Petition for Writ of Certiorari — First Team Auction, Inc. v. First State Bank of Clay County

86 -1445 Sf egteew

MAR? 1987

BOSEPH F. SPANIOL, UR,

CLERK

NO.

IN THE

SUPREME COURT OF THE UNITED STATES

October Term 1986

FIRST TEAM AUCTION, INC.,

Petitioner,

Vv.

FIRST STATE BANK OF CLAY COUNTY

(FORMERLY FIRST STATE BANK OF

LINEVILLE),

Respondent

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

Ben F. Easterlin IV

Ellis, Easterlin, Peagler

& Gatewood, P.C.

P.O. Box 488

Americus, Georgia 31709

(912) 924-9316

Attorney for Petitioner

QUESTION PRESENTED FOR REVIEW

Whether the courts below exceeded their

jurisdiction and statutory authority when they

resolved disputed and genuine issues of material

fact in favor of the respondent-movant on a mo-

tion for summary judgment.

CERTIFICATE OF INTERESTED PERSONS

The undersigned counsel of record certifies

that the following listed persons have an inter-

est in the outcome of the case. These represen-

tations are made in order that the Judges of this

Court may evaluate possible disqualifications or

recusal:

First Team Auction, the Petitioner

herein Ellis, Easterlin, Peagler &

Gatewood, P.c. Ben F. Easterlin IV,

attorney for Petitioner Larry Morris,

attorney for Petitioner Thomas Reuben

Bell, attorney for Respondent James J.

Odom, Jr., attorney for Respondent

inh Sms

QUESTION PRESENTED FOR REVIEW ....

CERTIFICATE OF INTERESTED PERSONS ....

TABLE OF CONTENTS ......-.

LIST OF AUTHORITIES . ......

oe a

I kg ke gs ef mf lll

CONSTITUTIONAL AND STATUTORY PROVISIONS

ERVOLVED . « « 2 © «

ener SP OE OE klk tl lt ltl

REASONS FOR GRANTING CERTIORARI .....

EEE « ¢ « e 8 «© « «

APPENDICES

A. The opinion of the Court of

ee

B. The opinion of the district court

C. Excerpts from the affidavit of

Carlus D. Gay, Jr., dated November 4,

1985. .

D. Excerpts from the affidavit of

Carlus D. Gay, Jr., dated February 14,

I Weta as 5 Bide te & Se. ti) GS! Le

-iii-

LIST OF AUTHORITIES

CASES Page

Adickes v. S.H. Kress & Co., 398 U.S.

[As (eee 4 4 ee ee 14

Admiralty Fund v. Jones, 677 F.2d 1289

(9th Cir. 1982) . . - ++ 4+ 2 «© + 22

Allen v. A.H. Robins Co., 752 F.2d 1365

(9th Cir. 1985) ..- ++ +++ +++ 21

Amason v. First State Bank of Lineville,

369 So. 2d 547 (Ala. 1979) - -+-s. + 17

Bajalia v. Jim Magill Chevrolet, Inc.,

497 So. 2d 489 (Ala. 1986) ... - 12

Braxton-Secret v. A.H. Robins Co., 769

F.2d 528 (9th Cir. 1985) <— ok so 21

Celotex Corp. v. Catrett, 106 S. Ct.

2548 (1986) ee ee oe oe oe a ae

McMillan & Niemeyer, Inc. Vv.

Earle,

Dekle, 418 So. 2d 97 (Ala.

CS a ee ee 19, 25

Elrod v. Ford, 489 So. 2d 534

gg 8 Se ee eee ee

Emmet v. Eastern Dispensary & Casualty

Hospital, 396 F.2d 931 (D.C. Ger.

SEs a at oe ie a 8 oe we el ee 23

Erie Railroad v. Tompkins, 304 U.S. 64

re 6 og a ks) ee nee eae ae

niga

CASES (Cont. ) Page

Exnicious v. United States, 563 F.2d

S26. (3008 Cis. 2977) «ot sc cnnenr

irst Team Auction v irs ate

of Clay County, No. CV85-H-2383-E

(N.D. Ala. Apr. 24, 1986) ..... 2

First Team Auction v. First State Bank of

Lineville, 808 F.2d 60 (llth Cir. 1986) . 2

Gates Rubber Co. v. USM Corp., 508 F.2d

603 (7th Cir. Seen bh ao alates & 23

Hartford Life Insurance Co. v. Title

Guarantee Co., 520 F.2d 1170 - Cc.

Cle. S970) 2c « ° a ae

Hunt v. American Bank & Trust Co. of

Baton Rouge, 783 F.2d 1011 (11th Cir.

1986) * > . — .* . . * _ > >. _ — . * 25

n re Bee st Antitrust Litigation,

600 F.2d 1148 (Sth 1979),

cert. denied, 449 U.S. 905 (1980) . 22

Lund; v. Union Carbide, 695 F.2d 394

(9am Clee Beet + ow bes ee ee OS

Robertson v. Seidman & Seidman, 609

F.2d 583 (2d Cir. fy ) a eT

Sartor v. Arkansas Natural Gas Corp.,

ous Guns: Gee eee): «+ se ce ee

Sewers v. A.H. Robins Co., 715 F.2d 1559

(11th Cir. 1983) . . > * * .* . *. . . 24

-V-

CASES (Cont. ) Page

Sperry v. Ba , 523 F.2d 708 (7th

Cir. 1975) > @. ae ee ee 23

Tyson v. Johns-Manville Sales Corp.,

399 So. 2d 263 (Ala. 1981) ..-.--. 12

Williams v. Bedenbaugh, 215 Ala. 200,

110 So. 286 (1926) a” ee a 18, 19

CONSTITUTIONAL PROVISION

U.S. Const. amend. VII

STATUTES

Ala. Code § 6-2-3 (1975 & Supp. 1986)

Ala. Code § 6-2-39 (1975) (repealed)

Ala. Code § 6-2-38 (Supp. 1986)

FEDERAL RULES OF CIVIL PROCEDURE

Teas. BP. Civ. BP, BS

-vi-

No.

IN THE

SUPREME COURT OF THE UNITED STATES

October Term 1986

FIRST TEAM AUCTION, INC.,

Petitioner,

Vv.

FIRST STATE BANK OF CLAY COUNTY

(FORMERLY FIRST STATE BANK OF

LINEVILLE),

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

To the Honorable Chief Justice and Associate

Justices of the Supreme Court of the United

States:

Petitioner, FIRST TEAM AUCTION, INC., prays

that a writ of certiorari issue to review the

December 10, 1986 judgment of the United States

Court of Appeals for the Eleventh Circuit.

OPINIONS WwW

The opinion of the Court of Appeals, First

Team Auction v. First State Bank of Lineville,

808 F.2d 60 (11th Cir. 1986), is a per curiam

affirmation of the district court opinion. A

copy of the order of the Court of Appeals is

attached hereto as Appendix A. The opinion and

order of the district court, First Team Auction

vy. First State Bank of Clay County, No. CV85-H-

2383-E (N.D. Ala. Apr. 24, 1986) is attached

hereto as Appendix B.

JURISDICTION

The judgment of the district court in favor

of Respondent was entered April 24, 1986. The

Court of Appeals affirmed the district court’s

judgment, per curiam, on December 10, 1986. The

jurisdiction of this court is involved pursuant

to 28 U.S.C. § 1254(1).

CONSTITUTIONAL AND STATUTORY PROVISIONS INVOLVED

U.S. Const. amend. VII provides, in pertinent

part:

In Suits at common law, where the

value in controversy shall exceed twen-

ty dollars, the right of trial by jury

shall be preserved, and no fact tried

by a jury, shall be otherwise

reexamined in any Court of the United

States, than according to the rules of

the common law.

Fed. R. Civ. P. 56(c) provides, in pertinent

part:

Motion and proceedings thereon

The motion shall be served at

least 10 days before the time fixed for

the hearing. The adverse party prior

to the day of hearing may serve oppos-

ing affidavits. The judgment sought

shall be rendered forthwith if the

pleadings, depositions, answers to

interrogatories, and admissions on

file, together with the affidavits, if

any, show that there is no genuine

Fed.

issue as to any material fact and that

the moving party is entitled to a judg-

ment as a matter of law. A summary

judgment, interlocutory in character,

may be rendered on the issue of

liability alone although there is a

genuine issue as to the amount of

damages.

R. Civ. P. 56(e) provides, in pertinent

part:

Form of affidavits; further testimony;

defense required

Supporting and opposing affidavits

shall be made on personal knowledge,

shall set forth such facts as would be

admissible in evidence, and shall show

affirmatively that the affiant is com-

petent to testify to the matters stated

therein. Sworn or certified copies of

all papers or parts thereof referred to

in an affidavit shall be attached

thereto or served therewith. The court

may permit affidavits to be supple-

mented or opposed by depositions,

answers to interrogatories, or further

affidavits. When a motion for summary

judgment is made and supported as

provided in this rule, an adverse party

may not rest upon the mere allegations

or denials of his pleading, but his

response, by affidavits or as otherwise

provided in this rule, must set forth

specific facts showing that there is a

genuine issue for trial. If he does

not so respond, summary judgment, if

appropriate, shall be entered against

him.

Ala. Code § 6-2-3 (1975) provided, in pertinent

part:

Accrual of claim--Fraud.

In actions seeking relief on the

ground of fraud where the statute has

created a bar, the claim must not be

considered as having accrued until the

discovery by the aggrieved party of the

fact constituting the fraud, after

which he must have one year within

which to prosecute his action. (Code

1852, § 2492; Code 1867, § 2916; Code

1876, § 3242; Code 1886, § 2630; Code

1896, § 2813; Code 1907, § 4852; Code

1923, § 8966; Code 1940, T.7, § 42.)

Ala. Code § 6-2-3 (Supp. 1986) provides, in per-

tinent part:

Accrual of claim--Fraud.

In actions seeking relief on the

ground of fraud where the statute has

created a bar, the claim must not be

considered as having accrued until the

discovery by the aggrieved party of the

fact constituting the fraud, after

which he must have two years within

which to prosecute his action. (Code

= 1852, § 2492; Code 1867, § 2916; Code

1876, § 3242; Code 1886, § 2630; Code

1896, § 2813; Code 1907, § 4852; Code

1923, § 8966; Code 1940, T. 7, § 42;

Acts 1984, 2nd Ex. Sess., No. 85-39, p.

40, § 2.}-

Ala. Code § 6-2-39(a)(5) (1975) (repealed)

provided, in pertinent part:

(a) The following must be commenced

within one year:

(5) Actions for any injury to the

person or rights of another not arising

from contract and not specifically

enumerated in this section[.]

Ala. Code § 6-2-38(1) (Supp. 1986) provides, in

pertinent part:

(1) All actions for any injury to

the person or rights of another not

arising from contract and not specifi-

cally enumerated in this section must

be brought within two years.

STATEMENT OF THE CASE

On September 6, 1985, Petitioner filed a

complaint in the United States District Court for

the Northern District of Alabama alleging that in

July 1983, Appellee fraudulently misrepresented

the value of certain real property securing a

note sold at that time to Petitioner by Respon-

dent. Jurisdiction was founded on diversity of

citizenship and jurisdictional amount in con-

troversy. 28 U.S.C. § 1332. Respondent defended

on the grounds, inter alia, that the complaint

was barred by the Alabama statute of limitations.

Subsequently, Respondent filed a motion for sum-

mary judgment on the grounds that Petitioner

knew, or should have known, of any fraud as of

January 9, 1984, and that Petitioner’s complaint

was violative of the Alabama one-year statute of

limitations for fraud claims. The district court

granted summary judgment to Respondent, and the

court of appeals subsequently affirmed, per

curiam, the district court’s judgment.

FACTS:

First Team Auction, Inc. [hereinafter

“"Petitioner”] is an auction company located in

Americus, Georgia and is in the business of con-

ducting consignment auctions of farm equipment,

construction equipment, livestock and real es-

tate. R1-11-2.1 prior to July 1983, Petitioner

operated almost exclusively in the State of Geor-

gia and had never sold any real property in

Alabama. R1-14-6. In the spring of 1983,

Petitioner began negotiating with Madison H.

Hooton, Sr., Marion P. Hooton, Madison H. Hooton,

Jr., and Marion E. Hooton d/b/a The Hooton Com-

pany (“Hooton”) to sell approximately three

thousand acres of timberland (“the timberland”)

owned by Hooton in Randolph, Clay, and Tallapoosa

lReferences are, unless otherwise noted, to

the record as it was labelled in the Court of

Appeals.

Counties, Alabama. At the time, Hooton was

primarily engaged in the production and sale of

chickens and eggs and had accumulated large in-

debtedness to certain lenders and to certain

suppliers of chickens, feed and other similar

items. These creditors ("the lienholders”) had

secured Hooton’s indebtedness to them through

mortgages and judgments on the timberland.

Hooton expressed to Petitioner a desire to sell

some of the timberland in order to reduce his

total indebtedness. In early or middle June

1983, Hooton and Petitioner agreed that

Petitioner would auction the timberland in July

1983. R1-11-2. At the same time, Hooton and

Petitioner executed a second contract whereby

Petitioner was to auction other property of

Hooton in the spring of 1984. This property was

residential and recreational development property

on a lake (the “lakefront property”), and it was

mortgaged to the First State Bank of Lineville

(“Respondent”). R1-11-3. Respondent agreed to

release its mortgage to facilitate the spring

1984 auction. R1-11-3, 4. R1-11-2.

On or about July 5, 1983, Ken Vaughn, Presi-

dent of Respondent bank, informed Petitioner

that, despite its earlier agreement to release

its lien on the lakefront property in the spring

of 1984, that foreclosure of Respondent’s

mortgage on the lakefront property was now im-

minent. Hooton, Petitioner and Respondent then

entered into negotiations to forestall the

foreclosure. R1-11-4. During these negotiations

Respondent showed Petitioner an MAI? appraisal

representing the fair market value of the

lakefront property to be in excess of one million

2”Member Appraisal Institute” denotes an or-

ganization for real estate appraisers of the

highest standards.

-lli-

dollars. Respondent emphasized that this was a

MAI appraisal and that the appraisal was there-

fore totally reliable as an indication of the

value of the property. R1-11-5. Concerned that

Respondent’s threatened foreclosure of Hooton’s

lakefront property would chill the sale of the

timberland in the July 1983 auction, Petitioner

purchased the Hooton mortgage to Respondent. R-

11-6, 7.

In purchasing this mortgage, Petitioner dic

not have time to make an independent determina-

tion of the value of the lakefront property and

relied entirely on the MAI appraisal and the

representations of Respondent. On July 23, 1983

First Team conducted the auction of the timber-

land, but shortly thereafter Hooton filed a Chap

ter 11 petition in the United States Bankruptcy

Court, nullifying all sales at this auction.

In August 1984, Appellant was finally able

-12-

to obtain a release of both the timberland and

the lakefront properties from the Bankruptcy

Court and sell them at auction. The lakefront

property sold for considerably less than the

value represented to Petitioner by Respondent,

and Petitioner did not recover the sum it paid to

Respondent to purchase the mortgage on this pro-

perty. This was Petitioner’s first indication or

knowledge that the lakefront property was worth

less than the value represented by Respondent in

July 1983. R1-11-9, 10. In May of 1985, Hooton

told Petitioner that Respondent knew in July 1983

that the MAI appraisal of the lakefront property

overstated its value and the Respondent tricked

Petitioner into purchasing this mortgage in order

to transfer the potential loss on Hooton’s debt

to Petitioner. R1-11-11. This was Appeilant’s

first knowledge of Appellee’s fraudulent mis-

representation of the value of the lakefront

-13-

property. R1-11-11.

The parties and the trial judge below were

all in agreement that January 9, 1984 was the

critical date for determining whether or not

Petitioner’s fraud cause of action was time-

barred. When the contract for sale of the

mortgage was entered into in July 1983, the

Alabama statute of limitations for action based

on fraud was one year. Ala. Code § 6-2-39(a) (5)

(1975) (repealed by Act No. 85-39, 1984-85 Ala.

Acts (2nd Special Sess. 40). As of January 9,

1985, fraud claims are governed by the two-year

statute of limitations of Ala. Code § 6-2-38(1)

(Supp. 1986). Because of the Alabama fraudulent

concealment statute, Ala. Code § 6-2-3 (1975 &

Supp. 1986), a cause of action for fraud is

tolled until the fraud either is discovered, or

should have been discovered.

Again, the parties agreed that, if

-14-

Petitioner did not, utilizing due diligence,

discover the fraud perpetrated by the Respondent

before January 9, 1984, Petitioner would gain the

benefit of the new two-year provision of both

Ala. Code §§ 6-2-38(1) and 6-2-3, and the cause

of action would not be time-barred. See Tyson v.

Johns- vi orp., 399 So. 2d 263, 268-

69 (Ala. 1981) (limitations period may be ex-

tended by legislature retroactively as long as

claim not already time-barred when legislature

acts). Cf. Bajalia v. Jim Magill Chevrolet,

Inc., 497 So. 2d 489, 491 (Ala. 1986) (cause of

action for fraud filed after expiration of one-

year period following discovery of fraud not

revived by subsequent amendment of Ala. Code § 6-

2-39 (Supp. 1986)). The critical issue, there-

fore, is whether the district court, and court of

appeals properly concluded that, as a matter of

law, Petitioner should have discovered the fraud

-15-

of Respondent prior to January 9, 1984.

REASONS FOR GRANTING CERTIORARI

In reaching its per curiam decision affirn-

ing the judgment of the district court granting

the Respondent summary judgment, the court of

appeals has decided a question of federal law in

conflict with past decisions of this Court and

other courts of appeals; furthermore, the court

below “has so far departed from the accepted and

usual course of proceedings, or so far sanctioned

such a departure by a lower court, as to call for

an exercise of this Court’s power of super-

vision.” Sup. Ct. R. 17.1(a).

It has always been clear that Fed. R. Civ.

P. 56, which governs the procedure of summary

judgment, may not sanction a violation of U.S.

Const. amend VII: i.e., a trial judge may not,

under the guise of a summary judgment motion,

-16-

“cut litigants off from their right of trial by

jury_if they really have issues to try.” Sartor

Vv. s N as , 321 U.S. 620, 627

(1944) (finding summary judgment inappropriate

where it invaded province of the jury). There-

fore, in order to ensure that a litigant’s right

to trial is not violated, Fed. R. Civ. P. 56 must

be interpreted to foreclose summary judgment

where there do exist disputed issues material to

the resolution of the case. Furthermore, even if

the nonmoving party will bear the ultimate burden

of persuasion at trial with respect to an issue,

summary judgment is only appropriate in the ab-

sence of a conflict in the materials considered

on the motion. Celotex Corp. v. Catrett, 106 S.

Ct. 2548 (1986); Adickes v. S.H. Kress & Co., 398

U.S. 144 (1970). In deciding whether there is a

genuine issue of material fact, the court must

view the evidence presented in the light most

-17<

favorable to the nonmoving party and resolve all

conflicts in favor of that side. Id. This is

precisely what the courts below failed to do.

This is not a case such as Celotex, in which the

nonmoving party introduced no summary judgment

evidence in support of the position it bore the

burden to establish at trial. Here, the allega-

tions of Respondent--that the Petitioner should

have discovered the fraud prior to January 9,

1984--were rebutted by the affidavits submitted

to the court by Carlus D. Gay, Jr., the President

of First Team Auction, the Petitioner (excerpts

from which are attached hereto as Appendices C

and D).

The key to the controversy is contained in

the meaning of Ala. Code § 6-2-3 (1975 & Supp.

1986). This is a fraudulent concealment statute,

but it is clear that it operates in the same

manner as a “discovery rule” when the underlying

basis of the cause of action is fraud itself:

Under § 6-2-3, Code 1975, an ac-

tion for fraud must be brought within

one year from the discovery of the

fraud. The statute of limittions will

not begin to run until the plaintiff

knows of facts which would have put a

reasonable mind on notice of tne pos-

sible existence of fraud.

Facts showing a fraud are con-

sidered to be discovered when they

should have been discovered by one who

has acquired knowledge sufficient to

provoke inquiry in the mind of a person

of ordinary prudence. Butler v.

Guaranty Savings & Loan Ass’n, 251 Ala.

449, 37 So.2d 638 (1948). One who is

being deceived, however, may be lulled

into a false sense of security. Conse-

quently, “[a] party thus situated is

not required to presume fraud or

suspect it, until something comes to

him leading a just person to suspect

and make inquiry.” Williams v. Beden-

baugh, 215 Ala. 200, 110 So. 286

(1926).

Earle, McMillan & Niemeyer, Inc. v. Dekle, 418

So. 2d 97, 99-100 (Ala. 1982) (emphasis added)

(holding that purchasers of real property who

alleged fraudulent misrepresentations of

PO cae

-19-

brokerage firm and real estate salesman fell

within fraudulent concealment exception where

there was no reason for plaintiffs to have ques-

tioned representations). While it is true that

the ultimate burden of persuasion at trial

regarding the tolling of the statute is upon the

plaintiff relying on the exception, Amason v.

First State Bank of Lineville, 369 So. 2d 547,

550-51 (Ala. 1979), the question of whether

plaintiffs should have discovered the fraud in

question within a certain time is one for the

jury when plaintiff’s evidence is “sufficient to

raise a reasonable inference in support of their

position that they did not discover a condition

which put them on notice of possible fraud[.]”

Elrod v. Ford, 489 So. 2d 534, 537 (Ala. 1986).

Furthermore, whether tne Petitioners in the case

sub judice exercised due diligence in discovering

the fraud must be analyzed in the following

-20-

statement of the law in Alabama:

Broadly speaking, the facts con-

stituting the fraud are to be con-

sidered as discovered when they ought

to be discovered, when such facts come

to knowledge as provoke inquiry in a

person of ordinary prudence, and which,

if followed up, would lead to the dis-

covery of the fraud. But this rule is

not to be so applied as to defeat the

ends of the statute. Fraud, in the

nature of it, implies that the party

as en mi nd WwW

i se sen j A_part

thus situated is not required to

esum ud or sus it ti

something comes to him leading a just

person to suspect and make inquiry.

Dealing with the case before us,

only a period of some four months

elapsed from the time of the purchase

of the stock until the twelve months’

period provided by the saving clause of

the statute began. This is not per se

an unreasonable time for the discovery

of the fraud or such time as calis for

explanation of long acquiescence and

delay. In such case, we think the rule

stated in Maxwell v. Lauderdale, supra,

quite strict enough; viz., the replica-

tion should show how and when the facts

constituting the fraud became known,

with a general denial of the knowledge

of such facts theretofore.

-21-

Williams v. Bedenbaugh, 215 Ala. 200, 110 So.

286, 289 (1926) (emphasis added).

The district court, in holding that Respon-

dent was entitled to summary judgment, does not

even refer to the affidavits of Petitioner’s

president filed in opposition to summary judgment

[Appendices C-D]. The district court in essence

held that Petitioner should have discovered the

fraud prior to January 9, 1984 because: (1) an

agent of the Petitioner purchased certain

lakefront property in July 1983 that should have

put Petitioner on notice of the fraud (Appendix

B-6); (2) Petitioner is a “sophisticated cor-

poration with considerable experience in the

purchase, sale and development of real estate,”

(Appendix B-7); and (3) Petitioner had its

representatives on the land involved by July 1983

(Appendix B-7). The court concluded that

Petitioner should have attempted to discover the

-22-

fraud before 1984. However, it is clear that

under Alabama substantive law which the district

court was constitutionally bound to apply in this

diversity case, j ailro Vv fe) ins, 304

U.S. 64 (1938); that the Petitioner was under no

absolute duty to investigate possible fraud where

there was no indication, until well into 1984,

that any fraud existed. a cMillan &

Niemeyer, Inc. v. Dekle, supra; Williams v.

Bedenbaugh, supra. Furthermore, on most of the

“facts” found by the district court in reaching

its conclusion, the court was just plain wrong,

as demonstrated by the affidavits by Petitioner’s

president. For example, Petitioner denied that

any lakefront property was sold in July 1983

(Appendix C-1). Thus, Petitioner, contrary to

the finding of the court, did not have construc-

tive knowledge that the lakefront property would

sell for less than the appraisal. Second,

aot ty pe

a

-23-

Petitioner denied that it had any experience in

the sale of lakefront property, and did not have

“considerable oxpexiance in the purchase, sale

and development of real estate” (Appendix B-7;

C-2). Finally, Petitioner denied that any of its

representatives inspected the lakefront property

until the spring of 1984; a fact which Respondent

was aware of (Appendix D-1-3; C-2-3).

Thus, all of the basis of the district

court’s decision were the subject of hotly-dis-

puted issues. By resolving the disputes in favor

of the moving party the district court, and the

court of appeals in affirming the trial court’s

decision, violated the meaning and spirit of Fed.

R. Civ, PP. 56.

Other circuit courts of appeals, in con-

sidering whether summary judgment was appropriate

when the nonmoving party claimed that the injury

was not discoverable before a particular point in

-24-

time, have disagreed with the analysis of the

district court in this case. For example, in

Braxton-Secret v. A.H. Robins Co., 769 F.2d 528

(9th Cir. 1985), it is stated that questions

involving a person’s state of mind are generally

factual issues inappropriate for summary judg-

ment, and such judgment should not be granted

where contradictory inferences can be drawn from

even undisputed facts. Id. at 531 (concluding

that plaintiff’s fraudulent concealment defense

did not preclude summary judgment where plaintiff

gained actual independent knowledge of the wrong

dispute concealment); see also Allen v. A.H.

Robins Co., 752 F.2d 1365 (9th Cir. 1985) (re-

versing summary judgment in favor of manufacturer

to permit plaintiff to set up fraudulent conceal-

ment defenses); Lundy v. Union Carbide, 695 F.2d

394 (9th Cir. 1982) (trial court’s grant of sum-

mary judgment improper where there existed fac-

aa

a een Ce

-25-

tual dispute as to whether plaintiff should have

discovered medical injury prior to a particular

date); Admiralty Fund v. Jones, 677 F.2d 1289

(9th Cir. 1982) (it was not clearly shown in

securities fraud action that buyer was put on

notice of defendant’s alleged misrepresentations

regarding corporate shares; thus, plaintiff’s due

diligence, or lack thereof, was substantial issue

of material fact, precluding summary judgment).

Other circuits are in accord. The Fifth

Circuit, prior to the split-off and creation of

the Eleventh Circuit, held in In re Beef Industry

Antitrust Litigation, 600 F.2d 1148, 1170 (5th

1979), cert. denied, 449 U.S. 905 (1980), that

the question of when the statute of limitations

began to run in the face of a claim of fraudulent

concealment “is a factual one, .. . and is

therefore not determinable on a motion for sum-

mary judgment” (citation omitted).

-26-

With respect to the Court of Appeals, Dis-

trict of Columbia Circuit, see Hartford Life

Insurance Co. v. Title Guarantee Co., 520 F.2d

1170 (D.C. Cir. 1975) (reversing summary judgment

where issue of whether plaintiff should have

learned of fraudulent conduct earlier than it did

was not established as a matter of law); Emmet v.

Eastern Dispensary & Casualty Hospital, 396 F.2d

931 (D.C. Cir. 1967) (genuine issue of fact

remained as to plaintiff’s fraudulent concealment

claim barring summary judgment). The Second

Circuit is in agreement, Robertson v. Seidman &

Seidman, 609 F.2d 583 (2d Cir. 1979) (summary

judgment erroneously granted where conflicting

inferences could be drawn from affidavits as to

whether plaintiff exercised due diligence in

discovering cause of action).

In the Seventh Circuit, see Sperry v.

Bargaren, 523 F.2d 708 (7th Cir. 1975) (whether

-27-

alleged fraud was concealed or was of such a

nature as to conceal itself, thus tolling statute

of limitations, could not be resolved on summary

judgment because of questions of fact); Gates

Rubber Co. v. USM Corp., 508 F.2d 603 (7th Cir.

1975) (evidence of fraudulent concealment raised

factual issue, precluding summary judgment). See

also Exnicious v. United States, 563 F.2d 418

(10th Cir. 1977) (material fact existed as to

whether claimant should have discovered condition

before he did, precluding summary judgment).

The Eleventh Circuit cases cited by the

district court below are clearly distinguishable.

In Sewers v. A.H. Robins Co., 715 F.2d 1559 (11th

Cir. 1983), the plaintiff claimant’s cause of

action was products liability--not fraud. Thus,

she was required, under Alabama law, to allege

and plead the acts constituting fraudulent con-

cealment on the part of the defendant manufac-

-28-

turer. This, like the plaintiff in Celotex Corp.

v. Catrett, supra, she wholly failed to do.

There were thus no disputed issues as to when she

should have discovered the fraud, since she had

not alleged any fraud at all. 715 F.2d at 1561-

62. The fraud in the case sub judice lies in the

underlying cause of action; no party has sug-

gested that the facts constituting that cause of

action have not been alleged.

Furthermore, Hunt v. American Bank & Trust

Co. of Baton Rouge, 783 F.2d 1011 (11th Cir.

1986) is likewise not controlling here. In that

case, the original receiver had already deter- |

mined, outside the limitations period, facts |

indicating that certain transactions were |

fraudulent, or suspected them to be so. In the

present case, Petitioner has submitted competent

summary judgment evidence that there were no such

suspicions until the spring of 1984. Because of

nT |

-29-

the high reputation for accuracy attributed to

MAI appraisals, Petitioner had no reason to look

for fraud where none appeared on the face of the

transaction, and had no duty to do so under

Alabama law. Earle, McMillan & Niemeyer, Inc. v.

Dekle, supra, 418 So. 2d at 100.

In sanctioning per curiam the actions of the

district court, it is submitted that the court of

appeals has acted inconsistently with the

decisions of this Court and other circuit courts

of appeals. Thus, Petitioner requests that this

Court exercise its supervisory authority and

reverse the court of appeals.

-30-

CONCLUSION

Wherefore, Premises Considered, Petitioner

respectfully prays that a Writ of Certiorari be

granted.

Respectfully submitted,

KX EMME

Ben F. Easterlin IV

Ellis, Easterlin, Peagler

& Gatewood, P.C.

P.O. Box 488

Americus, Georgia 31709

(912) 924-9316

Attorney for Petitioner

-31-

I certify that I have this date served three

(3) copies each of the foregoing Petition for

Writ of Certiorari upon the First State Bank of

Clay County (formerly State Bank of Lineville),

by mailing true and correct copies of the same

correctly addressed, and with sufficient postage

affixed thereto, to the following counsel:

Thomas Reuben Bell

223 North Norton Avenue

Sylacauga, Alabama 35150

James J. Odom, Jr.

P.O. Box 11244

Birmingham, Alabama 35202-1244

4H

This 6 day of Be ‘Zz , (a

br. F. Z_Caele IV

Attorney for Petitioner

APPENDIX A

The opinion of the Court of Appeals:

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

NO. 86-7371

FIRST TEAM AUCTION, Etc., DO NOT PUBLISH

Plaintiff-Appellant,

versus

FIRST STATE BANK OF

LINEVILLE, etc.,

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of Alabama

Before RONEY, Chief Judge, JOHNSON, Circuit

Judge, and ESCHBACH*, Senior Circuit Judge.

Irie.

PER CURIAM:

AFFIRMED. See Circuit Rule 25.

*Honorable Jesse E. Eschbach, Senior U.S. Circuit

Judge for the Seventh Circuit, sitting by desig-

nation.

~~

ne ee nate

Ne eee et

APPENDIX B

The opinion of the district court:

IN THE UNITED STATES DISTRICT COURT FOR THE

NORTHERN DISTRICT OF ALABAMA

EASTERN DIVISION

FIRST TEAM AUCTION, INC., )

PLAINTIFF, )

vs. ) CV85-H-2383-E

FIRST STATE BANK OF CLAY )

COUNTY,

DEFENDANT. |

MEMORANDUM OF DECISION

This cause

is before the court on the motion

of defendant for summary judgment in its favor on

the complaint.

The factual background of this

case is presented in the court’s order entered

January 3, 1986,

detail here.

and will not be reiterated in

This action arises out of a transaction

between plaintiff and defendant culminating in an

agreement executed July 21, 1983. On September

6, 1985, plaintiff filed this suit, claiming to

have been defrauded by defendant in the July 1983

transaction. Defendant’s main asserted ground

for summary judgment is that plaintiff’s claim

herein is time barred.

Three Alabama statutes are relevant here.

Before 1985, fraud claims in Alabama were

governed by the one-year statute of limitations

in Ala. Code §6-2-39(a) (5) (1975) (repealed by

Act No.85-39, 1984-85 Ala. Acts (2nd Special

Sess.) 40). Effective January 9, 1985, such

claims fall under the two-year statute prescribed

by Ala. Code §6-2-38(1) (Supp. 1985). The finai

statute that is critical here is Ala. Code §6-2-3

(1975 and Supp. 1985), which tolls the statute of

limitations on a fraud claim until such time as

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the plaintiff should with reasonable diligence

have discovered the fraud. (Before January 9,

1985, a party plaintiff had one year from the

date the fraud should have been discovered to

bring suit. Act No. 85-39, supra, extended that

time to two years, effective January 9, 1985).

The parties are in agreement that plaintiff

gains the benefit of the two-year statute if it

could not with reasonable diligence have dis-

covered its fraud claim before January 9, 1984.

See Tyson v. Johns-Manville Sales Corp., 399 So.

2d 263, 268-69 (Ala. 1981) (legislature may ex-

tend limitations period for existing claim, so

long as claim was not already time barred at the

time of the legislative action). Thus, the cru-

cial inquiry here is whether plaintiff’s alleged

fraud claim arose before January 9, 1984. If it

arose before that date, it would have been time

barred under §6-2-39(a) (5) well before this suit

was filed. If it arose on or after that date,

plaintiff gained the benefit of §6-2-38(1) and

the amended §6-2-3 and obtained an extra year in

which to file suit.

As an initial proposition, it must be noted

that, but for §6-2-3, plaintiff’s claim would

have arisen in July 1983, the time of the alleged

fraud, and thus would have been time barred over

a year before this suit was filed. The burden is

on plaintiff to show that it should not have

discovered defendant’s alleged fraud until such

time as to make the filing of suit timely under

§6-2-3. See Amason v. First State Bank, 369 So.

2d 547, 550 (Ala. 1979). In order to prove the

applicability of § 6-2-3, plaintiff must show not

merely that it was ignorant of the facts underly-

ing the alleged fraud, but rather that its ig-

norance was “superinduced by the fraud of the

[defendant] in the form of active concealment,

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conduct calculated to mislead, or to prevent

inquiry and lull into repose.” Peters Mineral

Land Co. v. Hooper, 208 Ala. 324, 329, 94 So. 606

(1922). Of course, the statute begins to run

notwithstanding §6-2-3 from the time the alleged

fraud should have been discovered, not from the

time of actual discovery. Johnson v. Shenandoah

Life Insurance Co., 291 Ala. 389, 397, 281 So. 2d

636 (1973). .

Here, the undisputed facts show that plain-

tiff bought mortgages from defendant in July

1983. It planned to sell the lands covered by

those mortgages (the “mortgaged lands”) in the

spring @f 1984, after selling other lands owned

by the mortgagor in July 1983. The auction of

the bulk of the mortgaged lands actually took

place in August 1984, after a lawsuit wherein

defendant here sought and obtained specific per-

formance of plaintiff’s agreement to buy the

mortgages, which lawsuit was resolved in December

1983, and after protracted negotiations in the

Bankruptcy Court for this district over the

release of the mortgaged lands from the estate of

the bankrupt mortgagor. At the August 1984 auc-

tion, the mortgaged lands brought in an amount

considerably less than their appraised value

under the appraisal plaintiff now says was

fraudulent.

Further, it appears that plaintiff had sold

some 40 acres of the mortgaged lands as part of

Tract R-4 in the July 1983 auction. This tract,

along with other tracts adjoining some of the

mortgaged lands, sold at auction for $350 per

acre, again apparently less than the appraised

value on which plaintiff purportedly relied. The

purchaser of Tract R-4 was, in fact, the agent of

plaintiff.

To judge from its financial statements and

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its activities, as reflected by the court record,

plaintiff is a sophisticated corporation with

considerable experience in the purchase, sale and

development of real estate. Plaintiff had had

its representatives on the mortgaged lands by

July 1983, at least to the extent necessary to

include photographs and information on the

mortgaged lands in promotional materials for the

July 1983 auction and to sell (and indirectly

purchase) Tract R-4 in the July 1983 auction.

Plaintiff was engaged in litigation over its con-

tract to buy the mortgages throughout the fall of

1983. Nonetheless, plaintiff says it could not

have discovered the alleged fraud in 1983, nor

even after the August 1984 auction. Rather, it

maintains that it discovered the alleged fraud

only after contact with the mortgagor in May

1985.

This argument will not hold water. Of

course, it is only important whether plaintiff

should have discovered the alleged fraud before

January 9, 1984, not whether its actual discovery

did not occur before May 1985. On this point,

the court must reiterate that plaintiff is a

sophisticated corporation claiming to have been

defrauded in a transaction of the kind in which

it regularly engages, not a naive individual of

whom an overbearing entity has taken advantage.

While disputes as to when a party plaintiff

should have known of a fraud may ordinarily be

left to the jury, it is clear that in some cir-

cumstances there may be no genuine dispute in

light of the identities and activities of the

parties, so that the matter may be resolved ina

defendant’s favor without trial. See, e.g., Hunt

v. American Bank & Trust Co., 783 F.2d 1011, 1014

(11th Cir. 1986). Further, it is settled that

§6-2-3 does not relieve a party plaintiff of

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diligence in the discovery of fraud, but rather

that it requires that fraudulent concealment of

the existence of the fraud be plead and proven.

Sellers v. A.H. Robins Co., 715 F.2d 1559, 1561-

62 (lith Cir. 1983).

The present case appears to be squarely

within the rule of Taylor v. South & North

Alabama Railroad Co., 13 F. 152, 159

(C.C.M.D.Ala. 1882), holding that a predecessor

statute to §6-2-3

- « « certainly does not absolve a

party from all effort or diligence to

obtain knowledge of the facts con-

stituting the fraud complained of. The

statute certainly was not intended [to]

and did not change the rule of equity

upon the subject of diligence in such

cases, and thus benefit those only who

might be willfully ignorant, or who,

from carelessness and indifference,

should neglect to avail themselves of

the means of information on the sub-

ject.

Se 2 8

There must, then, be some dis-

-B-10-

position and effort to obtain a

knowledge of the facts, and that is

what the law calls reasonable dili-

gence. The question is not what facts

the complainant actually knew, but of

what facts might he have obtained

knowledge had he sought it from the

natural sources of information which

were at his command.

Here, plaintiff was experienced in real

estate matters. For the latter half of 1983 it

was engaged in negotiations and litigation re-

garding the mortgaged land. The mortgaged land

was in its control from July 1983 on, and in July

1983 it auctioned off and bought for its own

account 40 acres of the mortgaged land. Plain-

tiff had ample access to information it needed to

discover the alleged fraud, and ample time and

reason to use that information. Its failure to

do so shows that it lacked the diligence required

to claim the benefit of §6-2-3.

On this record, it is apparent as a matter

of law that plaintiff should have known of defen-

-B-ii-

dant’s alleged fraud before January 9, 1984, and

thus that this action became time barred before

January 19, 1985. Accordingly, defendant’s mo-

tion for summary judgment in its faver will be

granted, and a separate order dismissing the

complaint with prejudice will be entered.

DONE this 24th day of April, 1986.

UNITED STATES DISTRICT JUDGE

ascied

NEY St a Ls a nse ae aR

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APPENDIX C

Excerpts from affidavit submitted by Carlus

D. Gay, Jr., Petitioner’s President, dated Novem-

ber 4, 1985:

"Upon obtaining the agreement of Hooton’s sup-

pliers and lenders to allow an auction of

Hooton’s timberland without reserve, Hooton and

First Team entered into an auction contract for

sale of approximately 3,000 acres, none of which

was included in the mortgage of First State Bank

of Lineville, in July, 1983 and a second auction,

consisting of property included in the mortgage

to First State Bank of Lineville in the spring of

1984. .. .” (emphasis added) R1-11-4.

"This property was significantly different in

character from the approximately 3,000 acres of

Hooton timberland which was to be sold in the

July, 1983 auction. None of that property was

lake front property, and it was scattered tracts

of hillside timberland. In contrast, the proper-

ty on which First State Bank of Lineville held a

mortgage was subdivision development type proper-

ty around the lake.” R1-11-6.

“First Team Auction had never sold any water

front property in Alabama at that time, and in

fact, to the best of my knowledge and recollec-

tion had not sold any real property in Alabama

before the Hooton auction” R1-11-6.

At the time of these negotiations, First Team had

not had the opportunity to cruise, appraise or

thoroughly inspect the property to determine its

value; but First Team had seen most of the

property. Nothing about the appearance of the

water front property indicated that it was of any

less value than specified in the ieee Soned

appraisal. Actually, the water front property

looked to be attractive subdivision development

property and only someone familiar with values

and comparable sales in that particular area

would have had any reason to know that this

property was not worth as much as indicated in

the appraisal.” R1-11-6.

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APPENDIX D

Excerpts from affidavit of Carlus D. Gay,

Jr., Petitioner’s President, dated February 14,

1986:

“, . . Hooton drove the First Team representative

around to see as much of the 3,000 acres of tim-

Oe EE ir Ot

berland as possible. During this cursory inspec-

tion, Hooton also pointed out some of the lake

front property. However, Hooton did not show the

First Team representative all of the lake front

property, and none of the lake front property was

inspected closely at this time as Hooton and the

First Team representative had too much territory

to cover ina few hours. R1-14-2.

. . . Furthermore, no representative of First

Team spent any time at all before the July 23,

1983 auction on or inspecting the lake front

property which was to be the subject of a later

auction. Also, because of its involvement with

the upcoming July 23, 1983 auction, First Team

had no opportunity and did not visit or inspect

the lake front property from July 5, 1983, the

time it began its negotiations with First State

Bank of Lineville regarding the purchase of the

Hooton mortgage on such property, until the July

23, 1983 auction. As a result, First Team had to

and did, rely entirely upon the representatives

by the bank as to the value of the lake front

property during these negotiations. R1-14-3.

- »« - and no representative of First Team had any

involvement with or performed any inspection of

the lake front property in any way between July

23, 1983 and the spring of 1984. R1-14-4.

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In the spring of 1984, First Team began

for the first time to plan for an auc-

tion of the lake front property, and

First Team representatives saw all of

the lake front property for the first

time. Prior to spring 1984, no First

Team personnel had thoroughly inspected

the lake front property at all, and the

only contact with such properties was

one or two occasions when a First Team

representative saw some of the tracts

while preparing for the July, 1983

auction. Even though plans for the

lake front auction began in the spring

of 1984, no actual work on the property

was undertaken until July due to the

lack of the Bankruptcy Court’s approval

of the sale until that time. R1-14-4.