Court Opinion

ID: 4097150
Source: CourtListenerOpinion
Date Created: 2016-11-10 05:11:13.363667+00
Date Added: 2024-06-11T07:45:32.063915
License: Public Domain

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

                             September 2016 Term
                               _______________                        FILED
                                                                  November 9, 2016
                                No. 15-0993                           released at 3:00 p.m.
                              _______________                       RORY L. PERRY II, CLERK
                                                                  SUPREME COURT OF APPEALS
                                                                       OF WEST VIRGINIA
                       BRAXTON LUMBER CO., INC.,
                               Petitioner

                                     v.

                               LLOYD’S INC.,
                                Respondent

      ____________________________________________________________

               Appeal from the Circuit Court of Braxton County

                 The Honorable Richard A. Facemire, Judge

                          Civil Action No. 07-C-121

                                 AFFIRMED

      ____________________________________________________________

                         Submitted: November 1, 2016
                           Filed: November 9, 2016

Steven L. Thomas, Esq.                    Debra T. Varner, Esq.

Charles W. Pace, Jr., Esq.                Richard R. Marsh, Esq.

Kay Casto & Chaney PLLC                   Michael P. Gruber, Esq.

Charleston, West Virginia                 McNeer, Highland, McMunn and

Counsel for the Petitioner                Varner, L.C.

                                          Clarksburg, West Virginia
                                          Counsel for the Respondent

CHIEF JUSTICE KETCHUM delivered the Opinion of the Court.
                              SYLLABUS BY THE COURT

              1.      A third-party complaint filed pursuant to Rule 14(a) of the West

Virginia Rules of Civil Procedure is proper only when the party to be joined is or may be

liable to the third-party plaintiff for all or part of the original plaintiff’s claim(s) against

the third-party plaintiff. A third-party complaint is not proper merely because it arises

from the same transaction or occurrence that is the subject matter of the original

plaintiff’s complaint against the defendant.

              2.      “The provisions of Section 8, Article 2, Chapter 55, Code, 1931,

expressly require a signed writing to constitute a new promise or an acknowledgment

from which such promise may be implied and that such promise or acknowledgment be

incorporated in a writing signed by the promisor or his agent; and to remove an account

from the . . . statute of limitations . . . , there must be an express promise to pay or, if

there be a mere acknowledgment, it must be unqualified, without condition, importing

liability and willingness to pay without reference to a future settlement, and it must be

determinate and unequivocal so as to be tantamount to an express promise to pay.” Syl.

Pt. 1, in part, Preston Cnty. Coke Co. v. Preston Cnty. Light & Power Co., 146 W.Va.

231, 119 S.E.2d 420 (1961).

              3.      “Mere entries by a party in his own book of accounts will not

operate as an acknowledgment, to take a demand out of the statute of limitations.” Syl.

Pt. 5, Stiles v. Laurel Fork Oil & Coal Co, 47 W.Va. 838, 35 S.E. 986 (1900).

                                               i
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.

              1
                Under West Virginia Code Section 46-3-118(a) [1993], “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[.]”

                                             1

                                  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 431 (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

                                            2

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

              2
                West Virginia Rule of Civil Procedure 14(a) allows a defendant to file a
third-party complaint against an individual “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.” Our
reference to the circuit court’s decision to allow Chuck to file a third-party complaint
against Lloyd’s, Inc. does not, in any way, condone the circuit court’s decision on that
matter. The record provides no indication that Lloyd’s, Inc. may be liable for all or part
of Greg’s claim set out in his complaint.
              3
                However, Comment 5 to West Virginia Code Section 46-3-203(d)
provides that: “The cause of action on an instrument [e.g., a promissory note] cannot be
split.”

                                             3

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

                                            4

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

             4
               See FRANKLIN D. CLECKLEY, ROBIN J. DAVIS, & LOUIS J. PALMER, JR.,
LITIGATION HANDBOOK ON WEST VIRGINIA RULES OF CIVIL PROCEDURE § 12(b)(6)[3],
at 393 (4th ed. 2012) (“[I]f matters outside the [motion to dismiss] are presented to the
court and are not excluded by it, the motion must be treated as one for summary
judgment[.]”).
             5
              Syl. Pt. 3, in part, Aetna Cas. & Sur. Co. v. Fed. Ins. Co. of N.Y., 148
W.Va. 160, 133 S.E.2d 770 (1963).
             6
                 Syl. Pt. 1, Painter v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).

                                             5

               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,

                                                6

              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:

              7
                  Emphasis added.
              8
                In 2016, the Legislature amended West Virginia Code Section 55-2-21.
Subsection(b) now provides, in pertinent part, that a defendant to a civil action “shall
have one hundred eighty days from the date of the service of process of the original
complaint, or the time remaining on the applicable statute of limitations, whichever is
longer, to bring [a] third-party complaint[.]” As of 2016, West Virginia Code Section 55­
2-21 no longer tolls the statute of limitations on a third-party complaint for the entire
pendency of a civil action. However, because Braxton Lumber’s 2007 lawsuit was
commenced before the 2016 revision’s effective date, it is inapplicable to this dispute.
              9
                See J.A. Street & Assocs., Inc. v. Thundering Herd Dev., LLC., 228 W.Va.
695, 704, 724 S.E.2d 299, 308 (2011) (West Virginia Code Section 55-2-21 [1981]’s
“application is based on the classification of [petitioner’s] claims against [respondent] as
a [third-party complaint,] or as an independent cause of action.”).

                                             7

                      [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) had it been asserted in the 2004 lawsuit because it

arose from the same general set of facts as Greg’s claims against it for waste, conversion,

self-dealing, and insider trading.

              However, Rule 14(a)’s terms are not met just because a defendant’s claim

against a third-party arises out of the same general set of facts as the original plaintiff’s

claim against the defendant.11 “[D]erivative liability is central to the operation of Rule

14. It cannot be used as a device to bring into a controversy matters which merely

happen to have some relationship to the original action.”12 Thus, under Rule 14(a), “a

third-party claim may be asserted only when the third party’s liability is in some way

dependent on the outcome of the main claim and the third party’s liability is secondary or

derivative.”13 Put simply,

              10
                   Emphasis added.
              11
               Laughlin v. Dell Fin Serv., L.P., 465 F. Supp. 2d 563, 567 (D.S.C. 2006)
(“Rule 14(a) does not allow the defendant to assert a separate and independent claim even
though the claim arises out of the same general set of facts as the main claim.”).
              12
Walker v. Option One Mortg. Corp., 220 W.Va. 660, 671, 649 S.E.2d
233, 244 (2007) (Davis, J., dissenting) (quoting Watergate Landmark Condo Unit
Owners’ Ass’n v. Wiss, Janey, Elstner Assocs., Inc., 117 F.R.D. 576, 578 (E.D. Va.
1987)).
              13
U.S. v. One 1977 Mercedes Benz, 708 F.2d 444, 452 (9th Cir. 1983).

                                              8

                       [A] third-party claim is only viable where a proposed
               third-party plaintiff says, in effect, “If I am liable to plaintiff,
               then my liability is only technical or secondary or partial, and
               the third-party defendant is derivatively liable and must
               reimburse me for all or part . . . of anything I must pay
               plaintiff.”14

Therefore, we hold that a third-party complaint filed pursuant to Rule 14(a) of the West

Virginia Rules of Civil Procedure is proper only when the party to be joined is or may be

liable to the third-party plaintiff for all or part of the original plaintiff’s claim(s) against

the third-party plaintiff. A third-party complaint is not proper merely because it arises

from the same transaction or occurrence that is the subject matter of the original

plaintiff’s complaint against the defendant.

               Thus, Braxton Lumber could not have asserted its claim against Lloyd’s,

Inc., seeking payment on the promissory note, in the 2004 lawsuit as a third-party

complaint under Rule 14(a). The only proper third-party complaint Braxton Lumber

could have filed in the 2004 lawsuit would have been against an individual who was or

may have been liable for all or part of Greg’s claims against it for waste, conversion, self-

dealing, or insider trading. Even assuming that Lloyd’s, Inc. is liable on the promissory

note, that does not make Lloyd’s, Inc. liable for all or part of Greg’s claims. Because

Braxton Lumber’s claim against Lloyd’s, Inc. on the promissory note is an independent

cause of action, West Virginia Code Section 55-2-21 does not toll the statute of

limitations in this case.

               14
                    Laughlin, 465 F. Supp. 2d at 566 (internal citations omitted).

                                                 9
                        B. West Virginia Code Section 55-2-8 [1882].

              The second tolling provision on which Braxton Lumber relies, West

Virginia Code Section 55-2-8, provides, in pertinent part:

                     If any person against whom the right shall have so
              accrued on an award, or on any such contract, shall by writing
              signed by him or his agent promise payment of money on such
              award or contract, the person to whom the right shall have so
              accrued may maintain an action or suit for the moneys so
              promised within such number of years after such promise as it
              might originally have been maintained within upon the award
              of contract, and the plaintiff may either sue on such a
              promise, or on the original cause of action[.] . . . An
              acknowledgement in writing as aforesaid, from which a
              promise of payment may be implied, shall be deemed to be
              such a promise within the meaning of this section.15

Thus, under West Virginia Code Section 55-2-8, when a debtor signs a new written

promise to pay a debt that has accrued or an acknowledgement in writing from which a

new promise of payment may be implied, the statute of limitations on a cause of action to

enforce payment on the debt starts over. We have further elaborated that:

                     The provisions of Section 8, Article 2, Chapter 55,
              Code, 1931, expressly require a signed writing to constitute a
              new promise or an acknowledgment from which such
              promise may be implied and that such promise or
              acknowledgment be incorporated in a writing signed by the
              promisor or his agent; and to remove an account from the
              operation of the . . . statute of limitations . . . , there must be
              an express promise to pay or, if there be a mere
              acknowledgment, it must be unqualified, without condition,
              importing liability and willingness to pay without reference to
              a future settlement, and it must be determinate and

              15
                   Emphasis added.

                                              10

              unequivocal so as to be tantamount to an express promise to
              pay.16

Under this tolling provision, “the burden of removing the statutory bar rests upon the

plaintiff,” in this case, Braxton Lumber.17

              Braxton Lumber contends written statements made during the 2004 lawsuit

implied a promise that Lloyd’s, Inc. would pay the promissory note. These writings

include: (1) an entry in Lloyd’s, Inc.’s accounting journal, which seems to reflect a debt

to Braxton Lumber; (2) a report by Lloyd’s, Inc.’s expert in the 2004 lawsuit, based on

Lloyd’s, Inc.’s accounting records, reflecting a 1997 debt to Braxton Lumber; and (3) a

written response by Greg to Chuck’s request for admissions in the 2004 lawsuit.

              In regard to Lloyd’s, Inc.’s accounting journal and the expert’s report based

thereon, our law is well-established that: “Mere entries by a party in his own book of

accounts will not operate as an acknowledgment, to take a demand out of the statute of

limitations.”18 As we have stated, “balance sheets do not constitute a promise or an

acknowledgement in writing that has been signed by the defendant or its agent as

expressly required by [West Virginia Code Section 55-2-8].”19 Thus, the entries in

              16
              Syl. Pt. 1, in part, Preston Cty. Coke Co. v. Preston Cty. Light & Power
Co., 146 W.Va. 231, 119 S.E.2d 420 (1961) (emphasis added).
              17
                   Stansbury v. Stansbury’s Adm’rs, 20 W.Va. 23, 29 (1882).
              18
                   Syl. Pt. 5, Stiles v. Laurel Fork Oil & Coal Co., 47 W.Va. 838, 35 S.E.
986 (1900).
              19
                   Preston Cty. Coke Co., 146 W.Va. at 247, 119 S.E.2d at 430.

                                              11
Lloyd’s, Inc.’s accounting journal and the expert’s report based thereon, is insufficient to

toll the statute of limitations under West Virginia Code Section 55-2-8.

              Braxton Lumber also asserts that a response by Greg to Chuck’s requests

for admissions in the 2004 lawsuit implied a new promise that Lloyd’s, Inc. would pay

the promissory note. Chuck submitted the following request for admission to Greg

during the 2004 lawsuit:

                     Do you admit that beginning in or about 1996, Braxton
              Lumber made a series of loans to Lloyd’s, Inc. totaling
              approximately $600,000.00, which allowed for the
              capitalization of Lloyd’s Ace Hardware and that by August
              15, 1998, the books of Braxton Lumber and Lloyd’s Inc. each
              reflected that Lloyd’s, Inc. owed Braxton Lumber not less
              than $600,000.00

Greg responded:

                     Admitted in so far as the fact that loans were made.
              Greg Lloyd, after reasonable investigation, does not possess
              knowledge or information sufficient to admit or deny facts
              about the amount of any such loans.20

Braxton Lumber further claimed: “Greg Lloyd, on behalf of Respondent Lloyd’s, signed

a verification on August 12, 2002, verifying under oath the answers and responses . . . to

be true and accurate.”21

              We find that Greg’s response did not toll the statute of limitations under

West Virginia Code Section 55-2-8. It did not contain a promise to pay the promissory

              20
                   Emphasis added.
              21
                Braxton Lumber provided no explanation for how the parties to the 2004
lawsuit conducted discovery in 2002. The record does not mention a lawsuit filed before
2004 relating to this dispute.

                                            12

note, or even an admission that Lloyd’s, Inc. was liable to pay it.            Rather, Greg’s

response merely stated that “loans were made,” and he was uncertain “about the amount

of any such loans.” Under West Virginia Code Section 55-2-8, “a new promise to pay

which will vivify a stale demand must be positive in all respects.”22 Greg’s response that

he was uncertain “about the amount of any such loans,” falls far short of this “positive in

all respects” standard.

              Moreover, for a writing to toll the statute of limitations under West Virginia

Code Section 55-2-8, “[i]t must acknowledge a fixed sum, or a balance which admits of

ready and certain ascertainment.”23 The record reveals that, during the 2004 lawsuit, the

circuit court, the lawyers working on the case, and some of the parties did not even know

which debt Chuck’s claim was based on. Their confusion was based, in large part, on

Braxton Lumber’s own failure to keep adequate records of its business dealings. By the

time the 2004 lawsuit was commenced, whether/how much Lloyd’s, Inc. owed Braxton

Lumber on any debt was shrouded in so much mystery that Chuck amended his

complaint to clarify that his suit was based on the promissory for $564,000.00. Clearly,

the sum or balance Lloyd’s, Inc. owed Braxton Lumber on the promissory note was not

capable of ready and certain ascertainment when Greg responded to Chuck’s request for

admissions.

              22
                   Syl. Pt. 1, in part, Hill v. Ringgold, 112 W.Va. 374, 164 S.E. 142 (1932).
              23
               Findley v. Cunningham, 53 W.Va. 1, 11, 44 S.E. 472, 476 (1903) (internal
quotations and citations omitted).

                                               13

                Greg’s response was not an acknowledgment in writing from which a

promise to pay the promissory note was implied. Because Braxton Lumber did not

produce a writing in which Lloyd’s, Inc. made a new promise to pay Braxton Lumber on

the promissory note, West Virginia Code Section 55-2-8 does not toll the six year statute

of limitations on its lawsuit. The circuit court’s entry of summary judgment on Braxton

Lumber’s lawsuit was proper.24

                                        IV.

                                    CONCLUSION

                Neither West Virginia Code Section 55-2-21 nor West Virginia Code

Section 55-2-8 tolled the six-year statute of limitations on Braxton Lumber’s lawsuit.

Therefore, we affirm the circuit court’s dismissal of Braxton Lumber’s lawsuit against

Lloyd’s, Inc.

                                                                               Affirmed.

                24
               Before disposing of this case, we note Braxton Lumber’s argument that
the circuit court erred on grounds of res judicata and collateral estoppel. Because
Braxton Lumber’s claim was time-barred, we decline to address these issues.

                                           14