Spellman v. American Sec. Bank, N.A.

• Decision Date: 31 January 1986
• Docket Number: No. 85-57.,No. 84-1297.,No. 85-186.,84-1297.,85-57.,85-186.
• Citation: 504 A.2d 1119
• Parties: Jerry C. SPELLMAN, Appellant, v. AMERICAN SECURITY BANK, N.A., Appellee.
• Court: D.C. Court of Appeals

504 A.2d 1119

Jerry C. SPELLMAN, Appellant, v. AMERICAN SECURITY BANK, N.A., Appellee.

No. 84-1297.

No. 85-57.

No. 85-186.

District of Columbia Court of Appeals.

Argued April 16, 1985.

Decided January 31, 1986.

Susan A. Griisser, with whom David F. Albright, Baltimore, Md., was on the brief, for appellant.

Douglas B. Mishkin, Washington, D.C., for appellee.

Before PRYOR, Chief Judge, and FERREN and TERRY,^* Associate Judges.

PER CURIAM:

These consolidated appeals challenge the grant of summary judgment awarding American Security Bank money allegedly due on two promissory notes which Jerry C. Spellman executed and a third note which he guaranteed, on the ground that genuine issues of material fact exist regarding whether the bank's claims were barred by the statute of limitations. The bank contends that summary judgment was proper and that Spellman cannot raise the defense of the statute of limitations to the guaranty for the first time on appeal. We reverse.

I

The bank sued Spellman on August 4, 1981, for breach of contract to recover money due on three promissory notes and a Covenant Not to Sue. Two notes, dated May 8 and 20, 1969, were for $200,000 each plus eight percent interest. After Spellman experienced difficulty in paying these notes, the bank sold the pledged collateral and notified him that the principal balances on the notes had been satisfied, but unpaid interest remained due. A third note for $270,000 was executed on March 6, 1970, by Action Enterprise Corporation (Action) and guaranteed by its owner and Spellman. Pursuant to a Memorandum of Understanding, dated March 5, 1970, the bank could demand payment of $200,000 immediately upon the availability of funds or ninety days from the date of the note, whichever was earlier; the remaining $70,000 in principal was also subject to demand immediately upon the availability of funds or eight months from the date of the note, whichever was earlier. Nine months later, in December 1970, Spellman and the bank signed under seal a Covenant Not to Sue. In March 1973, pursuant to a second Memorandum of Understanding, the bank waived its claim against Action, and a month later Spellman signed a Consent and Authorization whereby the bank agreed to dismiss a lawsuit against Action's owner on the condition that it preserved its rights against Spellman as guarantor.

Spellman asserted eleven defenses in his answer to the complaint, including the statute of limitations, fraud, failure to prosecute, and lathes. Following discovery, the bank filed a motion for summary judgment. The bank's Memorandum of Points and Authorities recited its efforts to collect the notes, including a 1977 lawsuit in Virginia against Spellman and his wife, and Spellman's alleged avoidance of service until December 1983. It attached a statement of material facts as to which there is no genuine issue, as required by Super.Ct.Civ.R. 12-I(k), as well as bank documents and correspondence, and affidavits of two vice presidents of the bank.

Spellman opposed the motion for summary judgment and also filed a cross-motion for dismissal under Super.Ct.Civ.R. 41(b) for failure to prosecute. He argued that the notes and the Covenant Not to Sue were unenforceable because he had established a prima facie defense of fraud. He relied on his deposition testimony with respect to the circumstances under which he was allegedly induced to sign the guaranty, and his Rule 12-I(k) statement in which he set forth facts to show why the bank's claims were time-barred and barred as a result of its failure to prosecute. He also claimed, relying on his deposition, that the guaranty was without consideration. His Rule 41(b) motion was based on the bank's alleged lack of due diligence in instituting the instant action, which was filed five years after his last payment on the notes, and in which he had not been served with process until twenty-eight months after the complaint was filed. The Rule 41(b) pleadings were incorporated by reference in his summary judgment papers.

The bank filed a response contending, first, that Spellman's failure to refer to the Covenant Not to Sue in his opposition to summary judgment, constituted a concession of liability; second, that there was adequate consideration for the guaranty;¹ and third, that the statute of limitations on the 1969 notes did not begin to run until July 31, 1975, at the earliest and was tolled because Spellman had "assiduously avoided service" from 1978 until he was served on December 27, 1983. The bank attached a second affidavit from one of its vice-presidents (Lewis) and accompanying documents in support of the latter contention.

The trial court granted the motion for summary judgment, without reaching the issues of the tolling of the statute of limitations and the enforceability of the Covenant Not to Sue. The court also denied Spellman's cross-motion to dismiss for lack of prosecution.

II

"Summary judgment is an extreme remedy which is appropriate only when there are no material facts in issue and when it is clear that the moving party is entitled to judgment as a matter of law." Willis v. Cheek, 387 A.2d 716, 719 (D.C. 1978). It should be granted sparingly in cases involving motive or intent. Wyman v. Roesner, 439 A.2d 516, 519 (D.C. 1981). A movant has the burden of proving an absence of material facts in dispute. Nader v. de Toledano, 408 A.2d 31, 42 (D.C. 1979), cert. denied, 444 U.S. 1078, 100 S.Ct. 1028, 62 L.Ed.2d 761 (1980); Wyman v. Roesner, supra, 439 A.2d at 519; Willis v. Cheek, supra, 387 A.2d at 719. When reviewing a trial court's order granting summary judgment, this court must conduct an independent review of the record. Burt v. First American Bank, 490 A.2d 182, 184 (D.C. 1985); Phenix-Georgetown, Inc. v. Chas. H. Tompkins Co., 477 A.2d 215, 221 (D.C. 1984); Holland v. Hannan, 456 A.2d 807, 814 (D.C. 1983). Our standard of review is the same as the trial court's. Burt v. First American Bank, supra, 490 A.2d at 184; Holland v. Hannan, supra, 456 A.2d at 814; Wyman v. Roesner, supra, 439 A.2d at 519.

If a movant has made a prima facie showing that there is no genuine issue of fact in dispute and it is clearly entitled to judgment as a matter of law, the opposing party may prevail only if he rebuts the showing with specific evidence. Wyman v. Roesner, supra, 439 A.2d at 516. "[T]he evidence — consisting of the pleadings and other material in the record — must be construed in the light most favorable to the party opposing the motion." Burt v. First American Bank, supra, 490 A.2d at 185; accord, Holland v. Hannan, supra, 456 A.2d at 815; Nader v. de Toledano, supra, 408 A.2d at 42; Bennett v. Kiggins, 377 A.2d 57, 59 (D.C. 1977), cert. denied, 434 U.S. 1034, 98 S.Ct. 768, 54 L.Ed.2d 782 (1978). Although material factual disputes must be pleaded in accordance with Super.Ct.Civ.R. 12-I(k) and 56(e), Bennett v. Kiggins, supra, 377 A.2d at 59, the court must still review all other material of record in determining whether there are disputed facts. Holland v. Hannan, supra, 456 A.2d at 815; District of Columbia v. Gray, 452 A.2d 962, 964 (D.C. 1982); Wyman v. Roesner, supra, 439 A.2d at 519. All inferences which may be drawn from subsidiary facts are to be resolved against the moving party. Willis v. Cheek, supra, 387 A.2d at 719, citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142 (1970), and United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962).

III

Expiration of the statute of limitations is a question of law, but certain facts must be determined before the question of law can be reached. See Calvin v. Calvin, 94 U.S. App.D.C. 42, 45, 214 F.2d 226, 229 (1954); United States v. Pall Corp., 367 F.Supp. 976, 981 (E.D.N.Y. 1973); Chartener v. Kice, 270 F.Supp. 432, 439 (E.D.N.Y. 1967). In this jurisdiction the time within which a party may commence an action to recover on a promissory note is three years. D.C. Code § 12-301(8) (1981); see Toomey v. Cammack, 345 A.2d 453, 454 (D.C. 1975). A cause of action against a maker or acceptor of a demand instrument accrues "upon its date, or if no date is stated, on the date of issue." D.C.Code § 28:3-122(b) (1981). Accepting for purposes of argument the bank's assertion that the statute of limitations began to run on the 1969 demand notes at the earliest in July 1975, the statute had run by the time the complaint was filed in 1981 unless there were intervening circumstances which tolled the statute. Herein lies the dispute.

In contending that Spellman intentionally and continuously avoided service of process so that the statute of limitations was tolled until he was served on December 27, 1983,² the bank relies on Spellman's deposition testimony that he traveled a lot, and on the affidavits of its vice-president (Lewis affidavits) which recited the bank's efforts to serve Spellman. It also contends that Spellman is estopped to raise the statute of limitations as a defense because the bank was lulled into inaction when he agreed to enter into settlement negotiations in the Virginia litigation. In response Spellman relies on his statement of material facts in which he denied evading service, and attacks the Lewis affidavits as hearsay and thus not in compliance with Super.Ct.Civ.R. 56(e). He also claims that he did not imply a promise to pay by entering into settlement negotiations in the Virginia litigation and therefore is not estopped to raise the statute of limitations as a defense. We hold that the bank has failed to demonstrate as a matter of law either that Spellman evaded service of process or that its claims on the 1969 notes are not barred by the three-year statute of limitations.

Super.Ct.Civ.R. 56(a) requires that "affidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify as to the matters...