Equipment Finance, LLC v. Steven M. Hutchison

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 11-3951
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EQUIPMENT FINANCE, LLC.
v.
STEVEN M. HUTCHISON;
BLUE HORIZON VEGETATIVE RECYCLING & LAND CLEARING, INC.
Steven M. Hutchinson,
Appellant
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On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 09-cv-01964)
District Judge: Hon. James Knoll Gardner
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Submitted Under Third Circuit LAR 34.1(a)
June 28, 2012
Before: SLOVITER, CHAGARES, and JORDAN, Circuit Judges.
(Filed: June 29, 2012)
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OPINION OF THE COURT
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JORDAN, Circuit Judge.
Steven M. Hutchison appeals the judgment of the United States District Court for
the Eastern District of Pennsylvania finding him liable for loans made by Equipment

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Finance, LLC (“Equipment Finance”) that he did not repay. Hutchison argues that the
statute of limitations on Equipment Finance’s action for repayment of those loans has
lapsed. Because we agree with Equipment Finance that the action is not time-barred, we
will affirm the judgment of the District Court.
I. Background
Beginning in May 2001, Equipment Finance made a series of loans to Hutchison
and his North Carolina company, Long Leaf Wood Products, Inc. (“Long Leaf/Mid
Atlantic”).1 The first loan was in the amount of $127,803.66 and was evidenced by a
promissory note executed under seal indicating that, “[i]n addition to the payment[]
provided for [by this note] … , [Long Leaf/Mid Atlantic] promises to pay on demand any
additional amounts required to be paid [due to additional loans provided by Equipment
Finance] … and this note shall evidence … the payment of all such sums advanced or
paid by the Lender.”2 (App. at 12.)
Beginning in July 2002 and continuing until January 2007, Equipment Finance
provided Hutchison with 17 additional loan checks totaling $1,352,040.3 Some of those
checks were made out to Hutchison, others were made out to Long Leaf/Mid Atlantic,
1 Hutchison later changed Long Leaf Wood Products, Inc.’s name to Mid Atlantic
Timber Company, Inc. For ease of reference, we refer to the company as Long Leaf/Mid
Atlantic throughout.
2 The note further set forth a schedule for repayment for a total amount due of
$161,298.87.
3 Equipment Finance also claimed that there was an 18th check for $30,000 that
they gave to Hutchison. Because Equipment Finance could not document that check, it
withdrew any claim for that additional amount.

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and, in two instances, checks were made out to a company owned by Hutchison’s son.4
All of the checks were deposited in either Hutchison’s personal accounts or in a Long
Leaf/Mid Atlantic account.5
Hutchison only made payments totaling $9,644.78,6 bringing his total debt to
Equipment Finance to $1,503,694.09. Equipment Finance ceased sending money to
Long Leaf/Mid Atlantic in 2007. Long Leaf/Mid Atlantic stopped doing business shortly
thereafter. Further, the State of North Carolina suspended Long Leaf/Mid Atlantic’s
corporate existence in 2004 and dissolved the company in 2009 for its failure to file
annual reports. In November 2008, Equipment Finance made a demand for repayment
but Hutchison did not comply. On May 8, 2009, Equipment Finance filed suit against
Hutchison and his son’s company. Asserting diversity jurisdiction, Equipment Finance
alleged, among other things, breach of contract of the first loan based on the promissory
note and breach of implied contract for the loan it said was represented by the remaining
17 checks.
4 The checks written to Hutchison’s son’s company, Blue Horizon Vegetative
Recycling and Land Clearing, Inc. (“Blue Horizon”), were made in error and should have
been written to Hutchison or Long Leaf/Mid Atlantic. When Hutchison informed
Equipment Finance of that error, it told Hutchison to have his son endorse the checks
over to Hutchison and deposit them in his own account, which Hutchison did.
5 Some of the funds borrowed from Equipment Finance by Hutchison were used to
make mortgage payments for property in Wilmington, North Carolina. Equipment
Finance intended to buy that mortgage and utilize the property as security for the money
advanced.
6 Those payments were made in partial satisfaction of the first loan check issued
pursuant to the promissory note.

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After a bench trial, the District Court issued findings of fact and conclusions of
law. The Court determined that Long Leaf/Mid Atlantic breached its obligation to repay
the first loan and owed Equipment Finance $151,654.09.7 The Court also determined that
it was appropriate to hold Hutchison personally liable for the loan to Long Leaf/Mid
Atlantic, since Hutchison was its sole officer, director and shareholder, completely
dominated the company, commingled corporate and personal funds, and failed to follow
corporate formalities, including the failure to file annual reports with North Carolina.
While the statute of limitations for a breach of contract claim in Pennsylvania8 is four
years, 42 Pa. Cons. Stat. Ann. § 5525(a)(7),9 the Court determined that the action was not
time barred because the statute of limitations on an action to recover funds loaned
pursuant to a promissory note executed under seal is 20 years, 42 Pa. Cons. Stat. Ann.
§ 5529(b),10 and Equipment Finance filed its lawsuit against Hutchison well within that
period.
7 That sum represents the difference between the $161,298.87 amount owed and
the $9,644.78 amount paid.
8 There is no dispute that Pennsylvania provides the controlling body of law for
this case.
9 That statute provides: “[T]he following actions and proceedings must be
commenced within four years: ... An action upon a negotiable or nonnegotiable bond,
note or other similar instrument in writing. Where such an instrument is payable upon
demand, the time within which an action on it must be commenced shall be computed
from the later of either demand or any payment of principal [or of] interest on the
instrument.” 42 Pa. Cons. Stat. Ann. § 5525(a)(7).
10 That statute provides: “Notwithstanding [§ 5525(a)] (relating to four-year
limitation), an action upon an instrument in writing under seal must be commenced
within 20 years.” 42 Pa. Cons. Stat. Ann. § 5529(b).

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With respect to the remaining 17 checks, the Court found that an implied-in-fact
contract existed between Equipment Finance and Long Leaf/Mid Atlantic and that
contract was breached when Long Leaf/Mid Atlantic failed to repay the loan embodied in
those 17 checks.11 The Court determined that, with respect to all 17 checks, there was a
single and continuing contract and that the four-year statute of limitations under
§ 5525(a)(7) did not begin to run until January 2007, at the earliest, when Equipment
Finance issued the last of the 17 checks. Likewise, the Court determined that piercing the
corporate veil was appropriate to hold Hutchison liable for the those loan checks.
Combining the first loan with the 17 additional checks, the Court determined that
Hutchison owed Equipment Finance $1,503,694.09.12 Hutchison timely appealed.
II. Discussion13
The only issue that Hutchison appeals is the District Court’s determination that the
action with respect to some of the 17 checks is not time barred. He argues that there was
no continuous contract and that the statute of limitations for each check began to run on
the day such check was issued. Thus, Hutchison argues, recovery on any check dated
11 As noted above, two of those checks were written out to companies owned by
Hutchison’s son. The Court determined that Hutchison was liable for those amounts
because the checks were endorsed over to, and cashed by, Hutchison.
12 That sum represents the $151,654.09 total left owing on the promissory note
plus the $1,352,040 total of the 17 additional checks.
13 The District Court had jurisdiction pursuant to 28 U.S.C. § 1332. We have
jurisdiction pursuant to 28 U.S.C. § 1291. We review the District Court’s factual
findings following a bench trial for clear error and exercise plenary review over its legal
conclusions. McCutcheon v. Am.’s Servicing Co., 560 F.3d 143, 147 (3d Cir. 2009).

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prior to May 8, 2005 – four years before the filing of the lawsuit on May 8, 2009 – is
barred by the statute of limitations. He submits that “[c]hecks are demand notes”
(Appellant’s Opening Br. at 13), and that the statute of limitations begins to run with “the
later of either demand or any payment of principal [or of] interest on the instrument,” 42
Pa. Cons. Stat. Ann. § 5525(a)(7). Using that standard, Hutchison submits that $664,000
of the District Court’s judgment against him cannot be collected.14 Equipment Finance
argues that the District Court correctly determined that there was a continuing agreement
and that loan repayment would not be expected to begin (and the statute of limitations
would not start to run) until, at the earliest, after the final loan check was delivered in
2007.
We look to Pennsylvania law to determine whether an implied-in-fact contract
existed. See Erie R. Co. v. Tompkins, 304 U.S. 64, 73 (1938) (“[F]ederal courts
exercising jurisdiction in diversity of citizenship cases … apply as their rules of decision
the law of the state … .”). The nature of an implied-in-fact contract must be ascertained
from all the facts and circumstances. See Liss & Marion, P.C. v. Recordex Acquisition
Corp., 983 A.2d 652, 659 (Pa. 2009) (citing Ingrassia Construction Company v. Walsh,
486 A.2d 478, 483 (Pa. Super. Ct. 1984), for the proposition that an implied-in-fact
contract may arise where “the ordinary course of dealing and the common understanding
of men, show a mutual intention to contract” (citation omitted)); Ingrassia, 486 A.2d at
483 (stating that the existence and nature of an implied-in-fact contract is determined by
14 The checks that Hutchison argues are time barred were dated between July 1,
2002 and October 8, 2004.

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the parties’ “outward and objective manifestations of assent, as opposed to their
undisclosed and subjective intentions”). Where the facts and circumstances show the
existence of a continuing contract, the statute of limitations does not begin to run until
“the breach occurs or the contract is … terminated.” Wm. B. Tenny, Builder & Developer
v. Dauphin Deposit Bank & Trust Co., 448 A.2d 1073, 1075 (Pa. Super. Ct. 1982)
(citation omitted).
The District Court found that the facts and circumstances with respect to the 17
checks showed the existence of a continuing contract. Those facts included the
depositing of all checks into accounts controlled by Hutchison, the promissory note’s
reference to future payments, the continuous nature of the checks, the November 2008
demand letter, and the other conduct of the parties. Therefore, the statute of limitations
did not begin to run until, at the earliest, Equipment Finance delivered the final loan
check in January 2007. We see no sound basis to disturb the District Court’s fact-finding
and legal conclusions, and because Equipment Finance brought the present action less
than four years after January 2007, the entire amount is recoverable.
Hutchison asserts that several facts indicate that the loan checks should be
considered distinct rather than a continuing contract. First, he argues that the checks
were made out to different entities including Long Leaf, Mid Atlantic, Hutchison himself,
and, in two cases, his son’s company, Blue Horizon. He submits that, “had there been a
continuous contract, all of the payees of the checks would have been exactly the same.”
(Appellant’s Opening Br. at 10.) Second, while Hutchison concedes the District Court’s
factual determination that there was an agreement with respect to the first check, he

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disputes that “the checks fall into the language of the Promissory Note.” (Id.) Rather, he
argues that the 17 additional checks were demand notes that were both separate from
each other and from the promissory note evidencing the first loan and that “the Statute of
Limitations begins to run on the date of [the issuance] of [each loan] check.” (Id. at 11.)
Appellant submits that to hold otherwise would allow Equipment Finance and other
lenders to start the clock on the statute of limitations at the time of their choosing when
they make a demand for repayment. Such a result, he argues, permits Equipment Finance
to “arrest the running of the Statute of Limitations … by resting on its laurels and
waiting until it files suit to say that demand was made.” 15 (Id. at 8.)
We disagree. On the facts of this case, Hutchison elevates form over substance
when he argues that the loans should be considered distinct because the checks were
made out to different individuals or entities. All of the checks were intended for
Hutchison and his business, and they were treated that way. They were ultimately
15 In his brief, Hutchison cites Gurenlian v. Gurenlian, 595 A.2d 145 (Pa. Super.
Ct. 1991) to support his argument that the statute of limitations begins to run as soon as
each check was issued. In Gurenlian, the court distinguished a promissory note from a
demand note and indicated that a promissory note conditioned repayment upon the
making of a demand while a demand note did not have such a condition. The Court thus
reasoned that the statute of limitations on a promissory note would not begin until a
demand is made, but for a demand note, “the running of the statute of limitations was not
contingent on a demand being made.” Id. at 150.
There is support here, however, for the position that the 17 checks constituted a
unitary loan since the first loan check was issued pursuant to a promissory note and
provided for the possibility of additional payments, and the District Court determined that
that was the parties’ intent.

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deposited in accounts controlled exclusively by Hutchison and used for his benefit or for
the benefit of the company he treated as an alter ago.
Because we agree with the District Court that the present case presents a
continuous agreement, Hutchison’s remaining arguments are unavailing. Contrary to
Hutchison’s assertions, Equipment Finance did not “rest on its laurels” but rather made a
demand in the months following the final check and brought suit the following year due
to Hutchison’s failure to comply with that demand. As a result, Equipment Finance’s
action is not barred by the relevant statute of limitations.
III. Conclusion
For the forgoing reasons, we will affirm the judgment of the District Court.

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