Goodwind Dev. Corp. v. West Bay Corp.

Opinion

T" i L Ll supERioR COLJT? r"&":' MI GUN' re

28230127 2023 OCT 2oh4 pr Pi{ 4: i}. 'TIU3 cwzéi UF IURT IN THE IN THE SUPERIOR SUPERIOR COURT COURT OF OF GUAM GUAM CLEHc: URTc'r-i6 GOODWIND DEVELOPMENT CIVIL CIVIL CASE no. cv0%h;23 CASE NO. cvoi~~:.23"~---- I

CORPORATION, CORPORA

Plaintiff, DECISION AND ORDER GRANTING DEFENDANTS' RULE RULE 12(B)(6) 12(B)(6) MOTION vs. TO DISMISS WEST BAY BAYCORPOARTION CORPOARTIONand 21 st and21st CENTURY CORPORATION,

Defendants.

I WEST BAY WEST BAYCORPOARTION CORPOARTION 21 st and21st and CENTURY CORPORATION,

Counterclaimants,

vs.

GOODWIND DEVELOPMENT CORPORATION,

Counterclaim Defendants.

INTRODUCTION

This matter came came before the the Honorable Honorable John John C. Terlaje Terlaje on onSeptember 29th 2023, September29th, 2023, for a

Motion Motion Hearing Hearing on on West West Bay Bay Colporation's Corporation'sand 2rstCentury and 21" Century Co1*poration's ("Defendants"') Corporation's ("Defendants"')

Motion to to Dismiss. Dismiss. Louie J. Yanza Louie J. Yanza appeared appeared for West West Bay Bay Corporation Corporation and 2!51 Century and 21" Century

Corporation. Anita P Corporation. Anita P.. Arriolia Arriolla appeared appeared for for the the G o o d w i n Development Goodwind Development Corporation Corporation

("Plaintiff"). ("Plaintiff''). Based Based on onthe the relevant relevant law lawand and authorities authorities the the Court Court now issues issues the the following

decision decision and and order GRANTING Defendant's Motion Motion to Dismiss. Dismiss. CV0028-23 DECISION AND ORDER GRANTING GRANTINGRULE RULE 12(8)(6) I2(B)(6) MOTION MOTION TO DISMISS Page2 Page

I. 1. FACTUAL AND PROCEDURAL BACKGROUND

Goodwin GoodwindDevelopment DevelopmentCorporation Corporation("GDC") (''GDC")initially initially filed filed their their Verified Verified Complaint Complaint on on

January, 2023, January, 2023, alleging alleging two two separate breaches of separate breaches of two separate promissory two separate promissory notes notes by West Bay

Corporation ("West Bay'') zpt Century Corporation ("Century") respectively. West Bay and Bay") and 21"

Answer and Counterclaim Century then filed an Answer Counterclaim to to GDC's GDC'scomplaint complainton onMarch 71\ 2023, alleging March7th,

several counterclaims for relief including fraud and misrepresentation. In response, GDC filed a

Counterclaims and an Alternative Motion Motion to Dismiss Counterclaims Motion to to Strike Strike on on April April 17, 17, 2023. Finally,

21 st Century West Bay and 21st Century filed their own own Motion Motionto toDismiss Dismisson onJuly July26th, 26th, 2023 2023.

The relevant facts regarding the Motion to Dismiss are as follows: follows:

1. The 1. Thetwo twopromissory promissorynotes noteswere wereprepared preparedand andsigned signed"in "inororaround May201 aroundMay l."Con 201I." 1 pl. 1] Compl.

5, 5, 10 (Jan. 19, 10 (Jan. 2023). 19, 2023).

"Pursuant 2. "Pur sua toto the the Pa Parties' r ties' aagreement, they were to eement, they to invest in aa Sa invest in n FrFrancisco San garage a ncisco ga ra

("Garage")." ("Garage")."Dens' Defs'Ccls. Ccls.1112-13 112-13(March (March61115 2023). 6th , 2023).

WestBay, 3. West Bay,whose whosesole soleshareholder shareholderisis Rowena Rowena Tan Tan Chua, Chua, was the nominee shareholder on

behalfofGDC. of GDC.GDC GDCinvested invested$750,000.00 $750,000.00 in in SF Bay, LLC SF Oakland Bay, LLC ("SFOB"), ("SFOB"), the the owner

of the Garage, so of so that that West West Bay Bay owned 75% of of the shares in SFOB. The promissory note

executedby was executed byWest WestBay Baytotoreflect reflect that that West WestBay Baywas wasmajority majority owner owner of of SFOB SFOB for tax

purposes." Id. purposes." Id.

4. Century Centurydid didininfact factborrow borrow$120,000.00 $120,000.00and andexecuted executed its its respective respective promissory promissory note in

favor of Id. 117-19. of GDC. Id. 1117-19.Counterclaim Counterclaim Defendants Defendants allege allege that the note has not been paid

November 2011.l. Id. since November Nevertheless, Counterclaimants Id Nevertheless, Counterclaimants allege that CDG demanded the

Century note be paid within a year and that "Century "Century paid off the the note by November 30, CV0028-23 DECISION AND ORDER GRANTING RULE 12(B)(6) 12(8)(6) MOTION MOTION TO DISMISS Page 33 Page

2011, through 2011, through some form of some form of payroll deduction of [Joseph Chua, Chua, Rowena's husband's]

salary," and that Century is no longer longer indebted indebted to to GDC. ld.1]119. GDC. Id 19.

TheWest 5. The WestBay Baynote notehas hasnot notbeen beenpaid paidsince sinceexecuting executing the the promissory promissory note. note. Dens' Defs' Ccls. Ccls.

(March (March6***, 2023). 6th, 2023 ).

"Aftereleven 6. "After eleven(11) (11)years years and and eight eight (8) (8) months, months, GDC GDC has has now now filed filed suit suit to recover on the

two promissory notes." Id. promissory notes." did not Id GDC did not make make any any other other demands demands for for repayment repayment of of the

promissory notes promissory notes during duringthe theabove abovetime period.Id.Id.#H timeperiod. 119. 19.

II. 11. LAW AND DISCUSSION

"ARule "A Rule I12(b)(6) motion tests 2(b)(6) motion tests the sufficiency of a claim." claim." Navarro v. Block, 250 F.3d 729, Navarro v.

Cir. 2001). 732 (9th Cir. 2001). When reviewing a Rule Rule 12(b)(6) 12(b)(6) motion, the Court Court must must "construe "construe the

pleading in the light most favorable to the non-moving party, favorable to party, and resolve all doubts in the non-

moving party's favor." favor." First Hawaiian Hawaiian Bank Bank v. v. Manley, Manley, 2007 Guam 2 1] 9 (citation omitted). 11 Dismissal is appropriate appropriate only only when the non-moving non-moving party can prove party "can prove no no set set of of facts facts in support of of

his claim which would entitle entitle him to to relief." relief." Taitano Taitano v. Calve Fin. Corp., 19 12 'ti Corp., 2008 Guam 12

v. Los Angeles (quoting Vasquez v. City., 487 F.3d 1246, 1249 (9th Cir. 2007)). Angeles City.,

A. The TheCourt CourtDisregards Disregards Facts Facts Not Included Included in in The The Original Original Complaint

The Court may not consider any material outside the the pleadings pleadings in ruling ruling on on aa Rule Rule 12(b)(6) l2(b)(6)

motion. See Newby v.v. Gov 't'r of See Newby of Guam, Guam, 2010 1 14, IO Guam 4 1[ 14,citing citing Lee v. v. City ofL.A., of L.A.,250 250 F.3d F .3d 688 688 th Cir, 2001). Accordingly, (9"' Cir. 2001). Accordingly, the Court disregards the second, third, third, and fourth fourth paragraphs paragraphs of of Part Part

II, Motion at 2, and the facts alleged in pages pages 88 and and 99 of ofthe the Motion. Motion. Mot. Mot. to to Dismiss 1 8-9. Dismiss112, CV0028-23 DECISION AND ORDER GRANTING RULE 12(B)(6) 12(8)(6) MOTION MOTION TO DISMISS Page4 Page

An Unlimited B. An Unlimited Waiver Waiver Violates Violates Guam Public Public Policy

Both parties encourage this Court to look to California law and and California codes codes regarding

the question of whether whether an an unlimited unlimited waiver waiver would policy.l1 Plaintiff cited would violate public policy. cited Brownrigg Brownrigg

v. v, Defreees, 196 Cal. 534, Defreees, 196 534, 23 238 (1925) 1925) to to argue argue that flat an an unlimited unlimited waiver would not violate public

policy, but this case was superseded by a statute that supports supports the the opposite opposite approach. See Cal. First

Bankv. v. Braden, Braden,215 Cal. App. ad 3d 672, 676-677 ("this ("this amendment intended not amendment was intended not only only to require

that waivers waivers of of the statute be be in in writing writing but but that that no no one one could waive waive the the statute for a period of more

than four years years beyond beyond the time time when the statute would run," referring to the Senate would otherwise have Mn,"

Committee). This Interim Judiciary Committee). This code code is is current current as of of January 2023 2023 in California and maintains maintains

that no no waiver waiver can can exceed exceed more more than than four fouryears yearsbeyond beyondthe thestatute limitations2 Thus, following statuteofoflimitations.

California's lead, this Court Court finds finds that that an an unlimited unlimited waiver that extends four years years beyond the

statute oflimitations limitations would violate violate public policy policy on on litigation litigation rights, rights, "which "wllich find find their justification theirjustification

in necessity and convenience convenience and and serve serve the the practical practical purpose purpose of of sparing courts from litigating stale

claims and people from from being put to the defense defense of of claims claims after after memories fade fade and and witnesses witnesses

disappear."See See First Security Security Bank Bank v. v. Buehne, Buehne, 314 314 Kan. 507, 501 501 P.3d 362 (2021).

C. The TheStatute Statuteof ofLimitations LimitationsBars Bars GDC's GDC'sBreach Breachof ofPromissory Promissory Notes Claims Notes Claims

A negotiable instrument must: "(a) be signed by the maker or drawer' and and (b) (b) contain contain an

unconditional promise unconditional promise or or order order to to pay pay a swn certain in money and sum certain and no no other other promise, promise, order, order,

obligation or power obligation power given by the maker or drawers..., ... ; and and (c) (c) be payable on demand demand or or at a definite definite

time; a nd (d) time, and (d) be be pa ble to payable to or order or or to to bea r bearer." 13 21 (2005). 3104(1) 21 GCA §§ 3104(l) 13 GCA (2005). Negotia Negotiable

11 Plf's Plf's Opp. Opp. to to Defy' Defs' Mot. Mot.totoDismiss Dismiss 1] ,i 11 and Defs' Defs' Rep. Rep. 117-8. ,i 7-8. 2 z "No waiver executed executed prior prior to to the the expiration of the time limited for for the the commencement commencement of of the action action by this title effective for shall be effective for a period period exceeding exceeding four four years yearsfrom fromthe dateof thedate ofexpiration expiration of ofthe thetime timelimited limited for for commencement commencement of of the action action by this title and and no no waiver executed executed after after the the expiration expiration of of such such time shall shall be effective for a period exceeding exceeding fourfour years from the years from the date date thereof, thereof, butbut any any such such waiver waiver may may bebe renewed renewed for for aa further further period period of not exceeding four years exceeding four years from from the the expiration expiration ofof the the immediately immediatelypreceding precedingwaiver." waiver."Cal.Cal.Civ. Civ. Pro. 360.5. Pro.§ 360.S. CV0028-23 DECISION AND ORDER ORDER GRANTING GRANTINGRULE RULE12(8)(6) l2(B)(6) MOTION MOTION TO DISMISS Page 5

instruments are are governed governed by by Article Article 33 of of the the Uniform Uniform Commercial ('UCC')33 internalized in Commercial Code ('UCC')

Guam Guam as the Guam as the Guam Uniform Uniform Commercial Commercial Code Code§ 3122, 3122, which which holds holds that, that, "(1) "(1) aa cause cause of of action action

against a maker rnadcerororananacceptor acceptoraccrues accrues... (2)ininthe ... (2) thecase case of of aa demand demand instrument upon its date or,

if no date date is is stated, stated, on the date of issue." 13 of issue." 13 GCA GCA §§ 3122 3122 (2022). (2022). The The promissory promissory notes notes are are

negotiable instruments, as negotiable instruments, as they are: (I) they are: (1) signed by their their makers, makers, (2) (2) contain contain an an unconditional unconditional

promise to pay promise to pay certain certain money money to to Goodwind, Goodwin, and andare (3) payable are (3) payable on on demand demand or or at at aa definite definite time. time.

Compl. (Jan. Compo. (Jan. 19, 19, 2023). 2023). Given Given that that the the promissory promissory notes notes are are negotiable instruments that do not

have a maturity dates, the notes accrued when they date4, the they were were executed executed ininMay May2011. Compl.1]~ 5, 10 2011.Comal. 10

(Jan. 19, 19, 2023).

Both promissory promissory notes include language that waives the statute statute of of limitations, limitations, "to the

extend extend allowable by law." law." Comal. Compl.Exs. andC,C,11~ 5-6, Exs.AAand ~ 10-12. 5-6, 1] 10-12. Both Both parties parties agree agree that this

language creates limitation on the waiver.55 It creates a limitation It is is not clear what this limitation, limitation, "to the extent extent

allowable by the law" would would mean, mean, ifif not not that the parties could only only waive the statute of limitations limitations

the maximum extent allowed by Guam law. According to Guam law, when promissory to the promissory notes

do not contain do not contain aa maturity maturity date, date, the the statute statute of limitations isis four of limitations fouryears. years.See See77GCA GCA§§1Il303(a) l ("An ("An

action upon any contract, obligation, obligation, or liability liability founded founded upon an instrument in writing"). Taking

our lead from California, perhaps the parties could have waived four four years years beyond beyond Ute the statute of of

limitations (eight years in total), but not indefinitely. Thus, it appears that the parties parties could only

waive the statute of of limitations up to four years or maybe eight eight years. If this was not the parties'

intent in including this language, language, then then the waiver would be unlimited and and violate violate public policy.

The statute oflimitations limitations for the Promissory Promissory Notes Notes started started in in May May of I, and this action was not of2011,

33 See Ecube v. RK Incorporation, 2021 Guam 2, 11 See £cube v. RK Incorporation, Guam 2, 'I] 19. 4 4 Compo. Com Exs.AAand pl. Exs. and C, c, 11 S-6,1110-12. 11 5-6, 11 10-12.(Jan. (Jan.19. 19.2023). 2023). s5 Plf's Plf's Opp. Opp. to Defs' Defs' Mot. Mot.totoDismiss Dismiss'H,i 66 and and Defs' Defs'Rep. Rep.11 3-4. 11 3-4. CV0028-23 DECISION ANDORDER DECISION AND ORDERGRANTING GRANTINGRULE RULE12(B)(6) I2(8)(6) MOTION DISMISS MOTION TO DISMISS Page66 Page

brought until eleven eleven years years and and eight eightmonths monthslater. later.Dens' Defs'Ccls. Ccls.(March 6th , 2023). (March61*', 2023). Therefore, Therefore, even even

using the eight-year limit limit from from California, this claim is stale.

Plaintiff GEDA v.v. Mailloux Plaintiff cites GEDA Maillol as as authority for the notion that the statute of limitations

waiver is binding here, but Mailloux Mai l l ol is a case case from from almost forty forty years years ago ago that that has has never never been been cited

and merely holds that the defendant defendant objectively objectively manifested manifested assent assent to to aa waiver, waiver, not not that that the statute

of of limitations waiver did not require a time limit. See GEDA v.v. Mailloux, See GEDA Maillol, 1986 1986 WL 68510. The

issue of whether the statute statute of limitations could be waived indefinitely was was not not addressed. addressed. Id.

Further, unlike Further, unlike the facts before the facts this Court, before this Court, the Defendant in Malloux made payments the Defendant yments on a

promissory note for promissory note for six years years before before defaulting, defaulting, at at which which point point the the Plaintiff Plaintiff quickly filed action.

Id. ,r1]2. 2. The The facts factsbefore before this this Court Court are arevery very different, different, because because the the Plaintiff Plaintiff before before us us waited waited almost

before making any demands on the Promissory Notes twelve years before Notes or bringing any legal action.

Dens' Cols. ,r119 Defs' Ccls. 19 (March 6th , 2023). (March6'h, 2023). The The situation situation before before us us is is strange and untimely strange and untimely and prejudices

the Defendants Defendantswho who will will have have to to End find witnesses with memory witnesses with memory of ofevents events from fromover overaadecade decade ago. ago.

As a consequence, the Court grants the motion to dismiss the two causes of action to enforce the

Promissory Notes. Given that the statute of limitations bar these causes of of actions, the Court does

not need to address the Defendant's Defendant'sassertion assertionof Lashes. See ofLaches. See Mot. Mot. to to Dismiss ,r Dismiss117-9.

III. 111. CONCLUSION AND ORDER GRANTS the Based on the foregoing, the Court GRANTS the Motion Motion to to Dismiss. Dismiss.

S0 SO ORDERED 24 October October 2023 2023.. re \ \

HON OHN I. TERLAJE TERLAJE Judge tor Court of Guam

Appearing Attorneys: Attorneys: Anita P. Arriola, Esq., Arriola Anita P. Arriola, Esq., ArriolaLaw LawFirm, Firm,for forPlaintiff PlaintiffGoodwind Goodwin Development Development Corp. Corp. Louie J. Yanza, Esq., Esq., Law Office of Louie J. Yanza, Yanza, for Defendants West Bay Corporation Corporation and st Century Corporation 2151 Century Corporation