Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-01218/USCOURTS-azd-2_09-cv-01218-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Jeffrey C. Stone, Inc., d/b/a Summit

Builders, 

Plaintiff, 

vs.

MidFirst Bank, et al., 

Defendants. 

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No. CV-09-01218-PHX-ROS

ORDER

Defendant MidFirst Bank seeks dismissal of one count in Plaintiff’s second amended

complaint. For the following reasons, the motion will be denied.

BACKGROUND

Summit is a general contractor that entered into a contract with ICP D200, LLC

(“ICP”) to construct a condominium project. ICP financed the project with a construction

loan from MidFirst. Summit is still owed approximately $1.4 million for its work on the

project. Count one of Summit’s second amended complaint alleges MidFirst negligently

failed to disclose the fact that ICP had defaulted on the construction loan. MidFirst argues

the amended complaint was not filed by the deadline and should be stricken. MidFirst also

seeks dismissal of the failure to disclose cause of action on the basis that MidFirst did not

have a duty to disclose to Summit the financial condition of ICP.

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ANALYSIS

I. Timeliness of Amended Complaint

The Court ordered Summit to file its amended complaint “no later than January 18,

2010.” Because January 18, 2010 was a federal holiday, Summit did not file its amended

complaint until approximately 2 a.m. on January 19, 2010. MidFirst argues the amended

complaint is untimely and must be stricken. 

Federal Rule of Civil Procedure 6 provides for an extension of time when “the last day

for filing” a document falls on a legal holiday. MidFirst is correct that this rule does not

apply when a court provides a date certain. Violette v. P.A. Days, Inc., 427 F.3d 1015, 1018-

1019 (6th Cir. 2005). But it is well-established that district courts have “broad inherent

powers to manage their own affairs so as to achieve the orderly and expeditious disposition

of cases.” Sherman v. United States, 801 F.2d 1133, 1135 (9th Cir. 1986). Here, nothing

would be gained by requiring Summit file a formal request that its second amended

complaint be accepted. Instead, in an exercise of its discretion, the Court will deem

Summit’s filing timely and proceed to the merits. See Bailey v. United Airlines, 279 F.3d

194, 203 (3d Cir. 2002) (affirming district court’s decision to accept filing one day after

deadline when deadline fell on holiday). 

II. Standard for Motion to Dismiss

“[F]or a complaint to survive a motion to dismiss, the non-conclusory ‘factual

content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim

entitling the plaintiff to relief.” Moss v. United States Secret Service, 572 F.3d 962, 969 (9th

Cir. 2009) (quoting Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)). Under this standard,

“[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory

statements, do not suffice.” Iqbal, 129 S. Ct. at 1949. While “legal conclusions can provide

the framework of a complaint . . . they must be supported by factual allegations” sufficient

for the court to conclude the plaintiff has stated a plausible claim. Id.

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III. Summit Has Adequately Pled a Negligent Failure to Disclose

Summit’s first cause of action is that MidFirst negligently failed to disclose to Summit

the financial condition of ICP (MidFirst’s customer). Generally, banks do not have a duty

to disclose a customer’s financial condition to a third party. Kesselman v. Nat’l Bank of

Ariz., 937 P.2d 341, 343 (Ariz. Ct. App. 1996). A bank may, however, have a duty to

disclose if there is a “special relationship” between the bank and the third party. A “special

relationship” can exist under a variety of circumstances. For example, a “special

relationship” exists if the bank was “directly involved with the third part[y] in the

transactions that [are] the subject of litigation.” Id. at 345. A special relationship also exists

when the third party “place[s] trust or confidence in the bank” based on the bank’s conduct.

Id.

According to the second amended complaint, Summit originally was paid according

to the following process. First, ICP would submit a pay request to MidFirst. Second,

MidFirst’s inspector would then “walk the site with Summit’s superintendent and/or project

manager to verify the completed work.” (Doc. 49 at 4). Finally, assuming the inspector

approved the work, MidFirst would provide ICP with the funds to disburse to Summit. In

August 2008, Summit expressed to ICP and MidFirst its displeasure with the amount of time

it was taking to receive payment. Thus, “MidFirst, [ICP], and Summit engaged in direct[]

negotiations and discussions to establish payment procedures that would ensure timely

payment [from] MidFirst to Summit.” (Doc. 49) (emphasis added). Ultimately, MidFirst

removed ICP from the payment process and substituted First Arizona Title to act as an

escrow agent to process the payments from MidFirst to Summit. MidFirst also imposed new

requirements on Summit regarding documentation.

 After additional delays in receiving payment, Summit “started making inquiries of

MidFirst and First Arizona Title.” On December 2, 2008, MidFirst sent an email to First

Arizona Title confirming that MidFirst would fully fund the balance of the loan.” This email

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 It is unclear who forwarded this email to Summit. 

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was forwarded to Summit.1 Summit continued working on the project based on MidFirst’s

statements in the email. Finally, in January 2009, MidFirst’s inspector approved Summits’s

work. The inspector stated he “would instruct MidFirst to release the payment.”

MidFirst argues that these facts are not sufficient to establish that MidFirst had a duty

to disclose to Summit that ICP had defaulted on the construction loan. MidFirst examines

the facts in isolation. For example, MidFirst correctly points out that MidFirst’s involvement

in payments to Summit is not enough, standing alone, to establish a special relationship. See,

e.g., Giles Const., Inc. v. Commercial Fed. Bank, 2006 WL 2711501 (D. Ariz. 2006) (merely

issuing checks did not establish special relationship). The allegations of the relationship

between MidFirst and Summit cannot, however, be viewed in a vacuum. The facts recited

in the complaint must be viewed as a whole. See Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950

(2009) (stating court must assume the veracity of the factual allegations “and then determine

whether they plausibly give rise to an entitlement to relief”). Taken together, the complaint

alleges MidFirst was in direct contact with Summit on multiple occasions, MidFirst’s

inspector assured Summit payment would be forthcoming, and MidFirst affirmed in writing

that the entire loan balance would be funded. In combination, these are sufficient allegations

to establish a “special relationship.” 

 Accordingly,

IT IS ORDERED the Motion to Strike and Motion to Dismiss (Doc. 60) is

DENIED. 

DATED this 29th day of April, 2010.

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