Opinion · Colorado Court of Appeals
Roseann Scott v. Donna Scott
428 P.3d 626
- Type
- Opinion
- Court
- Colorado Court of Appeals
- Jurisdiction
- Colorado
- Date
- 2018-02-22
- Topic
- estate-planning
finding that a single conclusory statement was inadequate to state a claim for civil theft | holding a “single, conclusory statement” about a defendant’s mental state “is not entitled to an assumption of truth” | noting that “a lawful possessor of property may become a converter once he or she refuses a demand for return of the property from the lawful owner” | Courts are not required to accept as true “legal conclusions that are couched as factual allegations.” | dismissing civil theft claim under Colo. R. Civ. P. 12(b)(5) | “‘conversion’ must be an intentional act”
Citator
- Cited by
- 25 opinions
The summaries of the Colorado Court of Appeals published opinions
constitute no part of the opinion of the division but have been prepared by
the division for the convenience of the reader. The summaries may not be
cited or relied upon as they are not the official language of the division.
Any discrepancy between the language in the summary and in the opinion
should be resolved in favor of the language in the opinion.
SUMMARY
February 22, 2018
2018COA25
Nos. 16CA1646 & 17CA0074, Scott v. Scott, — Torts —
Conversion — Unjust Enrichment
In this tort case, a division of the court of appeals considers
the situation where a party to a court-ordered separation agreement
promised to maintain his first wife as the beneficiary of life
insurance proceeds, but then remarried and changed the named
beneficiary to his second wife before his death.
The first wife filed a complaint against the second wife alleging
civil theft, conversion, and unjust enrichment. Second wife moved
to dismiss under C.R.C.P. 12(b)(5), arguing that first wife’s
complaint failed to state a claim for civil theft because it did not
allege intent to permanently deprive her of the proceeds, for
conversion because the husband was the “converter” and first wife
had only an expectancy interest in the proceeds, and for unjust
enrichment because husband was the wrongdoer. She also moved
to dismiss under C.R.C.P. 12(b)(6) because husband’s estate should
have been joined as a necessary party. The court summarily
dismissed the entire case based on the reasoning in the motion to
dismiss and then awarded second wife attorney fees and costs.
Applying Warne v. Hall, 2016 CO 50
, the division concludes
that the district court did not err in dismissing the civil theft claim
for lack of a plausible allegation of intent to permanently deprive.
However, the division further concludes that the district court erred
in dismissing the conversion and unjust enrichment claims under
C.R.C.P. 12(b)(5); first wife plausibly pleaded claims for relief under
those theories because she had a vested and irrevocable interest in
the insurance proceeds under the terms of the separation
agreement. The division also concludes that the district court erred
by dismissing the complaint under C.R.C.P. 12(b)(6), reasoning that
decedent’s estate was not a necessary party to this tort action.
Accordingly, the division affirms the judgment in part and
reverses in part, vacates the order granting second wife’s motion for
attorney fees and costs, and remands the case to proceed on the
conversion and unjust enrichment claims.
COLORADO COURT OF APPEALS 2018COA25
Court of Appeals Nos. 16CA1646 & 17CA0074
Mesa County District Court No. 15CV30761
Honorable Thomas M. Deister, Judge
Roseann Scott,
Plaintiff-Appellant,
v.
Donna Scott,
Defendant-Appellee.
JUDGMENT AFFIRMED IN PART, REVERSED IN PART,
ORDER VACATED, AND CASE REMANDED WITH DIRECTIONS
Division A
Opinion by CHIEF JUDGE LOEB
Rothenberg* and Carparelli*, JJ., concur
Announced February 22, 2018
Reams & Reams, Charles F. Reams, Zachary T. Reams, Grand Junction,
Colorado, for Plaintiff-Appellant
Hoskin Farina & Kampf, P.C., Andrew H. Teske, Grand Junction, Colorado, for
Defendant-Appellee
*Sitting by assignment of the Chief Justice under provisions of Colo. Const. art.
VI, § 5(3), and § 24-51-1105, C.R.S. 2017.
¶1 In this civil action, plaintiff, Roseann Scott (Roseann), appeals
the district court’s order and judgment granting the motion of
defendant, Donna Scott (Donna), to dismiss under C.R.C.P. 12(b)(5)
for failure to state a claim upon which relief could be granted, and
under C.R.C.P. 12(b)(6) for failure to join a necessary party.
Roseann also appeals the court’s postjudgment order granting
Donna’s motion for attorney fees and costs. We conclude that
Roseann failed to state a claim for only one of her claims and that
she did not fail to join a necessary party. We, therefore, affirm the
district court’s judgment in part, reverse in part, vacate the court’s
order granting attorney fees and costs, and remand with directions.
I. Background and Procedural History
¶2 Roseann was married to Melvin Scott (Melvin), and the couple
dissolved their marriage in 1978. As part of that dissolution, the
couple entered into a separation agreement that provided as
follows:
The parties agree that [Melvin] is presently
insured under several life insurance policies as
listed below. These policies will be maintained
in their current status until such time as
[Roseann] re-marries, and at that time the
beneficiaries may be changed to the children of
the parties. Upon emancipation of the parties’
1
children, if [Roseann] has re-married, [Melvin]
may change the beneficiary to whomever he
wishes.
The policies listed in the separation agreement, as relevant here,
included several policies provided to veterans (the veteran policies)
and a life insurance policy through Prudential (the Prudential
policy). The Prudential policy is the only insurance policy at issue
in this appeal.
¶3 Sometime after Melvin and Roseann dissolved their marriage,
Melvin married Donna; Roseann never remarried. Melvin and
Donna remained married until Melvin’s death. A few years prior to
his death, and decades after the separation agreement was
executed, Melvin changed the named beneficiary on the veteran
policies and the Prudential policy to Donna.
¶4 Melvin died on August 2, 2015. Donna, as the named
beneficiary on the veteran policies and the Prudential policy,
received the proceeds from all of these policies. Roseann attempted
to apply for the benefits of these policies and discovered they had
already been disbursed to Donna. Roseann, through counsel, sent
a demand letter to Donna on September 1, 2015, informing Donna
of the separation agreement and requesting that the proceeds from
2
the life insurance policies be transferred to her. Donna did not
transfer the funds to Roseann, but she eventually put the money
from the policies in a trust account pending the outcome of any
litigation.1
¶5 Roseann filed a complaint in the Mesa County District Court
naming Donna as the sole defendant in November 2015, and she
filed an amended complaint a month later. The amended complaint
alleged that Roseann was entitled to receive the money from Donna
based on the 1978 separation agreement under theories of civil
theft, conversion, and unjust enrichment/constructive trust.2
¶6 Instead of filing an answer, Donna removed the case to federal
district court based on administration of the veteran policies by the
federal government. After the case was accepted by the federal
district court, Donna filed a motion to dismiss Roseann’s claims
based on several theories, including federal preemption law as to
the veteran policies. Ultimately, the federal district court concluded
1 The parties stipulated that Donna placed the funds in a trust
account.
2 Roseann pleaded unjust enrichment and constructive trust as
separate claims in her amended complaint. However, the parties
appear to concede that constructive trust is essentially a remedy for
unjust enrichment and, thus, we analyze those two claims as one.
3
that federal legislative intent preempted the 1978 separation
agreement, and it dismissed Roseann’s claims with prejudice as to
the veteran policies only. The federal court remanded Roseann’s
remaining claims to the Colorado state court for resolution of the
claims as to the Prudential policy.
¶7 After the case was returned to state court, Donna filed a
motion to dismiss under both C.R.C.P. 12(b)(5) and C.R.C.P.
12(b)(6), arguing that Roseann’s claims failed to state a claim upon
which relief could be granted, and that Roseann had failed to join a
necessary party — namely, Melvin’s estate. After full briefing, the
district court summarily granted the motion to dismiss “for the
reasons stated by [Donna] in her motion and reply.”
¶8 Donna subsequently filed a motion for attorney fees and costs,
which the court granted in total based on its dismissal of the
entirety of Roseann’s case under C.R.C.P. 12(b).
¶9 Roseann now appeals the district court’s orders granting
Donna’s motion to dismiss and motion for attorney fees and costs.
II. Jurisdiction
¶ 10 In her answer brief, Donna argues that this court lacks
jurisdiction to review Roseann’s appeal because the district court
4
“did not adjudicate the merits of Roseann’s claims or preclude
further proceedings” and, therefore, its order was a dismissal
without prejudice, not a final judgment for purposes of appeal. We
reject this argument.
¶ 11 A final judgment is a jurisdictional prerequisite to review on
appeal. Brody v. Bock, 897 P.2d 769, 777
(Colo. 1995). A final judgment for purposes of appeal “ends the particular action in which it is entered, leaving nothing further for the court pronouncing it to do in order to completely determine the rights of the parties involved in the proceeding.” Harding Glass Co. v. Jones,640 P.2d 1123
, 1125 n.2 (Colo. 1982) (quoting D.H. v. People,192 Colo. 542, 544
,561 P.2d 5, 6
(1977)). ¶ 12 Ordinarily, the dismissal of a complaint without prejudice is not a final and appealable order because the factual and legal issues underlying the dispute, the merits of the case, have not been resolved. E.g., Brody,897 P.2d at 777
; Harris v. Reg’l Transp. Dist.,155 P.3d 583, 585
(Colo. App. 2006). However, a motion to dismiss
under C.R.C.P. 12(b)(5) is an assertion that the plaintiff’s complaint
is legally insufficient and therefore “mandates that the court
analyze the merits of the plaintiff’s claims.” Hemmann Mgmt. Servs.
5
v. Mediacell, Inc., 176 P.3d 856, 858
(Colo. App. 2007); see also Brody,897 P.2d at 777
(“If a judgment in fact completely resolves the rights of the parties before the court with respect to a claim and no factual or legal issues remain for judicial resolution, the judgment is final as to that claim.”); Harris,155 P.3d at 585
(noting
that the dismissal of a complaint without prejudice is a final and
appealable order where the circumstances of the case indicate that
the action cannot be saved by an amendment).
¶ 13 In her motion to dismiss, Donna argued that Roseann had
failed to state a claim upon which relief could be granted because
her claims were inapplicable to the procedural and factual
circumstances of this case; in other words, they were insufficient as
a matter of law.3 In granting the motion, the district court, without
any analysis or findings, simply adopted Donna’s arguments and
ruled that Roseann’s claims failed on their merits as a matter of
law. And, indeed, in her reply brief on appeal, Roseann admitted
that, if she had been ordered to file a further amended complaint,
she would have simply realleged the exact same claims for relief at
3 As an example, Donna argued that Roseann’s claims against her
failed because Roseann’s interest as a potential beneficiary of the
policies was a mere expectancy.
6
issue here. Thus, this action would not (and could not) have been
saved by an amended pleading. See Harris, 155 P.3d at 585
.
¶ 14 The order granting the motion to dismiss based on C.R.C.P.
12(b)(5), thus resolved the rights of the parties as to the claims in
the amended complaint and left nothing for the court to do. Indeed,
the register of actions shows that the district court closed the case
the day after entering its order granting the motion to dismiss; the
district court was required to reopen the matter only when Donna
filed her motion for attorney fees.
¶ 15 Because the district court’s order granting the motion to
dismiss was a ruling on the merits of Roseann’s case and left
nothing for the court to do to resolve the rights of the parties, we
conclude the order was final and appealable, and this court has
jurisdiction to hear the appeal.
III. C.R.C.P. 12(b)(5) Dismissal
¶ 16 The district court did not specify whether it was granting the
dismissal based on Donna’s C.R.C.P. 12(b)(5) arguments or her
argument based on C.R.C.P. 12(b)(6). Because the district court
adopted all of the reasoning in Donna’s motion to dismiss, we
7
consider her Rule 12(b)(5) assertions and those under Rule 12(b)(6)
in turn.
A. Standard of Review and Warne v. Hall, 2016 CO 50
¶ 17 We review a trial court’s determination on a motion to dismiss for failure to state a claim upon which relief can be granted de novo. E.g., Norton v. Rocky Mountain Planned Parenthood, Inc.,2018 CO 3, ¶ 7
. In our review, we accept all factual allegations contained in the complaint as true and view them in the light most favorable to the plaintiff.Id.
¶ 18 Until recently, the standard in Colorado on which to judge whether a complaint stated a claim upon which relief could be granted was the “no set of facts” standard: “a complaint should not be dismissed unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of the claim which would entitle him [or her] to relief.” Colo. Med. Soc’y v. Hickenlooper,2012 COA 121, ¶ 29
, aff’d,2015 CO 41
. ¶ 19 In June 2016, the Colorado Supreme Court replaced that standard with the federal “plausibility” standard announced in Ashcroft v. Iqbal,556 U.S. 662
(2009), and Bell Atlantic Corp. v. Twombly,550 U.S. 544
(2007). Warne, ¶ 24. Under the plausibility
8
standard, “to survive a motion to dismiss for failure to state a claim,
a plaintiff must allege a plausible claim for relief.” N.M. v. Trujillo,
2017 CO 79, ¶ 20
(citing Warne, ¶ 9). The plausibility standard emphasizes that facts pleaded as legal conclusions (i.e., conclusory statements) are not entitled to the assumption that they are true. Warne, ¶¶ 9, 27. Notably, Colorado courts have upheld dismissals because a complaint was conclusory in its allegations long before the supreme court announced the plausibility standard in Warne.Id.
at ¶ 18 (citing cases where Colorado courts have found a complaint insufficient because the factual allegations were conclusory). ¶ 20 In this case, Roseann filed her amended complaint prior to Warne, but Donna’s motion to dismiss and the court’s order granting the motion occurred post-Warne. Neither party cited to or relied on Warne in their briefs in the district court or on appeal. Accordingly, we ordered the parties to file supplemental briefs addressing the applicability of Warne and the plausibility standard in this appeal. ¶ 21 Judicial decisions are generally applied retroactively. E.g., Erskine v. Beim,197 P.3d 225, 227
(Colo. App. 2008). In order for a
9
judicial decision to be given only prospective effect, the decision
must, among other things, announce a new principle of law. Id.
In
Warne, the supreme court explicitly stated that the opinion did not
result in an amendment to the rules of procedure and was only
“interpretive gloss.” Warne, ¶¶ 24, 29. In her supplemental brief
addressing the applicability of Warne, Roseann did not argue that
Warne should only have prospective effect.4
¶ 22 Therefore, we perceive no reason why Warne should not apply
in this case. The motion to dismiss was filed after Warne, and after
the parties had already completed dismissal litigation of the veteran
policies in the federal court, which used the plausibility standard in
its analysis.
¶ 23 Accordingly, we apply the plausibility standard to Roseann’s
claims in her amended complaint.
B. Roseann’s Claims
¶ 24 Roseann’s complaint essentially alleged three claims for relief
against Donna. We address each in turn.
4Roseann argued instead that, because her complaint was filed
pre-Warne, the plausibility standard announced in Warne should
not apply to her pleading. She did not address the general rule that
case law applies retroactively.
10
1. Civil Theft
¶ 25 A plaintiff has a civil cause of action (civil theft) against the
taker of stolen property under section 18-4-405, C.R.S. 2017. This
statute allows recovery of treble damages and serves a punitive
rather than remedial purpose. In re Marriage of Allen, 724 P.2d 651, 656
(Colo. 1986). ¶ 26 To state a claim for civil theft, a plaintiff must allege the elements of criminal theft: that the defendant “‘knowingly obtains, retains, or exercises control over anything of value of another without authorization or by threat or deception,’ and acts intentionally or knowingly in ways that deprive the other person of the property permanently.” Van Rees v. Unleaded Software, Inc.,2016 CO 51
, ¶ 21 (quoting § 18-4-401(1), C.R.S. 2017). Thus, civil
theft, like criminal theft, requires the specific intent of the
defendant to permanently deprive the owner of the benefit of the
property. Id.
¶ 27 Roseann alleged that Donna “knowingly misused her title as
the second spouse of Melvin to obtain assets and funds from
Roseann pursuant to the [separation agreement]. Donna is aware
of the divorce decree.” Roseann further alleged that “Donna
11
intended to permanently deprive Roseann of the use and benefit of
her assets,” that she sent a letter to Donna informing her of the
separation agreement and demanding the return of the funds, and
that Donna refused to transfer the funds to Roseann.
¶ 28 Roseann’s allegation regarding Donna’s mental state is a
single, conclusory statement that Donna acted with the necessary
mens rea. In fact, the only mention of Donna’s mental state in the
amended complaint is a conclusory statement repeating the
language in the statute. The complaint does not allege that Donna
knew of the separation agreement before she received the insurance
proceeds. Instead, it seems to assert that Donna knew of the
separation agreement only after she received Roseann’s demand
letter. We therefore conclude that Roseann’s allegation that Donna
acted with the requisite intent is conclusory, and without more, it is
not entitled to the assumption of truth. Warne, ¶¶ 9, 27.
¶ 29 Even considering the allegation that Donna refused to turn
over the Prudential funds after Roseann sent a demand letter
informing Donna of the separation agreement, we conclude this
does not plausibly allege an intent by Donna to permanently
deprive Roseann of those funds. Donna received the proceeds of
12
the Prudential policy because she was the named beneficiary.5 Her
refusal to return the funds was simply based on her assertion that
she was legally entitled to the funds as the named beneficiary under
the policy; we do not view her conduct as articulating her intent to
permanently deprive Roseann of the proceeds, or steal them from
her. Indeed, Roseann’s allegation arises from the fact that Melvin
changed the named beneficiary of the Prudential policy, and thus
does not support any inference as to Donna’s intent. Moreover, the
parties stipulated that Donna placed the insurance proceeds in a
trust account with her attorney pending the outcome of any
litigation over the funds, indicating that she had no intent to
permanently deprive Roseann of the proceeds, but only to have a
court determine the rights of the parties as to those funds.
¶ 30 Because Roseann failed to sufficiently plead the requisite
intent to state a claim for civil theft, we conclude that the district
5 The Prudential policy beneficiary designation was referenced in
the amended complaint and is included as part of the record. In
that designation, Donna is named as beneficiary by name, not as
the spouse of the decedent. Accordingly, Roseann’s allegation that
Donna “knowingly misused her title” as Melvin’s second wife is
ambiguous at best.
13
court did not err in dismissing Roseann’s claim for civil theft under
C.R.C.P. 12(b)(5).
2. Conversion
¶ 31 Conversion under Colorado law is “any distinct, unauthorized
act of dominion or ownership exercised by one person over personal
property belonging to another.” Itin v. Ungar, 17 P.3d 129
, 135 n.10 (Colo. 2000) (quoting Byron v. York Inv. Co.,133 Colo. 418, 424
,296 P.2d 742, 745
(1956)). To state a claim for conversion, Roseann was required to allege in her complaint that “(i) [Donna] exercised dominion or control over property; (ii) that property belonged to [Roseann]; (iii) [Donna’s] exercise of control was unauthorized; (iv) [Roseann] demanded return of the property; and (v) [Donna] refused to return it.” L-3 Commc’ns Corp. v. Jaxon Eng’g & Maint., Inc.,863 F. Supp. 2d 1066, 1081
(D. Colo. 2012) (citing Glenn Arms Assocs. v. Century Mortg. & Inv. Corp.,680 P.2d 1315, 1317
(Colo. App. 1984)). ¶ 32 Unlike civil theft, conversion does not require that the converter act with the specific intent to permanently deprive the owner of his or her property. Itin,17 P.3d at 135
n.10.
14
An action for conversion does not rest on the
defendant’s knowledge or consciousness of the
wrongdoing, nor the wrongful intent of the
defendant. . . .
The act constituting “conversion” must be an
intentional act, but it does not require
wrongful intent. . . .
Conversion is a species of strict liability in
which questions of good faith, lack of
knowledge, and motive are ordinarily
immaterial. . . .
. . . A person who mistakenly believes that his
or her conduct is legal may nonetheless
commit conversion.
18 Am. Jur. 2d Conversion § 3 (2017) (footnotes omitted). Thus,
even a good faith recipient of funds who receives the money without
knowledge that it belonged to another can be held liable for
conversion. See Itin, 17 P.3d at 135
n.10. ¶ 33 Conversion takes place when the converter takes dominion over the property at issue. Glenn Arms Assocs.,680 P.2d at 1317
. A person in lawful possession of property may commit conversion when he or she refuses the legal owner’s demand for return of the property. See Davis v. Am. Nat’l Bank of Denver,149 Colo. 34, 37
,367 P.2d 325, 326
(1961); Emp’rs’ Fire Ins. Co. v. W. Guar. Fund Servs.,924 P.2d 1107, 1111
(Colo. App. 1996).
15
¶ 34 On appeal, Donna makes several arguments as to why
Roseann’s conversion claim fails as a matter of law. She primarily
argues that it was Melvin who converted the funds when he
changed the named beneficiary; that Roseann did not have any
vested right in the Prudential policy; and, therefore, that the
proceeds did not “belong” to Roseann. We reject these arguments.
¶ 35 We first address the argument that Roseann had no
recognizable interest in the Prudential policy proceeds. In Great
American Reserve Insurance Co. v. Maxwell, 38 Colo. App. 305, 307
,555 P.2d 988, 989-90
(1976), a division of this court held that a divorce decree requiring an insurance policyholder to maintain a policy for a certain beneficiary transforms that beneficiary’s expectancy interest in the policy proceeds into an irrevocable “vested right.” See also Rudolph v. Pub. Serv. Co. of Colo.,847 F. Supp. 152, 155
(D. Colo. 1994) (citing Maxwell for the rule that, in
Colorado, “the designation of children as beneficiaries of a life
insurance policy in a divorce decree is irrevocable”).
¶ 36 Colorado is not alone in adopting this rule:
Most courts have concluded that a promise,
made as part of a separation agreement, to
maintain a policy of insurance designating
16
either spouse or children as beneficiaries vests
in such spouse or children an equitable
interest in the policy which is superior to that
of a stranger to the agreement who was
subsequently named gratuitously as
beneficiary.
Torchia v. Torchia, 499 A.2d 581, 583-84
(Pa. Super. Ct. 1985) (emphasis added) (collecting numerous cases, including Maxwell). We find Maxwell and these other cases persuasive and applicable here. Accordingly, we conclude that Roseann has a protectable interest as the designated beneficiary of her former spouse’s life insurance policy because of the language contained in the separation agreement between her and Melvin, which was, as conceded by the parties, made an order of the court. ¶ 37 We are not persuaded by Donna’s argument that Maxwell is distinguishable because that case was filed by the insurance company as an interpleader action. In our view, this is a distinction without any meaningful difference. Many cases since Maxwell have been filed by the promisees of separation agreements against the recipients of the insurance proceeds, and the courts in these cases have recognized that the promisees have an irrevocable and legally protectable interest in the insurance proceeds. Seeid.
17
¶ 38 We next address and reject Donna’s argument that Roseann’s
claim fails because Melvin was the converter, not Donna. Although
the parties have stipulated that Melvin was the person who changed
the beneficiary designation on the Prudential policy, under the
circumstances here, we conclude that act did not make him a
“converter” of the funds. Conversion takes place at the time that
the converter takes possession of the converted property. Glenn
Arms Assocs., 680 P.2d at 1317
. Here, the property converted was the Prudential policy proceeds. Melvin never had possession of the Prudential proceeds because those funds became available only after his death, and Donna received and possessed those funds. ¶ 39 In any event, a lawful possessor of property may become a converter once he or she refuses a demand for return of the property from the lawful owner. Davis,149 Colo. at 37
,367 P.2d at 326
; Emp’rs’ Fire Ins. Co.,924 P.2d at 1111
. Indeed, under Colorado law, a claim for conversion does not require the specific intent to deprive another of property. A good faith recipient of funds can commit conversion. Itin,17 P.3d at 135
n.10. This type
of conversion is called “technical conversion” or “innocent
conversion.” Black’s Law Dictionary 407 (10th ed. 2014)
18
(“Technical conversion” is “the taking of another’s personal property
by one who acts in good faith and mistakenly believes that he or
she is lawfully entitled to the property. ― Also termed innocent
conversion . . . .”).
¶ 40 Thus, even though Donna may have received the policy
proceeds from Prudential in good faith and believed she was
lawfully entitled to the funds as the named beneficiary, under the
specific circumstances here, and certainly in the procedural context
of a C.R.C.P. 12(b)(5) motion, we believe Roseann should be allowed
to proceed with her conversion claim against Donna.
¶ 41 We now turn to the allegations in Roseann’s amended
complaint to determine whether the facts she pleaded were
sufficient to satisfy the plausibility test. Warne, ¶ 24. We conclude
that, under the circumstances here, the amended complaint
sufficiently alleged facts to state a plausible claim for relief based on
conversion.
¶ 42 Roseann alleged in her amended complaint that, under the
separation agreement, Melvin was obligated to maintain Roseann as
the beneficiary of the Prudential policy and that his remarriage to
Donna did not eliminate that obligation. She further alleged that,
19
after Melvin’s death, the funds from the Prudential policy were
distributed to Donna, that she sent Donna a letter demanding that
Donna transfer the funds to her as the beneficiary under the
separation agreement, and that Donna declined to do so. Having
incorporated all of her previous allegations by reference, we
conclude that Roseann adequately alleged that Donna’s dominion
and control were unauthorized because of the language in the
separation agreement and because of Donna’s refusal to return the
allegedly converted funds.
¶ 43 Thus, Roseann plausibly alleged that Donna had dominion
and control over the Prudential policy proceeds; the proceeds belong
to Roseann pursuant to the terms of the separation agreement;
Donna was not authorized to have dominion and control over the
proceeds; Roseann demanded in a letter that Donna return the
proceeds; and Donna refused to return the proceeds. Roseann
pleaded each element of conversion sufficiently for that claim to be
plausible, Warne, ¶ 24, and the district court thus erred in
dismissing that claim under C.R.C.P. 12(b)(5).
¶ 44 We emphasize that our holding is limited to the procedural
context of this case, which is the summary dismissal of a case on a
20
C.R.C.P. 12(b)(5) motion. Our holding regarding the conversion
claim is further limited to the specific circumstances here —
namely, a plaintiff whose claim is based on a vested and irrevocable
promise in a court-approved separation agreement to maintain the
plaintiff as the beneficiary of proceeds under an insurance policy.
3. Unjust Enrichment and Constructive Trust
¶ 45 We also conclude that the district court erred in dismissing
Roseann’s claim for unjust enrichment and constructive trust.
¶ 46 Unjust enrichment is a quasi-contractual, equitable remedy
designed to undo a benefit conferred on one party at the unfair
expense of another party. Pulte Home Corp. v. Countryside Cmty.
Ass’n, 2016 CO 64, ¶ 63
. A constructive trust is “a ‘flexible equitable remedy that may be imposed to prevent unjust enrichment’ by ‘enabl[ing] the restitution of property that in equity and good conscience does not belong to the defendant.’” Meadow Homes Dev. Corp. v. Bowens,211 P.3d 743, 748
(Colo. App. 2009) (quoting Lawry v. Palm,192 P.3d 550, 562
(Colo. App. 2008)).
¶ 47 Generally speaking, “a person who is unjustly enriched at the
expense of another is subject to liability in restitution.”
Restatement (Third) of Restitution and Unjust Enrichment § 1 (Am.
21
Law Inst. 2011) (hereinafter RST). “To prevail on an unjust
enrichment claim, a party ‘must prove that (1) the defendant
received a benefit (2) at the plaintiff’s expense (3) under
circumstances that would make it unjust for the defendant to retain
the benefit without commensurate compensation.’”6 Pulte Home
Corp., ¶ 63 (quoting Lewis v. Lewis, 189 P.3d 1134, 1141
(Colo. 2008)). ¶ 48 Unjust enrichment claims are legally sustainable where third parties, such as Prudential, make a payment to the ultimate defendant in the case. Generally speaking, “[i]f a third person makes a payment to the defendant to which (as between the 6 As a general rule, a party cannot recover for unjust enrichment as a matter of law where there is an express contract addressing the subject of the alleged obligation to pay. Pulte Home Corp. v. Countryside Cmty. Ass’n,2016 CO 64, ¶ 64
; Restatement (Third) of
Restitution and Unjust Enrichment § 2 (Am. Law Inst. 2011)
(hereinafter RST). In this case, there are arguably two express
contracts: the separation agreement and the Prudential policy and
beneficiary designation in that policy. However, neither of these
contracts is between the parties to this civil action, Roseann and
Donna. Therefore, this general bar to an unjust enrichment claim
is not applicable here. See RST § 2 cmt. c (“Considerations of both
justice and efficiency require that private transfers be made
pursuant to contract whenever reasonably possible, and that the
parties’ own definition of their respective obligations . . . take
precedence over the obligations that the law would impose in the
absence of [an] agreement.”) (emphasis added).
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[plaintiff] and the defendant) the [plaintiff] has a better legal or
equitable right, the [plaintiff] is entitled to restitution from the
defendant as necessary to prevent unjust enrichment.” RST § 48.
More specifically, a claim for unjust enrichment is proper where
each of the parties has a claimed independent right to a payment
that has been received by the defendant from a third party. Id. § 48
cmt. d.
¶ 49 As illustrated by the cases collected in Torchia, 499 A.2d at 583-84
, many cases have involved competing claims to a decedent’s
life insurance proceeds after a dissolution of marriage. Indeed, the
Restatement specifically notes that “[c]ompeting claims to [a]
decedent’s assets after family dissolution” is a common theme for
third-party unjust enrichment claims. RST § 48 cmts. d, g. The
Restatement explicitly articulates the exact circumstances of this
case as an example of a proper claim for unjust enrichment:
The more frequent source of disputes . . . is
the breach of a contractual undertaking, made
in the context of family dissolution, to cause
former family members to take a beneficial
interest in specified financial assets (typically
life insurance . . . ) remaining within the legal
control of the promisor. At the death of the
promisor, the assets in question are payable
instead to other named beneficiaries: typically,
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to surviving family members from a
subsequent marriage. . . . The promisees
accordingly claim the disputed assets from the
named beneficiaries . . . , asserting that their
entitlement is paramount. . . . [T]he
[promisee]’s remedy is typically via
constructive trust.
RST § 48 cmt. g & illus. 22.
¶ 50 We again turn to the allegations in the amended complaint to
determine whether Roseann stated facts sufficient for a plausible
claim of unjust enrichment and constructive trust. Roseann alleged
that Donna received a benefit that was promised to Roseann in the
separation agreement; that Roseann attempted to apply for the
Prudential policy proceeds, but the proceeds had already been paid
to Donna; and that, given the promise made to her in the
separation agreement, it would be inequitable under the
circumstances for Donna to retain the funds. Roseann sought
imposition of a constructive trust, alleging that Donna had received
the funds from Prudential and that she was not entitled, under the
terms of the separation agreement, to receive those funds. Roseann
asked the court to impose a constructive trust on the assets held by
Donna and to declare that Donna held those assets in constructive
trust for Roseann’s benefit. We conclude these allegations stated a
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plausible claim for unjust enrichment and the imposition of a
constructive trust.
¶ 51 As with the conversion claim, Donna’s primary argument is
that the district court’s dismissal of the unjust enrichment claim
should be affirmed because Melvin was the main wrongdoer in this
situation. However, claims for unjust enrichment and constructive
trust do not require wrongdoing on the part of the person receiving
the benefit. E.g., Mayer v. Bishop, 551 N.Y.S.2d 673, 675
(N.Y. App. Div. 1990) (“[I]t is not a prerequisite of an unjust enrichment claim that the one enriched commit a wrongful or unlawful act . . . .”); Faulknier v. Shafer,563 S.E.2d 755, 759
(Va. 2002) (“[C]onstructive
trusts can arise even when property has been acquired fairly and
without any improper means.”); 66 Am. Jur. 2d Restitution and
Implied Contracts § 11 (2017) (“Although unjust enrichment may
arise from fraud or several other predicates, the element of fraud or
tortious conduct on the part of a defendant is not necessary in an
action for unjust enrichment.”) (footnote omitted).
¶ 52 We recognize that Donna’s good faith receipt of the Prudential
policy proceeds may be considered by the fact finder in determining
whether the circumstances make it unjust for her to retain the
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funds and whether the proceeds in equity and good conscience
should go to Roseann as required for imposition of a constructive
trust. See Faulknier, 563 S.E.2d at 760
(listing circumstances that
may be considered by the fact finder in determining whether the
plaintiff is entitled to a constructive trust); RST § 48 cmt. i (“Proof
merely that the defendant has received a windfall, that the claimant
has been ill-treated, and that the third party’s payment to the
defendant . . . violates rules of good faith, basic fairness, or
common decency, does not suffice to make out a claim in
restitution . . . .”). Here, we have a particularly difficult case in
which two arguably innocent parties assert legal claims to the same
insurance proceeds. However, resolution of these claims should not
be decided on a motion to dismiss under C.R.C.P. 12(b)(5), but,
rather, should be left to a fact finder’s determination of equity
under the totality of the circumstances.
IV. Failure to Join a Necessary Party — C.R.C.P. 12(b)(6)
¶ 53 Donna also argued that Roseann’s complaint should be
dismissed under C.R.C.P. 12(b)(6) because Roseann failed to join a
necessary party ― namely, Melvin’s estate. The district court may
have adopted this reasoning as well when it dismissed the case for
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“the reasons stated” in Donna’s motion and reply. Because we
conclude that the amended complaint properly stated claims for
conversion and unjust enrichment, we must now decide whether
the complaint was nonetheless properly dismissed under C.R.C.P.
12(b)(6) because it failed to join Melvin’s estate. We conclude that
Melvin’s estate was not a necessary party. Therefore, the district
court erred in dismissing the case under C.R.C.P. 12(b)(6) as its
basis as well.
¶ 54 Under C.R.C.P. 12(b)(6), a case may be dismissed if the
plaintiff fails to join a party under C.R.C.P. 19. The relevant portion
of C.R.C.P. 19(a) provides as follows:
A person who is properly subject to service of
process in the action shall be joined as a party
in the action if: (1) In his absence complete
relief cannot be accorded among those already
parties, or (2) he claims an interest relating to
the subject of the action and is so situated
that the disposition of the action in his
absence may: (A) As a practical matter impair
or impede his ability to protect that interest or
(B) leave any of the persons already parties
subject to a substantial risk of incurring
double, multiple, or otherwise inconsistent
obligations by reason of his claimed interest.
Under C.R.C.P. 19, generally all parties having an interest in the
property at issue must be joined. Clubhouse at Fairway Pines,
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L.L.C. v. Fairway Pines Estates Owners Ass’n, 214 P.3d 451, 454
(Colo. App. 2008).
¶ 55 However, we conclude that Melvin’s estate was not required to
be joined as a party under C.R.C.P. 19. Under the remaining
claims for relief in Roseann’s amended complaint, complete relief
can be accorded between Roseann and Donna because Donna has
possession of the proceeds at issue. Moreover, Melvin’s estate will
not be harmed in any way if it is not a party to this action because
the life insurance proceeds were never part of the estate assets, but
were instead disbursed directly to Donna by Prudential. Melvin’s
estate has no interest in those proceeds that would necessitate its
joinder in this action.
¶ 56 Importantly, this is not an action for enforcement of the
separation agreement.7 Rather, this is essentially an action in tort,
seeking legal and equitable relief against a person (Donna) who has
possession of funds to which Roseann claims she is legally entitled.
Therefore, Melvin’s estate, while perhaps a proper and necessary
7 Under section 14-10-112(5), C.R.S. 2017, Roseann would not be
allowed to sue in contract for breach of the separation agreement;
she can only seek enforcement of the separation agreement as a
judgment of the domestic court.
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party in an enforcement action, is not a necessary party to this
action that alleges claims in tort and equity directly against Donna.
Donna points to no Colorado cases, and we have found none, that
would require Roseann to sue Melvin’s estate under an enforcement
theory instead of pursuing her claims against Donna.
¶ 57 Thus, because complete relief can be accorded to Roseann,
and the disposition of this action will not harm the interests of
Melvin’s estate, we conclude the estate is not a necessary party to
the action under C.R.C.P. 19. Accordingly, the district court’s order
dismissing the case under C.R.C.P. 12(b)(6) must be reversed.
V. Attorney Fees and Costs
¶ 58 After the court granted her motion to dismiss, Donna moved
for attorney fees under section 13-17-201, C.R.S. 2017, and for
costs under sections 13-16-113(2) and 13-16-107, C.R.S. 2017, and
C.R.C.P. 54(d) based on the district court’s dismissal of Roseann’s
complaint under C.R.C.P. 12(b). After a hearing, the district court
granted Donna’s motion for reasonable attorney fees and costs in
total, stating that “the statutes under which [Donna] has made her
claims for attorney fees and costs are applicable and appropriate.”
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¶ 59 Roseann contends that Donna is not entitled to attorney fees
and costs because the court erred in granting Donna’s motion to
dismiss. We agree.
¶ 60 Sections 13-17-201 and 13-16-113(2) require a court to award
reasonable attorney fees and costs, respectively, to the defendant
when the court has dismissed the action pursuant to a defendant’s
motion under C.R.C.P. 12(b). Section 13-16-107 allows for the
recovery of costs to the prevailing party on a motion to dismiss.
And, C.R.C.P. 54(d) allows for reasonable costs to be recovered by
the prevailing party in a civil action.
¶ 61 However, section 13-17-201 “does not authorize recovery [of
attorney fees] if a defendant obtains dismissal on some, but not all,
of a plaintiff’s tort claims.” Colo. Special Dists. Prop. & Liab. Pool v.
Lyons, 2012 COA 18, ¶ 60
. Because we conclude that the district
court improperly granted Donna’s motion to dismiss under C.R.C.P.
12(b)(5) (as to the claims for conversion and unjust enrichment) and
12(b)(6), we conclude that the court’s order granting attorney fees
and costs must be vacated. An award of costs under section 13-16-
113 is no longer appropriate because the entire “action” has not
been dismissed under C.R.C.P. 12(b).
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¶ 62 Further, any costs awarded under section 13-16-107 and
C.R.C.P. 54(d) are also inappropriate because Donna is no longer a
prevailing party. E.g., Gonzales v. Windlan, 2014 COA 176
, ¶ 50 (“[A] prevailing party is one who ‘prevails on a significant issue in the litigation and derives some of the benefits sought by the litigation.’” (quoting Archer v. Farmer Bros. Co.,90 P.3d 228, 230
(Colo. 2004))).
VI. Conclusion
¶ 63 The judgment is affirmed in part and reversed in part, and the
case is remanded with directions. The district court’s order
granting Donna’s motion for attorney fees and costs is vacated.
JUDGE ROTHENBERG and JUDGE CARPARELLI concur.
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