Thomas McDonnell, III v. Sandy Miller

Case: 15-60905 Document: 00513604517 Page: 1 Date Filed: 07/22/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 15-60905 United States Court of Appeals
Summary Calendar Fifth Circuit
FILED
July 22, 2016
THOMAS P. MCDONNELL, III, Lyle W. Cayce
Clerk
Plaintiff - Appellant
v.
SANDY MILLER,
Defendant - Appellee
Appeal from the United States District Court
for the Southern District of Mississippi
USDC No. 3:12-CV-697
Before KING, CLEMENT, and OWEN, Circuit Judges.
PER CURIAM:*
Plaintiff–Appellant Thomas P. McDonnell, III, brought suit against
Defendant–Appellee Sandy Miller on claims relating to a disputed transfer of
approximately 94,000 shares of company stock. The district court dismissed
all but one claim, denied McDonnell’s motion for partial summary judgment,
and ultimately denied the remaining breach of contract claim after a two day
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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No. 15-60905
bench trial. McDonnell now appeals. For the following reasons, we AFFIRM
the district court’s judgment.
I. FACTUAL AND PROCEDURAL BACKGROUND
On or about October 26, 2006, Plaintiff–Appellant Thomas P. McDonnell,
III, transferred approximately 94,000 shares of U-Save Holdings, Inc. (U-Save)
stock to Defendant–Appellee Sandy Miller. 1 McDonnell and Miller disagreed
over the nature of the stock transfer, and McDonnell ultimately filed suit
against Miller on October 9, 2012. In his version of the transfer, McDonnell
alleged that he and Miller entered into an oral contract for the sale of
approximately 94,000 shares of stock for $751,704.00, which was to be paid
through a $300,000.00 down payment and with the remaining $451,704.00
financed through a promissory note that was executed by Miller on October 20,
2006. McDonnell alleged that Miller failed to pay the down payment or to
satisfy the promissory note, which required the balance of the note to be paid
on or before October 20, 2009. By contrast, Miller contended that the shares
were transferred to “make Miller whole” because U-Save’s financial statements
overstated the company’s value when Miller initially purchased shares in the
company. Miller alleged that McDonnell attempted to “paper up” the
transaction with the promissory note in order to disguise the stock transfer as
an asset rather than a debt, that Miller signed the promissory note because
the parties agreed that Miller would never be called on to personally satisfy
the note, and that McDonnell had previously “papered up” other transactions.
On April 22, 2013, Miller moved for partial judgment on the pleadings,
contending that McDonnell’s claims for breach of oral contract, unjust
enrichment, equitable estoppel, and constructive trust were either time barred
or failed to state claims upon which relief could be granted. On December 2,
1 At the time, McDonnell and Miller were co-CEOs and Co-Chairmen of U-Save.
2
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2013, McDonnell moved for partial summary judgment on his claim for breach
of contract relating to the promissory note. The district court held a motion
hearing on February 13, 2014, and granted Miller’s motion for partial
judgment on the pleadings and denied McDonnell’s motion for partial
summary judgment.
The remaining claim for breach of the promissory note was tried over a
two day bench trial. After reviewing the record and evaluating the credibility
of trial witnesses, the district court concluded that the credible evidence
supported Miller’s version of how the stock transfer occurred. The court
further found that the credible evidence showed that the promissory note
lacked proper consideration because the parties did not intend for the note to
constitute a bargained-for exchange, but rather was made to conceal a debt.
The court concluded that, without consideration, the promissory note was an
invalid contract and therefore denied McDonnell’s claim for breach of the
promissory note. The district court subsequently entered final judgment, and
McDonnell timely appealed. On appeal, McDonnell challenges the district
court’s granting of Miller’s motion for partial judgment on the pleadings, its
denial of McDonnell’s motion for partial summary judgment, and its denial of
his breach of contract claim.
II. MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS
“We review a district court’s ruling on a Rule 12(c) motion for judgment
on the pleadings de novo,” using the same standard as a motion to dismiss
under Rule 12(b)(6). Gentiello v. Rege, 627 F.3d 540, 543–44 (5th Cir. 2010).
“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, 570 (2007)). “Dismissal is appropriate when the plaintiff has not
alleged enough facts to state a claim to relief that is plausible on its face or has
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failed to raise his right to relief above the speculative level.” Bass v. Stryker
Corp., 669 F.3d 501, 506 (5th Cir. 2012). “In reviewing these motions, we
accept all well-pleaded facts in the complaint as true and view them in the light
most favorable to the nonmovant.” Machete Prods., L.L.C. v. Page, 809 F.3d
281, 287 (5th Cir. 2015). 2
A. Breach of Oral Contract
First, McDonnell argues that the district erred because his claim for
breach of an oral contract—Miller’s alleged failure to pay the $300,000 down
payment—was not time barred. Under Mississippi law, a claim arising from
an unwritten contract “shall be commenced within three (3) years next after
the cause of such action accrued.” Miss. Code Ann. § 15-1-29. “In Mississippi,
a breach of contract claim accrues at the time of the breach regardless of when
damages resulting from the breach occur.” First Trust Nat’l Ass’n v. First Nat’l
Bank of Commerce, 220 F.3d 331, 334 (5th Cir. 2000); accord Wallace v.
Greenville Pub. Sch. Dist., 142 So. 3d 1104, 1107 (Miss. Ct. App. 2014).
McDonnell pleaded that he and Miller entered into an oral contract on October
26, 2006, for the sale of 94,000 shares for $751,704.00, including a $300,000.00
down payment. When Miller allegedly failed to make the down payment on
October 26, 2006, he breached the oral contract, and therefore McDonnell’s
breach of oral contract claim accrued on that date. See Wallace, 142 So. 3d at
1107. The three-year statute of limitations therefore expired on October 26,
2009, well before the filing of the present action on October 9, 2012.
McDonnell contends that Mississippi’s six-year statute of limitations
applies to his breach of oral contract claim because a “plain reading” shows
that the six-year limitations period applies to any contract for sale. While
2 With state law claims, as in the instant case, “[a] federal court sitting in diversity
applies the substantive law of the forum state.” Learmonth v. Sears, Roebuck & Co., 710 F.3d
249, 258 (5th Cir. 2013).
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McDonnell is correct that Mississippi’s version of Article 2 of the Uniform
Commercial Code (UCC) applies a six-year statute of limitations for “[a]n
action for breach of any contract for sale,” Miss. Code Ann. § 75-2-725(1), a
“contract for sale” is expressly defined as involving a present or future sale of
goods. Miss. Code Ann. § 75-2-106. And McDonnell concedes that stocks do
not fall within the definition of “goods” under Mississippi’s version of the UCC.
See Miss. Code Ann. § 75-2-105(1) (providing expressly that “Goods” do not
include “investment securities”). 3 Thus, the six-year UCC limitations period
does not apply, and McDonnell’s breach of oral contract claim was time-barred
pursuant to Miss. Code Ann. § 15-1-29.
B. Unjust Enrichment and Equitable Estoppel Claims
McDonnell next contends that the statute of limitations has not run as
to his claims for unjust enrichment and equitable estoppel. Assuming that
McDonnell could bring causes of action for unjust enrichment and equitable
estoppel, 4 those claims are time barred. Those actions do not have specific
limitations periods and are therefore governed by Mississippi’s general three-
year statute of limitations. See Miss. Code Ann. § 15-1-49(1). A cause of action
accrues “when it comes into existence as an enforceable claim”—i.e., all the
elements of the cause of action are present. Weathers v. Metro. Life Ins. Co.,
14 So. 3d 688, 692 (Miss. 2009) (quoting Bullard v. Guardian Life Ins. Co. of
Am., 941 So. 2d 812, 815 (Miss. 2006)). 5 In the present matter, McDonnell’s
3 McDonnell notes that Article 2 may be applied more broadly when “the context
otherwise requires,” Miss. Code Ann. § 75-2-102, but he has failed to cite any relevant
Mississippi authority applying such a broad interpretation to Miss. Code Ann. § 75-2-725(1).
4 Generally, an unjust enrichment claim may only be brought if no legal contract exists
between the parties. Franklin v. Franklin ex rel. Phillips, 858 So. 2d 110, 121 (Miss. 2003).
And parties dispute whether equitable estoppel is a separate cause of action under
Mississippi law. See C.E. Frazier Constr. Co., Inc. v. Campbell Roofing & Metal Works, Inc.,
373 So. 2d 1036, 1038 (Miss. 1979) (describing equitable estoppel as a cause of action).
5 The parties agree that the claims are governed by Mississippi law, and we look to
Mississippi law to determine when the claims accrue for the purposes of the statute of
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equitable claims relate to his oral agreement with Miller for the sale of
approximately 94,000 shares of stock for $751,704.00.
While McDonnell argues that the statute of limitations should run from
the date the promissory note was due—October 20, 2009—McDonnell could
have brought either equitable claim when he originally transferred the stock
on October 26, 2006. On that date, Miller took possession of the shares of stock
and allegedly failed to make the initial payment—the $300,000 down
payment—toward the $752,704.00, therefore receiving the property for less
than the promised amount and to the detriment of McDonnell. See Willis v.
Rehab Sols., PLLC, 82 So. 3d 583, 588 (Miss. 2012) (explaining that unjust
enrichment applies when “the person charged is in possession of money or
property which, in good conscience and justice, he or she should not be
permitted to retain”); Cothern v. Vickers, Inc., 759 So. 2d 1241, 1249 (Miss.
2000) (“A party asserting equitable estoppel must show (1) belief and reliance
on some representation; (2) change of position as a result thereof; and (3)
detriment or prejudice caused by the change of position.”). 6 Accordingly,
McDonnell’s claims for unjust enrichment and equitable estoppel accrued on
October 26, 2006. Because McDonnell failed to bring these claims until almost
six years later, those claims are barred by the statute of limitations. The
district court therefore did not err in dismissing these claims. 7
limitations. See, e.g., Barnes ex rel. Estate of Barnes v. Koppers, Inc., 534 F.3d 357, 359–60
(5th Cir. 2008).
6 Moreover, McDonnell has failed to cite any authority for his contention that such
equitable claims do not accrue until after a party has failed to make the final agreed-upon
payment, even though the party has already taken possession of the property without making
any earlier payment. Cf. Wallace, 142 So. 3d at 1107 (noting that a breach of a contract claim
accrues “at the time of the breach, regardless of the time when the damages from the breach
occurred”).
7 McDonnell’s passing mention that equitable estoppel may be asserted not as a
separate claim but as a defense to the statute of limitations is insufficient to adequately brief
such an argument on appeal. See Cinel v. Connick, 15 F.3d 1338, 1345 (5th Cir. 1994).
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C. Constructive Trust Claim
Finally, McDonnell alleges that the district court erred in dismissing his
constructive trust claim. Under Mississippi law, a constructive trust arises
when “one who unfairly holds a property interest [is] compelled to convey that
interest to another to whom it justly belongs.” Barriffe v. Estate of Nelson, 153
So. 3d 613, 618 (Miss. 2014) (quoting Allgood v. Allgood, 473 So. 2d 416, 421
(Miss. 1985)). The Mississippi Supreme Court has recognized several
circumstances that may support the remedy of a constructive trust, including
where there is an abuse of confidence. See Joel v. Joel, 43 So. 3d 424, 431 (Miss.
2010). While McDonnell contends that a confidential relationship existed
between himself and Miller when they entered into the oral contract for the
sale of the stock, he failed to plead sufficient facts showing Miller abused the
confidential relationship between the two business partners. See Barriffe, 153
So. 3d at 618 (“[I]t is well-settled that a constructive trust does not arise simply
because a party fails to perform under a contract.”).
The Mississippi Supreme Court has also recognized that “a constructive
trust will be raised where, at the time the promise is made, the grantee does
not intend to perform.” Griffin v. Armana, 687 So. 2d 1188, 1195 (Miss. 1996).
But McDonnell only advanced a single, conclusory allegation that Miller never
intended to perform the contract. See Beavers v. Metro. Life Ins. Co., 566 F.3d
436, 439 (5th Cir. 2009) (“[C]onclusory allegations or legal conclusions
masquerading as factual conclusions will not suffice to prevent a motion to
dismiss.” (quoting Fernandez-Montes v. Allied Pilots Ass’n, 987 F.2d 278, 284
(5th Cir. 1993))). The district court therefore did not err in granting judgment
on the pleadings for the constructive trust claim.
III. MOTION FOR PARTIAL SUMMARY JUDGMENT
McDonnell also contends that the district court erred in denying his
motion for partial summary judgment on the breach of contract claim relating
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to the promissory note. “The general rule in this Circuit is that ‘an
interlocutory order denying summary judgment is not to be reviewed when
final judgment adverse to the movant is rendered on the basis of a full trial on
the merits.’” Blessey Marine Servs., Inc., v. Jeffboat, L.L.C., 771 F.3d 894, 897
(5th Cir. 2014) (quoting Black v. J.I. Case Co., 22 F.3d 568, 570 (5th Cir. 1994)).
However, “a denial of summary judgment is appealable after a [bench] trial on
the merits when there was a ruling by the district court on an issue of law.”
Becker v. Tidewater, Inc., 586 F.3d 358, 365 n.4 (5th Cir. 2009). Thus, we may
review the district court’s denial of McDonnell’s motion for partial summary
judgment to the extent that there was a ruling by the district court on an issue
of law at the bench trial.
In the present matter, the only issue of law raised by McDonnell on
appeal was whether the district court improperly considered parol evidence in
determining whether Miller breached an enforceable promissory note. 8
Generally, parol evidence “is not admissible to add to, subtract from, vary or
contradict written instruments.” Byrd v. Rees, 171 So. 2d 864, 867 (Miss.
1965). However, “[t]he parol evidence rule has no application where the
writing is incomplete, ambiguous or where the evidence is not offered to vary
the terms of the written agreement.” Keppner v. Gulf Shores, Inc., 462 So. 2d
719, 725 (Miss. 1985). And the Mississippi Supreme Court has long-recognized
that the parol evidence rule “does not apply to evidence of failure of
consideration.” In re Johnson’s Will, 351 So. 2d 1339, 1341 (Miss. 1977); see
also Cocke v. Blackbourn, 57 Miss. 689, 691 (1880) (noting that parol evidence
can be used to show “the real consideration to be different from that expressed,
8 Other circuits have similarly reviewed a denied summary judgment motion after a
trial on the merits when the district court “consider[d] parol[] evidence that was inadmissible
under the applicable state law.” See, e.g., Banuelos v. Constr. Laborers’ Tr. Funds for S. Cal.,
382 F.3d 897, 903 (9th Cir. 2004).
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and that it had failed” or to show “want of consideration”). Here, Miller
introduced parol evidence to show that there was a lack of consideration for
the promissory note. See Estate of Davis v. O’Neill, 42 So. 3d 520, 527 (Miss.
2010) (stating that a valid, enforceable contract must have consideration). 9
The district court therefore did not err in considering parol evidence when the
court found genuine factual disputes that precluded granting summary
judgment on the breach of the promissory note claim.
IV. BREACH OF THE PROMISSORY NOTE CLAIM
“The standard of review for a bench trial is well established: findings of
fact are reviewed for clear error and legal issues are reviewed de novo.” One
Beacon Ins. Co. v. Crowley Marine Servs., Inc., 648 F.3d 258, 262 (5th Cir. 2011)
(quoting Water Craft Mgmt. LLC v. Mercury Marine, 457 F.3d 484, 488 (5th
Cir. 2006). “A factual finding is ‘clearly erroneous’ when ‘although there is
evidence to support it, the reviewing court on the entire evidence is left with
the definite and firm conviction that a mistake has been committed.’” Id.
(quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985)).
However, “[i]f the district court’s finding is plausible in light of the record
viewed as a whole, the court of appeals cannot reverse even though, if sitting
as the trier of fact, it would have weighed the evidence differently.” Bertucci
Contracting Corp. v. M/V ANTWERPEN, 465 F.3d 254, 258 (5th Cir. 2006).
McDonnell contends that the district court clearly erred because of the
“overwhelming” evidence showing that there was consideration for the
promissory note, including a memorandum describing the terms of the alleged
sale and the promissory note itself. The district court, however, considered
that evidence and also considered other evidence showing that McDonnell
9 Miller also introduced parol evidence to support his defense of estoppel to the breach
of the promissory note claim. See Stone v. Grenada Grocery Co., 1 So. 2d 229, 230 (Miss.
1941) (stating that “[a] waiver or estoppel may be shown by parol”).
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transferred the shares to “make Miller whole” and then disguised the payment
as a loan—in the form of a promissory note—in order to obfuscate the
transaction’s effect on McDonnell’s personal and corporate financial
statements. Reviewing the record as a whole, McDonnell has laid out a
plausible view of the evidence, but we cannot say that the district court clearly
erred in finding Miller’s version of the events more credible. See Anderson, 470
U.S. at 574 (“Where there are two permissible views of the evidence, the
factfinder’s choice between them cannot be clearly erroneous.”). Furthermore,
the district court did not err in finding that, based on the evidence the court
found credible, there was no consideration for the promissory note because the
note was meant to conceal a debt, not bind the parties to a bargained-for
exchange. See Daniel v. Snowdoun Ass’n, 513 So. 2d 946, 950 (Miss. 1987)
(stating that a presumption of consideration may be rebutted by “proof
designed to show that the consideration was not actually paid or bargained for”
and that “any conflict in the testimony is for the trier of fact”).
V. CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court.
10