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Harris v. Mundel

United States District Court, W.D. Washington, Seattle

July 26, 2018

CAROLYNNE R. HARRIS, as Trustee of the EDITH HEINEMANN HARRIS TRUST, Plaintiff,
v.
DAVID S. MUNDEL, as Trustee of the AUGUST B. MUNDEL and JOAN WEBB MUNDEL TRUST, Defendant.

          ORDER

          THE HONORABLE RICHARD A. JONES UNITED STATES DISTRICT JUDGE

         I. INTRODUCTION

         This matter comes before the Court on Defendant David S. Mundel's Motion to Dismiss. Dkt. # 4. Plaintiff Carolynne R. Harris opposes the Motion. Dkt. # 10. For the reasons set forth below, the Court GRANTS Defendant's Motion. Dkt. # 4.

         II. BACKGROUND

         As a preliminary matter, Defendant submitted several documents in support of his Motion. Dkt. ## 5-7. Defendant requests that the Court take judicial notice of some of the documents because their contents are alleged in the Complaint and Plaintiff does not question their authenticity. Defendant further requests that the Court take judicial notice of the other submitted documents because they are documents from state court proceedings that he alleges are related to this matter.

         Under Federal Rule of Evidence 201, “[t]he court may judicially notice a fact that is not subject to reasonable dispute because it: (1) is generally known within the court's territorial jurisdiction; or (2) can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.” Fed.R.Evid. 201. A court can take judicial notice of undisputed matters of public record, including documents on file in federal or state courts. Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001); see also Bennett v. Medtronic, Inc., 285 F.3d 801, 803 n. 2 (9th Cir. 2002). Documents not attached to a complaint may be considered if no party questions their authenticity and the complaint relies on those documents. Lee, 250 F.3d at 688; Harris v. Cty. of Orange, 682 F.3d 1126, 1131-32 (9th Cir. 2012).

         The Court takes judicial notice of the amended version of the 1988 Trust Agreement (Dkt. # 12 Ex. 1), the Edith Heinemann Harris Trust Agreement (Dkt. # 5 Ex. 2.), the Demand Promissory Note (09) (Dkt. # 5 Ex. 4), and the Demand Promissory Note (10) (Dkt. # 5 Ex. 5). All of these documents are documents “whose contents are alleged in a complaint and whose authenticity no party questions, but which are not physically attached to the [Plaintiff's] pleading.” Knivel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). Plaintiff filed this lawsuit as trustee of the Edith Heinemann Harris Trust (“Heinemann Harris Trust”) and the Complaint specifically references both Demand Promissory Notes. The amended version of the 1988 Trust Document was submitted by Plaintiff in response to Defendant's Motion, and neither party questions its authenticity. The Court also takes judicial notice of the remaining documents submitted by both parties as they are documents on file in other state courts. Dkt. # 5 Ex. 3; Dkt. # 6 Exs. 6-16; Dkt. # 7 Exs. 17-19; Dkt. # 12 Ex. 2.

         The following is taken from Plaintiff's Complaint, which is assumed to be true for the purposes of this motion to dismiss, as well as other documents that have been judicially noticed as noted above. Sanders v. Brown, 504 F.3d 903, 910 (9th Cir. 2007).

         Plaintiff is Trustee of the Heinemann Harris Trust. Dkt. # 1. Defendant is a trustee of the August B. Mundel and Joan Webb Mundel Trust (the “1988 Trust”). Id. at ¶ 2. The 1988 Trust has two co-trustees: Defendant, and Laurence Harris. Dkt. # 12 Ex. 1; Dkt. # 5 at ¶ 4; Dkt. # 11 at ¶ 3. Laurence Harris is the husband of Plaintiff. Dkt. # 11 at ¶ 4. The 1988 Trust was formed by August B. Mundel and Joan Webb Mundel, who married in 1969. Dkt. # 5 at ¶ 2. Joan had three children from a previous marriage: Timothy Harris, Laurence Harris, and Geoffrey Harris (the “Harris Family”). Id. All three Harris children are beneficiaries of the 1988 Trust. Defendant and two of his nieces, Helaine Libowitz Miserendino and Wendy Waxman (the “Mundel Family”), are also beneficiaries of the 1988 Trust. Id.

         On or about July 3, 2007, the Mundel Family, filed a lawsuit against Timothy Harris in the New York Supreme Court for Westchester County (the “New York Lawsuit”), alleging that Timothy had misappropriated nearly $1, 000, 000 in assets from the 1988 Trust. Dkt. # 6 Ex. 6. On June 10, 2010, the parties in the New York Lawsuit reached a settlement. Dkt. # 6 Ex. 8. At that time, Anthony Piscionere represented that he was counsel for the Harris Family. Dkt. # 6 Ex. 7. Laurence Harris and Geoffrey Harris were not named parties in that dispute. Dkt. # 5 Ex. 3. The parameters of the stipulation of settlement were stated on the record. Dkt. # 5 Ex. 3. The parties agreed that their experts would work together to determine the “amount of monies that should be in all of the trusts and the Estate of Joan Webb Mundel, ” and that the trusts included “the 1988 Trust . . . a 1988 [sic] Trust, a 2005 Trust, and the Heinemann Harris Trust, to the extent that it applies to these parties' monies.” Id. at 3. On August 10, 2011, Steven Kaplan was appointed as an “impartial accountant” and instructed to ascertain the value of all of the assets of the 1988 Trust, the Mundel Life Insurance Trust (the “1998 Trust”), the 2005 Joan Webb Mundel Living Trust (the “2005 Trust”), and the Heinemann Harris Trust “to the extent that trust contains assets of the aforementioned Mundel Trusts and any other trust containing assets of August or Joan Mundel.” Dkt. # 6 Ex. 8 at 2; Dkt. # 5 at ¶ 6. The August 10, 2011 Order also states that after Kaplan determined the value of all of the assets, the determination would be binding on all of the parties and on Laurence Harris and Geoffrey Harris, and that the Court would then issue an order and judgment distributing the assets in the agreed upon percentages as set forth in the June 10, 2010 stipulation of settlement. Id. Kaplan made interim determinations in November 2013 and March 2014, and a final arbitrator's determination in September of 2014. Dkt. # 6 Exs. 9-11.

         On October 3, 2014, the Mundel Family moved to confirm the September 2014 arbitrator's determination and for entry of judgment. Dkt. # 6 Ex. 12. Timothy Harris' counsel filed a response to the Motion requesting that the New York state court stay execution of a final judgment until the parties' related obligations and payments were determined and satisfied. Dkt. # 6 Ex. 13. On November 15, 2014, Timothy Harris died. Upon his death, Laurence Harris took his place as co-trustee of the 1988 Trust. On September 8, 2015, the New York state court granted the Mundel Family's motion to confirm the arbitration award. Dkt. # 6 Ex. 14. Timothy Harris' executor did not oppose the confirmation of the award, arguing instead that the Mundel Family was not entitled to the judgment until the trust's assets were liquidated to satisfy the arbitration award. Id. The judgment was then amended on April 6, 2016. Dkt. # 6 Ex. 16. On May 25, 2016, the Mundel Family registered the September 8, 2015 Judgment in Snohomish County, Washington. Dkt. # 7 Ex. 17. On October 28, 2016, Laurence Harris, in his capacity as co-trustee of the 2005 Trust, beneficiary of the Estate of Joan Webb Mundel, and co-trustee of the 1988 Trust, and Plaintiff, as co-trustee of the 2005 Trust, filed a motion for order vacating the September 8, 2015 Judgment. Dkt. # 7 Ex. 18. On November 28, 2016, the New York state court issued an order to show cause and temporary restraining order imposing a stay of all actions and efforts to enforce the September 8, 2015 Judgment. Dkt. # 7 Ex. 19. Pursuant to this November 28, 2016 Order, the parties to the Washington state court proceedings agreed to stay the matter pending resolution of the New York Lawsuit. Id.

         There are two promissory notes at issue in this case: Demand Promissory Note (09) and Demand Promissory Note (10). Dkt. # 1 ¶¶ 7, 8. Both promissory notes are dated February 21, 2007 and are made out to Plaintiff. Dkt. # 5 Exs. 4, 5. Demand Promissory Note (09) is for the original principal sum of $192, 664.35 and is witnessed by Laurence Harris and signed by Timothy Harris in his capacity as trustee of the 1988 Trust. Dkt. # 5 Ex. 4. Demand Promissory Note (10) is for the original principal sum of $85, 219.99 and is also witnessed by Laurence Harris and signed by Timothy Harris in his capacity as trustee of the 1988 Trust. Dkt. # 5 Ex. 5. The total original principal sum of both promissory notes is $277, 884.34. The Heinemann Harris Trust is the assignee and holder of both promissory notes. Dkt. # 1 at ¶ 11. Defendant alleges that these notes were included as part of the settlement of the New York Lawsuit.

         The Heinemann Harris Trust is mentioned in all three arbitration determinations issued in the New York Lawsuit. In the November 2013 determination, Kaplan noted that funds were transferred from the 1988 Trust to the Heinemann Harris Trust and subsequently transferred back. Kaplan questioned the propriety of the transaction. Dkt. # 6 Ex. 9. In the March and September 2014 updated arbitration determinations, Kaplan stated that he received additional information from Laurence Harris, some of which related to “the issues of loans and [settlement] related issues concerning the Heinemann Trust.” Dkt. # 6 Exs. 10, 11. According to Kaplan, Laurence Harris expressed his view that “loans 9 and 10 are Investments in demand promissory notes totaling $277, 884.34. [Laurence Harris] further annotated that loans 9 and 10 are unregistered securities. The gist of this is that he justified the loans as investment securities. . . .” Id. Kaplan further stated that, whether or not the loans were lawful by the terms of the trust, “[the Heinemann Harris Trust] has put forth funds with an expectation of repayment and such outstanding balances shall be respected.” Id. However, “as with all other loans discussed in the initial determination, there shall be no provision for interest.” Id.

         Plaintiff filed this lawsuit on July 21, 2017, seeking entry of a judgment against the 1988 Trust for the amount owed on both promissory notes, legal fees, and other costs. Dkt. # 1. Defendant moves to dismiss Plaintiff's Complaint pursuant ...


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