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Willis v. Smith

United States District Court, D. New Mexico

February 13, 2017

BOBBY WILLIS, Counterdefendant.


         In the COMPLAINT FOR FRAUD AND OTHER CLAIMS (Doc. No. 1-1), Plaintiffs Bobby L. Willis (Willis), individually and as trustee of the Bobby L. Willis and Carrie S. Willis Trust; Willis Asset Management, LLC; JTB Development Properties 3, LLC (JTB 3); and JTB Development Properties 4, LLC (together Plaintiffs) assert claims against Defendants Quentin Smith (Smith) and Storey & Clyde, Inc. (together Defendants) arising out of a failed real estate development in Kirtland, New Mexico. The case was removed from the Eleventh Judicial District Court, San Juan County, New Mexico under this Court's diversity jurisdiction. 28 U.S.C. § 1332(a). In the SECOND MOTION TO DISMISS: CLAIMS CONCERNING ALLEGED INVESTMENT AND CONSTRUCTIVE TRUST OF GEMSTONES, JEWELRY, AND ORGANS (Doc. No. 35) (Motion), Defendants seek dismissal of all claims related to Smith's alleged promise to invest gemstones, jewelry, and antique concert organs in exchange for an ownership interest in Americas Medical Clinic, LLC (AMC) and JTB 3. The Motion has been fully briefed. See RESPONSE TO DEFENDANTS' MOTION TO DISMISS CLAIM REGARDING GEMSTONES, JEWELRY, AND ORGANS (Doc. No. 50); and DEFENDANTS' REPLY ON MOTION TO DISMISS CLAIMS CONCERNING ALLEGED INVESTMENT AND CONSTRUCTIVE TRUST OF GEMSTONES, JEWELRY, AND ORGANS (Doc. No. 60) (Reply). The Court will grant the Motion in part and deny the Motion in part.


         Defendants move to dismiss under Rule 12(b)(6). After the close of the pleadings, however, a motion to dismiss is evaluated as a Rule 12(c) motion for judgment on the pleadings. Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 n.2 (10th Cir. 2002). Motions under Rule 12(c) are decided under the same standard as motions under Rule 12(b)(6). In ruling on the Motion, the Court must “assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted.” Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991). The court must “accept as true all well-pleaded facts [in the complaint], as distinguished from conclusory allegations, and view the facts in the light most favorable to the nonmoving party. . . .” Archuleta v. Wagner, 523 F.3d 1278, 1283 (10th Cir. 2008) (quotation and alteration omitted). However, the Court is under no obligation to accept bare conclusory allegations. Hall v. Belmon, 935 F.2d 1106, 1110 (10th Cir. 1991). Nor is the Court required to accept legal conclusions without factual support. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). To summarize, a complaint must contain sufficient factual allegations “to raise a right to relief above the speculative level, . . . on the assumption that all the allegations in the complaint are true.” Twombly, 550 U.S. at 555.

         In deciding Rule 12(b)(6) and Rule 12(c) motions, courts typically consider only the facts alleged in the complaint. County of Santa Fe v. Pub. Serv. Co. of N.M., 311 F.3d 1031, 1035 (10th Cir. 2002). Nevertheless, courts may review documents referred to in a complaint, if the documents are central to the plaintiff's claim and the parties do not dispute their authenticity. Id. And, courts may also take judicial notice of documents that are in the public record. S.E.C. v. Goldstone, 952 F.Supp.2d 1060, 1190 (D.N.M. 2013).


         A. General Allegations

         In 2011, Ronnie Garner (Garner) presented a plan for construction of a project called the Americas Medical Clinic. (Compl. ¶ 11.) Smith and Garner formed a limited liability company named Americas Medical Clinic, LLC (AMC). (Id. ¶¶ 9, 17.)[1] In August 2011, Garner hired Smith as project manager for the “various AMC companies.” (Id. ¶ 12.) Willis invested his own property in the AMC project based on representations made by Smith. (Id. ¶ 19.)[2] Due to Smith's mismanagement, the AMC project “collapsed resulting in significant financial losses to the Bobby Willis Plaintiffs.” (Id. ¶ 24.)

         “Smith delivered gemstones and jewelry to Willis as his investment in AMC and companies related to AMC (Exhibit 11)[, ]” and Smith “exchanged his gemstones and jewelry as an investment in AMC or JTB 3 LLC.” (Compl. ¶¶ 26-27.) Smith, Garner, Michael Atchison (Atchison) and Willis “all met in or around December 29, 2011 and negotiated an agreement confirmed by the attached Exhibit 14 whereby [Smith] transferred his jewelry, gemstones and antique organs for an alleged interest in JTB 3, LLC and AMC.” (Compl. ¶ 29.) “This handwritten agreement was then confirmed by Addendums attached hereto as Exhibit 15 dated December 29, 2011 whereby [Smith] was to acquire the 5% interest in AMC and JTB 3, LLC.” (Compl. ¶ 30.)

         Exhibit 11 is an unauthenticated email from Garner to Willis proposing “that the jewels held by Bobby Willis as asset for the ownership portion of JTB #3, LLC of Quentin Smith be returned to Quentin Smith.” Exhibit 14 is incomplete, does not name what entity it is related to, and has illegible handwritten notes on it. Exhibit 15 consists of two pages entitled “Addendums” dated December 29, 2011 that outline the “new” percentage ownership interests of several individuals in AMC and JTB 3. Smith is listed as having a 5% interest in each entity, and Smith's alleged signature appears on the bottom of each Addendum. Even though these exhibits are attached to the Complaint and appear to be central to the claims, the Court will not consider these exhibits because they are unauthenticated and either illegible or inexplicable. The Court will consider this Motion under the Rule 12 standards and not under the Rule 56 summary judgment standards.

         In the Complaint, Plaintiffs allege that Smith breached the agreement to invest in AMC and/or JTB 3 because “he never delivered the antique organs; because he later filed false police reports claiming the jewelry and gemstones were embezzled by Bobby Willis and due to his breach of promises and duties relative to AMC and thus any alleged interest in AMC and JTB 3 should be forfeited.” (Id. ¶ 31.)

         “In or around June 24, 2012, Garner arranged for the delivery of [Smith's] gemstones and jewelry to Branson, Missouri because Garner wanted to keep the gemstones and jewelry in a secured location[.]” (Compl. ¶ 33.) At the direction and control of Garner, and with the consent of Smith, all of the gemstones and jewelry were inventoried and stored in an underground storage facility in Branson, Missouri. (Id. ¶ 34.) Soon thereafter, Smith claimed that Willis embezzled the gemstones and jewelry, and the State of New Mexico seized the property from the storage facility and held it as evidence in the criminal case against Willis. (Id. ¶¶ 36-39.) See State v. Bobby Willis, Case No. M-47-FR-201200600. Smith told New Mexico authorities that the gemstones and jewelry were valued at over $5 million, but the property was actually worth far less. (Id. ¶¶ 42-44.) An appraiser for the State of New Mexico estimated that the value of many of the gemstones and jewelry was far lower than the value claimed by Smith. (Id. ¶ 43.)

         B. Claims Related to the Gemstones and Jewelry

         In Claim II, Plaintiffs allege that Smith negligently or intentionally provided false appraisals of “watches, jewelry and gemstones to which Bobby Willis and his related companies relied upon to their financial detriment.” (Id. 57A.) Plaintiffs also allege that Smith made false statements to law enforcement officials. (Id. ¶ 57B.)

         In Claim III, Plaintiffs allege that Smith “agreed to exchange his gemstones, jewelry and organs to AMC” for a 5% interest in AMC, and “Smith breached his agreement by failing to deliver all the promised goods, [and] by demanding return of the gemstones and jewelry[.]” (Id. ¶ 64.) Plaintiffs also allege that Smith may have “unilaterally taken action to grant himself larger percentages of AMC and/or JTB 3 than he deserved.” (Id. ¶ 68.)

         In Claim VI, Plaintiffs assert that Smith engaged in racketeering in connection with the failed business of AMC and JTB 3. (Id. ¶ 78.) In Claim VII, Plaintiffs allege that Smith is liable for malicious abuse of process for making false reports to law enforcement authorities that Willis embezzled Smith's gemstones and jewelry. (Id. ¶ 82.) In Claim VIII, Plaintiffs assert that Smith is liable for defamation for reporting that Willis “engaged in criminal activities” by embezzling Smith's gemstones and jewelry. (Id. ¶¶ 83-84.)

         In Claim X, Plaintiffs ask the Court to impose a constructive trust “on the gemstones and jewelry for the benefit of the Bobby Willis Plaintiffs or other potential parties damaged as a result of the fraudulent or negligent acts of Quentin Smith.” (Id. ¶ 94.) Plaintiffs also contend that the “gemstones and jewelry should be sold and the proceeds escrowed in the Court Registry pending the outcome of this case and potential recovery by the Bobby Willis Plaintiffs.” (Id. ¶ 95.) In Claim XI, Plaintiffs assert a claim for prima facie tort alleging that Smith intentionally caused harm to the Plaintiffs without justification. (Id. 97.)

         Defendants ask the Court to dismiss all claims related to Smith's gemstones and jewelry. Defendants assert that Smith is “one of many victims of Plaintiff Bobby Willis' schemes to defraud Smith and others through a series of business relationships among Willis, Smith, and many other third parties.” (Mot. at 2.) Smith contends that he did not deliver gemstones and jewelry to Willis in exchange for a 5% interest in AMC and JTB 3 but merely gave the gemstones and jewelry to Willis to store in a safe while Smith was visiting New Mexico.[3] In the Reply, however, Smith admits that he “brought the gemstones and jewelry to New Mexico at Bobby Willis's request as a possible investment.” (Reply at 7.)[4]


         A. ...

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