Opinion ID: 2545615
Heading Depth: 1
Heading Rank: 4

Heading: Summary Judgment as to Fraud Claims

Text: Section 6-2-38 ( 1 ), Ala.Code 1975, provides that fraud claims are subject to a two-year statute of limitations. That statute of limitations is subject to the `saving clause' provided by § 6-2-3[, Ala Code 1975]: `In actions seeking relief on the ground of fraud where the statute has created a bar, the claim must not be considered as having accrued until the discovery by the aggrieved party of the fact constituting the fraud, after which he must have two years within which to prosecute his action.' Ex parte Seabol, 782 So.2d 212, 216 (Ala. 2000). Section 6-2-3, Ala.Code 1975, supplies an objective test, tolling the statute of limitations on a fraud claim until the aggrieved party discovers or, in the exercise of reasonable care, should have discovered, the facts constituting the fraud. Seabol, 782 So.2d at 216; Foremost Ins. Co. v. Parham, 693 So.2d 409, 421 (Ala.1997). Therefore, the limitations period commences when the plaintiff discovers the fraud or when facts are known `which would put a reasonable mind on notice that facts to support a claim of fraud might be discovered upon inquiry.' Auto-Owners Ins. Co. v. Abston, 822 So.2d 1187, 1195 (Ala.2001) (quoting Jefferson County Truck Growers Ass'n v. Tanner, 341 So.2d 485, 488 (Ala.1977)). Southdale and Wheeler/Phillips argue that they did not gain knowledge of facts that would have put a reasonable mind on notice that they should inquire further into the circumstances of the sale of the Shelton property until at least October 2002. Therefore, they argue, the statute of limitations did not begin to run until October 2002, and they filed their initial complaint in May 2004, well within the two-year statute of limitations. The project participants argue that Southdale and Wheeler/Phillips were put on notice as to potential fraud claims in April 2002 when George notified their representatives that CSX was going to purchase the Shelton property. Therefore, the project participants argue, the statute of limitations on the fraud claims ran in April 2004, and the complaint filed the following month was untimely. The trial court concluded that the statute of limitations barred the tort claims. Although McKinney, a shareholder in Southdale, and Williams, counsel for Wheeler/Phillips, were informed in April 2002 that an option had been obtained on the Shelton property, George shared with them his understanding that CSX was to purchase that property as a transaction separate from the Hyundai project. Williams testified that he continued to seek information from George and McNair from April through October 2002 in an effort to discover whether the Shelton option had actually been exercised at more than $4,500 per acre but that he was met with a maze of confusion until October 2002, when McNair referred him to Scott Abney, one of the lawyers representing the State in the Hyundai project. Abney revealed to Williams that the State, not CSX as had been previously represented, had purchased the Shelton property in August 2002 for $12,000 per acre. Williams then shared his knowledge with McKinney. The project participants argue that McKinney and Williams were placed on notice on April 8, 2002, when George gave them a copy of the Shelton option agreement and informed them that CSX would be exercising the option instead of the City. They also argue that McKinney and Williams could have obtained a copy of the project agreement and read the provision in that document concerning the Shelton property. A public hearing was conducted to approve the project agreement, the project participants say, and Williams, as an attorney, and McKinney, as the probate judge for Montgomery County, were in positions in which they could have learned of the meeting. Southdale and Wheeler/Phillips argue in response that the project participants engaged in an acknowledged ploy to use CSX as a straw purchaser in order to avoid the effect of the most-favored-nation clause and that this ploy was carefully hidden from them until several months after they sold their property for $4,500 per acre, rather than the $12,000 per acre paid to Shelton. In Liberty National Life Insurance Co. v. Parker, 703 So.2d 307, 308 (Ala.1997), this Court stated that [t]he question of when the party discovered or should have discovered the fraud is generally one for the jury. The Parker Court continued, quoting Kelly v. Connecticut Mutual Life Insurance Co., 628 So.2d 454, 458 (Ala. 1993): ` [F]raud is discoverable as a matter of law for purposes of the statute of limitations when one receives documents that would put one on such notice that the fraud reasonably should be discovered. ... However,... documents that are vague or that do not reasonably indicate that a fraud has occurred, based on the circumstances of each case, will not warrant a finding that the fraud claim is barred as a matter of law.' 628 So.2d at 458 (emphasis added; other emphasis omitted) (quoting Hickox v. Stover, 551 So.2d 259, 262 (Ala.1989)). (Footnote omitted.) We recently affirmed the concept that when a party discovered or should have discovered fraud is normally a question for the jury. In Jones v. Alfa Mutual Insurance Co., 1 So.3d 23, 31 (Ala.2008), we stated: Alfa notes that this Court has previously held that `fraud is discoverable as a matter of law for purposes of the statute of limitations when one receives documents that would put one on such notice that the fraud reasonably should be discovered.' Kelly v. Connecticut Mut. Life Ins. Co., 628 So.2d 454, 458 (Ala.1993) (quoting Hickox v. Stover, 551 So.2d 259, 262 (Ala.1989), overruled on other grounds, Foremost Ins. Co. v. Parham, 693 So.2d 409 (Ala.1997)). The sentence immediately preceding the above-quoted sentence from Kelly, however, states: `The question of when a plaintiff should have discovered fraud should be taken away from the jury and decided as a matter of law only in cases where the plaintiff actually knew of facts that would have put a reasonable person on notice of fraud.' 628 So.2d at 458 (quoting Hicks v. Globe Life & Acc. Ins. Co., 584 So.2d 458, 463 (Ala. 1991), overruled on other grounds, Foremost Ins. Co., supra); see also Gilmore v. M & B Realty Co., 895 So.2d 200, 210 (Ala.2004) (``[t]he question of when a party discovered or should have discovered the fraud is generally one for the jury'' (quoting Ex parte Seabol, 782 So.2d 212, 216 (Ala.2000), quoting in turn Liberty Nat'l Life Ins. Co. v. Parker, 703 So.2d 307, 308 (Ala.1997))). Under the circumstances of this case, we cannot say that Southdale and Wheeler/Phillips actually knew of facts that would have put a reasonable person on notice of fraud. It is undisputed that they received from George in April 2002 a copy of the Shelton option agreement, a document running in favor of the City and assignable by the City. However, the question is whether that document should have alerted them that a fraud had occurred, especially when it was accompanied by the explanation George thought to be true but was notthat CSX was going to buy the property. We cannot say that the Shelton option agreement is a document in and of itself that would put one on notice of the fraud here alleged. Moreover, the accompanying explanation, which McKinney and Williams had no reason at the time to doubt, would lead a reasonable person to conclude that the most-favored-nation clause was not implicated because, upon the purchase of the Shelton land by CSX, Shelton would not be a landowner included in the project. That other documents existed or would come into existence later that would have afforded such notice does not alter the status of the document they sawthe Shelton option agreementas a document insufficient to put them on such notice that the fraud reasonably should have been discovered. The facts presented at the time the existence of the Shelton option agreement was disclosed to McKinney and Williams, as representatives of Southdale and Wheeler/Phillips, respectively, are not consistent with the ultimate facts: that CSX entered into a contract with Shelton for the sale of the property, which was then assigned to Hyundai and exercised by it, using funds provided by the State. McKinney and Williams were therefore not, at that time, on notice of facts that would have caused alarm when they initially learned of the Shelton option. Under these circumstances, we conclude that the question of when the fraud claims alleged by Southdale and Wheeler/Phillips accrued is a question that must be presented to a jury. Therefore, the trial court erred in entering the summary judgment as to the fraud claims on the basis that they were barred by the statute of limitations.