Birchwood-Manassas Assocs., L.L.C. v. Birchwood at Oak Knoll Farm, L.L.C.
290 Va. 5
| Va. | 2015Background
- Birchwood-Manassas Associates, LLC (Birchwood-Manassas) was a real-estate LLC managed by Ronald Horowitz and Burton Haims; Horowitz ran day-to-day operations.
- Two related entities, Birchwood at Oak Knoll Farm (Oak Knoll) and Birchwood at Wading River (Wading River), received transfers from Birchwood-Manassas between 2004 and 2009; transfers were recorded in ledgers but lacked formal loan documents, so obligations were repayable on demand.
- A member sought dissolution of Birchwood-Manassas; the circuit court dissolved the LLC and appointed a liquidating trustee in 2013 because of managerial conflicts; the trustee demanded repayment from Oak Knoll and Wading River.
- Birchwood-Manassas (through the trustee) sued in 2014 for breach of contract, unjust enrichment, and constructive trusts, and alleged managers breached fiduciary duties; defendants pleaded the claims were time-barred by the three-year statute of limitations.
- Birchwood-Manassas argued equitable tolling applied because the managers’ conflicts and fiduciary breaches made it impossible to bring suit within the limitations period; the circuit court granted the plea in bar and dismissed with prejudice.
- The Supreme Court of Virginia affirmed, holding Birchwood-Manassas failed to prove an "extraordinary circumstance" warranting equitable tolling and noting other members could have pursued claims earlier.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether equitable tolling applies due to managers' conflicts/breaches | Managers’ conflicts and breaches made it impossible to sue within limitations, so equity should toll the statute | No statutory tolling applies; plaintiffs failed to show extraordinary circumstances preventing suit | Court held equitable tolling not warranted; statute not tolled |
| Whether absence of formal loan documents affects claims' timeliness | Recorded transfers create demand obligations; claims timely if tolling applied | Substantive form of transfers irrelevant to limitations defense | Court accepted transfers created obligations but limitations still ran without tolling |
| Whether alleged misconduct was concealed or prevented suit | Conflicts/breaches functionally prevented assertion of rights | No concealment or affirmative acts preventing suit; other members could act | Court found no concealment/affirmative hindrance; suit could have been filed |
| Whether derivative or member actions could have preserved claims | Managers' control prevented internal pursuit of claims | Members had statutory rights to bring derivative actions; at least one member acted during limitations period | Court held other members could have sued; plaintiff failed due diligence |
Key Cases Cited
- Schmidt v. Household Fin. Corp., II, 276 Va. 108 (2008) (equitable tolling requires extraordinary circumstances and plaintiff bears burden of proof)
- Casey v. Merck & Co., 283 Va. 411 (2012) (statutes of limitations are strictly enforced absent clear statutory exception)
- Brunswick Land Corp. v. Perkinson, 153 Va. 603 (1930) (equity may toll limitations in extraordinary cases such as fraud or affirmative acts preventing suit)
- Simmons v. Miller, 261 Va. 561 (2001) (derivative actions permit members to assert company claims)
- Chesapeake & Ohio Ry. Co. v. Willis, 200 Va. 299 (1958) (equity aids the vigilant; laches and failure to act preclude relief)