Feriozzi Co Inc v. Ashworks Inc , 130 F. App'x 535 ( 2005 )

Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
5-10-2005
Feriozzi Co Inc v. Ashworks Inc
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-1565
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEAL
FOR THE THIRD CIRCUIT
No. 04-1565
THE FERIOZZI COMPANY, INC.
v.
ASHWORKS, INC.,
Appellant
On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civil No. 02-cv-00559)
District Judge: Hon. Joseph E. Irenas
Submitted Pursuant to Third Circuit LAR 34.1(a)
April 5, 2005
BEFORE: BARRY, AMBRO and COWEN, Circuit Judges
(Filed: May 10, 2005)
OPINION
COWEN, Circuit Judge.
Ashworks, Inc. (“Ashworks”) appeals the District Court’s order denying its motion
to dismiss the complaint filed by the Feriozzi Company, Inc. (“Feriozzi Company”).1
Ashworks argues that the District Court committed the following errors: (1) holding that
the statute of limitations for demand notes begins to run from the date a demand for
payment is made, rather than the date the agreement is entered, and (2) finding that the
estate of Joseph Feriozzi was not an indispensable party to, nor a real party in interest in,
this action.2 We will affirm the District Court’s order.
The District Court had diversity jurisdiction under 28 U.S.C. § 1332 and we have
jurisdiction pursuant to 28 U.S.C. § 1291. It is undisputed that Delaware law governs this
case. As we write solely for the parties, we only provide a brief recitation of the facts.
The Feriozzi Company brought an action to recover a $300,000 demand loan made
to Ashworks in the early Fall of 1996. This loan was evidenced by two checks issued
from the account of the Feriozzi Company to Ashworks, each in the amount of $150,000.
Ashworks denied liability and brought a counterclaim asserting that the $300,000
received from the Feriozzi Company was a partial payment of a $450,000 investment to
be paid under an alleged oral partnership or buy-in agreement and argued it was entitled
1
Concetta Feriozzi, the sister of the late Joseph Feriozzi, filed this action on behalf of
the Feriozzi Company.
2
The issue of whether the transferee Court properly applied the law of the case
doctrine is moot because we find that the initial Court properly denied Ashworks’ motion
to dismiss the complaint. Further, the transferee court considered the statute of
limitations argument and concluded that the action was not time-barred.
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to the remaining and outstanding $150,000 of the purchase price of the stock and other
damages.
Ashworks filed a motion to dismiss the claims on various grounds, including
statute of limitations and failure to join an indispensable party. The District Court,
Wolfson, J., denied the motion and the case was transferred to Irenas, J., to conduct a
bench trial. Following the bench trial, the District Court entered judgment in favor of the
Feriozzi Company in the amount of $300,000 plus interest against Ashworks.
First, Ashworks contends that the District Court erred in determining that the
complaint was not time-barred. Ashworks asserts that the complaint is untimely because
a six-year, rather than three-year, statute of limitations is applicable here. Alternatively,
Ashworks argues that even if the three-year statute were applicable, the action would
nonetheless be time-barred because the cause of action accrued when the demand loan
was entered, rather than when a demand for payment was made.
We review de novo the District Court’s order denying Defendant’s motion to
dismiss. Worldcom, Inc. v. Graphnet, Inc., 343 F.3d 651, 653 (3d Cir. 2003). Dismissal
on a pre-answer motion is only appropriate if it “‘appears beyond doubt that plaintiff can
prove no set of facts in support of its claim which would entitle [it] to relief.’” See id. at
653 (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
The three-year statute of limitations pursuant to the Delaware Code provides in
pertinent part: “[N]o action to recover a debt not evidenced by a record or by an
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instrument under seal . . . [and] no action based on a promise . . . shall be brought after the
expiration of 3 years from the accruing of the cause of such action.” 10 Del. C. § 8106.
The six-year statute of limitations under the Delaware Code provides: “When a cause of
action arises from a promissory note, bill of exchange, or an acknowledgment under the
hand of the party of a subsisting demand, the action may be commenced at any time
within 6 years from the accruing of such cause of action.” 10 Del. C. § 8109.
We find that the six-year statute of limitations is inapplicable here because there is
no note, bill of exchange or acknowledgment. The letter from Joseph Dell Aversano,
President and CEO of Ashworks, to Gary J. McCarthy, counsel to the Feriozzi Company,
dated November 15, 2001, was not an acknowledgment for purposes of the statute. The
letter indicated that Ashworks “has every intention of paying the $300,000.00 Demand
note to The Feriozzi Company, Inc.” (App. at 68.) However, the letter further explained
that “[l]ower sales over the last three years is restricting cash flow. . . . We are currently
trying to increase business. As soon as more funds are paid [d]own to the bank Ashworks
will make payments to The Feriozzi Company [o]n this note.” (Id.)
Rather than being a “clear, distinct and unequivocal acknowledgment of a
subsisting debt,” Kojro v. Sikorski, 267 A.2d 603, 605 (Del. Super. Ct. 1970), this
promise was “qualified [and] conditional.” Hart v. Deshong, 8 A.2d 85 (Del. Super. Ct.
1939). Accordingly, it could not serve as the basis for applying the six-year statute of
limitations under the Delaware Code. See Lowe v. Pfirrman, 1976 Del. C. P. Lexis 1
4
(holding that evidence failed to demonstrate there was such an unqualified and
unconditional acknowledgment as to remove the bar of the statute of limitations); see also
Fineberg v. Credit Int’l Bancshares, Ltd., et. al. 857 F. Supp. 338, 353 (D. Del. 1994)
(“In order to be entitled to the six year statute of limitations in 10 Del. C. § 8109 an
acknowledgment must be in writing . . . and must in itself establish the plaintiff’s claim or
cause of action.”).
Having determined that the three-year, rather than the six-year, statute of
limitations is applicable, we must now determine when the statute of limitations began to
run. Appellants argue that the statute began to run from the date the agreement was
entered. The District Court found that the statute began to run from the date the demand
was made: “The idea of accrual of a cause of action is that you have a right to get money
back on a demand note. You don’t have to get the money back until they make a demand
for it.” (App. at 345.)
Ashworks concedes that the only case in Delaware that has addressed this issue is
The Kent County R.R. Co. v. Wilson, 1875 Del. Lexis 9. In that case, the Court
recognized that the statute of limitations on a promissory note payable on demand begins
to run from the date it was executed. However, the Court held that the statute of
limitations did not begin to run on the promissory note until after the time the note
became payable according to the terms of the notices for payment because the agreement
was entered into before the company was organized. See id. at 17. Many years after the
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Wilson case was decided the Delaware legislature enacted 6 Del. C. § 3-118, which
outlines the accrual of a cause of action on a written demand note:
[I]f demand for payment is made to the maker of a note
payable on demand, an action to enforce the obligation of a
party to pay the note must be commenced within six years
after the demand. If no demand for payment is made to the
maker, an action to enforce the note is barred if neither
principal nor interest on the note has been paid for a
continuous period of 10 years.
6 Del. C. § 3-118(b).
Although this statute is not controlling in this case because the loan was not
evidenced by a writing, its reasoning is persuasive. The cases cited by Ashworks are not
controlling here, not only because they are from different jurisdictions, but more
importantly because the law in those states regarding accrual of causes of actions for
demand notes in writing conflict with the law of Delaware. See, e.g., Stebens v. R.V.
Wilkinson, 1957 Iowa Lexis 573 (“The Iowa authorities and rule are to the effect a
[promissory] note payable on demand is payable upon the date of its execution, and is
barred by the statute of limitations in ten years from its date.”)
Here, there was no demand or desire for payment for a few years after the loan was
made because the parties were trying to negotiate an investment deal. There was no
expectation for payment on the loan until it was clear, after the death of Joseph Feriozzi,
that there was no potential for an equity investment in Ashworks and the Feriozzi
Company demanded payment. Accordingly, we find that there was no breach until
6
payment was demanded and refused. It is undisputed that the cause of action was
commenced within three years of the first demand for payment. We therefore affirm the
District Court’s conclusion that the Feriozzi Company’s cause of action is not time-
barred.
Ashworks also argues that the District Court erred by not dismissing the complaint
for failure to join the estate of Joseph Feriozzi—an allegedly indispensable party to this
action. Ashworks contends that the estate is the real party in interest because Joseph
Feriozzi struck the deal with Joseph Dell Aversano in his individual capacity, rather than
through the Feriozzi Company. We disagree and will affirm the District Court’s
conclusion that the estate is not an indispensable party.
We review the District Court’s determinations regarding necessary parties pursuant
to Rule 19(a) of the Federal Rules of Civil Procedure under a “plenary standard to the
extent that it rests on conclusions of law and under a clear error standard as to any
subsidiary findings of fact.” HB Gen. Corp. v. Manchester Partners, L.P., 95 F.3d 1185,
1190 (3d Cir. 1996). We review the Court’s conclusions regarding indispensable parties
under Rule 19(b) for abuse of discretion. See id.To dismiss a case for failure to join an indispensable party, a two-part inquiry
should be applied. The first determination is whether the party is a “necessary party”
under Rule 19(a). A party is a necessary party if, in its absence: (1) complete relief
cannot be accorded to the present parties, (2) the disposition of the action would impair
7
the party’s ability to protect its own interest, or (3) any of the present parties would be
subject to a substantial risk of multiple or inconsistent obligations. Fed. R. Civ. P. 19(a).
If the party is deemed a necessary party, we must then consider whether the party in an
“indispensable party” under Rule 19(b). In determining whether a party is indispensable
the interests of the plaintiff, the defendant, the absentee party, the courts and the public
should be balanced. See Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S.
102, 109-111 (1968).
There is no dispute that the two checks, each in the amount of $150,000, were
issued by the Feriozzi Company to Ashworks. (App. at 96, 99.) Further, the letter signed
by Joseph Dell Aversano to Gary McCarthy, counsel for the Feriozzi Company, conceded
liability to the Company: “Ashworks, Inc. has every intention of paying the $300,000.00
Demand [N]ote to The Feriozzi Company, Inc.” (App. at 68.) Aside from the testimony
of Ashworks’ witnesses at trial, Ashworks has not presented any evidence that the
$300,000 was given to Ashworks by Joseph Feriozzi and not the Feriozzi Company. The
District Court did not err in determining that the estate is not a necessary party because
the documentary evidence, including the checks and the letter, outweighed the testimony
of Ashworks’ witnesses.
Because we find that the estate of Joseph Feriozzi was not a necessary party, it
cannot be the real party in interest. Rule 17(a) states that “[e]very action shall be
prosecuted in the name of the real party in interest,” and provides for dismissal of actions
8
if the real party in interest is not substituted or joined. Fed. R. Civ. P. 17(a). This rule
ensures that under the “governing substantive law, the plaintiffs are entitled to enforce the
claim at issue.” See HB Gen. Corp., 95 F.3d at 1196. We have already concluded that
the Feriozzi Company was entitled to enforce the loan. Accordingly, we reject
Ashworks’ argument that the claim should be dismissed because the estate, not the
Feriozzi Company, was the real party in interest.
For the foregoing reasons, the judgment of the District Court entered on February
5, 2004, will be affirmed.
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