Eaglebank v. Yajia Hu Schwartz Revocable Trust Dated 12/12017

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Senior Judge Raymond P. Moore
Civil Action No. 22-cv-01762-RM-SBP
EAGLEBANK,
Plaintiff/Counterclaim Defendant;
v.
YAJIA HU SCHWARTZ, and
MARK ALAN SCHWARTZ,
Defendants/Counterclaimants;
and
TAX LIEN LAW GROUP, LLC,
Counterclaimant;
and
YAJIA HU SCHWARTZ,
Cross-Plaintiff;
v.
JAMES ADAMS,
CHRISTINA ADAMS,
MICHAEL K. HAGEMANN, and
M.K. HAGEMANN, P.C.,
Cross-Defendants;
and
JAMES ADAMS, and
CHRISTINA ADAMS,
Third-Party Plaintiffs;
v.
YAJIA HU SCHWARTZ,
MARK ALAN SCHWARTZ,
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EAGLEBANK, and
TITLE COMPANY OF THE ROCKIES, LLC;
Third-Party Defendants.
______________________________________________________________________________
ORDER
______________________________________________________________________________
This consolidated action is before the Court on the Recommendation of United States
Magistrate Judge Susan Prose (ECF No. 44) to grant Cross-Defendants’ Motion to Dismiss (ECF
No. 29), seeking dismissal of the claims asserted against them by Cross-Plaintiff Schwartz. The
Recommendation advised that specific written objections were due within fourteen days after
being served a copy of the Recommendation. More than fourteen days have elapsed since the
Recommendation was issued, and Cross-Plaintiff has not filed an Objection. “In the absence of a
timely objection, the district court may review a magistrate judge’s report under any standard it
deems appropriate.” Summers v. Utah, 927 F.3d 1165, 1167 (10th Cir. 1991). For the reasons
below, the Court accepts the Recommendation, which is incorporated into this Order by
reference. See 28 U.S.C. § 636(b)(1)(B); Fed. R. Civ. P. 72(b).
This case began as two lawsuits filed in April 2022: the first by Plaintiff EagleBank
against the Schwartz Defendants in state court, and the second by Cross-Plaintiff against Cross-
Defendants in this Court. After the state court case was removed to this Court, the cases were
consolidated. (See ECF No. 28.) By then, the case had become something of a procedural
quagmire due to the various claims, counterclaims, and cross-claims asserted against various
parties. At present, however, the Court is focused solely on Cross-Defendants’ Motion to
Dismiss (ECF No. 29), which primarily targets the Amended Complaint Cross-Plaintiff filed in
state court in April 2022, asserting claims for breach of contract, specific performance, slander of
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title, fraud in the inducement, rescission, declaratory judgment, and interpleader against Cross-
Defendants.1
As outlined in the Recommendation, this lawsuit stems from a failed sale of real property
in Edwards, Colorado, from Cross-Plaintiff (“seller”) to the Adams Cross-Defendants (“buyers”)
and boils down to the question of “whether a seller can force buyers to purchase property—after
a title commitment revealed that the property is encumbered by a judgment in excess of three-
and-a-half million dollars—where the purchase contract gives the buyers the right to terminate
the contract in their ‘sole subjective discretion, based on any title matters.’” (ECF No. 44 at 2.)
After a thorough analysis of the issues presented in the operative complaint with respect to
Cross-Plaintiff and Cross-Defendants, the magistrate judge concluded that “the answer to this
question, as a matter of law, is no,” and recommended that the seller’s claims against the buyers
be dismissed with prejudice. (Id.)
As a threshold matter, the magistrate judge determined that Cross-Plaintiff’s Amended
Complaint was the operative pleading for purposes of ruling on the Motion because the
prerequisites for further amendment were never satisfied. (Id. at 3 n.3.) After providing a
detailed recitation of the relevant factual background, which the Court will not repeat here, the
magistrate judge then dutifully analyzed each of Cross-Plaintiff’s claims.
Applying Colorado law, the magistrate judge first concluded that the breach of contract
claim failed because the Adams Cross-Defendants retained the contractual right to terminate the
purchase of the property when they did, and therefore they had not failed to perform any duty
that was owed to Cross-Plaintiff. (Id. at 14-18.) The magistrate judge then concluded that
Cross-Plaintiff had waived the right to seek specific performance by declining to check to
1 In their Motion, Cross-Defendants argue in the alternative that the claims asserted in the “Omnibus Pleading” fail
in any event. (ECF No. 29 at 5.)
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appropriate box on the underlying contract, which was based on the form agreement approved by
the Colorado Real Estate Commission and required to be used by real estate brokers in Colorado.
(Id. at 6, 18-22.) Nor had Cross-Plaintiff shown she did not have an adequate remedy at law so
as to justify the imposition of the equitable remedy of specific performance. (Id. at 21-22.) The
magistrate judge concluded that Cross-Plaintiff had failed to plausibly allege the existence of any
slanderous or false statements made by the Cross-Defendants in support of her slander of title
claim. (Id. at 22-23.) The magistrate judge also concluded that Cross-Plaintiff’s allegations did
not support the inference of a “knowing misrepresentation” that could support a claim for fraud
in the inducement based on Cross-Plaintiff’s agreeing to extend to original closing date by four
days. (Id. at 25-26.) The magistrate judge further concluded that the agreed upon extension was
supported by consideration, and Cross-Plaintiff had failed to show the absence of a meeting of
the minds, that the amendment was unconscionable, or that she was under economic duress;
therefore, her rescission claim failed as well. (Id. at 27-33.) Since these claims had all failed,
the magistrate judge determined that Cross-Plaintiff was not entitled to declaratory relief or
sanctions. (Id. at 33-35.) Discerning no way Cross-Plaintiff could “plead around the facts before
this court now in a manner that would plausibly allege entitlement to the relief she seeks,” the
magistrate judge recommended the dismissal of all Cross-Plaintiff’s claims with prejudice. (Id.
at 36.) Finally, the magistrate judge recommended that the $120,000 in earnest money be
returned to the Adams Cross-Defendants.
The Court discerns no error on the face of the record and agrees with the magistrate
judge’s analysis of the issues presented in Motion. See Gallegos v. Smith, 401 F. Supp. 3d 1352,
1356-57 (D.N.M. 2019) (applying deferential review of the magistrate judge’s work in the
absence of any objection); see also Fed. R. Civ. P. 72(b) advisory committee’s note to 1983
addition (“When no timely objection is filed, the court need only satisfy itself that there is no
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clear error on the face of the record in order to accept the recommendation.”). Further, “[u]nder
this court’s firm waiver rule, the failure to timely object to a magistrate judge’s finding and
recommendations waives appellate review of both factual and legal questions.” Klein v. Harper,
777 F.3d 1144, 1147 (10th Cir. 2015) (quotation omitted). Therefore, the Court accepts the
Recommendation in its entirety.
Although no Objections were filed in this matter, Plaintiff filed a Response to the
Recommendation (ECF No. 45), essentially seeking to expand the scope of the Recommendation
so that all claims from Cross-Plaintiff’s Amended Complaint asserted against it would also be
dismissed. Cross-Defendants responded by stating that if the Recommendation is adopted, they
have no objection to dismissal of their claims against Plaintiff. However, the Court is not
persuaded that dismissal of any claims that were not addressed by the magistrate judge in the
Recommendation is appropriate at this juncture. With the granting of Cross-Defendants’
Motion, the parties may agree or stipulate to the dismissal of other claims via an appropriate
filing.
Therefore, the Court ACCEPTS and ADOPTS the Recommendation (ECF No. 44).
Cross-Defendants’ Motion to Dismiss (ECF No. 29) is GRANTED, and the claims against these
Defendants are DISMISSED WITH PREJUDICE. The Adams Cross-Defendants are directed to
file an appropriate motion—including the full name and address of the payee(s) and instructions
as to accrued interest—so that the Court can return their earnest money.
DATED this 18th day of September, 2023.
BY THE COURT:
____________________________________
RAYMOND P. MOORE
Senior United States District Judge
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