Lundborg v. Phoenix Leasing, Inc., 95-2278

• Decision Date: 08 March 1996
• Docket Number: No. 95-2278,95-2278
• Citation: 91 F.3d 265
• Parties: Susan D. LUNDBORG, etc., Plaintiff, Appellant, v. PHOENIX LEASING, INC., et al., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 265

91 F.3d 265

Susan D. LUNDBORG, etc., Plaintiff, Appellant, v. PHOENIX LEASING, INC., et al., Defendants, Appellees.

No. 95-2278.

United States Court of Appeals First Circuit.

Heard March 8, 1996.

Decided Aug. 5, 1996.

Ralph A. Dyer with whom Law Offices of Ralph A. Dyer, P.A., Portland, ME, was on briefs, for appellant.

David M. Wiseblood with whom Robert B. Kaplan, Joseph N. Demko, Frandzel & Share, San Francisco, CA, Anthony Perkins and Bernstein, Shur, Sawyer & Nelson, Portland, ME, were on brief, for appellees.

Before BOUDIN, Circuit Judge, CAMPBELL, Senior Circuit Judge, and LYNCH, Circuit Judge.

BOUDIN, Circuit Judge.

In this case, the district court dismissed claims brought by Susan Lundborg against Phoenix Leasing, Inc. ("Phoenix Leasing"), on the ground that they were barred by res judicata. We affirm the district court's judgment of dismissal but are compelled to do so on a ground that leaves open to Lundborg the opportunity to pursue a central aspect of her claims by an independent action in Maine state court. For reasons that will become apparent, such a suit is not a promising venture.

I.

The facts of the case are complicated and its procedural history involved; we offer a condensed version here. Because the district court dismissed the claims at issue on a motion to dismiss, the underlying "facts" described below are primarily drawn from the allegations of the complaint, Rockwell v. Cape Cod Hospital, 26 F.3d 254, 256 (1st Cir.1994), supplemented by pleadings in related cases of which the district court took judicial notice. In fact, there are six other related cases.

Susan Lundborg, a resident of Florida, was the sole shareholder of Community Cable Services of Maine, Inc. ("Community Cable"), which in 1988 became a general partner in Merlin Cable Operators ("Merlin"), a Maine general partnership. Soon after its formation, Merlin secured franchises to construct and operate two cable television systems in Maine. The partnership sought to borrow $850,000 of the estimated $1,000,000 cost of these projects.

In early 1989, Phoenix Leasing, a California corporation, agreed to loan Merlin that sum at an annual interest rate of 18 percent. The terms of the loan also required Merlin to pay Phoenix Leasing 25 percent of the value of the projects up to $150,000, plus an additional $50,000 for each year the loan was outstanding after 1990, amounting to what Lundborg claims was an effective annual interest rate in excess of 40 percent. The loan was secured by the cable systems and by Lundborg's personal guaranty, itself secured in part by a mortgage on her house in Suffolk County, New York.

In 1990, two additional cable television operators owned wholly or in part by Lundborg agreed to borrow money from Phoenix Leasing. The loans to Cable One CATV ("Cable One"), a New Hampshire limited partnership, and Sure Broadcasting, Inc. ("Sure"), a Delaware corporation, also imposed high rates of interest and demanding terms. Lundborg personally guaranteed the loans to Cable One and Sure, again giving Phoenix Leasing a mortgage on her Suffolk County house. The total of the three loans exceeded $4 million.

By December 1990, all three borrowers had stopped making payments to Phoenix Leasing and in April 1991, Phoenix Leasing began court actions to recover upon the loan agreements and to foreclose on the various properties securing the loans and Lundborg's personal guaranty. These included state court actions in Maine (against Merlin, Community Cable, and others) and New York (against Lundborg), and federal suits in New Hampshire (against Cable One and others) and Nevada (against Sure). ¹ Phoenix Leasing later filed claims in Merlin's federal bankruptcy proceeding in Maine and in Cable One's similar proceeding in New Hampshire. ²

Phoenix Leasing has prevailed in every case that has reached decision. In May 1991, Phoenix Leasing began a Maine state court action to recover on the original $850,000 loan. Merlin raised several affirmative defenses, including the defense of usury, and brought several compulsory counterclaims, see Me.R.Civ.P. 13(a), including claims for fraud, breach of duty of good faith, negligence, and abuse of process. The usury defense was cast in general terms and the fraud claims related to alleged actions of Phoenix Leasing quite different than the fraud charges that are now advanced.

Phoenix Leasing's Maine state court suit against Merlin was dismissed after Merlin filed for bankruptcy in August 1991. In September 1992, the Maine state court entered a default judgment against Community Cable on Phoenix Leasing's claims and Community Cable's counterclaims. In early 1994, the federal bankruptcy court in Maine awarded Phoenix Leasing cash and a promissory note on account of its claim against Merlin.

Phoenix Leasing also prevailed in February 1992 in its suit in New York state court against Lundborg to foreclose on her mortgage. In New Hampshire, Cable One declared bankruptcy after Phoenix Leasing brought suit in district court; but in the ensuing bankruptcy proceeding in New Hampshire, the court in December 1992 approved a settlement in favor of Phoenix Leasing and in July 1993 confirmed the plan of liquidation. In March 1995, Phoenix Leasing won its suit in the federal district court in Nevada to recover on the loan to Sure.

In February 1994, Lundborg learned that the loans to Merlin, Cable One, and Sure were not funded by Phoenix Leasing, but rather by two limited partnerships, in each of which Phoenix Leasing was general partner. This fact emerged during the deposition of Gary Martinez, Phoenix Leasing's executive vice president, in the Sure litigation in district court in Nevada. Lundborg alleges that these limited partnerships, and not Phoenix Leasing, were the "actual lenders" in the loan transactions.

This is said to matter because Phoenix Leasing, as a licensed personal property broker, was admittedly exempt from California's usury laws which cap the interest rate that an unlicensed lender may charge. The limited partnerships, Lundborg claims, were not exempt and the loans were therefore usurious and fraudulent. Moreover, Lundborg asserts that by suing in its own name, Phoenix Leasing misrepresented its standing to recover upon the loans in the various court actions, and Lundborg says this amounted to additional fraud.

Based on the Martinez deposition, Lundborg in June 1994 moved in the New York state suit to set aside the judgment on the ground that Phoenix Leasing lacked standing to foreclose on the mortgage because it was not the true lender; the New York court denied this motion and Lundborg did not appeal. In the then pending Nevada federal action, Sure moved for summary judgment on similar grounds; in December 1994, the district court rejected this argument and in March 1995 entered judgment for Phoenix Leasing, a ruling later upheld by the Ninth Circuit in an unpublished opinion.

In the bankruptcy courts in Maine and New Hampshire, Lundborg made somewhat broader efforts to reopen the judgments but with the same result. In January 1995, the Maine bankruptcy court (in circumstances more fully described hereafter) rejected Lundborg's motion for relief from judgment on account of fraud and based upon the Martinez deposition. In November 1995, the New Hampshire bankruptcy court rejected Cable One's effort to set aside the earlier settlement of the case, ruling that the limited partnerships involved in the Cable One loan in fact had licenses permitting them to exceed the usual usury limit under California law. At least one of the limited partnerships in the Merlin transaction was evidently not involved with the Cable One loan.

No comparable effort was made by Lundborg to reopen the earlier Maine state court default judgment entered against Community Cable in September 1992. Instead, in December 1994, Lundborg filed the present action against Phoenix Leasing and others in the federal district court in Maine, both on her own behalf and as successor in interest to Merlin and Community Cable. The gravamen was the same set of fraud allegations stemming from the Martinez deposition but the complaint set forth a welter of claims.

Lundborg's complaint included nine counts: a statutory claim for perjury arising under Maine law (count I); abuse of process in connection with the litigation in New York (count II); common law conversion, fraud, breach of duty of good faith, and interference with economic opportunity (counts III-VI); violation of California's usury statute (count VII); unjust enrichment (count VIII); and violation of the federal civil RICO statute (count IX). Additional defendants were the limited partnerships that allegedly funded the Merlin loan, Gus Constantin (the chairman of Phoenix Leasing) and Martinez.

All defendants in the Maine district court moved to dismiss. Adopting the able recommended decision of the magistrate judge, the district court granted this motion on September 6, 1995, without a separate opinion. The district court found that Lundborg had failed to articulate a RICO claim; in the absence of that claim the court held that it had no personal jurisdiction over the individual defendants as to any of the counts. Lundborg does not appeal these rulings.

The district court further held that the September 1992 judgment in Maine state court barred all of Lundborg's claims on res judicata grounds and, further, that Lundborg was estopped by judgments in New York and in the Maine bankruptcy court from relitigating the issue of Phoenix Leasing's fraud. Lundborg appeals this ruling as to counts I, III, IV, V, VII and VIII with respect to Phoenix Leasing and the limited partnerships.

II.

As an initial matter, Lundborg argues as a matter of law that her count I claim for perjury, pursuant to 14 Me.R.S.A. § 870, cannot be precluded by the earlier judgment in Maine state court. Section 870 creates a cause of action "[w]hen a judgment has been...