Fox v. Maulding
| Decision Date | 28 April 1997 |
| Docket Number | No. 96-5104,96-5104 |
| Citation | 112 F.3d 453 |
| Parties | RICO Bus.Disp.Guide 9263, 97 CJ C.A.R. 632 Odell FOX and Sharon Fox, Plaintiffs-Appellants, v. Dwight W. MAULDING, Walter E. Brown, John B. Clark, Mike Bezanson, Mark A. Gish, Wiley W. Smith, C.F. Bartlett, H.I. Bartlett, B.B. Bingman, J.M. Bingman, E.D. Hamilton, L.T. Jackson, Jr., J.L. Robertson, J.M. Davis, Edward A. Carson, J.W. Sherwood, Security National Bank of Sapulpa, a national banking association, and Security National Bankshares of Sapulpa, Inc., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Submitted on the briefs:
John L. Hull, III, and Sandra Lefler Cole, Tulsa, Oklahoma, for Plaintiffs-Appellants.
Gregory L. Mahaffey and Jayne Jarnigan Robertson of Mahaffey & Gore, P.C., Oklahoma City, Oklahoma, for Defendants-Appellees, John B. Clark, Mike Bezanson, Mark A. Gish, Wiley W. Smith, C.F. Bartlett, H.I. Bartlett, B.B. Bingman, J.M. Bingman, E.D. Hamilton, L.T. Jackson, Jr., J.L. Robertson, J.M. Davis, Edward A. Carson, J.W. Sherwood, Security National Bank of Sapulpa, a national banking association, and Security National Bankshares of Sapulpa, Inc.
Before TACHA, EBEL, and BRISCOE, Circuit Judges.
Plaintiffs brought the present action against Security National Bank of Sapulpa (SNB), its former Chairman of the Board and CEO, Dwight Maulding, and various other officers and directors, claiming defendants had violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. §§ 1961-68, in connection with a series of loans. Plaintiffs also alleged state law claims for fraud, constructive fraud, and intentional infliction of emotional distress. Based on Colorado River Water Conservation District v. United States, 424 U.S. 800, 96 S.Ct. 1236, 47 L.Ed.2d 483 (1976), the district court stayed the federal proceedings in light of what it determined to be parallel proceedings in Oklahoma state court. Once the state proceedings ended, the district court granted defendants' motion to dismiss the present action, concluding that the action was barred under the doctrines of claim and issue preclusion. 1
In June 1981, plaintiff Odell Fox and Scott Wilmott approached SNB about financing their purchase and development of a piece of real property in Oklahoma. SNB agreed to provide the financing, so long as Maulding could become an equal partner with Fox and Wilmott in the purchase and development of the property. The three men formed a partnership known as Glendale Acres, and so began a long and tortuous relationship between Fox, Maulding, and SNB. Over the course of time, SNB structured and provided the financing for a variety of other real estate deals and an offshoot tire business, in all of which Maulding obtained an interest. The Foxes contend that, due to defendants' fraudulent activities, they were driven further and further into debt, until they ultimately lost everything.
One of the last events in the series of allegedly fraudulent acts by defendants was a $94,000 loan to the Foxes in July 1984. The Foxes needed the additional money to pay off an existing SNB loan that had matured and to provide additional capital for the tire business. The Foxes allege that defendants "seized the opportunity to play upon the Plaintiffs' desperation," Appellants' App., Vol. II, Amended RICO Case Statement, at 459, and
[a]s a continuation of the scheme to defraud the Plaintiffs, Defendants through Maulding represented to Plaintiff, Sharon Fox, that they would need to secure the new loan with a mortgage on the Plaintiffs' home. In an effort to induce the Plaintiffs to enter into the mortgage, Defendants through Maulding represented that they would not ever bring any action to foreclose on the property.
Id., Third Amended Complaint, at 421.
The Foxes ultimately defaulted on the loan and, "in total disregard of the representations and promises and reassurances made," id. at 422, SNB instituted foreclosure proceedings against the Foxes' home in state court in July 1988. The Foxes contend that the loan went into default "[b]ecause of the failure and refusal of Defendants and the Bank to uphold the promise to adequately fund the tire business and the inability of Plaintiffs to achieve capitalization from other lending institutions due to their existing debt load." Id., Amended RICO Case Statement, at 459.
Meanwhile, in 1986, Maulding filed a petition in state court seeking an accounting, dissolution, and winding up of both the partnership with Odell Fox and Scott Wilmott and the corporation that had been formed to operate the tire business. Both Odell and Sharon Fox were parties to this action, as were Scott Wilmott and his wife. In late 1989, while the foreclosure and dissolution actions were still pending in state court, Odell Fox, proceeding pro se, filed two additional actions in state court against Maulding and SNB. The first suit alleged claims for conversion and for RICO violations, and the second suit alleged various acts of fraud in connection with the parties' business dealings.
In 1991, the Foxes retained new counsel, 2 who filed the present action in federal court and then entered appearances in the two pro se actions in state court and moved to dismiss them without prejudice. At the time the federal district court stayed the proceedings in this case, SNB had obtained a judgment in its favor in the foreclosure action, but had voluntarily stayed the sale of the Foxes' home pending the outcome of the dissolution action.
Plaintiffs appealed the district court's stay order, but, when the state proceedings ended during the pendency of that appeal, this court dismissed the appeal as moot. Thereafter, the district court dismissed the case, concluding that the present claims were either compulsory counterclaims in the foreclosure action or were actually determined in the partnership dissolution action and, therefore, were barred.
Federal courts must give to state court judgments "the same full faith and credit ... as they have by law or usage in the courts of such State, Territory or Possession from which they are taken." 28 U.S.C. § 1738. "We must, therefore, ascertain what preclusive effect Oklahoma would give its own decision before we may know what effect it should be given in the federal court." Stifel, Nicolaus & Co. v. Woolsey & Co., 81 F.3d 1540, 1544 (10th Cir.1996).
Oklahoma follows the familiar doctrines of res judicata (claim preclusion) and collateral estoppel (issue preclusion). Under the former doctrine, Panama Processes, S.A. v. Cities Serv. Co., 796 P.2d 276, 283 n. 27 (Okla.1990) (citations omitted). Under the latter doctrine, "once a court has decided an issue of fact or law necessary to its judgment, that issue may not be relitigated between the same parties or their privies in a suit upon a different cause of action." Id.
Oklahoma also has a compulsory counterclaim rule that "parallels exactly the language of Rule 13, Fed.R.Civ.P." Oklahoma Gas & Elec. Co. v. District Ct., Fifteenth Judicial Dist., 784 P.2d 61, 64 n. 8 (Okla.1989). Oklahoma's rule provides that a pleading must state as a compulsory counterclaim "any claim which at the time of serving the pleading the pleader has against the opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction." Okla. Stat. tit. 12, § 2013(A). "Failure to plead a compulsory counterclaim prevents a party from bringing a later independent action on that claim." Oklahoma Gas & Elec. Co., 784 P.2d at 64.
We review de novo the district court's determination that the claims asserted in the present action were compulsory counterclaims in the foreclosure action. Driver Music Co. v. Commercial Union Ins. Cos., 94 F.3d 1428, 1435 (10th Cir.1996). Because the Oklahoma legislature followed Fed.R.Civ.P. 13(a) in adopting a compulsory counterclaim rule, Oklahoma courts look to federal cases for guidance in applying the rule, see, e.g., Oklahoma Gas & Elec. Co., 784 P.2d at 64 n. 8; Turner v. FDIC, 805 P.2d 130, 131 (Okla.Ct.App.1991), and we may do likewise.
We begin by considering whether the present claims "arise[ ] out of the [same] transaction or occurrence" as SNB's claim in the foreclosure proceeding. Okla. Stat. tit. 12, § 2013(A). "The courts have given the terms 'transaction' and 'occurrence' ... flexible and realistic constructions in order to effect 'judicial economy', i.e., trial in one action of all related controversies between the parties and, of course, the avoidance of multiplicity of suits." Pipeliners Local Union No. 798 v. Ellerd, 503 F.2d 1193, 1198 (10th Cir.1974); see also Oklahoma Gas & Elec. Co., 784 P.2d at 64 (); Moore v. New York Cotton Exch., 270 U.S. 593, 610, 46 S.Ct. 367, 371, 70 L.Ed. 750 (1926) .
Rather than attempt to define the terms "transaction" and "occurrence" precisely,
most courts ... have preferred to suggest standards by which the compulsory or permissive nature of specific counterclaims may be determined: (1) Are the issues of fact and law raised by the claim and counterclaim...
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