces that the third-party claims are barred 
by the two-year statute of limitations. They recite the closure of the bank on 
November 1, 1985. They were not filed until August 19, 1989.

[¶16]   The cross claims list several 
instances in which appellees are alleged to have negligently furnished, or 
failed to furnish legal advice and guidance to appellants. The failure of the 
bank gave appellants "reason to know" that the alleged negligence existed at 
that time with reference to those instances,2 thereby precluding application of 
the exceptions contained in Wyo. Stat. § 1-3-107. Since the face of the 
third-party complaints reflected the closure of the bank, which gave reason for 
appellants to inquire into and know of the existence of the alleged instances of 
negligence and which alleged negligence could have been discovered shortly 
thereafter through the exercise of due diligence, the claims in such third-party 
complaints are barred by the two-year statute of limitations.

[¶17]   In this case, there is an 
additional practical reason for applying the statute of limitations under a 
W.R.C.P. 12(b)(6) motion to dismiss for failure to state a claim upon which 
relief may be granted, and for addressing the issue on appeal although it was 
not presented to the district court.

[¶18]   In this appeal, appellants contend: 
(1) that their pleadings set forth a claim sufficient to withstand a motion to 
dismiss, and (2) in any event, they should have been afforded an opportunity to 
amend their pleadings. In either case, appellees would have to file an answer. 
The answer would then affirmatively set forth the statute of limitations 
defense. In all likelihood, the resulting district court's ruling in favor of 
appellees would be appealed to this court. Judicial economy dictates addressing 
the statute of limitations issue at this time rather than after the removal and 
second appeal. This is not to say that we would agree or disagree with either 
party on the other issues presented in this appeal.

[¶19]   Finally, we recognize that the 
statute of limitations is applicable only when affirmative relief is sought. In 
this case, the application of the statute is to third-party claims. Thus, it is 
necessary to determine the objective of such claims.

"The purpose of 
limitation provisions is to bar actions and not suppress or deny matters of 
defense, and the general rule is that limitations are not applicable to defenses 
but apply only where affirmative relief is sought."

Hawkeye-Security 
Insurance Co. v. Apodaca, 524 P.2d 874, 879 (Wyo. 1974).

[¶20]   The rule that limitation statutes 
are not applicable to defenses, but apply

"only in the case of 
strict defenses, and, in the absence of statute, does not apply to cases of set 
off or counterclaim. * * *

* * * * * *

"In the absence of a 
statute to the contrary, a demand pleaded by way of a setoff, counterclaim, or 
cross claim is regarded as an affirmative action in most jurisdictions and 
therefore, unlike a matter of pure defense, is subject to the operation of the 
statute of limitations, and is unavailable if barred."

51 AM.JUR.2D 
Limitation of Actions §§ 76 through 78 (1970).

[¶21]   Appellants' third-party complaints 
specifically request affirmative relief. Among other things, appellant Boller 
alleges:

"As a further result, 
this plaintiff has suffered and is suffering emotional distress, mental 
disturbance, disruption of his life and social, personal and business affairs, 
loss of time, loss of income, loss of earnings, loss of personal and self 
esteem, loss of standing in the community, impairment of ability to perform his 
other tasks in life, and loss of enjoyment of life; all to his damage in a sum 
as great as fifty times over the accrued attorneys fees and costs today, which 
personal and general damage is on-going and increasing, and is very likely to 
increase at a much faster rate than will the actual damages for costs and 
expenses and attorneys fees; all of which will continue to occur and increase 
for as long as this litigation against him continues; for all of which he 
demands damages in such sum as shall be proved at the trial. Plaintiff also 
demands his costs herein and such other relief as is just."

And, among other 
things, appellant Nicholas alleges the foregoing in the same words as does 
appellant Boller, except that she also alleges "loss of consortium" and she 
alleges the present damage to be "a sum as great as ten times over the accrued 
attorneys' fees and costs today," rather than "fifty times over the accrued 
attorneys' fees and costs today" as alleged by appellant Boller. Appellant 
Boller alleges expenses and attorney's fees reasonably incurred in his defense 
to be "about $25,000, not including several items of expense for which 
statements have not been received," whereas appellant Nicholas alleges the 
amount expended therefor as of August 3, 1989 to be "$102,520.90, not including 
several items of expense for which statements have not been 
received."

[¶22]   Accordingly, the statute of 
limitations operates to bar appellants' claims against appellees.

[¶23]   Affirmed.

THOMAS, J., files a dissenting 
opinion in which MACY, J., joins.

THOMAS, Justice, dissenting, 
with whom MACY, Justice, joins.

[¶24]   I cannot agree with the disposition 
of this case on the basis of a conclusion that the claim was barred by the 
statute of limitations. The invocation of the protection of the statute of 
limitations is an affirmative defense that should be raised by the pleadings. 
That did not occur in this case, nor was the issue even considered in the trial 
court where the case was dismissed for failure to state a claim. The majority 
disposition is erroneous. I would hold that the complaint adequately states a 
claim and remand the case to the trial court for further 
proceedings.

[¶25]   I initially note that, despite the 
claim made in the majority opinion justifying this disposition on the basis of 
"judicial economy," we should not disregard our long-standing rule that forbids 
the consideration of issues that are raised for the first time on appeal. 
Acceptance of the argument concerning the statute of limitations, followed by 
deciding the case on that basis, is directly contrary to precedent that has 
served this court and the interests of justice in an exemplary fashion for many 
years. See Squaw Mountain Cattle Co. v. Bowen, 804 P.2d 1292 (Wyo. 1991); Epple 
v. Clark, 804 P.2d 678 (Wyo. 1991); Esponda v. Esponda, 796 P.2d 799 (Wyo. 
1990); U.S. Aviation, Inc. v. Wyoming Avionics, Inc., 664 P.2d 121 (Wyo. 1983); 
Roush v. Roush, 589 P.2d 841 (Wyo. 1979); Thickman v. Schunk, 391 P.2d 939 (Wyo. 
1964); Gore v. John, 61 Wyo. 246, 157 P.2d 552 (1945); Ideal Bakery v. Schryver, 
43 Wyo. 108, 299 P. 284 (1931).

[¶26]   My second concern is that, even 
though the majority relies upon the proposition that "`Wyoming is a "discovery 
state" which means that the statute of limitations is not triggered until the 
plaintiff knows or has reason to know the existence of the cause of 
action,'" the quoted concept in the context of this record is erroneous. Op. at 
1185, quoting Mills v. Garlow, 768 P.2d 554, 555 (Wyo. 1989). The majority 
theorizes that the facts demonstrating the elements of this principle have been 
sufficiently established to avoid any possible tolling of the applicable statute 
of limitations. The majority argues, on behalf of the appellees, that since the 
bank was closed on November 1, 1985 and, through the exercise of "`due 
diligence'" any negligence on the part of the appellees would have been 
"`reasonably discoverable' at the time of the closure or within a few months 
thereafter." Op. at 1185. 

[¶27]   This conclusion depends upon a 
degree of omniscience that this court heretofore has been denied. It assumes a 
knowledge of facts that were never addressed in the pleadings. Neither this 
court nor the trial court, other than by conjecture and assumption, has any real 
capacity to ascertain whether "the plaintiff knows or has reason to know the 
existence of the cause of action." Mills, 768 P.2d  at 555. The simple 
recognition of the date of the closing of the bank as compared with the date of 
the filing of the complaint does not suffice to cure this omission. For that 
reason, applying our usual concepts regarding motions made under Wyo.R.Civ.P. 
12(b)(6), the court should not seriously entertain a dismissal on the basis of a 
violation of the statute of limitations at this time. See Mummery v. Polk, 770 P.2d 241 (Wyo. 1989); Champion Well Service, Inc. v. NL Industries, 769 P.2d 382 
(Wyo. 1989).

[¶28]   Any such order can be sustained 
only when it is clear on the face of the complaint that the plaintiff is not 
entitled to relief. Paravecchio v. Memorial Hospital of Laramie County, 742 P.2d 1276 (Wyo. 1987), cert. denied 485 U.S. 915, 108 S. Ct. 1088, 99 L. Ed. 2d 249 
(1988). Cf. In re Sullivan's Estate, 506 P.2d 813 (Wyo. 1973) (dismissal under 
Rule 12(b)(6) is appropriate when statute of limitations itself is reflected on 
face of complaint). In this instance, the claims that the majority speculates 
were barred by the statute of limitations were raised in the separate answers of 
Boller and Nicholas as defendants. They were presented as counterclaims, 
cross-claims, and third-party claims in the answers and amendments thereto. The 
allegations include the fact that the third-party plaintiff "recently discovered 
the negligent conduct"; the fact that the negligent conduct commenced at the 
time the bank opened and continued "even after the bank was closed"; and that 
"None of the claims in this case matured before January of 1988, when the 
Receiver first threatened this plaintiff regarding matters to which he had 
reasonably relied upon the professional legal services of 
defendants."

[¶29]   The third-party defendant's motion 
to dismiss is presented under Wyo.R.Civ.P. 12(b)(6), and the facts alleged must 
be taken as true for the purpose of the motion. A dismissal under 12(b)(6) may 
be appropriate if the defense of the statute of limitations is raised. Horn v. 
Burns and Roe, 536 F.2d 251 (8th Cir. 1976). The only third-party defendant who 
did raise the defense of the statute of limitations no longer is a party in this 
case. The others have failed to accommodate to the standard found in Stryker v. 
Rasch, 57 Wyo. 34, 112 P.2d 570, 136 A.L.R. 770, reh'g denied, 113 P.2d 963 
(1941), that the statute of limitations is an affirmative defense that must be 
presented in the first responsive pleading and must be relied upon. The failure 
to affirmatively plead this defense operates as a waiver permitting the 
plaintiff to recover even when the period of limitations has expired. 51 
AM.JUR.2D Limitation of Actions § 457 (1970).

[¶30]   Furthermore, so far as this court 
knows, every element of an estoppel to assert the statute of limitations might 
well have been presented had that defense been raised in the trial court. This 
court has recognized that a party may be estopped from asserting the statute of 
limitations in an instance in which a party could show that the delay was 
induced by the defendant who misled the plaintiff after which the plaintiff 
acted upon the misinformation in good faith. Taylor v. Estate of Taylor, 719 P.2d 234 (Wyo. 1986). We also have recognized that the fraudulent concealment of 
facts necessary to a cause of action can estop the assertion of the statute of 
limitations. Olson v. A.H. Robins Co., Inc., 696 P.2d 1294 (Wyo. 1985). In 
addition, we have acknowledged the possibility that a defendant may lull the 
claimant into a reasonable belief that his claim would be settled without suit. 
Turner v. Turner, 582 P.2d 600 (Wyo. 1978). It is recognized that no tolling was 
effected in any of the cited cases, but the legal principles upon which tolling 
might occur are fairly well defined. Those legal issues can only be resolved 
upon the basis of facts addressed to the issue of the statute of limitations, 
and this record is totally devoid of those facts because the appellees failed to 
assert that defense in the trial court.

[¶31]   In this regard, I find I am 
troubled by the refusal of the majority to recognize the roles that various 
parties to this appeal have played in these circumstances. The performance of 
those particular roles might well have adversely affected the ability of the 
appellants to have "discovered" their cause of action, at least to the extent of 
questioning whether the statute of limitations should be tolled. The underlying 
problem in this case involves fraud on the part of certain bank officers. Absent 
any evidence to the contrary, I must concede that those charged could have, at 
least plausibly, gone to great lengths to conceal their wrongdoing. Discovery of 
the cause of action might very well have been delayed under the circumstances. 
See American Sur. Co. v. Pauly, 170 U.S. 133, 18 S. Ct. 552, 42 L. Ed. 977 (1898); 
Federal Deposit Ins. Corp. v. Aetna Cas. & Sur. Co., 426 F.2d 729 (5th Cir. 
1970); Alfalfa Elec. Co-op, Inc. v. Travelers Indem. Co., 376 F. Supp. 901 
(W.D.Okla. 1973); Federal Deposit Ins. Corp. v. National Sur. Corp., 281 N.W.2d 816 (Iowa 1979); National Newark & Essex Bank v. American Ins. Co., 76 N.J. 
64, 385 A.2d 1216 (1978).

[¶32]   In my judgment, it is wrong for 
this court to invoke the statute of limitations in the interests of "judicial 
economy" to deny these parties their day in court. The rules relating to the 
acceptance of the truth of the averments of a party in the context of a motion 
to dismiss pursuant to Wyo.R.Civ.P. 12(b)(6), the pleading of the statute of 
limitations as an affirmative defense or waiver if it is not pleaded, and the 
appellate discipline foreclosing consideration of an issue that is not initially 
presented to the trial court, all militate against the majority resolution. 
Their effect is overwhelming. I would reverse and remand for further proceedings 
in the trial court.

Footnotes

 1 W.R.C.P. 12 provides in 
pertinent part:

"(b) How 
presented. - Every defense, in law or fact, to a claim for relief in any 
pleading, whether a claim, counterclaim, cross-claim, or third-party claim, 
shall be asserted in the responsive pleading thereto if one is required, except 
that the following defenses may at the option of the pleader be made by motion: 
* * * (6) failure to state a claim upon which relief can be granted, * * 
*."

2 With reference to such 
instances, each appellant alleged as follows in their separate third-party 
complaints.

"Examples of that are: 
negligent advice and direction in setting up the bank operations, providing the 
format and pattern for future bank activities, e.g., negligence in the taking, 
transcription, preparation, approval, authentication and preservation of minutes 
of director's meetings and committee meetings, wherein the minutes are seldom, 
if ever, complete, usually reported in two or three paragraphs on a single page 
to describe long meetings which covered dozens of topics that are not mentioned 
in the minutes. The minutes of several meetings were often accumulated, then 
circulated among the directors for signatures. Signatures were added 
ritualistically with little opportunity for reading or examining and correcting 
them. Counsel failed to advise the bank and the directors that the directors had 
serious responsibility in respect to the minutes. Another example is the advice 
given the bank and the directors that things which occurred in the board room 
were so confidential and secret, that no lists or schedules, or copies of 
minutes, or notes made by board members during meetings should be removed from 
the board room by a director, rather, had to be left in the board room and 
gathered up by the secretary. That type of negligently delivered advice, and 
direction, became the pattern, the practice, the standard of procedure. 
Erroneous legal advice reaffirming the correctness of such practices and 
procedures was restated and reaffirmed at each meeting thereafter when an 
attorney was in attendance; if not expressly in so many words, expressly by the 
presence of one or more members of the law firm who observed and countenanced 
the re-performance of the same practices and procedures, as if that were 
entirely correct and the inviolable order of things. The commission of the same 
type of negligent conduct, and casual repeat thereof, occurred regarding the 
signing and adoption of minutes as if such were only ceremonial. Such negligence 
involved active, misleading advice and direction, and also negligent omission. 
The defendant legal professionals held themselves out as competent to set up, 
guide and direct the legal aspects of the bank and its operations, including 
advising and guiding the directors in their functions, affecting a competence in 
banking affairs which they did not have, or if they had, they failed to exercise 
and utilize it. The defendants were not competent in the field but negligently 
held themselves out to be so."