ANALYSIS OF OCTOBER 24, 2019 SUPREME COURT OPINIONS

(Posted October 24, 2019) The long (almost eight weeks) drought is over; for the first time since late August, we’ve got published opinions from the Supreme Court. The justices hand down two decisions today from appeals argued in the September session.

Limitation of actions

The Supreme Court has handed down precious few decisions interpreting the provisions of Code §8.01-232, describing rules for promises not to plead the statute of limitations. Today we get Radiance Capital Receivables v. Foster, from Gloucester County. It’s a proceeding to collect on an unpaid promissory note.

The appellee is one of the guarantors on the note, executed over ten years ago. The guaranty, signed roughly contemporaneously with the note itself, contains a provision whereby the guarantor “waives the benefit of any statute of limitations or other defenses affecting” his liability.

If you’re wondering about the validity of a provision that waives all defenses, as the last clause quoted above seems to indicate, join the club; that looks to me like a breathtakingly broad provision. But there’s no statute covering that, and there is one for promises not to plead the statute of limitations. Here’s what that statute says, in pertinent part:

a written promise not to plead such statute shall be valid when (i) it is made to avoid or defer litigation pending settlement of any case, (ii) it is not made contemporaneously with any other contract, and (iii) it is made for an additional term not longer than the applicable limitations period.

When the noteholder sued almost ten years after the guarantee, and more than five years after a notice of default, the guarantor asserted the statute of limitations. The noteholder pointed to the waiver language and the guarantor pointed to the statute. The trial court sided with the guarantor and dismissed the suit on a special plea.

Today the justices affirm. In her first opinion for the court, Justice Chafin explains that this guaranty doesn’t fit in any of the three categories in the statute. There was no litigation pending at the time of the waiver; the waiver and the note arose at practically the same time; and the waiver had no temporal end. That means it isn’t enforceable as a promise not to plead the statute of limitations.

The noteholder answered that this wasn’t a promise but a waiver, a different creature entirely. The court turns that aside, noting that the two have the same practical effect. To hold otherwise would enable parties to evade the statute merely by calling the promise something else.

The noteholder had one last attack. An earlier sentence in the statute provides, “Whenever the failure to enforce a promise, written or unwritten, not to plead the statute of limitations would operate as a fraud on the promisee, the promisor shall be estopped to plead the statute.” The noteholder insisted that the court’s refusal to enforce the waiver would act as a fraud.

The Supreme Court observes that fraud requires a statement of existing fact; not a promise to do something in the future. A party may maintain a fraud action based on a promise only if she proves that the promisor had no present intention to perform at the time he made the promise. There’s no evidence of such a state of mind here, so the fraud clause doesn’t help the noteholder. The court thus unanimously affirms the dismissal.

The lesson here is not to get caught unawares by the promise-not-to-plead statute. If you’re going to utilize such a promise, always ensure that it’s in writing, always ensure that you meet the terms of the statue, and (this is my suggestion only) always recite in the body of the agreement how the three statutory factors apply in your case.

Criminal law

As with the statute at issue in the appeal above, we don’t get many welfare-fraud appeals out of Ninth and Franklin. Today the justices decide Jefferson v. Commonwealth, involving a prosecution of a woman for receiving roughly $3,400 more in SNAP benefits than she was entitled to.

In applying for benefits, Jefferson duly reported her income from her job at a clothing store, but didn’t report anything from what looks to be a part-time job elsewhere. A social worker found out about the second job and interviewed Jefferson, who responded that she didn’t believe she needed to report the income because the extra money didn’t bring her over a gross-income limit of just under $4,000 a month.

The local DSS calculated the amount of payments that Jefferson received and the amount she would have received if she had reported everything, resulting in that $3,400 difference. Jefferson was indicted for two counts of fraud, each covering a six-month reporting period. A circuit court judge found her guilty and sentenced her to six years in prison, all of which the court suspended, and restitution of the $3,400.

The primary issue on appeal is whether the evidence was sufficient to convict because the DSS calculations didn’t account for a 20% credit that should have applied to the extra income. The prosecution’s witness never calculated the difference using that discount, citing an internal policy that the discount doesn’t apply to undisclosed income. On this issue, the justices disagree, holding that

the proper valuation method is the difference between the amount of public assistance or benefits the defendant received, and the amount of public assistance or benefits he would have been entitled to absent fraud. The amount of public assistance or benefits a defendant would have been entitled to necessarily includes any deductions he would have been eligible for if he had reported all of his income.

But that’s the end of the good news for Jefferson. The Supreme Court finds that, even with the 20% allowance, the evidence clearly showed that she received more than the $200 threshold for grand larceny. That makes these felony convictions valid. The court thus affirms the convictions, but remands the case for recalculation of the correct amount of the restitution owed.