Federal Deposit Insurance Corporation v. Gannett et al

Filing 26

ORDER granting Kathryn Gannett's 9 Motion to Dismiss. Mrs. Gannett shall be dismissed as a party. (See document for further details). Signed by Judge James A Teilborg on 7/13/11.(LAD)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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The Federal Deposit Insurance)
Corporation solely as Receiver for)
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Wheatland Bank,
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Plaintiff,
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vs.
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Douglas Gannett and Kathryn Gannett,)
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husband and wife,
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Defendants.

No. CV10-02726-PHX-JAT
ORDER

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Currently pending before the Court is Defendant Kathryn Gannett’s Motion to
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Dismiss (Doc. 9). The Court now rules on the Motion.
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BACKGROUND
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This case arises from an alleged breach of contract by Defendant Douglas Gannett.
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For a Rule 12(b)(6) Motion, all the well-pleaded allegations of the Complaint are deemed
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true. Movsesian v. Victoria Versicherung AG, 629 F.3d 901, 905 (9th Cir. 2010). On or
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about October 1, 2008, Wheatland Bank made a loan of $130,000 to 2nd Ave. Holdings,
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LLC. Defendant Douglas Gannett, manager of 2nd Ave. Holdings, made a personal guaranty
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of the loan. At that time, both Douglas Gannett and his wife, Defendant Kathryn Gannett,
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were domiciled in Illinois, although they are now residents of Arizona.
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2nd Ave. Holdings defaulted on the loan, and Douglas Gannett failed to pay as
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guarantor. Plaintiff Federal Deposit Insurance Corporation (“FDIC-R”), solely as Receiver
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for Wheatland Bank, has filed this action seeking judgment for $125,000 plus continuing

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interest, attorneys’ fees, costs, and such other relief as the Court deems just. FDIC-R seeks

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to collect against the separate and community property of Douglas Gannett.

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FDIC-R asserts that Kathryn Gannett is joined solely to ensure compliance with

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A.R.S. § 25-215(D) to the extent that recovery under the guaranty may be from the Gannetts’

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community property. No judgment is sought against the separate property of Kathryn

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Gannett.

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LEGAL STANDARD

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Kathryn Gannett has moved pursuant to Federal Rule of Civil Procedure 12(b)(6) to

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dismiss all claims against her. The Court may dismiss a complaint for failure to state a claim

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under 12(b)(6) for two reasons: 1) lack of a cognizable legal theory and 2) insufficient facts

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alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696,

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699 (9th Cir. 1990).

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To survive a 12(b)(6) motion for failure to state a claim, a complaint must meet the

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requirements of Federal Rule of Civil Procedure 8(a)(2). Rule 8(a)(2) requires a “short and

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plain statement of the claim showing that the pleader is entitled to relief,” so that the

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defendant has “fair notice of what the . . . claim is and the grounds upon which it rests.” Bell

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Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S.

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41, 47 (1957)).

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Although a complaint attacked for failure to state a claim does not need detailed

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factual allegations, the pleader’s obligation to provide the grounds for relief requires “more

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than labels and conclusions, and a formulaic recitation of the elements of a cause of action

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will not do.” Id. (internal citations omitted). The factual allegations of the complaint must

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be sufficient to raise a right to relief above a speculative level. Id. Rule 8(a)(2) “requires a

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‘showing,’ rather than a blanket assertion, of entitlement to relief. Without some factual

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allegation in the complaint, it is hard to see how a claimant could satisfy the requirement of

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providing not only ‘fair notice’ of the nature of the claim, but also ‘grounds’ on which the

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claim rests.” Id. at 556 n.3 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure
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§1202, pp. 94, 95(3d ed. 2004)).

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Rule 8’s pleading standard demands more than “an unadorned, the-defendant-

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unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(citing

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Twombly, 550 U.S. at 555). A complaint that offers nothing more than naked assertions will

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not suffice. Id. To survive a motion to dismiss, a complaint must contain sufficient factual

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matter, which, if accepted as true, states a claim to relief that is “plausible on its face.” Id.

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Facial plausibility exists if the pleader pleads factual content that allows the court to draw

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the reasonable inference that the defendant is liable for the misconduct alleged. Id.

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Plausibility does not equal “probability,” but plausibility requires more than a sheer

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possibility that a defendant has acted unlawfully. Id. “Where a complaint pleads facts that

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are ‘merely consistent’ with a defendant’s liability, it ‘stops short of the line between

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possibility and plausibility of entitlement to relief.’” Id. (citing Twombly, 550 U.S. at 557).

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In deciding a motion to dismiss under Rule 12(b)(6), the Court must construe the facts

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alleged in the complaint in the light most favorable to the drafter of the complaint, and the

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Court must accept all well-pleaded factual allegations as true. See Shwarz v. United States,

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234 F.3d 428, 435 (9th Cir. 2000). Nonetheless, the Court does not have to accept as true

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a legal conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286

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(1986).

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ANALYSIS

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Kathryn Gannett argues that FDIC-R has failed to state a claim against her as a matter

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of law. In support of its claim, FDIC-R cites A.R.S. § 25-215(D), which reads, “Except as

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prohibited in § 25-214, either spouse may contract debts and otherwise act for the benefit of

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the community. In an action on such a debt or obligation the spouses shall be sued jointly.

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. . .” Ariz. Rev. Stat. Ann. § 25-215(D) (2007). FDIC-R offers no other grounds in its

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Complaint for relief against Kathryn Gannett.1 “In determining the propriety of a Rule

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Although not raised in the Complaint, FDIC-R now asserts that Illinois law should
control the Court’s analysis. While the Response makes first mention of this argument, it
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12(b)(6) dismissal, a court may not look beyond the complaint to a plaintiff’s moving papers,

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such as a memorandum in opposition to a defendant’s motion to dismiss.” Schneider v.

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California Dep’t of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998).

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The exception to § 25-215(D) is § 25-214, which reads, in relevant part, “Either

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spouse separately may acquire, manage, control or dispose of community property or bind

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the community, except that joinder of both spouses is required in . . . [a]ny transaction of

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guaranty, indemnity or suretyship.” Ariz. Rev. Stat. Ann. § 25-214(C) (2007). “Joinder” in

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this section refers not to joinder of parties under Federal Rules of Civil Procedure 19 or 20,

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but to the execution of the guaranty. See Rackmaster Sys., Inc. v. Maderia, 193 P.3d 314,

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317 (Ariz. Ct. App. 2008). The plain meaning of § 25-214(C) is that both spouses must sign

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a guaranty in order to bind the community under Arizona law. See id.; Citibank (Arizona)

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v. Van Velzer, 982 P.2d 833, 837 (Ariz. Ct. App. 1998), cited with approval in Butler v. IMA

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Regiomontana S.A. de C.V., No. 98-16735, 2000 WL 127125, at *7 n.6 (9th Cir. Feb. 3,

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2000).

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The Complaint does not allege that Kathryn Gannett was a party to the guaranty. The

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guaranty does not bear her signature (Doc. 1-1). Kathryn Gannett was joined solely to

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comply with the requirements of § 25-215(D) regarding recovery against community

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property, but § 25-214(C) makes clear that such recovery is impossible without her signature

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on the guaranty. A.R.S. § 25-215(D) therefore cannot be the basis for this claim against

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Kathryn Gannett, and the Court will grant Kathryn Gannett’s Motion to Dismiss.

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Accordingly,

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IT IS ORDERED GRANTING Defendant Kathryn Gannett’s Motion to Dismiss

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does not cite to any Illinois law. Furthermore, the Illinois statute referenced in oral
argument—750 Ill. Comp. Stat. 65/12 (2011)—does not appear to apply to this case. While
it does speak to one spouse binding the other in contracts and encumbrances, it is expressly
limited to situations where a court has granted special powers to one spouse following the
imprisonment of or abandonment by the other spouse. See id.; 750 Ill. Comp. Stat. 65/11
(2011). Because FDIC-R has not cited to any relevant Illinois law in support of its claim, the
Court will not consider FDIC-R’s Illinois law argument.
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(Doc. 9). Mrs. Gannett shall be dismissed as a party.
DATED this 13th day of July, 2011.

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