Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_10-cv-02726/USCOURTS-azd-2_10-cv-02726-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1331 Fed. Question: Breach of Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

The Federal Deposit Insurance

Corporation solely as Receiver for

Wheatland Bank, 

Plaintiff, 

vs.

Douglas Gannett and Kathryn Gannett,

husband and wife, 

Defendants. 

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No. CV10-02726-PHX-JAT

ORDER

Currently pending before the Court is Defendant Kathryn Gannett’s Motion to

Dismiss (Doc. 9). The Court now rules on the Motion.

BACKGROUND

This case arises from an alleged breach of contract by Defendant Douglas Gannett.

For a Rule 12(b)(6) Motion, all the well-pleaded allegations of the Complaint are deemed

true. Movsesian v. Victoria Versicherung AG, 629 F.3d 901, 905 (9th Cir. 2010). On or

about October 1, 2008, Wheatland Bank made a loan of $130,000 to 2nd Ave. Holdings,

LLC. Defendant Douglas Gannett, manager of 2nd Ave. Holdings, made a personal guaranty

of the loan. At that time, both Douglas Gannett and his wife, Defendant Kathryn Gannett,

were domiciled in Illinois, although they are now residents of Arizona.

2nd Ave. Holdings defaulted on the loan, and Douglas Gannett failed to pay as

guarantor. Plaintiff Federal Deposit Insurance Corporation (“FDIC-R”), solely as Receiver

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for Wheatland Bank, has filed this action seeking judgment for $125,000 plus continuing

interest, attorneys’ fees, costs, and such other relief as the Court deems just. FDIC-R seeks

to collect against the separate and community property of Douglas Gannett.

FDIC-R asserts that Kathryn Gannett is joined solely to ensure compliance with

A.R.S. § 25-215(D) to the extent that recovery under the guaranty may be from the Gannetts’

community property. No judgment is sought against the separate property of Kathryn

Gannett.

LEGAL STANDARD

Kathryn Gannett has moved pursuant to Federal Rule of Civil Procedure 12(b)(6) to

dismiss all claims against her. The Court may dismiss a complaint for failure to state a claim

under 12(b)(6) for two reasons: 1) lack of a cognizable legal theory and 2) insufficient facts

alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696,

699 (9th Cir. 1990).

To survive a 12(b)(6) motion for failure to state a claim, a complaint must meet the

requirements of Federal Rule of Civil Procedure 8(a)(2). Rule 8(a)(2) requires a “short and

plain statement of the claim showing that the pleader is entitled to relief,” so that the

defendant has “fair notice of what the . . . claim is and the grounds upon which it rests.” Bell

Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S.

41, 47 (1957)).

Although a complaint attacked for failure to state a claim does not need detailed

factual allegations, the pleader’s obligation to provide the grounds for relief requires “more

than labels and conclusions, and a formulaic recitation of the elements of a cause of action

will not do.” Id. (internal citations omitted). The factual allegations of the complaint must

be sufficient to raise a right to relief above a speculative level. Id. Rule 8(a)(2) “requires a

‘showing,’ rather than a blanket assertion, of entitlement to relief. Without some factual

allegation in the complaint, it is hard to see how a claimant could satisfy the requirement of

providing not only ‘fair notice’ of the nature of the claim, but also ‘grounds’ on which the

claim rests.” Id. at 556 n.3 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure

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Although not raised in the Complaint, FDIC-R now asserts that Illinois law should

control the Court’s analysis. While the Response makes first mention of this argument, it

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§1202, pp. 94, 95(3d ed. 2004)).

Rule 8’s pleading standard demands more than “an unadorned, the-defendantunlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009)(citing

Twombly, 550 U.S. at 555). A complaint that offers nothing more than naked assertions will

not suffice. Id. To survive a motion to dismiss, a complaint must contain sufficient factual

matter, which, if accepted as true, states a claim to relief that is “plausible on its face.” Id.

Facial plausibility exists if the pleader pleads factual content that allows the court to draw

the reasonable inference that the defendant is liable for the misconduct alleged. Id.

Plausibility does not equal “probability,” but plausibility requires more than a sheer

possibility that a defendant has acted unlawfully. Id. “Where a complaint pleads facts that

are ‘merely consistent’ with a defendant’s liability, it ‘stops short of the line between

possibility and plausibility of entitlement to relief.’” Id. (citing Twombly, 550 U.S. at 557).

In deciding a motion to dismiss under Rule 12(b)(6), the Court must construe the facts

alleged in the complaint in the light most favorable to the drafter of the complaint, and the

Court must accept all well-pleaded factual allegations as true. See Shwarz v. United States,

234 F.3d 428, 435 (9th Cir. 2000). Nonetheless, the Court does not have to accept as true

a legal conclusion couched as a factual allegation. Papasan v. Allain, 478 U.S. 265, 286

(1986).

ANALYSIS

Kathryn Gannett argues that FDIC-R has failed to state a claim against her as a matter

of law. In support of its claim, FDIC-R cites A.R.S. § 25-215(D), which reads, “Except as

prohibited in § 25-214, either spouse may contract debts and otherwise act for the benefit of

the community. In an action on such a debt or obligation the spouses shall be sued jointly.

. . .” Ariz. Rev. Stat. Ann. § 25-215(D) (2007). FDIC-R offers no other grounds in its

Complaint for relief against Kathryn Gannett.1

 “In determining the propriety of a Rule

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does not cite to any Illinois law. Furthermore, the Illinois statute referenced in oral

argument—750 Ill. Comp. Stat. 65/12 (2011)—does not appear to apply to this case. While

it does speak to one spouse binding the other in contracts and encumbrances, it is expressly

limited to situations where a court has granted special powers to one spouse following the

imprisonment of or abandonment by the other spouse. See id.; 750 Ill. Comp. Stat. 65/11

(2011). Because FDIC-R has not cited to any relevant Illinois law in support of its claim, the

Court will not consider FDIC-R’s Illinois law argument.

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12(b)(6) dismissal, a court may not look beyond the complaint to a plaintiff’s moving papers,

such as a memorandum in opposition to a defendant’s motion to dismiss.” Schneider v.

California Dep’t of Corr., 151 F.3d 1194, 1197 n.1 (9th Cir. 1998).

The exception to § 25-215(D) is § 25-214, which reads, in relevant part, “Either

spouse separately may acquire, manage, control or dispose of community property or bind

the community, except that joinder of both spouses is required in . . . [a]ny transaction of

guaranty, indemnity or suretyship.” Ariz. Rev. Stat. Ann. § 25-214(C) (2007). “Joinder” in

this section refers not to joinder of parties under Federal Rules of Civil Procedure 19 or 20,

but to the execution of the guaranty. See Rackmaster Sys., Inc. v. Maderia, 193 P.3d 314,

317 (Ariz. Ct. App. 2008). The plain meaning of § 25-214(C) is that both spouses must sign

a guaranty in order to bind the community under Arizona law. See id.; Citibank (Arizona)

v. Van Velzer, 982 P.2d 833, 837 (Ariz. Ct. App. 1998), cited with approval in Butler v. IMA

Regiomontana S.A. de C.V., No. 98-16735, 2000 WL 127125, at *7 n.6 (9th Cir. Feb. 3,

2000).

The Complaint does not allege that Kathryn Gannett was a party to the guaranty. The

guaranty does not bear her signature (Doc. 1-1). Kathryn Gannett was joined solely to

comply with the requirements of § 25-215(D) regarding recovery against community

property, but § 25-214(C) makes clear that such recovery is impossible without her signature

on the guaranty. A.R.S. § 25-215(D) therefore cannot be the basis for this claim against

Kathryn Gannett, and the Court will grant Kathryn Gannett’s Motion to Dismiss.

Accordingly,

IT IS ORDERED GRANTING Defendant Kathryn Gannett’s Motion to Dismiss

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(Doc. 9). Mrs. Gannett shall be dismissed as a party. 

DATED this 13th day of July, 2011.

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