WV Supreme Court Reverses Dismissal of Action for Breach of Oral Agreement
The Supreme Court of Appeals of West Virginia issued a decision in March that didn’t attract a lot of attention, which may be due to the rather straightforward procedural issues presented by the appeal. But the facts in Hoover v. Moran, 2008 WL 696879 (March 14, 2008), make the decision worth studying.
Johnnie Hoover worked as a mechanic, welder, and equipment operator for Peter Moran’s company, Princess Beverly Coal Company, from 1984 until 2000. At various points from the mid-1980s until the early 1990s, Hoover alleged that he lent Moran money to cover the payroll and pay other debts.
In February 1985, Hoover loaned Moran $20,000 to be repaid within 60 days. Before the repayment date, Hoover alleged that Moran asked for more time to repay him and agreed, as consideration for the extension, to pay Hoover 10% of the profits from the sale of the company if it were ever sold. The parties did not put the agreement in writing and Hover was repaid at some point.
In 1997, Hoover and Moran attempted to negotiate Hoover’s claim of an interest in the proceeds from the company’s sale, but they could not reach an agreement. Two years later, Princess Beverly was sold for $11.6 million. Hoover sued Moran and the company in 2002, alleging breach of the oral agreement.
The defendants moved to dismiss for failure to state a claim. Before the circuit court could rule on the motion, however, Princess Beverly filed for bankruptcy in November 2002, and received an automatic stay against Hoover’s litigation. Subsequently the parties voluntarily dismissed Princess Beverly from the case. Then, the circuit court, on its own motion, dismissed the case against Moran due to inactivity for more than one year.
Hoover moved to reinstate the case, and the circuit court granted his motion in August 2006. The parties supplemented their briefs on Moran’s pending Rule 12(b)(6) motion. Moran argued that the action did not state a claim against him in his personal capacity, and that in order to be enforceable, the alleged agreement between him and Hoover had to be in writing.
Following a hearing on the motion, the circuit court granted Moran’s motion to dismiss on the grounds the complaint failed to state a claim against him in his personal capacity. Hoover’s motion for reconsideration was denied, and he prosecuted an appeal from the circuit court’s order. Moran also prosecuted a cross-appeal from the order reinstating the action.
As to the dismissal of the complaint for failure to state a claim against Moran as an individual, the Supreme Court, in a per curiam opinion, found that Hoover’s allegations against Moran and Princess Beverly, although somewhat ambiguous, “sufficiently placed Mr. Moran on notice that he was being sued in his individual capacity[,]” and reversed the dismissal on that basis.
The Court also rejected Moran’s argument that the action was barred because the statute of frauds contained in the Uniform Commercial Code required the agreement to be in writing, finding that the doctrine of promissory estoppel applied to Hoover’s claim. Hoover alleged that after he and Moran reached their agreement that Moran would pay Hoover 10% of the profits from the sale of Princess Beverly, Moran borrowed an additional $31,000 from Hoover, which Hoover was willing to lend because of the agreement:
“To the extent that Mr. Hoover’s allegations are true, an injustice would occur were we to allow the statute of frauds contained in W. Va. Code §46-8-319 to defeat his cause of action. We believe that under the doctrine of promissory estoppel, Mr. Hoover should have his day in court notwithstanding the possible application of the statute of frauds writing requirement of W. Va. Code §46-8-319.”
Moran did not fare any better in his appeal of the reinstatement of the action. The circuit court had reinstated the action because neither Hoover nor his counsel received notice of the dismissal as required by Dimon v. Mansy, 479 S.E.2d 339 (W.Va. 1996), which Moran did not dispute. Absent such notice, which is intended to give the parties an opportunity to be heard before the case is actually dismissed, the Supreme Court held that the reinstatement of the case was appropriate.
