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Birchwood-Manassas Assocs., L.L.C. v. Birchwood at Oak Knoll Farm, L.L.C.

Supreme Court of Virginia

June 4, 2015

Birchwood-Manassas Associates, L.L.C., Appellant,
v.
Birchwood at Oak Knoll Farm, L.L.C., et al., Appellees

Upon an appeal from a judgment rendered by the Circuit Court of Prince William County. Circuit Court No. CL13-5521.

OPINION

Upon consideration of the record, briefs, and argument of counsel, the Court is of opinion that there is no error in the judgment of the circuit court.

Birchwood-Manassas Associates, L.L.C. (Birchwood-Manassas) was formed in 1997 to own, develop and sell real estate in Prince William County, Virginia. Ronald J. Horowitz (Horowitz) and Burton Haims (Haims)

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were the managers of Birchwood-Manassas during its entire existence, and Horowitz exercised day-to-day control over the entity. Birchwood at Oak Knoll Farm (Oak Knoll) and Birchwood at Wading River (Wading River) (collectively, Defendants) were two entities also formed to develop and sell real estate under the management and control of Horowitz and Haims, with Horowitz exercising day-to-day control over both of them.

Between August 16, 2004 and June 30, 2009, Horowitz and Haims transferred funds from Birchwood-Manassas to Oak Knoll and Wading River. Oak Knoll and Wading River used the funds to develop and sell their respective properties. The transfers and repayment of funds between the entities were reported and documented in the ledgers and financial statements of the entities. However, there were no loan documents or any formal terms of repayment, thus creating demand obligations owed by Oak Knoll and Wading River in favor of Birchwood-Manassas.

In 2011, a member of Birchwood-Manassas filed suit in the Circuit Court of Prince William County seeking an order dissolving Birchwood-Manassas and the appointment of a liquidating trustee to wind up its affairs. The operating agreement of Birchwood-Manassas contained a clause requiring the entity to be dissolved and its affairs wound up no later than January 1, 2008. The circuit court ordered that Birchwood-Manassas be dissolved and determined that, as Code § 13.1-1048 requires, there was " 'cause shown'" to appoint a liquidating trustee to wind up its affairs, noting that, in regard to the liquidation of assets, an irreconcilable conflict existed between the current managers of Birchwood, Horowitz and Haims, and the companies to which Birchwood lent money, Oak Knoll and Wading River.[*]

The liquidating trustee accepted his appointment on January 29, 2013 and demanded the immediate repayment of the money owed by the Defendants to Birchwood-Manassas. After a prior complaint was dismissed without prejudice, Birchwood-Manassas filed an amended complaint against Oak Knoll Farm and Wading River on January 31, 2014, seeking damages for breach of contract and unjust enrichment and the imposition of constructive trusts on Defendants' respective properties and proceeds from the sale of their properties. Moreover, the amended complaint alleged numerous breaches of the fiduciary duties of loyalty and care by the managers of Birchwood-Manassas.

The Defendants filed a plea in bar asserting that Birchwood-Manassas's claims were time-barred. Birchwood-Manassas argued that the limitations period had been equitably tolled because the irrevocable conflict of interest of its managers, Horowitz and Haims, and their breaches of their fiduciary duties to Birchwood-Manassas made it impossible for Birchwood-Manassas to bring a claim against the Defendants within the applicable statute of limitations.

The circuit court granted the plea in bar and dismissed the amended complaint with prejudice. Birchwood-Manassas appeals.

Birchwood-Manassas asserts that the circuit court erred in ruling that the conflicts of interest and breaches of fiduciary duties of its former managers did not equitably toll the statute of limitations on its claims against the Defendants. The parties do not dispute that a three-year statute of limitations applies to the causes of action asserted against the Defendants and that the statute has run, if it was not tolled. Birchwood-Manassas had the burden to prove its entitlement to the tolling of the statute of limitations. See Schmidt v. Household Fin. Corp., II, 276 Va. 108, 117, 120, 661 S.E.2d 834, 839, 840 (2008).

This Court has held that:

It is well-established that statutes of limitations are strictly enforced and must be applied unless the General Assembly has clearly created an exception to their application. A statute of limitations may not be tolled, or an ...

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