Opinion ID: 2974907
Heading Depth: 4
Heading Rank: 3

Heading: The Proceedings Relevant to this Appeal

Text: Based on the Missouri Circuit Court’s decision in his favor on the ownership of the funds in question and the existence of a partnership between him and Gehres, Bagsby moved for leave to file a Third Amended Complaint in the Eastern District of Michigan to simplify this case by dropping all claims except for his request for declaratory relief and conversion against Gehres, the Gehres Family, and Schnelz, and negligent misrepresentation against Magnevu. The district court granted the motion; Bagsby filed a Third Amended Complaint in April of 2002. In May 2002, Gehres notified the district court that she had filed for bankruptcy in California. The district court stayed this case and closed it for administrative purposes. Schnelz then filed a motion for summary judgment. Bagsby moved for summary judgment on the declaratory and conversion counts of his Third Amended Complaint against Schnelz. The district court reopened the case and lifted the stay to consider those motions. Schnelz’s and Bagsby’s motions were referred to the Magistrate Judge, who recommended granting Schnelz’s motion and denying Bagsby’s motion in his order of September 9, 2003. Determining that regardless of whether California or Michigan substantive law applied to the dispute, Bagsby’s judgment in the Missouri Circuit Court would entitle him to a declaratory judgment against Schnelz only if Schnelz was a party, or in privity with a party, to the Missouri Circuit Court lawsuit, which it undisputedly was not. As to Bagsby’s conversion claim, the Magistrate Judge, applying California law, found that Schnelz properly relied on the Smith Barney 6 account documents noting that Gehres and Bagsby were tenants in common, such that Bagsby could not establish that he had the ownership interest or right of possession over the funds. The District Court Judge adopted the Magistrate Judge’s report and recommendation, and granted summary judgment in Schnelz’s favor on Bagsby’s declaratory relief and conversion claims, noting that Bagsby did not offer a substantive objection to the Magistrate Judge’s legal analysis of the declaratory judgment claim and that, as to the conversion claim, Gehres held the funds in the Smith Barney account as a tenant in common and had an equal right to posses them. The District Court Judge found that Bagsby failed to establish a genuine issue of material fact as to whether Schnelz wrongfully asserted dominion over Bagsby’s property. On June 22, 2004, the district court lifted the stay as to the remaining claims as Gehres had been granted a discharge in her case by the U.S. Bankruptcy Court for the Northern District of California. Later that summer, the Missouri Court of Appeals vacated the lower court’s decision in Bagsby’s favor on the existence of a partnership between himself and Gehres and her alleged unjust enrichment, concluding that Bagsby improperly and vexatiously split his causes of action between the Missouri Circuit Court and the federal district court (the pending action). The Court of Appeals remanded the case with directions to the Missouri Circuit Court to dismiss it. On September 7, 2004, Bagsby sought leave in the Eastern District of Michigan to file a Fourth Amended Complaint adding the defendants and claims previously named and pled, but then dropped.7 7 Bagsby moved for leave to file a Fourth Amended Complaint on May 18, 2004, seeking to add claims for civil conspiracy, fraud, money had and received, and unjust enrichment, previously claimed in the Second Amended Complaint. After the Missouri Court of Appeals reversed the Missouri Circuit Court’s judgment in Bagsby’s favor, he moved for leave to file a “Fourth Amended Complaint (Superceding Previous Fourth Amended Complaint)” on September 7, 2004. This complaint added claims for breach of fiduciary duty, detrimental reliance, breach of contract, restitution, violation of the Uniform Fraudulent Conveyances Act, constructive trust, accounting, and quantum meruit in addition to those claims he sought to add in the motion for leave to file a Fourth Amended Complaint filed on May 18, 2004. It does not appear that the district court ever ruled on his original motion of May 18, 2004, for leave to file a Fourth Amended Complaint, but instead ruled on his motion for leave to file a Fourth Amended Complaint (Superceding Previous Fourth Amended Complaint), filed on September 7, 2004. The September 7, 2004, motion is the subject of this appeal. 7 The parties consented to the jurisdiction of the Magistrate Judge under 28 U.S.C. § 636(c), who heard the pending motions relevant to this appeal, including Bagsby’s renewed motion to dismiss Gehres’ counterclaims for allegedly failing to disclose them in the bankruptcy proceeding, Gehres’s and the Gehres Family’s motions for summary judgment, Magnevu’s motion for summary judgment, and Bagsby’s motion for leave to file his Fourth Amended Complaint and supercede the previous Fourth Amended Complaint. On December 10, 2004, the Magistrate Judge denied Bagsby’s renewed motion to dismiss all Gehres’ counterclaims, stating, “[a]djudication of the claims and counterclaims made by the parties will be based upon the substantive merits, and not upon innuendo or allegations of criminal conduct.” (R. at 1138.) On February 16, 2005, the Magistrate Judge granted Gehres’s motion for summary judgment, finding that as to Bagsby’s declaratory-relief claim, the judgment entered by the Missouri Circuit Court on July 24, 2001, was not controlling on the issue of the ownership of the funds because the judgment was reversed on appeal and the case dismissed. With respect to Bagsby’s conversion claim, the Magistrate Judge, applying California law, found that the undisputed factual evidence showed that Bagsby unconditionally transferred the money to Gehres, and that “Bagsby failed to proffer sufficient evidence that Defendant Gehres obtained the funds by ‘wrongfully exercis[ing] dominion over the property of another,’” noting for example that the $354,500.00 check was made payable to Gehres as the sole payee with no conditional language. (R. at 1316.) The Magistrate Judge also rejected Bagsby’s argument that the divorce decree established ownership of the funds, finding that once the divorce was final and the parties began to reconcile, Bagsby transferred the money to Gehres of his own volition. Finally, in an alternative analysis with respect to the $354,500.00, the Magistrate Judge found that even if Bagsby himself had deposited the funds into the Smith Barney account instead of Gehres: 1) Gehres had the right under California law to withdraw the funds from the account, and 2) at the moment of withdrawal, ownership of any funds to which she would not have had the right on a proportional basis, transferred to her as a gift under Lee v. Yang, 3 Cal. Rptr. 3d 819 (Ct. App. 2003) and the California Court of Appeal’s interpretation of the California Multiple-Party Accounts Law (“CAMPAL”). The Magistrate Judge found that Gehres would be entitled to summary judgment on the conversion claim if she had a right of withdrawal under the terms of the Smith 8 Barney account and there was not a sufficient evidentiary dispute that she was under any separate legal obligation that restricted the right of withdrawal. Noting that Bagsby “has pointed to no record evidence of an agreement that created a legal obligation separate from the account documents which restricted [] Genres’s right to withdraw or use the funds,” and that the terms of the account itself provided that either Bagsby or Genres had the full power and authority to withdraw monies, individually or jointly, the Magistrate Judge granted summary judgment in Genres’s favor. (R. at 1322.) Finding Bagsby’s claims against the Genres Family to be derivative of the claims against Genres, the Magistrate Judge also granted the Genres Family’s motion for summary judgment. The Magistrate Judge granted Magnevu’s motion for summary judgment on Bagsby’s negligent misrepresentation claim,8 finding it was unsupported by fact or law. The Magistrate Judge denied Bagsby leave to file his Fourth Amended Complaint on the basis that because the proposed causes of action and defendants Bagsby sought to add to the case were derivative of the meritless conversion claim against Genres, the amendments were futile.