Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-02030/USCOURTS-ca10-88-02030-0/pdf.json

Nature of Suit Code: 850
Nature of Suit: Securities, Commodities, Exchange
Cause of Action: 

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FI LED 

Voiced StatRf Coun of Appeals 

UNITED STATES COURT OF APPEALS 'fenth Cfrcuit 

TENTH CIRCUIT 

LEONARD FREIS; FRED NEUMAN; ) 

DOROTHY NEUMAN; RICHARD JOHNSTON; ) 

SHARON FREED; SAUL ROSENFIELD; ) 

MARCELLA ROSENFIELD; NORTON ) 

BOSLOW; and MARILYN BOSLOW, ) 

) 

Plaintiffs-Appellants, ) 

) 

v. ) 

) 

PHOENIX PETROLEUM CORPORATION; ) 

MORTON KAATZ; HARRY KAATZ; and ) 

DALE CALHOUN, ) 

) 

Defendants-Appellees. ) 

OCT 2 6 1990 

ROBERT L. HOECKER 

Clerk 

No. 88-2030 

(D.C. No. 85-Z-2135) 

(District of Colorado) 

ORDER AND JUDGMENT1 

Before McKAY and EBEL, Circuit Judges, and WEST, 2 District Judge. 

This case concerns the district court's denial of two posttrial motions pursuant to Rule 59 of the Federal Rules of Civil 

Procedure. 

1 This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

2 Honorable Lee R. West, United States District Judge for the 

Western District of Oklahoma, sitting by designation. 

Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 1 
I. Facts 

Plaintiffs sued defendants 3 for securities law violations in 

connection with the purchase of working interests in two oil well 

leases. The parties stipulated that the working interests were 

purchased on January 30, 1984, April 11, 1984, and April 25, 1984. 

Plaintiffs claimed that defendants violated section 12(1) of the 

Securities Act of 1933, 15 u.s.c. § 771(1), because the securities 

were not registered. Plaintiffs also claimed that defendants made 

material misrepresentations and omissions that violated section 

12(2) of the Securities Exchange Act of 1934, 15 U.S.C. § 771(2); 

section 10b of the Securities Exchange Act of 1934, 15 U.S.C. § 

78j(b); and SEC Rule l0b-5, 17 C.F.R. § 240.l0b-5. 

The case was tried to a jury; and at the conclusion of the 

plaintiffs' case, defendants moved for directed verdict on the 

section 12(1) claim arguing that it was barred by the one year 

statute of limitations set forth in section 13 of the 1933 Act, 15 

U.S.C. § 77m. After hearing arguments on the motion for directed 

verdict, the court found that the section 12(1) cause of action 

accrued when the contracts were signed in January of 1984 and in 

April of 1984. Because this suit was not filed until 

September 20, 1985, more than one year after the contract dates, 

3 Defendants were Phoenix Petroleum corporation, Harry Kaatz, 

Morton F. Kaatz, and Dale Calhoun. Plaintiffs received notices of 

default against Phoenix Petroleum corporation and Dale Calhoun. 

The case against Harry Kaatz was dismissed by the district court 

after he sought bankruptcy protection. At trial, the plaintiffs 

proceeded against Morton F. Kaatz. 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 2 
the court granted defendants' motion for directed verdict. 

Record, vol. 5, at 451. 

The claims under section 12(2) of the 1933 Act, 15 U.S.C. § 

771(2), section 10b of the 1934 Act, 15 u.s.c. § 78j(b), and SEC 

Rule lOb-5 were submitted to the jury. The jury returned averdict in favor of plaintiffs and awarded damages in the amount of 

zero. The district court polled the jury on their verdict and 

submitted an interrogatory asking whether they found plaintiffs' 

section 12(2) claim timely. The jury answered in the affirmative. 

The court then entered judgment for plaintiffs in the amount of 

zero pursuant to the jury verdict. 

Plaintiffs filed two post-trial motions under Rule 59: (1) a 

motion for new trial on the issue of damages only, and (2) an 

alternative motion for new trial on all issues. Plaintiffs argued 

that there were two conflicting instructions on damages submitted 

to the jury. 4 Plaintiffs claimed that Instruction No. 31 "was 

extremely confusing and must have been the instruction used by the 

4 Instruction No. 21 stated: "If you find that plaintiffs are 

entitled to recover from the defendant under 15 U.S.C. § 771(2), 

you must award a sum of money equal to the consideration paid for 

such securities less the amount of income received thereon." 

Instruction No. 31 stated: "Finally, for plaintiffs to 

recover for misrepresentations or omissions by defendant, 

plaintiffs must show that they have suffered damages as a result 

of their reliance on defendant's fraud. The correct measure of 

damages is the difference between the fair market value of all 

that plaintiffs received and the fair market value of what they 

would have received had there been no fraudulent conduct." At 

Plaintiff's request, the court added the notation "(lOb-5)" at the 

end of the instruction in order to avoid jury confusion. 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 3 
jury in arriving at its damages verdict." Record, vol. 1, doc. 5, 

at 1. The court denied plaintiffs' motion for new trial stating 

that it was untimely because "plaintiffs failed to move the court 

immediately to reconvene the jury for further deliberations on the 

offending damages instructions." Order, June 2, 1988, at 2. The 

district court held that the jury instructions complained of were 

not confusing and that "[t]hey provided the jury with an adequate 

legal guidepost to reach a decision." Id. The district court 

also held that it would be second-guessing the jury's finding of 

zero damages and usurping the jury's function as a trier of fact 

if the plaintiffs' motion was granted. Id. at 3. 

Under Rule 59(e), plaintiffs requested that the court alter 

or amend findings and the directed verdict on the section 12(1) 

claim. Plaintiffs asserted below that the court erred in finding 

that the limitations period on the section 12(1) claim began to 

run when the separate agreements were entered into in January and 

April, 1984. Plaintiffs argued that the statutory period began to 

run in December 1984 when the defendant executed and delivered the 

assignments of working interests. Because the district court 

found that plaintiffs committed a fatal error in not pleading sufficient facts to demonstrate that the complaint was within the 

statute of limitations, the motion to alter or amend was denied. 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 4 
II. Motion for New Trial 

A. Standard of Review 

The district court's decision on a motion for new trial pursuant to Rule 59(a) is reviewed under an abuse of discretion 

standard. Bonin v. Tour West, Inc., 896 F.2d 1260, 1261 (10th 

Cir. 1990); see Brown v. McGraw-Edison Co., 736 F.2d 609, 616 

(10th Cir. 1984). A decision on a motion for new trial will not 

be reversed absent a gross, manifest, or clear abuse of discretion. See Harvey By Harvey v. General Motors Corp., 873 F.2d 

1343, 1346 (10th Cir. 1989); Karns v. Emerson Elec. Co., 817 F.2d 

1452, 1456 (10th Cir. 1987); Trujillo v. Goodman, 825 F.2d 1453, 

1461 (10th Cir. 1987); Holmes v. Wack, 464 F.2d 86, 89 (10th Cir. 

1972). 

B. Discussion 

The district court's denial of plaintiffs' motion for new 

trial is partially premised on plaintiffs' failure to complain of 

the confusing jury instruction. On appeal plaintiffs claim that 

their "motion for a new trial was not based on instruction no. 31, 

but rather the jury's complete and utter disregard of the court's 

instruction no. 21 and the undisputed evidence in this case." 

Brief of Appellants, at 33. A closer examination of plaintiffs' 

motion for a new trial reveals that they were complaining of an 

inconsistent verdict. 

Appeals from inconsistent verdicts are governed by Federal 

Rule of Civil Procedure 49. Rule 49(b) concerns the submission to 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 5 
a jury of a general verdict with written interrogatories on one or 

more issues of fact. "When the answers [to the interrogatories] 

are inconsistent with each other and one or more is likewise 

inconsistent with the general verdict, judgment shall not be 

entered, but the court shall return the jury for further consideration of its answers and verdict or shall order a new trial." 

Fed. R. Civ. P. 49(b). Plaintiffs submitted a post-verdict interrogatory to the jury on whether the section 12(2) claim was 

timely. After the jury answered in the affirmative, plaintiffs 

did not submit any additional interrogatories to the court for the 

jury's consideration. Although plaintiffs did briefly allude to 

the alleged inconsistency in the verdict, this was done only after 

the jury was discharged. 

We have held that a party must object to any inconsistency in 

the verdict before the jury is discharged, otherwise "he waives 

any future challenge to the inconsistency because his failure to 

make a timely objection deprives the court of the option of sending the jury back for further deliberations." Bonin v. Tour West, 

Inc., 896 F.2d 1260, 1263 (10th Cir. 1990); see also Jarvis v. 

Commercial Union Assur. Cos., 823 F.2d 392, 396 (10th Cir. 1987); 

Kirkendoll v. Neustrom, 379 F.2d 694, 698 (10th Cir. 1967). 

We are convinced that the plaintiffs' allusion to an inconsistent 

verdict after the jury was discharged did not preserve the issue 

for review. 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 6 
Plaintiffs state that "although the jury did not deliver a 

verdict designating liability under either section 12(2) or Rule 

lOb-5 in particular, it must necessarily have found liability 

under Section 12(2)." Brief of Appellants, at 18. The verdict 

form presented to the jury is reproduced as follows: 

We, the jury, find for the plaintiff, [plaintiff's 

name], and award damages of$ 0.00 against the 

defendant, Morton F. Kaatz. 

Record, vol. 1, doc. 8. In the cases we have found involving 

inconsistent verdicts, the verdict forms have provided information that could be reviewed on its face. See,~, Bonin v. 

Tour West, Inc., 896 F.2d 1260, 1262 (10th Cir. 1990); Jarvis v. 

Commercial Union Assur. Cos., 823 F.2d 392, 393-94 (10th Cir. 

1987). Here the verdict form submitted to the jury at the 

request of plaintiffs5 did not distinguish a finding of liability 

under any of the alleged statutory sections. In that sense it 

was a general verdict. The jury answered that the defendants 

were liable but that plaintiffs suffered zero damages. Plaintiffs now claim the that the jury found for plaintiffs on the 

section 12(2) claim and that the finding of zero damages is 

inconsistent with the judgment. 

"When submitting a general verdict and interrogatories under 

Rule 49(b), both the trial and appellate court have a duty to 

5 The defendants state in their brief that these forms were 

prepared by plaintiffs, and we have found nothing in the record to 

dispute that contention. Even assuming the court prepared the 

verdict form, plaintiffs should have objected to the form because 

it did not distinguish the various statutory sections under which 

defendants could have been found liable. 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 7 
reconcile the two if any seeming conflict arises." Harvey By 

Harvey v. General Motors Corp., 873 F.2d 1343, 1347 (10th Cir. 

1989). The district court attempted to reconcile the verdict 

when it stated: 

On the [section 12(2)] claims, the jury may have decided 

that some benefit received from plaintiffs' securities 

rendered nugatory the consideration paid for such securities. On the Rule l0b-5 claims, the jury may have 

decided that the fair market value of all that plaintiffs received, and the fair market value of what they 

would have received had there been no fraudulent conduct, was equally balanced. At any rate, the Court is 

not free to set aside the jury's verdict merely because 

the court might have awarded damages. 

Order, June 2, 1988, at 3. The district court's attempt to reconcile this verdict was not an abuse of discretion. We are persuaded that the jury might have found for plaintiffs on the Rule 

l0b-5 claim and against plaintiffs on the section 12(2) claim for 

one or more of the reasons set out in the appellees' brief. We 

are also persuaded that the jury could have found the section 

12(2) claim timely while finding no liability attached under that 

claim. It is not necessary for us to reconcile this verdict where 

the plaintiffs failed to bring to the court's attention the 

alleged inconsistency prior to the discharge of the jury. We 

believe plaintiffs waived the claim they may have had on the 

inconsistent verdict. Finding no abuse of discretion in the district court's order denying a new trial, the district court's 

entry of judgment on the jury's verdict is AFFIRMED. 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 8 
III. Motion to Alter or Amend 

A. Standard of Review 

At the conclusion of plaintiffs' case, the district court 

granted defendants' motion for directed verdict on the section 

12(1) claim. Plaintiffs moved the district court to alter or 

amend judgment on the section 12(1) claim and now appeal the 

denial of that motion. 

Both parties argue that our standard of review on the Rule 

59(e) motion is the same as that which would be applied by the 

trial court in making its initial ruling. That would be the correct standard of review if we were reviewing the court's decision 

to grant or deny a motion for directed verdict under Rule 50. 

Here, plaintiffs did not preserve for appeal the issue of whether 

the Rule 50 motion should have been granted. Plaintiffs could 

have done so by way of a motion to reconsider. The plaintiffs' 

request, however, was for the district court to alter or amend 

judgment pursuant to Rule 59(e); and the notice of appeal challenges the district court's order of June 2, 1988, in which their 

Rule 59(e) motion was denied. 

We have held that the standard of review for a motion to 

amend judgment pursuant to Rule 59(e) is "whether the district 

court abused its discretion." Varley v. Tampax, Inc., 855 F.2d 

696, 700 (10th Cir. 1988). Under the abuse of discretion standard, we will not disturb the district court's decision unless we 

find that the district court "made a clear error of judgment or 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 9 
exceeded the bounds of permissible choice in the circumstances." 

United States v. Ortiz, 804 F.2d 1161, 1164 n.2. (10th Cir. 1986). 

B. Discussion 

The district court did not abuse its discretion when it 

denied the motion to alter or amend in this case. We have examined the record and agree that plaintiffs did not plead affirmative facts to prove the action was brought within the statutory 

limitation period. In their brief on appeal, plaintiffs argue 

that their motion to amend the pleadings to conform to the evidence cured the initial error of failure to plead the date of 

delivery. We do not agree because the motion to conform was made 

at the end of the trial. When the district court granted defendants' motion for directed verdict at the close of plaintiffs' 

case, all issues and evidence pertaining to the section 12(1) 

claim were not before the court or the jury. Thus, the argued 

cure was not possible. 

The district court's holding that the plaintiffs committed a 

fatal error in not pleading sufficient facts is in accord with 

Toombs v. Leone, 777 F.2d 465 (9th Cir. 1985). In Toombs, the 

court held that "the plaintiff must affirmatively plead sufficient 

facts in his complaint to demonstrate conformity with the statute 

of limitations." 777 F.2d at 468. There the plaintiff had 

alleged that he purchased his securities on a certain date but 

made "no allegation with respect to the date upon which his securities were delivered." Id. When faced with a decision on 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 10 
whether the claim was time-barred, the court held that the date 

pleaded must be taken as the time of the alleged violation. Id. 

We agree that affirmative facts must be pleaded to show conformity 

with the statute of limitations when invoking the court's jurisdiction under section 12(1) of the Securities Act of 1933, 15 

u.s.c. § 771(1). 

The district court also relied on Cook v. Avien, Inc., 573 

F.2d 685 (1st Cir. 1978). In Cook the court was faced with a 

statute of limitations question under another section of the 

Securities Act. The court found that the general rule in federal 

court practice was that "when the very statute which creates the 

cause of action also contains a limitation period, the statute of 

limitations not only bars the remedy but also destroys the liability, and therefore the plaintiff must plead and prove facts 

showing that he is within the statute." Cook v. Avien, Inc., 573 

F.2d at 695. 

In the case before us, the cause of action is set forth in 

section 12(1) of the Securities Act of 1933, 15 u.s.c. § 771(1), 6 

and the limitation period for a section 12(1) claim is set forth 

in section 13 of the Securities Act of 1933, 15 U.S.C. § 77m. 

Because an action "to enforce a liability created under section 

6 Section 771(1) creates a civil liability for a person who 

"offers or sells a security in violation of section 77e of this 

title." 15 U.S.C. 771(1) (1988). Section 77e(a) prohibits the 

sale or delivery after sale of unregistered securities. 15 

u.s.c. 77e(a) (1988). 

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Appellate Case: 88-2030 Document: 010110064870 Date Filed: 10/26/1990 Page: 11 
771(1) of this title [is barred], unless brought within one year 

after the violation upon which it is based," the plaintiff must 

affirmatively plead facts which would prove he is within the 

statute. 15 U.S.C. § 77m (1988). Here plaintiffs did not plead 

affirmative facts that proved they were within the statute of limitations period on their section 12(1) claim. 

Finding no abuse of discretion in the district court's denial 

of the motion to alter or amend, we AFFIRM. 

Entered for the Court 

Monroe G. McKay 

Circuit Judge 

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