Varner v. Peterson Farms

• Decision Date: 16 June 2004
• Docket Number: No. 03-2814.,03-2814.
• Citation: 371 F.3d 1011
• Parties: Richard L. VARNER, Jr., on behalf of himself and others similarly situated; Kathleen E. Varner, on behalf of herself and others similarly situated; Richard L. Varner, on behalf of himself and others similarly situated; Louise Varner, on behalf of herself and others similarly situated, Appellants, v. PETERSON FARMS; Decatur State Bank; Terrel L. Shields, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1011

371 F.3d 1011

Richard L. VARNER, Jr., on behalf of himself and others similarly situated; Kathleen E. Varner, on behalf of herself and others similarly situated; Richard L. Varner, on behalf of himself and others similarly situated; Louise Varner, on behalf of herself and others similarly situated, Appellants, v. PETERSON FARMS; Decatur State Bank; Terrel L. Shields, Appellees.

No. 03-2814.

United States Court of Appeals, Eighth Circuit.

Submitted: January 15, 2004.

Filed: June 16, 2004.

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Robert D. Hart, argued, Tulsa, OK (Christopher D. Wolek, on the brief), for appellant.

Byron Freeland, argued, Little Rock, AR (Carrie Griffith, Siloam Springs, AR, on the brief, for Appellee Shields) and (Sherry P. Bartley and David P. Glover, Little Rock, AR, on the brief), for Appellees Peterson Farms and Decatur State Bank.

Before BYE, HEANEY, and SMITH, Circuit Judges.

SMITH, Circuit Judge.

Richard Varner Jr., Kathleen Varner, Richard Varner Sr., and Louise Varner (collectively referred to as "the Varners") sued Peterson Farms ("Peterson Farms"), Decatur State Bank ("Decatur Bank"), and Terrel L. Shields alleging claims for fraud, civil conspiracy, unjust enrichment, and violations of the Sherman Antitrust Act and the Packers and Stockyard Act. The Varners appeal the district court's¹ order dismissing their Packers and Stockyard Act, Sherman Antitrust Act, fraud and civil conspiracy claims because of the applicable statute of limitations and their unjust enrichment claim for failure to state a claim. We affirm.

I. Background

In October 1996, Richard Jr. and Kathleen Varner borrowed $258,000 from Decatur Bank to purchase and upgrade real estate they planned to use for poultry production. As part of the loan agreement, Decatur Bank provided them with a document titled "Projected Cash Flow for Agricultural Enterprises" that estimated their future annual net income from poultry production at $27,594.18. Shields, an appraiser, verified the value of the property. Richard Sr. and Louise Varner entered into a similar agreement with Decatur Bank. With the appraisals and loan agreements, the couples entered into growing contracts with Peterson Farms for the production of "broilers," a type of market poultry. Unfortunately, the Varners were unable to meet their interest obligations with Decatur Bank, which caused them to borrow additional monies from Decatur Bank to cover interest payments and living expenses. After taking out numerous loans, they ended the ventures and abandoned the contracts.

Decatur Bank filed foreclosure actions against the Varners in late 2000. Judgments and decrees of foreclosure were issued in favor of Decatur Bank on February 16 and 20, 2001, and the property was subsequently sold. Louise and Richard Sr. separately filed for bankruptcy. Decatur Bank obtained relief from the automatic bankruptcy stays, and the Varners were subsequently discharged from bankruptcy.

The Varners brought this action on May 28, 2002, in federal district court in Arkansas² asserting claims for securities fraud, common-law fraud, and violations of RICO and the Sherman Antitrust Act. After two amended complaints, the district court dismissed the Varners' RICO and securities fraud claims. The district court allowed the Varners to amend their complaint to replead their antitrust and fraud claims in a final effort to avoid dismissal. The third amended complaint contained claims for common law fraud, civil conspiracy, unjust enrichment, and antitrust violations under the Sherman Antitrust Act and the Packers and Stockyard Act.³

In their complaint, the Varners indicated that, after the foreclosures in 2001, they located a person who had worked previously as a loan officer at Decatur Bank. The Varners claimed that this former loan officer indicated that the projected cash-flow figures were false and misleading. In addition, the former loan officer indicated that Decatur Bank and its officer, Vernon Austin, knew of the false and misleading nature of the information, yet used it to entice people to enter into mortgages for poultry farms. The Varners summarized this allegation in the complaint by stating, "Although Plaintiffs were suspicious that the figures given to them were fraudulent, this was the first evidence that the Plaintiffs could obtain to prove their suspicions."

On June 5, 2003, pursuant to Peterson Farms's and Decatur Bank's motions, the district court dismissed the third amended complaint with prejudice. The district court determined that the claims were barred under the applicable statutes of limitations because each of the allegedly fraudulent documents upon which the Varners relied (Shields's appraisals, Decatur Bank's Projected Cash Flow statements, and Peterson's broiler growing contracts) were provided to the Varners in 1996, well beyond the limitations periods for each claim. The district court also concluded that the Varners' claim for unjust enrichment failed as a matter of law because this equitable doctrine did not apply where valid, legal, and binding contracts existed. The Varners appeal the district court's dismissal with prejudice of all claims.

II. Analysis

The Varners argue that the district court erred in dismissing their complaint with prejudice after finding that the statutes of limitations ran on their state and federal claims. It is undisputed that unless the applicable limitations periods are tolled the Varners' claims are barred. We review de novo a district court's grant of a motion to dismiss, applying the same standards as the district court. Kottschade v. City of Rochester, 319 F.3d 1038, 1040 (8th Cir.2003). "All facts alleged in the complaint are taken as true and construed in the light most favorable to the plaintiff." Id. However, like the district court, we are "free to ignore legal conclusions, unsupported conclusions, unwarranted inferences and sweeping legal conclusions cast in the form of factual allegations." Wiles v. Capitol Indem. Corp., 280 F.3d 868, 870 (8th Cir.2002).

Generally, a motion to dismiss may be granted when a claim is barred under a statute of limitations. Fed.R.Civ.P. 12. In order for a party to avail itself of this defense, the party must specifically plead the defense in its answer. However, while this failure would normally result in the waiver of a limitations defense, see, e.g., Myers v. John Deere Ltd., 683 F.2d 270, 273 (8th Cir.1982), we recognize that when it "appears from the face of the complaint itself that the limitation period has run," a limitations defense may properly be asserted through a Rule 12(b)(6) motion to dismiss. Wycoff v. Menke, 773 F.2d 983, 984-985 (8th Cir.1985). Under Arkansas law, as well, the defendant has the burden to affirmatively plead a statute-of-limitations defense. First Pyramid Life Ins. Co. of America v. Stoltz, 311 Ark. 313, 843 S.W.2d 842, 844 (Ark.1992). However, if it is clear from the face of the complaint that the action is barred by the applicable limitations period, the burden shifts to the plaintiff to prove by a preponderance of the evidence that the statute of limitations was in fact tolled. Id.

A. Dismissal of the Arkansas Fraud, Civil Conspiracy, and Unjust Enrichment Claims

The Varners first claim that the district court erred by dismissing their state law claims for fraud, civil conspiracy, and unjust enrichment. Upon review of these causes of action and the pleaded facts, we conclude that the district court properly granted the appellees' motions to dismiss.

The Varners complain that Decatur Bank, Peterson Farms, and Shields committed fraud and civil conspiracy by enticing potential poultry growers to contract with them by providing false and misleading information in documents and through representations by employees of the companies. They further claim that the appellees were unjustly enriched by these contractual arrangements. Under Arkansas law, a cause of action for fraud is governed by a three-year statute of limitations. Ark.Code Ann. § 16-56-105 (1987). As such, civil conspiracy-which is not a separate tort and must be based on the underlying tortuous activity-borrows its statute of limitations from the fraud cause of action. The statute of limitations begins to run-in the absence of concealment of the wrong-when the negligence occurs, not when the negligence is discovered. Smothers v. Clouette, 326 Ark. 1017, 934 S.W.2d 923, 925-926 (1996).

In order to toll the statute of limitations, there must be a fact question of "some positive act of fraud, something so furtively planned and secretly executed as to keep the plaintiff's cause of action concealed, or perpetrated in a way that it conceals itself." Martin v. Arthur, 339 Ark. 149, 3 S.W.3d 684, 687 (1999) (citations omitted). Where affirmative acts of concealment by the person charged with fraud prevent the discovery of that person's misrepresentations, the statute of limitations will be tolled until the fraud is discovered or should have been discovered with the exercise of reasonable diligence. Williams v. Hartje, 827 F.2d 1203, 1205-1206 (8th Cir.1987) (citing Walters v. Lewis, 276 Ark. 286, 634 S.W.2d 129, 132 (1982)); Wilson v. General Elec. Capital Auto Lease, Inc., 311 Ark. 84, 841 S.W.2d 619, 620 (1992).

Arkansas courts hold that "[a]lthough the question of fraudulent concealment is normally a question of fact that is not suited for summary judgment, when the evidence leaves no room for a reasonable difference of opinion, a trial court may resolve fact issues as a matter of law." Alexander v. Flake, 322 Ark. 239, 910 S.W.2d 190, 191 (1995). Concealment of facts, no matter how fraudulent or otherwise wrongful, has no effect on the running of a statute of limitations if the plaintiffs could have discovered the fraud or sufficient other facts on which to bring their lawsuit, through a reasonable effort on their part. Walters, 634 S.W.2d at 132.

Applying the...