Monday, March 16, 2015

Party Like It's 1828

Flex-A-Seal, Inc. v. Safford, 2015 VT 40

By Amy Davis

Just the other day, I thought, “Gee, I wonder how many cases from the 1800s still apply today,” then this gem fell into my lap.

Flex-A-Seal sued Safford in 2001 for embezzling funds during her employment with Flex-A-Seal. Safford and Flex-A-Seal settled, and in October 2002, the court issued a stipulated judgment order pursuant to that agreement, in the amount of $230,000. In November 2004, Flex-A-Seal filed a motion for trustee process against earnings. The court issued a stipulated order stating the original judgment amount, adjusted with interest, and also suspended the post-judgment interest after October 28, 2004 as long as Safford stayed employed at the same place.

Many years later, in April 2012, Safford changed jobs, so Flex-A-Seal filed a complaint to renew its judgment against Safford, and another motion for trustee process against Safford’s earnings. Safford, proceeding pro se, did not question the timeliness of the motions. The court, however, sua sponte, raised the question, citing 12 V.S.A. § 506 that imposes an eight-year time limit on filing actions on judgments. Safford thought, “yeah what a great point” and raised the defense in her answer.

The trial court, also thinking it raised a great point, denied Flex-A-Seal’s motion for trustee process as time-barred and dismissed Flex-A-Seal’s complaint. Flex-A-Seal argued that the final judgment was the 2004 stipulated order, which would have made its 2012 complaint within the eight years required under § 506. The trial court, however, found that the original judgment in 2002 started the clock on the statute of limitations, so the 2012 action was outside the scope.

In making its ruling, the trial court looked at the plain language of the statute, and Ayer v. Hemmingway, a 2013 SCOV case. Ayer questioned whether the statute of limitations in the case started the clock running in a 2001 default judgment, or later in 2006 with a stipulated amended order. That case surrounded a different statute (12 V.S.A. § 2903), however, the same eight-year time limit applied. In Ayer, SCOV determined that the “final judgment” that triggered the running of the statute of limitations was the 2001 default order because the order ended the litigation between the parties and disposed of the subject matter before the court.” The later 2006 order was not a new decision on the merits, and any other conclusion would continually move the statute of limitations.

Applying this reasoning to Flex-A-Seal, the trial court concluded that the 2002 judgment against Safford was the controlling judgment that triggered the statute. Flex-A-Seal argued that the period paused when Safford acknowledged her debt to Flex-A-Seal and made partial payments on it. The trial court recognized that in early contract law, acknowledging the existence of a debt is a partial promise to pay that has the effect of resetting the statute of limitations clock.

Then the trial court looked at 2008 SCOV entry order – Nelson v. Russo – explaining that under 12 V.S.A. § 506, a plaintiff must file a new and independent action to renew a judgment. A motion is not sufficient. Reiterating the principle in Ayer, the trial court concluded applying a contract rule to judgment renewals would create the uncertainty Ayer wanted to avoid, and found that the statute of limitations barred Flex-A-Seal’s complaint to renew judgment against Safford. Flex-A-Seal argued cases holding that acknowledgment and partial payment tolls the statute of limitations with regard to judgments because judgments are not contacts, but the trial court found its conclusions in line with decisions from other jurisdictions that held the opposite. The trial court dismissed the complaint as time-barred under 12 V.S.A. § 506.

Flex-A-Seal then asked the court to reconsider under Rule 59(e) because the court did not consider that in the 2002 settlement, Safford allegedly agreed to waive any defenses to enforcing the judgment, even time-related offenses. The court agreed saying they did not consider it but only because Flex-A-Seal never mentioned it in the first place, it was nowhere in the record, and if it existed, Flex-A-Seal could have presented the evidence in a timely fashion. Finally, Rule 59(e) was not meant to relieve a party from its own mistakes (that must sting), and even if the court did consider the agreement, it was not clear that the outcome would have been different.

SCOV, reviewing de novo, started with Ayer, and agreed that 2002 order triggered the running of the statute of limitations. Then the Court looked at the issue raised in the motion to reconsider, and agreed that the issue was not timely.

The final issue it considered was whether Safford’s acknowledgement and partial payment of the debt tolled the statute of limitations. Olcott v. Scales, an 1831 case holds that in judgment collection cases, acknowledgement of a debt removes the effect of the statute of limitations. The Court found that this principle is well-established as part of the common law, and has been adopted by statute. The basis for this rule is found in an 1828 case, Gailer v. Grinnel, where the Court held that acknowledging a debt within the statute of limitations period removed the statutory bar.

The Court in the present case then looked at the statues in effect at the time of these decisions, the statute modified in 1972, and again in 2010. Today, 12 V.S.A. § 506 states that to bring an action on a judgment or an action for renewal of judgments, one must file a new or independent action within eight years after the rendition of the judgment, and not after. Therefore, the controlling judgment in Flex-A-Seal is the 2002 action, but the clock on the statute of limitations paused when Safford acknowledged the debt in the 2004 stipulated order.

Lastly, SCOV acknowledges that there may be “some possible tension” between the holdings in Gailer and Olcott in light of the rationales of Ayer and Nelson, but because Safford did not raise this issue, they would not address it sua sponte – that’s what got us into this mess. So Gailer and Olcott live to die another day.

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