Court Opinion

ID: 8406469
Source: CourtListenerOpinion
Date Created: 2022-10-28 15:09:13.51902+00
Date Added: 2024-06-11T16:47:13.849175
License: Public Domain

10/28/2022
                    IN THE COURT OF APPEALS OF TENNESSEE
                                 AT JACKSON
                               Assigned on Briefs September 1, 2022

      MCGINNIS OIL COMPANY LLC v. WILLIAM H. BOWLING D/B/A
                     TEAGUE GROCERY ET AL.

                       Appeal from the Circuit Court for Fayette County
                         No. 20-CV-61       J. Weber McCraw, Judge
                          ___________________________________

                                 No. W2021-01104-COA-R3-CV
                             ___________________________________

This is a contract dispute. The trial court dismissed Appellant’s action for failure to state
a claim based on the statutes of limitations prescribed by Tennessee Code Annotated
section 47-2-725 and/or Tennessee Code Annotated section 28-3-109(a)(3). We reverse
and remand this matter to the trial court for further proceedings.

           Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court
                                Reversed and Remanded

KENNY ARMSTRONG, J., delivered the opinion of the court, in which FRANK G. CLEMENT,
JR., P.J., M.S., and JOHN W. MCCLARTY, J., joined.

Jacob Webster Brown, Memphis, Tennessee, for the appellant, McGinnis Oil Company,
LLC.

Darrell N. Phillips, Germantown, Tennessee, for the appellees, William Bowling and
Teague Grocery Store, LLC.

                                    MEMORANDUM OPINION1

1
    Rule 10 of the Rules of the Court of Appeals of Tennessee provides:

          This Court, with the concurrence of all judges participating in the case, may affirm, reverse
          or modify the actions of the trial court by memorandum opinion when a formal opinion
          would have no precedential value. When a case is decided by memorandum opinion it
          shall be designated “MEMORANDUM OPINION,” shall not be published, and shall not
          be cited or relied on for any reason in any unrelated case.
                           I. FACTUAL AND PROCEDURAL HISTORY

        Appellant McGinnis Oil Company, LLC (“McGinnis”) is a Tennessee company that
markets petroleum products, including gasoline and diesel fuel. Its operations includes
wholesaling Shell™-brand gasoline and diesel fuel. In April 2008, McGinnis entered into
a Retail Product Sales Agreement (“RPSA”) with Appellee William Bowling d/b/a Teague
Grocery and Teague Store, LLC (collectively, “Bowling”) for the sale of Shell-branded
gasoline. The RPSA set forth a termination date of August 31, 2018, “subject to Sellers
right to terminate th[e] Agreement in accordance with applicable Law.” The RPSA further
provided:

        Upon expiration, this Agreement will continue on a month-to-month basis
        for no longer than 36 months until the parties either execute a new agreement
        or Seller terminates or does not renew this Agreement in accordance with
        applicable Law.

Article 3 of the RPSA governed the terms of payment, providing:

        (b) TERMS OF PAYMENT: (1) Gasoline, gasohol, biodiesel and diesel fuel:
        7 days.

        Buyer shall pay for the Products in accordance with Seller’s payment terms
        in effect from time to time, any of which may be altered or revoked with
        notification to Buyer.

Article 3(c) provided:

        Seller’s extension of credit for the purchase of Products, the terms under
        which any such credit will be extended or maintained, and the amount of
        credit extended are subject to the sole discretion of Seller, any of which terms
        or amount may be altered or revoked with notification to Buyer.

       On December 7, 2020, McGinnis filed a complaint against Bowling seeking
damages in the amount of $773,156.37.2 In its complaint, McGinnis asserted that “[f]rom
very early on in his business relationship with McGinnis Oil, Bowling was behind on the
balance he owed McGinnis Oil under the RPSA[]” and that Bowling had fallen behind on
payments totaling $460,253.32 by April 2011. McGinnis asserted that “[a]s Bowling’s
debt snowballed,” McGinnis representative, William Cox, “communicated regularly” with
Mr. Bowling about the over-due payments, that Bowling accepted monthly statements

        2
         It appears undisputed that McGinnis filed its initial complaint on November 8, 2019, and that it
nonsuited the complaint on September 10, 2020.
                                                  -2-
“without exception or objection,” and that McGinnis and Bowling agreed that McGinnis
“would extend credit to Bowling equal to the amount of the overdue balance and would
hold the debt on said credit in abeyance, to be remedied by Bowling at a later time.”
McGinnis asserted that, at the recommendation of Bowling’s business consultant Chris
Zuercher, “the parties mutually agreed that McGinnis Oil would maintain a segregated
account to track the debt on the credit it was extending to Bowling, to be indicated on
McGinnis Oil’s subsequent monthly statements to Bowling, and that Bowling would pay
down the debt over time.” McGinnis submitted that “in accord with the agreement and
consent of Bowling, McGinnis Oil opened a second account for Bowling titled ‘Teague
Two.’” McGinnis asserted that the purpose of the second account was to separate
Bowling’s debt from his ongoing fuel purchases from regular operations going forward[,]”
that Bowling understood and agreed to the establishment and purpose of the second
account, and that the Teague Two account was used to track Bowling’s orders in April
2011. McGinnis asserted that it “sent Bowling account statements reflecting both his
current operating balance (under the Teague Two account) and his debt for the credit
McGinnis Oil had extended him (under the Teague Store account)[]” and that “Bowling
never questioned or objected to the indication of the debt on these statements.”

       McGinnis further asserted in its complaint that, by December 2013, Bowling “had
accrued an outstanding balance of $312,903.05 under McGinnis Oil’s Teague Two
account[.]” McGinnis asserted that, notwithstanding its “right to withhold future fuel
deliveries until Bowling became current on [the] balance[,]” McGinnis and Bowling agreed
that McGinnis would add the amounts due under the Teague Two account to the credit
extended to Bowling. McGinnis asserted that “[i]n December 2013, after discussing
possible courses of action, McGinnis Oil and Bowling mutually agreed that McGinnis Oil
would forbear on taking legal or other collection action against Bowling on the total
$773,156.37 balance and, in contemplation of an ongoing business relationship, instead
would extend Bowling credit in an equal amount to be due and owing from Bowling,
without specification as to whether this loan would be payable on demand or at some
specific time in the future.” McGinnis asserted that, “[i]n exchange for McGinnis Oil’s
forbearing on the debt, Mr. Bowling agreed to the $773,156.37 debt balance and to pay the
debt “upon demand.” McGinnis further asserted that Bowling agreed to “(a) not declare
bankruptcy, (b) remain current on all subsequent fuel purchases from McGinnis Oil, and
(c) begin paying an additional $0.02 per gallon of gasoline with the express understanding
and intent that McGinnis Oil would apply any additional ‘profits’ it generated from the
fuel-price increase against the $773,156.37 credit it had extended to Bowling.” McGinnis
asserted that Mr. Bowling and Mr. Cox agreed that the debt/credit would again be
segregated and that the Teague Two account would be “zeroed out” and used to track
Bowling’s orders through July 2019. It asserted that the parties continued to discuss
Bowling’s repayment of the debt, including a new agreement providing for an aggressive
payment schedule.

      McGinnis asserted that it continued to forbear on its right to collect the debt in
                                        -3-
exchange for Bowling’s agreement to pay the credited amount and the running balance on
the account and to “execute a new long-term contract containing the terms by which
Bowling would pay McGinnis Oil back the Teague Store balance.” McGinnis included
copies of texts between Mr. Bowling and Mr. Cox in support of its assertions.

        McGinnis asserted that, on July 17, 2019, Mr. Bowling notified Mr. Cox by email
that, despite “the men’s mutual understanding that Bowling would make arrangements for
paying down his sizable debt … under the terms of a renewed contract[,]” Bowling would
not be renewing the contract. McGinnis asserted that Mr. Cox telephoned Mr. Bowling on
the same day, and that Mr. Bowling “for the first time ever … alleged that McGinnis Oil
had been violating the RPSA for years by overcharging him for gasoline and claimed that
McGinnis Oil owed him money.”

        McGinnis also asserted that it contacted Bowling through legal counsel in August
2019 “to inform him in writing that he was in default of the December 2013 extension of
credit and to demand payment of the debt balance.” It asserted that Bowling failed to remit
payment in response to its demand letter and that McGinnis filed its first action in
November 2019. McGinnis asserted that Bowling filed a counterclaim in February 2020,
alleging that McGinnis owed him for overcharges under the RPSA. McGinnis nonsuited
its action on September 10, 2020.

       In its December 2020 complaint, McGinnis asserted claims for damages for breach
of contract and unjust enrichment. In its breach of contract claim, McGinnis asserted that
“[b]ecause the December 2013 credit extension did not specify whether the loan was to be
paid at any specific time or upon demand, by law it was a demand loan, payable
immediately.” It alleged that Mr. Bowling had “materially breached his promises to pay
back McGinnis Oil’s December 2013 demand loan.” McGinnis sought damages in the
amount of $773,156.37, prejudgment interest, reasonable attorneys’ fees, and costs.

        In May 2021, Bowling filed a motion to dismiss for failure to state a claim pursuant
to Tennessee Rules of Civil Procedure Rule 12.02(6). In its motion, Bowling asserted that
McGinnis’s cause of action “last accrued” in December 2013. It observed, “Tennessee
Code Annotated section 47-2-725 establishes a four-year statute of limitations for contracts
for the sale of goods, Tennessee Code Annotated section 28-3-109(a)(3) establishes a
general six-year statute of limitations for breach of contract, and Tennessee law establishes
a three-year statute of limitations for claims of unjust enrichment.” Bowling asserted,
“here, under the applicable statute, either all, or the majority of, Plaintiff’s claims are
excluded. Plaintiff claims the outstanding unpaid balance last accrued in December 2013,
yet Plaintiff did not file its complaint until November of 2019. As a result, the statute of
limitations bars Plaintiff s claims because the statute of limitations ran in December 2017.”

        Bowling did not specify whether it sought dismissal under the six-year or four-year
limitations period in its motion. However, in its memorandum of law in support of the
                                            -4-
motion, Bowling relied on Tennessee Code Annotated section 47-2-725(1)-(2) for the
proposition that a four-year limitations period is applicable to this matter and that, under
the statute, the “cause of action accrues when the breach occurs.”3 It submitted, “[a]s a
result, the question before this Court is, assuming Teague Store breached the Agreement,
when did the breach occur.” Bowling asserted that its agreement with McGinnis was a
“severable contract” and that the last breach occurred prior to December 2013.

       In its August 2021 response to Bowling’s motion to dismiss, McGinnis asserted that
Bowling’s argument in support of its motion to dismiss “ignore[d] the RPSA’s plain
language.” It argued that it extended credit to Bowling as permitted by Article 3(c) of the
RPSA; that, under the section, the “loan” became due when McGinnis demanded payment
in August 2019, when Bowling informed McGinnis that it did not intend to renew the
contract; and that Bowling breached the parties’ contract in 2019, when it refused payment.
McGinnis asserted:

       McGinnis Oil’s breach-of-contract claim does not arise out of Teague Store’s
       failure to pay within seven days of each delivery of Product. It arises from
       Teague Store’s failure to pay the credit extended under the terms of the RSPA
       when demand for payment was appropriately made.

       The trial court granted Bowling’s motion to dismiss by order entered on August 25,
2021, and McGinnis filed a timely notice of appeal to this Court.

                                             II. ISSUES

        The issue presented by this appeal, as we state it, is whether the trial court erred by
granting Bowling’s motion to dismiss for failure to state a claim based on the statute of
limitations.

                                   III. STANDARD OF REVIEW

       It is well-settled that a Tennessee Rules of Civil Procedure Rule 12.02(6) motion to
dismiss for failure to state a claim tests “‘only the legal sufficiency of the compliant, not
the strength of the plaintiff’s proof or evidence.’” Elvis Presley Enter., Inc. v. City of
Memphis, 620 S.W.3d 318, 323 (Tenn. 2021) (quoting Webb v. Nashville Area Habitat
for Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011)). When considering a motion filed
under the rule, the trial court must determine whether the allegations of the complaint, if
considered true, constitute a cause of action as a matter of law. Id. (citation omitted). “The
resolution of a 12.02(6) motion to dismiss is determined by an examination of the pleadings

3
 We observe that Bowling filed its memorandum of law in January 2021, several months before it filed its
motion to dismiss.
                                                 -5-
alone.” Webb. v. Nashville Area Habitat for Humanity, 346 S.W.3d 422, 426 (Tenn.
2011).

        When considering a motion to dismiss, the trial court “‘must construe the complaint
liberally, presuming all factual allegations to be true and giving the plaintiff the benefit of
all reasonable inferences.’” Id. (quoting Tigg v. Pirelli Tire Corp., 232 S.W.3d 28, 31-32
(Tenn. 2007) (quoting Trau-Med of Am., Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 696
(Tenn. 2002))) (additional citations omitted). It should grant the motion “‘only when it
appears that the plaintiff can prove no set of facts in support of the claim that would entitle
the plaintiff to relief.’” Id. (quoting Crews v. Buckman Labs. Int’l, Inc., 78 S.W.3d 852,
857 (Tenn. 2002)) (additional citations omitted). “A Rule 12.02(6) motion to dismiss
admits the truth of all of the relevant and material allegations contained in the complaint,
but it asserts that the allegations fail to establish a cause of action.” Leach v. Taylor, 124
S.W.3d 87, 90 (Tenn. 2004).

       When reviewing a trial court’s grant of a Rule 12.02(6) motion to dismiss, we
likewise must regard the allegations of the complaint as true. Elvis Presley Enter., 620
S.W.3d at 323 (citation omitted). Whether a lawsuit should be dismissed for failure to state
a claim based on the statute of limitations presents a question of law which we review de
novo with no presumption of correctness. Redwing v. Cath. Bishop for Diocese of
Memphis, 363 S.W.3d 436, 456 (Tenn. 2012).

                                       IV. ANALYSIS

       We begin our review by noting that the purpose of statutes of limitations is to
“promote fairness and justice.” Redwing, 363 S.W.3d at 456 (citation omitted). They are
not “swords” but “shields” that ensure that actions are brought within a defined period of
time. Id. (citations omitted). Statutes of limitations “are based on the presumption that
persons with the legal capacity to litigate will not delay bringing suit on a meritorious claim
beyond a reasonable time.” Id. (citation omitted).

        “A defense predicated on the statute of limitations triggers the consideration of three
components—the length of the limitations period, the accrual of the cause of action, and
the applicability of any relevant tolling doctrines.” Id. (citation omitted). The length of
the limitations period is defined by statute, and the choice of which statute is applicable
depends upon the “gravamen of the complaint.” Id. (quoting Whaley v. Perkins, 197
S.W.3d 665, 670 (Tenn. 2006) (quoting Gunter v. Lab. Corp. of Am., 121 S.W.3d 636,
638 (Tenn. 2003))) (internal quotation marks omitted). The question of accrual of the
action “relates to the date on which the applicable statute of limitations begins to run.” Id.
(citation omitted).

      The six-year limitations period generally applicable to a breach of contract action
“begins to run when a contracting party first knows or should know that the contract will
                                           -6-
not be performed.” Wilkins v. Third Nat. Bank in Nashville, 884 S.W.2d 758, 762 (Tenn.
Ct. App. 1994). However, under Tennessee Code Annotated section 47-2-725, a cause of
action for breach of a contract for sales “accrues when the breach occurs, regardless of the
aggrieved party’s lack of knowledge of the breach.” Tenn. Code Ann. § 47-2-725 (2). The
section also provides that the parties may agree to reduce the four-year limitations period
prescribed by the statute to not less than one year “but may not extend it.” Tenn. Code
Ann. § 47-2-725(1). As Bowling asserted in its memorandum of law in support of its
motion to dismiss, the dispositive issue relevant to Bowling’s motion is the date on which
the breach alleged by McGinnis occurred.

        In its August 2021 order dismissing the matter pursuant to the statute of limitations,
the trial court did not specify which statute is applicable to this matter. It stated, however,
that “[t]he indebtedness in question was incurred prior to December 2013[,]” and that it
“finds that no payments have been paid on the indebtedness of $773,156.37 since
December 2013.” The trial court’s order states:

       Further, the Court finds that the business agreement entered between the
       parties and referred to as the “Retailer Product Sales Agreement” (RPSA)
       provided the on-going business arrangement for the respective parties but did
       not alter the time calculation of the statute of limitations on the prior
       indebtedness. The Plaintiff contends that the RPSA allowed the Plaintiff to
       change its forbearance of collection of the prior sales-related indebtedness to
       an extension of credit or loan and thus, because of this restructuring, its claim
       takes on a new statute of limitation calculation. Noteworthy to the issue at
       hand, the RPSA required all notices and amendments to the agreement to be
       in writing and addressed to the parties as provided in the agreement. The
       Court finds that no written notices altering the terms of payment were
       executed, and the Plaintiff cannot rely upon its unilateral alteration of the
       RPSA agreement to extend any statute of limitations period. Finding that the
       statute of limitations bars the Plaintiff s claims, Defendant’s Motion to
       Dismiss is granted. Defendant’s attorney fees are denied.

       Bowling asserted in the trial court that, for purposes of its motion to dismiss, the last
breach accrued in December 2013, when it failed to pay for amounts due under the RSPA.
McGinnis, on the other hand, asserted that section 3(c) of the parties’ contract provided for
the extension of credit by McGinnis to Bowling; that the parties mutually agreed that
McGinnis would extend credit to Bowling in exchange for forbearance of its right to
commence an action; that texts between Mr. Cox and Mr. Bowling constitute evidence of
a credit/loan agreement between the parties; and that Bowling breached the agreement in
April 2019, when failed to comply with McGinnis’s demand letter.

       As noted above, Article 3(c) of the RPSA provides:

                                             -7-
       Seller’s extension of credit for the purchase of Products, the terms under
       which any such credit will be extended or maintained, and the amount of
       credit extended are subject to the sole discretion of Seller, any of which terms
       or amount may be altered or revoked with notification to Buyer.

Thus, the contract by its terms provided for the extension of credit to Bowling.

        It appears that the trial court granted Bowling’s motion to dismiss this action before
any discovery had taken place. As noted, we observe that McGinnis asserted that Bowling
“breached his promises to pay back McGinnis Oil’s December 2013 demand loan[]” in its
complaint; that, for purposes of its motion to dismiss, Bowling asserted that the last breach
occurred in December 2013; and that McGinnis asserted that Bowling breached the parties’
credit agreement when it failed to pay upon demand in April 2019.

        Whether, as McGinnis asserts, the parties agreed that credit would be extended to
Bowling as provided by Article 3 of the contract and due upon demand; whether the texts
between Mr. Cox and Mr. Bowling constitute notification and/or a written agreement; and
whether the parties entered into a credit agreement when Bowling’s debt was segregated
from the Teague Two on-going account — supported by consideration in the form of
McGinnis’s forbearance of its legal right to collect the debt — are unresolved factual issues
raised in the complaint that must be determined in order to decide 1) which limitations
period is applicable to this matter; 2) when the alleged breach of contract accrued; and 3)
whether the forbearance agreement asserted by McGinnis estops Bowling from asserting a
statute of limitations defense.

        As our supreme court has observed, “it must be remembered that we are addressing
the standard in assessing the sufficiency of a single document filed at the very beginning
of a case—the complaint. Our motion-to-dismiss jurisprudence reflects the principle that
this stage of the proceedings is particularly ill-suited for an evaluation of the likelihood of
success on the merits or of the weight of the facts pleaded, or as a docket-clearing
mechanism. Rule 8.01 has not been amended and still only requires “(1) a short and plain
statement of the claim showing that the pleader is entitled to relief, and (2) a demand for
judgment for the relief the pleader seeks.” Webb v. Nashville Area Habitat for Humanity,
Inc., 346 S.W.3d 422, 437 (Tenn. 2011).

       Construing McGinnis’s complaint in the light most favorable to McGinnis,
accepting its allegations as true, and drawing all reasonable inference in its favor, we
conclude that the trial court erred by granting Bowling’s motion to dismiss in this case.
Remaining issues presented in the parties’ briefs are pretermitted as premature and
unnecessary to our disposition of this appeal.

                                      V. CONCLUSION

                                             -8-
        The trial court’s judgment granting Bowling’s motion to dismiss is reversed, and
the case is remanded to the trial court for further proceedings consistent with this opinion.
Costs on appeal are taxed to the Appellee, William H. Bowling, d/b/a Teague Grocery, et.
al., for all of which execution may issue if necessary.

                                                  s/ Kenny Armstrong
                                                  KENNY ARMSTRONG, JUDGE

                                            -9-