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GKC Beard Investments LLC v. Beard Oil Co.

United States District Court, W.D. Oklahoma

October 2, 2019

GKC BEARD INVESTMENTS, LLC, a Florida Limited Liability Company, Plaintiff,
v.
BEARD OIL COMPANY, a Delaware Corporation, Defendant.

          ORDER

          DAVID L. RUSSELL UNITED STATES DISTRICT JUDGE

         Before the Court is the Motion for New Trial (Doc.No. 55) filed by Plaintiff, GKC Beard Investments, LLC. Therein Plaintiff requests that the Court reconsider its June 27, 2018 Order granting summary judgment to the Defendant premised on the conclusion that the statute of limitations had expired by the time Plaintiff filed this action to recover against Defendant. By that same Order and premised on the same argument, the Court denied Plaintiff's Motion for Summary Judgment.

         Rule 59(e) is an appropriate vehicle to review the court's order and judgment as the rule allows the court to alter or amend a judgment. The purpose of a motion under Rule 59(e) is “to correct manifest errors of law or to present newly discovered evidence.” Commonwealth Property Advocates, LLC v. Mortgage Electronic Registration Systems, Inc., 680 F.3d 1194, 1200 (10th Cir. 2011) (internal quotation marks omitted). “Rule 59(e) motions may be granted when ‘the court has misapprehended the facts, the party's position, or the controlling law.' Servants of the Paraclete v. Does, 204 F.3d 1005, 1012 (10th Cir. 2000).” Nelson v. City of Albuquerque, 921 F.3d 925, 929 (10th Cir. 2019).

         As the parties are aware, the issue presented is when did the claim against Beard Oil Company accrue for purposes of enforcing the Unconditional and Continuing Guaranty and Indemnity Agreement, which included the following:

Section 2.1 The Guarantor hereby absolutely and unconditionally guarantees to the Lender (a) the full and prompt payment of the principal, interest, premiums, penalties and late charges, if any, required to be paid by Borrower pursuant to the Note and/or Loan Documents or any renewals, replacements, extensions or modifications thereof when and as the same shall become due, whether at the stated maturity thereof, by acceleration or otherwise, and (b) the full and prompt performance of all other obligations, if any, required to be performed by the Borrower pursuant to the Note and/or Loan Documents as and when the same shall become due . . . .

Doc. No. 27-3. Plaintiff argues that in granting summary judgment to Defendant the Court erred in concluding that the Note was in default on April 15, 2012, because the principal, Beard Oil Equipment Company was not “in default” until such time as the holder (at the time Ardmore Investments 2010, LLC) elected to accelerate the debt, which, at the earliest, would have been June 22, 2012; this case filed on May 15, 2017 was therefore timely.[1] Plaintiff additionally argues that the payment due on April 15, 2012, was not due on the original note, but rather was a payment owed to secure the March 12, 2012 extension of the note, a separate contract. Plaintiff argues that the underlying dispute involves two separate contracts, the original note and the extension.

         At the outset, the Court notes its disagreement with Plaintiff's contention that the Note and Extension are separate contracts given the following provision of the March 12, 2012 Extension:

IT IS MUTUALLY AGREED by and between the parties hereto that this Agreement shall become part of the Note and Mortgage by reference and that nothing herein shall impair the security now held for said indebtedness.

Doc.No. 33-4, p. 5. Accordingly, there is but one contract with regard to the underlying debt, although it incorporates various extensions by reference. The issue here is the relationship between two separate but related contracts, the underlying Note and the Guaranty.

         Regardless, the Court finds that because Plaintiff did not accelerate the debt with regard to the underlying contract until at least June 22, 2012, the only claim accrued against Beard Oil Equipment Company and therefore the guarantors, involved the April 15, 2012 extension payment.[2] In Oklahoma Brick Corp., the court addressed a note with a voluntary acceleration clause, indicated by language granting the holder the option of determining whether the entire debt became owing on the failure to pay any installment. The debtor asserted that the statute of limitations barred collection. 497 P.2d at 216. The court concluded that the statute of limitations begins to run on each installment of an installment note on the day following the maturity of that installment. 497 P.2d at 217. This of course does not necessarily answer the question of when the cause of action against the guarantor Beard Oil Company accrued for purposes of starting the statute of limitations.

         The Court notes its prior reliance on Okla. Stat. tit. 15 § 332 and Cadle Co. v. Bianco, 849 P.2d 437 (Okla.Civ.App. 1992), wherein the court noted that the statute of limitations begins to run when a cause of action accrues; and further, that a guarantor is immediately liable upon default of the principal. In Cadle, the court did not set forth the terms of the underlying loan document nor the type of default; i.e., whether the original debtor failed to make interest payments, as in Union Central Life, or whether the payments constituted both principal and interest. Further, the case against the guarantors was not pursued until five years after the judgment was entered against the underlying debtors.

         This case is similar to City of Lincoln v. Hershberger, 725 N.W.2d 787 (Neb. 2007), wherein the court considered the statute of limitations with regard to guarantors when the Id. at 216. Here, the same holds true, and thus it appears the underlying Note might not truly be an installment contract under Oklahoma law. Regardless, the outcome herein regarding the timeliness of Plaintiff's claim would be the same, because this action was filed within five years of the September 12, 2012, maturity date pursuant to the March 12, 2012 Note and Mortgage Extension Agreement. See also Id. at 216-17 (differentiating Core v. Smith, 102 P. 114, 118-119 (1909), because no default on an installment was involved when the debtor missed payments of interest on an interest-only note with an acceleration clause providing that the entire obligation, including principal, would be due upon failure to pay interest or taxes in a timely manner, which the court construed as optional despite mandatory language). debtor failed to make any payments on a loan with terms establishing interest-only payments for two years, followed by principal-and-interest payments for an additional five years. The lender, the City of Lincoln, declared default in 1995 and gave the notice of default to the guarantors as required by the guaranty. Four years later, the City sued both the debtor and the guarantors, who asserted the claim was barred by the five-year statute of limitations because no payments had ever been made on the contract, and therefore, the claim against them accrued on June 8, 1993, the date the contract was signed. Id. at 789-90. On appeal, the case was reversed and remanded for a determination of when the debtor defaulted, because there, as here, the statute of limitations began to run on the guaranty when the cause of action accrued, which was defined by reference to when the principal debtor defaulted. Id. at 790. On remand, the court again granted summary judgment to the guarantors, finding that the optional acceleration clause in the financing agreement, an installment contract, answered the question of when the cause of action accrued against the guarantors. The appellate court reversed again, finding that the statute of limitations began to run only as to unpaid installments, not the entire debt, absent acceleration.

[W]here a contract contains an option to accelerate, the statute of limitations for an action on the whole indebtedness due begins to run from the time the creditor takes positive action indicating that the creditor has elected to exercise the option. (citation omitted)

Id. at 791. The court concluded that, although the defendants were guarantors rather than original debtors, the guarantor stepped into the debtor's shoes and therefore, the same analysis applied, and the statute of limitations began to run when the creditor exercised its right to accelerate the debt. As a result, the claim against the guarantor was timely. See alsoPhoenix Acquisition Corp. v. Campcore, Inc., 612 N.E.2d 1219, 1220 (N.Y. 1993)(“The fact that [creditor] had a bargained-for, exclusive acceleration option to call the entire indebtedness due immediately upon any default does not, by operation of law, ...


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