                                                            F I L E D
                                                      United States Court of Appeals
                                                              Tenth Circuit
                  UNITED STATES COURT OF APPEALS
                                                             NOV 23 2001
                         FOR THE TENTH CIRCUIT
                                                         PATRICK FISHER
                                                                  Clerk

TOM REYNOLDS; DEBBIE
REYNOLDS, individually and doing
business as Energy Plus Corp.,                 No. 01-1094
                                           (D.C. No. 00-K-2460)
            Plaintiffs-Appellants,               (D. Colo.)

v.

QUARTER CIRCLE M RANCH,
INC.; MUELLER RANCH
HOMEOWNERS ASSOCIATION,
INC., a Colorado Nonprofit
Corporation; RANDY WITTE,
Director, President of Mueller Ranch
Homeowners Association, Inc.;
POLLY MUNSON, Director, Member
of the Architecture Control
Committee of Mueller Ranch
Homeowners Association, Inc.; PAT
JAHNER, Director and Secretary of
Mueller Ranch Homeowners
Association, Inc.; MARSHA WITTE,
Treasurer of Mueller Ranch
Homeowners Association, Inc.;
PHRED JAHNER, Member of the
Architecture Control Committee of
Mueller Ranch Homeowners
Association, Inc.; ELLEN
CORDIONIERE, Member of the
Architecture Control Committee of
Mueller Ranch Homeowners
Association, Inc.; WILLIAM A.
MUNSON, Member of the
Architecture Control Committee of
Mueller Ranch Homeowners
Associations, Inc.; JOHN A.
McKNIGHT, Member of the
Architecture Control Committee of
Mueller Ranch Homeowners
Association, Inc.,

               Defendants-Appellees.



                            ORDER AND JUDGMENT           *




Before HENRY, ANDERSON,           and BRISCOE, Circuit Judges.




       After examining the briefs and appellate record, this panel has determined

unanimously that oral argument would not materially assist the determination of

this appeal.   See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is

therefore ordered submitted without oral argument.

       Plaintiffs Tom and Debbie Reynolds, an interracial married couple, and

Energy Plus Inc., their privately-held business entity (the Reynolds), are owners

of a parcel of land in the Mueller Ranch, a covenant-controlled residential

subdivision in rural El Paso County, Colorado. They instituted this action against

defendants, who are all associated with the Mueller Ranch Homeowners


*
      This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.

                                          -2-
Association, Inc. (the Homeowners Association), alleging racial discrimination in

violation of the Fair Housing Act of 1968, 42 U.S.C. §§ 3601-3631; the Civil

Rights Act of 1866, 42 U.S.C. §§ 1981, 1982; the Colorado Fair Housing Act,

Colo. Rev. Stat. § 24-34-501 to 509.   1
                                           The district court granted the defendants’

motion to dismiss, holding that it lacked jurisdiction to proceed because the

judgment entered in a prior state lawsuit, filed by the Homeowners Association,

barred the present action. We reverse the decision of the district court.


                                  BACKGROUND          2



       The Reynolds entered into an agreement to purchase site #6 in the Mueller

Ranch on July 14, 1998. Mueller Ranch covenants require that plans and

specifications must be submitted to and approved in writing by the Architecture

Control Committee (ACC) of the Homeowners Association before construction

begins. By December 1999, however, the Reynolds had made improvements to

their lot without ACC approval. From December 1999 through February 2000,




1
      Plaintiffs also asserted state claims of negligence and breach of contract.
From their filings in this court, it appears that they are appealing only the
dismissal of a their discrimination-based claims.
2
       The factual record in this case is undeveloped. At the time of the district
court’s dismissal ruling, the case file contained plaintiffs’ complaint and a trial
brief (submitted by all defendants except Pat and Phred Jahner), to which portions
of the state-court record was attached as an exhibit.

                                            -3-
the Reynolds submitted plans to the ACC and the ACC rejected them as

inadequate and incomplete.

       On March 27, 2000, the Homeowners Association filed a complaint in state

court, requesting a mandatory injunction requiring the removal of material or

structures installed on the Reynolds’ property and enjoining any further

construction prior to the ACC’s written approval of plans. The Homeowners

Association also sought an award of costs, including attorneys’ fees, pursuant to

the Mueller Ranch covenants. After entry of a clerk’s default, the Reynolds filed

a belated answer, generally denying the allegations in the complaint.   3



       On May 19, 2000, the state court found that the Reynolds had been properly

served with process, that they demonstrated no just cause to set aside the clerk’s

default, that they had been given repeated warnings concerning the requirements

of the covenants, and that they had violated these requirements. It therefore

entered default judgment in favor of the Homeowners Association. Additionally,

the court determined that the Homeowners Association was entitled to a

permanent injunction enjoining the Reynolds from further construction on their



3
      The Reynolds’ untimely answer is not included in the record on appeal and,
evidently, was not before the district court. In the state court’s order denying
defendants’ motion for relief under Colo. R. Civ. P. 60(b), however, the court
described the “purported Answer [as] merely a general denial of the allegations in
the Complaint [which] sets out no claim of any meritorious defense.” Appellants’
App. at 65.

                                            -4-
property and requiring restoration of the property to its pre-construction

condition. The court, however, essentially stayed the effective date of its order by

setting deadlines for the Reynolds’ submission of plans, for the Homeowners

Association’s action on the plans, and for the Reynolds’ resort to the court for

injunctive relief if their plans were rejected. The court also awarded costs and

attorneys’ fees to the Homeowners Association.

      On August 23, a new attorney entered an appearance for the Reynolds,

requested a status conference, and asked for injunctive relief. In this filing, the

attorney raised the first suggestion of discrimination. She maintained that her

clients had been “left in an untenable and unequitable position because of the

events of this case and the ongoing disdainful and discriminatory actions of

Plaintiff against Defendants concerning the improvement of their property.”

Appellants’ App. at 60. The court denied the Reynolds’ motions, stating that

“[t]his matter has been concluded, and judgment has been entered against

Defendants.” Id. at 62.   In subsequent orders, the court denied the Reynolds’

motion for relief from judgment under Colo. R. Civ. P. 60(b) and entered an order

finding the Reynolds in contempt of court for failing to restore the property.

      Outside of court, the dispute between the Reynolds and the Homeowners

Association continued. The Reynolds allege that, during the post-judgment

period, they were intimidated and their property was vandalized. On


                                          -5-
November 21, 2000, the Reynolds sent a final set of plans to the ACC and, ten

days later, the ACC again determined that the plans were incomplete and

inadequate.

      Shortly afterwards, the Reynolds filed this discrimination action in federal

district court, seeking damages and asking for injunctive relief. At a hearing held

January 17, 2001, counsel for the Homeowners Association argued that the

state-court lawsuit had stripped the district court of jurisdiction over the

Reynolds’ complaint because the discrimination claims could have been advanced

as counterclaims.   4
                        Counsel asserted that the allegations in the substitute

attorney’s entry of appearance made it “abundantly clear” that the discrimination

theory “had ripened while the state court matter was proceeding.”        Id. at 85. 5


4
       Originally, the hearing was set on the Reynolds’ motion for a temporary
restraining order, but the district court first heard argument on the Homeowners
Association’s jurisdictional challenge. The Reynolds’ motion (which is not
included in the appendices filed by the appellants and appellees) apparently
requested a stay of a state foreclosure action. Because the district court
determined it had no jurisdiction over any matter raised in the Reynolds’
complaint, it did not reach the merits of the motion. The court, however, made an
appropriate reference to 28 U.S.C. § 2283, which provides that a federal court
may not stay proceedings in a state court “except as expressly authorized by Act
of Congress, or where necessary in aid of its jurisdiction, or to protect or
effectuate its judgments.”
5
        The parties agree that state and federal courts share concurrent jurisdiction
over the Reynolds’ federal discrimination claims.     See 42 U.S.C. § 3613(a)(1)(A)
(allowing an aggrieved person to bring a Fair Housing Act claim in either federal
district court or state court); Gonzales v. Hernandez , 175 F.3d 1202, 1206 (10th
Cir. 1999) (discussing concurrent jurisdiction over § 1981 and § 1983 claims).

                                             -6-
         The district court accepted the Homeowners Association’s argument. The

court determined that, through operation of the doctrine of res judicata, it lacked

jurisdiction over the Reynolds’ claims. It therefore dismissed the case with

prejudice and later denied the Reynolds’ motion for relief under Fed. R. Civ. P.

60(b).

                                          DISCUSSION

         We review de novo the district court’s determination that the doctrine of

res judicata barred plaintiffs’ claims.      See Fox v. Maulding , 112 F.3d 453, 457

(10th Cir. 1997). “Federal courts must give to state court judgments ‘the same

full faith and credit . . . as they have by law or usage in the courts of such State,

Territory or Possession from which they are taken.’”       Id. at 456 (quoting

28 U.S.C. § 1738). Therefore, we look to the law of Colorado to determine the

preclusive effect to be given the judgment entered in the state foreclosure action.

Id.

         Under Colorado law, “subsequent actions” are barred “when [an] initial

proceeding produces a final judgment, and when identity of subject matter,

identity of claims for relief, and identity of parties exist as to both claims.”

Eason v. Bd. of County Comm’rs        , 961 P.2d 537, 539 (Colo. Ct. App. 1997).

Res judicata “not only bars issues actually decided, but also any issues that should

have been raised in the first proceeding, but were not.”      Id. Nevertheless,


                                              -7-
“[u]nless compulsory counterclaim rules apply, . . . purely defensive use of a legal

theory does not preclude a later action for affirmative recovery on the same

theory.” Id. Colorado’s compulsory counterclaim rule, Colo. R. Civ. P. 13(a),

like its federal counterpart, “requires an answer to a complaint to include any

counterclaims that the pleader has against the opposing party   at the time of filing ,

if such counterclaims arise out of the same transaction or occurrence as the

opposing party's claim.”   Id. (emphasis added).    See also Arch Mineral Corp. v.

Lujan , 911 F.2d 408, 412 (10th Cir. 1990) (stating that, under Fed. R. Civ. P.

13(a), “[w]here a defendant acquires a claim after his answer has been filed it is

not a compulsory counterclaim even if it arises out of the same transaction”).

      The Homeowners Association may be correct in asserting that the

Reynolds’ discrimination claims arose out of same transaction or occurrence as

the matters raised in the prior state-court action. Res judicata bars the pursuit of

these claims, however, only if they could have been maintained at the time when

the Reynolds filed their answer in state court. Even under the Homeowners

Association’s view of the case, the issues of discrimination described by the

plaintiffs did not arise until after the entry of judgment, when the state court

considered the case “concluded.” Appellant’s App. at 62.

      The record before the district court did not establish a res judicata bar of

the Reynolds’ discrimination claims. Although we make no comment on the


                                           -8-
ultimate merit of these claims, we conclude that the district court erred in

dismissing the action for lack of jurisdiction. We REVERSE the district court’s

order of dismissal and remand for further proceedings consistent with this order

and judgment.



                                                     Entered for the Court



                                                     Stephen H. Anderson
                                                     Circuit Judge




                                         -9-
