United States District Court, W.D. Arkansas, Fayetteville Division
CENTRAL UNITED METHODIST CHURCH, INC. PLAINTIFF
BARBSTAN PARTNERS, LTD. DEFENDANT
OPINION AND ORDER
HOLMES, III, U.S. DISTRICT JUDGE
the Court are Defendant's motion (Doc. 32) to dismiss the
second amended complaint and brief (Doc. 33) in support.
Plaintiff filed a response (Doc. 43) in opposition and
Defendant filed a reply (Doc. 46) with leave of Court. The
motion will be granted in part and denied in part.
second amended complaint seeks rescission of a contract on
the basis of mutual mistake, fraud, and constructive fraud.
The mutual mistake claim was also raised in the first amended
complaint, and the Court has already denied a motion to
dismiss this claim. (Doc. 26). Defendant argues that the new
factual allegations in the second amended complaint made in
support of the fraud claims demonstrate that no mutual
mistake existed. In ruling on a motion to dismiss, the Court
accepts all facts alleged in the complaint as true and grants
all reasonable inferences in the nonmovant's favor.
Gallagher v. City of Clayton, 699 F.3d 1013, 1016
(8th Cir. 2012). The Federal Rules of Civil Procedure
“favor decisions on the merits, and reject an
approach that pleading is a game of skill in which one
misstep may be decisive.” Schiavone v.
Fortune, 477 U.S. 21, 27 (1986). “[D]ecisions on
the merits are not to be avoided on the basis of ‘mere
technicalities.'” Id. (quoting Foman
v. Davis, 371 U.S. 178, 181 (1962)).
alleges inconsistent facts-that Defendant was mistaken, and
that Defendant was not mistaken about an option-to-purchase
term in a contract for lease. Given that Rule 8(d) allows
parties to plead alternative claims for relief, and in light
of Rule 8(e)'s mandate that “[p]leadings must be
construed so as to do justice, ” Defendant's motion
to dismiss the mutual mistake claim will again be denied.
motion also seeks dismissal of the newly-added fraud and
constructive fraud claims, arguing that they are barred by
the statute of limitations, that there was no
misrepresentation of material fact, and that no special
relationship existed between the parties. Regarding its
statute of limitations argument, Defendant contends that
Plaintiff's claims are untimely under the three-year
statute of limitations for fraud. Plaintiff argues that
because it seeks rescission, the three-year statute of
limitations does not apply, but rather the claim must only be
brought within a reasonable time upon discovery of the fraud;
or, in the alternative, that the five-year statute of
limitations under Ark. Code Ann. § 16-56-111(a) applies,
which requires “[a]ctions to enforce written
obligations, duties, or rights . . . be commenced within five
(5) years after the cause of action shall accrue.”
motion to dismiss on the basis of an affirmative defense like
the statute of limitations should be granted only where it is
clear from the face of the complaint that the defense must
succeed. Wycoff v. Menke, 773 F.2d 983, 984-85 (8th
Cir. 1985). When determining which statute of limitations to
apply, the Court “must look to the facts alleged in the
complaint itself to ascertain the area of law in which they
sound.” Kassees v. Satterfield, 303 S.W.3d 42,
44 (Ark. 2009) (“[W]e look to the gist of the action to
determine which statute of limitations to apply.”). The
“gist” of Plaintiff's claims is that
Defendants intentionally misrepresented and/or concealed
material information about its interpretation of the lease
amendment. These facts fit comfortably within the area of
fraud, not contract. Moreover, though Plaintiff seeks
rescission of the parties' contract, rescission is a
remedy, not a cause of action. The causes of action upon
which Plaintiff seeks rescission are fraud and constructive
fraud, and therefore the three-year statute of limitations
governing those claims applies.
Arkansas law, actions for fraud and constructive fraud must
be brought within three years from the date the fraud
occurred. Ark. Code Ann. § 16-56-105; see also
Moix-McNutt v. Brown, 74 S.W.3d 612, 613-14 (Ark. 2002);
Wilson v. Gen. Elec. Capital Auto Lease, Inc., 841
S.W.2d 619, 620-21 (Ark. 1992). However, fraudulent
concealment tolls the statute of limitations “until the
party having the cause of action discovers the fraud or
should have discovered it by the exercise of due
diligence.” Shelton v. Fiser, 8 S.W.3d 89, 96
(Ark. 2000). Arkansas law is clear that for there to be
concealment, “not only must there be fraud, but the
fraud must be furtively planned and secretly executed so as
to keep the fraud concealed.” Delanno, Inc. v.
Peace, 237 S.W.3d 81, 84 (Ark. 2006). Though alleging
fraud is necessary, it is not alone sufficient to toll the
statute of limitations. Id. at 85.
claim for actual fraud is based on statements made by Jake
Pollack on April 7, 2014. (Doc. 29, ¶¶ 97-103). A
timely claim for actual fraud must have been brought by April
7, 2017. The date the fraud occurred on Plaintiff's
constructive fraud claim is less clear. The constructive
fraud argument is premised on Defendant's failure to
disclose material information, specifically its
interpretation of the lease amendment's option to
purchase. Typically, such claims require a duty to speak.
See Howard W. Brill et al., Arkansas Law of Damages
§ 33:9 (2018) (“[L]iability for constructive fraud
only arises in circumstances when a duty to speak
exists.”); Farm Bureau Policy and Members v. Farm
Bureau Mut. Ins. Co. of Arkansas, Inc., 984 S.W.2d 6,
14-15 (Ark. 1998). Any alleged duty in this case ceased to
exist after July 29, 2014, the date the parties signed the
contract to convey the property to Plaintiff. Therefore, the
date the fraud occurred was, at the latest, July 29, 2014. A
timely claim for constructive fraud must have been brought by
July 29, 2017.
filed this action in state court on August 6, 2018, so both
claims are untimely unless the running of the statute of
limitation was suspended. Even accepting the facts in the
complaint as true and resolving all inferences in
Plaintiff's favor, there is no evidence of furtive
planning and no evidence that Defendant secretly worked to
keep any alleged fraud a secret. In fact, Plaintiff had both
the original lease and the lease amendment in its possession
at all relevant times. Merely alleging fraud is not enough-there
must be active concealment. See Delanno, 237 S.W.3d
at 84-85. This was an arm's length transaction between
two parties represented by counsel. Because it is clear from
the face of the complaint that Plaintiff failed to timely
assert its fraud and constructive fraud claims, both claims
will be dismissed.
THEREFORE ORDERED that the motion to dismiss is GRANTED IN
PART and DENIED IN PART. The motion is GRANTED to the extent
that Plaintiff's claims for fraud and constructive fraud
are DISMISSED WITH PREJUDICE. Plaintiff's claim for
mutual mistake remains pending.
 As an alternative basis for dismissal,
the Court notes that the lease terms were equally available
to both parties, and no duty to disclose could arise.
Bridges v. United States Ass'n, 438 S.W.2d 303,
306 (Ark. 1969). Without a duty to disclose, the constructive
fraud claim fails. Id. Similarly, “where,
under the circumstances, the facts should be apparent to one
of his knowledge and intelligence from a cursory glance, or
he has discovered something which should serve as a warning
that he is being deceived, ” a plaintiff does not
justifiably rely on an affirmative misrepresentation.
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