Cliffton Equities Incorporated v. Summerlin Asset Management III LLC

Filing 32

ORDER denying 19 Motion to Dismiss Count Two of Cournterclaim. (See document for further details). Signed by Senior Judge Paul G Rosenblatt on 12/17/12.(LAD)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 10 Cliffton Equities, Inc., Plaintiff, 11 12 13 vs. Summerlin Asset Management III, LLC, 14 Defendant. 15 ) ) ) ) ) ) ) ) ) ) ) No. CV-12-08131-PCT-PGR ORDER 16 Pending before the Court is the plaintiff’s Motion to Dismiss Count Two of 17 Counterclaim (Doc. 19). Having considered the parties’ memoranda in light of the 18 relevant record and the oral argument of counsel, the Court finds that the motion 19 should be denied. 20 Background 21 The parties entered into three loan transactions, each with its own loan 22 agreement, master promissory note and security agreement. Pursuant to these 23 transactions, the defendant borrowed money from the plaintiff in order to acquire first 24 lien promissory notes secured by deeds of trust on residential property. The first 25 loan agreement, dated October 30, 2009, was for $1,000,000. The defendant used 26 money from the first loan agreement to purchase nine first lien promissory notes, 1 one of which was for a property owned by a person named Rowley. Rowley 2 subsequently defaulted on his promissory note and the property was repossessed 3 by the defendant and was sold for $181,091.70. The defendant paid the plaintiff 4 $88,530.29 of the Rowley sale proceeds but has refused to release the remaining 5 $92,561.41 of the proceeds based on a claimed offset for other amounts it contends 6 it is entitled to recoup from the plaintiff. 7 The plaintiff’s Second Amended Complaint alleges claims for breach of 8 contract and for declaratory judgment, both of which arise from the defendant’s 9 failure to pay it the remaining proceeds from the Rowley sale. The defendant’s 10 answer to the Second Amended Complaint contains counterclaims for breach of 11 contract, unjust enrichment/restitution, and for an accounting. The defendant’s 12 counterclaims arise from its contention that the plaintiff breached the parties’ 13 agreements and has been unjustly enriched by insisting that surplus note sale 14 proceeds from one note transaction be used to make up losses experienced in other 15 note transactions both within the same loan agreement and in different loan 16 agreements. 17 Discussion 18 The plaintiff, presumably pursuant to Fed.R.Civ.P. 12(b)(6), has moved to 19 dismiss the defendant’s unjust enrichment/restitution counterclaim.1 The gist of the 20 plaintiff’s argument is that the counterclaim is not based on a cognizable legal theory 21 22 23 24 25 26 1 This counterclaim, which the defendant states relates to alleged overpayments it mistakenly made to the plaintiff in transactions other than the Rowley note, alleges in part that “Counterdefendant has been unjustly enriched in an amount to be proven at trial but not less than $92,561.41 representing the surplus proceeds from Promissory Notes used to pay short falls in Promissory Notes whether within the same Loan Agreement or separate Loan Agreements.” -2- 1 because the parties’ relationship is governed by various express contracts. See 2 Brooks v. Valley Nat’l Bank, 548 P.2d 1166, 1171 (Ariz.1976) (“[W]here there is a 3 specific contract which governs the relationship of the parties, the doctrine of unjust 4 enrichment has no application.”); see also, Trustmark Ins. Co. v. Bank One, Arizona, 5 NA, 48 P.3d 485, 492 n.5 (Ariz.App. 2002) (Court noted that the “absence of a legal 6 remedy” element of an unjust enrichment claim is controlled by whether there is a 7 contract which governs the relationship between the parties.) 8 The Court agrees with the defendant that the mere existence of the loan 9 contracts does not automatically invalidate the unjust enrichment counterclaim as 10 an alternative pleading theory.2 See Adelman v. Christy, 90 F.Supp.2d 1034, 1045 11 (D.Ariz.2000) (“The language in Brooks [v. Valley Nat’l Bank] ... is misleadingly 12 overbroad. The mere existence of a contract governing the dispute does not 13 automatically invalidate an unjust enrichment alternative theory of recovery. A 14 theory of unjust enrichment is unavailable only to a plaintiff if that plaintiff has already 15 received the benefit of her contractual bargain.”) (Emphasis in original). The 16 defendant’s position is that it has not received the benefit of its bargain under the 17 contracts since it has mistakenly overpaid the plaintiff under the terms of the 18 contracts. 19 In its reply, the plaintiff argues that the Adelman exception to the general rule 20 2 21 22 23 24 25 26 While the defendant’s counsel conceded at oral argument that the unjust enrichment counterclaim was not expressly pleaded as an alternative to the breach of contract counterclaim, that is not legally significant because “there are no requirements to include the magic words ‘in the alternative’ in making alternative claims.” Arnold & Associates, Inc. v. Misys Healthcare Systems, 275 F.Supp.2d 1013, 1029 (D.Ariz.2003). The defendant has stated that is not seeking a double recovery through its alternative claims; rather, it is seeking recovery of its overpayment to the plaintiff whether it be under its breach of contract counterclaim or its unjust enrichment counterclaim. -3- 1 is not controlling, and the unjust enrichment counterclaim is untenable, because the 2 defendant received the sole benefit of its bargain under the parties’ contracts when 3 it received the loan monies; it further argues that the parties’ dispute over the loan 4 repayments arose after the defendant received those monies. 5 While the plaintiff’s assertion that the parties’ repayment dispute will be 6 answered by the parties’ contracts may subsequently turn out to be correct, the 7 plaintiff has not persuaded the Court that the unjust enrichment counterclaim has 8 been improperly raised as an alternative theory of recovery under Fed.R.Civ.P. 9 8(d)(2). The record before the Court is simply insufficient to allow the Court to 10 determine that the Adelman exception is inapplicable here because none of the 11 parties’ various contracts are currently part of the record. Notwithstanding the 12 plaintiff’s argument to the contrary, the Court concludes that knowledge of the 13 contents of the parties’ contracts is essential because without that information the 14 Court cannot, for example, determine whether the defendant has received all that 15 it bargained for or that the defendant is seeking through its unjust enrichment 16 counterclaim to obtain relief prohibited by the parties’ contracts. See e.g., Isofoton, 17 S.A. v. Giremberk, 2006 WL 1516026, at *4 (D.Ariz. May 30, 2006) (In a case 18 involving breach of contract and unjust enrichment claims stemming from the 19 defendant’s alleged failure to pay for the plaintiff’s products under a commission 20 agreement, the court, in denying the defendant’s motion to dismiss the unjust 21 enrichment claim due to the existence of a contract between the parties, concluded 22 that it could not determine through the motion to dismiss that the unjust enrichment 23 claim was not properly pleaded as an alternative theory of recovery under Rule 8 24 because no findings had been made yet about the existence of a binding agreement 25 and whether the benefit of the bargain had been received); cf. U.S. Bank Nat’l Ass’n 26 -4- 1 v. Casa Grande Regional Medical Center, 2006 WL 1698288, at *6 (D.Ariz. June 16, 2 2006) (In a case involving breach of contract and unjust enrichment claims stemming 3 from the plaintiff’s alleged overpayment to the defendant, the court, citing in part to 4 the Adelman case, ruled on summary judgment that the existence of a contract 5 between the parties did not preclude the unjust enrichment claim since “an unjust 6 enrichment claim may be brought in the alternative, subject to a single recovery, so 7 long as the unjust enrichment claim does not seek to relieve the plaintiff of the 8 effects of an express provision in the contract. ... Here, even if the contracts did not 9 provide for reimbursement, they in no way prohibited reimbursement of such an 10 overpayment. [The plaintiff’s] unjust enrichment claim therefore does not seek to 11 subvert any express provision of the parties’ contract and was properly raised in the 12 alternative.”) (Emphasis in original). Therefore, 13 14 15 IT IS ORDERED that the plaintiff’s Motion to Dismiss Count Two of Counterclaim (Doc. 19) is denied. DATED this 17th day of December, 2012. 16 17 18 19 20 21 22 23 24 25 26 -5-

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