Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_05-cv-00532/USCOURTS-azd-4_05-cv-00532-1/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 28:1346 Tort Claim

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opinion

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

SERGIO RENTERIA, et al.,

Plaintiffs, 

vs.

UNITED STATES OF AMERICA,

Defendant. 

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No. CIV 05-532-TUC-CKJ

ORDER 

On May 16, 2006, Magistrate Judge Charles R. Pyle issued a Report and

Recommendation [Doc. # 25] in which he recommended Defendant's Motion to Dismiss

[Doc. # 9] be granted in part and denied in part. Plaintiffs and Defendant have filed

objections to the Report and Recommendation and Plaintiffs have filed a response to

Defendant's Objection. Plaintiffs have requested oral argument. The Court finds, however,

resolution of the issues is appropriate without oral argument. 

The Magistrate Judge has set forth the factual background and this Court will not

repeat it here.

Defendant's Objection to Report and Recommendation

Good Samaritan Doctrine

Magistrate Judge Pyle found that, under Arizona law, the Good Samaritan Doctrine

is applicable to economic harm as well as physical harm. Lloyd v. State Farm Mutual

Insurance Co., 176 Ariz. 247, 250, 860 P.2d 1300, 1303 (App. 1992); Jeter v. Mayo Clinic

Case 4:05-cv-00532-CKJ Document 30 Filed 09/11/06 Page 1 of 8
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Arizona, 211 Ariz. 386, 402, 121 P.3d 1256, 1272 (App. 2005). Defendant asserts, however,

that the Arizona courts have never applied the doctrine to commercial lending cases and the

Arizona courts have not determined whether "a person who gratuitously lends money to a

person who relies on the offer will be liable under the Restatement § 323 if the person

negligently fails to make the loan, causing economic harm to proposed borrower."

Defendant's Objection to Report and Recommendation, p. 3. Lloyd and Jeter make clear that

the Good Samaritan Doctrine applies to economic harm. Neither of these cases nor any other

Arizona authority excepts lending from that authority. The Good Samaritan Doctrine,

therefore, is applicable to the Renterias' claims.

Misrepresentation 

Magistrate Judge Pyle also found that the Renterias' claim regarding the inability to

plant alfalfa on a leased farm could go forward because the AMTA payments had apparently

been approved and the Renterias could reasonably rely on Defendant to use reasonable

efforts to timely distribute the funds. Defendant asserts that the misrepresentation exception

should bar the Renterias' claim:

The provisions of this chapter and section 1346(b) of this title shall not apply to – 

(h) Any claim arising out of assault, battery, false imprisonment, false arrest ,

malicious prosecution, abuse of process, libel, slander, misrepresentation, deceit, or

interference with contract rights . . .

28 U.S.C. § 2680(h).

The Renterias assert that, without regard to the misrepresentations, "the defendant's

negligent approval of crops that could not be cultivated because of prior use of herbicide is

what caused plaintiffs harm, in addition, of course, to the negligent delay in purely

ministerial processing of one of the loans causing plaintiffs to lose the benefit of an entire

crop season." Plaintiffs' Response to Defendant's Objection to Magistrate's Report and

Recommendations, p. 2. Although the Renterias appear to address Defendant's objection as

if it is regarding a herbicide claim, Defendant's objection refers to the inability of Plaintiffs

to plant alfalfa because of the alleged untimely distribution of funds. The Court will address

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that objection.

The United States is immune under 28 U.S.C. § 2680(h) from "[a]ny claim arising out

of ... misrepresentation," whether negligent or willful. Mount Homes, Inc. v. United States,

912 F.2d 352, 354 (9th Cir. 1990). The § 2680(h) misrepresentation exception is broadly

construed. Frigard v. United States, 862 F.2d 201, 202 (9th Cir. 1988). This Court "must

look beyond the characterizations in the pleadings to distinguish misrepresentation from

negligence claims, a task which is frequently far from simple." Rich Prods. Corp. v. United

States, 804 F.Supp. 1270, 1272 (E.D.Cal. 1992).

The United States Supreme Court has provided guidance in distinguishing

misrepresentation claims from negligence claims in the context of 28 U.S.C. § 2680(h)

immunity claims. United States v. Neustadt, 366 U.S. 696, 81 S.Ct. 1294, 6 L.Ed.2d 614

(1961); Block v. Neal, 460 U.S. 289, 103 S.Ct. 1089, 75 L.Ed.2d 67 (1983). Where the

plaintiffs relied on an inaccurate written appraisal prepared by the Federal Housing

Administration ("FHA"), the Court held that the plaintiff's claim against the FHA based on

this reliance was barred by the misrepresentation exception. Neustadt, 366 U.S. at 710-11.

The Court defined negligent misrepresentation as breach of "the duty to use care in obtaining

and communicating information upon which that party may reasonably be expected to rely

in the conduct of his economic affairs." Id. at 706. The Supreme Court also has

distinguished the duty to obtain and communicate accurate information from the duty to

perform a separate task. Block. In Block, the plaintiff received a loan from the Farmers

Home Administration ("FmHA") to build her home. Block, 460 U.S. at 291. The loan

agreement required the FmHA to approve all plans and gave the FmHA the right to inspect

and test all materials and workmanship. Id. When plaintiff discovered that the completed

house was defective, plaintiff sued FmHA alleging that it had failed properly to inspect and

supervise construction. Id. at 297. The Supreme Court held that FmHA was subject to suit

for allegedly breaching a separate duty to supervise the construction of the plaintiff's home,

independent of its duty to obtain and communicate information. Id. at 297. The Supreme

Court distinguished Neustadt on the grounds that plaintiffs in Neustadt had alleged no injury

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that they would have suffered independent of their reliance on the negligent appraisal. Id.

In Block, however, the FmHA's misrepresentations were not essential to the claim of

negligent supervision. Id. The Supreme Court held that FmHA's "duty to use due care to

ensure that the builder adhere to previously approved plans and cure all defects before

completing construction [was] distinct from any duty to use due care in communicating

information" to the plaintiff. Id. The Court concluded that the misrepresentation exception

did not bar the claim in Block. Id.

Therefore, in determining whether a claim is barred by the § 2680(h)

misrepresentation exception, this Court must look beyond the language in which the

complaint is couched and consider the "essence" or "gravamen" of the suit. Rich Products

Corp. v. United States, 804 F.Supp. 1270, 1273 (E.D.Cal. 1992) (citing Mount Homes, Inc.,

912 F.2d at 355). "[I]f the alleged misrepresentation is essential to the claim then the action

is barred even though there is some other allied negligence by the government, for example,

in gathering the information that proves inaccurate." Id. "When government misinformation

is at issue, plaintiff must allege injury independent of that caused by the erroneous

information." Id. citing Mount Homes, Inc. 912 F.2d at 356. The misrepresentation

exception "particularly protects the United States from suit by commercial entities which

claim to have lost money because of reliance on false government information." Id.

In stating a claim of negligence rather than misrepresentation, a plaintiff must

eliminate the government's communication of inaccurate information from the essence of the

claim. See id. The essence of the Renterias' claim is that the failure of Defendant to timely

distribute the funds caused the Renterias to lose the benefit of an entire crop season. The

essence of the action is based on negligent performance of a task separate from any alleged

duty to obtain and communicate information. The Renterias' claim regarding the inability

to plant alfalfa on a leased farm because the funds were not timely distributed is not barred

by the misrepresentation exception. 

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1

The Court notes that the Renterias object to consideration of this possibility because

it is not contained within the complaint. However, 7 U.S.C. § 1983a(4) recognizes that loans

may not be immediately funded. This is not a factual consideration, but a legal

consideration.

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Plaintiff's Objection to Magistrate's Report and Recommendations

Crop Year 2000

The Renterias assert that the Report and Recommendation incorrectly determined that

the Renterias had failed to state a claim for the 2000 crop year. The Magistrate Judge

determined that the Renterias were not legally entitled to rely on their expectations for a loan

to be approved promptly. The Renterias assert that the Magistrate Judge incorrectly

considered information outside of the complaint. Although review is limited to the contents

of the complaint, Campanelli v. Bockrath, 100 F.3d 1476, 1479 (9th Cir. 1996), a dismissal

is appropriate if some other bar to relief is apparent from the face of the complaint. 2A J.

Moore, W. Taggart & J. Wicker, Moore's Federal Practice, ¶ 12.07 at 12-68 to 12-69 (2d

ed. 1991 & supp. 1191-92), citing Imbler v. Pachtman, 424 U.S. 409, 96 S.Ct. 984, 47

L.Ed.2d 128 (1976). The Court agrees with the Renterias that a determination of whether the

Renterias reasonably relied upon receiving a loan is not a question that can be determined

in a motion to dismiss. However, if the Renterias did not have a legal right to rely upon

receiving the loan, the Court need not reach the issue of whether the reliance was reasonable.

Here, the loan could have been denied or not immediately funded.1

 The Renterias' apparent

attempt to "equate loan eligibility with loan entitlement," Helgeson v. Bureau of Indian

Affairs, 153 F.3d 1000, 1004 (9th Cir. 1998), simply does not make the Renterias legally

entitled to rely on their expectations of an approved loan. The Court finds that the Renterias

have not stated a claim for crop year 2000.

Crop Year 2001 

The Renterias object to the Magistrate Judge's consideration of the issue of whether

Defendant had a duty to prevent the Renterias from entering into and ultimately defaulting

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2

The Court notes that the Renterias have not alleged that the property upon which the

crops were planted was even the collateral for the loans. Rather, it appears that the collateral

for the loans was real property situated in Oregon. Complaint, ¶ 11.

3

Arizona does appear to recognize the principle of "pledge" through A.R.S. § 47-9207.

See Douglas S. John, Ariz. Legal Forms, Commercial Transactions § 9.98 (2d ed.) ("A

secured party in possession of collateral before default is a kind of bailee (pledgee)".

However, as stated, there is no allegation of possession in this case.

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on the loans. Rather, the Renterias assert that the Court should consider Defendant's duty to

avoid negligently impairing collateral securing a loan. In support of this assertion, the

Renterias cite to A.R.S. § 47-9207.A. That provision provides that " . . . a secured party shall

use reasonable care in the custody and preservation of collateral in the secured party's

possession." A.R.S. § 47-9207.A. However, the Renterias have not alleged that Defendant

was in possession of the collateral. Moreover, the Renterias have alleged that Defendant

caused or exacerbated the crop failures, not that Defendant impaired the collateral2

 itself.

The Court finds that the Renterias have not stated a claim establishing that Defendant had

a duty pursuant to this statute. The Court finds, therefore, that the Renterias have failed to

state a claim of negligence pursuant to this statute.

The Renterias also assert that Defendant's duty regarding the collateral in this case

cannot be decided without considering the loan documents, the circumstances surrounding

the decision on what crops to plant, Defendant's knowledge of the herbicide problem, and

other issues. The Renterias cite Frederick v. United States, 386 F.2d 481, 487 (5th Cir.

1967), for the proposition that a creditor may be sued if he irregularly or negligently sells

security. There is no such allegation in this case. Similarly, the Renterias cite Lifemark

Hospitals, Inc. v. Liljeberg Enterprises, Inc., 304 F.3d 410 (5th Cir. 2002), which holds that

to exhibit a "trust relationship" requires protection of the debt or obligation and the collateral.

This duty, however, arose from substantive Louisiana "pledge" law.3

 However, the Renterias

have failed to allege under what authority a duty is required in Arizona. Moreover, the

Renterias' reliance on First National Bank v. Milford, 239 Kan. 151, 718 P.2d 1291 (1986),

for the determination of who is responsible for the care and preservation of crops fails to

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consider that such a duty was imposed by a statute similar to A.R.S. § 47-9207.A. because

the "creditor" exercised dominion and control over the crops "sufficient to establish a duty

on its part to use reasonable care in preserving the [crops]." 239 Kan. at 156-57, 718 P.2d

at 1296. Here, there is no allegation that Defendant exercised dominion or control over the

crops; i.e., there has been no allegation of possession. The Court finds the Renterias have

failed to state a claim upon which relief can be granted based on negligently impairing the

collateral. 

Crop Year 2002

The Renterias having failed to state a claim for relief based on Defendant negligently

impairing the collateral in 2001, the Renterias cannot state a claim that their inability to

obtain loans for the 2002 crop year is attributable to any breach of duty by Defendant. 

After an independent review, IT IS ORDERED:

1. The Report and Recommendation [Doc. # 25] is ADOPTED;

2. Defendant's Motion to Dismiss [Doc. # 9] is GRANTED in part;

3. All claims related to crop year 2000 are DISMISSED;

4. The claim that Defendant negligently loaned money in crop year 2001 is

DISMISSED;

5. The claim that the Renterias' inability to obtain a loan for the 2002 crop year

was caused by Defendant is DISMISSED;

6. The Renterias' claim related to Defendant's negligent failure to timely disburse

funds to allow herbicide treatment for the 2001 crop year and the Renterias' claim that FSA

failed to timely distribute funds for the crop year 2002 survive the Motion to Dismiss, and;

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7. This matter is referred back to Magistrate Judge Charles R. Pyle for further

pretrial proceedings and report and recommendation in accordance with the provisions of 28

U. S. C. § 636(b)(1) and L.R.Civ.P. 72.1 and 72.2.

DATED this 11th day of September, 2006.

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