McGillis Investment Company, LLP v. First Interstate Financial Utah LLC
370 P.3d 295
Colo. Ct. App.2015Background
- MIC and FIF partnered on commercial loans; dispute centers on a 2003 $1,850,000 loan to Kersey Commercial to buy 63 acres in Kersey, Colorado (the Kersey Property).
- Multiple participants (Carnahan, the Sysum brothers, Allison, Erbes) engaged in suspect transactions surrounding the Property; Kersey Commercial defaulted and MIC/FIF foreclosed in 2005.
- MIC and FIF bought the Property at foreclosure; in 2006 MIC executed a short Assignment of the Property in favor of FIF (purpose disputed: transfer of ownership vs. enabling FIF to pursue appraiser litigation).
- MIC sued FIF in Utah in 2009 alleging fiduciary breach and related claims; Utah jury returned a verdict for MIC in 2010. Shortly after, FIF recorded the Assignment and settled other litigation for a small amount.
- MIC sued FIF in Colorado (quiet title, breach of fiduciary duty, unjust enrichment, etc.). After this court remanded on claim-preclusion questions, a jury found the Assignment was not intended to transfer ownership, awarded MIC damages and quieted title to MIC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Admissibility of a nonparty witness invoking the Fifth Amendment before a jury and whether an adverse inference may be given | MIC: the Sysum brothers' assertions were probative of a conspiracy with Thurston; the jury may be instructed to draw an adverse inference | FIF: a nonparty's Fifth Amendment invocation cannot support an adverse inference unless the witness is an agent or controlled by the party | Court: Adopted LiButti balancing approach; allowed Jonathan Sysum to invoke in front of jury and gave adverse-inference instruction because circumstances made the inference trustworthy; excluded adverse inference for Matthew Sysum but cured error with instruction to disregard |
| Who decides when MIC knew or should have known of any dispute over the Assignment (claim preclusion accrual) | MIC: accrual (when it knew of the dispute) is a fact question for the jury | FIF: trial court must decide accrual/privity and preclusion as a matter of law | Court: accrual-of-claim timing is a jury question; jury’s findings resolved the claim-preclusion issue against FIF |
| Scope of relitigation after remand (whether other Kersey-loan matters were barred by Utah judgment) | MIC: remand allowed litigation of Assignment validity and related claims (quiet title, fiduciary duty, etc.) | FIF: MIC should be precluded from relitigating aspects already decided or that could have been raised in Utah | Court: MIC I required remand on Assignment/ownership facts; trial evidence on Dry-Up Agreement, subsequent recording and settlement were not barred and could be tried |
| Prejudice vs. probative value of admitting nonparty Fifth-invocation evidence under CRE 403 | MIC: the invocation was narrowly elicited and probative of conspiracy and breaches | FIF: such evidence is unduly prejudicial and speculative | Court: no CRE 403 abuse; limited, innocuous questioning and jury instruction mitigated prejudice |
Key Cases Cited
- Baxter v. Palmigiano, 425 U.S. 308 (U.S. 1976) (Fifth Amendment adverse inferences permitted in civil cases against parties)
- LiButti v. United States, 107 F.3d 110 (2d Cir. 1997) (articulates nonexclusive factors for admitting nonparty Fifth Amendment invocations and adverse inferences)
- FDIC v. Fid. & Deposit Co. of Md., 45 F.3d 969 (5th Cir. 1995) (supports case-by-case balancing test for nonparty Fifth Amendment invocation)
- Brink's, Inc. v. City of New York, 717 F.2d 700 (2d Cir. 1983) (discusses admissibility and balancing under Rule 403 for nonparty privilege invocations)
- RAD Servs., Inc. v. Aetna Cas. & Sur. Co., 808 F.2d 271 (3d Cir. 1986) (analyzes nonparty invocation issues in civil litigation)
- Coquina Invs. v. TD Bank, N.A., 760 F.3d 1300 (11th Cir. 2014) (endorses case-by-case approach and warns against fishing expeditions when eliciting privilege invocations)
- Lentz v. Metro. Prop. & Cas. Ins. Co., 768 N.E.2d 538 (Mass. 2002) (applies LiButti factors to permit adverse inference from nonparty invocation where relationships and interests supported reliability)
- Asplin v. Mueller, 687 P.2d 1329 (Colo. App. 1984) (civil parties may invoke Fifth Amendment and jury may be instructed that adverse inferences are permissible)