Court Opinion

ID: 165306
Source: CourtListenerOpinion
Date Created: 2010-08-14 08:48:24+00
Date Added: 2024-06-11T17:18:32.586006
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                   UNITED STATES COURT OF APPEALS
                                                                         DEC 8 2004
                         FOR THE TENTH CIRCUIT
                                                                    PATRICK FISHER
                                                                             Clerk

    MANHEIM AUTOMOTIVE
    FINANCIAL SERVICES, INC.,

             Plaintiff-Counter-Claim
             Defendant-Appellee,                       No. 03-4285
                                                (D.C. No. 2:02-CV-60-TC)
    v.                                                  (D. Utah)

    FORSHEE AUTO SALES, INC.

             Defendant-Counter-
             Claimant,

    and

    KENNETH M. FORSHEE; RENEE
    FORSHEE,

             Defendants-Counter-
             Claimants-Appellants.

                          ORDER AND JUDGMENT            *

Before SEYMOUR , KELLY , and McCONNELL , Circuit Judges.

*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
       After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination

of this appeal.   See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument.

       Defendants-appellants Kenneth and Renee Forshee (the Forshees) appeal

the order entered by the district court on October 20, 2003 granting summary

judgment in favor of plaintiff-appellee Manheim Automotive Financial Services,

Inc. (Manheim) on the Forshees’ counterclaims for breach of contract and tortious

interference with business relations. Our jurisdiction arises under 28 U.S.C.

§ 1291, and we affirm. To the extent the Forshees are seeking to appeal orders

that were entered in the separate bankruptcy case that was filed by defendant

Forshee Auto Sales, Inc. (Forshee Auto), we dismiss that portion of this appeal

for lack of jurisdiction.

                                           I.

       Forshee Auto was a Utah corporation that formerly operated a used car

dealership in Utah. The Forshees were the sole shareholders of Forshee Auto.

Kenneth Forshee was also an officer and director of the company, while Renee

Forshee was also an officer.

       In January 2001, Forshee Auto entered into a floor-plan financing

arrangement with Manheim to finance the purchase of automobile inventory. As

                                           -2-
part of the arrangement, Forshee Auto executed a $750,000 promissory note in

favor of Manheim. Pursuant to the terms of a separate security agreement,

Forshee Auto also granted Manheim a security interest in its automobile

inventory. In addition, the Forshees executed individual guaranties in favor of

Manheim.

      On December 10, 2001, Manheim filed an action against Forshee Auto and

the Forshees in a Utah state court, alleging that Forshee Auto had defaulted on its

obligations under the note and security agreement. In response to Manheim’s

claims, Forshee Auto and the Forshees filed counterclaims against Manheim for

breach of contract and tortious interference with business relations, claiming,

among other things, that Manheim had “acted in bad faith to create a spurious

default as an excuse to put Defendants out of business.” Aplt. App. at 169.

      On December 21, 2001, Forshee Auto filed a petition for bankruptcy in the

United States Bankruptcy Court for the District of Utah.   See In re Forshee Auto

Sales, Inc. , No. 01-39047 (Bankr. D. Utah). Because the state-court case was

related to the bankruptcy proceeding, Manheim then removed the case to the

United States District Court for the District of Utah pursuant to 28 U.S.C.

§§ 1334 and 1452. After the state-court case was removed to the District of Utah,

it was not consolidated with Forshee Auto’s bankruptcy case or otherwise referred

to the bankruptcy court. Instead, as explained by Manheim in its response brief,

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“there continued, concurrently, two separate legal proceedings involving the

parties to this appeal. One was the District Court Action before [United States

District Judge Tena Campbell]. The other was [Forshee Auto’s] bankruptcy

proceeding before [United States Bankruptcy Judge William Thurman].” Aplee.

Br. at 5. This appeal involves a summary judgment order that was entered by

Judge Campbell in the district court case, and, to avoid confusion, we will refer

herein to the district court case as “this case.” Before addressing Judge

Campbell’s order, however, it is necessary to briefly discuss the proceedings in

Forshee Auto’s bankruptcy case.

      During the course of the bankruptcy case, Manheim “obtained an order

from the Bankruptcy Court granting it relief from the automatic stay, which

allowed [Manheim] to sell its collateral under the Security Agreement to satisfy

[Forshee Auto’s] debt to [Manheim]. The proceeds from the sale of the collateral

paid [Forshee Auto’s] indebtedness to [Manheim] in full.”   Id. at 6. As a result,

Manheim and the bankruptcy trustee entered into a settlement agreement and

mutual release, and, in May 2003, Judge Thurman entered an order in the

bankruptcy case approving the settlement agreement and mutual release. In light

of the settlement in the bankruptcy case, Manheim and the bankruptcy trustee then

filed a stipulated motion in this case to dismiss Manheim’s claims against Forshee

Auto and Forshee Auto’s claims against Manheim with prejudice. In June 2003,

                                          -4-
in response to the stipulated motion, Judge Campbell entered an order in this case

dismissing all of the claims between Manheim and Forshee Auto with prejudice.

       Subsequently, in July 2003, Manheim moved for summary judgment in this

case on the counterclaims asserted by the Forshees in their individual capacities,

arguing that the Forshees did not have standing to assert the counterclaims based

on their status as shareholders of Forshee Auto because the claims belonged

exclusively to Forshee Auto. In October 2003, Judge Campbell entered an order

granting Manheim’s motion for summary judgment. In her order, Judge Campbell

acknowledged that, under Utah law, “a shareholder may ‘bring an individual

cause of action if the harm to the corporation also damaged the shareholder         as an

individual rather than [as] a shareholder.’” Aplt. App. at 16 (quoting        Stocks v.

United States Fid. & Guar. Co. , 3 P.3d 722, 724 (Utah Ct. App. 2000)). Judge

Campbell found, however, that “[t]he Forshees fail[ed] to explain how they

supposedly were damaged other than as shareholders, and they . . . presented no

evidence in support of such a claim.”      Id. at 17. As a result, the Forshees “never

[got] beyond conclusory allegations or references to their pleadings,” and their

“unsupported argument that they were damaged as individuals . . . [was]

insufficient to create a genuine issue of material fact.”   Id.

       In her order, Judge Campbell also addressed the issue of whether the

Forshees have standing to pursue their individual claims against Manheim based

                                             -5-
on their status as personal guarantors of Forshee Auto’s obligations to Manheim.

Judge Campbell concluded that “[t]he Forshees do not have standing to bring an

action against Manheim simply because they guaranteed [Forshee Auto’s]

obligations under the Note and Security Agreement.”        Id. (citing DLB Collection

Trust ex rel. Helgesen & Waterfall v. Harris      , 893 P.2d 593, 597-98 (Utah Ct.

App. 1995) and Nicholson v. Ash , 800 P.2d 1352, 1356 (Colo. Ct. App. 1990)).

       In this appeal, the Forshees are challenging Judge Campbell’s

determination that they do not have standing to pursue their individual claims

against Manheim for breach of contract and tortious interference. The Forshees

are also attempting to appeal several orders that were entered by Judge Thurman

in Forshee Auto’s bankruptcy case. Specifically, the Forshees claim that Judge

Thurman erred by: (1) denying a motion to dismiss that the Forshees filed in the

bankruptcy case; (2) denying a motion to withdraw documents that the Forshees

filed in the bankruptcy case; (3) denying a motion to amend that the Forshees

filed in the bankruptcy case; and (4) approving the settlement in the bankruptcy

case between Forshee Auto and Manheim.

                                            II.

       A. Rule 56 Standards.

       “We review the grant of summary judgment de novo applying the same

standard as the district court embodied in Rule 56(c).”      Adler v. Wal-Mart Stores,

                                            -6-
Inc. , 144 F.3d 664, 670 (10th Cir. 1998). Under Rule 56(c), summary judgment is

proper if “there is no genuine issue as to any material fact and . . . the moving

party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). “In

applying this standard, we view the factual record and draw all reasonable

inferences therefrom most favorably to the nonmovant.”      Adler , 144 F.3d at 670.

However, “[c]onclusory allegations that are unsubstantiated do not create an issue

of fact and are insufficient to oppose summary judgment.”     Harvey Barnett, Inc.

v. Shidler , 338 F.3d 1125, 1136 (10th Cir. 2003).

      The parties must also make specific showings to satisfy their respective

burdens under Rule 56. We have explained the burden-shifting process under

Rule 56 as follows:

             The movant bears the initial burden of making a prima facie
      demonstration of the absence of a genuine issue of material fact and
      entitlement to judgment as a matter of law. In so doing, a movant
      that will not bear the burden of persuasion at trial need not negate the
      nonmovant’s claim. Such a movant may make its prima facie
      demonstration simply by pointing out to the court a lack of evidence
      for the nonmovant on an essential element of the nonmovant’s claim.

             If the movant carries this initial burden, the nonmovant that
      would bear the burden of persuasion at trial may not simply rest upon
      its pleadings; the burden shifts to the nonmovant to go beyond the
      pleadings and set forth specific facts that would be admissible in
      evidence in the event of trial from which a rational trier of fact could
      find for the nonmovant. To accomplish this, the facts must be
      identified by reference to affidavits, deposition transcripts, or
      specific exhibits incorporated therein. Thus, although our review is
      de novo, we conduct that review from the perspective of the district
      court at the time it made its ruling, ordinarily limiting our review to

                                          -7-
       the materials adequately brought to the attention of the district court
       by the parties.

Adler , 144 F.3d at 670-71 (quotations and citations omitted).

       B. Judge Campbell’s Summary Judgment Order.

       Under Utah law, “[i]t is well-settled that even though a shareholder owns

all, or practically all, of the stock in a corporation, such a fact does not authorize

him to sue as an individual for a wrong done by a third party to the corporation.”

Stocks , 3 P.3d at 724 (quotation omitted). But Utah courts have also “recognized

a narrow exception to the general rule regarding a shareholder’s capacity to bring

an individual suit.”   Id. Under the exception, a shareholder may “bring an

individual cause of action if the harm to the corporation also damaged the

shareholder as an individual rather than as a shareholder       .” Harris , 893 P.2d at

596. Consequently, the exception applies to cases where there is a “violation[] of

a duty arising from a contract or otherwise, and owed directly to the shareholder.”

Id. “Thus, in this case the exception would apply if the alleged wrongful conduct

of [Manheim] is a violation of a duty arising from a contract or otherwise with

[the Forshees], and owed directly to [the Forshees].”       Stocks , 3 P.3d at 724

(quotations omitted).

       As noted by Judge Campbell in her summary judgment order, in          Harris , the

Utah Court of Appeals rejected the assertion of standing by a stockholder who

was also a joint-guarantor of a corporation’s debts. Although the court noted that

                                            -8-
the shareholder had “suffered . . . losses as a result of his status as a shareholder

and joint-guarantor,” it nonetheless concluded that “it is the corporation that has

suffered direct injury, and any damage resulting to the stockholder is merely

indirect[.]” Harris , 893 P.2d at 597 (citing     Nicholson , 800 P.2d at 1356). In

addition, the court noted that “all of the shareholders in this closely-held

corporation suffered in the same manner when they were forced to make good on

personal guarantees.”   Id. As a result, the shareholder could not show that he

“suffered a loss that was unique to him alone,”      id. , and the court therefore

affirmed the trial court’s entry of summary judgment against the shareholder,         id.

      Harris appears to be consistent with the decisions of other courts that have

addressed similar shareholder standing issues in cases involving personal

guarantees. See, e.g., Nicholson , 800 P.2d at 1356-57 (holding that a

shareholder’s status as a guarantor of a corporation’s debts did not give him

standing to assert individual claims against the directors of the corporation where

the shareholder was not seeking to enforce any specific obligations owed to him

under the terms of the guarantee);   Marchman v. NCNB Tex. Nat’l Bank         , 898 P.2d

709, 717-18 (N.M. 1995) (holding that a shareholder’s status as a guarantor of a

corporation’s debts did not give him standing to assert individual claims against a

creditor of the corporation where the guarantees were never enforced and all of

the “injuries alleged [were] indirect damages suffered by the parties in their

                                           -9-
capacities as shareholders or employees”);       Wells Fargo AG Credit Corp. v.

Batterman , 424 N.W.2d 870, 874 (Neb. 1988) (“By itself, a shareholder’s status

as a guarantor for the debt of the corporation . . . does not entitle the shareholder

to maintain an action against a third party for injury to the corporation.”);   Pepe v.

Gen. Motors Acceptance Corp. , 604 A.2d 194, 196 (N.J. Super. Ct. App. Div.

1992) (holding that shareholders’ status as personal guarantors of the debts of

several automobile dealerships did not give them standing to assert claims against

a creditor that provided the dealerships with floor plan financing where “[t]he

causes of action pleaded by the [shareholders] all assert[ed] losses sustained by

them as a result of the destruction of their corporations[,] . . . [and] the claims

[were] entirely derivative of causes of action which . . . [belonged] to the

corporations”).

       Nonetheless, this is a difficult area of corporate law, and, as noted by the

Colorado Court of Appeals in      Nicholson , the case law is not entirely uniform.

See Nicholson , 800 P.2d at 1357 (citations omitted). Further, because there are

important factual difference in the various cases involving shareholders who have

executed personal guarantees, it is difficult to articulate a hard and fast standing

rule. Fortunately, however, this is not a task that we need to undertake in this

case, because we conclude that the Forshees failed to properly oppose Manheim’s

motion for summary judgment.

                                             -10-
       As set forth above, under Rule 56, a party moving for summary judgment

“may make its prima facie demonstration simply by pointing out to the [district]

court a lack of evidence for the nonmovant on an essential element of the

nonmovant’s claim.”       Adler , 144 F.3d at 671. In the memorandum that Manheim

submitted in support of its motion for summary judgment, Manheim made such a

prima facie demonstration by pointing out to the district court that the Forshees

had insufficient evidence to support their allegations that they suffered actionable

individual injuries as a result of the alleged misconduct of Manheim.       See Aplt.

App. at 342, 345-50. Consequently, because the Forshees would have had the

burden of persuasion at trial with respect to their counterclaims, the burden then

shifted to the Forshees “to go beyond [their] pleadings and set forth specific facts

[by reference to affidavits, deposition transcripts, or specific exhibits] that would

be admissible in evidence in the event of trial from which a rational trier of fact

could find for [them].”    Adler , 144 F.3d at 671 (quotation omitted).

       In the brief the Forshees filed in opposition to Manheim’s motion for

summary judgment, the Forshees failed to refer to any affidavits, deposition

transcripts, or exhibits to support their claim that they suffered actionable

individual injuries as a result of Manheim’s alleged misconduct.        See Aplt. App.

at 377-80. Indeed, the Forshees did not even bother to mention the fact that they

had personally guaranteed Forshee Auto’s obligations to Manheim.          Id. Further,

                                           -11-
the Forshees made no attempt to specifically describe or delineate the individual

injuries that they allegedly sustained as a result of Manheim’s alleged misconduct.

Id. Instead, the Forshees’ opposition to Manheim’s motion for summary judgment

was based solely on the following conclusory allegations:

      [Manheim] . . . undertook a course of deceit, and abuse, which did
      damage to [Forshee Auto]. However, that reprehensible conduct was
      not narrowly targeted at the corporation only, but was target[ed] at
      [the Forshees] as individuals as well. The malfeasance of [Manheim]
      . . . damaged [the Forshees] . . . as individuals, not merely because
      they were shareholders. The damage complained of by [the
      Forshees] would have occurred to them even if they had not owned
      any stock in the corporation.

              ....

             The counterclaim pleads that [the Forshees] have suffered
      damages as a result of breach of contract by [Manheim], by tortious
      interference with business by [Manheim], and by the bad faith and
      unethical conduct of [Manheim]. (See paragraphs “4” through “8” of
      [the Forshees’] counterclaim.) Those are causes of action which are
      maintainable without reference to [the Forshees’] status as
      stockholders.

Id. at 379.

      The Forshees’ conclusory allegations were woefully insufficient for

purposes of defeating Manheim’s motion for summary judgment. At best, the

Forshees simply regurgitated the conclusory allegations in their counterclaims.

Moreover, even if it were permissible for the Forshees to rely on the unsupported

allegations in their pleadings, we note that the Forshees’ “Answer and

Counterclaim,” id. at 166-72, does not set forth any specific facts showing that

                                        -12-
Manheim’s alleged misconduct “amount[ed] to a breach of duty owed to [the

Forshees] personally.”   Harris , 893 P.2d at 596. Thus, we agree with Judge

Campbell that “[t]he Forshees’ fail[ed] to explain how they supposedly were

damaged other than as shareholders, and they . . . presented no evidence in

support of such a claim.” Aplt. App. at 17.

      Finally, even if we were to overlook the deficiencies in the Forshees’

summary judgment opposition and assume that Manheim owed certain duties

directly to the Forshees based on their guarantees, it is undisputed that the

Forshees’ guarantees were never enforced. Instead, as noted above, Manheim

used the proceeds it obtained from the sale of Forshee Auto’s vehicle inventory to

satisfy Forshee Auto’s obligations under the promissory note and security

agreement. Consequently, the Forshees did not suffer any sort of direct injury

based on their guarantees.   See Marchman , 898 P.2d at 717 (holding that a

shareholder/guarantor did not suffer direct injury for standing purposes where the

guarantees entered into by the shareholder were never enforced).

      C. Bankruptcy Court Orders.

      This court does not have jurisdiction to review any of the bankruptcy court

orders that were entered by Judge Thurman in Forshee Auto’s bankruptcy case.

As set forth above, while this case was removed to federal court, it was never

consolidated with Forshee Auto’s bankruptcy case or otherwise referred to the

                                         -13-
bankruptcy court, and it remained as a separate and distinct proceeding before the

district court.   1

       28 U.S.C. § 158 sets forth the avenues of appeal that are available under

federal law for obtaining review of bankruptcy court orders. Because the Tenth

Circuit has established a Bankruptcy Appellate Panel (BAP), a bankruptcy litigant

may first appeal to either the BAP or the district court in which the bankruptcy

court is located.      Id. at § 158(c)(1). If the order of the bankruptcy court is

affirmed by either the BAP or the district court, the litigant may then appeal the

order to this court.     Id. at § 158(d); see also Fed. R. App. P. 6(b)(1).

       In Forshee Auto’s bankruptcy case, the Forshees filed an appeal in the

district court concerning the orders entered by Judge Thurman, and District Judge

Dale Kimball entered an order affirming Judge Thurman’s orders in May 2004.

See Aplee. Supp. App. at 290-93. Following the entry of Judge Kimball’s order,

the Forshees could have filed an appeal in this court concerning Judge Thurman’s

orders. The Forshees did not file an appeal in this court concerning Judge

Thurman’s orders, however, and the time for doing so has long since expired.

1
      We also note that the Forshees’ notice of appeal does not refer to any
bankruptcy court orders. Instead, the notice of appeal indicates only that the
Forshees are appealing the summary judgment order that was entered in this case
by Judge Campbell. See Aplee. Supp. App. at 30.

                                             -14-
      The judgment of the district court is AFFIRMED. To the extent the

Forshees are seeking to appeal orders that were entered in Forshee Auto’s

bankruptcy case, we DISMISS that portion of this appeal for lack of jurisdiction.

                                                   Entered for the Court

                                                   Michael W. McConnell
                                                   Circuit Judge

                                       -15-