Sevastopoulos v. Wells Fargo Bank

Decision Date05 October 2022
Docket Number2:19-cv-00182-CW
PartiesKATHLEEN SEVASTOPOULOUS, Plaintiff and Counterclaim Defendant, v. WELLS FARGO BANK, N.A., Defendant and Counterclaim Plaintiff. WELLS FARGO BANK, N.A., Third-Party Plaintiff, v. ATHANASIOS SEVASTOPOULOS, Third-Party Defendant.
CourtU.S. District Court — District of Utah
MEMORANDUM DECISION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

CLARK WADDOUPS, UNITED STATES DISTRICT COURT JUDGE

Before the court is a motion for summary judgment filed by Defendant Wells Fargo Bank, N.A. (Wells Fargo) [ECF No 44]. The court heard oral argument on the motion. At the conclusion of the hearing, the court took the motion under advisement. After considering the written submissions and the arguments presented at the hearing, the court GRANTS Defendant's motion for summary judgment.

FACTUAL BACKGROUND

In November 1973, the Kathleen Smith Trust (the “Trust”) was created and Plaintiff Kathleen Smith Sevastopoulos was designated as the grantor and sole beneficiary of the Trust. Plaintiff's mother, Marion B Smith (“Smith”), was designated the trustee of the Trust.

In 1984, Smith, in her capacity as Trustee, purchased real property located at 1425 Tomahawk Drive, Salt Lake City (the “Tomahawk Property”). In May 2013, Smith entered into a loan agreement with Wells Fargo (the 2013 Loan Transaction) whereby Wells Fargo placed a lien (the “Deed of Trust”) on the Tomahawk Property, which remains there to this day. Around the same time Smith entered into the loan agreement with Wells Fargo, Plaintiff's husband, Athanasios Sevastopoulos, provided Wells Fargo with an appraisal of the Tomahawk Property necessary to obtain the line of credit.

The Deed of Trust was recorded against the Tomahawk Property on May 31, 2013, specifying that Wells Fargo loaned $500,000 to Smith as Trustee of the Trust and that the loan was secured by the Tomahawk Property. This recording gave constructive notice of the Deed of Trust to all interested parties.

I. PLAINTIFF'S PRE-LITIGATION CORRESPONDENCE

Two years after the recording of the Deed of Trust, on September 23, 2015, Plaintiff began sending letters to Wells Fargo, explaining her position that the Tomahawk Property could not be used as collateral for the loan because the Trust was invalid and the Tomahawk Property “was used illegally as collateral' by Smith. ECF No. 44 at 5 (emphasis in original). Plaintiff sent subsequent letters on October 9, 2015, October 18, 2015, November 9, 2015, December 2, 2015, December 22, 2015, and January 7, 2016, alleging that Wells Fargo had failed to read the Trust and that the lien was improperly placed on the Tomahawk Property. Plaintiff contended that had Wells Fargo read the Trust, Wells Fargo would have seen by the terms of the Trust that it had expired when Plaintiff turned 21 years old.

On February 19, 2016, Plaintiff's attorney sent a letter to Wells Fargo reiterating that Wells Fargo had failed to read the Trust and that it was Plaintiff's “intention to undertake such action as may be necessary including amending the complaint to name additional parties to clear title to the Tomahawk Property. Id. at 10. Plaintiff's attorney alleged that Wells Fargo “was negligent in not examining the Trust to see if it was still in effect at the time the 2013 Loan Transaction was entered into.” Id.

II. PLAINTIFF'S LAWSUITS CONCERNING THE TRUST AND DEED OF TRUST

On January 21, 2016, Plaintiff brought suit in state court against Smith and Plaintiff's father, Nicholas G. Smith. Nearly a year later, on December 14, 2016, Plaintiff filed suit against Wells Fargo in state court (the 2016 Suit”), alleging, among other things, the issuance of a wrongful lien in the form of the Deed of Trust executed as part of the 2013 Loan Transaction. Specifically, Plaintiff alleged that Wells Fargo “either did not review the Trust before entering into the 2013 Loan Transaction . . . or it reviewed the Trust and simply ignored the language in the Trust providing for its termination.” Id. at 11. On March 30, 2018, following Wells Fargo's removal of the 2016 Suit to federal court, this Court dismissed the 2016 Suit with prejudice.

On October 31, 2018, in connection with Plaintiff's state court action against Smith, Plaintiff deposed Smith, who testified that more senior officials at Wells Fargo had reviewed the Trust and approved the 2013 Loan Transaction. Smith said this when prompted by her husband, Nicholas Smith, to recall that senior officials reviewed the loan. Plaintiff contends that this was “new information,” despite having previously alleged that Wells Fargo had “reviewed [the] trust and simply ignored the language.” Id.

III. PLAINTIFF'S SECOND COMPLAINT AGAINST WELLS FARGO

On February 5, 2019, Plaintiff filed the present Verified Complaint against Wells Fargo, alleging that Wells Fargo aided and abetted Smith's breach of fiduciary duty by securing a loan with Plaintiff's Tomahawk Property. Since that time, Smith and Smith's husband, Nicholas Smith, have died.

Defendant filed a motion for summary judgment, arguing that Plaintiff's suit is barred by the applicable statute of limitations and principles of claim preclusion. This court agrees and grants Defendant's motion.

LEGAL STANDARD

Summary judgment is appropriate when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). The movant bears the initial burden of demonstrating the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Once the movant has met this burden, the burden then shifts to the nonmoving party to “set forth specific facts showing that there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (citation omitted). When applying the summary judgment standard, the court must “view the evidence and make all reasonable inferences in the light most favorable to the nonmoving party.” N. Nat. Gas Co. v. Nash Oil & Gas, Inc., 526 F.3d 626, 629 (10th Cir. 2008).

[W]here a defending party pleads a statute of limitation and moves for summary judgment, and it appears that the action is barred by the appropriate statute of limitations and there is no genuine issue as to any material fact in connection with such statute, . . . then the motion for summary judgment should be granted.” Borum v. Coffeyville State Bank, 6 Fed.Appx. 709, 711 (10th Cir. 2001) (finding “that the evidence is clear and undisputable that plaintiff knew or should have known with the exercise of reasonable diligence all of the operative facts underlying his . . . claims more than two years before he filed his complaint”).

ANALYSIS

Wells Fargo moves the court for summary judgment against Plaintiff alleging that the undisputed facts demonstrate, as a matter of law, that Plaintiff's claims are barred by the applicable statute of limitation and principles of claim preclusion. In response, Plaintiff first contends that the statute of limitation was tolled until October 2018 due to application of the “exceptional circumstances” prong of the discovery rule. Second, Plaintiff argues that res judicata is inapplicable because the operative facts giving rise to Plaintiff's aiding and abetting claim were not available to her, and because she was not required to bring her aiding and abetting claim as part of a claim for wrongful lien. The court will address each argument in turn.

I. PLAINTIFF'S CLAIMS ARE BARRED BY THE STATUTE OF LIMITATIONS

“As a general rule, a statute of limitations begins to run upon the happening of the last event necessary to complete the cause of action.” Mower v. Simpson, 392 P.3d 861, 869 (citation omitted). “Once a statute has begun to run, a plaintiff must file his or her claim before the limitations period expires or the claim will be barred.” Id. “Mere ignorance of the existence of a cause of action will neither prevent the running of the statute of limitations nor excuse a plaintiff's failure to file a claim within the relevant statutory period.” Id.

A claim for aiding and abetting a breach of fiduciary duty is subject to a four-year statute of limitations. See United Park City Mines Co. v. Greater Park City Co., 870 P.2d 880, 890 (Utah 1993) (concluding that a claim for aiding and abetting a breach of fiduciary duty was barred by the four-year statute of limitations); see also Utah Code Ann. § 78B-2-307(3). Neither party disputes this bar, both conceding that but for an exception to the statute of limitations, Plaintiff had to bring her cause of action within four years of the happening of the last event necessary to complete a claim for aiding and abetting.

In this case, it is undisputed that Plaintiff's claim arose, at the latest, in May 2013 - when Smith allegedly breached her fiduciary duties by entering into the 2013 Loan Transaction and authorizing Wells Fargo to record the Deed of Trust against the Tomahawk Property. The Deed of Trust was recorded with the Salt Lake County Recorder's Office on May 31, 2013. Plaintiff's claim thus expired, at the latest, on May 31, 2017 - four years after the recording of the Deed of Trust. Plaintiff did not file her Complaint until February 5, 2019, almost two years after the statute of limitations expired. Thus, but for some exception which tolls the statute of limitations period, Plaintiff's claim is barred.

A. Plaintiff Has the Burden to Prove the Limitations Period Should Be Tolled.

Utah law recognizes three situations in which a plaintiff can toll the statute of limitations until her discovery of the relevant facts giving rise to the cause of action. In such situations, “the burden of establishing that a limitations period should be...

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