Ivan v. Wells Fargo Bank NA et al

Filing 10

ORDER denying 4 Wells Fargo's Motion to Dismiss. ORDER that the stipulation 9 is denied, without prejudice. Signed by Judge James A Teilborg on 7/30/12.(TLJ)

1

WO

2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE DISTRICT OF ARIZONA

8
9

Florin V. Ivan,
Plaintiff,

10
11

vs.

12
Wells Fargo Bank, N.A.,
13
Defendant.
14

)
)
)
)
)
)
)
)
)
)
)
)

No. CV 12-1065-PHX-JAT
ORDER

15
16

Plaintiff filed suit in this case alleging breach of the covenant of good faith and fair

17

dealing as to Defendant Wells Fargo, a violation of the Arizona Consumer Fraud Act as to

18

a yet unnamed Doe Defendant, and tortious interference with a contractual relationship

19

and/or negligence as to other yet unnamed Doe Defendants. Defendant Wells Fargo moves

20

to dismiss arguing Plaintiff has failed to state a claim under Federal Rule of Civil Procedure

21

12(b)(6).

22

I.

23

Plaintiff has a line of credit, in the amount of $229,000, with Defendant Wells Fargo,

24

secured by a piece of real property. On March 22, 2011, Plaintiff owed $102,000.00 on the

25

account. On March 23, 2011, Plaintiff attempted to draw down the line of credit another

Background1

26
27
28

1

The facts are from Plaintiff’s complaint and are taken as true for purposes of a
motion under 12(b)(6). See Shwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000).
Further, Defendant does not appear to dispute any of these facts.

1

$126,000.00 (for a total outstanding balance of $228,000.00). Defendant refused to disburse

2

the additional $126,000.00. Later that same day, Defendant disbursed an additional $500.00

3

on the line of credit at Plaintiff’s request. As indicated above, Plaintiff is suing for a breach

4

of the covenant of good faith and fair dealing due to Defendant Wells Fargo’s refusal to

5

make the requested $126,000.00 distribution.

6

II.

12(b)(b)

7

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

8

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

9

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

10

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

11

Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)(quoting Conley v. Gibson, 355 U.S. 41,

12

47 (1957)). Also, a complaint must contain sufficient factual matter, which, if accepted as

13

true, states a claim to relief that is “plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,

14

678 (2009).
A.

15

Breach of the Covenant of Good Faith and Fair Dealing

16

Plaintiff claims that Defendant Wells Fargo violated the covenant of good faith and

17

fair dealing by refusing to make a distribution that was within the monetary limit of the line

18

of credit. Defendant Wells Fargo moves to dismiss arguing that the contract contains six

19

reasons it can suspend or close the account and that: 1) Defendant can “reduce” the line of

20

credit for all the reasons it can suspend or close the account, and 2) Plaintiff has failed to

21

plead that none of these six reasons would justify Defendant’s actions in this case.2 See Doc.

22

4-1 at 10, § 18. Plaintiff responds and argues that nothing in this section of the contract

23

allows for a “reduction” in the line of credit and the Bank’s failure to honor the line of credit

24

is sufficient to state a claim. Specifically, Plaintiff claims that the contract is clear that if the

25

account is not closed or suspended (and his was not), then advances “shall be considered

26
2

27
28

And particularly Defendant is focused on the provision that allows the account to
be closed or suspended if, “the value of the Property declines significantly below its original
appraised value... .” Doc. 4-1 at 10, § 18.
-2-

1
2
3
4
5
6

obligatory.” Doc. 5 at 4.
In Southwest Sav. And Loan Ass’n v. SunAmp Sys., 838 P.2d 1314, 1320 (Ariz. App.
1992), the Court stated:
In this case, therefore, inquiry does not end with recognition that Southwest
had contractual authority to freeze, and ultimately terminate, SunAmp’s credit
line. The question is whether the jury might reasonably have found that
Southwest wrongfully exercised this power “for a reason beyond the risks”
that SunAmp assumed in its loan agreement, [citation omitted] or for a reason
inconsistent with SunAmp’s “justified expectations,”...

7
Similarly, summarizing SunAmp, the court in Bike Fashion Corp. v. Kramer, 46 P.3d
8
431, 435 ¶ 17 (Ariz. App. 2002) stated:
9
10
11
12
13
14

...a party may breach the implied covenant of good faith and fair dealing even
if the express terms of the contract speak to a related subject. In SunAmp
Systems, 172 Ariz. at 559, 838 P.2d at 1320, the court examined whether
Southwest Savings wrongfully exercised its contractual authority to freeze
SunAmp’s credit line for a “reason inconsistent with SunAmp’s ‘justified
expectations’” under the contract. Although the court determined that
“SunAmp had no justifiable expectation that a reasonable lender would [have]
act[ed] differently,” id. at 561, 838 P.2d at 1322, the court nevertheless
examined whether Southwest Savings had breached the covenant of good faith
and fair dealing despite the existence of a contract term granting Southwest
Savings discretion to freeze SunAmp’s credit line.

15
Thus, the result of SunAmp is that a party can state a claim for breach of the covenant
16
of good faith and fair dealing in the context of failing to allow an advance on a line of credit
17
even when the contract gives the lender the authority to freeze the line of credit. Because
18
Plaintiff has alleged that Defendant Wells Fargo failed to allow him to take an advance on
19
his line of credit inconsistent with his expectations, and Plaintiff has provided factual
20
specifics on when and how he attempted to take the advance, Plaintiff has sufficiently stated
21

a claim that survives a motion to dismiss.3

22
23
24
25
26
27
28

3

Because the Court finds that Plaintiff states a claim even assuming Defendant is
correct that: (1) the contract allowed it to reduce the line of credit, and (2) the property
securing the line of credit decreased in value, the Court need not reach Defendant Wells
Fargo’s argument that, to state a claim, Plaintiff must affirmatively plead that none of the
exceptions in the contract exist. However, the Court notes that issues like whether the
property declined in value significantly from the original appraisal are unlikely to be able to
be determined on a 12(b)(b) motion.
-3-

1

B.

Claims Against Doe Defendants

2

Wells Fargo’s motion to dismiss sought dismissal of claims against Wells Fargo only.

3

Doc. 4 at 5, lines 2-3. Accordingly, the Court need not consider whether the claims against

4

the Doe Defendants raised in Counts 2 and 3 state a claim.

5

With respect to these Doe Defendants, the parties have filed a stipulation seeking an

6

extension of time for Plaintiff to identify and serve the Doe Defendants. Generally, the

7

Federal Rules of Civil Procedure do not permit the use of Doe defendants. See, e.g., Fed. R.

8

Civ. P. 10(a); Craig v. U.S., 413 F.2d 854, 856 (9th Cir.), cert. denied, 396 U.S. 987 (1969).

9

However, situations arise, such as the present, where the identity of alleged
defendants will not be known prior to the filing of a complaint. In such
circumstances, the plaintiff should be given an opportunity through discovery
to identify the unknown defendants, unless it is clear that discovery would not
uncover the identities, or that the complaint would be dismissed on other
grounds.

10
11
12

Gillespie v. Civiletti, 629 F.2d 637, 642-43 (9th Cir. 1980).
13
Thus, the Court can permit limited discovery to allow a Plaintiff to discover the
14
identity of the fictitious defendants. See Third Degree Films, Inc. v. Does 1-131, 2012 WL
15
692993, **6-7 (D. Ariz. March 1, 2012)(discussing limited Rule 26(d) discovery for the
16
purpose of identifying John and Jane Doe defendants).
17
Here, Plaintiff has named 400 fictitious defendants. This runs afoul of the limited
18
circumstances when a fictitious defendant might be used to identify a specific person or
19
entity whose name Plaintiff could not learn before filing the complaint.
20
Thus, on this record, the Court will not grant the unlimited stipulation as proposed by
21
the parties. Instead, as part of the Rule 26(f)/16 proposed case management plan, the parties
22
shall propose: 1) an early, expedited deadline by which Plaintiff will complete discovery to
23
learn the identity of any Doe Defendants; 2) an early, expedited date by which Plaintiff will
24
amend the complaint to add the real names of the Defendants in counts 2 and 3 and dismiss
25
any remaining fictitious defendants; and 3) a very short deadline following the filing of the
26
amended complaint by which Plaintiff will serve any newly added Defendants.
27
28
-4-

1

III.

2

IT IS ORDERED that Defendant Wells Fargo’s motion to dismiss (Doc. 4) is denied.

3

IT IS FURTHER ORDERED that the stipulation (Doc. 9) is denied, without

4
5

Conclusion

prejudice, as indicated above.
DATED this 30th day of July, 2012.

6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
-5-