Trust v. W. Land Servs.

Decision Date30 March 2021
Docket Number2:20-CV-00813-RJC
CourtU.S. District Court — Western District of Pennsylvania
PartiesTHE PR LIQUIDATING TRUST, by and through KELLY McCULLOUGH, its Trustee, Plaintiff, v. WESTERN LAND SERVICES, INC., and AUSTIN EXPLORATION, LLC, Defendants.

Robert J. Colville, United States District Judge

Before the Court is a Motion to Dismiss (ECF No. 17) filed by Defendants Western Land Services, Inc. ("Western") and Austin Exploration, LLC ("Austin") (collectively "Defendants") pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendant's Motion has been fully briefed and is ripe for disposition. For the reasons that follow, the motion will be granted and the Complaint will be dismissed with prejudice.

I. Factual Background & Procedural History

The Complaint in this action was filed on June 3, 2020 (ECF No. 1) ("Compl."). The allegations in the Complaint are as follows. Plaintiff, The PR Liquidating Trust ("Trust"), holds all assets of Provident Royalties, LLC and its affiliated companies, including Montague Oil & Gas, LLC ("Montague"), pursuant to a June 10, 2010 Order of Court approving Provident Royalties, LLC and its affiliated companies' Consolidated Plan of Liquidation for Debtors' Estates Under Chapter 11 of the United States Bankruptcy Code, issued by the United States Bankruptcy Court for the Northern District of Texas at Bankruptcy Case No. 09-33886. A copy of the Court's Order is attached to the Complaint. (Compl. ¶¶ 8-9). In 2008, Montague allegedly engaged Defendant Western to identify and purchase oil and gas mineral rights in Pennsylvania on behalf of Montague, and Montague would pay Western for its services and reimburse Western for the purchase prices of the properties. (Compl. ¶¶ 10-11). "However, it has recently come to the attention of the Trustee that Western failed to deed these properties to Montague, and instead either continues to hold those properties through an affiliate or successfully sold those properties without ever deeding them to Montague." (Compl. ¶ 12).

Under this arrangement, Western purportedly purchased the mineral rights of three properties on behalf of Montague: 1) The Bell Property - 81.435 acres of a tract of land located in Jackson Township, Greene County, Pennsylvania; 2) The Hresko Property - 6 acres of a tract of land located in Sewickley Township, Westmoreland County, Pennsylvania; and 3) The Jones Property - 21 acres of a tract of land located in South Huntingdon Township, Westmoreland County, Pennsylvania. (Compl. ¶¶ 13, 22, 29). The Bell Property, the Hresko Property, and the Jones Property (collectively the "Properties") were all purchased by Western in 2008. (Compl. ¶¶ 13, 22, 29).

Western deeded the Properties to its affiliate, Defendant Austin, in 2009. (Compl. ¶¶ 15, 24, 31). Austin allegedly subsequently leased and/or deeded the Properties generating rents and profits for Western and itself. (Compl. ¶¶ 16-20, 24-27, 32). Plaintiff claims that Western's failure to deed the Properties' mineral rights to Montague and its alleged misappropriation of the rents and profits for its own use were in breach of an agency contract with Montague and its fiduciary duty not to engage in self-dealing. (Compl. ¶¶ 34-46). Plaintiff also claims Western converted money paid by Montague by deeding the Properties to Austin, and not Montague, in 2009. (Compl. ¶¶ 48-53).

In addition, Plaintiff asserts that Western's purchase of the Properties with funds from Montague, and fraudulent conveyance of the Properties to Austin in 2009, should result in the Properties being placed in a constructive trust, and that Western and Austin have a duty to conveythe Properties and any rents and proceeds from the Properties to Montague. (Compl. ¶¶ 55-61). Lastly, Plaintiff claims that Defendants conspired to wrongfully deprive Montague of the rents, profits, and proceeds of the Properties. (Compl. ¶¶ 63-66).

The Trust has brought 5 claims in this action: Breach of Contract (Count I) (Compl. ¶¶ 34-39), Breach of Fiduciary Duty (Count II) (Compl. ¶¶ 40-46), and Conversion (Count III) (Compl. ¶¶ 47-53) against Western; and claims for a Constructive Trust (Count IV) (Compl. ¶¶ 54-61) and Civil Conspiracy (Count V) (Compl. ¶¶ 62-68) against Western and Austin.

On July 17, 2020, Defendants filed their motion to dismiss. (ECF No. 17). Defendants challenge all five claims on statute of limitations grounds (Defs.' Mot. Dismiss ¶ 4), and Counts II, III, and V on gist of the action grounds. (Defs.' Mot. Dismiss ¶ 6).

I. Legal Standard

A motion to dismiss filed pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). In deciding a motion to dismiss, the court is not opining on whether the plaintiff will likely prevail on the merits; rather, when considering a motion to dismiss, the court accepts as true all well-pled factual allegations in the complaint and views them in a light most favorable to the plaintiff. U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002). While a complaint does not need detailed factual allegations to survive a Rule 12(b)(6) motion to dismiss, a complaint must provide more than labels and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544,555 (2007). A "formulaic recitation of the elements of a cause of action will not do." Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)).

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554 (2007)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). The Supreme Court of the United States has explained:

The plausibility standard is not akin to a "probability requirement," but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are "merely consistent with" a defendant's liability, it "stops short of the line between possibility and plausibility of 'entitlement to relief.'"

Id. (quoting Twombly, 550 U.S. at 556) (internal citations omitted).

"A statute of limitations defense is an affirmative defense that a defendant must usually plead in his answer." Stephens v. Clash, 796 F.3d 281, 288 (3d Cir. 2015). Although the statute of limitations is an affirmative defense, a court can dismiss a complaint based on the statute of limitations when "the complaint facially shows noncompliance with the limitations period and the affirmative defense clearly appears on the face of the pleading." Oshiver v. Levin, Fishbein, Sedran & Berman, 38 F.3d 1380, 1384 n.1 (3d Cir. 1994). But "'[i]f the bar is not apparent on the face of the complaint, then it may not afford the basis for a dismissal of the complaint under Rule 12(b)(6).'" Schmidt v. Skolas, 770 F.3d 241, 249 (3d Cir. 2014) (quoting Robinson v. Johnson, 313 F.3d 128, 135 (3d Cir. 2002)) (quoting Bethel v. Jendoco Constr. Corp., 570 F.2d 1168, 1174 (3d Cir. 1978)). And "a plaintiff is not required to plead, in a complaint, facts sufficient to overcome an affirmative defense." Schmidt, 770 F.3d at 251. "Thus, if 'the pleadingdoes not reveal when the limitations period began to run,' then 'the statute of limitations cannot justify Rule 12 dismissal.'" Stephens, 796 F.3d at 288 (quoting Barefoot Architect, Inc. v. Bunge, 632 F.3d 822, 835 (3d Cir. 2011)).

III. Discussion

A. Statute of Limitations

The statute of limitations requires aggrieved individuals to bring their claims within a certain time of the injury, so that the passage of time does not damage the defendant's ability to adequately defend against claims made." Dalrymple v. Brown, 549 Pa. 217, 701 A.2d 164, 167 (1997). "Statutes of limitations 'are designed to effectuate three purposes: (1) preservation of evidence; (2) the right of potential defendants to repose; and (3) administrative efficiency and convenience.'" Meehan v. Archdiocese of Phila., 870 A.2d 912, 919 (Pa. Super. 2005) (quoting Kingston Coal Co. v. Felton Min. Co., 456 Pa. Super. 270, 690 A.2d 284, 288 (1997)). "Generally speaking, the statute of limitations begins to run as soon as the right to institute and maintain the suit arises." U.S. Bank, Nat. Ass'n v. First Am. Title Ins. Co., 944 F. Supp. 2d 386, 398 (E.D. Pa. 2013), aff'd sub nom. U.S. Bank Nat. Ass'n v. First Am. Title Ins. Corp., 570 F. App'x 209 (3d Cir. 2014); Sevast v. Kakouras, 591 Pa. 44, 915 A.2d 1147, 1153 (2007).

Defendants argue that Plaintiff's claims are barred by the applicable statutes of limitations because, as alleged, Western purchased and allegedly failed to deed the relevant properties to Montague in 2008. They argue that at the latest, Montague and Plaintiff were on constructive notice that Western failed to deed the properties to Montague in 2009 when Western recorded its transfer of the properties to Austin. Because the applicable statutes of limitations are two, four, and five years, and there are no applicable tolling doctrines, Plaintiff's claims expired long before Plaintiff filed its Complaint on June 3, 2020, according to Defendants.

The relevant statutes of limitations are as follows:

1. Count I: Breach of Contract

In Pennsylvania, the statute of limitations for a breach of contract action is four years. See 42 Pa. Cons. Stat. § 5525(8). Generally, in Pennsylvania, "'an action founded on a contract accrues when the contract is breached.'" PSC Info Grp. v. Lason, Inc., 681 F.Supp.2d 577, 588 (E.D. Pa. 2010) (quoting Sadtler v. Jackson-Cross Co., 402 Pa. Super. 492, 587 A.2d 727 (1991)).

2. Count II: Breach of Fiduciary Duty

Under Pennsylvania law, the statute of limitations for a breach of fiduciary...

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