Carlisle v. Matson Lumber Co.

Opinions of the United
2006 Decisions States Court of Appeals
for the Third Circuit
6-2-2006
Carlisle v. Matson Lumber Co
Precedential or Non-Precedential: Non-Precedential
Docket No. 05-5144
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 05-5144
ALBERT T. CARLISLE,
Appellant
v.
MATSON LUMBER COMPANY; MATSON HARDWOODS, INC.
Appeal from the United States District Court
for the Western District of Pennsylvania
(D. C. Civil No. 04-cv-00284E)
District Judge: Hon. Gary L. Lancaster
Submitted Under Third Circuit L.A.R. 34.1(a)
May 19, 2006
Before: RENDELL and VAN ANTWERPEN, Circuit Judges,
and ACKERMAN, District Judge*
(Filed: June 2, 2006)
OPINION OF THE COURT
*
The Honorable Harold A. Ackerman, Senior District Judge for the District of New
Jersey, sitting by designation.
ACKERMAN, District Judge.
Appellant Albert T. Carlisle (“Carlisle”) is the record owner of real property
formerly known as “Clough Farm.” In 1968, the timber rights for the Clough Farm
property were split from the ownership of the land, and transferred separately. Carlisle
purchased the Clough Farm property (without any timber rights, which were explicitly
excluded from the sale) in 1970. In 2004, Carlisle brought a diversity action against
defendants Matson Lumber Company and Matson Hardwoods, Inc. (collectively,
“Matson”), entities that claim ownership of certain rights to the timber on the Clough
Farm. Carlisle’s complaint sought, inter alia, a declaratory judgment asserting that
Carlisle owns the Clough Farm property in fee simple absolute, effectively ousting
Matson of any interest in the Clough Farm timber. Additionally, Carlisle’s complaint
sought to nullify a quitclaim deed issued in 2003 by a prior owner of the Clough Farm
property, purporting to transfer all timber rights in the property to Matson (“the Quitclaim
Deed”).
Matson filed a motion for summary judgment, arguing, inter alia, that the bulk of
Carlisle’s present claims were barred by res judicata, pursuant to a prior litigation
commenced by Carlisle in 1995 which resolved ownership of the Clough Farm timber
rights as between Carlisle and Matson. The District Court agreed, and, following an
evidentiary hearing to assess the value of the remaining claim regarding the Quitclaim
Deed, dismissed that claim as insufficient to satisfy the amount in controversy
requirement for diversity jurisdiction. Carlisle now appeals the District Court’s grant of
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summary judgment dismissing the bulk of his claims on res judicata grounds, and the
District Court’s decision on reconsideration dismissing the remaining claim for failure to
satisfy the amount in controversy requirement.
I.
Prior to 1968, Clough Farm was owned by Marion Kinkead. In 1968, Kinkead
entered into two agreements, both dated April 1, 1968, with Fisher & Young, Inc.
(“Fisher & Young”), for the sale of all of the land and premises of Clough Farm,
excluding the trees and timber on the property. The first agreement, which was
subsequently recorded in the Office of the Recorder of Deeds, conveyed to Fisher &
Young all of the land and premises, excepting trees and timber rights, which were
reserved and retained by Marion Kinkead. The second agreement, which was never
recorded, conveyed to Fisher & Young the right to cut and remove existing trees
exceeding 12” in diameter until April 1, 1978 (the “1968 Unrecorded Agreement”).
Pursuant to the 1968 Unrecorded Agreement, on April 1, 1978, the timber rights granted
by the Agreement would expire and all timber rights would “revert to the owner of the
land.”
On January 9, 1970, Fisher & Young sold to Appellant Carlisle all of the Clough
Farm land and premises, with the exception of the trees and timber rights. Three years
later, on April 20, 1973, Kinkead conveyed to Fisher & Young by Timber Deed the rights
to all timber and trees with trunks exceeding 12” in diameter. This Timber Deed
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memorialized and explicitly referenced the prior 1968 Unrecorded Agreement between
Kinkead and Fisher & Young, which first established Fisher & Young’s right to harvest
certain trees from the Clough Farm property. This Timber Deed was explicitly subject to
the same conditions as the referenced 1968 Unrecorded Agreement. Thus, the Timber
Deed was arguably subject to the same condition contained in the 1968 Unrecorded
Agreement that the timber rights conveyed therein would terminate on April 1, 1978, and
revert to the “owner of the land.”
Despite an apparent reversionary interest in the timber on the Clough Farm
property, it appears that Marion Kinkead and her estate never recognized rights to the
Clough Farm timber inasmuch as the timber rights were not included in the filed
inventory of the estate upon Marion Kinkead’s death in 1988. However, in 2003,
Kinkead’s executrix issued a quitclaim deed transferring to Matson Lumber Company
(“Matson Lumber”), the successor to Fisher & Young,1 all of the trees and timber
standing or fallen on the Clough Farm (the “Quitclaim Deed”). Presumably, the
executrix’s authority to make the Quitclaim Deed was premised on the theory that the
Clough Farm timber rights had vested in Mrs. Kinkead on April 1, 1978, by virtue of the
1968 Unrecorded Agreement or the recorded 1973 Timber Deed.
In 1995 Carlisle commenced an action against Matson Lumber Company and
Matson Hardwoods, Inc. (again, collectively, “Matson”) in the United States District
1
Fisher & Young went through various corporate acquisitions and mergers,
eventually emerging as Matson Lumber Company in 1995.
4
Court for the Western District of Pennsylvania (“Carlisle I”, at No. 95-0376). That action
asserted various breach of contract and trespass claims against Matson for alleged failure
to abide by the terms of agreement of sale of the Clough Farm property. In that action,
Carlisle conceded that Matson owned timber rights to the trees and timber on the Clough
Farm property, but alleged that Matson was performing its cutting activities in violation
of the agreement of sale. Nevertheless, that action also sought a declaratory judgment
“setting forth the scope of Matson’s timber rights under the agreement of sale, thus
clarifying the parties’ legal relations and respective rights.” (App. at 93).
The action proceeded to a jury trial, and resulted in a jury verdict finding that the
parties intended to grant Matson the right to harvest those trees that existed on the
property in 1969. Matson, claiming rights to all timber, appealed to this Court, which
affirmed the verdict, holding that the jury established that Matson did not have timber
rights in perpetuity; rather, Matson’s timber rights were limited to the harvest of only
those trees in existence on the property in 1969. The assumption made by both the
District Court and the Third Circuit in Carlisle I was that Carlisle had the right, under the
agreement of sale, to harvest the trees planted or sprouted on the property after 1969.
Carlisle acquired new counsel and filed a subsequent action in Pennsylvania state
court (“Carlisle II”) which re-asserted certain claims that Carlisle had voluntarily
withdrawn in Carlisle I. That action is still pending and has not reached final judgment.
However, Matson moved for summary judgment dismissing certain of those claims, on
the basis of res judicata, and was partially successful. (App. at 199-208.) In particular,
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the state court ruled that plaintiff could not argue in the state case that Matson possessed
only the right to harvest trees that were of a certain diameter as of 1969, because Carlisle
had made contrary arguments in the federal action (Carlisle I), and had not advanced any
such argument, even as an alternative, in that prior federal action. In addition, the state
court found that any claims that arose before the close of evidence in the federal case
“could have been advanced in federal district court” and to the extent they were not, they
were now barred by res judicata.
Carlisle commenced the instant action on September 28, 2004, ostensibly to
challenge the validity of the May 22, 2003 Quitclaim Deed issued by Mrs. Kinkead’s
executrix, purporting to grant the Clough Farm timber rights to Matson. The instant
action sought: 1) declaratory relief stating that Carlisle owns the Clough Farm property in
fee simple absolute, and that Matson has no right or interest in the property; 2) injunctive
relief preventing Matson from asserting any claim to the Clough Farm property adverse to
Carlisle’s interest; and 3) a declaration that the May 22, 2003 Quitclaim Deed is null and
void.
Matson filed a summary judgment motion seeking dismissal of Carlisle’s
complaint on the grounds that the claims therein are barred by the doctrine of res
judicata.2 The District Court granted Matson’s motion in part in an Order dated May 9,
2005, dismissing the claims relating to the determination of ownership of the Clough
2
Carlisle also sought summary judgment on a procedural point, which was not
granted.
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Farm property, with the exception of the claims relating to the 2003 Quitclaim Deed.
Additionally, the District Court determined that, due to the dismissal of the bulk of
plaintiff’s claims, it was unclear whether the remaining claims regarding the Quitclaim
Deed would satisfy the amount in controversy prerequisite to diversity jurisdiction.
Accordingly, the District Court ordered the parties to participate in an evidentiary hearing
to submit evidence regarding the value of the remaining claims to determine the valid
amount in controversy. The evidence presented by Carlisle’s valuation expert indicated
that the post-1969 timber at issue under the Quitclaim Deed claims had a present value of
approximately $4,200.
Carlisle filed a Motion for Reconsideration on September 29, 2005. The District
Court denied the Motion for Reconsideration on October 28, 2005. As part of the Order
denying the Motion for Reconsideration, the District Court held that it lacked jurisdiction
over the only remaining claim in the action, the Quitclaim Deed claim, based on the
evidence presented at the evidentiary hearing regarding the value of such claim. The
District Court found that, because the bulk of Carlisle’s claims were invalid as barred by
res judicata, Carlisle had invoked diversity jurisdiction in bad faith, inflating its
Complaint with non-justiciable claims in an effort to fulfill the amount in controversy
requirement for diversity jurisdiction. Consequently, the District Court dismissed the
action for lack of jurisdiction. Carlisle now brings this appeal, which we review pursuant
to our authority under 28 U.S.C. § 1291.
7
II.
Carlisle appeals the District Court’s grant of summary judgment dismissing the
bulk of the claims as barred by res judicata. We review a district court’s grant of
summary judgment de novo, using the same standard that governs the district court’s
review of a motion for summary judgment. Mass. Sch. of Law v. ABA, 107 F.3d 1026,
1032 (3d Cir. 1997).
In order for res judicata to apply, “it is necessary that: 1) there be a final judgment
on the merits; 2) the party against whom the bar is asserted is the same; and 3) the
subsequent suit is based upon the same cause of action.” United States v. Athlone
Industries, Inc., 746 F.2d 977, 983 (3d Cir. 1984). Significantly, where these elements
are found, a plaintiff is barred from relitigating not only those claims which were, in fact,
actually decided, but also those that the parties might have asserted, but did not, in the
prior action. Bradley v. Pittsburgh Bd. of Educ., 913 F.2d 1064, 1070 (3d Cir. 1990).
In this case, there is no dispute that the first two elements of the test for application
of res judicata have been met: the existence of a final judgment and the identity of
parties. However, Carlisle vigorously disputes whether this action is “based upon the
same cause of action” as Carlisle I. Carlisle argues that this action is different from
Carlisle I because the instant action is premised upon the 2003 Quitclaim Deed, which
did not exist at the time Carlisle I was litigated, and thus, this action could not have been
brought as part of Carlisle I. This argument is unavailing because the instant action seeks
greater and more extensive relief than simply the nullification of the Quitclaim Deed.
8
Carlisle’s main claim for relief is an order stating that he is the fee simple owner of all of
the land and timber on the Clough Farm property. As a result, this action implicates the
same issues and causes of action that were litigated to conclusion in Carlisle I, namely the
ownership of the trees and timber on the Clough Farm property.
Carlisle argues that, to the extent that the claims in this action are premised on the
operation of the 1968 Unrecorded Agreement and the 1973 Timber Deed, such claims
could not have been brought in Carlisle I because Carlisle had no notice of the existence
of either document at the time that action was filed. The District Court rejected such
reasoning, concluding that while there is no evidence that Carlisle had any actual notice
of the 1968 Unrecorded Agreement at the time of filing of Carlisle I, Carlisle had
constructive notice of the 1973 Timber Deed as a matter of law, because that document
was recorded in his chain of title.
We agree with the District Court’s conclusion. As a matter of law, Carlisle had
notice of the 1973 Timber Deed because it was recorded in his chain of title. Moreover,
basic common sense dictates that Carlisle was on notice that his 1970 purchase of the
Clough Farm land did not include any timber rights, as his agreement with Fisher &
Young explicitly excepted any such timber rights. The notable exclusion of timber rights
from his purchase should have spurred Carlisle, certainly by the time of filing of Carlisle
I, to make inquiry as to the actual owner of the timber rights. Such inquiry would have
led Carlisle to the recorded 1973 Timber Deed, which was in his chain of title.
Additionally, because Carlisle had constructive notice of the 1973 Timber Deed, he can
9
properly be charged with inquiry notice of the 1968 Unrecorded Agreement, as that
Agreement was explicitly referenced in the 1973 Timber Deed. Carlisle’s constructive or
inquiry notice of the 1968 Unrecorded Agreement and 1973 Timber Deed thus renders
any claims stemming from these documents as barred by res judicata, as such claims
could have and should have been brought in Carlisle I. Avins v. Moll, 610 F. Supp. at
324-25.
Carlisle also argues that the District Court erred in dismissing Carlisle’s claim
regarding the 2003 Quitclaim Deed as barred by the doctrine of res judicata. Carlisle
misconstrues the District Court’s decision. The District Court did not rule that the claim
relating to the Quitclaim Deed was barred by res judicata. Rather, the District Court
explicitly held that the claim regarding the validity of the Quitclaim Deed remained
viable, but dismissed that claim for jurisdictional reasons discussed below. Accordingly,
we find no error in the District Court’s conclusion that the claims in this action relating to
the question of ultimate ownership of the Clough Farm and its timber rights, including
those claims premised on the 1968 Unrecorded Agreement and the 1973 Timber Deed,
are barred by the doctrine of res judicata as claims that could have been brought in the
prior action.
III.
With respect to the District Court’s decision to dismiss Carlisle’s remaining claims
premised on the 2003 Quitclaim Deed for failure to satisfy the jurisdictional amount, we
10
exercise plenary review over questions of subject matter jurisdiction. Packard v.
Provident Nat'l Bank, 994 F.2d 1039, 1044 (3d Cir. 1993).
After dismissing the bulk of Carlisle’s claims in this action as barred by res
judicata, the District Court noted that its jurisdiction was questionable with respect to the
remaining claim regarding the alleged cloud on Carlisle’s title to the Clough Farm caused
by the issuance of the 2003 Quitclaim Deed. The District Court found that the alleged
cloud on title could only have an effect on Carlisle’s ownership of timber that sprouted on
the Clough Farm after 1969. In doing so, the District Court recognized that it was
undisputed that Carlisle owned the Clough Farm land (as opposed to timber) outright, so
the value of the land was not part of the calculus. Furthermore, the rights to pre-1969
timber had been adjudicated in Carlisle I in favor of Matson. Because there was no
allegation in the Complaint or evidence before the court regarding the value of the post-
1969 Clough Farm timber, the District Court had no basis for deciding whether the
Quitclaim Deed claim satisfied the jurisdictional amount.
To resolve this issue, the District Court ordered an evidentiary hearing to assess
the value of the post-1969 timber on the Clough Farm. That hearing resulted in testimony
from Carlisle’s expert that the present value of the timber was approximately $4,200.3 In
3
Carlisle’s expert had originally submitted a future-value analysis of the post-1969
timber, valuing the timber at $3.5 million in 50 years, and an investment analysis
premised on the amount of money that would have to be invested today to match the
projected value of the timber in 50 years ($388,050). The District Court correctly
rejected those valuations as irrelevant, because an analysis of the jurisdictional amount in
controversy is limited to the present value of the property at issue at the time of the filing
11
light of this evidence that Carlisle’s claims regarding the Quitclaim Deed fell far short of
the jurisdictional threshold, the District Court determined that those claims could not
satisfy the diversity jurisdiction amount in controversy, and would be dismissed without
prejudice to their reassertion in a state forum. In so ruling, the District Court determined
that Carlisle’s original allegations in the Complaint as to the satisfaction of the amount in
controversy were made in bad faith, as they were based upon Carlisle’s unreasonable
inclusion of claims that were previously adjudicated, and therefore barred by the doctrine
of res judicata, as well as the 2003 Quitclaim Deed claim, which fell far short of the
jurisdictional threshold.
We note that, as a general rule, the amount in controversy is determined as of the
time the complaint is filed, and that once a federal court finds that it has diversity
jurisdiction, subsequent events cannot divest the court of jurisdiction. Newman-Green
Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830 (1989). However, as noted by the District
Court, exceptions to this rule exist, which allow courts to look beyond the allegations of
the complaint in situations where a plaintiff has claimed satisfaction of the jurisdictional
amount in bad faith, or when subsequent events reveal that the amount actually in
controversy at the time of filing was less than the threshold amount. St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 288 (1938) (hereinafter “Red Cab”) (holding
that “[t]he rule governing dismissal for want of jurisdiction in cases brought in the federal
of the Complaint, not the future value or the investment value of such property. Kelly v.
Lehigh Nav. Coal Co., 151 F.2d 743, 746 (3d Cir. 1945).
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court is that . . . the sum claimed by the plaintiff controls if the claim is apparently made
in good faith”) (emphasis supplied); id. at 289 (holding that “if, from the proofs, the court
is satisfied to a [legal] certainty that the plaintiff never was entitled to recover” the
amount claimed for purposes of conferring jurisdiction, “the suit will be dismissed”).
The District Court premised its finding of bad faith on the following evidence of
Carlisle’s unreasonableness in including “non-justiciable claims” in the Complaint in
order to satisfy the amount in controversy requirement:
[F]irst, the majority of the claims were already actually litigated
to verdict in this very court, or should have been because they
dealt with the same issue of ownership of the Clough Farm
timber; second, a state court had already rebuffed plaintiff’s
attempt to relitigate ownership of the Clough Farm timber based
on the doctrine of res judicata due to the earlier federal case;
third, many of the allegations of the complaint directly
contradicted evidence and arguments that plaintiff presented to
this court during the prior federal court case; fourth, the case
was not based on any new documents or evidence, other than the
2003 timber deed, which is the basis of the surviving quiet title
action; and, fifth, the requested judgment would be contrary to
the judgment entered by this court in the prior federal case.
(App. at 25.)
The District Court noted that it “could have dismissed the entire case” based on
Carlisle’s bad faith in reasserting previously-litigated claims, but gave Carlisle the
opportunity to prove that his remaining claims regarding the Quitclaim Deed would
satisfy the jurisdictional amount in controversy. Based on the evidence submitted at the
hearing, Carlisle could not so prove. Carlisle’s expert admitted that the post-1969 timber
on the Clough Farm property had a present value of less than $5,000. Thus, the District
13
Court correctly concluded that it was “a legal certainty” that Carlisle was never entitled to
recover an amount exceeding $75,000, despite the allegations of the Complaint.
Carlisle argues that the District Court’s decision to dismiss the bulk of Carlisle’s
claims pursuant to the doctrine of res judicata was a “subsequent event” that may not be
considered in analyzing original jurisdiction. However, the case law indicates otherwise.
The District Court’s determination regarding the validity of a plaintiff’s claims as of the
time of filing of the complaint is not a “subsequent event”; rather, it is the kind of
determination that courts are explicitly permitted, if not encouraged, to rely upon when
questioning the jurisdictional basis for a suit. In State Farm Mutual Automobile
Insurance Co. v. Powell, 87 F.3d 93 (3d Cir. 1996), this Court considered the impact of
the District Court’s realization that, of three insurance policies claimed to be applicable in
the Complaint, only two were actually valid. This Court deemed this discovery to
constitute a post-filing “revelation” regarding the status and validity of the claims in the
Complaint at the time of filing, and thus distinguished the revelation from a “subsequent
event” that altered the amount of a plaintiff’s potential recovery:
It is true that a federal court’s jurisdiction ordinarily depends
upon “the facts as they exist when the complaint is filed,”
Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 830, 104
L. Ed. 2d 893, 109 S. Ct. 2218 (1989), and thus subsequent
events that reduce the amount in controversy below the statutory
minimum do not require dismissal. See Jones v. Knox
Exploration Corp., 2 F.3d 181, 182-83 (6th Cir. 1993).
However, “[a] distinction must be made . . . between subsequent
events that change the amount in controversy and subsequent
revelations that, in fact, the required amount was or was not in
controversy at the commencement of the action.” Id. at 183
14
(emphasis added).
State Farm, 87 F.3d at 97. Thus, this Court held that “the discovery that one of the original
three policies was not in effect during Powell’s accident should be considered a revelation
that only two policies were at issue when the litigation was commenced, not a ‘subsequent
event.’” Id.The Supreme Court in Red Cab has endorsed, if not explicitly mandated, the practice
of considering post-filing revelations of the invalidity of claims at the time of filing when
examining an action’s jurisdictional basis:
In a cause instituted in the federal court the plaintiff chooses his
forum. He knows or should know whether his claim is within
the statutory requirement as to amount. His good faith in
choosing the federal forum is open to challenge not only by
resort to the face of his complaint, but by the facts disclosed at
trial, and if from either source it is clear that his claim never
could have amounted to the sum necessary to give jurisdiction
there is no injustice in dismissing the suit. Indeed, this is the
court’s duty under the Act of 1875.
Red Cab, 303 U.S. at 290.
In light of these precedents, the District Court committed no error in finding that
Carlisle had inflated the value of his claims in this action by asserting non-justiciable claims
in bad faith. Moreover, even without such a finding of bad faith, the District Court could
have dismissed the action based upon the fact that the recognition of the invalidity of the bulk
of Carlisle’s Complaint under the res judicata doctrine served as a “revelation” that the
Complaint asserted more damages than could be validly claimed, and the evidentiary hearing
revealed that the actual amount in controversy at the time of the filing of the Complaint did
15
not meet the jurisdictional threshold. For the foregoing reasons, we will affirm the District
Court’s dismissal of the action.
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