Nascimento v. Wells Fargo Bank N A

Filing 87

AMENDED ORDER Denying 1 - 15 Motion for partial summary Judgment. Granting 54 MOTION for Summary Judgment. Signed by Judge James C. Mahan on 12/13/2013. (Copies have been distributed pursuant to the NEF - SLR)

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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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2:11-CV-1049 JCM (GWF)

JOSEPH NASCIMENTO,

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Plaintiff,

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v.

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WELLS FARGO BANK, NA, et al.,

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Defendants.

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AMENDED ORDER

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Presently before the court is plaintiff Joseph F. Nascimento’s motion for partial summary

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judgment. (Doc. # 1-15). Defendant Wells Fargo Bank, N.A. filed an opposition (doc. # 5), and

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plaintiff replied (doc. # 8). Also before the court is defendant’s motion for summary judgment. (Doc.

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# 54). Plaintiff filed an opposition (doc. # 55), and defendant replied (doc. # 56).

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I.

Factual background

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While some of the facts are disputed, the court provides only those facts that are relevant to

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the instant motions. In March 2006, Plaintiff Joseph F. Nascimento obtained a home equity line of

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credit in the amount of $20,000 secured by a deed of trust on plaintiff’s real property. (Doc. # 54,

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Ex. 2). Defendant Wells Fargo Bank, N.A.1 serviced the loan. Plaintiff alleges that he reported

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“suspicious activity” on the $20,000 line of credit to defendant related to two $5,000 draws on the

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account. (Doc. # 1-1, ¶ 6). Plaintiff claims that he mailed a letter to defendant on November 21,

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James C. Mahan
U.S. District Judge

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Formerly Wachovia Bank before its merger with Wells Fargo Bank.

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2009, offering to settle the matter for $750,000. (Doc. # 54, Ex. 3). Plaintiff asserts that defendant

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accepted this settlement via four separate letters dated: December 28, 2009, December 29, 2009,

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January 7, 2010, and January 14, 2010. (Doc. # 54, Exs. 5, 6, 7, and 8). Defendant asserts that it has

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no record of receiving plaintiff’s settlement offer or sending any of the four purported acceptance

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letters. (Doc. # 54, Ex. 4, ¶¶ 6-10).

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Plaintiff filed a complaint in state court alleging: (1) breach of contract; (2) fraudulent

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inducement; (3) negligence; (4) common law fraud; (5) breach of implied covenant of good faith and

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fair dealing; (6) constructive fraud; and (7) equitable and declaratory relief. (Doc. # 1-1). Defendants

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timely removed this action to this court. (Doc. # 1). Plaintiff moves for summary judgment only as

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to his breach of contract and breach of implied covenant of good faith causes of action. (Doc. # 1-

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15). Defendant moves for summary judgment as to all of plaintiff’s causes of action.

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II.

Standard of review

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The Federal Rules of Civil Procedure provide for summary adjudication when the pleadings,

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depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,

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show that “there is no genuine issue as to any material fact and that the movant is entitled to a

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judgment as a matter of law.” FED. R. CIV. P. 56(a). A principal purpose of summary judgment is “to

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isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24

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(1986).

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In determining summary judgment, a court applies a burden-shifting analysis. “When the

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party moving for summary judgment would bear the burden of proof at trial, it must come forward

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with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial.

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In such a case, the moving party has the initial burden of establishing the absence of a genuine issue

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of fact on each issue material to its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213

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F.3d 474, 480 (9th Cir. 2000) (citations omitted).

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In contrast, when the nonmoving party bears the burden of proving the claim or defense, the

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moving party can meet its burden in two ways: (1) by presenting evidence to negate an essential

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element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving party failed to

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James C. Mahan
U.S. District Judge

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make a showing sufficient to establish an element essential to that party’s case on which that party

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will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323–24. If the moving party fails

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to meet its initial burden, summary judgment must be denied and the court need not consider the

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nonmoving party’s evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 159–60 (1970).

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If the moving party satisfies its initial burden, the burden then shifts to the opposing party

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to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith

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Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, the opposing

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party need not establish a material issue of fact conclusively in its favor. It is sufficient that “the

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claimed factual dispute be shown to require a jury or judge to resolve the parties’ differing versions

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of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 631 (9th

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Cir. 1987).

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In other words, the nonmoving party cannot avoid summary judgment by relying solely on

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conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 1040, 1045

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(9th Cir. 1989). Instead, the opposition must go beyond the assertions and allegations of the

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pleadings and set forth specific facts by producing competent evidence that shows a genuine issue

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for trial. See Celotex Corp., 477 U.S. at 324.

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Where a moving party’s papers are insufficient to support a motion for summary judgment,

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or reveal a genuine issue of material fact, summary judgment is inappropriate. Martinez v. Stanford,

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323 F.3d 1178, 1182-83 (9th Cir. 2003).

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III.

Discussion

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A.

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Both plaintiff and defendant move for summary judgment on this cause of action. To prevail

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on a breach of contract cause of action in Nevada, a plaintiff must prove: (1) existence of a valid

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contract, (2) breach by defendant, and (3) damages as a result of the breach. Sani v. Int’l Game Tech.,

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434 F.Supp.2d 913, 919-20 (D. Nev. 2006) (citing Richardson v. Jones, 1 Nev. 405, 405 (1865).

Breach of contract

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To have a valid contract, there must be (1) an offer, (2) an acceptance, (3) meeting of the

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minds, and (4) consideration. May v. Anderson, 119 P.3d 1254, 1257 (Nev. 2005). In Nevada,

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James C. Mahan
U.S. District Judge

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“preliminary negotiations do not constitute a binding contract unless the parties have agreed to all

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material terms.” Id. Further, “an enforceable settlement agreement cannot exist when the parties have

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not agreed to the essential terms of the release because these provisions constitute a material term

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of the settlement contract.” Id. at 1258. Also, “where essential terms of a proposal are accepted with

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qualifications, or not at all, an agreement is not made.” Heffern v. Vernarecci, 544 P.2d 1197, 1198

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(Nev. 1976).

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Here, plaintiff asserts that a contract was formed by plaintiff’s offer letter and defendant’s

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acceptance letters. (Doc. # 1, ¶ 9). However, none of the letters sent by defendant constitute a valid

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acceptance or create a binding contract. These acceptance letters fail to establish a valid contract

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because the release terms contained in each acceptance letter differ from those contained in the offer

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letter. Provided that release provisions are material to a settlement agreement, there is no enforceable

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contract without a meeting of the minds as to these terms. See Heffren, 544 P.2d at 1198.

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Plaintiff’s November 21, 2009, offer letter contemplates plaintiff releasing all of plaintiff’s

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claims in exchange for a check in the amount of $750,000. (Doc. # 54, Ex. 3, 19). However, the

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acceptance letters each requires additional and different release provisions than those contemplated

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in the offer.

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First, defendant’s December 28, 2009, acceptance letter requires plaintiff to release all claims

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as to any account with Wells Fargo and to release all future claims. Further, the first acceptance letter

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contains a confidentiality clause, a non-disparagement clause, and is limited to emotional pain and

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suffering. (Doc. # 54, Ex. 5). Second, defendant’s December 29, 2009, acceptance letter requires

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plaintiff to relinquish the right to any information related to plaintiff’s line of credit and contains a

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confidentiality clause as to the settlement and the line of credit. (Doc. # 54, Ex. 7). Third,

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defendant’s January 7, 2010, acceptance letter requires plaintiff to relinquish his ability to make any

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inquires regarding plaintiff’s line of credit and contains a confidentiality clause. (Doc. # 54, Ex. 8).

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And fourth, defendant’s January 14, 2010, acceptance letter requires plaintiff to release all present

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and future claims against both banks, Wachovia and Wells Fargo, and contains a confidentiality

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clause. (Doc. # 54, Ex. 6).

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James C. Mahan
U.S. District Judge

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Plaintiff asserts that the letters defendant mailed to plaintiff “were clear and unambiguous”

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and that plaintiff certainly understood the terms of the settlement agreement. (Doc. # 55, 21:11-17).

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However, plaintiff’s argument fails to appreciate how the acceptance letters’ varying material terms

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preclude formation of a valid contract.

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The court finds that the parties did not enter into a valid binding contract because the parties

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did not agree on the scope of the waiver and release terms. See, e.g., Rachford v. Air Line Pilots

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Ass’n, 375 F.Supp.2d 908 (N.D. Cal. 2005). Without a valid contract, there can be no breach of

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contract. See Sani, 434 F.Supp.2d at 919-20. Thus, defendant has met its burden by presenting

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evidence to negate an essential element of the breach of contract cause of action, Celotex Corp., 477

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U.S. at 323–24; plaintiff, however, has failed to meet his burden. Plaintiff has not produced

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competent evidence that shows a genuine issue of material fact on this issue to preclude summary

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judgment in defendant’s favor. See id. at 324.

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Thus, the court finds defendant has demonstrated that it is entitled to summary judgment in
its favor on plaintiff’s breach of contract claim.

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B.

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Both plaintiff and defendant move for summary judgment on this cause of action. To prevail

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on a breach of implied covenant of good faith and fair dealing claim, a plaintiff must show that (1)

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plaintiff and defendant were parties to a contract, (2) the defendant owed a duty of good faith and

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fair dealing to the plaintiff, (3) the defendant breached his duty by performing in a manner unfaithful

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to the purpose of the contract, and (4) the plaintiff’s justified expectations were denied. See Perry

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v. Jordan, 900 P.2d 335, 338 (Nev. 2008). This breach occurs, “[w]here the terms of contract are

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literally complied with but one party to the contract deliberately contravenes the intention and spirit

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of the contract . . . .” Hilton Hotels Corp. v. Butch Lewis Prods. Inc., 808 P.2d 919, 922-23 (Nev.

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1991).

Breach of the implied covenant of good faith and fair dealing

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Here, plaintiff’s move for summary judgment on the implied covenant of good faith and fair

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dealing claim. Plaintiff alleges that the home equity line of credit agreement included a covenant of

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good faith and fair dealing that defendant breached. (Doc. # 1-1, ¶¶ 39-40). As a moving party,

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James C. Mahan
U.S. District Judge

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plaintiff bears the burden of coming forward with evidence which would entitle him to a directed

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verdict if the evidence went uncontroverted at trial. See C.A.R. Transp. Brokerage Co., 213 F.3d at

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480.

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However, plaintiff has not met his “initial burden of establishing the absence of a genuine

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issue of fact on each issue material to [his] case.” Id. Plaintiff’s motion does not set forth any facts

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to demonstrate that defendant “literally complied with” the home equity line of credit agreement.

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(See doc. # 1-15). Plaintiff’s motion fails of demonstrating that defendant breached his duty by

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performing the contract in a manner unfaithful to the purpose of the contract; thus, plaintiff is not

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entitled to summary judgment on this cause of action.

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Defendant’s motion argues that plaintiff has failed to meet his burden. Defendant asserts that

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plaintiff neither alleges nor provides any evidence that defendant technically complied with the home

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equity line of credit agreement and acted in a way that contravened the spirit of the agreement. (Doc.

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# 54, 15:20-31).

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The court agrees. Plaintiff did not make a sufficient showing to establish an essential element

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on this cause of action upon which plaintiff bears the burden of proof at trial. See Celotex Corp., 477

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U.S. at 323–24. Because plaintiff has not raised the issue even to that of a factual dispute, see T.W.

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Elec. Serv., Inc., 809 F.2d at 631, the court finds that defendant is entitled to summary judgment on

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this cause of action.

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C.

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Only defendant moves for summary judgment on this cause of action. To establish negligence

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a plaintiff must show that (1) the defendant owned him a duty of care, (2) the defendant breached

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that duty, (3) the breach was the legal cause of the plaintiff’s injury, and (4) the plaintiff suffered

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damages. See Scialabba v. Brandise Group, 921 P.2d 928, 930 (Nev. 1996).

Negligence

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The economic loss doctrine prohibits recovery in tort for purely economic losses. See

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Calloway v. City of Reno, 993 P.2d 1259, 1263 (Nev. 2000) (superseded by statute on other grounds

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as stated in Olson v. Richard, 89 P.3d 31, 32–33 (Nev. 2004). The economic loss doctrine “serves

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to distinguish between tort, or duty-based recovery, and contract, or promise-based recovery, and

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James C. Mahan
U.S. District Judge

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clarifies that economic losses cannot be recovered under a tort theory.” Calloway, 993 P.2d at 1264;

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see also Giles v. Gen. Motors Acceptance Corp., 494 F.3d 865, 879 (9th Cir.2007) (“Broadly

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speaking, Nevada applies the economic loss doctrine to bar recovery in tort for purely monetary harm

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in products liability and in negligence cases unrelated to products liability” though not necessarily

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in all tort actions). Pure economic loss includes “loss of profits, without any claim of personal injury

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or damages to other property.”Calloway, 993 P.2d at 1263.

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Here, plaintiff alleges that defendant “owed a duty of care to Plaintiff in the operation,

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maintenance and management of [plaintiff’s home equity line account].” (Doc. # 1-1, ¶ 27). Plaintiff

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then alleges that defendant breached its duty of care that caused an impending foreclosure of

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plaintiff’s real property, payments that plaintiff did not legally owe, and other monetary and non-

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monetary damages. (Doc. # 1-1, ¶ 31). Plaintiff does not, however, allege any personal injury or

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damage to other property.

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Plaintiff’s negligence claim is substantially identical to his cause of action for breach of the

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implied covenant of good faith and fair dealing in the home equity line of credit agreement. Further,

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plaintiff does not allege any harm beyond economic loss. Thus, the court finds that plaintiff’s

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negligence claim is “cloaked in the language of tort” and is not “extraneous” to the contract. Giles,

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494 F.3d at 880. Therefore, the negligence claim is barred by the economic loss doctrine.

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Plaintiff argues that the economic loss doctrine does not apply because defendant had a duty

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to plaintiff imposed by law as opposed to contract. (Doc. # 55, 23:5-9). However, this argument fails

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because the laws cited by plaintiff were not the basis for any of the causes of action asserted by

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plaintiff in his complaint. (See generally doc. # 1-1). Thus, the court finds that application of the

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economic loss doctrine is appropriate in this case.

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Accordingly, defendant is entitled to summary judgment in its favor on plaintiff’s negligence
cause of action.

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D.

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Only defendant moves for summary judgment on these cause of actions. To prevail on a fraud

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claim a plaintiff must show by clear and convincing evidence that: (1) the defendant made a false

Fraudulent inducement and common law fraud

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James C. Mahan
U.S. District Judge

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misrepresentation, (2) the defendant’s knowledge or belief that the representation is false (or

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insufficient basis for making the representation), (3) the defendant’s intention to induce the plaintiff

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to act or to refrain from acting in reliance upon the misrepresentation, (4) the plaintiff’s justifiable

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reliance upon the misrepresentation, and (5) damage to the plaintiff resulting from such reliance.

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Albert H. Wohlers & Co. v. Bartgis, 969 P.2d 949, 957-58 (Nev. 1998); see also J.A. Jones Const.

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Co. v. Lehrer McGovern Bovis, Inc., 89 P.3d 1009, 1018 (Nev. 2004).

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Plaintiff alleges that defendant “falsely represented to Plaintiff that it had accepted Plaintiff’s

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Settlement Offer” and that “Plaintiff justifiably relied upon [defendant’s] misrepresentation by both

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continuing to pay on the account as instructed in [defendant’s] January 14, 2010 letter, and refraining

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from discussing his experience regarding the account with anyone pending receipt of a release and

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settlement check from [defendant]. (Doc. # 1-1, ¶¶ 11, 14). Plaintiff contends that the letters

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defendant sent to plaintiff were in an effort to stifle plaintiff from initiating a complaint against

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defendant with regulatory authorities. (Doc. # 55, 22:20-21).

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Defendant argues that plaintiff was already obligated to make payments toward the loan.

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(Doc. # 54, Ex. 2). As such, continuing to make payments could not constitute a change in position,

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or reliance, sufficient to support a fraud claim. (Doc. # 54, 20:23-2:5). Further, defendant argues that

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plaintiff continued to discuss his “experience regarding the account” following receipt of the

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acceptance letters. (Doc. # 54, 21:8-9). Defendant references plaintiff’s March 25, 2010, customer

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complaint filed with the office of the comptroller of the currency. (Doc. # 54, Ex. 10). Further,

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defendant cites to plaintiff’s June 18, 2010, letter to Senator Harry Reid. (Doc. # 54, Ex. 12). Both

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of these communications discuss plaintiff’s “experience regarding the account.” Defendant contends

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that plaintiff did not change his behavior in reliance on defendant’s misrepresentation.

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The court agrees. Plaintiff specifically references these two “untaken” courses of action to

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demonstrate justifiable reliance (i.e., stopping payment on the note and sharing plaintiff’s experience

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regarding his account). However, plaintiff was obligated to continue making payments on the note

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underlying the deed of trust. Thus, any requirement by the January 14, 2010, acceptance letter calling

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for continued payment cannot serve as the basis for justifiable reliance as plaintiff already bore the

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James C. Mahan
U.S. District Judge

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responsibility to make these payments.

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Further, defendant has provided sufficient evidence to establish that plaintiff shared his

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unsatisfactory experience with his account following the January 14, 2010, acceptance letter.

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Plaintiff failed to comply with the requirement that he not share his experience with his account.

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The court finds that defendant has met its burden by demonstrating that plaintiff has failed

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to make a showing sufficient to establish justifiable reliance as required to prove common law fraud

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and fraudulent inducement. See Celotex Corp., 477 U.S. at 323–24. Thus, the court finds that

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defendant is entitled to summary judgment on these causes of action.

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E.

Constructive fraud

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Only defendant moves for summary judgment on this cause of action. “Constructive fraud

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is the breach of some legal or equitable duty which, irrespective of moral guilt, the law declares

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fraudulent because of its tendency to deceive others or to violate confidence.” Long v. Towne, 639

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P.2d 528, 529-30 (Nev. 1982). “Constructive fraud is characterized by a breach of duty arising out

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of a fiduciary duty or confidential relationship.” Id. at 530. This type of relationship “exists when

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one reposes a special confidence in another so that the latter, in equity and good conscience, is bound

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to act in good faith and with due regard to the interests of the one reposing the confidence.” Id. Thus,

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to prove constructive fraud, plaintiff must show either a confidential or fiduciary relationship with

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defendant.

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Although the Nevada Supreme Court has not ruled on the issue, this court has predicted that

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the Nevada Supreme Court would hold that a lender does not owe a fiduciary duty, as “an arms-

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length lender-borrower relationship is not fiduciary in nature, absent exceptional circumstances.”

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Yerington Ford, Inc. v. Gen. Motors Acceptance Corp., 359 F.Supp.2d 1075, 1090 (D.Nev. 2004),

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overruled on other grounds by Giles, 494 F.3d 865; see also Megino v. Linear Fin., No.

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2:09–CV–00370, 2011 WL 53086, at *5 (D.Nev. Jan. 6, 2011); Saniel v. Recontrust Co., No.

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2:09–cv–2290–RLH–RJJ, 2010 WL 2555625, at *3 (D.Nev. Jun. 23, 2010) (holding that a “typical

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lender-borrow relationship” does not constitute a special relationship and therefore does not give rise

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to a fiduciary duty).

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U.S. District Judge

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Plaintiff argues that his relationship with defendant meets the threshold required by Long,

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639 P.2d 528. (Doc. # 55, 24:16-18). Further, plaintiff alleges that defendant had “both a legal and

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equitable duty to Plaintiff to maintain the account.” (Doc. # 1-1, ¶ 42). Defendant argues that

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defendant does not owe plaintiff a fiduciary duty as their relationship consisted “of nothing more

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than an arms-length business transaction.” (Doc. # 54, 20:5). Defendant also contends that there is

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nothing unusual or peculiar about the relationship to establish an exceptional circumstance. Plaintiff

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goes onto argue that he is not only a borrower of defendant but also a depositor thus establishing a

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special relationship with defendant. (Doc. # 55, 24:14-15).

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Plaintiff’s argument fails. Plaintiff is not suing defendant in his capacity as a bank customer,

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but as a borrower. Thus, any duty defendant may owe plaintiff as a bank customer cannot serve as

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the basis of plaintiff’s constructive fraud claim. Further, in the capacity that plaintiff is suing

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defendant, as a borrower, this claim does not stand. This district has found that a lender does not owe

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a fiduciary duty to an arms-length borrower. See Yerington Ford, Inc., 359 F.Supp.2d at 1090.

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Lastly, plaintiff does not point to sufficient facts to demonstrate exceptional circumstances that

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would require the imposition of a fiduciary duty. Without a duty, plaintiff cannot establish a breach

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as required for constructive fraud. See Long, 639 P.2d at 529-30.

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The court finds that defendant has met its burden by demonstrating that plaintiff has failed

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to make a showing sufficient to establish a fiduciary duty as required to prove constructive fraud. See

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Celotex Corp., 477 U.S. at 323–24. As such, the court finds that summary judgment in defendant’s

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favor on this claim is appropriate.

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F.

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Only defendant moves for summary judgment on this cause of action. Plaintiff’s last claim

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for relief seeks accounting and declaratory relief. These are equitable remedies and not independent

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causes of action. Because the court finds that defendant is entitled to summary judgment on all of

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plaintiff’s underlying substantive claims, the court finds that it need not address these requests for

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relief independently. See Aguilar v. WMC Mort. Corp., No. 2:09-cv-1416-ECR-PAL, 2010 WL

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185951, at *4 (D.Nev. Jan. 15, 2010).

Equitable and declaratory relief

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James C. Mahan
U.S. District Judge

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IV.

Conclusion

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According to the foregoing,

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IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that Joseph F. Nascimento’s

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motion for partial summary judgment (doc. # 1-15) be, and the same hereby is, DENIED.
IT IS FURTHER ORDERED that Defendant Wells Fargo Bank, N.A.’s motion for summary
judgment (doc. # 54) be, and the same hereby is, GRANTED.

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IT IS FURTHER ORDERED that the clerk of the court enter judgment in favor of defendant.

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DATED December8, 2012.
November 13, 2013.

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UNITED STATES DISTRICT JUDGE
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James C. Mahan
U.S. District Judge

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