United States District Court, W.D. Virginia, Roanoke Division
REPORT AND RECOMMENDATION
S. BALLOU UNITED STATES MAGISTRATE JUDGE
before me are plaintiff Timothy Basham's motion for leave
to amend his complaint (Dkt. No. 13) and defendant Timothy
Jenks's motion for judgment on the pleadings (Dkt. No.
16). I heard oral argument on these motions on December 6,
2017, and took them under advisement. I consider these
motions pursuant to 28 U.S.C. § 636(b)(1)(B) and
recommend that Basham's motion for leave to amend his
complaint be denied as futile, and that Jenks's motion
for judgment on the pleadings be granted, and the complaint
be dismissed with prejudice.
and Jenks became business partners in 2007 when they formed
Waterstone Development Company, LLC (“Waterstone,
LLC”) for the development of residential homes. Compl.
¶ 4, Dkt. No. 1-2. Basham and Jenks each owned 50% of
Waterstone, LLC. Id. Thereafter, Waterstone, LLC
obtained a loan from Franklin Community Bank for the
construction and development of a residential neighborhood.
In December 2013, Waterstone became insolvent. Compl. ¶
8. Basham alleges in his brief that the bank seized personal
collateral of both Jenks and Basham in partial satisfaction
of the outstanding loan balance. Pl.'s Br. in Supp. of
Mot. to Amend at 2, Dkt. 14. The value of the personal
collateral is unclear; however, even after the seizure of the
personal collateral, Waterstone, LLC remained in debt
“to Franklin Community Bank and other creditors . . .
in excess of $280, 000.” Compl. ¶ 9. Basham
alleges that Jenks “contributed only $6, 000 towards
the debt of [Waterstone, LLC]” and that the amount
“paid by [Basham] without contribution from [Jenks] was
$274, 000.” Compl. ¶ 9. Thus, Basham asserts that
he paid “approximately $134, 000 owed by [Jenks] when
[Jenks] failed to live up to his obligation as required under
the parties Operating Agreement” and that he has
suffered damages in the amount of $134, 000. Compl.
only cause of action alleged in the original complaint is for
breach of contract. Compl. ¶¶ 11-16. However,
Basham seeks to amend the complaint to assert a claim for
common law contribution between co-sureties. Am. Compl.
¶¶32-40, Dkt. No. 13-1. In support of his motion to
amend and his contribution action, Basham alleges that the
parties signed multiple promissory notes personally
guaranteeing the repayment of Franklin Community Bank's
loan to Waterstone, LLC. Am. Compl. ¶¶ 9-17. The
amended complaint asserts that “for most promissory
notes executed by the parties, both the plaintiff and the
defendant executed a personal guarantee for the repayment of
any outstanding amounts if the LLC failed to pay.” Am.
Compl. ¶17. Basham further alleges that the “debt
to [Franklin Community Bank] has not been repaid in full and
remains an open debt to the bank.” Am. Compl. ¶24.
Motion for Leave to Amend the Complaint
Rule of Civil Procedure 15(a) allows parties to amend
pleadings either within 21 days after service, or at any time
with either written consent from the opposing party or leave
of the court. Fed.R.Civ.P. 15(a). Courts are instructed to
“freely give leave when justice so requires.”
Id. As the Fourth Circuit has explained,
“[t]his directive gives effect to the federal policy in
favor of resolving cases on the merits instead of disposing
of them on technicalities.” Mayfield v.
NASCAR, 674 F.3d 369, 379 (4th Cir. 2012) (quoting
Matrix Capital Mgm't Fund, LP v. BearingPoint, Inc.,
576 F.3d 172, 192 (4th Cir. 2009)). In the Fourth Circuit,
“The law is well settled ‘that leave to amend a
pleading should be denied only when the amendment
would be prejudicial to the opposing party, there has been
bad faith on the part of the moving party, or the amendment
would be futile.'” Edwards v. City of
Goldsboro, 178 F.3d 231, 242 (4th Cir. 1999)(emphasis in
original) (citation omitted).
recommend that Basham's motion to amend the complaint be
denied because the proposed amendment, adding the claim of
contribution, would be futile. See Johnson v. Oroweat Foods
Co., 785 F.2d 503, 510 (4th Cir.1986) (finding that
leave to amend should only be denied as futile “when
the proposed amendment is clearly insufficient or frivolous
on its face”). Neither the complaint nor the amended
complaint, allege that the parties' debt has been
satisfied, which I find is a required element to allege a
cause of action for contribution under the common law of
Virginia. In fact, the amended complaint specifically alleges
that the debt to Franklin Community Bank “remains
partially outstanding.” Am. Compl. ¶ 39.
Virginia law, the right to contribution arises “on the
broad principles of equity, ” instead of from any
express contract or agreement between the parties. See
Houston v. Bain, 196 S.E. 657 (Va. 1938) (“Where
two persons are subject to a common burden it shall be borne
equally between them. The law implies a contract between the
parties to contribute ratably towards the discharge of the
obligation.”) Before a party may seek contribution from
his co- guarantor, the debt must be fully satisfied. This
requirement is contained in the case law developing the
common law right to contribution. See Van Winckel v.
Carter, 95 S.E.2d 148, 152 (Va. 1956) (“The right
to contribution becomes complete and enforceable upon the
payment or discharge of the common obligation.”)
(citations omitted); see also Gardner v. Bean, 677
P.2d 1116 (Utah 1984) (“Generally, common law
contribution presumes the payment and extinguishment of the
debt by one for the benefit of all.”); See also
Carey v. McCaslin, 43 N.E.2d 519, 520 (Ohio Ct. App.
1942) (holding that “a co-obligor is entitled to
contribution from another co-obligor when the former has
completely satisfied the obligation, even though in so doing
he has paid a sum of money less than his proportionate share
of the face amount of the obligation”).
Sacks v. Tavss, the Supreme Court of Virginia
discusses when “equity should intervene” and
award contribution. 375 S.E.2d 719, 722 (Va. 1989). The court
specifically noted that the “Tavsses did not make full
satisfaction of the indebtedness due to the Bank and did not
secure a release which covered the Sackses” and then
held that to merit contribution one surety must (1) pay more
than his proportionate share of the amount owed the creditor,
or (2) pays less than his proportionate share and also secure
a release for his cosurety. Id. Implicit in both
these prongs is the requirement that the surety first
extinguish the debt, either by full satisfaction of the debt,
or by partial satisfaction, but obtaining a complete release.
The Sacks court explains that “Comment d [to
§ 154 of the Restatement of Security] contemplates that
the settlement by one surety for less than the amount of the
debt will be in full satisfaction of the debt,
meaning that the paying surety must secure a release not only
for himself but also for his cosurety or cosureties before he
can demand contribution based upon the amount of the
settlement.” Sacks, 375 S.E.2d at 721
(emphasis in original); see also NationsBank of Virginia,
N.A. v. Jordache Venture Assocs., No. CIV.A.
2:92CV494, 1993 WL 724806, at *8 (E.D. Va. Aug. 4, 1993),
aff'd sub nom. NationsBank of Virginia, N.A. v.
Mizrachi, 27 F.3d 563 (4th Cir. 1994) (noting that the
court “ultimately decided to rely” on the case of
Sacks v. Tavss, which “precludes a partner
from seeking contribution or indemnification from a copartner
until the entire amount of the debt has been paid” but
finding that a party's arguments for an extension or
modification of Sacks was made in good faith).
alleges in the proposed amended complaint that
Waterstone's debt to Franklin Community Bank which Jenks
and he guaranteed remains outstanding, and, therefore, he
cannot allege that he has satisfied the amount due or
otherwise secured a release of the debt. Accordingly, Basham
cannot allege the necessary elements of a claim for
contribution against Jenks, rendering the proposed amended
complaint futile. As such, I recommend that Basham's
motion to amend be denied.
Motion for Judgment on the Pleadings
to Rule 12(c) of the Federal Rules of Civil Procedure, a
party may move for judgment on the pleadings after the
pleadings are closed. Fed.R.Civ.P. 12(c). A motion for judgment
on the pleadings is governed by the same standard as a
Federal Rule of Civil Procedure 12(b)(6) motion to dismiss.
See Independence News, Inc. v. City of Charlotte,
568 F.3d 148, 154 (4th Cir. 2009); Pac. Ins. Co. v. Am.
Nat'l Fire Ins. Co., 148 F.3d 396, 405
(4th Cir.1998)). However, the court may also
consider the defendant's answer. See Massey v.
Ojaniit, 759 F.3d 343, 347 (4th Cir. 2014); see also
Void v. Orangeburg Cty. Disabilities & Special Needs
Bd., Civil Action No. 5:14-cv-02157-JMC, 2015 WL 404247,
at *2 n.1 (D.S.C. Jan. 29, 2015).
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) examines the legal sufficiency of the facts alleged
on the face of the plaintiff's complaint.
Edwards, 178 F.3d at 243; see also Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (holding that
to survive a Rule 12(b)(6) motion, “[f]actual
allegations must be enough to raise a right to relief above
the speculative level.”). When considering a motion to
dismiss, the court must accept as true all of the factual
allegations contained in the complaint. Erickson v.
Pardus, 551 U.S. 89, 94 (2007). The court “may
also consider documents attached to the complaint,
see Fed.R.Civ.P. 10(c), as well as those attached to
the motion to dismiss, so long as they are ...