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McDonald v. Zions First Nat'l Bank, N.A.

Court of Appeals of Colorado, Second Division

March 12, 2015

R. Kirk McDonald, Plaintiff-Appellant,
v.
Zions First National Bank, N.A., Defendant-Appellee

Page 958

Eagle County District Court No. 09CV604. Honorable Frederick W. Gannett, Judge.

R. Kirk McDonald, Pro se.

Bloom Murr Accomazzo & Siler, PC, Joseph A. Murr, Daniel R. Delaney, Maris S. Davies, Denver, Colorado, for Defendant-Appellee.

OPINION

CASEBOLT, JUDGE

Page 959

[¶1] This appeal arises from a contractual dispute involving a construction loan agreement between plaintiff, R. Kirk McDonald, and defendant, Zions First National Bank, N.A. Plaintiff, appearing pro se, appeals the partial summary judgment in defendant's favor that dismissed his claims for breach of contract and breach of an implied covenant of good faith and fair dealing. Plaintiff also requests review of several orders the trial court issued to enforce its award of attorney fees to defendant. In addition, he seeks review of a number of ancillary issues.

[¶2] We first address a jurisdictional issue and conclude that plaintiff's improper attempt to remove this litigation to the federal district court did not deprive the trial court or this court of jurisdiction to act. We then conclude that our review is limited to the summary judgment and any order substantively affecting it, and that the trial court did

Page 960

not err in granting partial summary judgment in defendant's favor and denying his motion for new trial. Finally, we decline to address plaintiff's remaining contentions because they are not properly before us. Accordingly, we affirm.

I. Factual Background and Procedural History

[¶3] In 2007, plaintiff purchased a parcel of land with the intent to construct a building on it. To fund the purchase and subsequent construction, he entered into a loan transaction with defendant. When closing the loan, plaintiff signed a number of documents, including a construction loan agreement (Agreement).

[¶4] Plaintiff submitted several applications for the disbursement of loan funds, both to reimburse himself for amounts he had paid and to pay others. Defendant rejected some of those applications and refused to disburse some of the loan funds. According to plaintiff, defendant's refusal to disburse all the loan funds he requested required him to pay certain vendors out of his own pocket. Eventually, plaintiff defaulted on the loan and defendant foreclosed on the property.

[¶5] Plaintiff filed this action in 2009. In his amended complaint, plaintiff asserted that defendant breached the Agreement, and further breached an implied covenant of good faith and fair dealing. Defendant's amended answer asserted counterclaims against plaintiff for breach of contract and unjust enrichment.

[¶6] After the close of discovery, defendant moved for summary judgment. Among other things, defendant proffered as exhibits an affidavit from one of its vice presidents and several of plaintiff's applications for the disbursement of loan funds. Plaintiff filed an unverified response to defendant's motion. Although he referred to several exhibits in his response, none of those exhibits appears in the record before us.

[¶7] The trial court partially granted defendant's motion, dismissing plaintiff's two substantive claims. However, it denied that part of defendant's motion seeking judgment on its counterclaims, reasoning that genuine issues of material fact remained for trial. Soon thereafter, defendant filed and the court granted a motion to dismiss its counterclaims without prejudice, and it vacated the trial date. The trial court also granted defendant's request for attorney fees pursuant to the terms of the Agreement and entered judgment in favor of defendant in the amount of $102,267.75.

[¶8] For approximately two and one-half years, defendant attempted to enforce the judgment and collect its attorney fees from plaintiff. As a part of its efforts, defendant noticed plaintiff's deposition pursuant to C.R.C.P. 69. After plaintiff refused to participate in a deposition scheduled for September 11, 2013, the trial court granted defendant's motion to compel his attendance at a second deposition.

[¶9] On October 15, 2013, two days before the second deposition was scheduled to occur, plaintiff filed a notice of removal of the action in the United States District Court for the District of Colorado. He did not at that time file any document in the trial court evidencing the removal.

[¶10] After defendant failed to appear at the October 17 deposition, the trial court ordered plaintiff to appear at a hearing on December 13, 2013, to show cause why he should not be held in contempt for failing to follow the trial court's previous orders. Plaintiff then filed a motion to preclude the hearing based on the filing of his notice of removal in the federal court. On December 12, 2013, plaintiff filed a notice of removal in the trial court.

[¶11] At the December 13 hearing, the trial court denied plaintiff's motion to preclude the hearing. According to the uncontested account of defendant, the trial court orally ruled that plaintiff's attempt to remove this case was erroneous, and that it continued to retain jurisdiction.

[¶12] The federal district court has never issued an order remanding the matter to the trial court. Nor is there any indication that the federal district court accepted the removal and lodged the case on its docket.

[¶13] Pursuant to defendant's request, on December 23, 2013, the trial court certified

Page 961

under C.R.C.P. 54 that its order granting partial summary judgment in defendant's favor was final. This appeal followed.

II. Jurisdiction

[¶14] We must first determine whether the trial court had jurisdiction to certify its order as final under C.R.C.P. 54(b) and, if it did, whether we have jurisdiction to review it.

A. Plaintiff's Notice of Removal

[¶15] As a general rule, removal of an action to federal court divests the state court of jurisdiction while the removal petition is pending in federal court. See, e.g., Loctite Corp. v. Dist. Court, 718 P.2d 252, 253 (Colo. 1986); Blazer Elec. Supply Co. v. Bertrand, 952 P.2d 857, 858 (Colo. App. 1998). Thus, because plaintiff filed his notice of removal before the trial court issued its C.R.C.P. 54(b) certification and the record does not reflect that the federal district court has issued an order of remand, it appears the trial court lacked jurisdiction to enter the C.R.C.P. 54(b) order.

[¶16] However, " a number of . . . courts have carved out exceptions to th[is] general rule focusing on situations where removal petitions were frivolous, duplicative[,] or abusive," Astoria Fed. Sav. & Loan Ass'n/Fid. N.Y. FSB v. Lane, 64 A.D.3d 454, 883 N.Y.S.2d 473, 475 (N.Y.App.Div. 2009), and defendant asserts we should apply such an exception here. No Colorado appellate court has addressed the propriety of such an exception; accordingly, this issue presents a matter of first impression.

1. Standard of Review -- Removal

[¶17] This issue involves the construction of 28 U.S.C. § 1441(a) (2012) and 28 U.S.C. § 1446(d) (2012). We review de novo the application and construction of statutes. In re B.B.O., 2012 CO 40, ¶ 6.

2. Law -- Removal

[¶18] Under section 1441(a), " any civil action brought in a [s]tate court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending." Removal becomes effective when " the defendant or defendants" file a notice of removal in the federal district court, file a copy of the notice with the clerk of the state court in which the action is pending, and " give written notice thereof to all adverse parties." 28 U.S.C. § § 1446(d). Once removal becomes effective, " the [s]tate court shall proceed no further unless and until the case is remanded." Id.

[¶19] " The intent of 28 U.S.C.A. § 1446 is to prevent state and federal courts from sharing jurisdiction over a case and thus avoid jurisdictional conflicts." Motton v. Lockheed Martin Corp., 692 So.2d 6, 8 (La. Ct. App. 1997). Thus, as a general rule, removal of an action divests the state court of its jurisdiction over the dispute while the removal petition is pending in federal court. See South Carolina v. Moore, 447 F.2d 1067, 1073 (4th Cir. 1971); see also Loctite Corp., 718 P.2d at 253 (" The law is clear that the removal to federal court divested the state court of jurisdiction." ).

[¶20] However, several courts have adopted a narrow exception to this general rule. See, e.g., Astoria, 883 N.Y.S.2d at 474-75; Attig v. Attig, 177 Vt. 544, 862 A.2d 243, 248-49 (Vt. 2004); Hunnewell v. Palm Beach Cnty., 786 So.2d 4, 5 (Fla. Dist. Ct. App. 2000). These courts have concluded that the state court does not lose jurisdiction where a notice of removal is " 'insufficient on its face to raise even a colorable claim'" of removability. Hunnewell, 786 So.2d at 5 (quoting Farm Credit Bank of St. Paul v. Ziebarth, 485 N.W.2d 788, 791 (N.D. 1992)); see also F & L Drug Corp. v. Am. Century Ins. Co., 200 F.Supp. 718, 723 (D. Conn. 1961) (" It is well settled that, if, upon the face of the record, including the petition for removal, a suit does not appear to be a removable one, then the state court is not bound to surrender its jurisdiction." ) (collecting cases).

[¶21] In Bell v. Burlington N. R.R. Co., 1986 OK CIV APP 17, 738 P.2d 949, 953-54 (Okla.Civ.App. 1986), the court provided a lengthy historical analysis of the justification for this exception. The court noted that the 1948 enactment of 28 U.S.C. § 1441 " replaced removal statutes

Page 962

that had been on the books for many years," id. at 954 (citing 28 U.S.C. § § 72-76), and stated that the language currently found in 28 U.S.C. § 1446(d) " 'is derived from sections 72, 74 and 76 of Title 28, U.S.C., 1940 edition," id. (quoting Historical and Revision Notes, U.S.C. Ann.). The court concluded that the origin of the phrase " proceed no further" that appears in 28 U.S.C. § 1446(d) was significant because the Supreme Court had previously interpreted the phrase " proceed no further" that had appeared in 28 U.S.C. § 72. See id. (citing Metro. Cas. Ins. Co. v. Stevens, 312 U.S. 563, 566, 61 S.Ct. 715, 85 L.Ed. 1044 (1941)).

[¶22] In Metropolitan, the Supreme Court held that " [t]he rule that proceedings in the state court subsequent to the petition for removal are valid if the suit was not in fact removable is the logical corollary of the proposition that such proceedings are void if the cause was removable." 312 U.S. at 566.

[¶23] Based on this interpretation, the Bell court concluded that the Metropolitan rule was " implicit in the old statute's proscription 'proceed no further'" and that " the new statute did not intend to and in fact did not alter the Metropolitan rationale or implications." Bell, 738 P.2d at 954.

[¶24] Several courts have adopted a similar interpretation of the Metropolitan decision. See, e.g., Hunnewell, 786 So.2d at 6 (While it is true a state court loses jurisdiction if " on the face of the petition for removal . . . the cause appeared to be removable, . . . the converse of that statement is that if on the face of the petition absolutely no colorable claim for removal is made, then the state court need not recognize the removal." (internal quotation marks omitted)); Wilson v. Sandstrom, 317 So.2d 732, 740 (Fla. 1975) (" When removal is shown to be improper the [s]tate court's actions are not void." ); Wenrick v. Schloemann-Siemag Aktiengesellschaft, 361 Pa.Super. 137, 522 A.2d 52, 55 (Pa. S.Ct. 1987) (" We agree . . . that . . . continuation of the trial after attempted removal, was proper." ); but see Moore, 447 F.2d at 1073 (concluding that the procedure established by the 1948 enactment of 28 U.S.C. § 1446 " effectively reversed the premise underlying the Rives-Metropolitan rule" ).

[¶25] " The provisions of 28 U.S.C. § 1441(a) . . . preclude removal by a plaintiff." Nat'l Cigarette Serv. Co., Inc. v. Farr, 42 Colo.App. 356, 358, 594 P.2d 603, 605 (1979). " The Supreme Court has long held that where a defendant asserts a counterclaim against a plaintiff[,] the plaintiff is not entitled to remove." NCO Fin. Sys., Inc. v. Yari, 422 F.Supp.2d 1237, 1239 (D. Colo. 2006) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109, 61 S.Ct. 868, 85 L.Ed. 1214 (1941)).

[¶26] Based on the above authorities, we are persuaded that we should recognize a narrow exception to the general rule that precludes state courts from proceeding further when removal has been effected. We therefore hold that a Colorado court is not deprived of jurisdiction where a party's notice of removal to a federal court indicates, on its face and as a matter of ...


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