Snow v. Chartway Federal Credit Union

2013 UT App 175
_________________________________________________________

THE UTAH COURT OF APPEALS

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

Memorandum Decision
No. 20120215‐CA
Filed July 18, 2013

Fourth District, American Fork Department
The Honorable Christine S. Johnson
No. 100105167

Brian W. Steffensen, Attorney for Appellant and
Cross‐appellee
Adam C. Buck and David P. Williams, Attorneys
for Appellee and Cross‐appellant

JUDGE CAROLYN B. MCHUGH authored this Memorandum
Decision, in which JUDGES WILLIAM A. THORNE JR. and
MICHELE M. CHRISTIANSEN concurred.

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.

1. Chartway Federal Credit Union (Chartway) cross‐appeals,
asserting that there are additional grounds under which the district
court could have dismissed those claims. A cross‐appeal is
unnecessary where the appellee seeks “to uphold the trial court’s
(continued...)
Snow v. Chartway Federal Credit Union

¶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 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

1. (...continued)
ruling on grounds that were raised but rejected below.” Nova Cas.
Co. v. Able Constr., Inc., 1999 UT 69, ¶ 7, 983 P.2d 575. Because we
affirm the decision of the district court on the grounds that are the
subject of the main appeal, we need not consider the additional
grounds raised by Chartway. See Cox v. Cox, 2012 UT App 225,
¶ 21, 285 P.3d 791 (“An issue is moot when resolution of it cannot
affect the rights of the parties.”).

2. “[W]e accept the factual allegations in the complaint as true and
consider them and all reasonable inferences to be drawn from them
in a light most favorable to [Snow]” when determining whether the
district court properly granted Chartway’s rule 12(b)(6) motion to
dismiss. See Webster v. JP Morgan Chase Bank, NA, 2012 UT App 321,
¶ 2, 290 P.3d 930 (mem.) (citation and internal quotation marks
omitted).

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Snow v. Chartway Federal Credit Union

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

3. “A short sale, also known as a pre‐foreclosure sale, is when you
sell your home for less than the balance remaining on your
mortgage.” Short Sale, KnowYourOptions.com by Fannie Mae,
http://www.knowyouroptions.com/avoid‐foreclosure/options‐to
‐leave‐your‐home/short‐sale (last visited July 10, 2013).

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Snow v. Chartway Federal Credit Union

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.” 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

4. Snow also alleged other claims that he voluntarily dismissed
prior to the district court’s ruling on Chartway’s motion to dismiss.

5. Snow also appealed the district court’s dismissal of his claims for
negligent misrepresentation and fraudulent nondisclosure but
concedes in his reply brief to this court that the district court
properly dismissed those causes of action.

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Snow v. Chartway Federal Credit Union

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. [Snow’s] assertions constitute new rights and
duties between the parties that are inconsistent with the existing
terms of the Note.”

¶9 Snow concedes that the Note does not contain any language
requiring Chartway to negotiate new terms or to accept any offered
short sale of the Property. Nevertheless, Snow argues that
Chartway’s promise to allow a prospective buyer to assume the
loan constituted a new agreement to which the implied covenant

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Snow v. Chartway Federal Credit Union

of good faith and fair dealing applied independent of the Note. In
response, Chartway contends that Snow’s claim fails as a matter of
law because Snow has not identified any written document
containing that alleged promise in or attached to the Second
Amended Complaint or on appeal that would satisfy the statute of
frauds.

¶10 The Note states, “Statute of Frauds. This agreement,
including the trust deed and documents incorporated herein, is a
final expression of the agreement between the parties. This
agreement cannot be contradicted by evidence of any alleged oral
agreement.” Utah’s statute of frauds provides, “Every contract . . .
for the sale, of any lands, or any interest in lands, shall be void
unless the contract, or some note or memorandum thereof, is in
writing . . . .” Utah Code Ann. § 25‐5‐3 (LexisNexis 2007); see also id.
§ 25‐5‐1 (“No estate or interest in real property . . . nor any trust or
power over or concerning real property or in any manner relating
thereto, shall be created, granted, assigned, surrendered or
declared otherwise than by act or operation of law, or by deed or
conveyance in writing . . . .”). “Generally, if an original agreement
was required to comply with the statute of frauds, any material
modification of that agreement must also conform to the statute of
frauds.” Holt v. Katsanevas, 854 P.2d 575, 579 (Utah Ct. App. 1993).

¶11 We agree with Chartway that Snow has failed to identify
any written document satisfying the statute of frauds that modifies
the Note or creates a new agreement requiring Chartway to
negotiate new terms or to accept an assumption of the Note or a
short sale of the Property.6 Likewise, Snow does not assert any

6. On appeal, Snow argues that Chartway is estopped from
asserting the statute of frauds as a defense because emails and
other evidence exist that prove Chartway agreed to allow an
assumption or a short sale under certain specified conditions.
However, the exhibits attached to the Second Amended Complaint
(continued...)

20120215‐CA 6 2013 UT App 175
Snow v. Chartway Federal Credit Union

exception to the statute of frauds. See, e.g., Fericks v. Lucy Ann Soffe
Trust, 2004 UT 85, ¶ 14, 100 P.3d 1200 (discussing promissory
estoppel exception to the statute of frauds); Wilberg v. Hyatt, 2012
UT App 233, ¶ 7, 285 P.3d 1249 (mem.) (discussing the part
performance exception to the statute of frauds). Here, the terms of
the Note do not require Chartway to relieve Snow of his
obligations thereunder or to approve a third party to assume them.
Absent a modification of the Note, using the covenant of good faith
and fair dealing to require Chartway to accept an assumption
would be inconsistent with the term of the Note making any
assumption subject to Chartway’s approval. The covenant cannot
be used to impose obligations inconsistent with the terms of the
underlying agreement. See Young Living, 2011 UT 64, ¶ 10. Where
Snow has failed to come forward with any writing signed by either
Chartway or Heritage in which the credit union agreed to modify
the express terms of the written agreement or to approve an
assumption of the loan or a short sale of the Property, we agree
with the district court that the Second Amended Complaint does
not state a claim for breach of the implied covenant of good faith
and fair dealing.

6. (...continued)
do not include a writing executed by either Heritage or Chartway
agreeing to modify the terms of the Note. See Utah Code Ann. § 25‐
5‐1 (LexisNexis 2007) (requiring that the writing be “subscribed by
the party” granting the interest in real property). Furthermore,
Snow did not provide any such writing to the district court in
response to Chartway’s motion to dismiss, thereby converting it to
a motion for summary judgment. See generally Utah R. Civ. P. 12(b)
(“If, on a motion asserting the defense numbered (6) to dismiss for
failure of the pleading to state a claim upon which relief can be
granted, matters outside the pleading are presented to and not
excluded by the court, the motion shall be treated as one for
summary judgment and disposed of as provided in Rule 56, and all
parties shall be given reasonable opportunity to present all material
made pertinent to such a motion by Rule 56.”).

20120215‐CA 7 2013 UT App 175
Snow v. Chartway Federal Credit Union

¶12 Snow next contends that the district court erred in
dismissing his claim for negligent infliction of emotional distress.
In order for Snow to establish a claim for negligent infliction of
emotional distress, the Second Amended Complaint must allege
that Chartway caused emotional distress under circumstances
where Chartway should have realized that the “conduct involved
an unreasonable risk of causing the distress” and, “from facts
known to [it], should have realized that the distress, if it were
caused, might result in illness or bodily harm.” See Harnicher v.
University of Utah Med. Ctr., 962 P.2d 67, 69 (Utah 1998) (citation
and internal quotation marks omitted); see also Restatement
(Second) of Torts § 313 (1965). “[T]he emotional distress suffered
must be severe; it must be such that a reasonable [person,]
normally constituted, would be unable to adequately cope with the
mental stress engendered by the circumstances of the case.”
Harnicher, 962 P.2d at 70 (second alteration in original) (citation and
internal quotation marks omitted). However, a claim for negligent
infliction of emotional distress “‘does not give protection to mental
and emotional tranquillity in itself.’” Id. (quoting Restatement
(Second) of Torts § 313 cmt. a (1965)). “Consequently, much of the
emotional distress which we endure . . . is not compensable.” Id. at
72 (omission in original) (citation and internal quotation marks
omitted).

¶13 Here, Snow argues that his Second Amended Complaint
establishes a claim for negligent infliction of emotional distress
because Chartway did not allow another buyer to assume the loan,
delayed in approving the short sale, and then foreclosed on Snow’s
home. As a result, the Second Amended Complaint indicates that
Snow “has gone through extreme weight loss and has undergone
the care of a doctor as a result of his distress and suffering.”

¶14 We have concluded, however, that nothing in the Note
required Chartway to approve an assumption of the loan or a short
sale of the Property. Accordingly, Snow’s allegations cannot
support a claim for negligent infliction of emotional distress

20120215‐CA 8 2013 UT App 175
Snow v. Chartway Federal Credit Union

because Chartway’s actions were consistent with the parties’
contractual agreements.

[C]onduct, although it would otherwise be extreme
and outrageous, may be privileged under the
circumstances. The actor is never liable, for example,
where he has done no more than to insist upon his
legal rights in a permissible way, even though he is
well aware that such insistence is certain to cause
emotional distress.

Restatement (Second) of Torts § 46 cmt. g (1965); cf. Bennett v. Jones,
Waldo, Holbrook & McDonough, 2003 UT 9, ¶ 66, 70 P.3d 17 (“An
allegation of improper . . . use of legal process against an individual
is not redressable by a cause of action for intentional infliction of
emotional distress.” (citing Cantu v. Resolution Trust Corp., 6 Cal.
Rptr. 2d 151, 169 (Cal. Ct. App. 1992))); Cantu, 6 Cal. Rptr. 2d at 169
(“Where . . . a party acts in good faith to pursue its own legal rights,
such conduct is privileged, even if emotional distress will result.”).

¶15 Furthermore, Snow has not alleged facts that would cause
a reasonable person to suffer severe injury rendering him unable
to cope in his daily life. See Harnicher, 692 P.2d at 70; see also
Osmond v. Litton Loan Servicing, LLC, No. 1:10‐CV‐11, 2011 WL
1988403, at *4 (D. Utah May 20, 2011) (determining that although
foreclosure is “an upsetting experience, it is not the sort of
experience that leaves the average person unable to cope or live his
or her life” sufficient to establish a claim for negligent infliction of
emotional distress). To hold otherwise would subject lenders to tort
liability for the natural and understandable distress suffered by a
borrower who defaults on a mortgage loan and therefore faces a
foreclosure action. While we are not unsympathetic to the real
emotional impact of losing one’s home, the lender is merely
pursuing the collateral the borrower agreed to pledge as security
for repayment of the loan proceeds. Accordingly, we affirm the

20120215‐CA 9 2013 UT App 175
Snow v. Chartway Federal Credit Union

district court’s dismissal of Snow’s claim for negligent infliction of
emotional distress.

¶16 In sum, the district court properly dismissed Snow’s claims
for breach of the implied covenant of good faith and fair dealing
and negligent infliction of emotional distress. Affirmed.

20120215‐CA 10 2013 UT App 175