Gans v . Gant 12-CV-279-SM 7/3/13 UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Michael Gans, Plaintiff
v. Case N o . 12-cv-279-SM Opinion N o . 2013 DNH 093 Amy Gant, Defendant
O R D E R
Michael Gans brings this action to collect three loans his
father (Harold) allegedly made in the 1980’s and 1990’s to
Michael’s uncle (Harold’s brother, Ralph), both of whom are now
deceased. Michael claims he is owed nearly $2 million, including
more than $1.7 million in interest. The defendant, Amy Gant, is
Michael’s aunt (Ralph’s widow). Amy moves to dismiss the
complaint on several grounds. Michael objects.
For the reasons discussed, Michael’s complaint is dismissed
for lack of subject matter jurisdiction. And, because each of
the three claims Michael seeks to pursue is plainly time-barred,
affording him leave to amend the complaint to allege factual
predicates sufficient to establish federal jurisdiction (here,
diversity of citizenship) would be futile. Because the futility
issue i s , for all practical purposes, dispositive of the claims,
the court’s limitations analysis is set out in more detail than
would otherwise be required. The limitations discussion is not to support a limitations ruling (over which the court presently
has no jurisdiction), but to describe the bases upon which the
court concludes that an amendment would be futile.
Standard of Review
When ruling on a motion to dismiss under Fed. R. Civ. P.
12(b)(6), the court must “accept as true all well-pleaded facts
set out in the complaint and indulge all reasonable inferences in
favor of the pleader.” SEC v . Tambone, 597 F.3d 436, 441 (1st
Cir. 2010). Although the complaint need only contain “a short
and plain statement of the claim showing that the pleader is
entitled to relief,” Fed. R. Civ. P. 8(a)(2), it must allege each
of the essential elements of a viable cause of action and
“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. 6 6 2 , 678 (2009) (citation and internal
punctuation omitted).
The court may dismiss a complaint “when the pleader’s
allegations ‘leave no doubt that an asserted claim is time-
barred.’” Gorelik v . Costin, 605 F.3d 1 1 8 , 121 (1st Cir. 2010)
(quoting LaChapelle v . Berkshire Life Ins. Co., 142 F.3d 5 0 7 , 509
(1st Cir. 1998)). See also Santana-Castro v . Toledo-Davila, 579
F.3d 109, 113-14 (1st Cir. 2009) (“Affirmative defenses, such as
the statute of limitations, may be raised in a motion to dismiss
2 under Federal Rule of Civil Procedure 12(b)(6), provided that the
facts establishing the defense are clear on the face of the
plaintiff’s pleadings. Where the dates included in the complaint
show that the limitations period has been exceeded and the
complaint fails to sketch a factual predicate that would warrant
the application of either a different statute of limitations
period or equitable estoppel, dismissal is appropriate.”)
(citations and internal punctuation omitted).
Background
According to the complaint, between 1981 and 1995, Harold
Gans extended three loans to his brother, Ralph Gant. They are
fairly described as follows:
1. The 1981 Loan. Evidenced by a letter, dated November 2 0 , 1981, from Ralph to Harold (document n o . 2 1 - 2 ) , promising to repay principal of $100,000, plus interest from Ralph’s “current credit account with [Harold] of about $26,000”; repayment to be made in two installments: $50,000 on December 1 , 1982, and the balance on December 3 1 , 1983.
That letter bears a notation, allegedly signed by Ralph on August 2 8 , 1984, stating that the “Loan has been extended and is subject to call on 30 days written notice.”
2. The 1993 Loan. Oral loan agreement; principal amount of $10,000; no specific terms of repayment specified; the complaint alleges that “an agreement to repay the funds with interest was implied by the parties’ relationship.” Complaint at para. 1 4 .
3 3. The 1995 Loan. Evidenced by a written agreement, signed by Harold, Ralph, and Ralph’s wife (Amy) in June of 1995 (document n o . 2 1 - 3 ) ; principal loan amount of $50,900; interest rate specified as “the interest rate applicable to the mortgage of the Property” owned by Ralph and Amy in Shelter Island, New York; payable upon the sale of the Shelter Island property.
As security for the 1995 Loan, Ralph and Amy purportedly
transferred their ownership interest in the Shelter Island
property to Harold, subject to an existing first mortgage.1
In addition, Ralph pledged to “make strenuous efforts to
achieve a sale of the Property at the earliest possible date.”
The 1995 Loan at 1 . The agreement provided that the proceeds
from the sale of the Shelter Island property would be applied as
follows:
a) payment of the outstanding mortgage;
b) payment of the broker’s commission;
c) re-payment to [Harold] of $50,900 plus interest. The interest rate utilized shall be the interest rate applicable to the mortgage of the Property during the time period in question.
1 There i s , however, no allegation that Ralph and Amy actually conveyed the property to Harold by deed or other recorded instrument. Nor is there any allegation that Harold’s loan was formally secured by a mortgage. Not surprisingly, then, Michael does not claim that any of the notes is subject to the twenty-year limitation period provided by N.H. Rev. Stat. Ann. 508:2 and 508:6.
4 d) balance, if any, to be paid to [Harold]. The balance shall be applied to cover (1) the remaining balance and (2) debts incurred by Ralph A . Gant to Gans in the past.
Id. (emphasis supplied). Presumably, the highlighted language is
a reference to the 1981 Loan and the 1993 Loan.
Ralph and Amy sold the Shelter Island property in October of
1999. No portion of the sale proceeds was paid to Harold.
Nearly eight years later, in August of 2007, Harold died
intestate. Prior to his death, Harold never demanded repayment
of any of the money his brother, Ralph, owed him. Nor,
apparently, did the administrator of Harold’s estate. Nearly
four years later, in February of 2011, Harold’s widow, Eleanor,
also died intestate. Neither Eleanor nor the administrator of
her estate demanded repayment of any of the money Ralph owed to
Harold. And, according to the complaint, each of the three loans
remains unpaid to this day.
The plaintiff, Michael Gans, alleges that his parents
(Harold and Eleanor) lived and died in Luxembourg. And, says
Michael, by operation of Luxembourg law, he “inherited Harold’s
assets and liabilities, including Harold’s claims against Ralph
and [Amy] for failure to repay the 1981 Loan, the 1993 Loan, and
the 1995 Loan.” Complaint at para. 2 7 . It i s , however, unclear
whether Michael claims to have inherited those assets directly
5 from his father’s estate (in approximately 2007) or from his
mother’s estate (in approximately 2011). Nevertheless, Michael
asserts that on May 1 8 , 2012, he called the loans and demanded
that Ralph’s widow, Amy, repay them. No payments have been made.
On July 2 5 , 2012, Michael filed suit in this court,
asserting that Amy is liable to him for the full amount of all
three loans, plus interest. His complaint advances three claims:
breach of contract (count o n e ) ; unjust enrichment (count t w o ) ;
and constructive trust (count three). In total, Michael says he
is owed approximately $2 million. Amy denies that she is liable
on any of the loans that were extended to Ralph and notes, among
other things, that she was not even a party to the 1981 Loan or
the 1993 Loan. Additionally, she asserts that the limitations
period applicable to each of the loans lapsed many years ago.
Discussion
I. Subject Matter Jurisdiction.
It is well-established that the party invoking federal
jurisdiction (here, Michael), bears “the burden of proving facts
sufficient to support a finding” that such jurisdiction exists.
Topp v . CompAir, Inc., 814 F.2d 8 3 0 , 839 (1st Cir. 1987). In his
complaint, Michael asserts that this court has subject matter
jurisdiction over his state law claims under the provisions of 28
U.S.C. § 1332. That i s , he says the amount in controversy
6 exceeds $75,000 and the parties are of diverse citizenship. But,
the factual allegations in his complaint are insufficient to
support the legal conclusion Michael urges.
The complaint does not allege the citizenship of either
Michael or the defendant, Amy. Instead, it simply asserts that
“Michael Gans is an individual residing in Baech, Switzerland”
and “Defendant, Amy Gant, is an individual residing [in]
Portsmouth, New Hampshire.” Complaint at paras. 1 and 2
(emphasis supplied). Mere allegations of “residency,” rather
than “citizenship,” are insufficient to invoke this court’s
diversity jurisdiction. See generally Cameron v . Hodges, 127
U.S. 3 2 2 , 325 (1888) (“This court has always been very particular
in requiring a distinct statement of the citizenship of the
parties, and of the particular State in which it is claimed, in
order to sustain the jurisdiction of [federal] courts.”). See
also Garcia v . Bernabe, 288 F.2d 6 0 , 61 (1st Cir. 1961) (“The
allegations of residence are insufficient to establish
jurisdiction [under 28 U.S.C. § 1332].”); Brooks v . Yawkey, 200
F.2d 663, 663-64 (1st Cir. 1953) (“[I]t is alleged in the
complaint that the plaintiff-appellant’s decedent at the time he
brought this action about a year before his death was a
‘resident’ of Michigan, and that the defendants are ‘residents’
of Massachusetts. Clearly these are insufficient allegations of
7 diversity of ‘citizenship’ necessary for federal jurisdiction
under Title 28 U.S.C. § 1332(a)(1)).2
Because the complaint fails to allege the citizenship of the
parties, it does not plead a sufficient basis for the court to
exercise jurisdiction under 28 U.S.C. § 1332. Consequently, the
complaint must be dismissed for lack of subject matter
jurisdiction.
II. Michael’s Claims are Time-Barred.
Despite the absence of well-pled jurisdictional facts, it is
likely that the actual facts would support the court’s exercise
of diversity jurisdiction over Michael’s claims. That is to say,
Michael might well be able to amend his complaint to adequately
allege diversity jurisdiction, since in all likelihood he is a
citizen of Luxembourg and Amy is a citizen of New Hampshire.
And, given that likelihood, it is appropriate, in the interests
of judicial economy and conservation of the parties’ resources,
to consider whether such an amendment would be futile.
2 I f , for example, Michael is a citizen of the United States, who happens to reside in Switzerland, the court would lack subject matter jurisdiction under 28 U.S.C. § 1332. See, e.g., D.B. Zwirn Special Opportunities Fund, L.P. v . Mehrotra, 661 F.3d 1 2 4 , 125-26 (1st Cir. 2011) (citing Cameron, 127 U.S. at 324).
8 Before addressing the substance of Michael’s claims against
Amy, it is probably worth noting that the parties agree that the
writings evidencing the loans Harold extended to Ralph are not
“negotiable instruments” and, therefore, they are not governed by
the Uniform Commercial Code. Rather, they are governed by common
law principles of contract. The parties also agree that New
Hampshire’s statute of limitations determines whether Michael’s
claims are timely. See generally Keeton v . Hustler Magazine,
Inc., 131 N.H. 6 (1988).
Under New Hampshire law, breach of contract actions are
subject to a three-year statute of limitations. N.H. Rev. Stat.
Ann. (“RSA”) 508:4, I . See also Coyle v . Battles, 147 N.H. 9 8 ,
100 (2001) (“To be timely, a contract claim must be brought
within three years of when it arose. A cause of action arises
once all the necessary elements are present. In the case of a
contract action, it would be when the breach occurs.”) (citations
and internal punctuation omitted). S o , for term or installment
loans, the three-year limitations period runs from the date on
which the obligation to repay was breached. See, e.g., Gen’l
Theraphysical, Inc. v . Dupuis, 118 N.H. 2 7 7 , 279 (1978). For
demand obligations, however, New Hampshire’s three-year
limitations period begins to run immediately upon creation of the
obligation to repay. See, e.g., Merrimack River Sav. Bank v .
Higgins, 89 N.H. 1 5 4 , 154-55 (1937) (“In the effect of the
9 statute of limitations the promise to pay on demand . . . is to
pay forthwith. The promise creates a matured obligation as soon
as it is given.”); Newell v . Clark, 73 N.H. 289, 291 (1905)
(noting that because an action to enforce a demand obligation can
be brought immediately upon the creation of that obligation, the
limitations period begins to run from that date).
Absent exceptions not relevant here, equitable claims are
subject to the same three-year limitations period. See, e.g.,
Cote v . Cote, 94 N.H. 3 7 2 , 374 (1947) (“Unless it is inequitable,
a court of equity in applying the doctrine of laches will follow
substantially the analogy of the statute of limitations.”);
Wentworth v . Wentworth, 75 N.H. 5 4 7 , 550 (1910) (“As a general
rule, courts of equity, equally with courts of law, are bound by
the statute of limitations.”). See also Coyle, 147 N.H. at 102
(holding that, as is the case here, plaintiff’s unjust enrichment
claim was subject to the same three-year limitations period as
his breach of contract claim).
S o , with respect to the 1981 Loan and the 1993 Loan (both of
which are demand obligations), the three-year limitations would
seem to have lapsed long ago.3 But, that limitations period may
3 The 1981 loan was originally extended in the form of a term note, payable in two installments on fixed dates. Those dates passed and Ralph failed to make the required payments. Arguably, then, the three-year limitations period began running
10 be tolled “by a party’s acknowledgment of a subsisting debt with
an admission that the party is liable and willing to pay.” A & B
Lumber Co., LLC v . Vrusho, 151 N.H. 7 5 4 , 756 (2005). To toll the
limitations period under such circumstances:
an acknowledgment of debt must be more than a recognition of debt; it must be an admission of liability for an unpaid debt that the party is then willing to pay. Specifically, the admission must be direct and unqualified. Awareness of a debt does not constitute an acknowledgment of an existing debt and a willingness to pay.
Id. (citations and internal punctuation omitted).
Viewing the complaint’s allegations in the light most
favorable to Michael, and construing all plausible inferences in
his favor, the very best that can be said is that Ralph’s
obligations to repay the 1981 Loan and the 1993 Loan were
“acknowledged” and incorporated by reference into the 1995 Loan,
when Ralph and Harold agreed that the balance of sale proceeds
from the Shelter Island property would be used to pay “debts
incurred by Ralph A . Gant to Gans in the past.” Under that
construction, the limitations period on all three of Ralph’s
obligations to Harold would have begun running upon the sale of
at that time and would have lapsed in December of 1986. But, the parties appear to have converted that term note into a demand note, when Ralph acknowledged the existence of the debt and allegedly made the notation that the “Loan has been extended and is subject to call on 30 days written notice.” Document n o . 21- 2.
11 the Shelter Island home - the date on which each of those
obligations became immediately due and payable.
All agree that Ralph and Amy sold the Shelter Island
property in October of 1999. Complaint, at par. 2 4 . But,
neither Ralph nor Amy made any payments to Harold from the
proceeds of that sale. Id. They were, therefore, in default and
the three-year limitations period began to run; it lapsed in
October of 2002. But, Harold never sought to enforce the Gants’
obligations to repay the loans prior to his death in 2007 -
nearly eight years after the sale of the property. Nor did the
administrator of Harold’s estate.
If Michael inherited Harold’s claims against Ralph and Amy
directly from Harold’s estate (in or around August of 2007),
Michael waited an additional five years before attempting to
enforce those claims, in July of 2012. S o , even if those claims
had been viable when Michael says he inherited them (they were
n o t ) , the three-year limitations period still would have lapsed
well before Michael sought to pursue them.4
4 Alternatively, if Harold’s widow acquired (through intestate succession) whatever contract rights Harold may have had, she also never brought suit to enforce the Gants’ obligations prior to her death, nearly four years later - more than eleven years after the latest date on which the Gants arguably defaulted on their obligations.
12 Given the factual allegations set forth in the complaint, it
is plain that the three-year limitations period applicable to
each of the three loans at issue lapsed many years ago.
Michael’s breach of contract claim (count o n e ) , therefore, would
be time-barred. His equitable claims for unjust enrichment
(count two) and constructive trust (count three), are subject to
the same three-year limitations period, and would also be time-
barred. Like his breach of contract claim, those equitable
claims accrued (and the limitations period began running), at the
latest, when the Gants sold the Shelter Island property, but
failed to make any payments to Harold. See, e.g., Coyle, 147
N.H. at 102. The complaint does not allege any basis for
equitable tolling (in any event, it is difficult to imagine facts
that would warrant tolling the limitations period beyond Harold’s
death). Consequently, those claims would be time-barred as well.
III. Michael’s Motion for Certification.
A further reason to deny Michael leave to amend his
complaint is the fact that, despite his suggestion to the
contrary, New Hampshire’s law governing the limitations period
applicable to demand obligations is clear. For that reason, the
court previously denied Michael’s Motion for Certification of
Issues to the New Hampshire Supreme Court (document n o . 7 ) . In
support of that motion, Michael asserted that New Hampshire
precedent in this area of the law is “outdated,” “lacks
13 significant analysis,” and may be “contrary to the contracting
parties’ reasonable expectations.” Plaintiff’s Motion for
Certification (document n o . 7 ) at 3.5
Certification of a question of law to the New Hampshire
Supreme Court is appropriate when the court has before it
“questions of law of this State which may be determinative of the
case then pending in the certifying court and as to which it
appears to the certifying court that there is no controlling
precedent in the decisions of [the New Hampshire Supreme]
[C]ourt.” N.H. Sup. C t . R. 3 4 . This is not such a case. There
is controlling precedent governing the limitations period
applicable to demand obligations. It i s , as noted above,
Merrimack River Sav. Bank and Newell. And, “[w]hen state law is
sufficiently clear . . . to allow a federal court to predict its
course, certification is both inappropriate and an unwarranted
burden on the state court.” Manchester Sch. Dist. v . Crisman,
5 While New Hampshire’s precedent in this area may be dated, that alone does not compel the conclusion that it is “outdated.” In fact, New Hampshire precedent appears to be consistent with well-established law in a number of other jurisdictions. See, e.g., J. A . Bock, Annotation, When Statute of Limitations Begins to Run Against Note Payable on Demand, 71 A.L.R. 2d 284 (Supp. 2007) (“It appears to be well-settled that a promissory note payable ‘on demand’ is due immediately without a demand and that the statute of limitations commences to run against such a note from the date of its execution and delivery and not from the date of demand.”). See also Williston & Lord, 31 Williston on Contracts, § 79:29 (4th ed.) (“[The statute begins to run immediately on delivery of the obligation of a maker of a note . . . that is by its terms payable on demand.”).
14 306 F.3d 1 , 14 (1st Cir. 2002). If the New Hampshire Supreme
Court had not decided Merrimack River Sav. Bank and Newell, then
perhaps a question might be appropriately certified. See U.S.
Steel v . M . DeMatteo Constr. Co., 315 F.3d 4 3 , 54 (1st Cir. 2002)
(“certification is particularly appropriate where the question at
issue is novel, and the law unsettled.”). But, whether the New
Hampshire Supreme Court would stand by its decisions in Merrimack
River Sav. Bank and Newell, or whether it might overrule those
decisions and apply a different rule, is not a novel question of
unsettled law suitable for Rule 34 certification.
When, in situations such as this, a federal court is called
upon to apply state law, it must “take state law as it finds i t :
‘not as it might conceivably b e , some day; nor even as it should
be.’” Kassel v . Gannett Co., 875 F.2d 935, 950 (1st Cir. 1989)
(quoting Plummer v . Abbott Laboratories, 568 F. Supp. 9 2 0 , 927
(D.R.I. 1983)). When state law has been authoritatively
interpreted by the state’s highest court, this court’s role is
straightforward: it must apply that law according to its tenor.
See Kassel, 875 F.2d at 950.
Finally, while not dispositive, the court notes that a
plaintiff who chooses a federal forum, rather than a state forum,
in a diversity action “is in a peculiarly poor position to seek
certification.” Phoung Luc v . Wyndham Mgmt. Corp., 496 F.3d 8 5 ,
15 95 (1st Cir. 2007) (quoting Venezia v . Miller Brewing Co., 626
F.2d 1 8 8 , 192 n.5 (1st Cir. 1980)). See also Kassel, 875 F.2d at
950 (“If plaintiff, fully chargeable with knowledge of the
decided New Hampshire cases, nonetheless chose to reject a state-
court forum in favor of a federal forum, he is in a perilously
poor position to grumble when we follow existing state
precedent.”); Croteau v . Olin Corp., 884 F.2d 4 5 , 46 (1st Cir.
1989) (“[O]ne who chooses to litigate his state action in the
federal forum (as plaintiff did here) must ordinarily accept the
federal court’s reasonable interpretation of extant state law
rather than seeking extensions via the certification process.”).
Conclusion
Plaintiff’s complaint is dismissed for lack of subject
matter jurisdiction. And, while the court would normally grant,
sua sponte, leave to amend to plead sufficient jurisdictional
facts, such an amendment would serve no purpose in this case.
The three claims Michael seeks to advance against Amy are plainly
time-barred under applicable New Hampshire law, and there is no
cause to certify to the New Hampshire Supreme Court questions
regarding potential modification of New Hampshire’s limitations
period as applied to this case.
16 For the foregoing reasons, defendant’s Motion to Dismiss
(document n o . 21) is granted. The Clerk of Court shall enter
judgment in accordance with this order and close the case.
SO ORDERED.
Steven J . McAuliffe Jnited States District Judge
July 3 , 2013
cc: Michael C . Harvell, Esq. Joseph L . Bierwirth, Jr., Esq.