Foster v. Wells Fargo Bank NA
Filing
15
ORDER, Defendant Wells Fargo's Motion to Dismiss 8 is granted; directing the Clerk to terminate this action and enter judgment accordingly. Signed by Judge G Murray Snow on 3/10/14.(REW)
1
WO
2
3
4
5
6
IN THE UNITED STATES DISTRICT COURT
7
FOR THE DISTRICT OF ARIZONA
8
9
Katie Foster,
No. CV-13-01701-PHX-GMS
Plaintiff,
10
11
v.
12
ORDER
Wells Fargo Bank NA,
13
14
15
Defendant.
Pending before the Court is Defendant Wells Fargo Bank NA’s Motion to
Dismiss. (Doc. 8.) For the following reasons, the Motion is granted.
16
BACKGROUND
17
This case arises from a letter from Defendant Wells Fargo approving a short sale
18
of real property by its owner, Shelly Ulestad (“Ulestad”), a non-party to this lawsuit.
19
Ulestad owned real property in Phoenix, Arizona. She reached an agreement with
20
Plaintiff Kate Foster to sell that property to Plaintiff in a short sale. Ulestad and
21
Plaintiff’s purchase contract contained a short sale addendum, which made clear that the
22
purchase contract provided a price for the property that would not fully satisfy either the
23
outstanding balance of Ulestad’s mortgage on the property, obtained through Wells
24
Fargo, or the second lien against the property held by Desert Schools Federal Credit
25
Union. (Doc. 1-1 ¶ 6.) Thus, the sale would not go forward until Ulestad received
26
permission from both lenders. (Id.)
27
Ulestad sought approval of the short sale. In response, in a letter dated May 13,
28
2013 (the “short sale approval letter”), America’s Serving Company, Wells Fargo’s loan
1
servicer and a division of Wells Fargo Home Mortgage, approved the short sale
2
transaction as long as Ulestad met certain requirements. (Doc. 1-1 at ¶ 11.) The letter
3
stated that if the requirements were met, Wells Fargo would approve the short sale, pay a
4
certain amount of the second mortgage to Desert Schools Federal Credit Union, and
5
ultimately release Ulestad from her Wells Fargo mortgage. (Id. at ¶¶ 13–15.) To comply
6
with the letter’s requirement that the sale be an arm’s length transaction, both Foster and
7
Ulestad signed an affidavit dated May 14, 2013, avowing that the sale was at arm’s
8
length. (Id. at ¶ 10.)
9
Ulestad and Plaintiff continued to go forward with the transaction and prepare for
10
the close of escrow. (Doc. 1-1 ¶ 11.) Plaintiff alleges that Wells Fargo did not indicate
11
that there was any problem with the transaction at this time. (Id.) On July 10, 2013, Wells
12
Fargo provided the final approval necessary to close escrow. (Id. ¶ 12.) On July 12, 2013,
13
Plaintiff and Ulestad closed escrow and lien payments were sent to Wells Fargo and to
14
Desert Schools Federal Credit Union. (Id. ¶ 13.) On this same day, Wells Fargo contacted
15
Plaintiff and told her that there were problems with the transaction and that they would
16
not provide a release of their lien on the property to complete the sale. (Id. ¶ 15.) The
17
problems identified by Wells Fargo were that title to the property had inappropriately
18
been placed into a trust, in violation of the short sale approval letter, and that Plaintiff had
19
reached an agreement to sell the property to a third party after the short sale closed, in
20
violation of the arm’s length affidavit. (Id. ¶ 16.) On July 15, 2013, the next business day
21
after the close of escrow, Wells Fargo returned the payoff funds. (Id. ¶17.) At some point
22
later, Wells Fargo noticed a trustee’s sale of Ulestad’s property through its trustee, First
23
American Title, scheduled for July 25, 2013. (Id. ¶¶ 22.)
24
Plaintiff filed the present action against Wells Fargo in Maricopa County Superior
25
Court on July 24, 2013. (Doc. 1-1.) She alleged breach of contract and breach of the
26
covenant of good faith and fair dealing, sought declaratory relief that the short sale
27
approval letter was a payoff statement and that she was entitled to specific performance,
28
and sought injunctive relief to enjoin the July 25 trustee’s sale of the property for the
-2-
1
pendency of the suit. (Id.) Plaintiff also filed a Motion for a Temporary Restraining Order
2
to halt the July 25 sale. (Doc. 1-1 at 31.) Later on July 24, Maricopa County Superior
3
Court Judge Robert Oberbillig granted Plaintiff’s Motion for a Temporary Restraining
4
Order, pending a hearing on the matter scheduled for July 30. (Doc. 1-1 at 34.) The
5
record indicates that this hearing was postponed, but the record does not indicate when, if
6
ever, the hearing occurred. (Doc. 1-1 at 43–47.) On August 16, 2013, Defendant removed
7
the case to this Court. (Doc. 1-1 at 27.)
8
Defendant now moves to dismiss on the grounds that Plaintiff’s allegations do not
9
support the existence of any contract between Plaintiff and Defendant and on the grounds
10
that the short sale approval letter was not a payoff statement, and thus cannot be enforced
11
by Plaintiff. (Doc. 8.)
DISCUSSION
12
13
I.
LEGAL STANDARD
14
Rule 12(b)(6) is designed to “test the legal sufficiency of a claim.” Navarro v.
15
Block, 250 F.3d 729, 732 (9th Cir. 2001). To survive dismissal for failure to state a claim
16
pursuant to Federal Rule of Civil Procedure 12(b)(6), a complaint must contain more than
17
“labels and conclusions” or a “formulaic recitation of the elements of a cause of action”;
18
it must contain factual allegations sufficient to “raise a right to relief above the
19
speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While “a
20
complaint need not contain detailed factual allegations . . . it must plead ‘enough facts to
21
state a claim to relief that is plausible on its face.’” Clemens v. DaimlerChrysler Corp.,
22
534 F.3d 1017, 1022 (9th Cir. 2008) (quoting Twombly, 550 U.S. at 570). “A claim has
23
facial plausibility when the plaintiff pleads factual content that allows the court to draw
24
the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft
25
v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). Plausibility
26
requires “more than a sheer possibility that a defendant has acted unlawfully.” Twombly,
27
550 U.S. at 555. Accordingly, a plaintiff must do more than employ “labels,”
28
“conclusions,” or a “formulaic recitation of the elements of a cause of action.” Id.
-3-
1
When analyzing a complaint for failure to state a claim under Rule 12(b)(6), “[a]ll
2
allegations of material fact are taken as true and construed in the light most favorable to
3
the nonmoving party.” Smith v. Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). However,
4
legal conclusions couched as factual allegations are not given a presumption of
5
truthfulness, and “conclusory allegations of law and unwarranted inferences are not
6
sufficient to defeat a motion to dismiss.” Pareto v. FDIC, 139 F.3d 696, 699 (9th Cir.
7
1998).
8
II.
APPLICATION
9
Defendant moves to dismiss on the grounds that Plaintiff has failed to state a
10
cognizable claim because she has failed to plead sufficient facts to establish that there
11
was a valid and enforceable contract between Plaintiff and Defendant. In addition,
12
Defendant argues that the short sale approval at issue in this case does not meet the
13
statutory definition of a payoff statement under Arizona law.
14
A.
The Letter is Not a Contract Between Plaintiff and Defendant
15
Defendant first moves to dismiss on the grounds that, if the short sale approval
16
letter is a contract, Plaintiff is not a party to that contract. Plaintiff asserts claims of
17
breach of contract and breach of the covenant of good faith and fair dealing. (Doc 1-1 ¶¶
18
25–36.) These claims are both predicated on Plaintiff’s allegation that the short sale
19
approval letter sent from Defendant to Ulestad is a valid and enforceable contract to
20
which Plaintiff is a party. (Id. ¶¶ 26, 33.) The short sale approval letter is dated May 13,
21
2013, and addressed to Ulestad. (Id. at 11.) The letter states that “[t]his Notice of Short
22
Sale Approval provides all of the conditions and requirements that must be met before the
23
short sale transaction can be finalized.” (Id.) It goes on to describe these requirements,
24
including that the sale be an arm’s length transaction. It notes that“[f]ailure to comply
25
with any of the conditions/requirements included in this Notice could result in our refusal
26
to issue a satisfaction, release or conveyance of your mortgage.” (Id. at 14.) The only
27
reference to Plaintiff in the letter is a reference to the purchase contract between Ulestad
28
and Plaintiff. (Doc. 1-1 at 12 (“This approval is based on the purchase contract dated
-4-
1
02/01/2013 between SHELLY ULESTAD, the seller(s), and KATIE FOSTER, the
2
buyer(s), for a purchase price of $173,500.000.”))
3
Assuming the letter constituted a unilateral contract, as Plaintiff alleges, Plaintiff
4
does not plead sufficient facts to establish that she was a party to that contract. Plaintiff
5
states that she must be a party to the contract because “the vast majority of the
6
performance required under the letter is from Plaintiff.” (Doc. 13 at 5.) While the short
7
sale approval was certainly based on Ulestad’s separate purchase contract with Plaintiff,
8
the terms of the letter only obligate its recipient, Ulestad. The letter lists the conditions
9
that “the borrower/seller must meet” (Doc. 1-1 at 11–12) and requires that the seller
10
complete certain paperwork (Id. at 13–14). The letter references the approved sale price
11
and seller costs from the purchase agreement with Plaintiff, but does so in the context of
12
instructing Ulestad what steps she must take to obtain final approval of that sale and
13
ultimately receive a release of her mortgage.
14
While Plaintiff may be correct that Defendant would not have issued the letter to
15
Ulestad if Ulestad had not entered into the purchase contract with Plaintiff, it does not
16
follow that Plaintiff becomes the promisee of the contract between Ulestad and her
17
lender. See Watson Const. Co. v. Amfac Mortgage Corp., 124 Ariz. 570, 579, 606 P.2d
18
421, 430 (Ct. App. 1979) (quoting 1 Corbin on Contracts § 21.52 (1963)) (“In the case of
19
a unilateral contract, there is only one promisor; and the legal result is that he is the only
20
party who is under an enforceable legal duty. The other party to this contract is the one to
21
whom the promise is made, and he is the only one in whom the contract creates an
22
enforceable legal right.”) “[P]rivity of contract must exist before a party may seek to
23
enforce a contract . . .” Goodman v. Physical Res. Eng’g, Inc., 229 Ariz. 25, 30, 270 P.3d
24
852, 857 (Ct. App. 2011) (discussing Stratton v. Inspiration Consol. Copper Co., 140
25
Ariz. 528, 529–30, 683 P.2d 327, 328–29 (App. 1984)). As Plaintiff does not allege facts
26
that establish such privity of contract, she is unable to bring her claims based on that
27
contract.
28
-5-
1
B.
2
Defendant next moves to dismiss Plaintiff’s claim for a declaratory judgment
3
stating that the short sale approval letter constitutes a payoff statement and that Plaintiff
4
is entitled to specific performance pursuant to that payoff statement. (Doc. 1-1 ¶¶ 37–41.)
5
Under Arizona law, a payoff demand statement is “a written statement that is prepared in
6
response to a written demand made by an entitled person or that person’s authorized
7
agent that sets forth the amounts required by the secured lender to fully satisfy all of the
8
obligations secured by the loan that is the subject of the demand.” Ariz. Rev. Stat. Ann.
9
§ 33-715(J)(4). Here, the short sale approval letter was issued in response to Ulestad’s
10
request for permission to do a short sale. By definition, this was a request to sell her
11
property for less than the outstanding balance of the debt owed to Defendant. The short
12
sale approval letter outlines Defendant’s conditional approval for Ulestad to proceed with
13
the short sale even though the short sale would not, as the statute requires, “fully satisfy
14
all the obligations secured by the loan.” The short sale approval letter does not meet the
15
statutory definition of a payoff statement. Thus, Plaintiff cannot be entitled to specific
16
performance under the statute. Therefore,
17
18
19
20
21
The Letter is Not a Payoff Statement
IT IS ORDERED that Defendant Wells Fargo’s Motion to Dismiss (Doc. 8) is
granted.
IT IS ORDERED directing the Clerk of Court terminate this action and enter
judgment accordingly.
Dated this 10th day of March, 2014.
22
23
24
25
26
27
28
-6-
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?