Rumsey Land Company v. Resource Land Holdings
944 F.3d 1259
10th Cir.2019Background
- Rumsey filed Chapter 11 in Colorado (2010); Rumsey Farm was encumbered by a first deed of trust held by Pueblo Bank & Trust (PBT).
- Resource Land Holdings (RLH) initially offered ~$7.5M to buy the land; when that failed, RLH executed a confidential loan-purchase agreement to buy PBT’s debt for $4.93M, PBT refused to close, and RLH sued to enforce the agreement.
- Bankruptcy auction (2011): RLH submitted a stalking-horse bid but did not participate in the final auction; PBT submitted a credit stalking-horse bid, became back-up bidder, and ultimately acquired the property; PBT then conveyed the property to RLH pursuant to a settlement for $4.75M.
- Rumsey did not learn of the RLH–PBT loan-purchase agreement, lawsuit, or settlement until 2015 and sued for fraudulent concealment (state law) and collusive bidding under 11 U.S.C. § 363(n).
- The district court granted summary judgment to RLH and PBT (fraudulent concealment and § 363(n)); on appeal the Tenth Circuit affirmed: (1) RLH had no § 551(2) disclosure duty as it was not a party to a business transaction with Rumsey; (2) Rumsey forfeited arguments against PBT; (3) the § 363(n) claim to avoid the sale was time-barred under Rule 60(c)(1), and the § 363(n) damages claim failed for lack of evidence of an intent to control bidding price.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraudulent concealment — duty to disclose (RLH) | RLH had a duty under Restatement §551(2)(b),(e) to disclose its loan-purchase agreement and correct ambiguous/misleading statements | RLH had no fiduciary/trust relationship or other basis to be a ‘‘party to a business transaction’’ with Rumsey | Affirmed for RLH: no §551(2) duty because RLH was not a party to a business transaction with Rumsey |
| Fraudulent concealment — duty to disclose (PBT) | PBT concealed material facts (loan agreement, settlement) that injured Rumsey | PBT argued dismissal/summary judgment; defendants pointed out plaintiff focused on RLH in district court | Affirmed for PBT on forfeiture grounds: Rumsey failed to present specific arguments below and did not invoke plain-error review on appeal |
| §363(n) — avoidance (vacatur of sale) | The secret agreement and settlement controlled price; sale should be avoided | The avoidance claim is governed by Rule 60(c)(1) one-year limit and is untimely (brought ~4 years later) | Affirmed: avoidance request time-barred under Rule 60(c)(1) |
| §363(n) — damages (money recovery) | Alternatively, damages are appropriate for difference between value and sale price because defendants’ agreement intended to control price | Damages claim not governed by Rule 60(c)(1); but plaintiff must prove defendants intended to control price — plaintiff lacks specific evidence of intent | Affirmed: damages claim fails on summary judgment for lack of specific facts showing intent to control bidding price |
Key Cases Cited
- Rocky Mountain Expl., Inc. v. Davis Graham & Stubbs LLP, 420 P.3d 223 (Colo. 2018) (Colorado elements for fraudulent concealment)
- Mallon Oil Co. v. Bowen/Edwards Assocs., Inc., 965 P.2d 105 (Colo. 1998) (duty to disclose under Restatement §551)
- Level 3 Commc’ns, LLC v. Liebert Corp., 535 F.3d 1146 (10th Cir. 2008) (applying §551 inquiry in commercial disclosure context)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (summary judgment / genuine issue standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden-shifting framework)
- In re N.Y. Trap Rock Corp., 42 F.3d 747 (2d Cir. 1994) (§363(n) requires agreement intended to control sale price)
- Tool Box, Inc. v. Ogden City Corp., 419 F.3d 1084 (10th Cir. 2005) (Rule 60(c)(1) one-year limit is absolute)