Snow v. Chartway Fed. Credit Union

• Court: Court of Appeals of Utah
• Citation: 306 P.3d 868,739 Utah Adv. Rep. 68
• Docket Number: No. 20120215–CA.,20120215–CA.
• Parties: Scott SNOW, Plaintiff, Appellant, and Cross-appellee v. CHARTWAY FEDERAL CREDIT UNION, Defendant, Appellee, and Cross-appellant.
• Decision Date: 20 August 2013

306 P.3d 868
739 Utah Adv. Rep. 68

Scott SNOW, Plaintiff, Appellant, and Cross-appellee
v.
CHARTWAY FEDERAL CREDIT UNION, Defendant, Appellee, and Cross-appellant.

No. 20120215–CA.

Court of Appeals of Utah.

July 18, 2013.
Rehearing Denied Aug. 20, 2013.

[306 P.3d 869]

Brian W. Steffensen, for Appellant and Cross-appellee.

Adam C. Buck and David P. Williams, for Appellee and Cross-appellant.

Memorandum Decision
McHUGH, Judge:

¶ 1 Scott Snow appeals the district court's dismissal of his claims for breach of the implied covenant of good faith and fair dealing and negligent infliction of emotional distress.¹ We affirm.

¶ 2 In January 2007, Snow obtained a construction loan from Tooele Federal Credit Union for $747,900 to build a new residence on property located in Highland, Utah (the Property).² The loan was evidenced by a promissory note (the Note) and secured by a trust deed recorded against the Property. On June 2, 2008, Snow obtained a modification

[306 P.3d 870]

of the Note, which increased the principal of the loan to $926,285. Thereafter, Tooele Federal Credit Union changed its name to Heritage West Federal Credit Union (Heritage).

¶ 3 After Snow began to have difficulty making his loan payments, Heritage agreed to reduce the loan's interest rate for one year. Although the written modification of the loan agreement indicates that the interest rate would revert to its original percentage on April 25, 2010, Snow relied on “assurances from Heritage that [Snow] would be able to sit down again in another year to discuss the reduction in the interest rate.” When Snow still could not make his loan payments, he approached Heritage about the possibility of finding someone to assume the loan. Heritage provided Snow with terms it would require in any assumption transaction, which “did not specify that the loan amount could be no more than the amount Snow owed under the loan.” After Snow presented a “ready, willing and able buyer,” Heritage changed the terms needed for assumption. Specifically, Heritage insisted on “a $300,000 ... down payment requirement for the buyer, plus a $300,000 required certificate of deposit ... to be deposited into Heritage during the entire life of the loan.” Heritage required these additional terms because it was unwilling to “do the deal unless [its] exposure [was] less than $700,000.” As a result, the buyer “walked away from the deal.”

¶ 4 Heritage later went out of business, and its assets were liquidated. On December 31, 2009, Chartway purchased Heritage's “assets, loans and shares.” In January 2010, Snow approached Chartway to inquire about the possibility of a short sale of the Property.³ Chartway approved the short sale in April, subject to a closing deadline in June. The buyers “backed out” of the transaction before closing. Thereafter, Snow tendered the deed to the Property in lieu of foreclosure, but Chartway refused to accept it. Snow eventually defaulted on the loan, and Chartway initiated foreclosure proceedings, appointed a substitute trustee, and scheduled a trustee's sale for October 25, 2010.

¶ 5 Three days before the scheduled trustee's sale, Snow filed a complaint against Chartway. Snow later filed an amended complaint, and on March 4, 2011, Snow filed a second amended complaint (the Second Amended Complaint). The Second Amended Complaint alleged causes of action against Chartway for negligent misrepresentation, fraudulent nondisclosure, breach of the implied covenant of good faith and fair dealing, and negligent infliction of emotional distress.⁴ On August 15, 2011, Chartway moved to dismiss the Second Amended Complaint pursuant to rule 12(b)(6) of the Utah Rules of Civil Procedure for failure to state a claim upon which relief can be granted. The district court granted the motion to dismiss and Snow filed a timely appeal.

¶ 6 On appeal, Snow confines his claim of error to the district court's dismissal of his claims for breach of the implied covenant of good faith and fair dealing and negligent infliction of emotional distress.⁵ “On appeal from a motion to dismiss for failure to state a claim for relief, we give the trial court's ruling no deference and review it under a correctness standard.” Webster v. JP Morgan Chase Bank, NA, 2012 UT App 321, ¶ 2, 290 P.3d 930 (mem.) (citation and internal quotation marks omitted). Rule 12(b)(6) of the Utah Rules of Civil Procedure allows for a complaint to be dismissed where the pleadings fail “to state a claim upon which relief can be granted.” Utah R. Civ. P. 12(b)(6). “A rule 12(b)(6) motion to dismiss addresses only the sufficiency of the pleadings, and therefore, is not an opportunity for the trial court to decide the merits of the case.”

[306 P.3d 871]

Williams v. Bench, 2008 UT App 306, ¶ 20, 193 P.3d 640 (citation and internal quotation marks omitted). “Nevertheless, in deciding the propriety of a rule 12(b)(6) motion, trial courts are obliged to address the legal viability of a plaintiff's underlying claim as presented in the pleadings.” Id.

¶ 7 Snow first argues that the district court erred in dismissing his claim for breach of the implied covenant of good faith and fair dealing. Specifically, Snow claims that Chartway promised him that if he found a buyer who was willing to meet certain requirements, Chartway would allow that buyer to assume the loan. Snow argues that he relied on Chartway's promise, that he found a prospective buyer who was prepared to close on Chartway's terms, and that Chartway ultimately failed to accept that offer. “As a general rule, every contract is subject to an implied covenant of good faith.” Brown v. Moore, 973 P.2d 950, 954 (Utah 1998) (citation and internal quotation marks omitted). “ ‘Under [the covenant], both parties to a contract impliedly promise not to intentionally do anything to injure the other party's right to receive the benefits of the contract.’ ” Markham v. Bradley, 2007 UT App 379, ¶ 18, 173 P.3d 865 (alteration in original) (quoting Eggett v. Wasatch Energy Corp., 2004 UT 28, ¶ 14, 94 P.3d 193). “No such covenant may be invoked, however, if it would create obligations inconsistent with express contractual terms.” Young Living Essential Oils, LC v. Marin, 2011 UT 64, ¶ 10, 266 P.3d 814.

¶ 8 Here, the Note provides, “[Snow] cannot assign [his] rights under this agreement without [Chartway's] approval and any such assignment that is attempted shall be void.” The Note further provides, “In the event of default, [Chartway] shall have all remedies allowed by law or equity.” The district court determined that the Note contained “no language identifying that [Chartway is] obligated to negotiate new loan terms.” Additionally, the district court concluded that “nowhere in the Note does it state that Heritage, and now Chartway, has to accept an offered short sale of [Snow's] property....