U.S. v. Rollinson

• Decision Date: 03 February 1989
• Docket Number: Nos. 86-5173,86-5174,s. 86-5173
• Citation: 866 F.2d 1463,275 U.S.App.D.C. 345
• Parties: UNITED STATES of America v. Mark ROLLINSON, et al., Edmund S. Barnett, Appellant. UNITED STATES of America v. Mark ROLLINSON, et al., Appellant, Edmund S. Barnett, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1463

866 F.2d 1463

275 U.S.App.D.C. 345

UNITED STATES of America v. Mark ROLLINSON, et al., Edmund S. Barnett, Appellant.

UNITED STATES of America v. Mark ROLLINSON, et al., Appellant, Edmund S. Barnett, et al.

Nos. 86-5173, 86-5174.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 20, 1988.

Decided Feb. 3, 1989.

Appeal from the United States District Court for the District of columbia.

Clark S. Kall, Alexandria, Va., for appellants in 86-5173 and 86-5174.

Paul J. Pantano, Jr., John R. Burns and Brian D. Alprin, Washington, D.C., were on the brief for appellant in 86-5173.

Claire M. Whitaker, Asst. U.S. Atty., with whom Jay B. Stephens, U.S. Atty., John D. Bates, R. Craig Lawrence and Michael J. Ryan, Asst. U.S. Attys., were on the brief, for appellee. Mary Coster Williams, Asst. U.S. Atty., Washington, D.C., also entered an appearance, for appellee.

Before WALD, Chief Judge, MIKVA and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge SENTELLE.

SENTELLE, Circuit Judge:

Defendants, Edmund S. Barnett, Sr., and Mark Rollinson, appeal from the District Court's grant of summary judgment in favor of the United States for the unpaid principal and interest due and payable on a Small Business Administration ("SBA") loan secured by loan guarantees they executed. United States v. Rollinson, 629 F.Supp. 581 (D.D.C.1986). In granting the government's motion, the Court rejected appellants' arguments that the claim was time-barred and that certain deferrals and alleged modifications of the original contract released them as guarantors. Id. at 583-86. Appellants renew these contentions before this Court and additionally argue that the District Court erroneously granted summary judgment, as there were outstanding issues of material fact. We disagree and affirm, although for reasons assigned as an alternative theory by the District Court.

I. BACKGROUND

On October 16, 1973, Sounds Reasonable, Inc. ("SRI" or "the Company"), a now defunct District of Columbia corporation which owned and operated a recording studio, produced music, and performed other creative audio services, entered into a loan agreement with the District of Columbia National Bank of Washington ("Bank"). The loan of $120,000 at eleven percent annual interest was secured in part by a promissory note payable, both principal and interest, in monthly installments of $2,055 until the date of maturity, October 16, 1980. SBA guaranteed ninety percent of the loan pursuant to a Loan Guarantee Agreement it had entered into with the Bank that year. In order to induce the Bank loan and the SBA guarantee, the appellants and three other individuals personally guaranteed the loan's repayment. ¹

Contrary to the expectations of all involved, SRI was unable to meet its obligations. According to appellant Rollinson's affidavit, SRI was in arrears "within a few months after the loan was made." Joint Appendix ("J.A.") D7. Bank records reflect delinquencies in repayment as early as September, 1974. J.A. C151. By November 11, 1974, SBA had been made aware that "[t]he company is in bad financial shape and according to the bank, the future looks bleak." J.A. E39. By its terms, SBA's Loan Guaranty Agreement required SBA approval of any "alteration in the terms" of the loan. J.A. G61. And, pursuant to the Bank's request, on November 12, 1974, SBA approved the first of at least five deferrals of principal payments granted SRI. J.A. E40.

Over the next three years, SRI's financial woes continued. On April 1, 1977, after a series of deferrals and missed payments, the Bank alerted SRI and the loan's guarantors to the Company's renewed delinquencies and expressed its intent to demand payment in full under the acceleration clauses of the note and guaranty agreements unless certain corrective steps were taken. J.A. C165-67. When the measures were not forthcoming, the Bank made a similar demand on December 22 of the same year. Because of SRI's continuing failure to meet its obligations as they came due, on March 30, 1978, the Bank made demand on SBA for payment of the guaranteed portion of the loan. The note was assigned to SBA on April 11, 1978. J.A. C175.

Although it appears that SRI had not made a single payment since September, 1977, it and SBA entered into a modification agreement on February 5, 1979, whereby SRI's past installments were deferred, the maturity date of the note was extended by nine years (to October 16, 1989), and the monthly installments were reduced by approximately one-third (to $1,364 per month). J.A. E51. SRI made its only payment under the new arrangement in March, 1979; consequently, on October 25, 1979, SBA made demand upon the note's guarantors for $99,100 in principal and $18,844 in interest. J.A. A17-20. The demand was not honored, and on November 6, 1984, SBA filed this action.

II. DISCUSSION

According to appellants, the District Court erred in granting the government's motion for summary judgment because "[a] viable issue of fact [exists] as to when the limitations period began." Brief for Appellant Barnett at 16.

Summary judgment is appropriate under Federal Rule of Civil Procedure 56(c) on demonstration "that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." It is the moving party who bears the onus of establishing his entitlement to summary judgment, and it takes but little evidence to create an issue for trial. See Kozup v. Georgetown University, 851 F.2d 437 (D.C.Cir.1988); Abraham v. Graphic Arts Int'l Union, 660 F.2d 811 (D.C.Cir.1981). It is axiomatic that "the substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

The substantive law at issue here, the statute of limitation of actions brought by the United States and founded upon a contract, 28 U.S.C. Sec. 2415(a) (Supp. IV 1986), requires that the action be "filed within six years after the right of action accrues ... Provided, That in the event of later partial payment of written acknowledgment of debt, the right of action shall be deemed to accrue again at the time of each such payment or acknowledgement[.]" There is no contention that Sec. 2415(a) does not apply; rather, the controversy concerns the import of its terms. When did SBA's right of action accrue?

The parties challenge the District Court's choice of the triggering mechanism for the running of the statute, which, according to the Court, was the date " 'when the claim first could be sued upon, rather than within six years of when the [g]overnment acquired the claim.' " 629 F.Supp. at 583 (quoting United States v. Cardinal, 452 F.Supp. 542, 545 (D.Vt.1978)). In deciding when "the claim first could be sued upon," the District Court relied heavily on the fact that the guaranties at issue provide that the " '[h]older is authorized to declare all or any part of the indebtedness immediately due and payable upon the happening of any of the following events: (1) Failure to pay any part of the indebtedness when due.' " Id. at 584. The Court noted that this language vests authority in the holder to determine when the debtor was in default. Id. Relying primarily on authority from outside this Circuit, the Court reasoned that because "the right to accelerate the installment payments was at the option of the holder, the cause of action was not perfected until a demand was made." Id. Thus, it accepted the government's argument that because SBA made demand on October 25, 1979, its right of action accrued on that date, and because suit was brought within six years (on November 6, 1984), the action was timely filed. Id.

Appellant Rollinson contends that the Court erred in failing to recognize that the claim could have been pursued much sooner than it was, as "SRI was in default practically from the start back in 1973." Brief for Appellant Rollinson at 23. Appellants rely on authority from this Court that when demand is necessary to commence the running of the statute of limitations, "a party is not at liberty to stave off operation of the statute inordinately by failing to make demand; when statutorily unstipulated, the time for demand is ordinarily a reasonable time." Nyhus v. Travel Management Corp., 466 F.2d 440, 452-53 (D.C.Cir.1972) (footnote omitted). Thus, appellants argue, because SRI was in arrears, and because their understanding was that the note would be declared in default at the first sign of trouble, the Bank "waited unreasonably too long" in making its demand. Brief for Appellant Rollinson at 23. At the very least, they contend, a triable issue exists as to the reasonableness of the holders' delay.

The District Court recognized that Nyhus presents a holder of a note from delaying unreasonably in making its demand, but contrary to appellants' contentions, the Court found that any delay by the Bank and SBA could "hardly be characterized as unreasonable," 629 F.Supp. at 584 n. 2, concluding that it would be "simply unreasonable to expect the SBA to call in loans at the first sign of trouble." Id. at 585. Moreover, "[e]ven if the SBA's failure to make demand for six months following [the April 16, 1979] default was unreasonable, the Court would still be compelled to conclude that the agency's right of action accrued on or about April 16, 1979," the date of SRI's first missed payment under the modified repayment schedule. Id. at 584 n. 2. For the reasons we discuss below, it appears that April 16, 1979, would be the earliest date the statute could have begun to run.

Appellant Barnett alternatively contends that the cause of action accrued "when the government suffer[ed] its loss," that is, when SBA reimbursed the Bank for its loss on April 11, 1978. Reply Brief for Appellant Barnett at 2. Substantial authority can be found for this position. In United States (SBA) v. Corsino, 648 F.Supp. 454 (D.P.R.1986),...