Title: Cockreham v. Wyoming Production Credit Ass'n

State: wyoming

Issuer: Wyoming Supreme Court

Document:

Cockreham v. Wyoming Production Credit Ass'n1987 WY 134743 P.2d 869Case Number: 86-231Decided: 10/06/1987Supreme Court of Wyoming

Hobart 
COCKREHAM and Marilyn Cockreham, Appellants (Plaintiffs)

 
 
v.

 
 
WYOMING 
PRODUCTION CREDIT ASSOCIATION, a corporation, Board of Directors of Wyoming 
Production Credit Association, Individual Members Unknown, Dave Sedar, John 
Buckingham, Don Ditmonson, and other Unknown Officers and Agents of Wyoming 
Production Credit Association, Appellees (Defendants)

 
 
Herbert 
K. Doby of Elletson & Doby, for Appellants.

 
 
Jerry A. 
Yaap of Bishop, Bishop & Yaap, Casper; Howard P. Olsen, Jr., for Appellees. 

 
 
Brown, 
C.J., and Thomas, Cardine, Urbigkit, and Macy, JJ. Thomas, J., filed a 
concurring opinion. 

 
 
URBIGKIT, 
Justice.

 
 

[¶1.]     Hobart and Marilyn 
Cockreham, now plaintiffs-appellants, were defendants in an earlier foreclosure 
action brought by generally the same parties as present appellees. That action 
concluded with a judgment of foreclosure by default against the Cockrehams. In 
this action, the Cockrehams' present claims involving the original loan, the 
foreclosure process, and post-foreclosure conversion and trespass against the 
lender, Wyoming Production Credit Association (PCA) and its directors, officers 
and shareholders, whose motion to dismiss was granted before an answer was 
filed.

 
 

[¶2.]     We reverse the broad 
dismissal as untimely, and consider the issues presented: (1) motion to dismiss; 
(2) judicial notice; and (3) bankruptcy/real-party-in-interest 
status.

 
 
FACTS

 
 

[¶3.]     The difficult problems 
in American agriculture are no less disturbing nor more clearly evidenced than 
by this example of the decline of American agricultural prosperity in the late 
1980's. This case involves a large Wyoming ranch operation to which PCA extended 
a general loan in excess of $ 1,000,000. The appellants borrowed this 
substantial sum of money for their ranch operation on an improper financial 
statement for which Mr. Cockreham was convicted in federal court and placed on 
probation.

 
 

[¶4.]     The Cockrehams' ranch 
did not generate sufficient income to repay the loan; they defaulted, and PCA 
foreclosed. Because we remand to the trial court for disposition by summary 
judgment or trial, it is not helpful to engage in an extended discussion of the 
course of the loan, default, and foreclosure events. It is sufficient to point 
out that following a judicial foreclosure by default, and without appeal in that 
case, this case raises claims involving the universe of real-estate lending and 
foreclosure: (1) breach of statutory and regulatory duty; (2) breach of 
fiduciary duty; (3) breach of obligation of good faith; (4) breach of contract; 
(5) trespass; and (6) conversion.

 
 

[¶5.]     In reviewing the six 
claims, it appears that the first four involve pre-foreclosure events, and that 
the other two, trespass and conversion, may have occurred later. Consequently, 
we cannot determine from an examination of the mortgage attached to the 
complaint whether, as a matter of law, the defendants may not have committed 
actionable offenses alleged against them. Neither do we find, as a matter of 
law, that whatever may have happened in the foreclosure process was 
determinative of all issues of liability asserted in the complaint as trespass 
and conversion. See extensive discussion of res judicata and collateral estoppel 
in Texas West Oil and Gas Corporation v. First 
Interstate Bank of Casper, Wyo., 
743 P.2d 857 (1987).

 
 

[¶6.]     Responding to the 
plaintiffs' complaint, the defendants brought a Motion to Strike, Dismiss, and 
Impose Sanctions, alleging bad faith, triviality, failure to state a claim, and 
lack of jurisdiction based on the res-judicata effect of the foreclosure 
proceeding. In support of their motion, the defendants filed a comprehensive, 
six-page affidavit signed by one of the officers, to which there were 43 pages 
of attachments. The assertions contained in the affidavit responded to the 
allegations found in the plaintiffs' complaint. As further support for their 
motion, the defendants also filed summaries of depositions taken of the 
plaintiffs, and a memorandum brief which included extensive allegations of fact 
taken from the affidavits and depositions. The trial court held a hearing on the 
motion, issued its decision letter the next day, and subsequently entered an 
order of dismissal.

 
 
MOTION 
TO DISMISS

 
 

[¶7.]     In its order dismissing 
plaintiffs' claims, the trial court stated in part:

 
 
"1. 
Defendant's Motion to Dismiss should be granted for reasons of failure to state 
a compulsory counterclaim in an earlier action, res judicata, collateral 
estoppel, and failure to state a claim. All allegations in the Complaint fall 
within one or more of these categories.

 
 
"2. The 
Courts determination set out herein can be done by scrutiny of the Complaint and 
supporting documents, and it is not necessary to consider Affidavits, 
Depositions, or other material."

 
 

[¶8.]     Rule 12(b), W.R.C.P. 
states:

 
 
"* * * * 
If on a motion * * * * to dismiss for failure of the pleading to state a claim 
upon which relief can be granted, matters outside the pleading are presented to 
and not excluded by the court, the motion shall be treated as one for summary 
judgment and disposed of as provided in Rule 56, and all parties shall be given 
reasonable opportunity to present all material made pertinent to such a motion 
by Rule 56."

 
 

[¶9.]     The trial court, in an 
apparent effort to avoid the time-of-notice requirements of Rule 56, W.R.C.P., 
structured its order as one for dismissal rather than summary judgment, and 
specifically stated that it was not necessary to consider material extraneous to 
the pleadings in treating the motion as one for dismissal. Consequently, the 
filed affidavits and depositions, as well as the factual events described in the 
briefs, are not properly before this court. Torrey 
v. Twiford, 
Wyo., 713 P.2d 1160 (1986); Hickey v. Burnett, Wyo., 707 P.2d 741 (1985); Larsen v. Roberts, 
Wyo., 676 P.2d 1046 (1984); Kimbley v. City of Green 
River, Wyo., 642 P.2d 443 (1982); Harris v. Grizzle, 
Wyo., 625 P.2d 747 (1981). In our review of the propriety of the order of dismissal, we 
may not consider those facts and events presented only by extraneous documents. 
This court, sitting in its customary role as an appellate court, is not the 
proper forum in which to develop facts. Gifford v. 
Casper Neon Sign Co., Wyo., 618 P.2d 547, 551 
(1980).

 
 

[¶10.]  The identical federal rule applicable to 
a motion to dismiss was discussed by the United States Supreme Court in Conley v. Gibson, 355 U.S. 41, 48, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957):

 
 
"* * * * 
Following the simple guide of Rule 8(f) that 'all pleadings shall be so 
construed as to do substantial justice,' we have no doubt that petitioners' 
complaint adequately set forth a claim and gave the respondents fair notice of 
its basis. The Federal Rules reject the approach that pleading is a game of 
skill in which one misstep by counsel may be decisive to the outcome and accept 
the principle that the purpose of pleading is to facilitate a proper decision on 
the merits."

 
 

[¶11.]  This court has adopted that position, and 
has recognized the limited scope of a motion to dismiss in light of modern 
notice pleadings. Carbon County School District 
No. 2 v. Wyoming State Hospital, Wyo., 680 P.2d 773 (1984); Johnson v. Aetna Casualty 
& Surety Co. of Hartford, Connecticut, 
Wyo., 608 P.2d 1299 (1980); Moxley v. 
Laramie Builders, Inc., Wyo., 600 P.2d 733 
(1979).

 
 

[¶12.]  On its face, the plaintiffs' claim states 
a cause of action, at least with regard to the trespass and conversion claims. 
The plaintiffs allege that the foreclosure judgment was entered before the 
events occurred upon which those two causes of action are based. Thus, there 
appear to be causes of action which arose subsequent to the foreclosure 
judgment, and, at least facially, cannot be barred by res judicata, failure to 
state a counterclaim, or collateral estoppel.

 
 

[¶13.]  All aspects of the six-count complaint 
cannot be resolved by res judicata without resort to "evidence" created by the 
depositions and affidavits. This evidence, extrinsic to the pleadings, is not 
appropriately considered on a motion to dismiss, and consequently, we disapprove 
of the trial court's disposition of the case on a motion to dismiss.1 Torrey v. Twiford, 
supra.

 
 
JUDICIAL 
NOTICE

 
 

[¶14.]  In the absence of the affidavits and 
attachments submitted by PCA, this record is inconclusive. The only support for 
the trial court's disposition would have been by judicial notice of the record 
in the prior judicial foreclosure proceeding. Judicial notice in this situation 
may not be governed by Rule 201, W.R.E., because we are here concerned with 
court records.2

 
 

[¶15.]  Although we do not disregard this court's 
general power to take judicial notice, Weber v. 
Johnston Fuel Liners, Inc., Wyo., 540 P.2d 535 (1975), we now establish two requirements for judicial notice of 
prior court proceedings in order to insure a proper record for appellate review. 
First, written notice must be given to the trial court so that it is clear what 
matters the trial court had the opportunity to consider; and second, judicially 
noticed documents must be physically included as part of the record filed on 
appeal, or must be on file at the Supreme Court as the result of a different 
proceeding. Slepian v. Slepian, Ala. 
App., 355 So. 2d 714 (1977), cert. denied 355 So. 2d 717 (1978). Compare Hickey v. Burnett, 
supra, 707 P.2d  at 744, and particularly fn. 4.

 
 

[¶16.]  We do not say that the record in this 
case is necessarily insufficient to justify judicial notice of the prior 
foreclosure. For the purposes of this case, we will consider that the record of 
the prior foreclosure action is made a part of the record in this case, despite 
its arrival here by attachment to an affidavit which we cannot consider.3 Even so, the judicially noticed 
default foreclosure proceeding is not sufficient to support a motion to dismiss, 
at least as to the conversion and trespass claims. Concordia v. Bendekovic, 693 F.2d 1073 (11th Cir. 1982). The 
summary-judgment process can use the record as then completed and now available, 
and sort out litigable issues, if any, which are not subject to res judicata or 
collateral-estoppel defenses. Butler 
v. Olshan, 280 Ala. 181, 191 So. 2d 7 
(1966).4

 
 
BANKRUPTCY

 
 

[¶17.]  This court learned from appellees' brief 
and oral argument that appellants filed bankruptcy, apparently in early, 1985. 
Appellees present here for the first time the issue whether the plaintiffs are, 
or the trustee in bankruptcy is the real party in interest. Appellees' 
real-party-in-interest argument can be developed in two fashions. First, the 
claims asserted by the plaintiffs may now belong to the trustee in bankruptcy 
and are generally related to the proceeding in the bankruptcy court. Second, the 
claims of impropriety in the foreclosure sale of property which plaintiffs 
allege belonged to third parties, including their children, may actually belong 
to those third parties. The present record does not contain sufficient grounds 
on which to make these determinations.

 
 

[¶18.]  The following quotation from the 
appellants' brief which reflects the tenor of their complaint, demonstrates the 
complex and emotional conflict:

 
 
"Subsequently, 
on or about June 4, 1983, the Wyoming PCA caused to be conducted a sale of the 
Cockrehams' personal property at the ranch in Niobrara County, Wyoming. This sale was conducted in a vicious, 
hateful manner, with complete disregard of the Cockrehams' rights. Numerous 
items not a part of any security agreement between the parties were sold. Some 
of these items included: their son's refrigerator/freezer and Honda motorcycle, 
approximately thirty (30) mini trampolines, Cockrehams' brand, the 
grandchildren's sled, and approximately thirty (30) head of registered Arabian 
horses. The Defendant's agents also removed property which had become realty, 
such as hooks in the walls of outbuildings and Hobart Cockreham's saddle rack, 
which had been bolted into a concrete floor.

 
 
"Further, 
without notice to the Cockrehams, and several days prior to this June 4, 1983 
sale, agents of the Wyoming PCA gave a registered Arabian mare of the 
Cockrehams to one Katy Geist, in return for Ms. Geist's aiding Wyoming PCA 
agents prior to and at the ranch, on the day of the sale. This mare was never 
properly sold nor accounted for by the Wyoming PCA."

 
 

[¶19.]  Generally, at least, this court can 
envision a factual scenario where the real-party-in-interest contention might be 
dispositive to most or possibly all of the complaint claims. We choose not to 
pursue the inquiry, for two well-established reasons. First, this court will not 
consider an issue first presented in this court on appeal, unless explicitly and 
clearly documented as jurisdictional. Gardner 
v. Walker, Wyo., 
373 P.2d 598 (1962). This court will not consider any matter 
upon which the record is silent. Mentock v. 
Mentock, Wyo., 
638 P.2d 156, 160 (1981).

 
 

[¶20.]  Second, we choose not to invite the 
federal bankruptcy record to this court for review without first obtaining the 
able consideration and advocacy of counsel on the issues which the record might 
invoke. Those issues initially should be submitted to the trial court as 
affirmative defenses, pursuant to Rules 9 and 17, W.R.C.P., and particularly so 
considering the rights of ratification, joinder, or substitution provided in 
Rule 17. Hickey v. Burnett, supra.

 
 

[¶21.]  In Wyoming 
Wool Marketing Association v. Urruty, 
Wyo., 394 P.2d 905, 908 (1964), we said:

 
 
"* * * * 
We would agree that the burden is on the movant to sustain a motion. We would 
agree also that in the usual case the question of whether the action is 
prosecuted in the name of the real party in interest is affirmative matter to be 
sustained by a party claiming to the contrary."

 
 
Upon 
issue raised and proof provided, this question should properly first be 
considered by the trial court.

 
 

[¶22.]  We reverse the order of dismissl, and 
remand for further proceedings.

 
 
THOMAS, 
J., filed a concurring opinion.

 
 
THOMAS, 
Justice, concurring.

 
 

[¶23.]  I concur in the result which is reached 
by the majority opinion in this case. I dissented in Texas West Oil and Gas Corporation v. First Interstate Bank 
of Casper, N.A., Wyo., 743 P.2d 857 (1987), because I 
did not perceive that case as an appropriate one in which to invoke the concepts 
of res judicata or collateral estoppel. Consequently, I cannot agree with the 
reliance in this case upon that case, and would simply refer the interested 
researcher to CLS v. CLJ, Wyo., 693 P.2d 774 (1985); Delgue v. Curutchet, 
Wyo., 677 P.2d 208 (1984); and the cases cited in those opinions relative 
to the doctrines of res judicata and collateral estoppel.

 
 
FOOTNOTES

 
 

1Review of a large number of cases, 
primarily federal, reveals the general but not unanimous rule that res judicata 
and collateral estoppel can defensively be presented by a notice to dismiss. 
Critical evaluation justifies the conclusion that summary judgment or a joint 
motion for summary judgment and to dismiss, with a clear request that the court 
designate and judicially notice desired court records when then considered, is 
trouble avoidance in the litigative process. Compare Weber v. Johnston Fuel Liners, Inc., Wyo., 540 P.2d 535 (1975), with 
Miller v. Shell Oil Co., 345 F.2d 891, 893 (10th Cir. 
1965):

 
 
"Clearly, from the record, Shell 
properly raised a defense of res judicata by motion, but, we cannot say that the 
fact which would make the defense good appear plainly upon the face of the 
complaint. In order to justify the granting of the motion to dismiss the court 
must have considered evidentiary matter outside the 
complaint."

 
 
See also Texas West Oil and Gas Corporation v. First Interstate Bank 
of Casper, 
supra.

 
 

2The determination whether judicially 
noticed court records are adjudicative under Rule 201, or legislative and thus 
excluded, is not without question. It is said that sometimes it may be 
adjudicative, others legislative, and even in some cases both adjudicative and 
legislative. See especially Note, Judicial Notice: Rule 201 of the Federal Rules of Evidence, 
XXVIII U. of Fla. L. Rev. 723 (1976), particularly fn. 171 at 751, wherein the 
writer said, in talking about Alexander v. 
HEW, 392 F. Supp. 1 (N.D. Ill. 
1975):

 
 
"* * * * In determining whether to 
permit the third party complaint, the court took judicial notice of dismissals 
in the previous actions as proof that the plaintiff had been given a full 
opportunity to litigate her grievances. The fact of the prior action was in one 
sense legislative because it was used by the judge to determine what course of 
action to take. However, the fact was also adjudicative because it related to 
the actions of an immediate party. * * * *

* * * 
*

"Whether judicially noticed facts 
relating to prior records of current cases and of previous cases should be 
classified as adjudicative or legislative for purpose of Rule 201 is a question 
that needs to be resolved."

 
 
On the admissibility question without 
using these differentiated definitions, see generally Wigmore on Evidence § 
2579. The definitions arose from the writings of Kenneth Culp Davis, see Davis, 
Judicial Notice, 55 Columbia L. Rev. 945 (1955), and Davis, An 
Approach to Problems of Evidence in the Administrative Process, 55 Harvard 
L. Rev. 364, 402 (1942); Wright & Graham, Federal Practice and Procedure: 
Evidence § 5103, and 1987 Supplement. It is noteworthy that rule drafters in 
Alaska and Montana have eliminated the distinction 
between adjudicative and legislative judicial notice by characterization as 
artificial and confusing. See Wright & Graham, supra, 1987 Supplement at 
220.

 
 

3Even if the reviewing jurist sneaks a 
look at the voluminous documentation in affidavit and deposition "for 
background," recognition is still required that plaintiffs were not given an 
opportunity to respond.

 
 

4Collateral estoppel as well as res 
judicata are involved, since there are parties defendant in this proceeding who 
were not plaintiffs in the initial foreclosure proceeding, namely officers, 
agents, and directors of the lender.