Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-arwd-6_04-cv-06112/USCOURTS-arwd-6_04-cv-06112-0/pdf.json

Nature of Suit Code: 160
Nature of Suit: Stockholder's Suits
Cause of Action: 28:1332 Diversity-Breach of Contract

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IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

HOT SPRINGS DIVISION

DAVID A. SMITH and GLADYS H. SMITH PLAINTIFFS

V. Civil No. 04-6112

UNION CARBIDE CORPORATION DEFENDANT

MEMORANDUM OPINION

On this 6 day of February 2006, there comes on for th

consideration the motion for summary judgment filed by the

defendant (Docs. #13-15, 19), Plaintiffs’ Response (Docs. #20,

23) and Defendant’s Reply (Doc. #22). Because we find that

the action is barred by the applicable statute of limitations,

the defendant’s motion for summary judgment (Doc. #13) will be

GRANTED and the above-captioned case DISMISSED WITH PREJUDICE.

I. Background.

Plaintiffs and Defendant entered into a surface lease on

October 18, 1979, whereby Defendant was to use Plaintiffs’

property for its mining and milling activities. On July 7,

2004, Plaintiffs filed a complaint in the Circuit Court of Hot

Spring County alleging Defendant breached the lease by

removing topsoil from Plaintiffs’ property and converting it

to Defendant’s own use. On August 18, 2004, Defendant removed

the case to this Court. 

On January 20, 2006, Defendant filed a motion for summary

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judgment (Doc. 13) contending Plaintiffs’ claim is barred by

the statute of limitations because the alleged breach occurred

more than five years before the filing of Plaintiffs’

complaint. Plaintiffs maintain the statute of limitations did

not begin to run until the lease expired in December 1999,

because Defendant continued to breach the lease until that

time and had the opportunity to cure its default until the

lease expired in December 1999.

II. Summary Judgment Standard.

The court should grant summary judgment "if the

pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and

that the moving party is entitled to judgment as a matter of

law." FED.R.CIV.P. 56(c). A fact is material only when its

resolution affects the outcome of the case. See Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510,

91 L.Ed.2d 202 (1986). If reasonable minds could differ as to

the import of the evidence, judgment should not be granted.

Id. at 250-51, 106 S.Ct. at 2511-12. However, the nonmoving

party must set forth specific facts, by affidavit or

otherwise, sufficient to raise a genuine issue of material

fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324,

106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). Summary judgment

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is only appropriate when no genuine issue of material fact

exists, and the moving party is entitled to judgment as a

matter of law." Callanan v. Runyon, 75 F.3d 1293, 1296 (8th

Cir. 1996)(citations omitted). All disputed facts are to be

resolved and all inferences drawn in favor of the nonmoving

party. Id.

III. Discussion.

Defendant contends that Plaintiffs’ complaint is barred

by the five-year statute of limitations applicable to breach

of contract claims. ARK. CODE ANN. § 16-56-111. According to

Defendant, any removal of topsoil by Defendant from

Plaintiffs’ property occurred prior to June 1997. In

response, Plaintiffs do not dispute that their action is

subject to the five-year limitations period, but contend that

the limitations period did not commence until the expiration

of the lease because Defendant had the opportunity to cure the

breach through that date and continued to breach the lease

through its expiration in December 1999.

Arkansas law requires that actions for breach of a

written contract be filed within five years of the breach.

ARK. CODE ANN. § 16-56-111. In routine contract actions, the

statute of limitations begins to run upon the occurrence of

the last element essential to the cause of action. Zufari v.

Architecture Plus, 914 S.W.2d 756 (1996). The test for when

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a breach of contract action accrues is the point when the

plaintiff could have first maintained the action to a

successful conclusion. Dupree v. Twin City Bank, 777 S.W.2d

856 (1989). 

Defendant contends that Plaintiffs were aware of the

alleged breach as early as April 1997. Defendant points to a

letter from Plaintiffs’ former counsel to Defendant’s

predecessor, Umetco, dated April 16, 1997, listing Plaintiffs’

settlement demands for the alleged breach of the lease

agreement. (Doc. 19, Ex. 2). In his deposition on January 26,

2006, Plaintiff David Smith testified that the letter was, in

fact, a claim against Defendant for breach of the lease.

(Doc. 19, Ex. 1).

Plaintiffs do not dispute that they were aware of the

breach as early as April 1997. However, they contend that the

statute of limitations did not begin to run at that time

because Defendant continued to breach the lease through the

expiration of the lease agreement in December 1999. (Doc.

20). Additionally, Plaintiffs contend the statute of

limitations did not commence until December 1999 because

Defendant had the opportunity until December 1999 to remedy

the breach. Plaintiffs argue they could not maintain an

action for breach of contract at that time. To support their

position, Plaintiffs point to David Smith’s testimony that he

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“expected” Defendant to put the property back “as near as

possible” to its condition prior to the lease and that David

Smith saw soil being removed by Defendant as late as 1999.

(Doc. 20, Ex. A). Further, Plaintiffs direct the Court to a

provision of the lease that states, in pertinent part:

In the event of any default...on the part of Union

Carbide..., Owner shall be entitled to terminate

this Agreement only in the event it gives to Union

Carbide thirty (30) days prior written notice...

During the said thirty (30) day period Union

Carbide shall that the right to cure or otherwise

satisfy any such default or failure to perform and

thereby reinstate its rights... In the event that

it commences curative action during said thirty

(30) day period but it cannot reasonably cure any

default...during such period, then, provided that

it diligently pursues all necessary actions, it

shall have such additional period as may be

reasonably necessary for the purposes of curing its

default...

Plaintiffs contend that this provision prevented them from

bringing suit prior to the expiration of the lease in December

1999 because Defendant had the opportunity to cure the alleged

breach up to the expiration of the lease.

Under Arkansas law, the five-year statute of limitations

began to run when Defendant allegedly breached the lease. By

Plaintiffs’ own admission, Defendant breached the lease as

early as April 1997 which can only mean that the statute of

limitations ran in April 2002. Plaintiffs’ argument that

Defendant continued to breach the lease until December 1999

does not toll the statute of limitations as Plaintiffs had a

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valid cause of action as early as April 1997. Further, the

clause in the lease that allows Defendant to cure any breach

would not toll the statute of limitations as there is no

evidence that Defendant ever commenced any curative action.

Therefore, pursuant to the lease, Defendant would not be

entitled to any additional period of time to cure the alleged

breach, and Plaintiffs could have maintained an action against

Defendant when they became aware of the breach as early as

April 1997. Accordingly, the Court finds that Plaintiffs’

claim is barred by the applicable statute of limitations. 

III. Conclusion.

 As Plaintiffs’ breach of contract claim is barred by the

applicable statute of limitations, Defendant’s motion for

summary judgment is GRANTED and this case is DISMISSED WITH

PREJUDICE. As the Court stated in its Order of January 30,

2006, it will consider awarding attorney’s fees incurred by

Plaintiffs as a result of Defendant’s untimely motion, and any

request should be filed within ten days. A separate judgment

will be entered concurrently herewith.

IT IS SO ORDERED. 

/s/ Robert T. Dawson 

Honorable Robert T. Dawson

United States District Judge

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