RJT Real Estate Holdings, LLC v. Davis (In re RJT Real Estate Holdings, LLC)

• Decision Date: 01 April 2021
• Docket Number: Adversary Proceeding No. 20-2019,Bankruptcy Case No. 18-29037
• Parties: In re: RJT REAL ESTATE HOLDINGS, LLC, Debtor. RJT REAL ESTATE HOLDINGS, LLC, Plaintiff, v. GARY E. DAVIS, personally and as Trustee of the Gary E. Davis Revocable Trust, and John Does 1-3, Defendants.
• Court: U.S. Bankruptcy Court — District of Utah

In re: RJT REAL ESTATE HOLDINGS, LLC, Debtor.RJT REAL ESTATE HOLDINGS, LLC, Plaintiff, v. GARY E. DAVIS, personally and as Trustee of the Gary E. Davis Revocable Trust,and John Does 1-3, Defendants.

Bankruptcy Case No. 18-29037

Adversary Proceeding No. 20-2019

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF UTAH

April 1, 2021

Chapter 11

Hon. R. Kimball Mosier

MEMORANDUM DECISION

This adversary proceeding brings a state-law contract dispute before this Court for resolution on summary judgment. In 2009, the Gary E. Davis Revocable Trust Dated October 1, 2008, of which Defendant Gary E. Davis is the trustee, entered into a contract to sell real property to the predecessor in interest of Plaintiff RJT Real Estate Holdings, LLC (RJT). According to RJT, the property was not in the condition it had bargained for and, as a result, the parties agreed to orally modify the contract terms. Davis denies the existence of the modification and, after RJT had not kept up with payments he asserted were due under the contract, he declared default and sought to sell the property. RJT filed bankruptcy in December 2018 in an attempt to protect the property from foreclosure.

Once in bankruptcy, RJT filed a complaint against Davis, alleging, among other things, that Davis had breached the underlying contract and the oral modification. Each party offers a different story to explain what happened during the nine years between the sale of the property and RJT's bankruptcy, and those stories tell of a succession of unrecorded conversations, unwritten agreements, and purported handshake deals not memorialized. Each party contends that it was operating under the arrangement it thought was in place during that time, but what one side asserts, the other often denies. Many points of contention pit one party's word against the other's.

Davis moved for summary judgment on RJT's complaint, primarily on statute of limitations grounds, but also invoking statute of frauds and ripeness as grounds to dismiss certain of the claims. After considering the record in this adversary proceeding, including Davis's motion, RJT's objection, and relevant exhibits; after considering the parties' oral arguments; and after conducting an independent review of applicable law, the Court issues the following Memorandum Decision granting Davis's motion in part and denying it in part.

I. JURISDICTION

The Court's jurisdiction over this adversary proceeding is properly invoked pursuant to 28 U.S.C. § 1334 and § 157(a) & (c). While this matter is a non-core proceeding, the Courtnevertheless has jurisdiction over it as a related-to proceeding because its outcome "could conceivably have an[] effect on the estate being administered in bankruptcy."¹

Bankruptcy courts possess authority to hear non-core proceedings that are "otherwise related to a case under title 11," but they cannot enter final orders in such matters unless the parties consent.² Although a litigant's consent need not be express—the sine qua non is instead that it be knowing and voluntary³—a common way to signal consent is through a simple statement made in a pleading. Rule 7008 requires a complaint to "contain a statement that the pleader does or does not consent to entry of final orders or judgment by the bankruptcy court,"⁴ and Rule 7012(b) imposes the same requirement on responsive pleadings.

Neither RJT's complaint nor Davis's answer tracks the precise language of those rules, however. Even so, those documents make the parties' intent clear. The complaint states that RJT "stipulates to the jurisdiction of the Bankruptcy Court," citing the holding of the Supreme Court's decision in Wellness.⁵ In Wellness, of course, the Supreme Court held that there is no constitutional violation when "parties knowingly and voluntarily consent to adjudication by a bankruptcy judge" of a claim that is constitutionally entitled to adjudication by an Article III tribunal.⁶ Although the complaint does not use the word consent, no talismanic incantation is required to evince consent. The Court deems RJT's stipulation to this Court's jurisdiction and its citation to Wellness—a casethat authorized bankruptcy court adjudication of the type of state-law claims at issue here—as RJT's knowing and voluntary consent to this Court entering a final order in this proceeding.

As for Davis's answer, it too does not use the word consent, but, answering the second paragraph of the complaint, states that Davis stipulates to the jurisdiction of this Court. This likewise constitutes knowing and voluntary consent. Therefore, and because neither party has suggested that the Court cannot enter a final order in this proceeding, the foregoing analysis satisfies the Court that it may enter a final order. Venue is appropriate under 28 U.S.C. § 1409.

II. PROCEDURAL BACKGROUND

The only matter before the Court is Davis's motion for summary judgment, and this decision addresses that motion on the merits after considering RJT's objection thereto. Such an unremarkable procedural posture obscures the circuitous route this proceeding took to reach that destination. A cursory glance at the docket reveals a more complex procedural history, and the Court wishes to clarify how it led to the present before reaching the merits.

RJT commenced this adversary proceeding by filing a complaint against Davis on March 16, 2020. The complaint alleged nine causes of action, all under state law: two for breach of contract and one each for unjust enrichment, fraud, constructive fraud, fraudulent misrepresentation, negligent misrepresentation, laches, and civil conspiracy. Davis answered timely, and matters proceeded initially without incident. The Court entered a scheduling order on May 15, which, among other things, set November 18, 2020 as the fact discovery cut-off date and April 19, 2021 as the dispositive motion deadline.⁷

The procedural oddities began on August 14, 2020, when RJT filed a document entitled Plaintiff's First Motion for Summary Judgment.⁸ The document's caption belied its content, however. With one exception, it cited to no "parts of materials in the record" as required by Rule 56(c)(1), a glaring deficiency for any purported summary judgment motion, but particularly so for one in a case involving a dispute over a contract that was allegedly modified by a handshake deal.⁹ Instead, RJT sought summary judgment "based on the pleadings as they exist at this stage of the litigation,"¹⁰ language that, when combined with RJT's failure to cite to evidence in support of its motion, suggested that RJT perhaps intended to seek judgment on the pleadings under Rule 12(c). But this appears unlikely. In the first place, RJT did not invoke that rule. Moreover, while such motions can be made at any time after the pleadings are closed so long as they do not delay trial, they are ordinarily filed "promptly after the close of the pleadings."¹¹ Here, RJT filed its motion approximately four months after Davis filed his answer. But most importantly, the substance of the motion is inconsistent with the purpose of Rule 12(c). That rule

is designed to provide a means of disposing of cases when the material facts are not in dispute between the parties and a judgment on the merits can be achieved by focusing on the content of the competing pleadings, exhibits thereto, matters incorporated by reference in the pleadings, whatever is central or integral to the claim for relief or defense, and any facts of which the district court will take judicial notice. The motion for a judgment on the pleadings only has utility when all material allegations of fact are admitted or not controverted in the pleadings and only questions of law remain to be decided by the district court.¹²

RJT's motion made clear that RJT did not seek a judgment based on the undisputed material facts established through Davis's affirmations and denials of the factual allegations in its complaint.

Rather, RJT's motion attacked the sufficiency of Davis's answer, arguing that Davis's "blanket denials," failure to present "competing facts," and assertion of defenses without supporting facts¹³ meant that the answer failed to meet the standards of Twombly and Iqbal.¹⁴ As a result, RJT argued that it was entitled to summary judgment on "the only facts plead[ed],"¹⁵ i.e., the allegations in the complaint. Thus, RJT's motion was a procedural chimaera: It presented itself as a summary judgment motion, though without evidence; sounded at times like a Rule 12(c) motion, though contradicted that rule's purposes; and, after essentially arguing that Davis's answer should be disregarded, ultimately sought judgment on the complaint alone.¹⁶

RJT's motion never came before the Court for adjudication, however, because it was plagued by procedural defects. This Court's Local Rules require that a party seeking summary judgment "obtain and set an appropriate hearing date" for its motion and provide notice to the opposing party of the motion and hearing date along with "a specific objection deadline that is at least 21 days after service" of the notice.¹⁷ RJT failed to follow this procedure; it did not set its motion for hearing and, although Davis's counsel received a copy of the motion through CM/ECF, the Court's case management and electronic filing system, it also did not provide Davis with the requisite notice. As a result, RJT's motion lay inactive on the docket. RJT has repeatedly broughtup Davis's failure to respond to the motion,¹⁸ but since RJT did not follow the correct notice procedures, Davis was under no obligation to do so.

On September 3, 2020, Davis filed his own motion for summary judgment, which he noticed for hearing in compliance with the Local Rules. The notice, which was delivered via CM/ECF to Sarah Larsen, RJT's then-counsel of record in this adversary proceeding, expressly listed September 24, 2020 as the deadline to object to Davis's motion. The notice also contained a standard admonition cautioning RJT that if it or...