TPM Holdings, Inc. v. Intra Gold ( 1996 )


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    UNITED STATES COURT OF APPEALS UNITED STATES COURT OF APPEALS
    FOR THE FIRST CIRCUIT FOR THE FIRST CIRCUIT
    ____________________

    No. 95-1786

    TPM HOLDINGS, INC.,

    Plaintiff, Appellee,

    v.

    INTRA-GOLD INDUSTRIES, INC.
    and JASPER C. ROWE,

    Defendants, Appellants.

    ____________________

    APPEAL FROM THE UNITED STATES DISTRICT COURT

    FOR THE DISTRICT OF NEW HAMPSHIRE

    [Hon. Paul J. Barbadoro, U.S. District Judge] ___________________

    ____________________

    Before

    Selya, Cyr and Boudin,

    Circuit Judges. ______________

    ____________________

    Jasper C. Rowe with whom Law Offices of Jasper C. Rowe was on _______________ _______________________________
    briefs for appellants.
    Daniel P. Schwarz with whom Christopher Cole and Sheehan, ___________________ _________________ ________
    Phinney, Bass & Green, P.C. were on briefs for appellee. _______ __________________


    ____________________

    July 30, 1996
    ____________________






















    Per Curiam. Intra-Gold Industries, Inc. ("Intra-Gold"), __________

    a Texas corporation, appeals from the New Hampshire district

    court's grant of summary judgment in favor of TPM Holdings,

    Inc. ("TPM"), in TPM's action to remove a notice of lis ___

    pendens from the title of property it owns in New Hampshire. _______

    The lis pendens relates to a Texas federal-court action ____________

    brought by Intra-Gold against TPM and another party, New

    England Aggregate Trust, Inc. ("Aggregate Trust"), in which

    Intra-Gold sought enforcement of an alleged agreement with

    Aggregate Trust to transfer to Intra-Gold certain mineral

    rights in the New Hampshire property.

    The background facts are complex but largely undisputed,

    and we limit our description to the transactions directly

    pertinent to this appeal. In June 1992, TPM bought a

    promissory note and mortgage interest in 3,500 acres of

    property located in both Freedom and Madison, New Hampshire.

    One of the mortgagors was Freedom Properties Realty Trust

    ("Freedom Properties"), a New Hampshire general partnership

    with Aggregate Trust as its general partner. By late 1992,

    the mortgagors were in default, and TPM had initiated

    foreclosure proceedings.

    Intra-Gold claims that in January 1993, Aggregate Trust

    agreed on behalf of Freedom Properties to assign the latter's

    mineral rights in the New Hampshire property to Intra-Gold.

    According to Intra-Gold this was part of a plan to avoid the



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    foreclosure; in return for the mineral rights, Intra-Gold

    would try to arrange financing that would permit Aggregate

    Trust to retire its debt to TPM and would pay royalties to

    Aggregate Trust for the minerals removed.

    But in February 1993, the mortgagors of the New

    Hampshire property--including Freedom Properties--agreed to

    deed the property to TPM in lieu of foreclosure proceedings.

    The agreement reserved in the mortgagors the right to exploit

    the minerals for one year and gave them an option to purchase

    the property within one year for approximately $4 million.

    Intra-Gold took the position that by entering into this

    settlement, Aggregate Trust had breached its January 1993

    agreement with Intra-Gold.

    In July 1994, Intra-Gold filed suit in Texas state court

    against Aggregate Trust and TPM, seeking damages and

    rescission of the deed transferring the property to TPM.

    The defendants removed the case to the federal district court

    for the Eastern District of Texas. The day after bringing

    the suit, Intra-Gold placed--without notice to TPM or

    application to any court--a notice of lis pendens on the deed ___________

    for the New Hampshire property. It was the filing of this

    lis pendens in the Registry of Deeds in Carroll County, New ___________

    Hampshire that prompted the litigation at issue here.

    On November 1, 1994, TPM filed a complaint in the

    federal district court in New Hampshire, based on diversity



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    jurisdiction, seeking a declaration that the notice of lis ___

    pendens was not valid under the New Hampshire statute. N.H. _______

    Rev. Stat. Ann. 511-A:8 permits filing a lis pendens ____________

    without prior application to the court or notice to the

    adverse party, in "equity cases for specific performance of

    an agreement to transfer land or a unique chattel." TPM

    pointed out that Intra-Gold's Texas complaint sought only

    money damages and rescission of the deed from Aggregate Trust

    (and the other mortgagors) granting the New Hampshire

    property to TPM.

    While pre-trial motions were pending in the New

    Hampshire action, the Texas district court on April 7, 1995,

    dismissed with prejudice all of Intra-Gold's claims against

    TPM for failure to state a claim. Fed. R. Civ. P. 12(b)(6).

    On motion by TPM, the court followed with an order on May 17,

    1995, cancelling the notice of lis pendens filed in the New ___________

    Hampshire Registry of Deeds. Intra-Gold proceeded with its

    claims against Aggregate Trust, but after a bench trial in

    the summer of 1995, the court found in Aggregate Trust's

    favor on all claims.

    One might think that resolution of the underlying claims

    against TPM in Texas would moot the New Hampshire action by

    removing the basis for the lis pendens, but Intra-Gold ____________

    appealed the Texas decision to the Fifth Circuit, and some

    cases suggest that a lis pendens remains in effect pending ___________



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    appeal. See 54 C.J.S. Lis Pendens 26 (1987). In all ___ ____________

    events, neither party asserts mootness, and there are obvious

    practical reasons why--with the Fifth Circuit appeal pending-

    -it is important for TPM to maintain in force the district

    court's declaration that the lis pendens is invalid. We thus ___________

    resume the chronology.

    In the New Hampshire district court, Intra-Gold argued

    by motion that the court should refuse to entertain TPM's

    claim because similar issues were then before the Texas

    district court. Intra-Gold contended this result was

    required both by 28 U.S.C. 1450--a claim now abandoned--and

    for reasons of "fairness and judicial economy." In the

    alternative, Intra-Gold argued that Texas law should govern

    the validity of the lis pendens. The district court denied ___________

    this motion in June 1995.

    During the June 1995 hearing, the New Hampshire district

    court also proposed sua sponte to grant summary judgment on ___ ______

    the merits in favor of TPM, because the lis pendens was not ___________

    authorized by the New Hampshire statute because the

    underlying Texas action was not an equity case for specific

    performance of an agreement to transfer land or a unique

    chattel. In opposition, Intra-Gold conceded this defect, but

    argued that it had filed an amended complaint in the Texas

    suit on December 7, 1994--over a month after TPM had

    initiated the New Hampshire declaratory action--which asked



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    for "an injunction preventing transfer of the property to TPM

    or any third party and granting title to the property to

    [Intra-Gold]."

    Unpersuaded, the district court granted summary judgment

    in TPM's favor, explaining simply that the lis pendens "was ___________

    not filed in compliance with N.H. Rev. Stat. Ann. 511-A."

    Intra-Gold now appeals, renewing its earlier claim that, for

    prudential reasons of fairness and economy, the New Hampshire

    district court should have declined to hear TPM's action to

    remove the lis pendens. Alternatively, Intra-Gold contends ___________

    that the amended complaint in the Texas suit falls within the

    "specific performance" exception of the New Hampshire lis ___

    pendens statute. We discuss the claims in order. _______

    Obvious concerns arise when actions involving the same

    parties and similar subject matter are pending in different

    federal district courts: wasted resources because of

    piecemeal litigation, the possibility of conflicting

    judgments, and a general concern that the courts may unduly

    interfere with each other's affairs. To resolve such

    tensions, courts rely primarily on common sense and

    historical practice. See, e.g., Colorado River Water ___ ____ ______________________

    Conservation Dist. v. United States, 424 U.S. 800, 817 ___________________ ______________

    (1976); 28 U.S.C. 1404.

    Where the overlap between the two suits is nearly

    complete, the usual practice is for the court that first had



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    jurisdiction to resolve the issues and the other court to

    defer. West Gulf Maritime Ass'n v. ILA Deep Sea Local 24, _________________________ _______________________

    751 F.2d 721, 729 (5th Cir. 1985). But where the overlap

    between two suits is less than complete, the judgment is made

    case by case, see Colorado River Water Conservation Dist., ___ ________________________________________

    424 U.S. at 817, based on such factors as the extent of

    overlap, the likelihood of conflict, the comparative

    advantage and the interest of each forum in resolving the

    dispute.

    Here, the heart of the Texas action was Intra-Gold's

    breach of contract claim against Aggregate Trust. If

    determining the validity of the lis pendens required the New ___________

    Hampshire district court to assess the merits of this claim,

    there might be a good case for deferring to the Texas suit.

    But the New Hampshire court was asked only to decide whether

    Intra-Gold's Texas suit constituted an "equity case for

    specific performance of an agreement to transfer land or a

    unique chattel" under N.H. Rev. Stat. Ann. 511-A:8. This

    required an assessment of the nature of the claims being ______

    made, not their merit, and could not realistically be said to

    interfere with the Texas court's authority or conduct of its

    case.

    Only slightly more troublesome is the argument that the

    validity of the lis pendens was being litigated in the Texas ___________

    suit. Formally this was true, since a few days after filing



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    the New Hampshire suit, TPM also brought a motion in the

    Texas district court seeking cancellation of the lis pendens. ___________

    And indeed, after the Texas court dismissed Intra-Gold's

    claims against TPM, that court did issue an order to cancel

    the lis pendens. But beneath this surface resemblance the ____________

    two courts were addressing very different issues.

    Neither party has shown that the Texas district court

    ever had before it a claim that the lis pendens did not ____________

    comply with the New Hampshire statute. Instead it appears

    that TPM simply requested that, if the Texas court dismissed

    Intra-Gold's claims, it also cancel the lis pendens since ___________

    there would no longer be any litigation pending. If so,

    there was little risk of conflict posed by the New Hampshire

    court's resolution of the independent issue of whether the

    lis pendens complied with New Hampshire state law. ___________

    We turn now to the merits of the New Hampshire district

    court's decision on summary judgment that the lis pendens was ___________

    invalid. The district court said that the notice of lis ___

    pendens was not filed in compliance with the New Hampshire _______

    statute, a point that Intra-Gold has effectively conceded.

    But, as already noted, Intra-Gold argues that its amended

    complaint did seek such specific performance. While this is

    itself an issue open to dispute, for us the anterior question

    is whether an amended complaint--even within N.H. Rev. Stat.





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    511-A--can revive and salvage an earlier, invalid lis ___

    pendens. _______

    It does not appear the New Hampshire state courts have

    ever decided this issue, but cases from elsewhere suggest

    that the answer is no. E.g., 5303 Realty Corp. v. O & Y ____ __________________ _____

    Equity Corp., 476 N.E.2d 276 (N.Y. 1984). This result may ____________

    appear severe or formalistic. But it may also be viewed as a

    counterweight to the obvious dangers inherent in a lis ___

    pendens scheme that allows a party to wield this considerable _______

    power without prior application to any court, and with no

    judicial assessment of the merits of the underlying suit.

    The purpose of a lis pendens is to notify potential ____________

    purchasers that there is pending litigation that may affect

    title to real property and that the purchaser will take

    subject to the judgment. This cloud on title can impair the

    marketability of the property. Under the New Hampshire

    statute, as in many states, this can be done without resort

    to a court, under specified circumstances. The resulting

    danger of abuse has led courts to require strict compliance

    with lis pendens statutes. E.g., S. Utsunomiya Enters., Inc. ___________ ____ ___________________________

    v. Moomuku Country Club, 866 P.2d 951, 963 (Haw. 1994); E & E ____________________ _____

    Hauling, Inc. v. County of DuPage, 396 N.E.2d 1260, 1266 ______________ _________________

    (Ill. App. Ct. 1979).

    Consistent with this strict-compliance approach, we see

    no reason why an invalid lis pendens should be made valid by ___________



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    a later amendment to a complaint. Where the original _____

    complaint does not support the lis pendens, it is easy enough ___________

    for the plaintiff who files an amended complaint to file a

    new lis pendens based upon that new complaint. Allowing an ___________

    amended complaint alone to breathe life into an earlier,

    previously invalid lis pendens could easily cause confusion ___________

    and unfair prejudice. Since the plaintiff is responsible for

    the original error and is free to file a new lis pendens ___________

    along with the amended complaint, this outcome appears well

    warranted.

    Of course, lacking precedent from a New Hampshire court,

    we can only make our best assessment as to how the state

    court would resolve the issue. And there are other contexts

    in which a later act can revive an earlier, otherwise defunct

    claim. See, e.g., Fed. R. Civ. P. 15(c). But in the present ___ ____

    context, we think that the practical considerations already

    mentioned, and the general instance that a lis pendens ____________

    applicant turn square corners, carries the day for TPM.

    Affirmed. _________















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