Code v. Aspenwood Real Estate et al
Filing
36
MEMORANDUM DECISION AND ORDER granting in part and denying in part 21 Defendants' Motion for Summary Judgment. The case is Administratively Closed. Case may be reopened upon motion of pla(s) or dft(s). The parties are directed to provide the Court a joint status report within thirty days (30) of the decision by the Utah Court of Appeals. Signed by Judge Ted Stewart on 6/29/2016. (eat)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
MEMORANDUM DECISION AND
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS'
MOTION TO DISMISS AND/OR FOR
SUMMARY JUDGMENT
CATHY CODE,
Plaintiff,
v.
ASPENWOOD REAL ESTATE CORP.,
ELITE LEGACY CORPORATION, JOHN
AND JANE DOES I-X,
Case No. 1:15-CV-107 TS
Defendants.
District Judge Ted Stewart
This matter is before the Court on Defendants’ Motion to Dismiss and/or for Summary
Judgment. The Court will grant Defendants’ Motion in part for the reasons discussed below.
I. BACKGROUND
This case arises from a commission fee dispute on a sale of land in 2006. Still Standing,
L.C. (“Still Standing”) initially purchased the subject land—170 acres in the Ogden Valley—
from the State of Utah in 1998. Prior to selling the property to Still Standing, the State warned
that
[t]here is likely no access. Although there is an ungraveled and unimproved road
leading to the [P]roperty, it crosses privately owned lands. Historical access may
exist, but the Trust Lands Administration is not guaranteeing access to the
property. 1
1
Docket No. 21-2, at 3.
1
Despite this warning, Still Standing purchased the Property and attempted to establish
access by filing suit in state court against neighboring property owners. Still Standing was
unsuccessful and its claims were dismissed at trial. 2
On January 20, 2006, Still Standing received an offer to purchase the Property from
Emmett Warren through Re/Max Elite (“Remax”) and entered into a For Sale By Owner
Commission Agreement (the “FSBO”) with Remax. On February 6, 2006, Warren and Still
Standing entered into a Real Estate Purchase Contract (the “REPC”) on the Property. It is
alleged that the terms of the FSBO were triggered when the REPC was entered into and Still
Standing then owed a real estate commission fee to Remax. When the purchase fell through,
Warren, Still Standing, and Remax filed suit in Weber County state court asserting various
claims, counterclaims, and crossclaims against each other for the failure of the sale and the
earnest money held under the terms of the REPC. In 2008, Warren and Still Standing negotiated
a settlement and the court dismissed all claims between them.
In 2009, Remax and its agent, Tim Shea, filed a Second Amended Answer and
Counterclaim against Still Standing, adding both Chuck Schvaneveldt (Still Standing’s principal
and owner), and Cathy Code (Schvaneveldt’s then girlfriend and now wife) to the lawsuit for the
commission fee under the FSBO. 3 Schvaneveldt and Code were both alleged signatories to the
FSBO. However, the state-trial court had previously ruled that Shea could not bring a claim for
the commission in his own name, but allowed Remax to file its own counterclaim to seek the
2
Id.
3
Docket No. 21-17, at 4.
2
commission. 4 Shea’s claims against Code were dismissed in 2010. 5 In January 2012, a Third
Amended Answer and Counter Claim and Third Party Complaint was filed against Schvaneveldt
and Code for the commission fee by Elite Legacy Corporation D/B/A Re/Max Elite, Aspenwood
Real Estate Corporation D/B/A Re/Max Elite, and Hilary Own “Skip” Wing, principal broker
D/B/A as Re/Max Elite. 6
Prior to trial, the state court dismissed all of Still Standing’s claims against Remax on
summary judgment and all claims against Still Standing at a pretrial conference. 7 This left
unresolved only Remax’s commission claims against Schvaneveldt and Code.
In August 2012, a four-day jury trial was held. Code moved for directed verdict and was
dismissed from the case. The jury found Schvaneveldt liable for Remax’s commission fee. 8 The
trial court ultimately held that since Code was not liable for the commission fee, she was entitled
to recover part of her attorneys’ fees. Both Code and Wing—a party to the litigation but not to
the FSBO contract—have appealed the trial court’s partial grant of Code’s motion for attorneys’
fees. Code has since withdrawn her appeal. 9
Throughout litigation, Still Standing, Schvaneveldt, and Code asserted various arguments
challenging Remax’s claim to the commission fee, including alleging that Remax is a void dba
with no legal recognition, that the REPC was forged and modified, and that the “brokers, agents,
4
Id. at 5.
5
Id. at 9.
6
Id. at 11–12.
7
Id. at 12–13.
8
Id. at 13.
9
Docket No. 31-9, at 1.
3
and employees committed a fraud in the handling of the REPC or knew that a fraud had been
committed and failed to act.” 10 Post-trial, Schvaneveldt began asserting new allegations of fraud
against Elite Legacy Corporation and Aspenwood Real Estate Corporation—the Defendants in
this case—over the transfer of rights to the dba Re/Max Elite. These allegations center on Dale
Quinlan, who was an owner and principle broker of Aspenwood Real Estate Corporation at the
time of its incorporation in 2005. Schvaneveldt essentially argued that at the time the FSBO and
REPC were entered into with Remax, the dba was solely owned by Dale Quinlan, rather than by
any other party. These allegations are the same allegations that underlie this federal lawsuit.
Defendant Aspenwood Real Estate Corp. (“Aspenwood”) began as an LLC in 2003 and
was converted into a corporation on March 11, 2005. 11 At the time of incorporation, Aspenwood
had nine owners, including Shane Thorpe as President/Owner, Skip (Hilary) Wing as Vice
President/Owner, and Dale Quinlan as Principle Broker/Owner. 12
In 2004, Mr. Quinlan filed with the State of Utah a “Business name Registration/DBA
Application” for use of the dba “Re/Max Elite.” 13 Mr. Quinlan states that he applied for use of
the DBA as the “sole ‘applicant/owner’” 14 and “was conducting business in the real estate
profession as Dale Quinlan, DBA RE/MAX ELITE.” 15
10
Docket No. 21-35, at 7.
11
Docket No. 21-12, at 3.
12
Id.
13
Docket No. 31-6, at 3.
14
Id. at 1.
15
Id.
4
Mr. Thorpe, Aspenwood’s President/Owner, states that Mr. Quinlan was asked to file the
“Business Name Registration/DBA Application” on behalf of Aspenwood. Mr. Thorpe alleges
that in February of 2006, Aspenwood discovered that Mr. Quinlan had listed himself as owner of
the dba and asked Mr. Quinlan to correct this “error.” 16
A letter dated March 7, 2006, entitled “Re: Transfer Ownership of Aspenwood Real
Estate Corp. DBA Re/Max Elite,” transferred “the ownership of Aspenwood Real Estate Corp
from Dale Quinlan to Shane Thorpe.” 17 It was signed, “Sincerely, Dale Quinlan.” Mr. Thorpe
asserts that the letter incorrectly transferred Mr. Quinlan’s ownership interest of Aspenwood to
Mr. Thorpe instead of the rights of the dba Re/Max Elite to Aspenwood. A second letter was
created, dated March 9, 2006, entitled, “Re. Transfer Ownership of DBA Re/Max Elite,” which
transferred “the ownership of Re/Max Elite from Dale Quinlan to Aspenwood Real Estate
Corp.” 18 That letter was also signed “Sincerely, Dale Quinlan.”
Mr. Quinlan states that he examined the two letters and has no recollection of signing
either of the letters. He believes his “signature appears to be exactly the same on both pages but
[that he] never gave anybody permission to just copy [his] signature to any Re/Max Elite
letter.” 19 Mr. Quinlan alleges that he was the sole owner of the dba Re/Max Elite and was the
contracting party during the months of January and February 2006, when the FSBO and REPC
were entered into.
16
Docket No. 21-12, at 7.
17
Docket No. 31-1, at 9.
18
Id. at 7.
19
Docket No. 31-6, at 1.
5
In December 2006, Mr. Quinlan sold his ownership shares back to Aspenwood. Mr.
Quinlan stayed on as an agent with Aspenwood until he left the company in April 2007.
The March 7 and March 9, 2006 letters substantially form the basis of Schvaneveldt and
Code’s allegations of fraud against Aspenwood and Elite Legacy. In a post-trial Motion to
Dismiss Commission Claims Based on Lack of Standing and Jurisdiction filed in state court on
July 8, 2013, Schvaneveldt argued for the first time that at the time the FSBO was entered, the
rights of the dba Re/Max Elite did not belong to Aspenwood and Elite Legacy, but instead
belonged to Mr. Quinlan. Schvaneveldt argued that Mr. Quinlan held the rights to the dba
Re/Max Elite and never transferred the rights to Aspenwood; therefore, Aspenwood and Elite
Legacy did not have any rights to the commission claim against Schvaneveldt. Schvaneveldt’s
argument was rejected by the Weber County state court.
Schvaneveldt reasserted this argument in a subsequent “Rule 60(b) Motion for Relief
from Judgment” requesting relief from the commission claim judgment. At this point in the
litigation, Code, Schvaneveldt, and Still Standing entered into a Settlement and Assignment
Agreement with Mr. Quinlan, dated July 12, 2013, in which
Dale Quinlan, individually, and Dale Quinlan DBA Remax Elite and formerly
DBA Remax Elite, along with his agents, promise not to pursue or continue to
pursue any existing nor future legal action, claim, appeal, judgment nor collection
against the Seller. This agreement includes but is not limited to any and all claims
or commission claims or rights in any way related to the Seller and/or based on
any For Sale By Owner Commission Agreement (FSBO), including the FSBO
with January 20, 2006 . . . or any REPC, including the REPC allegedly signed by
[Schvaneveldt] on February 7, 2006, and/or related . . . in the litigation case
number 060906802. Remax Elite agrees it will dismiss all commission claims
and related claims against the Seller in [that case]. . . . 20
20
Docket No. 31-12, at 1.
6
Additionally, Schvaneveldt obtained from the State of Utah Department of Commerce a
letter, dated December 11, 2013, which states in its entirety:
Because of administrative action, the attached letter in the file of Re/Max Elite,
file number 5800619-0151, had been invalidated. The ownership of the DBA
Re/Max Elite has been returned to Dale Quinlan. 21
The state court again rejected these arguments. The state court’s ruling on
Schvaneveldt’s Rule 60(b) Motion and the issue regarding Mr. Quinlan’s ownership rights are
currently on appeal before the Utah Court of Appeals. 22 Meanwhile, in March 2014, Still
Standing filed its First Amended Complaint in Davis County state court based on the Quinlan
argument. In its First Amended Complaint, Still Standing asserts four causes of action for (1)
declaratory action and injunctive relief, (2) civil conspiracy and fraud, (3) negligence, and (4)
wrongful use of civil proceedings and abuse of process. The Davis County case is currently
stayed pending the Weber County case appeal. 23
Code filed this lawsuit on August 25, 2015, based on the same Quinlan argument. In her
Complaint, Code alleges that Defendants “conspired to create forged documents that they filed
with the Utah Division of Corporations, then made subsequent false transfers, as part of their
fraudulent real estate commission scheme.” 24 Code asserts two causes of action for (1) civil
conspiracy and fraud and (2) fraudulent wrongful use of civil proceedings and fraudulent abuse
of process. She states that her “claims are based entirely on Defendants’ fraudulent acts and
21
Docket No. 31-7.
22
Docket No. 21-4, at 85; see also Docket No. 21-22, at 10.
23
Docket No. 21-36, at 12.
24
Docket No. 2, at 1.
7
fraudulent omissions which caused the severe damages described in [the] complaint,” 25 including
“litigation costs, fees, expenses, collateral damages, and lost opportunities.” 26
II. DISCUSSION
Defendants Aspenwood and Elite Legacy (collectively, “Defendants”) bring this Motion
to Dismiss and/or for Summary Judgment and request the Court dismiss Code’s claims under
four legal theories: (1) the Colorado River doctrine; (2) the Rooker-Feldman abstention doctrine;
(3) two Utah statutes of limitations; and (4) res judicata. Additionally, Defendants argue that
Code filed this lawsuit in federal court in bad faith and that Defendants should be awarded
attorneys’ fees for having to respond.
Having reviewed and considered the parties’ arguments, the Court will stay this matter
under the Colorado River doctrine and decline to reach any of Defendants’ other arguments for
dismissal.
Defendants seek dismissal of this case under the Colorado River abstention doctrine.
Colorado River controls, where, as here, a district court is asked to stay or dismiss a federal suit
pending the resolution of a parallel state court proceeding. 27 Generally, “‘the pendency of an
action in the state court is no bar to proceedings concerning the same matter in the Federal court
having jurisdiction.’” 28 However, dismissal based on “considerations of wise judicial
25
Id.
26
Id. at 10.
27
Rienhardt v. Kelly, 164 F.3d 1296, 1302 (10th Cir. 1999).
28
Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (quoting
McClellan v. Carland, 217 U.S. 268, 282 (1910)).
8
administration, giving regard to conservation of judicial resources and comprehensive
disposition of litigation” is permitted under the Colorado River doctrine. 29
Colorado River is only applicable in very limited and exceptional circumstances. 30 The
Supreme Court has set forth a number of factors to consider in determining whether an
exceptional circumstance exists. 31 “Before examining these factors, however, a federal court
must first determine whether the state and federal proceedings are parallel.” 32 “[E]xact identity
of parties and issues is not required. Rather, state and federal proceedings are sufficiently
parallel if ‘substantially the same parties litigate substantially the same issues.’” 33
Once a court decides that the state and federal litigations are parallel, the court must then
determine whether deference to state-court proceedings is appropriate. 34 The Supreme Court in
Colorado River provided four factors to consider in assessing whether deference is warranted:
(1) whether the state or federal court first assumed jurisdiction over the same res; (2) the
inconvenience of the federal forum; (3) the desirability of avoiding piecemeal litigation; and (4)
the order in which jurisdiction was obtained by the concurrent forums. 35
29
Id. (internal quotation and citation omitted).
30
Id. at 818.
31
Fox v. Maulding, 16 F.3d 1079, 1081 (10th Cir. 1994).
32
Id.
33
United States v. City of Las Cruces, 289 F.3d 1170, 1182 (10th Cir. 2002) (quoting
Fox, 16 F.3d at 1081).
34
Fox, 16 F.3d at 1082.
35
D.A. Osguthorpe Family P’ship v. ASC Utah, Inc., 705 F.3d 1223, 1234 (10th Cir.
2013) (citing Colorado River, 424 U.S. at 818).
9
The Court noted that “[n]o one factor is necessarily determinative; a carefully considered
judgment taking into account both the obligation to exercise jurisdiction and the combination of
factors counselling against that exercise is required.” 36
Since the original Colorado River factors were set out, the Supreme Court in Moses H.
Cone Memorial Hospital v. Mercury Construction Corporation37 additionally allowed
consideration of whether federal law provides the rule of decision on the merits and whether the
state-court proceedings adequately protect the litigants’ rights. 38 The Court also strongly
suggested that courts may take into account the possibly “vexatious or reactive nature of either
the federal or the state litigation.” 39 All of these considerations must “be applied in a pragmatic,
flexible manner with a view to the realities of the case at hand.” 40 “Only the clearest of
justifications will warrant dismissal.” 41
Defendants argue that this case is an exceptional circumstance warranting dismissal
under Colorado River. Defendants argue that there is a danger of piecemeal litigation, that
significant progress has been made in state court, federal law is not implicated, state court
proceedings would adequately protect the parties’ rights, and that this case is vexatious and
reactive in nature.
36
Colorado River, 424 U.S. at 818–19.
37
460 U.S. 1 (1983).
38
D.A. Osguthorpe Family P’ship, 705 F.3d at 1235.
39
Moses H. Cone, 460 U.S. at 17 n.20.
40
Id. at 21.
41
Colorado River, 424 U.S. at 819.
10
Code argues that Colorado River is inapplicable because there is no parallel state-court
litigation. Code asserts that she was dismissed from the Weber County case and is no longer a
party to the suit. She also asserts that she is not the plaintiff in the Davis County case.
Therefore, Code argues she does not have any claims pending in state court that pose a risk of
piecemeal litigation.
As set forth above, exact identity of parties is not required. Parallel proceedings exist
where substantially the same parties litigate substantially the same issues in different forums.
Here, Code, Schvaneveldt, and Still Standing—all original parties in the Weber County case—
have ongoing litigation at either the Utah Court of Appeals, Davis County state court, or federal
court, involving the same allegations of forgery and the alleged creation of a fraudulent real
estate commission scheme by Defendants to obtain a commission under the FSBO in 2006.
Thus, the federal and state proceedings are parallel.
Since parallel proceedings exist, the Court next looks to the Colorado River factors to
determine whether this case presents an exceptional circumstance warranting deference to the
state courts. D.A. Osguthorpe Family Partnership v. ASC Utah, Inc. provides helpful guidance.
In D.A. Osguthorpe, the Tenth Circuit applied Colorado River and affirmed the federal district
court’s dismissal of a case that had originated in Utah state court. The state-court litigation
involved a dispute arising under a Development Agreement between several parties. When
development stalled, the parties filed suit against each other alleging various claims for breach of
contract. At some point in the litigation, Osguthorpe filed a motion to compel arbitration under
the Development Agreement. The state-court judge denied Osguthorpe’s motion. Osguthorpe
appealed the state-court judge’s ruling denying arbitration and asked the state-court judge to
11
recuse himself from the case, vacate his ruling on arbitration, and stay proceedings pending the
outcome of the interlocutory appeal. When the state-court judge denied Osguthorpe’s requests,
Osguthorpe petitioned the Utah Supreme Court for emergency relief and for an immediate stay
of all trial-court proceedings pending the resolution of its appeal. The Utah Supreme Court
summarily denied Osguthorpe’s petition.
Osguthorpe then turned to the federal courts for relief, requesting declaratory judgment
that the state district court had violated Osguthorpe’s due-process rights, and additionally sought
an immediate injunction against ASC Utah, Wolf Mountain, the state-court judge, and the Third
Judicial District Court from proceeding with the case until resolution of the arbitration appeal.
The federal district court in that case dismissed Osguthorpe’s case for lack of subjectmatter jurisdiction under Rooker-Feldman and “the general principles of abstention.” 42 The
Tenth Circuit affirmed the district court’s ruling based on the “general principles of
abstention”—more specifically, under the Colorado River doctrine. 43
The Tenth Circuit found that the first two Colorado River factors did not apply in D.A.
Osguthorpe. The first factor—whether the state or federal court first assumed jurisdiction over
the same res—was inapplicable because neither court assumed jurisdiction over property. The
second factor—the relative inconvenience of the federal forum— was afforded scant weight
because the state and federal courthouses involved were at “no great geographical distance from
42
D.A. Osguthorpe Family P’ship, 705 F.3d at 1230.
43
Id. at 1231.
12
each other.” 44 However, the court found that the remaining factors weighed heavily in favor of
dismissal.
Of “paramount” consideration was the third factor: “the danger of piecemeal litigation.” 45
The state-court litigation in D.A. Osguthorpe spanned five years and amassed “thousands of
entries and spans nearly two hundred pages in the record.” 46 The litigation “consumed years of
intensive court involvement, voluminous motion practice, extensive discovery, and even
substantial physical resources as basic as paper, copy toner, and storage space.” 47 The statecourt litigation became “profoundly intertwined with the machinery of the Utah judicial
system.” 48 Additionally, “the Utah state court had already overseen years of intensive litigation
before the federal court’s jurisdiction was invoked.” 49 This fact ties into the fourth Colorado
River factor—the order in which the state and federal courts obtained jurisdiction in the matter.
With this factor, “‘priority should not be measured exclusively by which complaint was filed
first, but rather in terms of how much progress has been made in the two actions.’” 50 In D.A.
Osguthorpe, “[a]ll progress in this case . . . [was] made in the state court.” 51
Moreover, the court additionally considered whether federal law applied, whether the
state-court proceedings would adequately protect the litigants’ rights, and also took into account
44
Id. at 1234.
45
Id.
46
Id.
47
Id.
48
Id. at 1235.
49
Id.
50
Id. (quoting Moses H. Cone, 460 U.S. at 21).
51
Id.
13
the possibly vexatious or reactive nature of either the federal or the state litigation. The court
concluded that although the Federal Arbitration Act governed the merits of Osguthorpe’s
arbitration claims, that factor “does not automatically compel the conclusion that the resolution
of a claim arising under the Act is a task better suited for the federal courts.” 52 The court found
that there was also no indication that Osguthorpe’s rights were somehow less protected in state
court. Finally, the court also took into account the fact that “Osguthorpe came to the federal
courts for relief only after receiving an unfavorable state-court ruling on arbitrability several
years after litigation had begun in Utah’s state-court system.” 53 Thus, having applied the
Colorado River factors in a “pragmatic, flexible manner with a view to the realities of the case at
hand,” the Tenth Circuit concluded that the case had been “interwoven with a state-court
system—on both the trial and appellate levels” 54 and that the case “should live out the rest of its
days in the place where it began: the Utah state courts.” 55
As in D.A. Osguthorpe, the first two Colorado River factors do not apply in this case.
However, the remaining factors weigh decidedly in favor of withholding the exercise of
jurisdiction. First, the danger of piecemeal litigation is considerable. This lawsuit began in
2006, when Warren, Still Standing, and Remax filed suit against one another in Weber County
district court after the proposed sale on the Property fell through. From 2006 until Code filed her
lawsuit in federal court in August 2015, litigation in the Weber County state court has generated
more than 9000 pages of filed documents and is now on appeal after having reached final
52
Id.
53
Id.
54
Id.
55
Id. at 1236.
14
judgment on the merits. The issues raised by Code in this suit have been addressed by the parties
and the Weber County state court and are currently on appeal. The Davis County case is
currently stayed pending resolution of the Weber County appeal. While Code is correct that she
does not have any pending claims in state court, her claims here are intimately bound up in the
ongoing state litigation. The primary issues are who owns the Remax DBA and who, if anyone,
is entitled to the commission. As these issues are currently before the state court, this factor
weighs in favor of state-court deference.
In the same way as D.A. Osguthorpe, this case
consumed years of intense court involvement, substantial judicial resources, and is interwoven
with the state court at both the trial and appellate level.
Second, all progress—several years of litigation—was made in state court before this
court’s jurisdiction was invoked. This factor weighs heavily in favor of state-court deference.
“Colorado River concerns itself with efficiency and economy.” 56 “Its goal is to preserve judicial
resources” 57 and avoid “duplicative litigation.” 58
As stated, many of the key issues underlying Code’s claims are making their way through
the Utah state courts. Moreover, federal law is not implicated in this case and there is no
indication that Code’s rights are somehow less protected in the Utah state-court proceedings.
Further, Code did not come to federal court until her husband received unfavorable rulings in the
state court. Thus, having considered the combination of Colorado River factors against the
56
Id. at 1233.
57
Id. (internal quotation and citation omitted).
58
Id.
15
obligation to exercise jurisdiction, the Court believes “clear justifications” exist warranting statecourt deference under the Colorado River doctrine.
While the Supreme Court has declined to address whether deference to state-court
proceedings under Colorado River should result in a stay or a dismissal of the federal action, 59
the Tenth Circuit has stated that “the better practice is to stay the federal action pending the
outcome of the state proceedings.” 60 That way, “[i]n the event the state court proceedings do not
resolve all the federal claims, a stay preserves an available federal forum in which to litigate the
remaining claims, without the plaintiff having to file a new federal action.” 61 Accordingly, the
Court will stay this case pending resolution of the state proceedings, allowing Code access to this
Court in the event the state-court proceedings do not resolve all issues.
III. CONCLUSION
It is therefore
ORDERED that Defendants’ Motion to Dismiss and/or for Summary Judgment is
GRANTED IN PART. This matter is stayed pending resolution of the state-court proceedings.
The Clerk of the Court is directed to administratively close this case forthwith. The parties are
directed to provide the Court a joint status report within thirty days (30) of the decision by the
Utah Court of Appeals.
59
Moses H. Cone, 460 U.S. at 28.
60
Fox, 16 F.3d at 1083.
61
Id.
16
DATED this 29th day of June, 2016.
BY THE COURT:
Ted Stewart
United States District Judge
17
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