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Rumbaugh v. Harley

United States District Court, E.D. California

July 3, 2019

ROBIN RUMBAUGH, TRUSTEE OF THE EDITH AND JAMES HARLEY TRUST DATED AUGUST 31, 1981, Plaintiff,
v.
CYNTHIA HARLEY, CYNTHIA HARLEY, TRUSTEE OF THE HARLEY FAMILY TRUST U/D/T/ DATED DECEMBER 15, 1988, AND DOES I THROUGH X, Defendant.

          ORDER

         Defendant moves to dismiss and separately moves to strike portions of plaintiff's first amended complaint. Plaintiff opposes both motions. As explained below, the court GRANTS the motion to dismiss and DENIES the motion to strike as MOOT.

         I. BACKGROUND

         On August 31, 1981, grantors Edith Harley and James Harley created the Edith S. Harley and James M. Harley Trust. First. Am. Compl. (“FAC”), ECF No. 25, ¶¶ 2, 6. When James Harley died on October 29, 1987, the Trust agreement provided for the establishment of the Edith S. Harley Survivor Trust, which is revocable, and the James M. Harley Residual Trust, which is irrevocable. Id. ¶ 6. On October 22, 2008, Edith Harley resigned as trustee of the Survivor and Residual Trusts, and her son, Richard Harley, was appointed successor trustee of both Trusts. Id. Richard Harley died unexpectedly on October 4, 2014. Id. ¶ 7. Edith Harley was unable to act as trustee of the Trusts. Id. Accordingly, Edith's daughter, plaintiff Robin Rumbaugh, filed a petition to confirm trustee in the First Judicial District of the State of Nevada, requesting the court appoint Rumbaugh as the successor trustee of the Trusts. Id. On November 17, 2015, that court appointed Rumbaugh trustee. Id.

         On an unspecified date after Richard's death, Rumbaugh learned that assets of the Trusts were in defendant Cynthia E. Harley's possession, either in Harley's capacity as trustee of the Harley Family Trust U/D/T dated December 15, 1988, or personally. Id. ¶ 8. That property consists of: (1) real property located at 22532 Phoenix Lake Road, Sonora, California, which plaintiff alleges “was purchased by Defendant with cash belonging to Plaintiff, ” and (2) $523, 868.46 in cash. Id. ¶ 8(a)-(b).

         Also on an unspecified date, but after Rumbaugh was appointed trustee on November 17, 2015, Rumbaugh requested that Harley return the trust assets. Id. ¶ 9. Harley agreed and retained counsel to assist her in returning the property, and the parties arranged for the return to take place no later than February 28, 2017. Id. ¶¶ 9, 13. Upon Harley's request, Rumbaugh agreed that Harley's son and his family could reside on the Sonora property until that date. Id. ¶ 16.

         In a September 12, 2016 email, Harley's counsel proposed that Harley return the property to Rumbaugh and resolve any claims Rumbaugh had against Harley. Id. ¶ 14. The parties then prepared a proposed written agreement for the return of the property. Id. ¶ 15. On November 4, 2016, Harley's counsel sent Rumbaugh's counsel an email with proposed changes to the draft settlement agreement. Id. ¶ 15. On February 14, 2017, Harley's counsel advised Rumbaugh for the first time that Harley would not return the property. Id. ¶ 17. Harley never signed the agreement. Id. ¶ 15. On September 22, 2017, Rumbaugh filed this suit. See Compl., ECF No. 1.

         In her initial complaint, Rumbaugh alleged conversion, unjust enrichment, constructive trust and money had and received. Id. ¶¶ 11-32. The court granted Harley's motion to dismiss that complaint in its entirety, finding Rumbaugh's claims were time-barred under California Code of Civil Procedure section 366.2, [1] which required Rumbaugh to file all claims arising from Richard's misconduct within one year of his death. Prior Order, ECF No. 24. In that order, the court found equitable estoppel did not render Rumbaugh's claims timely, as the statute of limitations expired on October 4, 2015, one year after Richard's death, and Rumbaugh alleged she relied on Harley's promise to return the property only as early as November 2015, after the statute of limitations had expired. Id. at 10-18. Noting unjust enrichment is not a standalone claim but may be construed as a quasi-contract claim for restitution, the court granted Rumbaugh leave to amend her claim for unjust enrichment, as she “may be able to provide greater clarity with respect to . . . the extent she could not have sued Richard for the same misconduct . . . .” Id. at 15-16. Applying similar reasoning, the court also granted Rumbaugh leave to amend her claim of money had and received. Id. at 17-18.

         Rumbaugh filed her first amended complaint on September 11, 2018, bringing a single quasi-contract claim for restitution. FAC ¶¶ 11-22. Harley again moves to dismiss the complaint in its entirety, arguing Rumbaugh's claim is barred by California Code of Civil Procedure section 366.2 and that Rumbaugh cannot sufficiently allege the necessary elements of a quasi-contract claim. Mot. to Dismiss (“Mot.”), ECF No. 32-1. Rumbaugh opposes, Opp'n, ECF No. 36, and Harley filed a reply, Reply, ECF No. 41. Harley also moves to strike portions of Rumbaugh's first amended complaint that, according to Harley, improperly “pertain[] to settlement discussions.” ECF No. 33-1 at 2. Rumbaugh opposes that motion, ECF No. 37, and Harley has replied, ECF No. 42. After hearing argument on both motions, the court submitted the motions and resolves them here.

         II. LEGAL STANDARD

         Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move to dismiss a complaint for “failure to state a claim upon which relief can be granted.” A court may dismiss “based on the lack of cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990).

         Although a complaint need contain only “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), in order to survive a motion to dismiss this short and plain statement “must contain sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A complaint must include something more than “an unadorned, the-defendant-unlawfully-harmed-me accusation” or “‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action.'” Id. (quoting Twombly, 550 U.S. at 555). Determining whether a complaint will survive a motion to dismiss for failure to state a claim is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. at 679. Ultimately, the inquiry focuses on the interplay between the factual allegations of the complaint and the dispositive issues of law in the action. See Hishon v. King & Spalding, 467 U.S. 69, 73 (1984).

         In making this context-specific evaluation, this court must construe the complaint in the light most favorable to the plaintiff and accept as true the factual allegations of the complaint. Erickson v. Pardus, 551 U.S. 89, 93-94 (2007). This rule does not apply to “‘a legal conclusion couched as a factual allegation, '” Papasan v. Allain, 478 U.S. 265, 286 (1986) quoted in Twombly, 550 U.S. at 555, nor to “allegations that contradict matters properly subject to judicial notice” or to material attached to or incorporated by reference into the complaint. Sprewell v. Golden State Warriors, 266 F.3d 979, 988-89 (9th Cir. 2001). A court's consideration of documents attached to a complaint or incorporated by reference or matter of judicial notice will not convert a motion to dismiss into a motion for summary judgment. United States v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003); Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995); compare Van Buskirk v. Cable News Network, Inc., 284 F.3d 977, 980 (9th Cir. 2002) (noting that even though court may look beyond pleadings on motion to dismiss, generally court is limited to face of the complaint on 12(b)(6) motion).

         III. DISCUSSION

         A quasi-contract claim seeking restitution is not based on a “true contract, ” but instead arises from “an obligation . . . created by the law without regard to the intention of the parties, and is designed to restore the aggrieved party to his or her former position by return of the thing or its equivalent in money.” 1 Witkin, Summary 11th Contracts § 1050, Nature of Restitution (2018). Restitution is the remedy for a defendant's unjust enrichment, which occurs when “a defendant has been unjustly conferred a benefit ‘through mistake, fraud, coercion, or request.'” Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 762 (9th Cir. 2015) (quoting 55 Cal. Jur. 3d Restitution § 2). A quasi-contract claim requires: “(1) a defendant's receipt of a benefit and ...


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