Nathan v. Whittington

• Decision Date: 30 August 2013
• Docket Number: No. 12–0628.,12–0628.
• Parties: Marc H. NATHAN, Petitioner, v. Stephen WHITTINGTON, Respondent.
• Court: Texas Supreme Court

408 S.W.3d 870

56 Tex. Sup. Ct. J. 1177

Marc H. NATHAN, Petitioner,

v.Stephen WHITTINGTON, Respondent.

No. 12–0628.

Supreme Court of Texas.

Aug. 30, 2013.

Andrew M. Williams, Henry L. Burkholder, Andrew M. Williams & Associates, Bellaire, Martin R. Nathan, Attorney at Law, Houston, R. Leonadis McKinney, IV, Myers Doyle, Houston, TX, for Petitioner.

Eric P. Chenoweth, James E. Zucker, YetterColeman LLP, Houston, TX, for Respondent.

PER CURIAM.

We must decide in this case whether a statute that “suspends the running” of a “statute of limitations” applies to a statute of repose that otherwise “extinguishes” the plaintiff's cause of action. The trial court held that it does not and granted the defendant's motion for summary judgment. The court of appeals, with one justice dissenting, held that it does and reversed. We hold that the suspension statute does not apply to a statute of repose, so we reverse the judgment of the court of appeals and reinstate the trial court's summary judgment.

Stephen Whittington initially filed suit in Nevada and prevailed on his claims against a former business partner, Evan Baergen. To collect on the judgment, he then filed another suit in Nevada, against both Baergen and Marc Nathan, the petitioner in the present case. In the second suit, Whittington alleged that Baergen had fraudulently transferred assets to Nathan in violation of the Nevada Uniform Fraudulent Transfer Act (Nevada UFTA). Whittington filed the second suit in May 2008, just under four years after the date he alleged the fraudulent transfer occurred in May 2004. Six months later, in November 2008, the Nevada court held that it lacked personal jurisdiction over Nathan and dismissed Whittington's claims. Less than sixty days later, in January 2009, Whittington filed the present suit, in a Texas court, under the Texas UFTA (TUFTA), again alleging that Baergen had fraudulently transferred assets to Nathan. Nathan moved for summary judgment, arguing that TUFTA's four-year statute of repose extinguished Whittington's claim. SeeTex. Bus. & Com.Code § 24.010(a)(1) (1993). The trial court agreed and granted Nathan's motion for summary judgment.

Whittington appealed, and the court of appeals reversed and remanded. The majority held that section 16.064(a) of the Texas Civil Practice & Remedies Code suspended the expiration of TUFTA's statute of repose and allowed Whittington to file this new suit within sixty days after the Nevada court dismissed the second Nevada suit for lack of jurisdiction. Whittington v. Nathan, 371 S.W.3d 399, 403 (Tex.App.–Houston [1st Dist.] 2012). One justice dissented, on the ground that section 16.064(a) suspends the running of a “statute of limitations,” not of a statute of repose like the TUFTA provision that extinguished Whittington's claim. Id. (Brown, J., dissenting).

We review the trial court's summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex.2010). To resolve this case, we must construe both TUFTA's section 24.010 and section 16.064(a) of the Civil Practice & Remedies Code. We also review issues of statutory construction de novo. Loaisiga v. Cerda, 379 S.W.3d 248, 254–55 (Tex.2012). Our objective is to give effect to the Legislature's intent, and we do that by applying the statutes' words according to their plain and common meaning unless a contrary intention is apparent from the statutes' context. Molinet v. Kimbrell, 356 S.W.3d 407, 411 (Tex.2011).

In TUFTA section 24.010, entitled “Extinguishment Of Cause Of Action,” the Legislature has provided that

a cause of action with respect to a fraudulent transfer or obligation under this chapter is extinguished unless action is brought ... within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant.

Tex. Bus. & Com.Code § 24.010(a)(1). The parties and the court of appeals all agreed that this provision is a statute of repose, rather than a statute of limitations. “[W]hile statutes of limitations operate procedurally to bar the enforcement of a right, a statute of repose takes away the right altogether, creating a substantive right to be free of liability after a specified time.” Methodist Healthcare Sys. of San Antonio, Ltd. v. Rankin, 307 S.W.3d 283, 287 (Tex.2010) (quoting Galbraith Eng'g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 866 (Tex.2009)). Statutes of repose are of an “absolute nature,” and their “key purpose ... is to eliminate uncertainties under the related statute of limitations and to create a final deadline for filing suit that is not subject to any exceptions, except perhaps those clear exceptions in the statute itself.” Id. at 286–87. Unlike statutes of limitations, which are intended primarily to encourage diligence on the part of plaintiffs, statutes of repose may serve other purposes and may run from some event other than when the cause of action accrued. See Nelson v. Krusen, 678 S.W.2d 918, 926 (Tex.1984) (Robertson, J., concurring).

Although we have not previously addressed this issue, other Texas courts have, and like the parties and the court of appeals in this case, they have agreed that the provision is a statute of repose. See Janvey v. Democratic Senatorial Campaign Comm., 793 F.Supp.2d 825, 830–31 n. 5 (N.D.Tex.2011) (citing cases and stating “the few Texas intermediate appellate courts to expressly consider the matter view the time-bar provision as a statute of repose”); see also Zenner v. Lone Star Striping & Paving, L.L.C., 371 S.W.3d 311, 315 n. 1 (Tex.App.–Houston [1st Dist.] 2012, pet. denied) (“Entitled ‘Extinguishment of Cause of Action,’ section 24.0010[sic] is a statute of repose, rather than a statute of limitations.”).

But TUFTA is a uniform act, so its provisions must “be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.” Tex. Bus. & Com.Code § 24.012. We will therefore independently review the issue, to ensure that our construction of section 24.010 is as consistent as possible with the constructions of other states that have enacted a Uniform Fraudulent Transfer Act containing a similar provision.

We have found that some courts, including the high courts of several states, have referred to this UFTA provision as a “statute of limitations,” ¹ while others have referred to it as a “statute of repose.” ²See K–B Bldg. Co. v. Sheesley Constr., Inc., 833 A.2d 1132, 1133 n. 1 (Pa.Super.Ct.2003)(noting that its “review of decisions of other jurisdictions reveals that [the provision] is referred to as both a statute of limitations and a statute of repose”). But in most of the opinions in which the court referred to the provision as a statute of limitations, including all of those of the states' high courts, the courts did not actually consider or address the issue. Instead, they simply referred to the provision as a statute of limitations without actually concluding that it was a statute of limitations as opposed to a statute of repose.

In the absence of any uniformity among the other states, we have also considered the comments of the National Conference of Commissioners on Uniform State Laws, which promulgated the model UFTA. We note first that their Prefatory Notes to the model UFTA also refer to the provision as a “statute of limitations.” Unif. Fraudulent Transfer Act, 7A pt.II U.L.A. 7 (2006) (Prefatory Note) (“The new Act also includes a statute of limitations that bars the right rather than the remedy on expiration of the statutory periods prescribed.”). Because of this, a Pennsylvania intermediate appellate court decided to label the provision as a statute of limitations, even though it recognized that “[t]he language of the provision, which involves the extinguishment of a cause of action rather than a limitation on the action, would appear to be labeled properly as a statute of repose.” K–B Bldg. Co., 833 A.2d at 1133 n. 1.

Considering the actual language of TUFTA section 24.010 and the Commissioners' comments to UFTA section 9 on which it is modeled, we agree with the parties and the court of appeals in this case that it is a statute of repose, rather than a statute of limitations. By its own terms, the provision does not just procedurally bar an untimely claim, it substantively “extinguishes” the cause of action. As the Commissioners' Prefatory Note explains (despite its reference to a “statute of limitations”), the provision “bars the right rather than the remedy on expiration of the statutory periods prescribed.” ” Unif. Fraudulent Transfer Act, 7A pt.II U.L.A. 7 (2006) (Prefatory Note). And the Commissioners' comments to section 9 explain that “[i]ts purpose is to make clear that lapse of the statutory periods prescribed by the section bars the right and not merely the remedy.” Id. at 195, § 9 cmt. 1. This language is nearly identical to our definition of a statute of repose. See Rankin, 307 S.W.3d at 287 (“[W]hile statutes of limitations operate procedurally to bar the enforcement of a right, a statute of repose takes away the right altogether, creating a substantive right to be free of liability after a specified time.” (quoting Galbraith, 290 S.W.3d at 866)). Unlike a statute of limitations, the provision “extinguishes” the underlying cause of action. We do not perceive strong uniformity among the states in their interpretation of this provision, and we see no need to compromise the statute of repose jurisprudence of cases like Galbraith and Rankin to follow states that have merely referred to the provision as a statute of limitations without actually deciding the issue.

In addition to agreeing that the TUFTA provision is a statute of repose, the parties also agree that, unless section 16.064(a) applies, the statute of repose extinguished Whittington's claim before he filed this suit. In section...