Cartwright v. Colorado Bank of Walsh, Inc.

• Decision Date: 20 April 1987
• Docket Number: Civ. A. No. 86-K-1807.
• Parties: Ganem Kurt CARTWRIGHT, Jr., Plaintiff, v. COLORADO BANK OF WALSH, INC., a Colorado corporation, John Gehlhausen, James Bailey, Marvin Daniels, and Larry Harper, Defendants.
• Court: U.S. District Court — District of Colorado

658 F. Supp. 240

Ganem Kurt CARTWRIGHT, Jr., Plaintiff, v. COLORADO BANK OF WALSH, INC., a Colorado corporation, John Gehlhausen, James Bailey, Marvin Daniels, and Larry Harper, Defendants.

Civ. A. No. 86-K-1807.

United States District Court, D. Colorado.

April 20, 1987.

Carl D. Fatta, Pueblo, Colo., and Pete Cordova, Salida, Colo., for plaintiff.

Lewis M. Quigg, Shaw, Simons & Quigg, Pueblo, Colo., for Colorado State Bank, Bailey, Daniels & Harper.

Duncan W. Cameron, and Susan J. Trout, Hall & Evans, Denver, Colo., for defendants.

MEMORANDUM OPINION AND ORDER

KANE, District Judge.

This diversity action is before me on motions by defendant Colorado Bank to dismiss and by defendant John Gehlhausen for summary judgment. The relevant facts are lengthy and complex since they stem from a tangled series of financial transactions and legal actions taking place between plaintiff and defendants over the space of nine and one-half years.

The initial interaction between the parties giving rise to the case at bar revolved around a promissory note entered into between plaintiff and defendant bank in March of 1978. The note was purported to contain a 90% unconditional federal guarantee through the FHA. When the parties signed the note, the bank had only a conditional guarantee which was revoked by the FHA in May for the bank's failure to obtain adequate security on the note. Regardless of the guarantee status, advances under the promissory note were made by the bank to plaintiff over the course of two months, cattle owned by plaintiff were used for collateral and the bank consented to plaintiff's transfer of the cattle to Wyoming during that period. That consent was noted on a loan comment sheet.

A year later plaintiff had paid off a considerable amount of interest on the promissory note. Yet by August of 1979, and after the bank's failure to file or perfect a security interest in the transferred collateral cattle, the bank deemed itself insecure under the provisions of the note, and accelerated payment. With the assistance of attorney, defendant Gehlhausen, the bank declared plaintiff to have violated the security agreements by removing the cattle from the state without written authorization from the bank, and by refusing to allow the bank to inspect the cattle as per the agreement. Both defendants interpreted these actions to constitute default. Facts presented by all parties, however, strongly suggest both that plaintiff was given written permission by a bank official for the transfer, and that the bank's decision to accelerate payment may have instead been due to its own mishandling in guaranteeing the security interest.

By the end of August the bank had filed suit in a Colorado state court seeking a money judgment against plaintiff in the amount of the promissory note, and claiming entitlement to plaintiff's property in a replevin determination. The court granted summary judgment to the bank in February of 1980 for the amounts requested, but any further proceedings were interrupted by plaintiff's filing of an automatic stay under a bankruptcy action initiated to determine his debtor status.

In December of 1980, the bankruptcy court refused to discharge plaintiff's debts since it did not find credible plaintiff's explanation of his loss of assets.

In May of 1981, the bank, again with the assistance of defendant Gehlhausen, convinced a Colorado district attorney to bring criminal charges against plaintiff for the felony violation of defrauding a secured creditor. Although plaintiff was bound over for trial in November of that year, all charges were later dismissed, after trial commenced in August of 1982, for lack of evidence. That dismissal was based primarily on testimony from the bank's own representative indicating that plaintiff had indeed been given permission to transfer the cattle.

Two years later, in August of 1984, plaintiff instituted a state court civil action against the bank alleging nine claims for relief, including malicious prosecution, abuse of process, breach of contract, fraud, and libel and slander. Although the complaint was detailed and cogent, that same month defendant bank made an untimely motion to make the complaint more definite and certain.

In November of that year, the court granted that motion irrespective of its nonconformity with time requirements, and plaintiff attempted to comply by submitting a simple laundry list of his causes of action. Additionally, defendant bank was granted an extension of time in which to answer the complaint, stating that it was unable to respond properly to plaintiff's nine distinct tort claims within the ten day time limit provided for in the local rules. By December, however, defendant bank instead only filed a motion to dismiss proclaiming plaintiff's failure to state a claim upon which relief can be granted. Citing only a local rule concerning pleading form, defendant's motion made no attempt to invoke a substantive response to the complaint. Indeed, the motion was obviously in disregard of both the competency and the merits of plaintiff's complaint since it merely realleged that plaintiff still had not specifically explained the nature of the torts claimed. Neither the plaintiff nor the court responded to this motion.

Nearly a year later, in November of 1985, plaintiff filed a notice with the court of his voluntary dismissal of his state action pursuant to state procedural rule C.R. C.P. 41(a)(1)(A) providing for voluntary dismissal on the plaintiff's notice so long as costs are paid, and the notice for dismissal is filed before either an answer or a motion for summary judgment by the opposing party has been filed. Agreeing with an erroneous interpretation of C.R.C.P. 41(a)(1) proposed by defendant Gehlhausen, the state court considered the voluntary dismissal to be one under C.R.C.P. 41(a)(1)(B) instead, an alternative provision which requires a stipulation of dismissal signed by all parties to the suit. Relying on a finding simply that defendant had filed a motion to dismiss, and that no signed stipulation existed or had been agreed to, the state action was supposedly dismissed again with prejudice by the state court citing C.R.C.P. 41(a)(2) for refusal by plaintiff to prosecute the action with diligence.

Plaintiff filed an untimely motion with the court to amend or for reconsideration, but this motion was denied in September of 1986 under the deemer provision of C.R. C.P. 59(j). Plaintiff did not appeal either state court determination.

Plaintiff filed the present action in this court in August of 1986. His complaint has recently been allowed to be amended to add parties and claims, and as amended it currently seeks five claims for relief. These are malicious prosecution, abuse of process, breach of contract, trade libel, and fraud. In addition, plaintiff seeks punitive damages against all defendants.

Both defendant bank and defendant Gehlhausen rely on similar arguments in support of their respective motions to dismiss and for summary judgment. They claim principles of res judicata or collateral estoppel bar all of plaintiff's claims, that the malicious prosecution and abuse of process claims are defective and insufficient as a matter of law, and that the breach of contract, trade libel, and abuse of process claims are time-barred by the applicable statutes of limitations. In addition, defendant Gehlhausen claims he was not a party to any contract with plaintiff for purposes of plaintiff's breach of contract claim.

Plaintiff has responded with various statute of limitations arguments, and claims that all elements required for proof of malicious prosecution and abuse of process are supported by alleged facts.¹

Plaintiff raises an intriguing response to defendants' res judicata arguments. He reasons that because neither a motion for summary judgment nor an answer was filed by defendant bank in the state court action before he filed his C.R.C.P. 41(a)(1) voluntary dismissal, that filed dismissal operated to close the state court action independent of the state judge's later decision to treat it differently. Plaintiff claims that from the moment of filing the voluntary dismissal, the state court had no jurisdiction to render the various later judgments against him, and thus the dismissal with prejudice of his action was void as a matter of law so that res judicata or collateral estoppel principles could not now apply.

Defendant bank disputes plaintiff's interpretation of the Colorado statute. Defendant Gehlhausen, on the other hand, has responded to plaintiff's res judicata arguments under the rubric of a rather novel legal analysis. Gehlhausen suggests the Full Faith and Credit clause of Article IV of the U.S. Constitution absolutely precludes federal courts from inquiring into "whatever mistakes of law may underlie the judgment" of a state court. Gehlhausen finds support for his interpretation of the role of the federal judiciary by citing a single fact-bound proposition from a Supreme Court case concerning the scope of state appellate review of notice requirements for jurisdiction in an in rem proceeding in a state trial court.

For defendant bank to prevail on a motion to dismiss under Rule 12(b)(6), Fed.R. Civ.P., it must appear "beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-6, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Mitchell v. King, 537 F.2d 385, 386 (10th Cir.1976). All facts must be construed in favor of the plaintiff. Gardner v. Toilet Goods Ass'n., 387 U.S. 167, 172, 87 S.Ct. 1526, 1529, 18 L.Ed.2d 704 (1967). So long as the plaintiff may offer evidence to support a legally recognized claim for relief, the motion to dismiss should be denied. Brezinski v. F.W. Woolworth, 626 F.Supp. 240, 241-2 (D.Colo.1986).

The summary disposition which Gehlhausen now requests is appropriate only if "the pleadings, depositions,...