The Supreme Court of Guam has issued a sweeping opinion affirming the dismissal of claims brought by Goodwind Development Corporation (Goodwind) against West Bay Corporation and 21st Century Corporation (the Defendants), while also upholding the dismissal of the Defendants’ counterclaims. The lengthy legal battle centered on promissory notes issued in connection with a multi-million dollar parking garage investment in San Francisco.
The Supreme Court ultimately affirmed the Superior Court’s judgment, concluding that Goodwind’s breach of contract claims were barred by the statute of limitations, and that the Defendants’ counterclaims—including allegations of fraud and breach of contract—failed due to a lack of specific pleading details or because they were barred by the parol evidence rule.
Goodwind’s Appeal Fails: Statute of Limitations Wins
Goodwind appealed the Superior Court’s decision to dismiss its complaint, which sought payment on two promissory notes issued in 2011 by West Bay ($750,000) and Century ($120,000). Goodwind argued, among other things, that the notes contained waivers of the statute of limitations, making the claims timely despite being filed over eleven years later, in January 2023.
The Supreme Court disagreed. Chief Justice Torres, writing for the panel, found that the notes’ waivers were explicitly limited by the phrase, “to the extent allowable by law.” Under Guam law, the general statute of limitations for written instruments is four years. Crucially, the Court found that Guam law does not contain any “special case” statute expressly permitting parties to waive or extend this limitations period for promissory notes.
The Court specifically rejected Goodwind’s reliance on a 1986 decision, *Mailloux*, which had previously allowed a statute of limitations waiver. The Supreme Court determined that *Mailloux* lacked a strong legal foundation because it failed to analyze the relevant Guam statute governing limitations periods (GCCP § 312, the predecessor to the current law) and neglected public policy concerns.
Because the notes were issued in May 2011, the four-year statute of limitations expired around May 2015. Since the waivers were unenforceable, Goodwind’s claims were time-barred. The Court also found that Goodwind’s request for leave to amend its complaint was properly denied, as no amendment could cure the fatal timing defect.
Defendants’ Counterclaims Dismissed on Pleading Grounds
The Defendants cross-appealed the dismissal of their numerous counterclaims, which arose from the complex arrangement used to acquire the San Francisco parking garage—an arrangement reportedly designed to mitigate U.S. “profits tax” implications due to Goodwind’s foreign ownership.
Fraud Claims Lacked Specificity
The Defendants alleged several fraud-related counterclaims, including intentional misrepresentation, fraud in the inducement, and constructive fraud. The Supreme Court found these claims failed to meet the heightened pleading standard required for fraud under Guam Rule of Civil Procedure 9(b).
This standard requires pleading the “who, what, when, where, and how” of the alleged misconduct with particularity. The Court noted that while the Defendants identified Goodwind and some executives (like CFO Willy Onglao and President Chiang), they failed to clearly delineate which specific individual made which specific fraudulent promise (e.g., promising the West Bay Note would never be repaid, or promising Goodwind would cover loan expenses).
The Court highlighted that because the Defendants themselves were officers of Goodwind at the time, they had inside knowledge and were held to a higher standard of specificity than an outside party would be. Since the counterclaims relied on broad assertions against “Goodwind” without pinpointing the actors and their precise conduct, they were dismissed.
Parol Evidence Rule Blocks Contract and Covenant Claims
The Defendants also argued the trial court wrongly applied the parol evidence rule to exclude evidence supporting their claims for breach of contract and breach of the implied covenant of good faith and fair dealing. These claims relied on alleged oral agreements that Goodwind would cover certain expenses and that the West Bay Note was not intended to be repaid.
The Supreme Court confirmed that the promissory notes were integrated written agreements to which the parol evidence rule applies. While the rule generally has exceptions for fraud or to challenge a contract’s validity, the Court found:
1. Breach of Contract/Covenant: These claims presume a valid contract exists. Therefore, the exceptions designed to challenge validity or address fraud in the *formation* of the contract did not apply to claims alleging breaches of the written terms or implied promises. Extrinsic evidence contradicting the written terms was properly excluded.
2. Negligent Misrepresentation: The Court broke from its past practice, adopting the majority rule that the parol evidence rule is a rule of *contract* law and does not apply to the *tort* of negligent misrepresentation. However, this win was short-lived. Even though the rule didn’t bar the evidence, the underlying negligent misrepresentation counterclaim was dismissed because, like the fraud claims, it was not pleaded with sufficient particularity.
Unjust Enrichment Fails as Derivative of Dismissed Fraud
Finally, the Court addressed the unjust enrichment counterclaim, which alleged Goodwind unjustly benefited by failing to pay its share of the garage operating expenses and the SFOB loan. While the Supreme Court agreed with the Defendants that the lower court erred in dismissing this claim based on the statute of limitations, it affirmed the dismissal on alternative grounds.
Following a persuasive line of reasoning from several federal circuits, the Supreme Court held that when an unjust enrichment claim is entirely based on the same alleged improper conduct underlying related fraud claims, it cannot survive if the underlying fraud claims fail. Since the Defendants’ fraud-based counterclaims were dismissed for lack of particularity, their derivative unjust enrichment claim also failed.
The Court concluded that the trial court correctly dismissed all claims in the direct appeal and all counterclaims in the cross-appeal.