TPM Holdings, Inc. v. Intra Gold

• Court: Court of Appeals for the First Circuit
• Decided: July 30, 1996
• Docket: 95-1786
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                            UNITED STATES COURT OF APPEALS

                                FOR THE FIRST CIRCUIT
                                FOR THE FIRST CIRCUIT

                                 ____________________



        No. 95-1786



                                 TPM HOLDINGS, INC.,



                                 Plaintiff, Appellee,



                                          v.



                             INTRA-GOLD INDUSTRIES, INC.

                                 and JASPER C. ROWE,



                               Defendants, Appellants.



                                 ____________________



                     APPEAL FROM THE UNITED STATES DISTRICT COURT



                          FOR THE DISTRICT OF NEW HAMPSHIRE



                    [Hon. Paul J. Barbadoro, U.S. District Judge]
                                             ___________________



                                 ____________________



                                        Before



                                Selya, Cyr and Boudin,



                                   Circuit Judges.
                                   ______________



                                 ____________________



            Jasper  C. Rowe with  whom Law Offices  of Jasper  C. Rowe  was on
            _______________            _______________________________

        briefs for appellants.

            Daniel  P.  Schwarz  with  whom   Christopher  Cole  and  Sheehan,
            ___________________               _________________       ________

        Phinney, Bass & Green, P.C. were on briefs for appellee.
        _______  __________________


____________________



                                    July 30, 1996

                                 ____________________



Per Curiam.  Intra-Gold Industries, Inc. ("Intra-Gold"),
                 __________



            a  Texas corporation, appeals from the New Hampshire district



            court's grant  of summary judgment in favor  of TPM Holdings,



            Inc.  ("TPM"), in  TPM's action  to  remove a  notice of  lis
                                                                      ___



            pendens from the title of  property it owns in New Hampshire.
            _______



            The  lis  pendens  relates to  a  Texas  federal-court action
                 ____________



            brought  by Intra-Gold  against TPM  and  another party,  New



            England Aggregate  Trust, Inc. ("Aggregate Trust"),  in which



            Intra-Gold sought enforcement  of an  alleged agreement  with



            Aggregate Trust  to  transfer to  Intra-Gold certain  mineral



            rights in the New Hampshire property.



                 The background facts are complex but largely undisputed,



            and we  limit our  description to  the transactions  directly



            pertinent  to  this appeal.    In  June  1992, TPM  bought  a



            promissory  note  and  mortgage interest  in  3,500  acres of



            property  located in both Freedom and Madison, New Hampshire.



            One of  the mortgagors  was Freedom  Properties Realty  Trust



            ("Freedom Properties"), a  New Hampshire general  partnership



            with Aggregate Trust  as its general partner.   By late 1992,



            the  mortgagors  were  in  default,  and  TPM  had  initiated



            foreclosure proceedings.



                 Intra-Gold claims that in  January 1993, Aggregate Trust



            agreed on behalf of Freedom Properties to assign the latter's



            mineral rights in  the New Hampshire property  to Intra-Gold.



            According to Intra-Gold this was part of a  plan to avoid the


-2-
                                         -2-



foreclosure;  in return  for the  mineral rights,  Intra-Gold



            would  try to arrange  financing that would  permit Aggregate



            Trust  to retire its  debt to TPM and  would pay royalties to



            Aggregate Trust for the minerals removed. 



                 But   in  February  1993,  the  mortgagors  of  the  New



            Hampshire property--including  Freedom Properties--agreed  to



            deed the property to TPM in lieu  of foreclosure proceedings.



            The agreement reserved in the mortgagors the right to exploit



            the minerals for one year and gave them an option to purchase



            the  property within one  year for approximately  $4 million.



            Intra-Gold  took  the  position that  by  entering  into this



            settlement, Aggregate  Trust had  breached  its January  1993



            agreement with Intra-Gold.



                 In July 1994, Intra-Gold filed suit in Texas state court



            against  Aggregate   Trust  and  TPM,  seeking   damages  and



            rescission  of the deed  transferring the  property to  TPM. 



            The defendants removed the case to the federal district court



            for the  Eastern District of  Texas.  The day  after bringing



            the   suit,  Intra-Gold  placed--without  notice  to  TPM  or



            application to any court--a notice of lis pendens on the deed
                                                  ___________



            for the New  Hampshire property.  It  was the filing  of this



            lis pendens in  the Registry of Deeds in  Carroll County, New
            ___________



            Hampshire that prompted the litigation at issue here. 



                 On November  1,  1994,  TPM filed  a  complaint  in  the



            federal district court  in New Hampshire, based  on diversity


-3-
                                         -3-



jurisdiction,  seeking a declaration  that the notice  of lis
                                                                      ___



            pendens was not valid under  the New Hampshire statute.  N.H.
            _______



            Rev.  Stat. Ann.     511-A:8  permits  filing a  lis  pendens
                                                             ____________



            without  prior application  to  the court  or  notice to  the



            adverse party, in  "equity cases for specific  performance of



            an  agreement to  transfer land  or a  unique chattel."   TPM



            pointed  out that  Intra-Gold's Texas  complaint sought  only



            money damages and rescission of the deed from Aggregate Trust



            (and  the  other  mortgagors)  granting   the  New  Hampshire



            property to TPM.  



                 While  pre-trial   motions  were  pending   in  the  New



            Hampshire action, the Texas district court on April 7,  1995,



            dismissed with prejudice all  of Intra-Gold's claims  against



            TPM for failure  to state a claim.  Fed. R. Civ. P. 12(b)(6).



            On motion by TPM, the court followed with an order on May 17,



            1995, cancelling the  notice of lis pendens filed  in the New
                                            ___________



            Hampshire Registry of  Deeds.  Intra-Gold proceeded  with its



            claims against Aggregate  Trust, but after  a bench trial  in



            the  summer of  1995, the  court  found in  Aggregate Trust's



            favor on all claims.



                 One might think that resolution of the underlying claims



            against TPM in  Texas would moot the New  Hampshire action by



            removing  the basis  for  the  lis  pendens,  but  Intra-Gold
                                           ____________



            appealed the Texas  decision to the  Fifth Circuit, and  some



            cases  suggest that a  lis pendens remains  in effect pending
                                   ___________


-4-
                                         -4-



appeal.   See 54  C.J.S. Lis  Pendens    26 (1987).   In  all
                      ___            ____________



            events, neither party asserts mootness, and there are obvious



            practical reasons why--with the Fifth Circuit appeal pending-



            -it is  important for TPM  to maintain in force  the district



            court's declaration that the lis pendens is invalid.  We thus
                                         ___________



            resume the chronology.



                 In the  New Hampshire district court,  Intra-Gold argued



            by  motion that  the court  should refuse to  entertain TPM's



            claim  because  similar  issues were  then  before  the Texas



            district  court.    Intra-Gold  contended  this   result  was



            required both by 28 U.S.C.   1450--a claim now abandoned--and



            for  reasons  of "fairness  and  judicial economy."    In the



            alternative, Intra-Gold argued that  Texas law should  govern



            the validity of  the lis pendens.  The  district court denied
                                 ___________



            this motion in June 1995.



                 During the June 1995 hearing, the New Hampshire district



            court also proposed sua  sponte to grant summary judgment  on
                                ___  ______



            the merits in favor of  TPM, because the lis pendens  was not
                                                     ___________



            authorized   by  the   New  Hampshire  statute   because  the



            underlying Texas action  was not an equity  case for specific



            performance of  an agreement  to  transfer land  or a  unique



            chattel.  In opposition, Intra-Gold conceded this defect, but



            argued that  it had filed  an amended complaint in  the Texas



            suit  on  December  7,  1994--over  a  month  after  TPM  had



            initiated the  New Hampshire declaratory  action--which asked


-5-
                                         -5-



for "an injunction preventing transfer of the property to TPM



            or  any third  party and  granting title  to the  property to



            [Intra-Gold]." 



                 Unpersuaded, the district court granted summary judgment



            in  TPM's favor, explaining simply that  the lis pendens "was
                                                         ___________



            not filed  in compliance  with N.H.  Rev. Stat. Ann.  511-A."



            Intra-Gold  now appeals, renewing its earlier claim that, for



            prudential reasons of fairness and economy, the New Hampshire



            district court should have  declined to hear TPM's  action to



            remove  the lis pendens.   Alternatively, Intra-Gold contends
                        ___________



            that the amended complaint in the Texas suit falls within the



            "specific performance"  exception of  the  New Hampshire  lis
                                                                      ___



            pendens statute.  We discuss the claims in order. 
            _______



                 Obvious concerns  arise when actions involving  the same



            parties and similar  subject matter are pending  in different



            federal  district  courts:    wasted   resources  because  of



            piecemeal   litigation,   the  possibility   of   conflicting



            judgments, and a general  concern that the courts  may unduly



            interfere  with  each  other's  affairs.    To  resolve  such



            tensions,  courts   rely  primarily   on  common  sense   and



            historical  practice.    See,   e.g.,  Colorado  River  Water
                                     ___    ____   ______________________



            Conservation  Dist. v.  United  States,  424  U.S.  800,  817
            ___________________     ______________



            (1976); 28 U.S.C.   1404.



                 Where  the overlap  between  the  two  suits  is  nearly



            complete, the usual practice is  for the court that first had


-6-
                                         -6-



jurisdiction to  resolve the  issues and the  other court  to



            defer.  West Gulf  Maritime Ass'n v. ILA  Deep Sea Local  24,
                    _________________________    _______________________



            751  F.2d 721, 729  (5th Cir. 1985).   But  where the overlap



            between two suits is less than complete, the judgment is made



            case  by case, see  Colorado River Water  Conservation Dist.,
                           ___  ________________________________________



            424  U.S. at  817,  based on  such factors  as the  extent of



            overlap,   the  likelihood   of  conflict,   the  comparative



            advantage  and the  interest of  each forum in  resolving the



            dispute.



                 Here, the  heart of  the Texas  action was  Intra-Gold's



            breach  of  contract  claim  against  Aggregate  Trust.    If



            determining the validity of the lis pendens required the  New
                                            ___________



            Hampshire district court to assess  the merits of this claim,



            there might be a good  case for deferring to the Texas  suit.



            But the New Hampshire court  was asked only to decide whether



            Intra-Gold's  Texas  suit  constituted  an "equity  case  for



            specific performance  of an agreement  to transfer land  or a



            unique chattel" under  N.H. Rev. Stat. Ann.    511-A:8.  This



            required  an assessment  of the  nature  of the  claims being
                                             ______



            made, not their merit, and could not realistically be said to



            interfere with the Texas court's authority or conduct of  its



            case.



                 Only  slightly more troublesome is the argument that the



            validity of the lis pendens  was being litigated in the Texas
                            ___________



            suit.  Formally this was true, since a  few days after filing


-7-
                                         -7-



the  New Hampshire  suit, TPM  also brought  a motion  in the



            Texas district court seeking cancellation of the lis pendens.
                                                             ___________



            And indeed,  after  the Texas  court  dismissed  Intra-Gold's



            claims against TPM,  that court did issue an  order to cancel



            the lis  pendens.  But  beneath this surface  resemblance the
                ____________



            two courts were addressing very different issues.



                 Neither  party has shown  that the Texas  district court



            ever  had before  it a  claim that  the lis  pendens did  not
                                                    ____________



            comply with the  New Hampshire statute.   Instead it  appears



            that  TPM simply requested that, if the Texas court dismissed



            Intra-Gold's claims,  it also  cancel the  lis pendens  since
                                                       ___________



            there  would no  longer be  any litigation  pending.   If so,



            there was little risk of  conflict posed by the New Hampshire



            court's  resolution of the  independent issue of  whether the



            lis pendens complied with New Hampshire state law.
            ___________



                 We turn now to the  merits of the New Hampshire district



            court's decision on summary judgment that the lis pendens was
                                                          ___________



            invalid.   The  district court  said that  the notice  of lis
                                                                      ___



            pendens  was not filed  in compliance with  the New Hampshire
            _______



            statute, a  point that  Intra-Gold has effectively  conceded.



            But, as  already noted,  Intra-Gold argues  that its  amended



            complaint did seek such specific  performance.  While this is



            itself an issue open to dispute, for us the anterior question



            is  whether an amended complaint--even within N.H. Rev. Stat.


-8-
                                         -8-



511-A--can  revive  and salvage  an  earlier,  invalid lis
                                                                      ___



            pendens.
            _______



                 It does  not appear the New Hampshire  state courts have



            ever decided  this issue,  but cases  from elsewhere  suggest



            that  the answer  is no.   E.g., 5303  Realty Corp. v.  O & Y
                                       ____  __________________     _____



            Equity Corp.,  476 N.E.2d 276  (N.Y. 1984).  This  result may
            ____________



            appear severe or formalistic.  But it may also be viewed as a



            counterweight  to the  obvious  dangers  inherent  in  a  lis
                                                                      ___



            pendens scheme that allows a party to wield this considerable
            _______



            power without  prior application  to any court,  and with  no



            judicial assessment of the merits of the underlying suit.



                 The purpose  of a  lis  pendens is  to notify  potential
                                    ____________



            purchasers that there  is pending litigation that  may affect



            title  to real  property  and that  the  purchaser will  take



            subject  to the judgment.  This cloud on title can impair the



            marketability  of  the  property.   Under  the  New Hampshire



            statute, as in  many states, this can be  done without resort



            to a  court, under  specified circumstances.   The  resulting



            danger of abuse  has led courts to require  strict compliance



            with lis pendens statutes.  E.g., S. Utsunomiya Enters., Inc.
                 ___________            ____  ___________________________



            v. Moomuku Country Club, 866 P.2d 951, 963 (Haw. 1994); E & E
               ____________________                                 _____



            Hauling,  Inc. v.  County of  DuPage, 396  N.E.2d 1260,  1266
            ______________     _________________



            (Ill. App. Ct. 1979).



                 Consistent with this strict-compliance  approach, we see



            no reason why an invalid lis pendens should  be made valid by
                                     ___________


-9-
                                         -9-



a later  amendment  to  a  complaint.    Where  the  original
              _____



            complaint does not support the lis pendens, it is easy enough
                                           ___________



            for the  plaintiff who files  an amended complaint to  file a



            new lis pendens  based upon that new complaint.   Allowing an
                ___________



            amended  complaint alone  to breathe  life  into an  earlier,



            previously invalid lis pendens  could easily cause  confusion
                               ___________



            and unfair prejudice.  Since the plaintiff is responsible for



            the original  error and  is free  to file  a new  lis pendens
                                                              ___________



            along with the  amended complaint, this outcome  appears well



            warranted.



                 Of course, lacking precedent from a New Hampshire court,



            we can  only make  our best assessment  as to  how the  state



            court would resolve the issue.   And there are other contexts



            in which a later act can revive an earlier, otherwise defunct



            claim.  See, e.g., Fed. R. Civ. P. 15(c).  But in the present
                    ___  ____



            context, we think  that the practical considerations  already



            mentioned,  and the  general  instance  that  a  lis  pendens
                                                             ____________



            applicant turn square corners, carries the day for TPM. 



                 Affirmed.
                 _________


-10-
                                         -10-