Schultz v. Averett et al

Filing 51

ORDER ADOPTING REPORT AND RECOMMENDATIONS re 49 Report and Recommendations ; granting in part and denying in part 33 Motion to Dismiss for Failure to State a Claim. Signed by Judge Jill N. Parrish on 9/12/2018. (jds)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
CHARLES SCHULTZ,
Plaintiff,

ORDER ADOPTING REPORT AND
RECOMMENDATION

v.
MICHAEL AVERETT, HEATHER
BATEMAN, KASEY BATEMAN, JAY
BINKERD, JONATHAN BLOTTER,
ERIC BUNKER, LYNN CRISLER,
LAMBERT DEEGAN, MICHAEL
DUGGIN, JOHN GLODOWSKI, DIANE
GROSE, DANIEL HARVATH, KIM
NORRIS, ED PRESSGROVE, LANCE
TURNER, PAM SKINNER, LYNNE
SCHINDURLING, FRANCIS SMITH,
GARY WALTON, GARY WEIGHT, THE
TOWN OF DANIEL, and JOHN OR JANE
DOES 1 through 10,

Case No. 2:15-cv-00720-JNP-EJF
Judge Jill N. Parrish

Defendants.
The defendants moved to dismiss the complaint filed by plaintiff Charles Schultz. [Docket
30]. Magistrate Judge Furse issued a Report and Recommendation that this court grant in part and
deny in part the defendants’ motion. [Docket 49].
Schultz did not file an objection to the Report and Recommendation. He therefore waived
any argument that the Report and Recommendation was in error. See United States v. One Parcel
of Real Prop., 73 F.3d 1057, 1060 (10th Cir. 1996). The court will decline to apply the waiver rule
only if “the interests of justice so dictate.” Moore v. United States, 950 F.2d 656, 659 (10th Cir.
1991). The court has reviewed the portion of the Report and Recommendation that concluded that
some of the claims in this action should be dismissed. The court determines that these portions of
the Report and Recommendation are not clearly erroneous and finds that the interests of justice do

not warrant deviation from the waiver rule. The court, therefore, ADOPTS these portions of the
Report and Recommendation.
The defendants have objected to the portion of the Report and Recommendation in which
Judge Furse concluded that the seventeenth cause of action should not be dismissed. Because the
defendants filed an objection, the court “must determine de novo” whether its objections have
merit. FED. R. CIV. P. 72(b)(3).
Schultz titles his seventeenth cause of action as being for “Fraudulent Over Collection of
Taxes, Demand for Refund of Over Payment of Taxes, Theft by Deception and Fraud.” In this
cause of action, he alleges that the Town of Daniel rezoned a piece of property he owned from
residential to agricultural but did not inform either him or Wasatch County of the change. The
county, therefore, continued to tax Schultz at the higher residential rate and not at the lower
agricultural rate. Schultz essentially makes two claims within this seventeenth cause of action: he
seeks a refund for the overpayment of taxes and he alleges that the town committed a fraud that
caused him to be overtaxed.
The Town of Daniel moved to dismiss the seventeenth cause of action, arguing that it was
immune to suit and that the fraud claim had not been pled with particularity. In the Report and
Recommendation, Judge Furse interpreted Schultz’s fraud claim to be for fraudulent nondisclosure
and rejected both of the town’s arguments for dismissal.
The Town of Daniel now objects to this portion of the Report and Recommendation. First,
the town raises a new argument. It asserts that Schultz has not stated a claim for fraudulent
nondisclosure because it did not have a duty to disclose the zoning change. “To prevail on a claim
[for] fraudulent nondisclosure, a plaintiff must prove by clear and convincing evidence that (1) the
defendant had a legal duty to communicate information, (2) the defendant knew of the information

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he failed to disclose, and (3) the nondisclosed information was material.” Anderson v. Kriser, 266
P.3d 819, 823 (Utah 2011) (alteration in original) (citation omitted). Courts must first analyze
whether a duty to communicate information exists. Yazd v. Woodside Homes Corp., 143 P.3d 283,
286 (Utah 2006). “A person who possesses important, even vital, information of interest to another
has no legal duty to communicate the information where no relationship between the parties
exists.” Id. at 287.
The Town of Daniel contends that it had no duty to inform either the county or Schultz of
the zoning change so that an accurate tax could be assessed because Schultz is presumed to know
the law—including the proceedings of town zoning boards. In support of this argument, the town
cites In re Adoption of B.Y., 356 P.3d 1215, 1222 (Utah 2015). In that case, the Utah Supreme Court
held that a biological father could not complain about inadequate notice of the Utah Adoption Act’s
requirements for an unmarried father to establish his paternal rights because “he had constructive
notice of the content and applicability of the terms of Utah law.”
While the court agrees that individuals may not avoid laws of general application by
pleading ignorance, the Town of Daniel’s argument misapplies this well-accepted principle. In this
cause of action, Schultz is not attempting to avoid the zoning change because he did not know
about it. Instead, he asserts that the town had a duty to disclose the zoning change so that the county
could correctly calculate his property taxes. The court agrees that the town had a duty to provide
accurate information regarding Schultz’s tax burden. The Town of Daniel cannot, as Schultz
alleges, withhold this information with impunity in order to fraudulently collect more taxes than
are due. In short, the court rejects the Town of Daniel’s augment that it had no duty to report correct
property tax information to Wasatch County so that individuals who own property in the town
receive an accurate tax bill.

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Finally, the Town of Daniel argues that Schultz’s fraud claim should be dismissed because
he said that it was not a fraud claim. In its motion to dismiss, the town argued that the seventeenth
cause of action should be dismissed because Schultz had not pleaded his fraud claim with
particularity as required by Rule 9(b) of the Federal Rules of Civil Procedure. In his response brief,
Schultz stated that his “Seventh Cause of Action” did not allege fraud. Judge Furse disagreed with
this statement and applied a Rule 9(b) analysis to the fraud claim pleaded in the seventeenth cause
of action.
Whether Schultz was trying to avoid the requirements of Rule 9(b) or whether he was
confused about what cause of action was at issue when he stated that there was no fraud claim in
his “Seventh Cause of Action” is of no moment. He could not amend his complaint to change the
essential nature of his seventeenth cause of action through any statements made in his response
brief. He could only amend his complaint with leave of the court under Rule 15(a)(2). Judge Furse,
therefore, correctly concluded that the seventeenth cause of action stated a claim for fraud.
CONCLUSION AND ORDER
The court OVERRULES the objection to the Report and Recommendation filed by the
Town of Daniel. [Docket 50.] The court, therefore, ADOPTS IN FULL the Report and
Recommendation, [Docket 49] and ORDERS as follows:
1. The court DISMISSES WITH PREJUDICE Schultz’s tortious interference with
economic relations (tenth cause of action), tortious interference with prospective
business relations (ninth and eleventh causes of action), intentional infliction of
emotional distress (twelfth and fifteenth causes of action), and negligent infliction of
emotional distress (thirteenth and sixteenth causes of action) claims.

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2. The court GRANTS IN PART AND DENIES IN PART the defendants’ motion to
dismiss. [Docket 33.]
3. The court DISMISSES WITHOUT PREJUDICE all claims against the individual
defendants: Michael Averett, Heather Bateman, Kasey Bateman, Jay Binkerd, Jonathan
Blotter, Eric Bunker, Lynn Crisler, Lambert Deegan, Michael Duggin, John Glodowski,
Diane Groase, Daniel Harvath, Kim Norris, Ed Pressgrove, Lance Turner, Pam
Skinnger, Lynne Schindurling, Francis Smith, Gary Walton, and Gary Weight.
4. The court also DISMISSES WITHOUT PREJUDICE the first cause of action for
unlawful taking of property under the United States Constitution, the second cause of
action for unlawful taking of property under the Utah Constitution, the eighth cause of
action for tortious interference with economic relations, and the fourteenth cause of
action for a violation of the Fourteenth Amendment.
5. Schultz shall have twenty-one days to file an amended complaint that remedies the
deficiencies identified in the Report and Recommendation, if he can.
6. The court DENIES the remainder of the defendants’ motion to dismiss.
SO ORDERED September 12, 2018.
BY THE COURT:

______________________________________
JILL N. PARRISH
United States District Judge

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