Trost v. Embernate et al
Filing
33
ORDER Granting In Part And Denying In Part Defendants Typically Tropical Properties, LLC's And Rainbow Real Estate Group, LLC's Motion to Dismiss re 8 . Signed by JUDGE J. MICHAEL SEABRIGHT on 12/6/11. (gls, )CERTIF ICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
JENNIFER CORY TROST, a resident )
of the State of California,
)
)
Plaintiff,
)
)
vs.
)
)
LEILANI P. EMBERNATE, a resident )
of the State of Hawaii, formerly doing )
business as TYPICALLY TROPICAL )
PROPERTIES, LLC and PACIFIC
)
STAR MORTGAGE, INC.;
)
TYPICALLY TROPICAL
)
PROPERTIES, LLC, a Hawaii limited )
liability company now known as
)
RAINBOW REAL ESTATE GROUP, )
LLC; and PACIFIC STAR
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MORTGAGE, INC., a dissolved
)
Hawaii corporation.
)
)
Defendants.
)
_______________________________ )
CIVIL NO. 11-00458 JMS-KSC
ORDER GRANTING IN PART AND
DENYING IN PART DEFENDANTS
TYPICALLY TROPICAL
PROPERTIES, LLC’S AND
RAINBOW REAL ESTATE GROUP,
LLC’S MOTION TO DISMISS
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS
TYPICALLY TROPICAL PROPERTIES, LLC’S AND RAINBOW REAL
ESTATE GROUP, LLC’S MOTION TO DISMISS
I. INTRODUCTION
Defendants Typically Tropical Properties, LLC, and Rainbow Real
Estate Group (collectively “Typically Tropical”)1 move to dismiss Plaintiff
1
The Complaint’s caption identifies Typically Tropical Properties LLC (“Typically
(continued...)
Jennifer Cory Trost’s Complaint filed on July 25, 2011. Co-Defendant Leilani P.
Embernate (“Embernate”), proceeding pro se, has filed an Answer and
Counterclaim, but has not filed any position as to Typically Tropical’s Motion.2
The Motion primarily argues that the Complaint is barred by applicable statutes of
limitations. The court heard the Motion on December 5, 2011, and orally ruled
that (1) Counts One (fraud), Two (breach of fiduciary duty), and Three (breach of
contract) are not time-barred, but that (2) Count Four (negligent and intentional
infliction of emotional distress) is barred by a two-year statute of limitations. This
Order provides an explanation of the oral rulings and addresses certain matters that
were not discussed at the hearing.
II. BACKGROUND
The court need not repeat the allegations of the Complaint, which the
court assumes as true for purposes of this Motion. See, e.g., Savage v. Glendale
Union High Sch., 343 F.3d 1036, 1039 n.1 (9th Cir. 2003). Essentially, the
Complaint alleges a continuing “scheme to defraud” Plaintiff that began in October
1
(...continued)
Tropical”) as “a Hawaii limited liability company now known as Rainbow Real Estate Group.”
The Complaint similarly alleges that Typically Tropical is “known as Rainbow Real Estate
Group, LLC, doing business as Typically Tropical.” Doc. No. 1, Compl. ¶ 5. The court will
refer to movant as “Typically Tropical” whether it is one entity or two.
2
Although Embernate has not joined in or opposed the Motion, the parties agreed at the
hearing that this Order should also apply to claims against her.
2
2002 and ran to November 2006. It alleges a series of eleven real-estate related
investment transactions whereby Plaintiff’s real estate agent/mortgage
broker/investment counselor also borrowed and loaned money from Plaintiff,
commingled funds, and committed various acts of fraud or self-dealing without
disclosure and without providing accountings. It alleges fraud, breach of fiduciary
duty, breach of contract, infliction of emotional distress, and other counts seeking
equitable remedies. It alleges that the activities were concealed from Plaintiff until
November 2006. Doc. No. 1, Compl. ¶ 10.
The Complaint was filed on July 25, 2011. Because many of the
transactions occurred before July 25, 2005 (six years prior to the filing of the
Complaint), Typically Tropical moves to dismiss, primarily on statute of
limitations grounds.3
///
3
Typically Tropical also briefly contends that the Complaint does not allege fraud with
particularity and that federal subject matter jurisdiction is lacking under 28 U.S.C. § 1332
because $75,000 is not in controversy. Those arguments lack merit and, at the hearing, the
parties agreed that the focus of the Motion was directed to whether certain Counts are timebarred. In any event, the amount in controversy exceeds $75,000. See, e.g., Doc. No. 1, Compl.
at 6 (alleging tax liabilities of $105,000), and at 7 (alleging $80,000 investment with failure to
record an interest). See St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89
(1938) (stating that when a complaint pleads more than the jurisdictional amount “the sum
claimed by the plaintiff controls if the claim is apparently made in good faith” and that “[i]t must
appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify
dismissal”).
3
III. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss
a claim for “failure to state a claim upon which relief can be granted[.]”
“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, ___, 129 S. Ct. 1937, 1949 (2009)
(quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also
Weber v. Dep’t of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008). This
tenet -- that the court must accept as true all of the allegations contained in the
complaint -- “is inapplicable to legal conclusions.” Id. Accordingly, “[t]hreadbare
recitals of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555). Rather, “[a]
claim has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. at 1949 (citing Twombly, 550 U.S. at 556). Factual
allegations that only permit the court to infer “the mere possibility of misconduct”
do not show that the pleader is entitled to relief as required by Rule 8. Id.
A claim may be dismissed under Rule 12 as “barred by the applicable
statute of limitations only when ‘the running of the statute is apparent on the face
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of the complaint.’” Von Saher v. Norton Simon Museum of Art at Pasadena, 592
F.3d 954, 969 (9th Cir. 2010) (quoting Huynh v. Chase Manhattan Bank, 465 F.3d
992, 997 (9th Cir. 2006)). Such motion should be granted “only if the assertions of
the complaint, read with the required liberality, would not permit the plaintiff to
prove that the statute was tolled.” Morales v. City of Los Angeles, 214 F.3d 1151,
1153 (9th Cir. 2000) (citation omitted).
IV. DISCUSSION
A.
Count One -- “Fraud, Misrepresentation, Concealment and Deceit”
Count One alleges that the continuing scheme and various transactions
constituted fraud. A six-year statute of limitations under Hawaii Revised Statutes
(“HRS”) § 657-1(4)4 applies to claims of fraud or fraudulent misrepresentation.
See Eastman v. McGowan, 86 Haw. 21, 27, 946 P.2d 1317, 1322 (1997); Au v. Au,
63 Haw. 210, 217, 626 P.2d 173, 179 (1981); Mroz v. Hoaloha Na Eha, Inc., 360
F. Supp. 2d 1122, 1135 (D. Haw. 2005).
Here, the Complaint alleges sufficient details to establish a plausible
4
HRS § 657-1(4) provides:
The following actions shall be commenced within six years next
after the cause of action accrued, and not after:
....
(4) Personal actions of any nature whatsoever not specifically
covered by the laws of the State.
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continuing scheme to defraud through November 2006. That is, at least three
transactions in the scheme to defraud occurred after July 25, 2005. As pled, Count
I is not time barred.
B.
Count Two -- “Damages for Breach of Fiduciary Duty”
Count Two alleges a breach of fiduciary duty. Typically Tropical
characterizes a breach of fiduciary duty as a tort, and thus argues that the claim is
barred by a two-year period in HRS § 657-7.5 Indeed, some Hawaii authority
indeed indicates that -- in deciding whether attorneys’ fees can be awarded on such
a claim -- breach of fiduciary duty can be characterized as a tort. See TSA Int’l Ltd.
v. Shimizu Corp., 92 Haw. 243, 264, 990 P.2d 713, 734 (1999) (“TSA’s claims for
. . . breach of fiduciary duty sound in tort” under HRS § 607-14). But it can also
be contractual in nature. See Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877,
886 (9th Cir. 2000) (“[W]here a party’s breach of fiduciary duty claim is based on
the non-performance or breach of contractual obligations and the complaint seeks
damages flowing from that non-performance or breach, the claim would sound in
assumpsit[.]”) (applying Hawaii law).
5
HRS § 657-7 provides:
Actions for the recovery of compensation for damage or injury to
persons or property shall be instituted within two years after the
cause of action accrued, and not after, except as provided in
section 657-13.
6
“For a breach of fiduciary duty claim, ‘the applicable statute of
limitations is determined by -- as variously phrased -- the nature of the right sued
upon, the primary interest affected by the defendant’s wrongful conduct, or the
gravamen of the action.’” Manosca v. Wachovia Mortg., 2011 WL 2970824, at *6
(N.D. Cal. July 20, 2011). This rule is consistent with Hawaii law. Cf. Kona
Enters., 229 F.3d at 886. If the gravamen of a breach of fiduciary duty claim is
fraud, then the fraud limitations period applies. See Monaghan v Ford Motor Co.,
897 N.Y.S.2d 482, 484 (N.Y. App. Div. 2010) (“[W]here an allegation of fraud is
essential to a breach of fiduciary duty claim, courts have applied a six-year statute
[applicable to claims of fraud].”) (New York law); Nev. State Bank v. Jamison
Family P’ship, 801 P.2d 1377, 1382 (Nev. 1990) (“A breach of fiduciary duty is
fraud and, therefore, the three-year statute of limitations [for fraud]” applies.)
(Nevada law).
Accordingly, because Plaintiff’s Complaint asserts a breach of
fiduciary duty claim based on fraud, the applicable statute of limitations is HRS
§ 657-1(4). The gravamen of Plaintiff’s breach of fiduciary duty claim is based on
a broker’s self-dealing and failures to disclose, and thus sounds in fraud.6 Because
6
Alternatively, the Complaint is based on breaches of fiduciary duty arising out of a
contractual relationship -- and thus a six-year period would also apply. See HRS § 657-1(1).
The court does not read the Count as sounding in personal injury (for which two-year period
(continued...)
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the Complaint alleges breaches of fiduciary duty within the six-year period, Count
Two may not be dismissed at this stage as time-barred.
C.
Count Three -- “Damages for Breach of Contract”
A six-year statute of limitations applies to Count Three. See HRS
§ 657-1(1).7 The Complaint alleges a continuing contractual relationship between
Plaintiff and Defendants, and Plaintiff’s counsel made clear at the hearing that
Plaintiff alleges the existence of a single contract with Defendants continuing until
November 2006. Accordingly, because events occurred within the six-year period,
Count Three as pled is timely.
D.
Count Four -- “Damages for Negligent/Intentional Infliction of
Emotional Distress”
Count Four seeks recovery in tort for infliction of emotional distress
(i.e., “damage or injury to persons or property”). The two-year limitation period
under HRS § 657-7 applies to Count Four. See, e.g., Guillermo v. Hartford Life &
6
(...continued)
would apply under HRS § 657-7), but even if there is some question, “courts will apply the
longer limitations period when there is doubt as to which statute applies.” Au v. Au, 63 Haw.
210, 221, 626 P.2d 173, 182 (1981). Under Au, a six-year period would still apply.
7
HRS § 657-1(1) provides:
The following actions shall be commenced within six years next
after the cause of action accrued, and not after:
(1) Actions for the recovery of any debt founded upon any
contract, obligation, or liability[.]
8
Acc. Ins. Co., 986 F. Supp. 1334, 1336 (D. Haw. 1997) (“Negligent and intentional
infliction of emotional distress claims are personal injury claims, and therefore fall
within the limits outlined in H.R.S. § 657-7.”). Accordingly, Count Four is facially
time barred based on the allegations of the Complaint. Count Four is DISMISSED
without leave to amend.8
V. CONCLUSION
Defendant Typically Tropical’s Motion to Dismiss is GRANTED in
part and DENIED in part. Count Four is DISMISSED without leave to amend as
to all Defendants. Counts One, Two, and Three, however, are not barred by
applicable statutes of limitations and remain as to all Defendants.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, December 6, 2011.
/s/ J. Michael Seabright
_____________________________
J. Michael Seabright
United States District Judge
Trost v. Embernate et al., Civ. No. 11-00458 JMS-KSC, Order Granting in Part and Denying in
Part Defendants Typically Tropical Properties, LLC’s and Rainbow Real Estate Group, LLC’s
Motion to Dismiss
8
Plaintiff has also sought relief for emotional distress as damages for fraud under Count
One. The Motion only raised whether an independent claim for emotional distress is timebarred, and this Order does not address, one way or the other, whether such damages are
available for fraud.
9
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