Cadles of Grassy Meadows II, L.L.C. v. Goldner
| Citation | 542 F.3d 437 |
| Decision Date | 08 September 2008 |
| Docket Number | No. 07-10711.,07-10711. |
| Parties | CADLES OF GRASSY MEADOWS II, L.L.C., by Assignment from Olney Savings Association, Plaintiff-Appellant, The State of Texas, Intervenor Plaintiff-Appellant, v. David GOLDNER; Robert Goldner, Defendants-Appellees. |
| Court | United States Courts of Appeals. United States Court of Appeals (5th Circuit) |
Beverly Ann Whitley (argued), Bell, Nunnally & Martin, Dallas, TX, for Plaintiff-Appellant.
Greg C. Noschese, Holly Michele Church, Munsch, Hardt, Kopf & Harr, LaDawn H. Conway (argued), Alexander, Dubose, Jones & Townsend, LLP, Dallas, TX, for Defendants-Appellees.
Appeals from the United States District Court for the Northern District of Texas.
Before DAVIS, SMITH and DeMOSS, Circuit Judges.
Cadles of Grassy Meadows II, L.L.C. ("Cadles"), sued David and Robert Goldner to recover on a debt. The court dismissed the suit as time-barred, holding that a Texas provision tolling the statute of limitations against out-of-state defendants violates the Commerce Clause of the United States Constitution. We affirm the dismissal.
The Goldners were partners in Equivest Properties, a Texas general partnership. In 1985 and 1988, Equivest executed promissory notes in Texas to pay about $2.7 million to Olney Savings Association. In their individual capacities, the Goldners agreed to guarantee Equivest's debt to Olney, and they listed a Texas address in the guarantees. The notes were further secured by deeds of trust that created liens on real property owned by Equivest in Texas. The notes were due on December 31, 1988, at which time a claim for recovery on the debt accrued.
By the end of 1988, the Goldners had left Texas and did not return. The full debt was not paid, and the Goldners resided in New York. In 1992, Olney, now doing business as AmWest Savings Association, sued Equivest and the Goldners in Texas state court to recover unpaid portions of the debt. In 1994, the court rendered a judgment against the defendants for the unpaid principal, interest, costs, and attorneys' fees. Equivest became defunct,1 and the state court granted the Goldners' motion to void the judgment as to themselves.2
Through a series of assignments, Cadles in 2004 acquired all interest in the debt and judgment and in 2006 sued the Goldners for unpaid amounts due. Cadles maintained that its suit to recover on the almost eighteen-year-old debt was timely, because the applicable statute of limitations3 was tolled by a Texas statute extending limitations against out-of-state defendants: "The absence from this state of a person against whom a cause of action may be maintained suspends the running of the applicable statute of limitations for the period of the person's absence." TEX. CIV. PRAC. & REM.CODE § 16.063. Judicial gloss on that statute has clarified that tolling applies to Texas residents who are not present in Texas and to nonresidents who are not present in Texas but were present there when they contracted the debt or when the cause of action accrued. See Jackson v. Speer, 974 F.2d 676, 678-79 (5th Cir.1992) (citing state cases).
Whether applied to a resident or nonresident, however, the provision tolls limitations against defendants for as long as they are not present in Texas. It is undisputed that the Goldners were present in Texas when they incurred the debt but have been absent from Texas and have not been there for an aggregate period of four years since accrual of the cause of action.
On diversity grounds, the Goldners removed the suit to federal court and moved for judgment on the pleadings, arguing that the claim is barred by limitations because the Texas tolling provision violates the dormant commerce clause. Cf. U.S. CONST., art. I, § 8, cl. 3. The State of Texas intervened to defend the statute's constitutionality. Finding the tolling statute unconstitutional, the district court deemed the suit time-barred and entered judgment for the Goldners.
We review a judgment on the pleadings de novo. Nunez v. Simms, 341 F.3d 385, 388 (5th Cir.2003). We accept the complaint's well-pleaded facts as true and view them in the light most favorable to the non-movant. Johnson v. Johnson, 385 F.3d 503, 529 (5th Cir.2004).
In Bendix Autolite Corp. v. Midwesco Enterprises, Inc., 486 U.S. 888, 108 S.Ct. 2218, 100 L.Ed.2d 896 (1988), the Court invalidated an Ohio tolling provision similar to the Texas statute at issue here. Ohio, like Texas, tolled limitations for as long as a defendant was not present in the state. The Court explained that when "a State denies ordinary legal defenses or like privileges to out-of-state persons or corporations engaged in commerce, the state law will be reviewed under the Commerce Clause to determine whether the denial is discriminatory on its face or an impermissible burden on commerce," id. at 893, 108 S.Ct. 2218, and "weigh[ed] and assess[ed] the State's putative interests against the interstate restraints to determine if the burden imposed is an unreasonable one," id. at 891, 108 S.Ct. 2218. The Court concluded that "the burden imposed on interstate commerce by the tolling statute exceeds any local interest that the State might advance." Id. Bendix compels the same conclusion here.
The dormant commerce clause analysis requires a "two-tiered approach." Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 578, 106 S.Ct. 2080, 90 L.Ed.2d 552 (1986). "When a state statute directly regulates or discriminates against interstate commerce, or when its effect is to favor in-state economic interests over out-of-state interests, [the Court has] generally struck down the statute without further inquiry." Id. at 579, 106 S.Ct. 2080. "When, however, a statute has only indirect effects on interstate commerce and regulates evenhandedly, we have examined whether the State's interest is legitimate and whether the burden on interstate commerce clearly exceeds the local benefits." Id.4 In Bendix, 486 U.S. at 891, 108 S.Ct. 2218, the Court observed that the Ohio tolling statute "might have been held to be a discrimination that invalidates without extended inquiry," i.e., at the first tier, but the Court nevertheless chose to apply the balancing test, and we do the same here.
As an initial matter, however, Cadles maintains that the Goldners were not "out-of-state persons ... engaged in commerce," id. at 893, 108 S.Ct. 2218, so the Commerce Clause does not even reach the activities in question. In the parlance of the balancing test, this argument amounts to a claim that applying the Texas tolling statute to the Goldners has no effects on interstate commerce, be they direct or indirect. We disagree.
The Texas provision deprives defendants of a limitations defense by virtue of the fact that they are out of state.5 It thus restricts one's freedom to incur business obligations in Texas and then to leave the state without detriment. That is what the Goldners did: They obtained a loan in Texas and left for New York, carrying the debt obligations with them. The transportation of persons between states falls within the ambit of the Commerce Clause, see, e.g., Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241, 253-57, 85 S.Ct. 348, 13 L.Ed.2d 258 (1964); Edwards v. California, 314 U.S. 160, 173, 62 S.Ct. 164, 86 L.Ed. 119 (1941), and though Cadles maintains that the Goldners "transported nothing from Texas to New York except themselves," Cadles overlooks that the Goldners brought their debt along with them—i.e., they effectively "transported" a commercial obligation.6 The Goldners' actions plainly affected interstate commerce and therefore implicated the Commerce Clause.
Turning to burdens and benefits, the effects of the Texas tolling statute are substantially similar to those of the Ohio statute struck down in Bendix. The Bendix Court first assessed the Ohio statute's burden on interstate commerce and observed that "[a]lthough statute of limitations defenses are not a fundamental right," a state "may not withdraw such defenses on conditions repugnant to the Commerce Clause." Bendix, 486 U.S. at 893, 108 S.Ct. 2218.
Because the Ohio statute tolled the statute of limitations while defendants were not present in Ohio, the Court held that it burdened out-of-staters. Although an out-of-state business could have established a presence in Ohio and avoided tolling by appointing a resident agent for service of process in that state, doing so would have subjected the business to the general jurisdiction of the Ohio courts. That resulted in a Hobson's choice: "The Ohio statutory scheme thus forces a foreign corporation to choose between exposure to the general jurisdiction of Ohio courts or forfeiture of the limitations defense, remaining subject to suit in Ohio in perpetuity." Id. That choice was a "significant burden" on interstate commerce. Id.
Like the Ohio statute, the Texas statute tolls limitations while a defendant is not present in Texas. The state, however, contends that its statute does not burden out-of-staters because, unlike the situation in Ohio, out-of-staters can be present in Texas without subjecting themselves to the general jurisdiction of the Texas courts. In other words, Texas maintains that it has no Hobson's choice: To avoid tolling, an out-of-state defendant need only appoint a resident agent and need not thereby be subject to the state's general jurisdiction.
The state's argument relies on the assumption that individuals such as the Goldners can establish presence in Texas for tolling purposes by appointing resident agents. The state cites two cases holding that a corporation that establishes a "registered agent for service of process" in Texas is "present" for purposes of the tolling provision.7 The Goldners, however, point out that no Texas court has applied the tolling provision to individuals who appoint resident agents, as distinguished from corporations that register resident agents with the state.8 In the cases addressing...
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