Alexander v. Flake

• Decision Date: 30 October 1995
• Docket Number: No. 95-5,95-5
• Citation: 910 S.W.2d 190,322 Ark. 239
• Parties: William V. ALEXANDER, Jr., Appellant, v. John FLAKE, Appellee.
• Court: Arkansas Supreme Court

Page 190

910 S.W.2d 190

322 Ark. 239

William V. ALEXANDER, Jr., Appellant, v. John FLAKE, Appellee.

No. 95-5.

Supreme Court of Arkansas.

Oct. 30, 1995.

Randel Miller, Jonesboro, for appellant.

Isaac A. Scott, Jr., David M. Powell, Stephen R. Lancaster, Little Rock, for appellee.

DUDLEY, Justice.

Plaintiff William V. Alexander, Jr. filed this suit on June 11, 1993, alleging that defendant John Flake committed fraud, breach of fiduciary duty, and fraudulent concealment in the development of a real estate project in Boulder, Colorado. Defendant Flake later moved for summary judgment. The primary issue was whether the three-year statute of limitations had run by the time suit was filed. The trial court ruled that the suit was barred. Plaintiff appeals. We affirm the ruling of the trial court.

Summary judgment is a remedy that should only be granted when there are no genuine issues of material fact and when the case can be decided as a matter of law. Hampton v. Taylor, 318 Ark. 771, 776, 887 S.W.2d 535, 538 (1994). Our review is limited to examining the evidentiary items presented below and determining whether the trial court correctly ruled that those items left no material facts disputed. Id. at 777, 887 S.W.2d at 539. The facts must be viewed in the light most favorable to the party against whom the motion was filed, and all doubts and inferences are resolved against the moving party. Id.

A defense of limitation is an affirmative defense. When it is clear on the face of the complaint that the action is barred, the burden shifts to the plaintiff to prove by a preponderance of the evidence that the statute of limitations was tolled. First Pyramid Life Ins. Co. v. Stoltz, 311 Ark. 313, 843 S.W.2d 842, cert. denied, 510 U.S. 908, 114 S.Ct. 290, 126 L.Ed.2d 239 (1992).

Although the question of fraudulent concealment is normally a question of fact that is not suited for summary judgment, when the evidence leaves no room for a reasonable difference of opinion, a trial court may resolve fact issues as a matter of law. Miles v. A.O. Smith Harvestore Prods., Inc., 992 F.2d 813, 817 (8th Cir.1993). The statute of limitations for fraud and breach of fiduciary duty actions is three years. Ark.Code Ann. § 16-56-105 (1987); Hampton v. Taylor, 318 Ark. 771, 887 S.W.2d 535 (1994); Smith v. Elder, 312 Ark. 384, 849 S.W.2d 513 (1993). Plaintiff Alexander filed this lawsuit on June 11, 1993. Consequently, for the complaint to have been timely filed, plaintiff must neither have known, nor been able to discover through reasonable diligence, the alleged fraud before June 11, 1990.

I. Statute of Limitations

The parties filed extensive affidavits, exhibits, depositions, and briefs in the trial court. A review of those documents reveals the following facts.

A. Undisputed Facts

Plaintiff Alexander is an attorney licensed to practice before the Bars of Arkansas, Tennessee, and the District of Columbia. After graduating from Vanderbilt Law School, he served as a law clerk for a federal district judge. He then practiced law for seven years. He was a member of Congress for twenty-four years. He has the capacity to understand legal documents.

In November 1984, plaintiff and five other men, including defendant Flake, signed a general partnership agreement to form Boulder Properties I. The purpose of the partnership was to develop a condominium complex in Boulder, Colorado. Under the terms of the partnership agreement, plaintiff Alexander had a profit or loss percentage of 16.667%. The partnership financed the project through Twin City Bank of North Little Rock by executing a promissory note in the amount of $5,150,000. The partners executed this "first" guaranty agreement under which the partners were jointly and severally liable for full payment of the note. Thus, in 1984, plaintiff Alexander, along with each of the others, was jointly and severally liable for the five-million dollar debt.

The real estate market in Boulder deteriorated, and the condominium units did not sell as the partners had anticipated. In April 1987, the partnership executed another guaranty agreement, the "continuing" guaranty agreement, under which each of the partners reduced his liability to 125% of his pro rata share of the partnership. Under the continuing guaranty, plaintiff and defendant each guaranteed 20.83% of the amount of the note. At the same time, the principal amount of the note was reduced to $3,500,000. Thus, under the "continuing" guaranty, the amount of plaintiff's joint and several liability was reduced.

David McCreery, the managing general partner, sent memoranda to each partner, before and after the execution of the continuing guaranty, outlining the financial problems of the project, initially expressing belief that the project ultimately would be successful; informing the partners of their share of marketing expenses due; informing the partners that they must seek financing for their personal amount of the debt; informing the partners that it would be necessary for them to make monthly payments on the current interest due to the Twin City Bank; discussing the continuing guaranty; discussing the shortfall of the property; and discussing the possibility of the partners providing individual letters of credit for their pro rata share of the shortfall.

As early as January 1987, the memoranda expressed concern over the success of the project. In March 1987, one of McCreery's memoranda stated, "I can't tell you how I regret that this development did not turn out the way we all had intended for it to, but markets change and we got involved in a market that deteriorated about the time that we started construction." In September 1987, McCreery's memorandum to the partners stated that he calculated the shortfall on the loan to be $600,000, but that Twin City Bank was requesting a letter of credit in the amount of $1,150,000. The memorandum stated that each partner's decision to provide a letter of credit or other collateral for his pro rata share was his personal decision. This memorandum also referred to the fact that the loan was on the bank examiners' list of criticized loans.

Plaintiff Alexander wrote a letter to Twin City Bank in November 1987, in which he proposed collateral in Mississippi County for his 16.6% interest in the Boulder property. This was more than four years before suit was commenced. Plaintiff also made numerous payments to the partnership for monthly interest assessments in accordance with the memoranda. Plaintiff obtained a loan of $259,250 from Twin City Bank in May 1988, to cover his part of costs associated with Boulder Properties.

In 1990, the development sold for a loss. Plaintiff failed to satisfy his obligations to Twin City Bank, and the bank filed a foreclosure suit against plaintiff in Mississippi County, the venue of the collateral.

B. Plaintiff's Allegations of Fact

Plaintiff's affidavits and other evidentiary matters, which we must accept as true in reviewing the grant of summary judgment, reflect the following. In the early 1980's, defendant Flake and Congressman Alexander became friends through their mutual interest in politics. Defendant would call plaintiff frequently to discuss state political issues as well as matters pending in Congress. Plaintiff believed defendant was a concerned citizen with a genuine interest in public policy.

In their conversations, plaintiff told defendant that he had very limited funds for investment and had little time to spend on looking after his investments. Defendant stated that plaintiff could join in some of his investments, and together they made several investments. Defendant brought plaintiff into five different business ventures and told him of the transactions only after the fact. The first of these investments included use of a non-recourse promissory note. Defendant knew that plaintiff did not know the details of the ventures and did not have the time or inclination to learn about them. Defendant always reported to plaintiff that the various ventures were going well.

In 1984, defendant entered plaintiff in the Boulder I partnership. Defendant knew that plaintiff would not review the various documents before signing them and that it was defendant's responsibility to review the documents. Once defendant sent the documents to plaintiff, plaintiff considered the documents to have defendant's stamp of approval, and he routinely signed and returned them to defendant without reading them. At times, defendant sent only the signature page of documents. In numerous phone calls extending through 1991, defendant continued to discuss the Boulder project in glowing terms.

In 1987, defendant told plaintiff that he would send him a document for his signature. Defendant stated that the document was merely a formality that the bank needed. The document was the continuing guaranty which reduced both plaintiff and defendant's liability to 20.83% of the loan. Plaintiff contends that had he realized that the continuing guaranty reduced defendant Flake's liability he would not have signed it.

Plaintiff learned from the memoranda that the project needed more money, but he still believed, because of the representations of defendant, that he had no exposure or liability to the bank. Defendant later requested that plaintiff sign a note, and he did so only after defendant assured him that the note was just something needed for the bank's records. At that point, plaintiff continued to believe the project was profitable and that he had no personal liability.

In support of his contention that a fiduciary relationship existed, plaintiff averred that, in 1984, following the closing of a transaction on property unrelated to the partnership, defendant purchased a certificate of deposit as plaintiff's trustee. When the certificate of deposit matured, the funds were sent to plaintiff. Further, in 1990, defendant contacted a certified public accountant to discuss the manner of...