Boller v. Western Law Associates, P.C., 90-84

• Decision Date: 03 April 1992
• Docket Number: No. 90-84,90-84
• Citation: 828 P.2d 1184
• Parties: Lewis BOLLER and Alice Nicholas, Appellants (Third-Party Plaintiffs), v. WESTERN LAW ASSOCIATES, P.C., John T. Pappas, L.M. Chipley, H. Cody Runyan, and Gregg A. Parish, Appellees (Cross-Defendants and Third Party Defendants). v. John L. VIDAKOVICH, Appellee (Defendant).
• Court: Wyoming Supreme Court

Page 1184

828 P.2d 1184

Lewis BOLLER and Alice Nicholas, Appellants (Third-Party Plaintiffs), v. WESTERN LAW ASSOCIATES, P.C., John T. Pappas, L.M. Chipley, H. Cody Runyan, and Gregg A. Parish, Appellees (Cross-Defendants and Third Party Defendants). v. John L. VIDAKOVICH, Appellee (Defendant).

No. 90-84.

Supreme Court of Wyoming.

April 3, 1992.

Rehearing Denied April 28, 1992.

J. Kenneth Barbe of Brown & Drew, Casper, for appellees L.M. Chipley and Gregg A. Parish.

Patrick J. Murphy of Williams, Porter, Day & Neville, Casper, for appellees Western Law Associates and John T. Pappas.

Gerald R. Mason of Gerald R. Mason, P.C., Pinedale, for appellee H. Cody Runyan.

Before THOMAS, CARDINE and MACY, JJ., and RAPER and ROONEY, JJ. (Retired).

ROONEY, Justice, Retired.

This appeal is from an order granting appellees' W.R.C.P. 12(b)(6) motion ¹ to dismiss appellants' third-party complaints for failure to state a claim upon which relief could be granted. The claims contained in the original and amended complaints against appellants have been settled and are not involved in this appeal.

We affirm.

Although the appeal is predicated on issues relative to presentation of elements of negligence in the third-party complaints sufficient to withstand the motion to dismiss, we need not address such issues since we agree with appellee Runyan's contention that appellants' third-party claims are barred by the statute of limitations.

Appellants were two of the directors of the Yellowstone State Bank. The Bank was closed November 1, 1985, and the Federal Deposit Insurance Corporation was appointed receiver of the bank for the purpose of liquidating its assets. In the process of doing so, it filed suit against the directors of the bank alleging that the failure of the bank was caused by specified actions and inactions of the directors contrary to their duties with reference to approving loan transactions.

Appellants responded in separate third-party complaints against appellees that, among other things, their actions or inactions were a result of negligence on the part of appellees consisting of appellees' failure to furnish proper legal advice and guidance to appellants.

Wyo. Stat. § 1-3-107 (1988) provides in pertinent part:

"(a) A cause of action arising from an act, error or omission in the rendering of licensed or certified professional or health care services shall be brought within the greater of the following times:

"(i) Within two (2) years of the date of the alleged act, error or omission, except that a cause of action may be instituted not more than two (2) years after discovery of the alleged act, error or omission, if the claimant can establish that the alleged act, error or omission was:

"(A) Not reasonably discoverable within a two (2) year period; or

"(B) That the claimant failed to discover the alleged act, error or omission within the two (2) year period despite the exercise of due diligence."

Appellee Runyan appropriately argues:

"The First Amended Complaint reveals that the 20 specific loans upon which losses were taken and which in turn resulted in the cause of action against appellants occurred between February 28, 1983 and August 21, 1985. It stands to reason, then, that any act, error or omission which caused the making of one of those loans would have occurred before August 21, 1985. Two years from that date would have been August 21, 1987. Another date that the Court might consider, which date is undisputed, is that the bank was closed on November 1, 1985, two years from that date, of course, being November 1, 1987. The Third Party Complaints were filed on August 14, 1989. Without any questions or even dispute, more than two years elapsed after any alleged act, error or omission which generated any of those loan losses."

In their third-party complaints, appellants recite that they "recently discovered the negligent conduct," subject of the claim against appellees, and they now contend that the exceptions contained in Wyo.Stat. § 1-3-107 prevent the running of the statute of limitations. The fact of "discovery" is not determinative for this purpose. The question is whether or not the acts, errors or omissions constituting negligence by appellants were "reasonably discoverable within a two (2) year period" and whether or not "due diligence" was exercised by appellants to discover the acts, errors or omissions within the two year period.

"Wyoming is a 'discovery' state, which means that the statute of limitations is not triggered until the plaintiff knows or has reason to know the existence of the cause of action." Mills v. Garlow, 768 P.2d 554, 555 (Wyo.1989) (emphasis added).

When the bank was closed on November 1, 1985, "due diligence" on the part of appellants would certainly require a determination as to the reason for the closure, and if appellees' negligence was a contributing reason for the closure, as appellants now contend, the claim against appellees would mature at that time. If the closure was a result of appellees' negligence, as now contended by appellants, such was definitely "reasonably discoverable" at the time of the closure or within a few months thereafter. Appellants had reason to know of the existence of their potential claim for relief against appellees when the bank was closed.

Appellants also argue that the statute of limitations issue should not be considered on appeal inasmuch as it was not presented to the district court. We consider this argument together with a procedural issue (not argued by appellants) relative to whether or not a statute of limitations defense can be considered under a W.R.C.P. 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted.

W.R.C.P. 8 provides in pertinent part:

"(c) Affirmative defenses.--In pleading to a preceding pleading, a party shall set forth affirmatively * * * statute of limitations * * *."

However, we have long held that if the defense appears on the face of the complaint, the complaint is subject to a demurrer. Bonnifield v. Price, 1 Wyo. 172 (1874); Cowhick v. Shingle, 5 Wyo. 87, 37 P. 689 (1894); Columbia Savings & Loan Ass'n v. Clause, 13 Wyo. 166, 78 P. 708 (1904); Union Stockyards National Bank of South Omaha, Neb. v. Maika, 16 Wyo. 141, 92 P. 619 (1907); Horse Creek Conservation District v. Lincoln Land Company, 54 Wyo. 320, 92 P.2d 572 (1939). See also Upton v. McLaughlin, 105 U.S. 640, 26 L.Ed. 1197 (1881). The obvious reason for so holding is that a complaint which, on its face, is out of time cannot logically state a claim for which relief would be proper.

The same reason exists when the complaint is challenged by the demurrer's successor, a motion to dismiss for failure to state a claim upon which relief can be granted, i.e., by a W.R.C.P. 12(b)(6) motion.

"In a number of jurisdictions where motion practice has been adopted and a motion to dismiss the complaint takes the place of a demurrer raising the issue of no cause of action, the courts have adopted the rule that if on the facts stated in the complaint, the action would be barred by limitations, the complaint may be dismissed on motion. It has also been held that the total effect of the various provisions of the Federal Rules of Civil Procedure, and similar state rules of practice, is to permit the defense of limitations to be raised by a motion to dismiss, where it appears from the complaint that the action is barred."

51 AM.JUR.2 D Limitation of Actions § 468 (1970).

The answers, counterclaims, cross claims and initial third-party claims separately filed by appellant Boller and appellant Nicholas reflect on their faces that the third-party claims are barred by the two-year statute of limitations. They recite the closure of the bank on November 1, 1985. They were not filed until August 19, 1989.

The cross claims list several instances in which appellees are alleged to have negligently furnished, or failed to furnish legal advice and guidance to appellants. The failure of the bank gave appellants "reason to know" that the alleged negligence existed at that time with reference to those instances, ² thereby precluding application of the exceptions contained in Wyo.Stat. § 1-3-107. Since the face of the third-party complaints reflected the closure of the bank, which gave reason for appellants to inquire into and know of the existence of the alleged instances of negligence and which alleged negligence could have been discovered shortly thereafter through the exercise of due diligence, the claims in such third-party complaints are barred by the two-year statute of limitations.

In this case, there is an additional practical reason for applying the statute of limitations under a W.R.C.P. 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted, and for addressing the issue on appeal although it was not presented to the district court.

In this appeal, appellants contend: (1) that their pleadings set forth a claim sufficient to withstand a motion to dismiss, and (2) in any event, they should have been afforded an opportunity to amend their pleadings. In either case, appellees would have to file an answer. The answer would then affirmatively set forth the statute of limitations defense. In all likelihood, the resulting district court's ruling in favor of appellees would be appealed to this court. Judicial economy dictates addressing the statute of limitations issue at this time rather than after the removal and second appeal. This is not to say that we would agree or disagree with either party on the other issues presented in this appeal.

Finally, we recognize that the statute of limitations is applicable only when affirmative relief is sought. In this case, the application of the statute is to third-party claims. Thus, it is necessary to determine the objective of such claims.

"The purpose of limitation provisions is to bar actions and not suppress or deny matters of defense,...