Title: Tender Care Veterinary Hospital, Inc. v. First Tuskegee Bank

State: alabama

Issuer: Alabama Supreme Court

Document:

REL:11/26/2014
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334) 229-
0649), of any typographical or other errors, in order that corrections may be made before
the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2014-2015
____________________
1131078
____________________
Tender Care Veterinary Hospital, Inc.
v.
First Tuskegee Bank
Appeal from Montgomery Circuit Court
(CV-09-900425)
STUART, Justice.
Tender Care Veterinary Hospital, Inc. ("TCVH"), appeals
the summary judgment entered by the Montgomery Circuit Court
in favor of First Tuskegee Bank on breach-of-fiduciary-duty
and fraud claims asserted by TCVH stemming from a construction
1131078
loan TCVH received from First Tuskegee in September 2004.  We
affirm.
I.
In 2004, TCVH sought financing from First Tuskegee to
construct a veterinary clinic and animal hospital in Pike
Road.  TCVH asserts that First Tuskegee ultimately agreed to
loan TCVH the requested funds on the condition that TCVH
employ 
PJ 
Construction 
and 
Services, 
Inc. 
("PJ 
Construction"),
as the general contractor on the project.  TCVH's president,
Dr. Patricia Joyce Patterson, testified in a deposition that
she agreed to that condition after 
First 
Tuskegee's 
president,
James W. Wright, assured her that PJ Construction would "do a
good job."  Accordingly, on September 30, 2004, TCVH executed
a loan agreement with First Tuskegee pursuant to which it
borrowed $675,000.   TCVH subsequently executed three more
1
First Tuskegee emphasizes to this Court on appeal that
1
the loan agreement makes no mention of PJ Construction.  First
Tuskegee further argues that there is no evidence in the
record establishing that First Tuskegee required TCVH to use
PJ Construction as its general contractor in order to receive
the loan.  However, because First Tuskegee stated in its
summary-judgment motion that "[this] allegation will be taken
as true for purposes of summary judgment," we will also accept
it as true when reviewing the summary judgment subsequently
entered on that motion.
2
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loan agreements with First Tuskegee, borrowing an additional
$567,000, $75,000, and $9,145, respectively.  
TCVH thereafter entered into a construction agreement
with PJ Construction, and, pursuant to that agreement, PJ
Construction began work at TCVH's site in Pike Road.  Under
the terms of that construction agreement, the maximum price of
the project was to be $300,000 and work was to be completed
within 180 days, or approximately some time in April 2005.  
2
However, almost immediately after work began, TCVH became
concerned 
about 
the 
quality 
and 
timeliness 
of 
PJ
Construction's performance.  Dr. Patterson stated in her
deposition that by January 2005 she was concerned that PJ
Construction would not complete the project on time.  By April
2005, the relationship between TCVH and PJ Construction was
essentially broken; TCVH was unhappy with the work PJ
Construction had performed to date and was unwilling to
authorize First Tuskegee to disburse to PJ Construction the
full amounts it was requesting for the work it had completed. 
It appears that PJ Construction performed no significant work
at TCVH's site after April 2005, and it ceased virtually all
Some of the initial loan proceeds were used to pay off
2
an existing mortgage on TCVH's property.
3
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activities related to TCVH by approximately May 11, 2005,
before completely abandoning the project some time in late
July 2005.  
3
TCVH subsequently received approval from First Tuskegee
to act as its own general contractor, and it thereafter
supervised construction and managed subcontractors until the
veterinary clinic and animal hospital opened in August 2006. 
However, the business was not profitable and, in September
2007, TCVH filed a petition for bankruptcy protection.  In
January 2008, First 
Tuskegee sued TCVH's owners, 
Dr. 
Patterson
and Dr. Howard King, seeking to recover on personal guaranty
agreements they had made as part of the loans issued to TCVH,
and in July 2008 First Tuskegee obtained a $1,623,285 judgment
against them.  TCVH was also engaged in multiple other
PJ Construction received a total of $111,000 for work
3
performed on behalf of TCVH –– $50,000 in January 2005 and
$61,000 in April 2005.  In February 2006, PJ Construction sued
TCVH, alleging that TCVH owed it an additional $137,198 under
their 
contract; 
however, 
that 
lawsuit 
was 
ultimately 
dismissed
because PJ Construction was not a licensed 
general 
contractor. 
See, e.g., Twickenham Station, Inc. v. Beddingfield, 404 So.
2d 43, 45 (Ala. 1981) (stating that it is illegal for an
unlicensed contractor to contract to perform the work of a
contractor as defined in § 34-8-1, Ala. Code 1975, and that
any such contract is void and unenforceable).
4
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lawsuits related to the construction of its facility and its
business operations during this time.
On April 7, 2009, TCVH initiated the instant action when
it moved the Montgomery Circuit Court to enter an injunction
enjoining First Tuskegee from selling the TCVH property at a
foreclosure sale later that day.  Upon TCVH's agreeing to
deposit one month's interest on the loans –– $11,063 –– with
the court, the trial court enjoined the foreclosure sale for
30 days to allow TCVH additional time to pay the amounts it
owed First Tuskegee.  However, after that 30-day period had
expired and TCVH still had not made full payment of the loans
to First Tuskegee, the trial court allowed the foreclosure
sale to be conducted and eventually disbursed to First
Tuskegee the funds being held by the court.
Nothing further happened in the case until approximately
two years later, when TCVH moved the trial court to schedule
a status conference.  At that status conference, the trial
court granted TCVH's request for leave to amend its complaint,
and, on December 9, 2011, TCVH filed an amended complaint
asserting breach-of-fiduciary-duty and fraud claims against
First Tuskegee.  The gravamen of those claims was that TCVH
5
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had been injured by First Tuskegee's requirement that it use
PJ Construction as the general contractor on the project
because PJ Construction was not licensed as a general
contractor in Alabama and because the quality of its
performance was below the quality one would expect from a
properly licensed general contractor.  The trial court then
reinstated the case to its active docket, and, following a
period of discovery, First Tuskegee moved the trial court to
enter a summary judgment in its favor, arguing, among other
things, that TCVH's claims were time-barred.  Specifically,
First Tuskegee noted that both of TCVH's claims were subject
to a two-year statute of limitations and that Dr. Patterson
had stated in her deposition that she first learned that PJ
Construction was not licensed as a general contractor in
approximately July 2005, after she took steps to collect on PJ
Construction's surety bond once it formally left the TCVH
site, but TCVH did not initiate an action against First
Tuskegee until almost four years later in April 2009.  First
Tuskegee also moved for a summary judgment on a counterclaim
it had asserted against TCVH seeking to recover the deficiency
balance still owed after the foreclosure of TCVH's property.
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TCVH opposed 
First 
Tuskegee's 
summary-judgment 
motion 
and
submitted a new affidavit from Dr. Patterson in which she now
asserted that she actually had not discovered that PJ
Construction was not licensed as a general contractor until
November 2008.  Thus, TCVH argued, its claims were in fact
timely.  First Tuskegee promptly moved to strike Dr.
Patterson's affidavit on the ground that it was untimely 
because it was filed only the day before the summary-judgment
hearing and on the basis of the sham-affidavit doctrine.  See
Rule 56(c)(2), Ala. R. Civ. P. (stating that "any statement or
affidavit in opposition [to a summary-judgment motion] shall
be served at least two (2) days prior to the hearing"), and
Panayiotou v. Johnson, 995 So. 2d 871, 879 (Ala. 2008) ("[T]he
so-called 
'sham 
affidavit 
doctrine' 
... 
prevents 
an 
individual
from contradicting prior sworn testimony to avoid the entry of
a summary judgment ....").
On April 17, 2014, the trial court granted both First
Tuskegee's motion to strike Dr. Patterson's affidavit and its
motion seeking a summary judgment, stating in relevant part:
"For the reasons set forth in its January 10,
2014, motion for summary judgment, it is ordered,
adjudged, and decreed that summary judgment be
entered in favor of First Tuskegee Bank on all
7
1131078
claims asserted by [TCVH].  Without limiting the
basis for its decision, the court specifically notes
that all claims asserted against First Tuskegee Bank
are 
conclusively 
barred 
by 
the 
statute 
of
limitations.  The undisputed evidence of record
reflects that the corporate representative for
[TCVH] admitted in deposition that actual discovery
of the facts giving rise to the claims in this case
was made more than two years before suit was filed
in April 2009.  In addition, the court finds that
the undisputed evidence of record further reflects
sufficient 
facts 
that 
reasonably 
should 
have
provoked inquiry into PJ Construction's licensure
status (which was publicly available) more than two
years before suit was filed.  Summary judgment
likewise is due to be entered in favor of First
Tuskegee Bank on its February 26, 2014, supplemental
motion for summary judgment on counterclaim.  The
counterclaim asserts that [TCVH] is in default of
its various promissory notes to First Tuskegee Bank,
and the court has been presented with no evidence
that would contradict the materials submitted by
First 
Tuskegee 
Bank 
in 
support 
thereof. 
Accordingly, it is ordered, adjudged, and decreed
that 
a 
total 
judgment 
in 
the 
amount 
of
$1,239,919.76, plus court costs, is hereby entered
in favor of First Tuskegee Bank and against [TCVH]. 
Execution 
may 
issue 
in 
accordance 
with 
the
provisions of law.
"With all issues having been resolved by the
court, 
this 
order 
shall 
be 
deemed 
a 
final
disposition of this action in its entirety.
"The 
Court 
finds 
that 
any 
contradictory
statements in the affidavit of Patricia Joyce
Patterson are simply improper [and] cannot be used
to create an issue of fact in light of her
unambiguous deposition testimony.  First Tuskegee
Bank's motion to strike is therefore due to be
granted to that extent."
8
1131078
On May 13, 2014, the trial court denied TCVH's motion to
alter, amend, or vacate the order entering the summary
judgment in favor of First Tuskegee, and, on June 24, 2014,
TCVH filed this appeal.
II.
We review a summary judgment pursuant to the following
standard:  
"This Court's review of a summary judgment is de
novo.  Williams v. State Farm Mut. Auto. Ins. Co.,
886 So. 2d 72, 74 (Ala. 2003).  We apply the same
standard of review as the trial court applied.
Specifically, we must determine whether the movant
has made a prima facie showing that no genuine issue
of material fact exists and that the movant is
entitled to a judgment as a matter of law. Rule
56(c), Ala. R. Civ. P.; Blue Cross & Blue Shield of
Alabama v. Hodurski, 899 So. 2d 949, 952-53 (Ala.
2004).  In making such a determination, we must
review the evidence in the light most favorable to
the nonmovant.  Wilson v. Brown, 496 So. 2d 756, 758
(Ala. 1986).  Once the movant makes a prima facie
showing that there is no genuine issue of material
fact, the burden then shifts to the nonmovant to
produce 'substantial evidence' as to the existence
of a genuine issue of material fact.  Bass v.
SouthTrust Bank of Baldwin County, 538 So. 2d 794,
797-98 (Ala. 1989); Ala. Code 1975, § 12-21-12."
Dow v. Alabama Democratic Party, 897 So. 2d 1035, 1038-39
(Ala. 2004). 
III.
9
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TCVH argues that the summary judgment should be reversed
because, it argues, the trial court erred in holding that
TCVH's claims were time-barred.  Although TCVH acknowledges
that both of its claims are subject to a two-year statute of
limitations, it argues that the trial court erred by
concluding that the claims accrued in approximately 
July 2005,
when First Tuskegee alleges TCVH discovered that PJ
Construction was not a licensed general contractor.  Rather,
TCVH argues that its breach-of-fiduciary-duty claim did not
accrue until First Tuskegee initiated foreclosure proceedings
in early 2009 and their relationship turned adversarial and
that its fraud claim did not accrue until November 2008, when
TCVH asserts it actually learned that PJ Construction was not
a licensed general contractor.   TCVH argues that its December
2011 amended complaint asserting those claims relates back to
its April 2009 filing and that its claims were therefore
asserted within two years of their accrual in early 2009 and
November 2008, respectively.  See Weber v. Freeman, 3 So. 3d
825, 834-35 (Ala. 2008) ("[The plaintiff's] clarified second
amended complaint was filed after the statutory period had
run; therefore, the claims against [the defendant] set forth
10
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in the amended complaint are time-barred unless Rule 15, Ala.
R. Civ. P., applies.  Under Rule 15(c)(2), an amendment
relates back to the original complaint when 'the claim ...
asserted in the amended pleading arose out of the conduct,
transaction, or occurrence set forth or attempted to be set
forth in the original pleading ....'").
We first consider the timeliness of TCVH's breach-of-
fiduciary-duty claim.  In support of its argument that the
limitations period on this claim did not begin to run until
its fiduciary relationship with First Tuskegee turned
adversarial in early 2009, TCVH cites Tonsmeire v. AmSouth
Bank, 659 So. 2d 601, 604 (Ala. 1995), for the proposition
that "'[t]he [limitations period] for [an action based on]
breach of fiduciary duty begins to run once the fiduciary
relationship is terminated and possession of trust 
property by
the trustee becomes adverse'"  (quoting with approval the
order of the trial court).  However, TCVH fails to recognize
that both Tonsmeire and Benners v. First National Bank, 247
Ala. 74, 22 So. 2d 435 (1945), upon which Tonsmeire relied,
concerned the alleged breach of fiduciary duties owed by a
trustee to the beneficiary of the trust administered by the
11
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trustee.   In the instant case, there is no "trustee" or
4
"trust property," and it is a different class of fiduciary
duties that are alleged to have been breached.  In cases
alleging a breach-of-fiduciary-duty claim not involving a
trust, this Court has not considered the date the parties
terminated their fiduciary relationship when considering the
application of the two-year statute of limitations; 
rather, 
it
has focused on when the aggrieved party was damaged.  See,
e.g., System Dynamics Int'l, Inc., 683 So. 2d 419, 421 (Ala.
1996) ("[I]n situations where the act itself is not a legal
injury, not a completed wrong, and the plaintiff's injury
comes only as a result of what the defendant has done, the
cause of action accrues and the limitations period begins to
run when damage is sustained.").  However, as further
explained by the United States District Court for the Middle
District of Alabama in Davis v. Dorsey, 495 F. Supp. 2d 1162,
1171 (M.D. Ala. 2007), even though a breach-of-fiduciary-duty
claim will accrue when damage is sustained, the two-year
statute of limitations can still be tolled based on the
This tolling 
of 
the 
limitations 
period 
for 
claims 
against
4
trustees has now been codified in § 19-3B-1005, Ala. Code
1975.
12
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aggrieved party's ignorance.  Thus, like its fraud claim, the
timeliness of TCVH's breach-of-fiduciary-duty claim will
ultimately hinge on when TCVH was damaged and TCVH's knowledge
of the relevant facts. 
Dr. Patterson gave unequivocal testimony regarding both
of those points in her deposition.  With regard to the damage
sustained by TCVH, Dr. Patterson testified that by June 2005
it was clear that PJ Construction's work product was not what
one would expect from a licensed general contractor because,
she stated, PJ Construction was committing obvious violations
of building codes and was not completing its work in a
workmanlike manner.  When asked by First Tuskegee's attorney
specifically whether TCVH had, at that point in time, been
damaged by the actions of PJ Construction, she readily agreed
that it had:
"Q.
Did you feel, as of June 2005, that these
delays that failed to meet your expectations
for [PJ Construction] had caused harm to
[TCVH]?
"A.
Yes.
"Q.
That harm being financial?
"A.
Yes.
"Q.
And physical?
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"A.
Yes."
When asked to clarify when TCVH learned that PJ Construction
was not a licensed general contractor, Dr. Patterson also made
it clear that she had become aware of that fact in
approximately July 2005:
"Q.
Did you ever attempt to do any investigation as
to whether [PJ Construction] was a licensed
general contractor with the state licensing
board?
"A.
After their departure, I made an effort to find
out about their guarantee –– bond surety so
that we would be able to file to get enough
funds to complete it.  And at that time, I
found out that they were not licensed general
contractors.  I went to every agency in
Montgomery County, and no one had ever –– they
weren't recorded as a general contractor's
license anywhere in the state of Alabama.
"Q.
And when did that take place?
"A.
After their departure, when I was trying to get
the surety bond to make sure it was in force. 
After I spoke  with Ms. Sutton,
she gave me a
[5] 
copy of the surety bond.  And I called that
company, and then I went about getting the
information to have a meeting with Mr. Wright.
"Q.
And this would have been at some point shortly
after July 2006?
"A.
Yes.
Vanessa Sutton is a branch manager employed by First
5
Tuskegee.
14
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"Q.
I'm sorry.  2005.
"A.
2005.  Yes."
Thus, 
Dr. 
Patterson, 
TCVH's 
corporate 
representative,
acknowledged that, by approximately July 2005, TCVH was aware
1) that the misrepresentation First Tuskegee allegedly made ––
that PJ Construction was a licensed general contractor that
would do a good job –– was false and 2) that TCVH had been
injured as a result of that misrepresentation.  The breach-of-
fiduciary-duty and fraud claims subsequently asserted in the
April 2009 action were accordingly untimely because they were
not asserted for more than two years after they accrued in
approximately July 2005.
We further note, with regard to TCVH's argument that, via
her affidavit contradicting her deposition testimony, Dr.
Patterson created a genuine issue of material fact regarding
when TCVH learned that PJ Construction lacked a general
contractor's license, that this argument is not properly
before us.  The trial court struck Dr. Patterson's affidavit
pursuant to the sham-affidavit doctrine (although it did not
specifically invoke that doctrine by name), and it also
appears to be undisputed that the affidavit was untimely.  See
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Van Voorst v. Federal Express Corp., 16 So. 3d 86, 90-92 (Ala.
2008) (noting that there were "multiple valid grounds" for the
trial court to strike an affidavit that contradicted a party's
previous sworn testimony and that was also untimely filed). 
Nevertheless, TCVH continues to cite the affidavit, although
it has not offered any argument as to whether the trial court
erred by striking the affidavit.  In Gonzalez v. Blue
Cross/Blue Shield of Alabama, 689 So. 2d 812, 819 (Ala. 1997),
abrogated on other grounds, as recognized by Ex parte
Prudential Ins. Co. of America, 785 So. 2d 348, 350 (Ala.
2000), this Court considered a similar situation and stated:
"The [appellants'] brief merely cites the affidavit
as if it had been admitted as evidence, but the
[appellants] completely fail to argue why excluding
the affidavit was error and they cite no authority
to support their position.  'When an appellant fails
to properly argue an issue, that issue is waived and
will not be considered on appeal.'  Sullivan v. Alfa
Mut. Ins. Co., 656 So. 2d 1233 (Ala. Civ. App.
1995), citing Boshell v. Keith, 418 So. 2d 89 (Ala.
1982)."
See also Chambers v. Advanced Processing Sys., 853 So. 2d 984,
990 (Ala. Civ. App. 2002) ("Given the plaintiffs' failure to
demonstrate that the trial court erred in ordering Chambers's
affidavit stricken, we may not consider the assertions set
forth in that affidavit in our review of this appeal."). 
16
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Thus, there is no real dispute regarding the date  TCVH
learned that PJ Construction was not licensed, and,
accordingly, both TCVH's breach-of-fiduciary-duty claim and
its fraud claim are untimely.6
IV.
TCVH asserted breach-of-fiduciary-duty and fraud claims
against First Tuskegee stemming from a construction 
loan First
Tuskegee made to TCVH in September 2004.  The gravamen of
those claims was that TCVH was injured by First Tuskegee's
alleged insistence that TCVH use PJ Construction as the
general contractor on the project although PJ 
Construction 
was
not licensed as a general contractor in Alabama, that PJ
Construction's work product was below what one would expect
from a properly licensed general contractor, and that using PJ
Construction resulted in delays, cost overruns, and, TCVH
argues, the ultimate failure of its business.  However,
because TCVH's claims accrued in approximately July 2005 and
TCVH did not formally assert them until after it initiated
Having held that TCVH's claims are untimely, it is
6
unnecessary for us to consider the other arguments put forth
by First Tuskegee urging us to affirm the summary judgment on
other grounds, such as whether First Tuskegee in fact owed any
fiduciary duties to TCVH.
17
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this action in April 2009, those claims are barred by the two-
year statute of limitations that governs them.  Accordingly,
the summary judgment entered by the trial court in favor of
First Tuskegee is hereby affirmed.
AFFIRMED.
Moore, C.J., and Parker, Shaw, and Wise, JJ., concur.
18