L & B Development et al v. Barnes Bancorporation et al

Filing 43

MEMORANDUM DECISION AND ORDER denying 27 Motion to Dismiss; denying 27 Motion to Strike; Plaintiffs are to file an amended complaint and a written status report within 21 days of this order. Signed by Judge David Nuffer on 12/30/13 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
L & B DEVELOPMENT CO. INC., SOUTH
RIM, LC, HOGAN BROTHERS INC.,
JACKSON CLEARWATER CO. INC.,
LELAND J. HOGAN, JOYCE R. HOGAN,
WILLIAM J. HOGAN, AND JILL J.
HOGAN,
Plaintiffs,
v.

MEMORANDUM DECISION AND
ORDER DENYING DEFENDANT'S [27]
MOTION TO DISMISS AND MOTION TO
STRIKE AND ORDERING PLAINTIFFS
TO FILE AN AMENDED COMPLAINT
AND MORE DEFINITE STATEMENT

BARNES BANCORPORATION f/k/a
BARNES BANKING CO. INC., DEPOSIT
INSURANCE NATIONAL BANK OF
KAYSVILLE, FEDERAL DEPOSIT
Case No.: 2:12-cv-01119 DN
INSURANCE CORP., COLONY CAPITAL
L.L.C., RADC/CADC VENTURE 2010-2
District Judge David Nuffer
L.L.C., COLONY AMC 2001 ADC L.L.C.,
SITUSSERV L.P., MIDLAND LOAN
SERVICES INC., ARGENT MANAGEMENT
L.L.C., CURTIS HARRIS, MICHAEL
PAVICH, LLOYD SEDILLO, BRUCE
CURTIS, and DOES 1–10.
Defendants.

Defendant Lloyd Sedillo ("Sedillo") moves 1 to dismiss from the Plaintiffs' complaint 2 the
Eighth Cause of Action (fraudulent concealment) and any and all other claims of fraud,
intentional misrepresentation, or concealment as time-barred, and to strike or dismiss the entire
complaint relying on Rules 8(a), 8(d), 12(b)(6), and 12(f) of the Federal Rules of Civil

1

Defendant's Motion to Dismiss Fraud Claims as Time-Barred and Motion to Strike or Dismiss Plaintiffs' Entire
Complaint ("Def.'s Mot."), docket no. 27, filed Feb. 15, 2013.

2

Plaintiffs' Complaint (“Pls.' Compl.”), docket no. 2, filed Dec. 10, 2012.

Procedure. 3 Alternatively, Sedillo requests that "to the extent the Court does not dismiss the
Complaint in its entirety . . . that the Court will enter an order permitting [Sedillo] to respond to
the numerous allegations of the Complaint with a general denial . . . ." 4 Plaintiffs oppose
Sedillo's motion. 5 For the reasons set forth herein, Sedillo's motion is denied, though Plaintiffs
are ordered pursuant to Rule 12(e) to file an amended complaint containing a more definite
statement within twenty-one (21) days of the date of this order. 6
BACKGROUND
Plaintiffs' allegations arise from a series of loans to Plaintiffs for the development of land
near Tooele, Utah. 7 Sedillo was a commercial loan officer at Central Bank 8 before accepting a
position as vice president with Barnes Bank in 2006. 9 While employed at Central Bank, Sedillo
brokered a loan to Plaintiffs related to Phase I of the land development. 10 After beginning his
new position at Barnes Bank, Sedillo brokered an additional loan related to Phase II of the land
development. 11 Although Plaintiffs describe numerous facts and multiple loan agreements, the
root of Plaintiffs' complaint seems to focus on a third loan agreement brokered by Sedillo
between Plaintiffs 12 and Barnes Bank. The specific loan agreement at issue is a May 2009 loan

3

Def.'s Mot. at 1, 5, docket no. 27.

4

Id. at 1–2. See Fed.R.Civ.P. 8(b)(3).

5

Plaintiffs' Opposition to Defendants' Motion. ("Pls.' Opp'n"), docket no. 35, filed Mar. 25, 2013.

6

Fed.R.Civ.P. 12(e).

7

Pls.' Compl. ¶ 1, docket no. 2.

8

Id. ¶ 24.

9

Id. ¶ 28.

10

Id. ¶ 24.

11

Id. ¶ 29.

12

In parts of the complaint, Plaintiffs allege that all of them executed the loan documents. See e.g., Pls.' Compl. ¶¶
33–34, 38, 42, 46, 60–61, 65. However, other parts of Plaintiffs' complaint indicate that not all Plaintiffs were
parties to the executed loan documents. See e.g., Pls.' Compl. ¶¶ 1, 56 (stating plaintiff Jackson Clearwater Co. Inc.
was not a party to the loan contracts at issue).

2

agreement to complete Phase III of the land development. 13 Plaintiffs allege they unknowingly
became personally liable under the May 2009 loan agreement. 14 Further, Plaintiffs allege that
after Barnes Bank subsequently failed and Plaintiffs could not submit any more draw requests
under the May 2009 loan, that Plaintiffs have experienced financial losses and now face personal
liability under the May 2009 loan agreement. 15
DISCUSSION
Rule 8 of the Federal rules requires a complaint to contain "a short and plain statement of
the claim showing that the pleader is entitled to relief." 16 The United States Supreme Court has
since expounded on the "short and plain" requirement, holding that Rule 8 "does not require
detail factual allegations," but "demands more than an unadorned, the-defendant-unlawfullyharmed-me accusation." 17 "A pleading that offers 'labels and conclusions' or 'a formulaic
recitation of the elements of a cause of action . . .'" does not satisfy Rule 8. 18 Although Sedillo
relies extensively on certain provisions of Rule 8 in support of his motion, 19 he ignores Rule
8(e), which must be read with the standard for dismissal under Rule 12(b)(6). Rule 8(e) requires
that "[p]leadings must be construed so as to do justice." 20

13

Pls.' Compl. ¶ 46, docket no. 2. See Def.s' Mot. at 2, docket no. 27; Pls.' Opp'n at 2, docket no. 35.

14

Pls.' Compl. ¶¶ 82, 182, 220, docket no. 2.

15

Id. ¶¶ 50, 164, 220.

16

Fed.R.Civ.P. 8(a)(2).

17

Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quotation marks and citations omitted).

18

Id. (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)).

19

See Def.'s Mot. at 1–3, 8–10; Defendant's Reply in Support of Defendant's Motion ("Def.'s Reply") at 1–4 , docket
no. 37, filed Apr. 4, 2013.
20

Fed.R.Civ.P. 8(e).

3

To construe a pleading so as to do justice "requires 'that we not rely solely on labels in a
complaint, but that we probe deeper and examine the substance.'" 21 Further, "[a] claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged." 22 The plausibility standard
requires "more than a sheer possibility that a defendant acted unlawfully." 23 "[O]nly a complaint
that states a plausible claim for relief [can] survive[] a motion to dismiss." 24
In evaluating a motion under Rule 12(b)(6) 25 to dismiss a claim in a complaint for
"failure to state a claim upon which relief can be granted," 26 the court must "assume the truth of
the plaintiff's well-pleaded factual allegations and view them in the light most favorable to the
plaintiff." 27 The court's inquiry is "whether the complaint contains 'enough facts to state a claim
to relief that is plausible on its face.'" 28 Granting a motion to dismiss under rule 12(b)(6) "is a
harsh remedy which must be cautiously studied, not only to effectuate the spirit of the liberal
rules of pleading but also to protect the interests of justice." 29
Plaintiffs' complaint, though disorganized and not a model of clarity, contains sufficient
facts "to draw the reasonable inference that the defendant is liable for the misconduct alleged." 30

21

Alpine Bank v. Hubbell, 555 F.3d 1097, 1107–08 (10th Cir. 2009) (quoting Minger v. Green, 239 F.3d 793, 799
(6th Cir. 2001)).
22

Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556).

23

Id.

24

Id. at 679.

25

Fed.R.Civ.P. 12(b)(6).

26

Id.

27

Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (quoting Beedle v. Wilson, 422
F.3d 1059, 1063 (10th Cir. 2005)).
28

Id. (quoting Twombly, 550 U.S. at 570).

29

Dias v. City & Cnty. of Denver, 567 F.3d 1169, 1178 (10th Cir. 2009) (quoting Duran v. Carris, 238 F.3d 1268,
1270 (10th Cir. 2001)).

30

Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556).

4

Sedillo, it is alleged, was an employee of Central Bank and later of Barnes Bank during the time
period forming the basis of the allegations in the complaint. 31 Plaintiffs allege that Sedillo
"completed [the loan documents] on his own after obtaining Plaintiffs' signatures on blank
application forms;" 32 did not provide Plaintiffs' with an opportunity to review the loan
documents; 33 and failed to provide a complete set of loan document to Plaintiffs. 34 The
Plaintiffs' have provided "enough facts to state a claim to relief that is plausible on its face" 35 and
have "nudged their claims across the line from conceivable to plausible. . . ." 36 Thus, the
complaint sufficiently complies with Rule 8 and avoids dismissal under Rule 12(b)(6).
However, Plaintiffs' complaint is nevertheless deficient in two primary areas. First, the
complaint lacks clear identification of which plaintiffs were harmed by which defendants in each
of the causes of action. For example, the complaint lumps all of the plaintiffs together in many
of the allegations and causes of action related to execution of the loan documents and ownership
of the property, 37 even though other allegations indicate that not all of the plaintiffs executed the
loan documents or owned the property at issue. 38
Second, Plaintiffs allege various frauds and in argument on this motion rely on the
discovery rule to overcome the statute of limitations issue raised by Sedillo, but the allegations in
the complaint lack the requisite specificity. "In alleging fraud or mistake, a party must state with

31

See Pls.' Compl. ¶¶ 28, 46, docket no. 2.

32

Id. ¶ 51.

33

Id. ¶¶ 60, 163.

34

Id. ¶¶ 78, 163.

35

Twombly, 550 U.S. at 570.

36

Id.

37

See e.g., Pls.' Compl. ¶¶ 33–34, 38, 42, 46, 60–61, 65, 184, 185, docket no. 2.

38

See e.g., id. ¶¶ 1, 56

5

particularity the circumstances constituting fraud or mistake." 39 Post-Twombly, Rule 9(b)
requires that allegations of fraud "afford the defendant fair notice of [plaintiffs'] claims and the
factual ground upon which they are based . . ." 40 At a minimum, this requires plaintiffs to allege
the "who, what, when, where and how of the alleged [fraud]," 41 and then go on to detail "the
time, place, content, and consequences of the fraudulent conduct." 42 And "[w]hile the statute of
limitations is an affirmative defense, when the dates given in the complaint make clear that the
right sued upon has been extinguished, the plaintiff has the burden of establishing a factual basis
for tolling the statute." 43
Again, though the complaint consists of fifty-three pages and two-hundred forty
numbered paragraphs, it is not a model of clarity as to the date when Plaintiffs knew or should
have known of Sedillo's alleged fraudulent concealment of the contents of the loan documents at
issue in this case. 44 The facts alleged are insufficient to raise tolling by the discovery rule
because the allegations lack specificity as to the "who, what, when, where and how of the alleged
[fraud]" and discovery. 45
Although Rule 12(e) states that "[a] party may move for a more definite statement," 46 a
"district court [has] the inherent authority to require [a party] to file a more definite statement.
Such authority, if not inherent in Rule 12(e), is surely within the district court's authority to

39

Fed.R.Civ.P. 9(b).

40

United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1171 (10th Cir. 2010) (citations
omitted).
41

Id.

42

Id.

43

Aldrich v. McCulloch Props., Inc., 627 F.2d 1036, 1041 n.4 (10th Cir. 1980) (“Statute of limitations questions
may, therefore, be appropriately resolved on a Fed.R.Civ.P. 12(b) motion.”).
44

Def.'s Reply at 2–3, docket no. 37.

45

United States ex rel. Lemmon, 614 F.3d at 1171 (quotations omitted).

46

Fed.R.Civ.P. 12(e).

6

narrow the issues in the case in order to speed its orderly, efficient, and economic disposition" 47
and may be viewed as part of the "district court's case-management arsenal." 48
A more definite statement setting forth the factual basis supporting application of the
discovery rule is necessary before determining whether the discovery applies to toll the statute of
limitations on the claims against Sedillo, and to allow Sedillo to more fully and accurately
respond to the allegations against him. Factual allegations should also specifically identify
which plaintiffs were harmed by which defendants in each of the causes of action.
Sedillo alternatively moves the court to strike the complaint under Federal Rule of Civil
Procedure 12(f). Rule 12(f) states "[t]he court may strike from a pleading an insufficient defense
or any redundant, immaterial, impertinent, or scandalous matter." 49 Besides a few conclusory
arguments that "[t]he complaint contains 'redundant, immaterial, impertinent, or scandalous
material," 50 citation to Rule 12(f), 51 and a statement that Sedillo "vehemently disputes the many
defamatory and scandalous statements regarding him personally . . . ," 52 Sedillo fails to provide
factual support or examples of allegations in the complaint that are redundant, immaterial,
impertinent, or scandalous. Rather, Sedillo only asserts that "[t]he time and expense required to
respond to two hundred forty separate numbered paragraphs is neither reasonable nor necessary .

47

Fikes v. City of Daphne, 79 F.3d 1079, 1083 n.6 (11th Cir. 1996).

48

Twombly, 550 U.S. at 593 n.13. See also Sheets v. CTS Wireless Components, Inc., 213 F. Supp. 2d 1279, 1283–
84 (D. New Mexico 2002) (citing Barnett v. Bailey, 956 F.2d 1036, 1043–44 (11th Cir. 1992) (ruling that if a
complaint is ambiguous or contains insufficient information to frame a responsive pleading, the proper remedy is not
to order dismissal but to order clarification)); Anderson v. Bd. of Trs., 77 F.3d 364, 367 (11th Cir. 1996) (ruling that
courts may order sua sponte a plaintiff to provide a more definite statement).
49

Fed.R.Civ.P. 12(f).

50

Def.'s Mot. at 2, docket no. 27.

51

Id. at 5, 9.

52

Id. at 7.

7

. . [and] would impose undue burden and expense [on him]." 53 Sedillo's Rule 12(f) motion is
therefore denied.
CONCLUSION AND ORDER
IT IS THEREFORE ORDERED that Defendant Lloyd Sedillo's Motion to Dismiss Fraud
Claims as Time-Barred and Motion to Strike or Dismiss Plaintiffs' Entire Complaint 54 is
DENIED.
IT IS FURTHER ORDERED that Plaintiffs L&B Development Company, Inc., South
Rim, LC, Hogan Brothers, Inc., Jackson Clearwater Co. Inc., Leland J. Hogan, Joyce R. Hogan,
William J. Hogan, and Jill J. Hogan shall file an amended complaint within twenty-one (21) days
of this order. Failure to file an amended complaint within the prescribed time will result in
dismissal of this case with prejudice.
IT IS FURTHER ORDERED that Plaintiffs L&B Development Company, Inc., South
Rim, LC, Hogan Brothers, Inc., Jackson Clearwater Co. Inc., Leland J. Hogan, Joyce R. Hogan,
William J. Hogan, and Jill J. Hogan shall file a written status report within twenty-one (21) days
identifying the remaining defendants in this case and the status of the prosecution of this case
against those defendants.
Signed December 30, 2013.
BY THE COURT:

________________________________________
David Nuffer
United States District Judge

53

Def.'s Reply at 4, docket no. 37.

54

Docket no. 27.

8