Sundbeck v. Sundbeck
| Decision Date | 20 October 2011 |
| Docket Number | NO. 1:10CV23-A-D,1:10CV23-A-D |
| Parties | DANIEL M. SUNDBECK AND LUCY SUNDBECK PLAINTIFFS v. MILTON O. SUNDBECK, JR. |
| Court | U.S. Bankruptcy Court — Northern District of Mississippi |
DEFENDANT
On October 3, 2011, the Court entered an Order [219] granting in part and deferring in part Defendant's Motion for Summary Judgment [125]. The Court's Order [219] also denied in part and deferred in part the Plaintiffs' Motions for Summary Judgment [128, 172]. The claim in which the Court deferred ruling on arises from an alleged breach of fiduciary duty by Defendant Milton Sundbeck. Specifically, Plaintiffs claim that Defendant breached his fiduciary duty by "improperly causing SII to pay for his personal attorney fees and expenses" in the Cheryl Sundbeck lawsuit filed against Defendant in 2005. Defendant contends, among other things, that this claim is barred by the statute of limitations found in Mississippi Code Annotated Section 151-49. Because, at the time of ruling on the summary judgment motions, the Court was still allowing briefing from Plaintiffs on the statute of limitations issue, the Court deferred ruling on whether or not the statute bars Plaintiffs' claim. All supplemental briefing has now been submitted, and the Court finds that Plaintiffs' claim is barred by the three-year statute of limitations found in Section 15-1-49.
A. Applicability of Section 15-1-49 to Breach of Fiduciary Claim
Mississippi Code Annotated Section 15-1-49 states as follows:
(1) All actions for which no other period of limitation is prescribed shall be commenced within three (3) years next after the cause of such action accrued, and not after.
MISS. CODE ANN. § 15-1-49(1). In Plaintiffs' Memorandum in Support of Response to Defendant's Motion for Partial Summary Judgment, Plaintiffs conceded that Section 15-1-49(1) is "applicable" to this action. Further, after oral argument in this case, the Court allowed Plaintiffs an opportunity to address, or actually readdress, the statute of limitations issue. Plaintiffs submitted briefing and never disputed the applicability of the three-year bar on claims of this nature. Given this, the Court concludes that the applicable statute of limitations for breach of fiduciary duty due to Defendant's indemnification of the Cheryl Sundbeck lawsuit is three years pursuant to Section 15-1-49. See CitiFinancial Mortgage Co. v. Washington, 967 So. 2d 16, 17 (Miss. 2007) (). B. Tolling of Statute of Limitations
While not disputing that the three-year statute of limitations applies to this case, Plaintiffs do contend that the statute was tolled, causing the indemnification claim to allegedly not be time barred. The Court addresses Plaintiffs' concerns, along with issues relevant yet not raised by Plaintiffs, in turn below. However, before doing so, the Court provides some background evidence concerning the Cheryl Sundbeck lawsuit as it relates to the tolling of the statute of limitations issue(s):
Plaintiffs first contend that the statute of limitations is tolled by the doctrine of fraudulent concealment as set forth in Mississippi Code Annotated § 15-1-67, which states:
If a person liable to any personal action shall fraudulently conceal the cause of action from the knowledge of the person entitled thereto, the cause of action shall be deemed to have first accrued at, and not before, the time at which such fraud shall be, or with reasonable diligence might have been, first known or discovered.
MISS. CODE ANN. § 15-1-67; see also Robinson v. Cobb, 763 So.2d 883, 887 (Miss. 2000) (). Plaintiffs submit that fraudulent concealment tolling applies in this case because Further, Plaintiffs contend that neither Dan nor Lucy were ever aware of the indemnification payments until 2009.
Under Mississippi law, a plaintiff asserting fraudulent concealment as a basis for tolling the limitations period has "a two-fold obligation to demonstrate that (1) some affirmative act or conduct was done and prevented discovery of a claim, and (2) due diligence was performed on [her] part to discover it." Stephens v. Equitable Life Assurance Soc'y of the United States, 850So. 2d 78, 84 (Miss. 2003). As to the first requirement, when a fiduciary relationship exists, the failure to disclose can be an affirmative act. See Poe v. Summers, 11 So. 3d 129, 134 (Miss. Ct. App. 2009). However, the requirement of proof of an affirmative act refers not to proof of the act that gives rise to the claim but rather to a subsequent affirmative act of concealment. See Liddell v. First Family Financial Servs., Inc., 146 F. App'x 748, 751 (5th Cir. 2005) (); Ross v. Citifinancial, Inc., 344 F.3d 458, 464 (5th Cir. 2003) () (emphasis added). As to the second requirement, "the plaintiffs must show that they failed, despite the exercise of due diligence on their part, to discover the facts that form the basis of their [ ] claim." In re Catfish Antitrust Litigation, 908 F. Supp. 400, 407 (N.D. Miss. 1995).
The Court finds that Plaintiffs' claim of fraudulent concealment tolling the statute of limitations fails for numerous reasons. As noted above, there was a draft complaint sent to the Defendant prior to the September 2005 special meeting. This draft complaint sought broad relief, including dissolution of SII. The filed complaint did not threaten judicial dissolution. Apparently, Plaintiffs' main reasoning for alleging that fraudulent concealment applies is because when Dan Sundbeck asked the Defendant about the Cheryl Sundbeck lawsuit, Defendant represented that it threatened action against SII. This argument is not well taken as it relates to fraudulent concealment. First, the breach of fiduciary duty and "oppressive act" of Defendant that the Plaintiffs allege concerns not the basis of the underlying lawsuit; instead, it is the 2005 indemnification of Defendant for the lawsuit. Thus, the relevant act of concealment needed to ignite the tolling of the statute under this doctrine is a subsequent affirmative actconcealing the 2005 indemnification - not an affirmative act allegedly misrepresenting what exactly the lawsuit was about.
More importantly, however, is that - even assuming Plaintiffs can meet the first prong of the fraudulent concealment doctrine due to an existing fiduciary duty owed to Plaintiffs as minority shareholders, they fail to demonstrate that they exercised due diligence to discover the claim. In fact, Plaintiffs fail to even allege this element, as Plaintiffs essentially argue that they did not, and should have been required to, engage in due diligence to discover the indemnification payment. Plaintiffs initially assert that they could not access the relevant information concerning the Cheryl Sundbeck lawsuit due to a confidentially order. Defendant counters and asserts that the Cheryl Sundbeck case is public record in the Chancery Court of Clay County, Cause No. 2006-0236. In response to this, the Plaintiffs change course and argue that Dan should not have been required to look for the actual complaint because this "assumes knowledge of the legal system" which Dan denies having. This argument essentially concedes that Dan not only failed to exercise due diligence, but he failed to exercise any diligence. As Defendant points out, the lawsuit is public record and, in Mississippi, "an alleged fraudulent concealment does not toll the statute of limitations for matters of public record." Walton v. Walton, 52 So. 2d 468, 472 (Miss. App. 2011) (citing O'Neal Steel, Inc. v. Millette, 797 So. 2d 869, 875 (Miss. 2001)).
While Dan contends that he was not "aware" that SII had paid Defendant's attorney fees until 2009, such an argument (especially as it relates to "due diligence") is refuted by the fact that Dan and Lucy Sundbeck participated in the 2005 shareholders and board of directorsmeeting concerning indemnification by virtue of a proxy given to John W. Crowell.1 While Dan and Lucy contend that they acted as a mere "rubber stamp" at the direction of the Defendant, this does not excuse the fact that to avail themselves to the doctrine of fraudulent concealment, they must show they exercised due diligence.2 Thus, based on the foregoing reasons, Plaintiffs have not sustained their burden of demonstrating fraudulent concealment, and the Court will not toll the statute of limitations.
In responding to Defendant'...
To continue reading
Request your trial