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Richards v. Ohland

United States District Court, D. Utah, Central Division

August 13, 2018

TIMOTHY WATSON RICHARDS, an individual, and LAURIE O'KEEFE RICHARDS DAYNES, an individual, Plaintiffs,
v.
KARL OHLAND and KATHLEEN OHLAND, as Trustee of the HELENE E. RICHARDS TRUST, and as personal representatives of THE ESTATE OF HELENE E. RICHARDS, RAYMOND J. OHLAND, an individual, and RICHARD K. OHLAND, individually and in his capacity as the Trustee of the K.O. MINOR'S TRUST, and the A.O. MINOR'S TRUST, Defendants.

          ORDER AND MEMORANDUM DECISION

          TENA CAMPBELL, U.S. DISTRICT COURT JUDGE

         Plaintiffs seek leave to file a second amended complaint. For the reasons set forth below, their motion (ECF No. 24) is GRANTED IN PART AND DENIED IN PART.

         BACKGROUND

         This case arises out of a family trust which held a parcel of real property in Utah for the Plaintiffs. Plaintiffs contend that the Defendant family members violated that trust and committed fraud when the property was transferred to another trust and then to individuals who were not the intended beneficiaries. The relevant events occurred between 1991 and 2016. Plaintiffs brought suit in 2017, and now request leave to amend their original complaint to include five causes of action: (1) Fraudulent Concealment; (2) “Quiet Title - Violation of Richards Trust”; (3) “Quiet Title - Undue Influence and Breach of Fiduciary Duty”; (4) Intentional Interference with Expected Inheritance; and (5) Conversion.

         According to Defendants, amendment would be futile and so the court should deny the motion. As the basis for their opposition, Defendants contend that three of the claims are time-barred by the applicable statutes of limitations and that the other two claims do not state a claim upon which relief can be granted.

         FACTUAL ALLEGATIONS

         All of the facts set forth below are taken from Plaintiffs' proposed second amended complaint (ECF No. 24-1). The series of events is lengthy and complicated, so the court only discusses the facts necessary to provide context and decide the motion.

         The property at issue is located in Carbon County, Utah, and has been in the Richards family for decades. The Plaintiffs are the children of Peter Richards, who, along with his brother Stephen Richards, inherited the property in 1970. In 1991, Stephen (the Plaintiffs' uncle) deeded his interest in the property (hereinafter called the “Richards Property”) to himself and his wife, Helene Richards. They put the property in a family trust (along with other assets) by executing the “Richards Family Trust Agreement” (the “1991 Trust Document”). Stephen and Helene were co-trustees of the trust, called the “Richards Family Trust.” The 1991 Trust Document contained language that treated the Richards Property as Stephen's separate property. The 1991 Trust Document was amended and restated in the 2006 Richards Trust Agreement. According to Plaintiffs, “The 2006 Richards Trust Agreement provided that certain assets of Stephen and Helene would be distributed to both heirs of Stephen, including [the Plaintiffs], and heirs of Helene, including [the Defendants].” (Proposed 2d Am. Compl. ¶ 20, ECF No. 24-1.) But even given the general plan that the trust assets would go to both Stephen's heirs and Helene's heirs, the 2006 Richards Trust Agreement treated the Richards Property as Stephen's separate property that would not be distributed to Helene's heirs. The agreement contains the following provision: “The Trustees shall distribute to TIMOTHY WATSON RICHARDS and LAURIE O'KEEFE DAVIS, nephew and niece of Stephen O. Richards, all interest of Trustors in that certain real estate located in Carbon County, Utah.” (Id. ¶ 25 (quoting Section 8.1.1 of 2006 Richards Trust Agreement).)

         The agreement also restricted the rights of one trustor (e.g., Helene) to transfer property that was property of the other trustor (e.g., Stephen). Specifically:

Only the Trustor who contributed separate or quasi-community property may amend this trust regarding any property owned by such Trustor as his or her separate property or quasi-community property. … [A]ny amendment made by the other Trustor at any time shall have no effect and shall not be taken into account.

(2006 Richards Trust Agreement ¶ 15.2, attached as Ex. C to Proposed Am. 2nd Compl.) In other words, the agreement barred Helene from unilaterally amending the agreement to change the intended recipients of the Richards Property.

         Stephen died on December 17, 2008. But in May 2008, before he died, he “allegedly executed a Delegation of Co-Trustee Powers from Stephen O. Richards to Helene E. Richards” in which he delegated his trustee powers to Helene. (Proposed 2nd Am. Compl. ¶ 32 (emphasis added).) Twenty-three days before Stephen died, on November 24, 2008, Helene executed a Warranty Deed which transferred the Richards Property from the Richard Family Trust to herself. That warranty deed was recorded in Carbon County, Utah on December 3, 2008.

         Plaintiffs alleged that this act was “self-dealing, in violation of the 2006 Richards Trust Agreement, and in breach of her fiduciary duty to Stephen.” (Id. ¶ 33.) “Although Stephen was still alive at this time, he never signed the Warranty Deed and there is no documentation showing that he authorized this transaction.” (Id. ¶ 34.)

         After Stephen died, Helene created the “Helene Richards Trust” and included the Richards Property in it. The Helene Richards Trust, as amended in 2011, directed that the Richards Property be distributed in equal parts to Richards Ohland, Raymond Ohland, A.O. and K.O.

         Helene died on November 18, 2013. After Helene's death, Defendants Karl Ohland and Kathleen Ohland were appointed successor co-trustees. Plaintiffs were not notified that Helene had died. They did not learn of Helene's death until three years later, in September 2016, through independent channels.

         As co-trustees, Karl and Kathleen “had access to Helene's files, reviewed them, and had access to the 2006 Richards Trust Agreement and other related documents which informed them that Plaintiffs were potential creditors or claimants of Helene's Trust and Estate.” (Id. ¶ 44.) They knew that Plaintiffs were family members and Stephen's heirs and that Plaintiffs had an interest in the Richards Property under the 2006 Richards Trust Agreement.

         On February 3, 2014, Karl and Kathleen filed a Notice of Trust in Florida (where Helene lived and died), which said that notice was “mailed to attorney for the Personal Representative [i.e., Karl and Kathleen].” (Notice of Trust, attached as Ex. J to Proposed 2nd Am. Compl. and quoted in ¶ 49.) “The Notice of Trust was only mailed to McLin Burnsed, Karl and Kathleen's attorney, who drafted and prepared all the prior Helene trust documents, and had information concerning the prior trust agreements and ownership of prior trust assets, but never had his client provide any notice to potential creditors, including Plaintiffs, of Helene's death, her Trust, or her Estate.” (Proposed 2nd Am. Compl. ¶ 50.) No other party received notice. And then, only one day later, on February 4, 2014, the trust proceeding was closed. The Richards Property was distributed to Defendants Richards Ohland, Raymond Ohland, A.O. and K.O. According to Plaintiffs, Karl and Kathleen concealed that information from Plaintiffs in order to let Plaintiffs' claims lapse.

         On August 25, 2017, less than one year after learning of Helene's death, the Plaintiffs filed this action.

         ANALYSIS

         Standard of Review

         Under Rule 15(a)(2) of the Federal Rules of Civil Procedure, the court should freely give leave to amend “when justice so requires.” Leave should be denied if the court finds “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment ….“ Foman v. Davis, 371 U.S. 178, 192 (1962) (emphasis added).

         Defendants oppose the motion to amend, contending they will be unduly prejudiced and that amendment would be futile because it would not survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Gohier v. Enright, 186 F.3d 1216, 1218 (10th Cir. 1999) (holding that a proposed amendment is futile if the complaint, as amended, would be subject to dismissal for any reason, including failure to state a claim for relief that can be granted). When evaluating a complaint under Rule 12(b)(6), the court must accept all well-pleaded factual allegations as true and construe allegations in the light most favorable to the non-movant. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). If the proposed complaint states a claim for relief that is plausible on its face, the motion for leave to amend should be granted. See id. (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

         Defendants' Alleged Undue Prejudice

         According to the Defendants, they will be unduly prejudiced for two reasons.

         First, they contend that two witnesses are no longer alive and, accordingly, “there is little reliable evidence” of the events subject to Plaintiffs' proposed complaint. (Defs.' Opp'n Mot. File 2nd Am. Compl. at 4, ECF No. 25.) But the court is not evaluating evidence at this stage in the proceedings. Whether Plaintiffs have a proof problem is not an issue that can be determined in this context.

         Second, they assert that if the Plaintiffs are allowed to continue with their proposed claims, Defendants will incur “significant costs, expenses and attorney fees” defending against claims that they believe have no merit. (Id.) That is not a sufficient reason to deny leave to amend. See, e.g., Bylin v. Billings, 568 F.3d 1224, 1230 (10th Cir. 2009) (“the expenditure of time, money, and effort alone is not grounds for a finding of prejudice” under Rule 15(a)(2)); Minter v. Prime Equip. Co., 451 F.3d 1196, 1207 (10th Cir. 2007) (“Courts typically find prejudice only when the amendment unfairly affects the defendants ‘in terms of preparing their defense to the amendment.'”) (quoting Patton v. Guyer, 443 F.2d 79, 86 (10th Cir. 1971)).

         Sufficiency of Allegations

         1. ...


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