Mountaineer Fire & Rescue Equipment, LLC v. City National Bank of West Virginia, 112020 WVSC, 18-0984

Docket Nº:18-0984
Opinion Judge:HUTCHISON, JUSTICE
Party Name:MOUNTAINEER FIRE & RESCUE EQUIPMENT, LLC, BRIAN CAVENDER, and WALTER CAVENDER, Petitioners v. CITY NATIONAL BANK OF WEST VIRGINIA, and JOE BEAM, Respondents
Attorney:Michael D. Weikle, Esq. Tiffin, Ohio Counsel for Petitioners Ancil G. Ramey, Esq. Steptoe & Johnson PLLC Huntington, West Virginia Counsel for Respondent City National Bank of West Virginia Miles B. Berger, Esq. Romano & Associates, PLLC Charleston, West Virginia Counsel for Respondent Joe Beam
Judge Panel:CHIEF JUSTICE ARMSTEAD concurs JUSTICE JENKINS concurs,
Case Date:November 20, 2020
Court:Supreme Court of Appeals of West Virginia

MOUNTAINEER FIRE & RESCUE EQUIPMENT, LLC, BRIAN CAVENDER, and WALTER CAVENDER, Petitioners

v.

CITY NATIONAL BANK OF WEST VIRGINIA, and JOE BEAM, Respondents

No. 18-0984

Supreme Court of Appeals of West Virginia

November 20, 2020

Submitted: September 15, 2020

Appeal from the Circuit Court of Kanawha County The Honorable Charles E. King, Judge Civil Action No. 18-C-17

Michael D. Weikle, Esq. 1 Tiffin, Ohio Counsel for Petitioners

Ancil G. Ramey, Esq. Steptoe & Johnson PLLC Huntington, West Virginia Counsel for Respondent City National Bank of West Virginia

Miles B. Berger, Esq. Romano & Associates, PLLC Charleston, West Virginia Counsel for Respondent Joe Beam

CHIEF JUSTICE ARMSTEAD concurs, in part, and dissents, in part, and reserves the right to file a separate opinion.

JUSTICE JENKINS concurs, in part, and dissents, in part, and reserves the right to file a separate opinion.

SYLLABUS BY THE COURT

1. "Appellate review of a circuit court's order granting a motion to dismiss a complaint is de novo." Syllabus Point 2, State ex rel. McGraw v. Scott Runyan Pontiac-Buick, Inc., 194 W.Va. 770, 461 S.E.2d 516 (1995).

2. "The trial court, in appraising the sufficiency of a complaint on a Rule 12(b)(6) motion, should not dismiss the complaint unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)." Syllabus Point 3, Chapman v. Kane Transfer Co., 160 W.Va. 530, 236 S.E.2d 207 (1977).

3. "An interpretation of the West Virginia Rules of Civil Procedure presents a question of law subject to a de novo review." Syllabus Point 4, Keesecker v. Bird, 200 W.Va. 667, 490 S.E.2d 754 (1997).

4. "Only matters contained in the pleading can be considered on a motion to dismiss under Rule 12(b) R.C.P., and if matters outside the pleading are presented to the court and are not excluded by it, the motion should be treated as one for summary judgment and disposed of under Rule 56 R.C.P. if there is no genuine issue as to any material fact in connection therewith." Syllabus Point 4, in part, U.S. Fid. & Guar. Co. v. Eades, 150 W.Va. 238, 144 S.E.2d 703 (1965) (overruled on other grounds by Sprouse v. Clay Commc'n, Inc., 158 W.Va. 427, 211 S.E.2d 674 (1975)).

5. "A circuit court ruling on a motion to dismiss under Rule 12(b)(6) of the West Virginia Rules of Civil Procedure may properly consider exhibits attached to the complaint without converting the motion to a Rule 56 motion for summary judgment." Syllabus Point 1, Forshey v. Jackson, 222 W.Va. 743, 671 S.E.2d 748 (2008).

6. When a movant makes a motion to dismiss a pleading pursuant to Rule 12(b)(6) of the West Virginia Rules of Civil Procedure, and attaches to the motion a document that is outside of the pleading, a court may consider the document only if (1) the pleading implicitly or explicitly refers to the document; (2) the document is integral to the pleading's allegations; and (3) no party questions the authenticity of the document. If a document does not meet these requirements, the circuit court must either expressly disregard the document or treat the motion as one for summary judgment as required by Rule 12(b)(7).

7. A circuit court's decision whether or not to review a document outside of the pleadings, which is attached to a motion to dismiss pursuant to Rule 12(b)(6) of the West Virginia Rules of Civil Procedure, will be reviewed for an abuse of discretion.

OPINION

HUTCHISON, JUSTICE

In this appeal from the Circuit Court of Kanawha County, we examine orders dismissing various counterclaims and crossclaims from this action. The parties' arguments about the dismissal orders seemingly implicate the complicated interplay between the duties of banks toward their customers, the Uniform Commercial Code, and the statutory fiduciary duties of the members of limited liability companies.

At its heart, however, this appeal focuses on a narrow issue: the interpretation and application of Rule 12(b)(6) of the West Virginia Rules of Civil Procedure. That rule, although brief in length, can be devastating in application because it permits a trial court to dismiss a pleading that, beyond doubt, has "fail[ed] to state a claim upon which relief can be granted." The petitioners in this appeal argue that the circuit court improperly granted motions, pursuant to Rule 12(b)(6), to dismiss all claims they asserted against both of the respondents. In part, the petitioners assert that the circuit court improperly considered exhibits outside the pleadings that one respondent attached to its motion to dismiss.

As we set forth below, we find that the petitioners sufficiently asserted claims against both respondents, and that the respondents failed to show otherwise beyond doubt. We further find that a circuit court may consider only those exhibits that are intrinsic to the drafting of the pleading under challenge.

I. Factual and Procedural Background

When we examine a circuit court's order dismissing a pleading under Rule 12(b)(6), we are required to accept the pleading's allegations as true. As we have often said, "Since the preference is to decide cases on their merits, courts presented with a motion to dismiss for failure to state a claim construe the complaint in the light most favorable to the plaintiff, taking all allegations as true." Sedlock v. Moyle, 222 W.Va. 547, 550, 668 S.E.2d 176, 179 (2008) (citing John W. Lodge Distrib. Co. v. Texaco, Inc., 161 W.Va. 603, 605, 245 S.E.2d 157, 158 (1978)). Hence, we begin with a recitation of the crossclaims and counterclaims asserted by the petitioners against the respondents in their pleading.

Petitioners Walter Cavender and Brian Cavender are experienced firefighters and EMTs. Working together for 15 years, the Cavenders sold fire safety and rescue equipment.

In 2011, the Cavenders met with respondent Joe Beam, who presented himself as a successful businessman with an excellent credit record and a long-established banking relationship with the other respondent, City National Bank of West Virginia, Inc. ("City National"). The Cavenders reached an agreement with Mr. Beam to create a new limited liability company, petitioner Mountaineer Fire & Safety Equipment, LLC ("Mountaineer Fire"). The three men agreed that the Cavenders would continue to sell equipment to their many existing customers, while Mr. Beam would provide the Cavenders with office space and an office manager to handle mail, accounting, and other paperwork. The parties agreed that the Cavenders would be the majority owners and own 60% of Mountaineer Fire, while Mr. Beam would own 40%.

On March 11, 2011, Brian Cavender filed Articles of Organization for Mountaineer Fire with the West Virginia Secretary of State's office identifying Brian Cavender, Walter Cavender, and Mr. Beam as the only members.

Seven days later, on March 18, 2011, Brian Cavender and Mr. Beam visited City National to open a company checking account on behalf of Mountaineer Fire. City National provided them with a form resolution titled "Limited Liability Company Banking Resolution" (the "2011 Resolution"), and Brian Cavender and Mr. Beam completed and signed the form. The resolution designated Brian Cavender and Mr. Beam as the agents having authority to sign City National documents for Mountaineer Fire. The 2011 Resolution further authorized Brian Cavender and Mr. Beam to "enter into any such agreements" with City National regarding "funds, checks or items" of Mountaineer Fire. The 2011 Resolution also specified that it would remain in effect until City National received a "written notice of any amendment or revocation thereof[.]" Despite quoting language from the 2011 resolution, the petitioners did not attach a copy of the document to their pleading.

After receiving the signed 2011 Resolution, City National opened a checking account in the name of Mountaineer Fire (the "2011 account").

Over two years later, around June 27, 2013, Mr. Beam visited City National. The petitioners allege that, without notice to or authorization by Brian or Walter Cavender, and without a properly adopted corporate resolution, Mr. Beam directed City National to open a new checking account in the name of Mountaineer Fire (the "2013 account").

The petitioners assert in their pleading that City National provided Mr. Beam with a form "Limited Liability Company Authorization Resolution" to complete (the "2013 Resolution"). However, it seems Mr. Beam failed to properly complete the form 2013 Resolution. Quoting from the resolution, the petitioners point out that the form resolution required signatures from at least two members of Mountaineer Fire (the "Secretary" and "One Other Officer"); the form was signed by Mr. Beam alone. Second, quoting from the 2013 Resolution, the petitioners noted that the form provided: "This resolution supersedes resolution dated ___. If not completed, all resolutions remain in effect." Because Mr. Beam did not complete this portion, the petitioners contend that the 2011 Resolution continued to govern Mountaineer Fire's relationship with City National and, more importantly, that Brian Cavender retained the authority to act on behalf of Mountaineer Fire with City National. While the petitioners quoted language from the 2013 resolution, they did not attach a copy of the document to their pleading.

Despite Mr. Beam not having true authority from Mountaineer Fire to open an account, and despite not providing a properly adopted corporate resolution establishing his agency, the petitioners allege that City National improperly opened the new 2013 account. City National designated Mr. Beam as the only person with authority to...

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