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)
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-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?