In re Master Mortg. Inv. Fund, Inc., Bankruptcy No. 92-41306-2-11

CourtUnited States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Western District of Missouri
Writing for the CourtFRANK W. KOGER
Citation151 BR 513
Decision Date09 March 1993
Docket NumberAdv. No. 92-4286-2-11.,Bankruptcy No. 92-41306-2-11

151 B.R. 513 (1993)


Bankruptcy No. 92-41306-2-11, Adv. No. 92-4286-2-11.

United States Bankruptcy Court, W.D. Missouri.

March 9, 1993.

151 BR 514
151 BR 515
Bruce E. Strauss, Richard E. McLeod, Grace L. Spezia, Kansas City, MO, for defendant

John P. Kreis, Stroock, Stroock & Lavan, Los Angeles, CA, John W. McClelland, Wirken & King, Kansas City, MO, for debtor/plaintiff.


FRANK W. KOGER, Chief Judge.

This case comes before the court on Defendant American National Fire Insurance Company's (American National) motion for partial summary judgment on Counts II, III, IV, V, VI, VII, VIII, and IX. American National argues that Counts II, III, V, VI, VII, VIII, and IX may be disposed of by applying the Texas statute of limitations to those claims, but Plaintiff Master Mortgage Investment Fund, Inc. (Master Mortgage) argues for application of the law of the state of Kansas with the result that those causes of action would not be time barred. The Court, therefore, is called upon to resolve the threshold issue of whether Master Mortgage's adversary action is time barred.


Master Mortgage made a loan to Hotel Management Corporation of Texas to acquire a hotel property in Euless, Texas. American National issued a policy of insurance to insure the hotel property against various hazards including windstorm and hail damage. Master Mortgage was named as the loss payee on that policy. In May of 1989, a windstorm severely damaged the hotel roof. In June of that year, American National settled the roof damage claim with the hotel owner only; Master Mortgage was not informed of the damage or of the claim settlement in contravention of the loss payee clause in the insurance policy. The hotel owner had the roof damage repaired, but, as the alleged result of alleged inadequacies in the repair job, the roof subsequently leaked and caused severe damage to the interior of the hotel building. Eventually, the hotel owner defaulted on its debt to Master Mortgage, and in February of 1990 Master Mortgage foreclosed on the debt and purchased the property at the foreclosure sale. Because of the extensive water damage to the property, Master Mortgage ceased operation of the hotel in March of 1990.

151 BR 516

Master Mortgage originally filed suit against American National on October 3, 1990, in the District Court of Dallas County Texas. Master Mortgage filed its voluntary Chapter 11 petition on April 17, 1992. On August 31, 1992, Master Mortgage voluntarily dismissed the Texas action and, on the same date, filed the instant suit, alleging substantially the same causes of action, in the bankruptcy court.


Summary judgment is proper whenever there is no factual dispute and the case may be decided as a matter of law only. Fed.R.Civ.P. 56(c); Bankr.R. 7056. The evidence must be viewed in the light most favorable to the party opposing the summary judgment motion, Master Mortgage in this case. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970); Froholm v. Cox, 934 F.2d 959, 961 (8th Cir.1991).

Statute of Limitations

The issue that is most prominently raised in this summary judgment motion is whether or not Master Mortgage's causes of action are time barred by the Texas statute of limitations. Missouri considers general statutes of limitation to be procedural law rather than substantive. See Wentz v. Price Candy Co., 352 Mo. 1, 175 S.W.2d 852, 853 (1943); State ex rel. Research Medical Center v. Peters, 631 S.W.2d 938, 946 (Mo.Ct.App.1982). Missouri courts as well as federal courts sitting in Missouri apply Missouri statutes of limitation to cases being heard in Missouri even though another state's substantive law may be applied to decide the merits of the controversy. Sun Oil Co. v. Wortman, 486 U.S. 717, 722, 108 S.Ct. 2117, 2121, 100 L.Ed.2d 743 (1988) ("This Court has long and repeatedly held that the Constitution does not bar application of the forum State's statute of limitations to claims that in their substance are and must be governed by the law of a different State.") The Court will, therefore, apply the Missouri statute of limitation to determine whether or not Plaintiff's causes of action are time barred.

The Missouri statutes of limitation include a borrowing statute which provides that "Whenever a cause of action has been fully barred by the laws of the state, territory or country in which it originated, said bar shall be a complete defense to any action thereon, brought in any of the courts of this state." Mo.Rev.Stat. § 516.190 (1986) (emphasis added). Our task, then, is to determine where Master Mortgage's alleged causes of action originated. The answer to that question will tell us whether or not the causes of action are time barred in that jurisdiction, and are thus time barred under Missouri's borrowing statute.

The determination of where a cause of action accrued is not a conflict of laws question because the essence of a conflict of laws problem is determining whether the interests of other jurisdictions are strong enough to cause the forum state to displace the use of its own law in favor of the law of another jurisdiction. It is, rather, a question of interpreting the meaning and application of § 516.190, Missouri's borrowing statute. By enacting § 516.190, the Missouri Legislature has effectively precluded application of choice of law principles to the statute of limitations issue. Thompson v. Crawford, 833 S.W.2d 868, 872 (Mo.1992) (en banc); Brown v. Westinghouse Electric Corp., 803 S.W.2d 610, 613 (Mo.Ct.App.1990).

A cause of action originates for the purposes of § 516.190 at the place where plaintiff's alleged damages stemming from the pleaded cause of action are sustained and capable of ascertainment. See Thompson v. Crawford, 833 S.W.2d 868, 871 (Mo.1992) (en banc); Dorris v. McClanahan, 725 S.W.2d 870, 871 (Mo. 1987) (en banc) overruled on other grounds by Thompson v. Crawford, 833 S.W.2d 868 (Mo.1992). In tort cases, it is clear that it is irrelevant where the act causing the injury occurred. What is important is the place that the injury became manifest. In Renfroe v. Eli Lilly & Co., 686 F.2d 642, 646 (8th Cir.1982), the plaintiffs were exposed to DES in Missouri. Years later, one plaintiff was diagnosed with cancer in California and the other was

151 BR 517
diagnosed with cancer in Ohio. The court applied the California and Ohio statutes of limitation because plaintiff's alleged injuries did not become manifest until their cancers were diagnosed in those states. In Wayne v. Lederle Laboratories (In re Tetracycline Cases), 729 F.Supp. 662, 665 (W.D.Mo.1989), the Kansas statute of limitation was applied by way of Missouri's borrowing statute even though tetracycline was prescribed in Missouri, it was purchased in Missouri, it was ingested in Missouri, and the causal connection between the drug ingestion and resulting injury was diagnosed in Missouri. The critical factor was that plaintiff was a Kansas resident and located in Kansas when she first discovered the injury itself

The essence of Master Mortgage's claim is that American National failed to honor its promise to pay Master Mortgage as the loss payee on the insurance policy. The Court has been unable to locate Missouri cases dealing precisely with where such a cause of action accrues when such injury arises from the failure to perform a promise to pay, but other jurisdictions have addressed such an issue and have found that the injury is inflicted and, therefore, the cause of action accrues at the place where payment was to be made. In Stanbury v. Larsen, 803 P.2d 349, 353 (Wyo. 1990), the Wyoming Supreme Court found that a cause of action on a promissory note executed in California and payable in Wyoming accrued in Wyoming. In Bank of Boston International v. Arguello Tefel, 626 F.Supp. 314, 317 (E.D.N.Y.1986), the federal district court sitting in New York applied the New York borrowing statute to determine that the Massachusetts statute of limitations must be applied where payment on a promissory note executed by a Nicaraguan defendant was payable at Boston. In Baker v. First National Bank, 603 P.2d 397, 398 (Wyo.1979), where the mortgaged property and the mortgagor are located in Wyoming and mortgagee is located in Colorado, the Wyoming Supreme Court found that a cause of action arising from failure to pay the mortgage note accrued in Colorado for purposes of the Wyoming borrowing statute. In Aviation Credit Corp. v. Batchelor, 190 So.2d 8, 11 (Fla.Dist.Ct.App.1966), a Florida court found that a cause of action on a promissory note accrued in Florida where the payor resided out of state but payment was to be made in Florida.

The Court finds that Master Mortgage's alleged injury was sustained and capable of ascertainment in the state of Kansas due to American National's alleged failure to make payment to Master Mortgage as provided for in the loss payee clause at Master Mortgage's place of business in Kansas. Since the cause of action accrued in the state of Kansas, the Missouri borrowing statute directs the Court to the Kansas statute of limitations to determine whether or not Master Mortgage's action is time-barred.

The alleged improper payment was made to the property owner on June 23, 1989. Master Mortgage's original lawsuit was filed on October 3, 1990, in Texas and so was filed less than two years after the earliest possible date that the cause of action could have accrued. Master Mortgage has characterized all of the actions which are the subject of this summary judgment motion as tort actions. Since Kansas prescribes a two year...

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