Submitted: February 11, 2016
from United States District Court for the District of North
Dakota - Fargo
SMITH and COLLOTON, Circuit Judges, and GRITZNER,  District
COLLOTON, Circuit Judge.
and Lorie Finstad brought this action alleging Beresford
Bancorporation and its president, Frank Farrar,
(collectively, "Beresford") breached the terms of
an option contract by selling their former farm to James and
Wendy Gord. The Finstads also claim that the Gords tortiously
interfered with their contract with Beresford. The district
court,  exercising jurisdiction under 28 U.S.C.
§ 1332, granted summary judgment in favor of Beresford
and the Gords based on the preclusive effect of a prior
state-court judgment. See Finstad v. Gord
(Finstad I), 844 N.W.2d 913 (N.D. 2014). We affirm.
Finstads owned and operated a farm in Ransom County, North
Dakota. Beresford held a secured interest in the farmland as
the result of several loans it made to the Finstads between
2002 and 2004. In 2005, Beresford instituted foreclosure
proceedings against the Finstads. In response, the Finstads
filed for protection under Chapter 12 of the Bankruptcy Code.
The foreclosure action was automatically stayed.
October 2005, the Finstads and Beresford entered into a
settlement agreement to remove the farmland from the
bankruptcy proceedings. As part of the agreement, the
Finstads executed and delivered to Beresford a quitclaim
deed, conveying the Finstads' "rights, title and
interest in and to the real estate." The settlement
permitted the Finstads to remain on the land as tenants and
gave the Finstads an option to purchase the property back
from Beresford. The option price was the balance of the loans
owed to Beresford, plus 8% annual interest and less any lease
payments made under the settlement agreement. The
Finstads' option was annually renewable through March 15,
executing the settlement agreement, the Finstads made
payments totaling $438, 955.57 to Beresford between December
2005 and April 2008. The majority of that sum was the result
of a single, unscheduled payment on October 10, 2006, in the
amount of $345, 000. That payment was financed by a $375, 000
loan from the Gords, in exchange for which the Finstads
issued the Gords a second mortgage on the farmland.
sent the Finstads notices of default in March 2007, March
2008, and June 2008. In July 2008, the bank notified the
Finstads of its intent to sell the land. Beresford sold its
interest in the farmland to the Gords in December 2008 for
$64, 438.78, the amount that Beresford asserts was remaining
on the Finstads' debt. In early 2012, the Gords commenced
eviction proceedings, and the Finstads subsequently moved off
January 2012, the Finstads sued the Gords, Beresford, and
another bank holding company in North Dakota state court. In
that action, the Finstads alleged that the Finstad-Beresford
deed was intended to create an equitable mortgage, not to
convey title to the land to Beresford. In support, the
Finstads produced a letter from Beresford's president and
a title opinion for the local grazing association, describing
the Finstad-Beresford deed as a "financing vehicle"
that was not intended to effect a change in ownership.
Beresford's president also submitted an affidavit
stating, "Beresford intended to hold only a mortgage
interest in the Finstads' lands and the only interest
transferred to the Gords by Beresford was itself a mortgage
interest." The Finstads sought to quiet title in the
land and asked for a declaration of their ownership of the
land, subject to its equitable mortgage to Beresford and
actual mortgage to the Gords.
North Dakota district court dispensed with the Finstads'
claims in two separate orders. In October 2012, the court
dismissed the claims against Beresford with prejudice,
because the bank "has expressly and fully relinquished
all claims of a right, title or interest in the subject
property." One year later, the court granted summary
judgment in favor of the Gords. In this order, the court
first found that the Finstad-Beresford deed is "clear
and unambiguous on its face, " and that parol evidence
was therefore inadmissible to show that the Finstads retained
an interest in the property as equitable mortgagors. The
court then concluded that the Finstads lacked statutory
standing to challenge the Beresford-Gord deed because they
did not have an interest in the property and were not persons
interested under a deed or writings relating to the property.
App. 158 (citing N.D. Cent. Code §§ 32-17-01,
32-23-02). Accordingly, the court dismissed the Finstads'
complaint "with prejudice and on the merits." The
Finstads appealed only the order granting summary judgment
for the Gords, and the North Dakota Supreme Court affirmed.
Finstad I, 844 N.W.2d at 918-19.
losing their appeal, the Finstads filed this action in
federal court against Beresford and the Gords. They alleged
breach of contract and conversion against Beresford,
intentional interference with a contract against the Gords,
and the "tort of another damages" against all
defendants. The claim for tort of another damages, which
authorizes attorney's fees in certain tort actions, is
dependent on the Finstads prevailing on the other tort claims
alleged in the complaint. Hector v. Metro Ctrs.,
Inc., 498 N.W.2d 113, 122-23 (N.D. 1993); see
Restatement (Second) of Torts § 914(2) (Am. Law Inst.
and the Gords each moved for summary judgment, arguing that
the preclusive effect of Finstad I barred the
federal action. The district court granted both motions. The
court first ruled that the doctrine of claim preclusion
barred the claims against Beresford because they could have
been brought in Finstad I. The court then reasoned
that the claims against the Gords failed under the doctrine
of issue preclusion ...