WILLIAMS INDUSTRIES, INCORPORATED
P.O. Box 1770
Manassas, VA 20108
(703) 335-7800
March 17, 2006
Mr. John Cash, Accounting Branch Chief
Division of Corporation Finance
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-7010
Re: Williams Industries, Incorporated
Annual Report on Form 10-K
for the fiscal year ended July 31, 2005
File No. 000-08190
Form 10-Q for the fiscal quarter ended October 31, 2005
Definitive proxy statement on Schedule 14A
Dear Mr. Cash:
This is in response to your letter dated March 6, 2006, in
reference to your review of our response letter dated February 24,
2006 regarding the Commission's comments on their review of the
aforementioned filings of Williams Industries, Incorporated (the
Company). As you requested, our responses to your comments are
keyed to your comments.
Prior Comment # 2-Consolidated Statements of Operations
As you requested, we are providing, below, a copy of the
legal memorandum from the Company's outside counsel which supports
the legal basis for the discharge of the debt obligation.
Prior Comment # 5-Statements of Cash Flows
In future filings, the Company will determine whether to show
the individual components of investing and financing activities
based on the rule as stated in Rule 10-01(a)(4) of Regulation S-X.
Very truly yours,
WILLIAMS INDUSTRIES, INCORPORATED
/s/ Frank E. Williams, III
Frank E. Williams, III
C.E.O., President and C.F.O.
TEXT OF LEGAL MEMORANDUM FROM SMITH, PACHTER, MCWHORTER PLC
MEMORANDUM
Privileged and Confidential
Attorney-Client Communication
TO: Brian J. Vella
FROM: Tamara F. Dunlap
DATE: December 16, 2004
RE: Running of Statute of Limitations on Williams Industries Note
I. Facts
In the late 1980s, Mr. Williams in his individual capacity,
borrowed money from Sovran Bank (now NationsBank/ Virginia) in the
amount of $750,000.00. Williams Industries, Inc. (WII), in turn,
borrowed $750,000.00 from Mr. Williams. WII signed a note to Mr.
Williams in the amount of $750,000.00 (WII note).
In 1994, Mr. Williams entered into a personal settlement agreement
with NationsBank/ Virginia. Mr. Williams signed over the WII note
to the bank in 1994. On November 30, 1994, Williams Industries,
Inc., Williams Equipment Corp., Williams Enterprises, Inc., and
Williams Steel Erection Co., Inc. entered into an Amended and
Restated Debt Restructuring Agreement (Agreement). The WII
companies actually signed the Agreement on December 1, 1994.
The Agreement references a "certain promissory note dated August
28, 1989 made by WII to the order of Williams in the original
maximum principal amount of $750,000." The Agreement states that
"As of April 1, 1994, the Williams Industries Note had an
outstanding principal balance of $550,000. No payments have been
made on the Williams Industries Note since April 1, 1994." The
Agreement also notes that "WII, by signature below, hereby
reaffirms its obligations to NationsBank/ Virginia under the
Williams Industry Note" A copy of the note is not included with
the Agreement.
WII has not received any demands for payment on this note. WII
has not made any payments on the WII note since the date of the
Agreement. Further, WII auditors sent audit forms to NationsBank/
Virginia through 1997 requesting balances on "all notes" but not
listing any balances due. NationsBank/ Virginia balance
confirmations received by WII made no reference to the WII note.
WII has kept this loan on its books but halted the accrual of
interest in August 1997.
II. Issue
What is the status of the WII note, and may NationsBank/ Virginia
enforce the note?
III. Legal Analysis
It is clear that the WII note is in default, with no payment
having been made at least since December 1, 1994. The
enforceability of the note depends on whether a viable cause of
action still exists, or whether applicable statutes of limitations
have run. Although there are a couple of statutes of limitations
that could arguably apply to the WII note, all such potentially
applicable statutes of limitations have run.
A. Accrual and Tolling
When did NationsBank/ Virginia's cause of action accrue? "In
Virginia, the statute of limitations on a contract begins to run
from the time payment is due." Clifton D. Mayhew, Inc. v. Blake
Construction Co., 482 F.2d 1260, 1262 (4th Cir. 1973).
The accrual of a cause of action is governed, generally, by Va.
Code Ann. 8.01-230
In every action for which a limitation period is prescribed, the
right of action shall be deemed to accrue and the prescribed
limitation period shall begin to run from the date the injury is
sustained in the case of injury to the person or damage to
property, when the breach of contract occurs in actions ex
contractu and not when the resulting damage is discovered, except
where the relief sought is solely equitable or where otherwise
provided under 8.01-233, subsection C of 8.01-245, 8.01-
249, 8.01-250 or other statute.
8.01-230 (emphasis added).
In conjunction with 8.01-230, 8.01-229 Suspension or tolling of
statute of limitations; effect of disabilities; death; injunction;
prevention of service by defendant; dismissal, nonsuit or abatement;
devise for payment of debts; new promises; debts proved in creditors'
suits must also be reviewed. Specific to the facts in this matter,
According to Code 8.01-229(G)(1), the effect of a "new promise
in writing" is to begin the running of a new statute of
limitations permitting suit "within such number of years after
such promise as it might be maintained if such promise were the
original cause of action."
Board of Supervisors v. Sampson, 235 Va. 516, 521 (1988).
The original note between Mr. Williams and WII was signed sometime
in 1989. The note was then signed over to NationsBank/ Virginia
in 1994. Finally, on December 1, 1994, WII entered into an
Agreement with NationsBank/ Virginia promising to pay on the WII
note from 1989. That Agreement had the effect of being a "new
promise in writing." At the time the parties signed the
Agreement, the note was in default. The accrual of the statute of
limitations occurred at the breach of contract - December 1, 1994.
B. Negotiable Instrument
One statute of limitations that the Virginia courts could find
applicable to the WII note is Va. Code Ann. 8.3A-118. According
to 8.3A-118(h), "Notwithstanding the provisions of 8.01-246,
this section shall apply to negotiable and non-negotiable notes."
8.3A-118(a) and (b) provide time limitations for notes that are
both payable at a definite time (a) and payable on demand (b).
The limitations under part (a) bar actions not commenced within 6
years and the time limitations under part (b) bar actions not
commenced within 6 years, or alternatively 10 years.
(a) Except as provided in subsection (e), an action to enforce
the obligation of a party to pay a note payable at a definite time
must be commenced within six years after the due date or dates
stated in the note or, if a due date is accelerated, within six
years after the accelerated due date.
(b) Except as provided in subsection (d) or (e), if demand for
payment is made to the maker of a note payable on demand, an
action to enforce the obligation of a party to pay the note must
be commenced within six years after the demand. If no demand for
payment is made to the maker, an action to enforce the note is
barred if neither principal nor interest on the note has been paid
for a continuous period of ten years.
8.3A-118.
If the appropriate statute of limitations is found at 8.3A-
118(a), the running of the statute of limitations occurred on
December 1, 2000. If the note is actually a demand note, no
demand for payment has been made and no interest has been paid for
over 10 years, the running of the statute of limitations occurred
on December 1, 2004.
C. Statute of Limitations on Written Contracts
Alternatively, as the court in Rivera v. Nedrich found that
8.01.-246(2) was applicable to promissory notes, Virginia courts
might apply 8.01.-246(2) to the WII note.
With regard to the question concerning the statute of limitations,
Code 8.01-246(2) requires that a cause of action on a written
contract be brought within five years after the cause of action
accrues. This section applies to a promissory note such as the
one at issue in this appeal. Harris & Harris v. Tabler, 232 Va.
75, 348 S.E.2d 241 (1986). A cause of action on a note accrues
when the obligation to pay is breached. Code 8.01-230.
Rivera v. Nedrich, 259 Va. 1, 4 (1999). If the Nedrich Court is
correct and 8.01.-246(2) is applicable to the December 1, 1994
Agreement, the running of the statute of limitations occurred on
December 1, 1999.
D. Contingencies found in Notes
Courts find that statutes of limitations do not run until a
contingency identified in the note is met.
Where some condition precedent to the right of action exists,
whether it is a demand and refusal or some other act or
contingency, the cause of action does not accrue, and action
thereon cannot properly be commenced; nor does the statute of
limitations begin to run until that condition is performed. Thus,
if the obligation to pay a debt or the time of payment is
contingent on the performance of some act, the happening of some
event, or the lapse of a specified period of time, the debtor is
not in default, nor is the creditor entitled to call for
performance until the condition is fulfilled, and the statute
cannot begin to run until that time.
Salomonsky v. Kelly, 232 Va. 261, 264 (1986)(emphasis within
case)(citations omitted). We have not been advised that the
obligation to pay on the WII note is contingent on any act or
contingency. In fact, payments had been made but were later
discontinued, so if any contingencies did exist, it would seem
they had been met. Under the circumstances, it does not appear
that the existence of any contingencies has or will affect the
running of the statute of limitations on the WII note.
j:\23\23301\01\memos\sol memo - 12-16-04.doc
Footnotes:
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1. See Union Recovery Ltd. Pshp. v. Horton, 252 Va. 418, 421 (Va.,
1996) "Formerly, demand notes were subject to the five-year
statute of limitations applicable to contracts generally. Code
8.01-246(2).* Title 8.3A now provides for a six-year statute of
limitations on most forms of negotiable instruments. Code 8.3A-
118.
2. The promissory note in Rivera was executed in 1989, prior to
the enactment of 8.3A-118. According to the Editor's Note
accompanying 8.3A-118, the "provisions of the act governing
statutes of limitations and accrual actions shall apply
prospectively to all actions accruing on or after January 1,
1993." Rivera facts differ from the facts of the WII case in that
the Rivera note was not renewed after 1993 but instead, the
statute of limitations was tolled while the beneficiaries of the
note were disabled (minor children). The Rivera Court did not
discuss, nor could it apply, 8.3A-118.
3. Va. Code Ann. 8.01.-246(2). In actions on any contract which
is not otherwise specified and which is in writing and signed by
the party to be charged thereby, or by his agent, within five
years whether such writing be under seal or not.