Harvest Worship Center v. Resound Church

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Regina M. Rodriguez
Civil Action No. 22-cv-002285-RMR-NRN
HARVEST WORSHIP CENTER, a Colorado Nonprofit Corporation,
Plaintiff,
v.
RESOUND CHURCH, an Oregon Non-Profit Corporation,
Defendant,
RESOUND CHURCH, an Oregon Non-Profit Corporation,
Counterclaim Plaintiff,
v.
HARVEST CHURCH a/k/a HARVEST WORSHIP CENTER, STEPHEN LEE VALDEZ,
VICKIE MAESTAS, and DANIEL VALDEZ,
Counterclaim Defendants.
ORDER ADOPTING MAGISTRATE JUDGE RECOMMENDATION [ECF 149]
REGARDING HARVEST CHURCH’S MOTION TO JOIN ADDITIONAL PARTIES [ECF
77] AND HARVEST CHURCH’S MOTION FOR LEAVE TO AMEND ITS COMPLAINT
[ECF 78]
On May 24, 2023, at ECF No. 149, Magistrate Judge N. Reid Neureiter issued a
Recommendation 	on 	Plaintiff/Counterclaim 	Defendant 	Harvest 	Worship 	Center’s
(“Harvest”) Motion to Join Additional Parties Pursuant to Fed. R. Civ. P. 13(h), 19, and
20, and C.R.S. § 38-35-114 (“Motion to Join”), ECF No. 77, and Harvest’s Motion for
Leave 	to 	Amend 	its 	Complaint 	Pursuant 	to 	D.C.COLO.LCivR 	15.1(b) 	(“Motion 	to
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Amend”), ECF No. 78. Magistrate Judge Neureiter recommends that Harvest’s motions
be granted in part and denied in part. Resound Church (“Resound”) filed a partial
objection to the Recommendation, ECF No. 155. Harvest filed an objection to the
Recommendation, 	ECF 	No. 	156. 	The 	Court 	has 	received 	and 	considered 	the
Recommendation, 	the 	Objections, 	the 	record, 	and 	the 	pleadings. 	After 	de 	novo
consideration, 	the 	Court 	OVERRULES 	the 	Objections 	and 	ADOPTS 	the
Recommendation.
I. 	BACKGROUND
The Court has set forth the procedural and factual background of this case in its
earlier Orders and repeats itself only as necessary here. See ECF Nos. 168, 169.
This is a dispute over a church facility located in Federal Heights, Colorado (the
“Subject Property”). Steve Valdez was once the pastor of Harvest, which owned the
Subject Property. Luke Reid (“Reid”), pastor of Resound, and Steve Valdez were close
friends for many years. In 2017, Steve Valdez and Reid decided to work together to
operate a new church, Resound Church Denver, on the Subject Property. In conjunction
with this collaboration, the Harvest board voted to sell the Subject Property to Resound.
Thereafter, Harvest, through Steve Valdez, conveyed the Subject Property to Resound
via special warranty deed in 2018. Harvest ceased to exist as a separate congregation
and all Harvest employees became Resound employees.
Several years later, Steve Valdez and Reid had a falling out over Steve Valdez’s
commission of what has been called a “moral failure.” As a result, Steve Valdez
resigned 	from 	Resound 	Church 	Denver. 	As 	the 	relationship 	between 	the 	parties
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collapsed, 	so 	did 	Resound 	Church 	Denver’s 	congregation. 	As a 	result, 	Resound
decided to sell the Subject Property in 2021. At that point, Harvest (consisting only of
the Valdez family) took action, asserting that it is the rightful owner of the Subject
Property. The parties have been in litigation ever since.
In its First Amended Complaint, ECF No. 6, Harvest asserted the following claims
against Resound:
(1) a declaratory judgment to void Resound’s deed due to insufficient consideration;
(2) a declaratory judgment voiding the property transfer transaction due to violation
of the statue of frauds and due to negligent misrepresentation;
(3) breach of contract for breach of the purchase agreement;
(4) breach of contract for breach of an alleged joint venture between Harvest and
Resound;
(5) breach of contract for breaching the duty of good faith and fair dealing;
(6) fraud/fraudulent conveyance, alleging that Resound made misrepresentations as
part of a scheme to defraud Harvest and divest Harvest of the Subject Property;
(7) unjust enrichment, claiming that Resound received a benefit (presumably the
Subject Property) under circumstances that would make it unjust for Resound to
retain the benefit without paying; and
(8) for quiet title, asking that the Court declare the special warranty deed void and
vesting title in Harvest.
Resound brings counterclaims, ECF No. 61, against Harvest and its leadership
(Danny Valdez, Steve Valdez, and Vickie Maestas) for:
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(1) slander of Resound’s title to the Subject Property;
(2) intentional interference with contract relating to Resound’s proposed sale of the
Subject Property that fell apart due to this lawsuit;
(3) breach of the warranties of title against Harvest;
(4) aiding and abetting breach of warranties of title against the Valdezes and Ms.
Maestas;
(5) quiet title; and
(6) declaratory judgment that Resound is the true, rightful, and sole owner of the
Subject Property.
Harvest also asserted counterclaims, ECF No. 71, against Resound and its board
members, Luke Reid, David Crocker, David Schaal, and Anthony Nash (their inclusion
was subject to the Court’s ruling on its Motion for Joinder) for:
(1) breach of contract;
(2) tortious interference of business relations;
(3) defamation (libel and slander).
Harvest filed the subject motions, ECF Nos. 77, 78, for joinder to add as defendants
Reid and Resound’s individual board members – David Crocker (“Crocker”), David
Schaal (“Schaal”) (a non-diverse party), and Anthony Nash (“Nash”); and, as “interested
parties,” the lender, CDF Capital a/k/a Church Development Fund (“CDF”), and the
Adams County Colorado Treasurer and Public Trustee, Alex Villagran (“Public Trustee”)
(a non-diverse party). Harvest seeks leave to amend and file its proposed Second
Amended Complaint with its new and revised claims and additional parties.
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Resound partially opposes the subject motions, ECF No. 88. Resound argues that
Harvest has failed to allege sufficient facts or a plausible legal basis for the personal
liability 	of 	Resound’s 	individual 	board 	members, 	that 	the 	proposed 	fraudulent
misrepresentation claims fail as a matter of law, that Harvest’s constructive trust and
fraud theories are not available in this dispute, and that joinder of CDF and the Public
Trustee should not be permitted.
On May 24, 2023, Magistrate Judge Neureiter issued his Recommendation, ECF
No. 149, recommending that the subject motions be granted in part and denied in part.
II. 	PROCEDURAL POSTURE
This contentious suit has involved a great deal of motions practice on various issues.
After careful consideration—and conducting an evidentiary hearing—Magistrate Judge
Neureiter 	issued 	three 	Recommendations 	(including 	this 	one) 	concerning 	seven
pending motions. The Court adopted the first Recommendation, ECF No. 65, and
denied Harvest’s motion for remand and its request for a receiver. ECF No. 168. In
denying Harvest’s motion for remand, the Court ruled that it has diversity jurisdiction. Id.
The Court also adopted the second Recommendation, ECF No. 141, and ruled that
under black-letter property law in Colorado the special warranty deed is controlling and
conclusively resolves the title question. ECF No. 169. Therefore, the Court ruled that, as
a matter of law, title to the Subject Property rests exclusively with Resound. Id. 	The
Court also considered and rejected Harvest’s constructive trust theory. Id.
Now, the Court considers Magistrate Judge Neureiter’s third Recommendation, ECF
No. 149. As a result of the recent Orders, the landscape of the case has changed and
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narrowed since Harvest filed the subject motions. Crucial to this Order are the Court’s
recent rulings that (1) it has diversity jurisdiction over this matter (because some of the
parties Harvest seeks to add would destroy diversity), and (2) title to the Subject
Property rests exclusively with Resound (because several of Harvest’s claims in its
proposed 	Second 	Amended 	Complaint 	are 	based 	on 	Harvest’s 	claim 	to 	title).
Accordingly, this Order reflects the current state of the case.
III. 	LEGAL STANDARD
A. Standard of Review
The Court is required to make a de novo determination of those portions of a
magistrate judge’s recommendation to which a specific, timely objection has been
made, and it may accept, reject, or modify any or all of the magistrate judge’s findings or
recommendations. 28 U.S.C. § 626(b)(1) (“A judge of the court shall make a de novo
determination 	of 	those 	portions 	of 	the 	report 	or 	specified 	proposed 	findings 	or
recommendations to which objection is made.”); Fed. R. Civ. P. 72(b)(3) (“The district
judge must determine de novo any part of the magistrate judge’s disposition that has
been properly objected to.”); see United States v. One Parcel of Real Property, 73 F.3d
1057, 1060 (10th Cir. 1996) (“[A] party’s objections to the magistrate judge’s report and
recommendation must be both timely and specific to preserve an issue for de novo
review by the district court or for appellate review.”).
B. Motion to Amend
Under Federal Rule of Civil Procedure 15(a), after a party has amended its pleading
once as a matter of course, “a party may amend its pleading only with the opposing
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party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2). It is within the
discretion of the Court to grant or deny leave to amend, Foman v. Davis, 371 U.S. 178,
182 (1962), and “[t]he court should freely give leave when justice so requires,” Fed. R.
Civ. P. 15(a)(2). “Refusing leave to amend is generally only justified upon a showing of
undue delay, bad faith or dilatory motive, failure to cure deficiencies by amendments
previously allowed, or undue prejudice to the opposing party, or futility of amendment,
etc.” Castleglen, Inc. v. Resol. Tr. Corp., 984 F.2d 1571, 1585 (10th Cir. 1993) (citing
Foman, 371 U.S. at 182). “The non-moving party bears the burden of showing that the
proposed amendment is . . . futile.” Openwater Safety IV, LLC v. Great Lakes Ins. SE,
435 F. Supp. 3d 1142, 1151 (D. Colo. 2020) (Wang, Mag. J.).
“A proposed amendment is futile if the complaint, as amended, would be subject to
dismissal.” United States ex rel. Barrick v. Parker-Migliorini Int’l, LLC, 878 F.3d 1224,
1230 (10th Cir. 2017) (quoting Barnes v. Harris, 783 F.3d 1185, 1197 (10th Cir. 2015)).
“Accordingly, . . . [the Court] consider[s] the sufficiency of the . . . claims that [the
plaintiff] s[eeks] to add in [the] Second Amended Complaint.” Jefferson Cnty. Sch. Dist.
No. R-1 v. Moody’s Inv.’s Servs., Inc., 175 F.3d 848, 859 (10th Cir. 1999). “To survive a
motion to dismiss, a complaint must contain sufficient factual matter, accepted as true,
to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “[A] court
must accept as true all of the allegations contained in a complaint.” Id. However, legal
conclusions need not be accepted as true, and “[t]hreadbare recitals of the elements of
a cause of action, supported by mere conclusory statements, do not suffice.” Id.
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C. Joinder
Harvest purports to join the parties pursuant to both Rule 19 and Rule 20. Rule 19
governs required joinder. When applying Rule 19, a district court must first determine
whether the absent party is necessary to the lawsuit and, if so, whether joinder of the
absent party is feasible. See Fed. R. Civ. P. 19(a). An absent party is necessary to a
suit if, (1) in the person’s absence complete relief cannot be accorded among those
already parties, or (2) the person claims an interest relating to the subject of the action
and is so situated that the disposition of the action in the person’s absence may (i) as a
practical matter impair or impede the person’s ability to protect that interest or (ii) leave
any of the persons already parties subject to a substantial risk of incurring double,
multiple, or otherwise inconsistent obligations by reason of the claimed interest. Id. Rule
20 governs permissive joinder. Joinder is proper under Rule 20(a)(2) if: “(A) any right to
relief is asserted against them jointly, severally, or in the alternative with respect to or
arising 	out 	of 	the 	same 	transaction, 	occurrence, 	or 	series 	of 	transactions 	or
occurrences; and (B) any question of law or fact common to all defendants will arise in
the action.”
Under 28 U.S.C. § 1447(e), “If after removal the plaintiff seeks to join additional
defendants whose joinder would destroy subject matter jurisdiction, the court may deny
joinder, or permit joinder and remand the action to the State court.” A court considers
four factors when determining whether joinder and remand is proper under § 1447(e):
“(1) whether the amendment is intended to destroy federal jurisdiction, (2) whether the
plaintiff was dilatory in filing the motion, (3) whether the plaintiff would be significantly
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injured if the motion to amend were denied, and (4) any other equitable factors.”
Pacheco v. Const. Nursing & Rehab. Ctr. LLC, No. 21-cv-00875-DDD-KMT, 2021 WL
5548303, at *2 (D. Colo. July 6, 2021) (citing Telecom Decision Makers, Inc. v. Access
Integrated Networks, Inc., 654 F. App'x 218, 221 (6th Cir. 2016)).
A fraudulent joinder of non-diverse defendants will not defeat removal on diversity
grounds. Alexander v. Elect. Data Sys. Corp., 13 F.3d 940, 949 (6th Cir. 1994). “To
prove fraudulent joinder, the removing party must present sufficient evidence that a
plaintiff could not have established a cause of action against non-diverse defendants
under state law.” Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999).
However, if the Court finds that “there is a colorable basis for predicting that a plaintiff
may recover against non-diverse defendants” the Court must remand the action to state
court. Id.
IV. 	ANALYSIS
A. 	Harvest’s Objections to Reliance on Determination of Title to the Subject
Property
Harvest 	argues 	that 	Magistrate 	Judge 	Neureiter 	erred 	by 	relying 	on 	the
determination that title to the Subject Property rests with Resound as the basis for
concluding that Harvest’s proposed first, second, sixth, eighth, and ninth (in part) claims
are subject to dismissal and that amendment with respect to these claims is therefore
futile. See ECF No. 156 at 2. In its objection, Harvest attempts to incorporate its
previous objection to Magistrate Judge Neureiter’s title determination. Id. However, as
explained above and in its Order, ECF No. 169, the Court has overruled Harvest’s
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previous objection and determined that title to the Subject Property rests exclusively
with Resound as a matter of law.
Therefore, upon de novo review, the Court agrees with Magistrate Judge Neureiter
that Harvest’s proposed claims related to its assertion of title over the Subject Property
are “plainly subject to dismissal under Rule 12 and are therefore futile.” ECF No. 149 at
8. Thus, the Court exercises its discretion to deny leave to amend and add Harvest’s
first, second, sixth, eighth, and ninth (in part) claims for relief. Additionally, the Court
agrees with Magistrate Judge Neureiter that the Motion to Join with respect to CDF and
the Public Trustee should be denied, because Harvest only sought to join those parties
with respect to the eighth claim for relief – quiet title, and that claim is subject to
dismissal and therefore futile. Harvest’s objections to the denial of the above-referenced
claims and joinder of the above-referenced parties are overruled.
B. Harvest’s Objection to Denying as Futile the Tenth (Constructive Fraud)
and Eleventh (Constructive Trust) Claims
Harvest 	objects 	to 	Magistrate 	Judge 	Neureiter’s 	determination 	that 	Harvest’s
constructive fraud and constructive trust claims are subject to dismissal and therefore
amendment is futile. Harvest argues that its complaint alone is legally sufficient to state
a claim for which relief may be granted. ECF No. 156 at 4.
Harvest’s tenth claim for relief is for constructive fraud against Resound, Reid,
Crocker, Schaal, and Nash. “To establish a claim for constructive fraud, a plaintiff must
show (1) the existence of a duty due to a relationship between the parties; (2) violation
of the duty by making deceptive material representations of past or existing facts or
remaining silent when a duty to speak exists; (3) reliance thereon by the complaining
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party; (4) injury to the complaining party proximately caused thereby; and (5) the gaining
of an advantage by the party to be charged at the expense of the complaining party.
Barnett v. Elite Properties of Am., Inc., 252 P.3d 14, 24 (Colo. App. 2010). Harvest’s
eleventh claim for relief is for constructive trust against Resound, Reid, Crocker, Schaal,
and Nash. “[A] constructive trust can arise when two parties have a ‘confidential
relationship’ that caused one party to act less vigilantly than he or she would have done
had he or she been dealing with a stranger.” Sandstead-Corona v. Sandstead, P.3d
310, 318 (Colo. 2018). To plead and prove the existence of a confidential relationship,
“the 	evidence 	must 	give 	rise 	to 	a 	reasonable 	inference 	both 	that
[Reid/Crocker/Schaal/Nash] 	occupied 	a 	superior 	position 	over 	[Steve 	Valdez] 	that
[Reid/Crocker/Schaal/Nash] used to [Steve Valdez’s] disadvantage and that [Steve
Valdez] was justified in believing that [Reid/Crocker/Schaal/Nash] would act in [Steve
Valdez’s] interest.” Mancuso v. United Bank of Pueblo, 818 P.2d 732, 738 (Colo. 1991).
Upon de novo review, the Court agrees with Magistrate Judge Neureiter that Harvest
has not plausibly alleged a close confidential relationship between Steve Valdez and
Reid that would rise to the level necessary to find constructive fraud or impose a
constructive trust. The Court also agrees with Magistrate Judge Neureiter that any
further inquiry into the alleged confidential relationship would require the Court to
evaluate the ecclesiastical relationship between two pastors and would impermissibly
“tread dangerously close to the line which prohibits delving into and assessing the
ecclesiastical and spiritual relationships within a church.” Id. Additionally, the proposed
Second 	Amended 	Complaint 	is 	completely 	devoid 	of 	allegations 	supporting 	the
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existence of a confidential relationship (or any personal relationship, for that matter) with
Resound’s 	board 	members—Crocker, 	Schaal, 	and 	Nash. 	Nor 	does 	the 	Second
Amended Complaint identify any specific actions the board members took as part of the
alleged constructive fraud 	or 	in 	support of 	a 	constructive 	trust. 	Indeed, 	the only
allegation of a confidential relationship is the conclusory allegation as to Luke Reid. See
ECF No. 78-1 ¶ 211 (“Here, Steve Valdez and Luke Reid had a special confidential
relationship.”). Therefore, Harvest’s proposed tenth claim for relief (constructive fraud)
and eleventh claim for relief (constructive trust) are subject to dismissal and amendment
is futile. Harvest’s objections to the denial of the above-referenced claims are overruled.
C. Harvest’s Objections to Denial of Fourth, Fifth, and Seventh Claims Against
Nash, Schaal, and Crocker and Denial of Joinder of Nash, Schaal, and
Crocker
Harvest objects to Magistrate Judge Neureiter’s conclusion that Harvest’s claims for
individual liability against proposed parties Nash, Schaal, and Crocker as to the fourth,
fifth, and seventh claims are subject to dismissal under Rule 12(b)(6). Harvest contends
that Nash, Schaal, and Crocker are liable because they signed the letter terminating the
pastor-emeritus payment program and sent emails to the congregation about Steve
Valdez’s personal troubles. Harvest also objects to “the court neglecting to address
Harvest’s counterclaims against individual Defendant board members for breach of
contract, defamation, and tortious interference of business relationships, pursuant to
Fed. R. Civ. P. 13(b) and (h).” ECF No. 156 at 9. Harvest argues that its fourth, fifth, and
seventh claims and three counterclaims require the joinder of individually named board
members. In Harvest’s motion for joinder, ECF No. 77, it noted the joinder was to be
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considered with respect to the Motion to Amend and the counterclaims filed at ECF No.
71.
As an initial matter, Schaal is a non-diverse party that Harvest seeks to add after
removal. 	Permitting 	joinder 	of 	Schaal 	would 	destroy 	this 	Court’s 	subject 	matter
jurisdiction. Therefore, under 28 U.S.C. 1447(e), the Court must consider “(1) whether
the amendment is intended to destroy federal jurisdiction, (2) whether the plaintiff was
dilatory in filing the motion, (3) whether the plaintiff would be significantly injured if the
motion to amend were denied, and (4) any other equitable factors.” Pacheco, No. 21-cv-
00875-DDD-KMT, 2021 WL 5548303, at *2 (D. Colo. July 6, 2021) (citing Telecom
Decision Makers, Inc. v. Access Integrated Networks, Inc., 654 F. App'x 218, 221 (6th
Cir. 2016).
The Court finds there are no grounds for Harvest’s claims against Schaal. Indeed,
the only allegation attributable to Schaal is the factual allegation that he became lead
pastor of the Denver campus after Steve Valdez resigned and was a Resound board
member. The proposed Second Amended Complaint and counterclaims are devoid of
any specific allegations of actions Schall took that would subject him to personal liability.
As discussed in more detail below, Harvest has not been able to muster more than the
mere labels, conclusions, and naked assertions of Schaal’s liability. This is not enough
to state a claim for relief. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“A pleading
that offers labels and conclusions or a formulaic recitation of the elements of a cause of
action will not do. Nor does a complaint suffice if it tenders naked assertions devoid of
further factual enhancement.”) Denial of joinder would not harm Harvest, because it has
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no grounds to bring its claims against Schall in the first place. Thus, the Court denies
the joinder of Schaal.
Harvest’s fourth claim is for breach of oral contract to create a joint venture between
Harvest and Resound. See ECF No. 78-1 ¶ 115 (“The Joint Venture was an agreement
between 	two 	entities 	to 	collaborate 	for 	a 	common 	purpose.”) 	(emphasis 	added).
Harvest’s fifth claim is for breach of the contractual obligation of good faith and fair
dealing with respect to the alleged joint venture agreement. Id. ¶ 128 (“[T]he stronger
party was Resound . . . .”) (emphasis added). The Magistrate Judge found that,
because neither Nash, Schaal, nor Crocker are alleged to be parties to the alleged
contracts, the fourth and fifth claims are subject to dismissal. See Worman v. Farmers
Co-op. Ass’n, 4 F. Supp. 2d 1052, 1054 (D. Wyo. 1998) (“It is axiomatic that an
individual not a party to a contract may not be held liable for a breach of that contract.”).
The Court agrees that Harvest has failed to state a claim for breach of contract or
breach of good faith and fair dealing against Resound’s board members where there
are no allegations that the board members were party to the contracts.
Magistrate 	Judge 	Neureiter 	also 	rejected 	Harvest’s 	seventh 	claim 	for 	unjust
enrichment as to proposed parties Nash, Schaal, and Crocker. Under Colorado law, a
plaintiff seeking recovery for unjust enrichment must prove: (1) at plaintiff’s expense (2)
defendant received a benefit (3) under circumstances that would make it unjust for a
defendant to retain the benefit without paying. See DCB Constr. Co. v. Central City Dev.
Co., 965 P.2d 115, 119-20 (Colo. 1998). But Harvest alleges only that Resound unfairly
obtained a benefit at Harvest’s expense (title to the Subject Property). The Court agrees
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with Magistrate Judge Neureiter that the only alleged benefit to Resound’s individual
board members—reimbursement of expenses—is too attenuated to maintain an unjust
enrichment claim. This alleged benefit flows from the alleged benefit that Resound
received, and any recovery that Harvest would obtain in restitution would come from
Resound.
Harvest 	next 	argues 	that 	Magistrate 	Judge 	Neureiter 	failed 	to 	consider 	the
counterclaims asserted against the individual board members. Although Harvest is
correct that Magistrate Judge Neureiter failed to address the proposed joinder with
respect to the three counterclaims, the Court finds that this error does not change the
outcome because the counterclaims for individual liability against Nash, Schaal, and
Crocker are also subject to dismissal under Rule 12(b)(6).
Harvest’s first counterclaim asserts breach of contract against Resound, Reid,
Crocker, Nash, and Schaal and alleges that the parties breached Resound’s bylaws by
failing to pay lifetime emeritus payments as provided for in the bylaws. See ECF No. 71
at 17. But, to the extent Resound’s bylaws are a contract, they are a contract between
Resound and its shareholders, not between Resound’s individual board members and
Steve and Danny Valdez. See P.F.P. Fam. Holdings, L.P. v. Stan Lee Media, Inc., 252
P.3d 1, 3 (Colo. App. 2010) (“A corporation's bylaws constitute a contract between the
corporate entity and its shareholders.”). Thus, the Court denies Harvest’s request to join
Reid, Crocker, Nash, and Schaal as parties with respect to the first counterclaim.
Harvest’s second counterclaim is for tortious interference of business relations
against Resound, Reid, Crocker, Nash, and Schaal. Harvest alleges that the Resound
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board members entered into an oral joint venture contract with Harvest and the Valdez
family. ECF No. 71 ¶¶ 67 (“Harvest Parties and Resound Parties agreed to an oral
contract to collaborate efforts and participate in a Joint Venture . . . .”). Harvest then
alleges that the Resound board members intentionally interfered with the joint venture
contractual relationship. Id. ¶ 79 (“Resound parties cause tortious interference with the
Joint Venture contractual relationship . . . .”). But under Colorado law, a defendant
cannot be liable for interference with its own contract. See MDM Grp. Assocs., Inc. v.
CX Reinsurance Co., 165 P.3d 882, 886 (Colo. App. 2007) (citation omitted) (“It is
impossible for one party to a contract to maintain against the other party to the contract
a claim for tortious interference with the parties’ own contract.”). Thus, Harvest’s
allegation that the Resound board members interfered with their own contract fails to
state a claim for relief and is subject to dismissal under Rule 12(b)(6).
Harvest’s third counterclaim is for defamation against Resound, Reid, Crocker,
Nash, and Schaal. In Colorado, the required elements of a defamation claim are: “(1) a
defamatory statement concerning another; (2) published to a third party; (3) with fault
amounting to at least negligence on the part of the publisher; and (4) either actionability
of the statement irrespective of special damages or the existence of special damages to
the plaintiff caused by publication.” Williams v. Dist. Ct., Second Judicial Dist., City &
Cnty. of Denver, 866 P.2d 908, 911 n.4 (Colo. 1993). Although Harvest brings this
counterclaim against Resound and each individual board member, the only allegations
related 	to 	defamatory 	statements 	are 	those 	made 	in 	Crocker’s 	emails 	to 	the
congregation. Without any allegations of Nash, Reid, or Schall making defamatory
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statements, Harvest cannot satisfy the first element. Thus, the claim is subject to
dismissal as to Nash, Reid, and Schall.
The alleged defamation stems from Crocker’s “slanderous emails” sent to “a
congregation of 1700 persons.” ECF No. 78-1 ¶ 32. 	Harvest alleges the email
“expos[ed] very embarrassing information about Pastor Steve Valdez that had already
been addressed internally within the church.” Id. ¶ 131. In its counterclaim, Harvest
references the emails sent by Crocker and contends that the emails hurt Steve Valdez’s
reputation. 	The 	emails 	were 	attached 	to 	Harvest’s 	proposed 	Second 	Amended
Complaint. Id.; ECF No. 1-9. The emails describe Steve Valdez’s resignation due to his
sharing with Resound that “for a period of Covid he was secretly struggling with
addiction, this lack of accountability led to unhealthy and unstable behaviors.” Id. at 1.
The email expresses that “the Board was shocked to find these breaches of trust and
accountability 	which 	ultimately 	led 	to 	moral 	failures.” 	Id. 	Crocker 	expressed 	that
Resound wanted to protect Steve Valdez’s “privacy and confidentiality” but also wanted
to be transparent with the congregation. See id. (“While transparency must take place
gossip has no place in God’s house. For the integrity and future of the Church we
consider this a completed chapter for Denver.”). The emails reiterated Resound’s
values. Id. (“Resound Church always holds to its values of love and grace . . . a value
we hold onto dearly is that Jesus can restore people to safe, healthy and stable lives if
they choose to trust Him and make themselves accountable.”); (“The Church and Board
openly offered to walk with Steve, believing for his restoration not only for his ministry
but also affording time and resources for his family to recover.”). Crocker’s second
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allegedly 	defamatory 	email 	also 	reiterates 	the 	communication 	is 	directed 	at 	the
congregation as an ecclesiastical body. Id. at 6. (“We are the Church, not a building, not
a pastor, not a service, but you and I. We are the eccelsia, the ones called out by
God.”). In expressing his message regarding Steve Valdez’s resignation, Crocker noted
that he “pray[s] for wisdom and the leading of the Holy Spirit. I do ask God daily for help
in leading.”
Resound argued that the emails cannot be a basis for liability for defamation
because they are internal ecclesiastical communications sent to the congregation and
related to church governance, leadership, membership, and pastoral discipline. The
Court agrees. The Tenth Circuit has held that, pursuant to the First Amendment’s Free
Exercise and Establishment Clauses, “churches have autonomy in making decisions
regarding their own internal affairs. This church autonomy doctrine prohibits civil court
review 	of 	internal 	church 	disputes 	involving 	matters 	of 	faith, 	doctrine, 	church
governance, and polity.” Bryce v. Episcopal Church in the Diocese of Colorado, 289
F.3d 648, 655 (10th Cir. 2002) (citing Kedroff v. St. Nicholas Cathedral, 344 U.S. 94,
116–17 (1952)). “Before the church autonomy doctrine is implicated, a threshold inquiry
is whether the alleged misconduct is rooted in religious belief.” Id. at 657 (citation
omitted).
In 	Bryce, 	the 	Tenth 	Circuit 	clarified 	the 	type 	of 	situation 	where 	the 	First
Amendment prevents a civil court’s involvement. There, the plaintiffs were a youth
minister and her same-sex spouse, who sought to impose liability against church
leaders for statements made at church meetings and in letters to church members
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regarding 	their 	same-sex 	relationship. 	Id. 	at 	652-53. 	The 	purpose 	of 	the 	church
meetings was: “to address [plaintiff’s] employment situation within the church; to provide
religious education; to engage in sacred conversation; and to ensure healthy parish
communication.” Id. The Tenth Circuit held that plaintiff’s claims were barred by the
church autonomy doctrine because the statements “clearly addressed religious topics”
and were made “in the context of an internal church dialogue.” Id. Thus, while plaintiffs
“found these statements objectionable” they were “not purely secular disputes with third
parties, but were part of an internal ecclesiastical dispute and dialogue protected by the
First Amendment.” Id.
Similarly, in Seefried v. Hummel, the Colorado Court of Appeals held that the
First Amendment’s Free Exercise Clause and Establishment Clause precluded the court
from hearing defamation claims brought by church's former senior pastor and its former
associate pastor against church, its board of directors, and church members, relating to
statements made by board members and church members at meeting convened to
discuss whether senior pastor’s employment should be terminated. 148 P.3d 184, 189
(Colo. App. 2005). This was true even if the offending statements were secular in nature
or if the associate pastor had resigned from his position before the meeting because the
allegedly defamatory statements related directly to the church process that resulted in
termination of senior pastor’s employment. Id. The Colorado Court of Appeals found
that almost every court that has addressed the issue has found that allegations of
defamation are impossible to consider in isolation, separate and apart from a church’s
decision to terminate the plaintiff’s employment. Id. (collecting cases).
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Here, like in Bryce and Seefried, it is undisputed that the statements at issue
were made in the context of an internal church dialogue and were directly related to
church process regarding Steve Valdez’s removal as a pastor of Resound. The First
Amendment prohibits this Court from delving into internal church disciplinary procedures
or 	the 	right 	of 	the 	church 	to engage 	freely 	in 	ecclesiastical discussions 	with 	its
members. Accordingly, the defamation claim is subject to dismissal and the Court
denies joinder of Crocker with respect to this claim. Because all claims against Nash,
Crocker, and Schaal are subject to dismissal and therefore futile, the Court exercises its
discretion to deny amendment to add such claims and joinder of such parties.
D. Resound 	Objection 	to 	Recommendation 	on 	Ninth 	Claim 	(Fraudulent
Inducement Against Reid)
Resound objects only to Magistrate Judge Neureiter’s determination that Harvest
has stated a claim of fraudulent inducement against Reid and Resound based on the
allegations that Reid and Resound made false promises to pay Pastors Danny and
Steve Valdez lifetime emeritus payment of $50,000 per years, only to stop making
payments after the lawsuit was commenced. Resound argues that Harvest has failed to
plead 	fraud 	with 	particularity 	and 	the 	claim 	cannot 	be 	premised 	on 	a 	Church’s
disciplinary decision of pastors.
Upon de novo review, the Court finds that Magistrate Judge Neureiter properly
considered the elements and pleading standards for the claim of fraudulent inducement
as to the limited allegations surrounding the promise of emeritus payments. See ECF
No. 149 at 13. Whether Resound and Luke Reid misrepresented the fact that the
payments would be lifetime payments to induce the parties to work together and later to
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induce Steve Valdez’s resignation, only to never make the payments to Steve Valdez
and 	stop 	payments 	to 	Danny 	Valdez, 	does 	not 	require 	the 	Court 	to 	delve 	into
ecclesiastical issues. The Court agrees that, at this stage, Harvest’s allegations are
sufficient to state a claim grounded in fraud. See ECF No. 149 at 13. Resound’s
objection is overruled.
For these reasons, the Court OVERRULES Harvest’s and Resound’s objections and
ADOPTS the Recommendation.
Accordingly, the Court ORDERS:
1. 	Resound’s 	Partial 	Objection 	to 	the 	Recommendation, 	ECF 	No. 	155, 	is
OVERRULED;
2. 	Harvest’s Objection to the Recommendation, ECF No. 156, is OVERRULED;
3. 	The Recommendation, ECF No. 149, is ACCEPTED and ADOPTED;
4. 	Harvest’s Motion to Join Additional Parties Pursuant to Fed. R. Civ. P. 13(h),
19, and 20, ECF No. 77, is GRANTED IN PART as to joinder of Luke Reid
and DENIED IN PART as to joinder of David Crocker, David Schaal, and
Anthony 	Nash 	as 	individual 	defendants 	and 	counterclaim 	individual
defendants; and CDF Capital and Colorado Public Trustee – Alex Villagran,
as interested party defendants;
5. 	Harvest’s 	Motion 	for 	Leave 	to 	Amend 	its 	Complaint 	Pursuant 	to
D.C.COLO.LRiv 15.1(b), ECF No. 78, is GRANTED IN PART and DENIED IN
PART, such that the only claims from Harvest’s proposed Second Amended
Complaint that proceed are:
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• 	Third Claim for Relief: Breach of Contract – Purchase Sale Agreement
Against Resound and Luke Reid
• 	Fourth Claim for Relief: Breach of Oral Contract – Joint Venture
Against Resound and Luke Reid
• 	Fifth Claim for Relief: Breach of Good Faith and Fair Dealing Against
Resound and Luke Reid
• 	Seventh Claim for Relief: Unjust Enrichment Against Resound and
Luke Reid
• 	Ninth Claim for Relief: Fraud in the Inducement Against Resound and
Luke Reid
DATED: September 29, 2023.
BY THE COURT:
_____________________________
REGINA M. RODRIGUEZ
United States District Judge
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