Amfac Mortg. Corp. v. Arizona Mall of Tempe, Inc., No. 76-1495

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Writing for the CourtBefore WALLACE and ANDERSON; J. BLAINE ANDERSON
Citation583 F.2d 426
PartiesFed. Sec. L. Rep. P 96,588 AMFAC MORTGAGE CORPORATION, an Oregon Corporation, Plaintiff-Appellant, v. ARIZONA MALL OF TEMPE, INC., a Minnesota Corporation, Watson, Frederick O., and Watson, Jane Doe, his wife, Ericson, Orrin A., and Ericson, Galoris A., his wife, Watson Construction Company, a Minnesota Corporation, Commercial Union Insurance Company, a Massachusetts Corporation, the Ericson Development Co., a Minnesota Corporation, Defendants-Appellees.
Docket NumberNo. 76-1495
Decision Date03 October 1978

Page 426

583 F.2d 426
Fed. Sec. L. Rep. P 96,588
AMFAC MORTGAGE CORPORATION, an Oregon Corporation, Plaintiff-Appellant,
v.
ARIZONA MALL OF TEMPE, INC., a Minnesota Corporation,
Watson, Frederick O., and Watson, Jane Doe, his wife,
Ericson, Orrin A., and Ericson, Galoris A., his wife, Watson
Construction Company, a Minnesota Corporation, Commercial
Union Insurance Company, a Massachusetts Corporation, the
Ericson Development Co., a Minnesota Corporation,
Defendants-Appellees.
No. 76-1495.
United States Court of Appeals,
Ninth Circuit.
Oct. 3, 1978.

Page 428

William S. Hawgood, II (argued), Phoenix, Ariz., for plaintiff-appellant.

Joseph E. McGarry, Phoenix, Ariz., P. Michael Whipple (argued), Phoenix, Ariz., Frederick J. Martone (argued), of Jennings, Strouss & Salmon, Phoenix, Ariz., David L. White (argued), Phoenix, Ariz., for defendants-appellees.

Appeal from the United States District Court for the District of Arizona.

Before WALLACE and ANDERSON, Circuit Judges, and WILLIAMS, * District Judge.

J. BLAINE ANDERSON, Circuit Judge:

This is yet another attempt to convert the securities laws into something which they are not. The securities laws do not afford general relief when commercial loans turn out to have been unwisely made, nor are they a source of general federal jurisdiction. See Great Western Bank & Trust v. Kotz, 532 F.2d 1252, 1253 (9th Cir. 1976). Arizona Mall of Tempe, Inc. (Arizona Mall) defaulted on a building loan agreement with Amfac Mortgage Corporation (Amfac). Amfac brought suit in Arizona state courts on the secured promissory note which had been given by Arizona Mall. Amfac then instituted this action in the federal district court in Arizona, arguing that the promissory note was a "security" within the meaning of the federal and Arizona securities laws. 1 The district court dismissed all of Amfac's securities claims for failure to state claims upon which relief may be granted. The district court also dismissed Amfac's eighth claim for relief which involved a tort against a surety for failure to state a claim upon which relief may be granted.

We affirm.

FACTS

This case arises out of the transactions which were undertaken to finance the construction of a shopping center. The principal actors involved in those transactions include the parties to this appeal. Appellant Amfac was the lender who undertook the financing of the project. Appellee Arizona Mall was the owner and borrower from Amfac. Appellee Orrin Ericson was the president of Arizona Mall and also of Appellee Ericson Development Company. Appellee Watson Construction Company (Watson Construction) was the contractor for the construction of the shopping center, and Appellee Frederick O. Watson was the president of that company. Appellee Commercial Union Insurance Company (Commercial Union) was the surety on the construction bond under which Watson Construction was the principal, and Amfac and Arizona Mall were the obligees.

On July 11, 1973, Arizona Mall entered into a construction contract with Watson Construction by which Watson obligated itself to construct the shopping center. On that same day, a surety bond was secured from Commercial Union whereby Commercial Union, as surety, bound itself to protect Amfac and Arizona Mall as dual obligees, in the event of default by Watson Construction, the principal.

After reviewing the construction contract documents and receiving further assurances from Watson Construction, Amfac formally committed itself to the transaction on August 27, 1973, when the promissory note, deed of trust, and building loan agreement were executed. The promissory note had a face amount of 22.5 million. The entire principal sum under the note was payable

Page 429

by Arizona Mall to Amfac within two years. Arizona Mall could obtain an extension of one year providing it was not in default and upon payment of an additional $225,000.00. Interest on the money actually disbursed under the building loan agreement was to be paid monthly to Amfac. The interest rate was determined monthly at a rate of either 4% Or 51/2% Over the prime interest rate. In the event of default by Arizona Mall under the building loan agreement or deed of trust Amfac could accelerate and demand payment of all sums (both principal and interest) outstanding on the note. To secure payment on the note, Amfac was designated as the beneficiary under a deed of trust to the real property and the shopping center itself as it was completed.

Under the building loan agreement, Amfac was to make periodic advances of the principal amount of the promissory note depending upon the degree of completion of the shopping center and whether certain designated lease commitments had been obtained. Amfac's loan was further protected by various other provisions of the building loan agreement. There could be no changes in the plans of specifications which would change the square footage of the project or reduce or increase the contract price by $500.00 or more without the prior written approval of Amfac. The prior approval of Amfac was necessary before anything could be purchased for the shopping center under a conditional sales contract or security agreement. Amfac had the right to inspect both the project and Arizona Mall's books and records. A provision protected Amfac's interest from any lien claims. The events of default were spelled out in some detail.

Amfac's interest was additionally secured by other collateral which was pledged by Appellee Ericson and his wife. This included Ericson's interest in the following partnerships: Camelback Center, Conestoga Mall of Grand Island, Northern Center, Park Drive Shopping Center, and Valley West DM. Ericson also pledged 250 shares of the common capital stock of Ericson Development and his wife pledged 225 shares of the common capital stock of Village Ten, Inc. The Ericson appellees also signed a guaranty whereby they obligated themselves to pay all of the obligations of Arizona Mall. Amfac had the power under the guaranty to proceed against the Ericsons and their collateral regardless of what action was taken against Arizona Mall. Additionally, the Ericsons signed a guaranty of completion under which they agreed to assume all responsibility for completion of the project in the case of abandonment by Arizona Mall. Any indebtedness of Arizona Mall to the Ericsons was subordinated to the indebtedness and obligations of Arizona Mall to Amfac.

Amfac alleges that the promissory note issued by Arizona Mall was a security, and also that the guaranty, and completion guaranty, were each "securities." Additionally, Amfac claims that all of the documents involved in the transactions taken together were an investment contract and therefore a "security" under the securities laws.

DISMISSAL UNDER RULE 12(b)(6)

The test for determining the sufficiency of the plaintiff's complaint under Rule 12(b)(6), Fed.R.Civ.P., motion for dismissal is:

". . . (A) complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."

Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957), and Harmsen v. Smith, 542 F.2d 496, 502 (9th Cir. 1976). In this case, the court is aided in its determination by the attachment of several documents to the plaintiff's complaint. 2 The court is not limited by the mere allegations contained in the complaint as Amfac contends. These documents, as part of the complaint, are properly a part of the court's

Page 430

review as to whether plaintiff can prove any set of facts in support of its claim that there were securities involved in the present transaction. On a motion to dismiss, the complaint is construed in favor of the pleader. Sherman v. Yakahi, 549 F.2d 1287, 1290 (9th Cir. 1977). And any doubts are resolved in favor of the pleader. Williams v. Gorton, 529 F.2d 668, 672 (9th Cir. 1976).

Amfac argues that dismissal for failure to state a claim was improper in this case in view of Great Western Bank & Trust v. Kotz, 532 F.2d 1252 (9th Cir. 1976). In Great Western, which also presented the question of whether a security was involved, the court held that a dismissal under Rule 12(b)(6) was improper. However, the summary disposition was upheld because the court treated it as a motion for summary judgment. However, Great Western is distinguishable on this point from the present case. In Great Western, the district court considered evidentiary matter beyond the plaintiff's complaint. 3 Unless this evidentiary matter was incorporated in the plaintiff's complaint, it could not usually be considered by the court on a motion to dismiss for failure to state a claim. 4 Therefore, if any state of facts, even those inconsistent with the evidentiary matter presented to the court, could have supported the allegations of plaintiff's complaint, then dismissal was erroneous. However, in the present case this court is not so limited. Since the plaintiff attached to the complaint the several basic documents, the scope of the facts which can support plaintiff's claim is limited by the documents attached to the complaint and involved in this transaction. In the present case, dismissal would be improper only if under any state of facts supporting the allegations of plaintiff's complaint And the attached documents, plaintiff has stated a valid claim.

Additionally, Amfac contends that it is improper to decide the issue of whether there is a security on a motion to dismiss for failure to state a claim. However, if the transactions pleaded in plaintiff's complaint do not constitute "securities," then dismissal for failure to state a claim upon which relief can be granted is proper. Hilgeman v. National Insurance Co. of America, 547 F.2d 298, 300 (5th Cir. 1977). 5

Page 431

THE SECURITY ISSUE

The term "security" is defined broadly under both the Securities Act of 1933...

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  • Johnson v. Saul, Case No.: 20-CV-747 JLS (AHG)
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • January 25, 2021
    ...Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citing Amfac Mortg. Corp. v. Ariz. Mall of Tempe, Inc., 583 F.2d 426 (9th Cir. 1978) (noting that "material which is properly submitted as part of the complaint may be considered" in ruling on a Rule 12(b)(6) moti......
  • Davenport v. Servicing, No. C 10-0679 RS.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • July 16, 2010
    ...(9th Cir.1984). The exception is material which is properly submitted as part of the complaint. Amfac Mtg. Corp. v. Arizona Mall of Tempe, 583 F.2d 426, 429-30 (9th Cir.1978). Here, a copy of the deed of trust and a notice of foreclosure were submitted as part of the FAC. To state a claim f......
  • Johnson v. Saul, Case No.: 20-CV-747 JLS (AHG)
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • June 14, 2020
    ...Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citing Amfac Mortg. Corp. v. Ariz. Mall of Tempe, Inc., 583 F.2d 426 (9th Cir. 1978) (noting that "material which is properly submitted as part of the complaint may be considered" in ruling on a Rule 12(b)(6) moti......
  • Velazquez v. Gmac Mortg. Corp., Case No. CV 08-05444 DDP (PLAx).
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • December 22, 2008
    ...that is an exhibit to a pleading is part of the Page 1057 pleading for all purposes."); Amfac Mortg. Corp. v. Ariz. Mall of Tempe, Inc., 583 F.2d 426, 429-30 (9th When "matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summar......
  • Request a trial to view additional results
240 cases
  • Johnson v. Saul, Case No.: 20-CV-747 JLS (AHG)
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • January 25, 2021
    ...Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citing Amfac Mortg. Corp. v. Ariz. Mall of Tempe, Inc., 583 F.2d 426 (9th Cir. 1978) (noting that "material which is properly submitted as part of the complaint may be considered" in ruling on a Rule 12(b)(6) moti......
  • Davenport v. Servicing, No. C 10-0679 RS.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • July 16, 2010
    ...(9th Cir.1984). The exception is material which is properly submitted as part of the complaint. Amfac Mtg. Corp. v. Arizona Mall of Tempe, 583 F.2d 426, 429-30 (9th Cir.1978). Here, a copy of the deed of trust and a notice of foreclosure were submitted as part of the FAC. To state a claim f......
  • Johnson v. Saul, Case No.: 20-CV-747 JLS (AHG)
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • June 14, 2020
    ...Inc. v. Richard Feiner & Co., Inc., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citing Amfac Mortg. Corp. v. Ariz. Mall of Tempe, Inc., 583 F.2d 426 (9th Cir. 1978) (noting that "material which is properly submitted as part of the complaint may be considered" in ruling on a Rule 12(b)(6) moti......
  • Velazquez v. Gmac Mortg. Corp., Case No. CV 08-05444 DDP (PLAx).
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Central District of California
    • December 22, 2008
    ...that is an exhibit to a pleading is part of the Page 1057 pleading for all purposes."); Amfac Mortg. Corp. v. Ariz. Mall of Tempe, Inc., 583 F.2d 426, 429-30 (9th When "matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summar......
  • Request a trial to view additional results

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