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Volvo Financial Services v. Williamson

United States District Court, S.D. Mississippi, Southern Division

October 18, 2017




         BEFORE THE COURT are the [12] Motion for Summary Judgment filed by Plaintiff Volvo Financial Services, and the [14] Motion for Partial Summary Judgment filed by Defendant Elvis Williamson in this breach of contract case. Volvo seeks to recover deficiency judgments for tractor trailer trucks Williamson financed through Volvo. Williamson argues that a portion of Volvo's claim is barred by the statute of limitations. Both Motions have been fully briefed. The Court finds that the statute of limitations does not bar any part of Volvo's claim. Accordingly, Williamson's Motion for Partial Summary Judgment will be denied. Further, the Court finds no question of material fact concerning whether Volvo is entitled to the deficiency judgment it seeks. Volvo's Motion for Summary Judgment will be granted and a separate judgment entered.


         There are eight trucks at issue in this case, each purchased separately with financing by Volvo and secured with a separate promissory note. Williamson's purchase of the trucks, and Volvo's financing of the purchases, occurred between 2014 and 2015. In 2016 and 2017, Volvo repossessed and sold seven of the trucks (Notes 1-5, 7, 8). Volvo received insurance proceeds on the truck secured by Note 6 and that disposition is not contested in this case. Each disposition resulted in a deficiency balance, all of which are set out in the Attachment to this Order.

         The parties agree that North Carolina law controls interpretation of the Promissory Notes, but Mississippi supplies the controlling procedural law. Volvo moves for summary judgment asserting undisputed evidence that Williamson failed to fully pay the eight Promissory Notes and therefore breached the contracts under North Carolina law. Volvo contends that as a result, it is entitled to a deficiency judgment, because it disposed of the trucks in a commercially reasonable manner after providing reasonable notice to Williamson. Williamson defends against the Motion on the grounds that 1) Volvo acted in a commercially unreasonable manner when it sold the trucks secured by Notes 5, 7 and 8; 2) Volvo did not give commercially reasonable notice when it sold the trucks secured by Notes 1-5, 7 and 8; and 3) the sales prices of the trucks secured by Notes 7 and 8 were grossly inadequate.

         In Williamson's Motion for Partial Summary Judgment, he asserts that Volvo's deficiency claims on the first four promissory notes are barred by the statute of limitations in Miss. Code Ann. § 15-1-23. Under that statute, a deficiency claim must be “commenced or brought within one year from the date of the foreclosure or sale of the property pledged as security for said note or notes.” Accordingly, Williamson requests dismissal of Volvo's deficiency claims as to the first four promissory notes because the trucks pledged as security were sold more than one year before the lawsuit was filed. Volvo argues in opposition that the Notes provided for cross-collateralization, meaning that each of the Notes secured all of Williamson's obligations to Volvo. Volvo argues the Complaint was timely because the first four Notes remained secured until all of the trucks were sold.


         1. The Statute of Limitations

         Each of the Notes at issue contains the following choice of law provision: “This Note shall be effective only when accepted by Lender and shall be governed by the substantive (and not choice of law or conflicts) laws of the State of North Carolina.” The parties agree that this provision means that in this diversity case, the Court should apply Mississippi's procedural law and North Carolina's substantive law. Mississippi classifies statutes of limitations as procedural. Zurich Am. Ins. Co. v. Goodwin, 920 So.2d 427, 433 (Miss. 2006).

         Williamson argues that the one-year limitation period in Miss. Code § 15-1-23 applies to the Notes in this case. The statute provides that any lawsuit “brought upon any installment note, or series of notes of three or more” is barred unless it is “commenced or brought within one year from the date of the foreclosure or sale of the property pledged as security for said note or notes.” The first four truck sales took place during a one month period between January 27 and February 26, 2016. (Volvo Mot. Summ. J. Ex. 2A-D, ECF No. 12-2). This lawsuit was filed on April 10, 2017, more than one year from the sale of the last of the group of four trucks. Williamson contends that Volvo may not obtain a deficiency judgment that includes amounts due under the Notes secured by those four trucks.

         After Williamson asserted his statute of limitations defense, it became Volvo's burden to “show some legal or equitable basis for avoiding such period of limitations.” Stroud v. Progressive Gulf Ins. Co., No. 2016-CA-00750-COA, 2017 WL 4129619, at *3 (Miss. Ct. App. Sept. 19, 2017) (quoting Hall v. Dillard, 739 So.2d 383, 387-88 (¶ 19) (Miss. Ct. App. 1999). Volvo argues that the statute of limitations had not been triggered prior to the sale of all of the trucks because of the cross-collateralization language in the Notes. Volvo highlights the following language in the “Security Interest” provision appearing on the first page of each Note:

In order to secure (i) payment of the Indebtedness, all other debts and obligations at any time owed by Borrower to Lender or its affiliates, and (ii) complete and full performance of any Loan Party's obligations to Lender under the Loan Documents, now existing or at any time entered into, Borrower hereby grants to Lender a security interest in and to the equipment described above (the “equipment”) . . . . “Loan Documents” means this Note, all other loans made by, or obligations of, Borrower to Lender . . . .

(See, e.g., Volvo Mot. Summ. J. Ex. 1 A, at p. 2, ECF No. 12-1).

         Volvo argues that this language “effectively created a global indebtedness secured by all of the Equipment.” (Volvo Resp. 4, ECF No. 20). Therefore, according to Volvo, the sale of trucks in January and February 2016 was not sufficient to trigger the statute of limitations as to any Note because all of the Notes were secured by all of the trucks. Only after all of the trucks had been sold, and there was no more property securing the Notes, were the Notes “foreclosed” upon as contemplated by the statute. As the remaining four trucks were sold within the limitation period, it is irrelevant that the first four were sold outside of the limitations period.

         There are no Mississippi cases applying the statute of limitations in Miss. Code Ann. § 15-1-23 to a note containing the cross-collateral clause at issue here. Williamson urges the Court to consider each Note and each truck separately. However, in the Court's view, the Notes never concerned only one piece of equipment. Each Note contemplated additional security, and each successive purchase added a piece of equipment as security for each Note then existing. Unlike the cases cited by Williamson, the Notes here had additional equipment securing them even after the equipment initially securing the Note was sold. For example, in the Commercial Agency v. Loe case cited by Williamson, a plane securing a note was repossessed and sold, creating a deficiency. There was no question that all of the property securing the note was sold on a particular day. Commercial Agency v. Loe, 667 F.Supp. 359, 365 & n. 5 (S.D.Miss. 1987). The same is true of Guthrie v. The Merchants National Bank of Mobile, 180 So.2d 309, 311, 315 (Miss. 1965) (all property securing single note sold outside limitation period) and Rankin County Bank v. McKinion, 531 So.2d 822, 823 (Miss. 1988) (same). These cases do not answer the question presented in this case, which is whether a partial sale of security triggers the one year statute of limitations. Thus, the Court must make an Erie guess and predict how the Mississippi Supreme Court would resolve the issue if presented with the same case. BancPass, Inc. v. Highway Toll Admin., L.L.C., 863 F.3d 391, 401 (5th Cir. 2017).

         Initially, the Court concludes that although nominally eight promissory notes are involved here, they are, in effect, one note secured by eight trucks by operation of the cross-collateralization clause in each Note. The next question is whether the first or last truck sale triggered § 15-1-23. In this regard, the statute is ambiguous, since “the foreclosure or sale of the property pledged as security for said note or notes” could refer to one or all items of property pledged as security.

         If an ambiguity in a statute exists, a court must “turn to the principles of statutory construction.” Oktibbeha Cty. Hosp. v. Miss. State Dep't of Health, 956 So.2d 207, 212 (Miss. 2007). In doing so, “it is the Court's duty to ‘carefully review statutory language and apply its most reasonable interpretation and meaning to the facts of a particular case.'” Miss. Methodist Hosp. & Rehab. Ctr., Inc. v. Miss. Div. of Medicaid, 21 So.3d 600, 608 (Miss. 2009) (quoting Caldwell v. N. Miss. Med. Ctr., 956 So.2d 888, 891 (Miss. 2007)). To this end, “[w]hen reasonable, th[e] Court is obliged to reach an interpretation that gives effect to all of the statutory language.” Id.

         The Mississippi Supreme Court has considered the meaning of this statute, albeit in a different context. In the early case of Lewis v. Simpson, 167 So. 780, 781 (1936), the court found the statute to be ambiguous as to whether a junior mortgage holder who had not foreclosed was subject to the same limitation period as the senior mortgage holder who had foreclosed. The court held that Miss. Code Ann. § 15-1-23 applied only to the foreclosing party, stating that “[t]he outstanding purpose of this legislation, . . . was to discourage the foreclosure of mortgages during the depression period. The title to the act clears up the uncertainty in the body thereof; in unmistakable language it plainly names the notes secured by the foreclosed mortgage.” Although the holding does not directly apply to this case, the court's mention of the purpose of the statute is helpful.

         The most reasonable interpretation of the statute when applied to the facts of this case is that the sale or foreclosure must be complete to trigger the limitation period. It can be expected that sales of multiple items pledged as security for a single note will occur over some period of time, and it would serve no purpose to require the foreclosing party to file more than one lawsuit if sales spanned the limitation period. This interpretation has no effect on the purpose of the statute - to discourage the foreclosure of mortgages during the depression period. As noted above, the usual mortgage foreclosure situation involves one piece of property secured by a single note, generating no uncertainty about when the limitation period has commenced and no potential for multiple lawsuits. Those hazards exist only where, as in this case, multiple items of property are pledged as security for one promise to pay. Allowing the foreclosure/sales process to be completed before starting the one-year clock for an action on the note avoids these hazards.

         The Court therefore concludes that the statute of limitations in Miss. Code Ann. § 15-1-23 does not bar Volvo's claim to a deficiency judgment that includes the disposition of the first four trucks. The ...

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