Snow v. Chartway Federal Credit Union
306 P.3d 868
Utah Ct. App.2013Background
- In 2007 Snow obtained a construction loan secured by a trust deed; the loan was later modified and increased in principal. Heritage (formerly Tooele) later reduced the interest rate temporarily and discussed future negotiations.
- Snow tried to have a third party assume the loan; Heritage initially provided terms but later added onerous down‑payment/CD requirements, causing the prospective buyer to withdraw.
- Heritage’s assets (including the loan) were acquired by Chartway in December 2009. Snow sought a short sale in 2010; Chartway conditionally approved a short sale that later fell through. Snow tendered a deed in lieu of foreclosure, which Chartway refused; Snow defaulted and Chartway scheduled a trustee’s sale.
- Snow sued Chartway alleging (among other claims) breach of the implied covenant of good faith and fair dealing and negligent infliction of emotional distress; Chartway moved under rule 12(b)(6) to dismiss.
- The district court dismissed those two claims; Snow appealed. The appellate court reviews de novo the grant of a 12(b)(6) motion, accepting pleaded facts and reasonable inferences.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chartway breached the implied covenant of good faith by refusing an assumption/short sale | Snow: Chartway promised to allow a qualified buyer to assume the loan; Snow relied and produced a ready buyer | Chartway: No written modification exists; Note reserves approval rights and Statute of Frauds bars oral modification | Dismissal affirmed — plaintiff failed to plead a written modification; covenant cannot impose obligations inconsistent with the Note |
| Whether alleged oral promise is enforceable despite the Statute of Frauds | Snow: Emails/communications show promise; equitable estoppel/part‑performance exceptions apply | Chartway: No signed writing modifying the Note; plaintiff did not plead or present a writing that satisfies statute; no exception pled | Dismissal affirmed — no written agreement and no pleaded exception to statute of frauds |
| Whether Chartway’s conduct supports negligent infliction of emotional distress | Snow: Delay, refusal to accept deed, failed short sale and foreclosure caused severe emotional/physical harm | Chartway: Its actions were consistent with contractual rights and pursuing legal remedies; privileged to insist on legal rights | Dismissal affirmed — lender’s lawful pursuit of contract/foreclosure not actionable; no severe distress alleged |
| Whether the implied covenant can create new duties inconsistent with the Note | Snow: Covenant should apply to enforce the alleged promise | Chartway: Covenant cannot create obligations contrary to clear written terms | Dismissal affirmed — covenant cannot contradict express contract terms |
Key Cases Cited
- Brown v. Moore, 973 P.2d 950 (Utah 1998) (general rule that every contract is subject to an implied covenant of good faith)
- Young Living Essential Oils, LC v. Marin, 266 P.3d 814 (Utah 2011) (implied covenant cannot create obligations inconsistent with express contract terms)
- Harnicher v. University of Utah Med. Ctr., 962 P.2d 67 (Utah 1998) (elements and severity requirement for negligent infliction of emotional distress)
- Eggett v. Wasatch Energy Corp., 94 P.3d 193 (Utah 2004) (definition of the covenant—duty not to intentionally injure the other party’s right to contract benefits)
- Webster v. JP Morgan Chase Bank, N.A., 290 P.3d 930 (Utah Ct. App. 2012) (mem.) (standard of review on motion to dismiss and treatment of pleaded facts)