North Carolina Court of Appeals orders reset of the clock in suit against lender

The statute of limitations is like a loud, ever ticking alarm clock.  Once it goes off, a plaintiff's suit is finished forever.  But one North Carolina businessman may get to bring a suit against his bank despite filing the case well after the statute of limitations expired. The state's Court of Appeals said the bank's promises to forgive the debt essentially hit the snooze button.

William Ussery and Wayne Barker went into the chair-making business together in 1999. Their banker, Wiley Mabe of BB&T, assured them several times that they would qualify for the government-backed small business loan they needed to build their company. Relying on those repeated assurances, Ussery and Barker took out $275,000 in loans to ramp up their business.

In January 2002, Mabe told Ussery and Barker that, to Mabe's surprise, they hadn't qualified for a government loan. Ussery and Barker later learned that, in fact, Mabe had been directing them to the wrong type of loan and hadn't submitted the loan package on time because he didn't believe they would qualify. By that time, the company had taken on too much debt to qualify for the right type of loan, and Ussery and Barker were forced to close down their company and take out a new $425,000 loan from BB&T to pay back their earlier debts.

Due to the terms of the loan, Barker couldn't keep up with his payments and filed suit against BB&T in May 2003. Ussery didn't join the suit and claims BB&T dissuaded him from doing so, repeatedly promising him that everything would be worked out and the loan would be forgiven once Barker's suit was resolved. The suit ended with a confidential settlement in April 2006-after the statute of limitations had run on Ussery's claims.

Ussery demanded BB&T both cancel his debt and compensate him for failing to secure the government loan. BB&T froze the loan for more than a year in exchange for Ussery delaying his suit, but formally rejected his demands in 2008. Six years and five months after he learned the government loan had been denied, Ussery sued BB&T on seven causes of action. BB&T countersued and asked the trial court to dismiss Ussery's claims, saying the statutes of limitations-three years for most of the claims-had expired. A Richmond County judge granted the motion and entered summary judgment in favor of BB&T, and Ussery appealed.

On May 21, a divided North Carolina Court of Appeals reversed that decision, holding that while the statutes of limitations had indeed run, Ussery alleged that he had relied on the repeated assurances of BB&T in delaying his suit. The court found that Ussery had presented enough evidence for a jury to decide whether his claims were true. If so, the bank will not be able to assert the statutes of limitations as a defense to his suit.

BB&T claimed that it did not make any false representations when it told Ussery that "everything would be worked out," but the court said the question was not whether the bank intentionally made false statements, but whether it later took a position that was inconsistent with those statements. The court said Ussery had presented evidence that BB&T's actions did not comport with the assurances he alleged the bank had given him.

The evidence, Judge Linda Stephens wrote for the majority, "is sufficient to raise an inference that BB&T's actions, when taken together, lulled Plaintiff into a false sense of security, induced him to refrain from filing suit within the required limitations periods, and, as such, constituted conduct reasonably calculated to convey the impression that the facts were otherwise than, and inconsistent with, what BB&T later attempted to assert."

BB&T argued that if Ussery, a businessman and real estate developer who had hired an attorney, had been misled, it was through his own lack of reasonable care. The court disagreed, saying that while the law wouldn't protect someone who simply sleeps on his rights, it does protect people of all levels of sophistication who rely to their detriment on a false representation and lack the means to obtain the truth.

In this case, the truth depended on BB&T's willingness to cooperate at a later point, something Ussery couldn't possibly have known about. In such situations, the court would look to seek if the defendant wound up taking a position inconsistent with its prior statements-which Ussery properly alleged BB&T did.

Judge Chris Dillon dissented, meaning that the bank will have an automatic right to appeal the decision to the state's Supreme Court. Dillon would have ruled that the bank's promises to "work everything out" were merely promises to negotiate and that no jury could infer from them that the bank promised to settle the matter in any particular way. He also would have ruled that the oral promises to forgive the loan could not be admitted into evidence because they contradicted the terms of the written contract.

Steve Lawrence and Stacey Tally of Anderson, Johnson, Lawrence & Butler in Fayetteville represented Ussery. Kevin Williams and Mike Phillips of Bell, Davis & Pitt in Winston-Salem represented BB&T.

Lawrence said he understood from the outset that overcoming the statutes of limitations would be a challenge, but that he felt Ussery had the stronger argument about whether the question should be taken to a jury.

"That was the whole battle, we knew that the bank would not want to present these specific facts to a jury in an area that's lost a lot of jobs in the last few years," Lawrence said.