Summary
noting that “no Ohio Court has ever applied the discovery rule to a claim for breach of contract”
Summary of this case from White v. Barrington Golf ClubOpinion
2021-T-0015
09-30-2021
THE TAYLOR-WINFIELD CORPORATION, Plaintiff-Appellant, v. THE HUNTINGTON BANK, Defendant-Appellee.
Ned C. Gold, Jr., The Gold Law Firm, (For Plaintiff-Appellant). Natalie M. Niese, Weisensell Mastrantonio & Niese, LLP, Christopher J. Niekamp and Justin D. Tjaden, Buckingham Doolittle and Burroughs, (For Defendant-Appellee).
Civil Appeal from the Court of Common Pleas Trial Court No. 2019 CV 00749
Judgment: Reversed; remanded
Ned C. Gold, Jr., The Gold Law Firm, (For Plaintiff-Appellant).
Natalie M. Niese, Weisensell Mastrantonio & Niese, LLP, Christopher J. Niekamp and Justin D. Tjaden, Buckingham Doolittle and Burroughs, (For Defendant-Appellee).
OPINION
THOMAS R. WRIGHT, J.
{¶1} Appellant, The Taylor-Winfield Corporation ("Taylor-Winfield"), appeals the trial court's judgment entry granting appellee, The Huntington Bank's ("Huntington"), Civil Rule 12(B)(6) motion to dismiss the complaint as time-barred. The judgment is reversed.
{¶2} Taylor-Winfield filed suit against Huntington on April 30, 2019, seeking compensatory and punitive damages. In its amended complaint, Taylor-Winfield set forth five causes of action: breach of contract, promissory estoppel, misrepresentation and fraud, civil conspiracy, and breach of fiduciary duty. Huntington moved to dismiss the complaint under Civ.R. 12(B)(6) on multiple grounds, including that each claim was filed outside the applicable statute of limitations. The trial court dismissed the complaint in its entirety, concluding the events at issue occurred outside the applicable statute of limitations for each claim and, therefore, that Taylor-Winfield failed to state a claim upon which relief can be granted.
{¶3} From this decision, Taylor-Winfield appeals and advances three assignments of error:
[1.] The facts alleged in TWs amended complaint suffice to bring the claims of breach of fiduciary duty, breach of contract, promissory estoppel, and civil conspiracy within the ambit of the applicable statutes of limitations through the operation of the "discovery rule."
[2.] The trial court made unwarranted factual assumptions and determinations in applying the "discovery rule" to TWs fraud and misrepresentation claims.
[3.] An eight year statute of limitations applies to each of TWs claims.
{¶4} "'An order granting a Civ.R. 12(B)(6) motion to dismiss is subject to de novo review.'" LGR Realty, Inc. v. Frank & London Ins. Agency, 152 Ohio St.3d 517, 2018-Ohio-334, 98 N.E.3d 241, ¶ 10, quoting Perrysburg Twp. v. Rossford, 103 Ohio St.3d 79, 2004-Ohio-4362, 814 N.E.2d 44, ¶ 5.
{¶5} A Civ.R. 12(B)(6) motion to dismiss for failure to state a claim upon which relief can be granted is procedural and tests the legal sufficiency of the complaint. State ex rel. Hanson v. Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 548, 605 N.E.2d 378 (1992); McGrath v. Mgmt. & Training Corp., 11th Dist. Ashtabula No. 2001-A-0014, 2001 WL 1602740, *2 (Dec. 14, 2001). "In reviewing a motion to dismiss for failure to state a claim, we accept as true all factual allegations in the complaint. A complaint should not be dismissed unless it appears 'beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery.'" (Internal citation omitted.) LGR Realty at ¶ 10, quoting O'Brien v. Univ. Community Tenants Union, Inc., 42 Ohio St.2d 242, 327 N.E.2d 753 (1975), syllabus.
{¶6} Generally, a trial court cannot grant a Civ.R. 12(B)(6) motion to dismiss on the basis of an affirmative defense, such as the statute of limitations, because the arguments raised often rely on matters outside the pleadings. Byers DiPaola Castle, LLC v. Portage Cty Bd. of Commrs., 2015-Ohio-3089, 41 N.E.3d 89, ¶ 35 (11th Dist.). Thus, "[a] court may dismiss a complaint as untimely under Civ.R. 12(B)(6) only when, after accepting the factual allegations as true and making all reasonable inferences in favor of the plaintiff, the complaint shows conclusively on its face that the action is time-barred." Schmitz v. Natl. Collegiate Athletic Assn. ("Schmitz II"), 155 Ohio St.3d 389, 2018-Ohio-4391, 122 N.E.3d 80, ¶ 11, citing Maitland v. Ford Motor Co., 103 Ohio St.3d 463, 2004-Ohio-5717, 816 N.E.2d 1061, ¶ 11 and Velotta v. Leo Petronzio Landscaping, Inc., 69 Ohio St.2d 376, 379, 433 N.E.2d 147 (1982) ("A motion to dismiss a complaint under Civ.R. 12(B) which is based upon the statute of limitations is erroneously granted where the complaint does not conclusively show on its face the action is barred by the statute of limitations." (Citations omitted.)).
{¶7} "Application of a statute of limitations presents a mixed question of law and fact; when a cause of action accrues is a question of fact, but in the absence of a factual issue, application of the limitations period is a question of law." (Citations omitted.) Schmitz II at ¶ 11. "In order to conclusively demonstrate that the action is time barred, the allegations in the complaint must demonstrate both (1) the applicable statute of limitations, and (2) the absence of factors which would toll the pertinent statute, or make it inapplicable." (Citation omitted.) Ricketts v. Everflow Eastern, Inc., 2016-Ohio-4807, 68 N.E.3d 165, ¶ 12 (7th Dist.).
{¶8} Each of Taylor-Winfield's claims is premised on the following factual allegations, which we accept as true for resolving the present appeal.
{¶9} Taylor-Winfield, incorporated in 1927, was an international manufacturer of manufacturing equipment owned by the Anderson family. Both the corporation and the family have had an ongoing relationship with Huntington and its predecessors (Second National Bank and Sky Bank) in regard to nearly all aspects of banking. Mr. John A. Anderson-Taylor-Winfield's chairman of the board, CEO, and principal shareholder-was the longest tenured member of Second National Bank's Board of Directors at the time the bank was acquired by Sky Bank. For decades, Taylor-Winfield had an open line of credit with Huntington and its predecessors for several million dollars, which it used predominantly for working capital. Due to the corporation's outstanding credit rating, the line of credit was unsecured and was renewed annually for many years. Taylor-Winfield had never been in default on any payments or on any terms of the notes and agreements entered into with Huntington's predecessors relating to this line of credit.
{¶10} At the time of renewal in 2008, Huntington required Taylor-Winfield to provide security in the form of a mortgage on various real properties owned by Hubbparts, Inc., a Taylor-Winfield related company. At the time of renewal in 2010, the mortgage was amended, and Huntington required Mr. Anderson to personally guarantee those notes. On August 10, 2010, Mr. Anderson executed mortgages and two cognovit promissory notes, one for the principal amount of $4,000,000.00 and the other for the principal amount of $2,000,000.00. Subsequent to the 2010 renewal, Taylor-Winfield continued timely making all payments and did not violate any other terms and conditions of the notes.
{¶11} In September 2010, immediately after the cognovit notes were executed and the line of credit renewed, Huntington called the notes and demanded immediate payment from Taylor-Winfield, without explanation. Taylor-Winfield did not have the financial capacity to meet Huntington's demand for immediate payment and was, therefore, forced to immediately find a buyer to purchase the corporation and its assets so that the proceeds of the sale could be used to repay the notes.
{¶12} Taylor-Winfield was purchased by Brian Benyo ("Benyo Brothers") for $5,650,000.00-$4,000,000.00 was to be paid to Huntington in full settlement of the loan, with the remaining $1,500,000.00 to be applied toward Taylor-Winfield's accounts payable. To accomplish the purchase, Benyo Brothers formed a new company called Taylor Winfield Technologies, Inc. ("Technologies"). Benyo Brothers also owns other companies related to this matter, namely, Brilex Industries, Inc. ("Brilex") and McDonald Industrial Development, Inc. ("MID").
{¶13} Taylor-Winfield never received confirmation that the loan had been satisfied and cancelled or that accounts payable had been paid. And, unbeknownst to Taylor-Winfield at that time, Huntington sold the notes and mortgage to MID in March 2011. On April 17, 2013, MID obtained judgment by confession as to the cognovit notes in the amounts of $701,608.17 and $56,432.17, plus interest. The following day, MID filed suit to foreclose on the mortgages that were security for the notes.
{¶14} In or about 2018, Taylor-Winfield became aware that there may have been inappropriate dealings between Huntington and Benyo Brothers/Technologies related to the notes and mortgages. Taylor-Winfield approached the bank and asked to see certain documents, for an accounting of monies paid on the notes, and for an explanation as to why the notes had been called in 2010. Huntington first responded to these inquiries by claiming Taylor-Winfield had defaulted on payments. When Taylor-Winfield showed that it had not defaulted, Huntington refused to state its reasons for calling the notes. Huntington also advised that the loan sale agreement between Huntington and MID contains a confidentiality agreement that forbids the bank from providing information regarding the transaction. Huntington refused to provide any documents to Taylor-Winfield, with the exception of a nominal accounting provided during the course of these proceedings. Taylor-Winfield alleges that this accounting demonstrates that Benyo Brothers/Technologies paid only $3,376,807.33 on the loan, which is $773,192.67 less than required under the asset sale agreement.
{¶15} Taylor-Winfield supplemented its amended complaint with copies of the 2008 open-end mortgage between Hubbparts and Huntington and the 2010 first amendment to that mortgage; the August 2010 cognovit promissory notes between Taylor-Winfield and Huntington; the assignment of the open-end mortgage from Huntington to MID; and an unsigned loan sale agreement between Huntington and MID.
{¶16} In lieu of an answer, Huntington moved to dismiss the complaint, arguing in pertinent part that the complaint was filed well outside the applicable statute of limitations for each claim because the renewal of the line of credit and calling of the notes had occurred over eight years prior.
{¶17} In its first and second assigned errors, Taylor-Winfield argues the trial court erred in dismissing its claims as time-barred due to the court's failure to apply, or misapplication of, the "discovery rule." In its third assigned error, Taylor-Winfield contends the trial court applied the wrong statute of limitations to its claims.
{¶18} "Statutes of limitations serve a gate-keeping function for courts by '"(1) ensuring fairness to the defendant, (2) encouraging prompt prosecution of causes of action, (3) suppressing stale and fraudulent claims, and (4) avoiding the inconveniences engendered by delay-specifically, the difficulties of proof present in older cases."'" Flagstar Bank, F.S.B. v. Airline Union's Mtge. Co., 128 Ohio St.3d 529, 2011-Ohio-1961, 947 N.E.2d 672, ¶ 7, quoting Pratte v. Stewart, 125 Ohio St.3d 473, 2010-Ohio-1860, 929 N.E.2d 415, ¶ 42, quoting Doe v. Archdiocese of Cincinnati, 109 Ohio St.3d 491, 2006-Ohio-2625, 849 N.E.2d 268, ¶ 10. "That being said, statutes of limitations are remedial in nature and are to be given a liberal construction to permit cases to be decided upon their merits, after a court indulges every reasonable presumption and resolves all doubts in favor of giving, rather than denying, the plaintiff an opportunity to litigate." (Citations omitted.) Flagstar Bank at ¶ 7.
{¶19} "The general rule is that a cause of action exists from the time the wrongful act is committed." (Citations omitted.) Id. at ¶ 13. In certain circumstances, however, "applying the general rule '"would lead to the unconscionable result that the injured party's right to recovery can be barred by the statute of limitations before [the party] is even aware of its existence."'" Id., quoting O'Stricker v. Jim Walter Corp., 4 Ohio St.3d 84, 87, 447 N.E.2d 727 (1983), quoting Wyler v. Tripi, 25 Ohio St.2d 164, 168, 267 N.E.2d 419 (1971). Thus, the "discovery rule" exception to the general rule "provides that a cause of action does not arise until the plaintiff knows, or by exercise of reasonable diligence should know, that he or she has been injured by the conduct of the defendant." Flagstar Bank at ¶ 14, citing Collins v. Sotka, 81 Ohio St.3d 506, 507, 692 N.E.2d 581 (1998). "By its very nature, the discovery rule (concept) must be specially tailored to the particular context in which it is to be applied." Browning v. Burt, 66 Ohio St.3d 544, 559, 613 N.E.2d 993 (1993).
{¶20} Here, applying the discovery rule and accepting as true Taylor-Winfield's allegation that it did not become aware of Huntington's alleged wrongdoings until 2018, the complaint does not conclusively demonstrate the absence of factors that would toll the applicable statutes of limitations.
{¶21} We observe, however, that "'no Ohio court has ever applied the discovery rule to a claim for a breach of contract.'" Benkovits v. Bandi, 2021-Ohio-1877, ___ N.E.3d ___, ¶ 21 (8th Dist.), quoting Schmitz v. Natl. Collegiate Athletic Assn., 2016-Ohio-8041, 67 N.E.3d 852, ¶ 16 (8th Dist.), aff'd on other grounds, Schmitz II, 2018-Ohio-4391, citing Cristino v. Bur. of Workers' Comp., 2012-Ohio-4420, 977 N.E.2d 742, ¶ 41 (10th Dist.).
{¶22} Regarding the breach of contract claim, the parties disagree as to which statute of limitations governs. Huntington maintains that the alleged breach of contract relates to the cognovit promissory notes, which are negotiable instruments, and that the six-year limitations period found in R.C. 1303.16(B) applies: "* * * if demand for payment is made to the maker of a note payable on demand, an action to enforce the obligation of a party to pay the note shall be brought within six years after the date on which the demand for payment is made." Taylor-Winfield, on the other hand, contends that the facts alleged in its complaint support a claim that the foreclosure was inappropriate, and it has therefore asserted a claim based on a mortgage. Because a mortgage is a "specialty," see Bank of New York Mellon v. Walker, 2017-Ohio-535, 78 N.E.3d 930, ¶ 19 (8th Dist.), Taylor-Winfield maintains its complaint is governed by the eight-year limitations period in former R.C. 2305.06 (eff. 9-28-12): "* * * an action upon a specialty or an agreement, contract, or promise in writing shall be brought within eight years after the cause of action accrued."
{¶23} "The ground of the action and the nature of the demand determine which statute of limitation is applicable.'" Erickson v. Mgt. & Training Corp., 11th Dist. Ashtabula No. 2012-A-0059, 2013-Ohio-3864, ¶ 42, quoting Peterson v. Teodosio, 34 Ohio St.2d 161, 173, 297 N.E.2d 113 (1973). "Thus, 'in determining which limitation period will apply, courts must look to the actual nature or subject matter of the case, rather than to the form in which the action is pleaded.'" Erickson at ¶ 42, quoting Hambleton v. R.G. Barry Corp., 12 Ohio St.3d 179, 183, 465 N.E.2d 1298 (1984).
{¶24} Count One of Taylor-Winfield's amended complaint, "breach of contract by the Bank," alleges the following:
16. TW realleges paragraphs 1-15 of this Amended Complaint.
17. The documents executed at the time of the August 2010 renewal of the [line of credit] constituted a contract between TW and the Bank. In addition to the express terms of their agreement, that contract contained an implied covenant by the Bank to deal fairly and in good faith with TW. By calling the Notes in September 2010 in the absence of any default in payment of other violation by TW of any of the terms and conditions of the [line of credit], and then refusing to provide
TW with reasons for its draconian actions, the Bank did not deal with TW fairly or in good faith.
18. As a direct and proximate result of the Bank's breach of its implied covenant of good faith and fair dealing as alleged herein, TW was severely damaged. TWs economic damages included, but were not limited to, loss of its assets, the need to engage in a distress sale of its assets and business, loss of its future business, and loss of income from its future business. TW is entitled to recover its damages from the Bank.
19. In violating its covenant of good faith and fair dealing with TW, the Bank acted willfully, wantonly, maliciously, and with reckless disregard for the rights of TW, its owner, its customer, its supplier and perhaps most importantly - its employees and its families.
{¶25} From the face of the pleading, it is conclusive that the basis for the claim is not the foreclosure of the mortgage, but the calling of the cognovit promissory notes in September 2010. Therefore, regardless of whether the applicable statute of limitations is six or eight years, the complaint was filed outside of that time period.
{¶26} Nevertheless, we observe that it will (or should) rarely be determined that a plaintiffs complaint, standing alone, conclusively establishes a statute of limitations affirmative defense, with all of its many exceptions and tolling events, as a matter of law. "Ohio is a notice-pleading state, and Ohio law does not ordinarily require a plaintiff to plead operative facts with particularity." Granite City Ctr., LLC v. Bd. of Trustees of Champion Twp., 11th Dist. Trumbull No. 2020-T-0083, 2021-Ohio-1458, ¶ 21, citing Cincinnati v. Beretta U.S.A. Corp., 95 Ohio St.3d 416, 2002-Ohio-2480, 768 N.E.2d 1136, ¶ 29. The civil rules require a plaintiff to set forth a "short and plain statement of the claim" and a defendant to "set forth affirmatively" the statute of limitations defense in a responsive pleading. Civ.R. 8(A) & (C).
A clear distinction exists in the Civil Rules between the affirmative defense of the bar of the statute of limitations pursuant to Civ.R. 8(C), and a Civ.R. 12(B)(6) defense. The purpose behind the allowance of a Civ.R. 12(B) motion to dismiss based upon the statute of limitations is to avoid the unnecessary delay involved in raising the bar of the statute in a responsive pleading when it is clear on the face of a complaint that the cause of action is barred. The allowance of a Civ.R. 12(B) motion serves merely as a method for expeditiously raising the statute of limitations defense.Mills v. Whitehouse Trucking Co., 40 Ohio St.2d 55, 59-60, 320 N.E.2d 668 (1974).
{¶27} Where, as here, the absence of any tolling events is not conclusive from the face of the complaint, the matter is not expeditiously resolved by raising the issue in a Civ.R. 12(B) motion. Doing so, in effect, places the burden on the plaintiff to affirmatively plead compliance with the statute of limitations, which is contrary to the mandates of Civ.R. 8. "[T]he absence of factual allegations in the complaint is not a proper basis for determining the validity of an affirmative defense." Granite City at ¶ 25; see also Lanzer v. Louisville, 2016-Ohio-8071, 75 N.E.3d 752, ¶ 52 (5th Dist.), citing York v. Ohio State Hwy. Patrol, 60 Ohio St.3d 143, 573 N.E.2d 1063 (1991) ("a plaintiff is not required to prove his or her case through the pleadings in the complaint, since the plaintiffs lack of access to relevant evidence at that stage of the proceedings would allow dismissal of many valid claims").
{¶28} "A statute-of-limitations defense may be raised by a Civ.R. 12(C) motion for a judgment on the pleadings, which is directed to all the pleadings, including the answer the defendant has filed setting out a statute-of-limitations affirmative defense as required by Civ.R. 8(C)." Thomas v. Progressive Cas. Ins. Co., 2011-Ohio-6712, 969 N.E.2d 1284, ¶ 35 (2d Dist.), fn. 1. However, "[t]he defense is more appropriately addressed in the context of a summary judgment motion or at trial if disputed issues of fact exist relating, for example, to accrual dates, fraudulent concealment, continuing unlawful conduct, or whether information possessed by a plaintiff sufficed to provide notice of the claim." In re Natl. Prescription Opiate Litigation, 440 F.Supp.3d 773, 787-788, citing Am. Premier Underwriters, Inc. v. Natl. R.R. Passenger Corp., 839 F.3d 458, 464 (6th Cir.2016); accord State ex rel. Jones v. Suster, 84 Ohio St.3d 70, 79, 701 N.E.2d 1002 (1998) ("Once discovery has been concluded, many of the issues addressed [in a motion to dismiss] may be more appropriately raised in a summary judgment motion after evidence has been gathered.").
{¶29} We conclude Taylor-Winfield's complaint is legally sufficient to survive a Civ.R. 12(B)(6) motion to dismiss on statute of limitations grounds. Accordingly, Taylor-Winfield's assignments of error are sustained to the extent indicated.
{¶30} The judgment of the Trumbull County Court of Common Pleas is reversed, and this matter is remanded to the trial court for further proceedings consistent with this opinion.
MARY JANE TRAPP, P.J., JOHN J. EKLUND, J., concur.