Mayotte v. U.S. Bank ( 2021 )

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS January 22, 2021
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_______________________________________
MARY M. MAYOTTE,
Plaintiff - Appellant,
v. No. 20-1027
U.S. BANK NATIONAL
ASSOCIATION, as Trustee for
Structured Asset Investment Loan
Trust Mortgage Pass–Through
Certificates, Series 2006-4; and
WELLS FARGO BANK, N.A.,
Defendants - Appellees.
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:14-CV-03092-RBJ)
_________________________________
Brad Kloewer, Cain & Skarnulis, Salida, Colorado, on behalf of the
Plaintiff-Appellant.
Andrew M. Jacobs, Snell & Wilmer, Phoenix, Arizona (Anna M. Adams,
Snell & Wilmer, Denver, Colorado, with him on the briefs), on behalf of
the Defendants-Appellees.
_________________________________
Before HOLMES, BACHARACH, and EID, Circuit Judges.
_________________________________
BACHARACH, Circuit Judge.
_________________________________
This appeal grows out of the interplay between remedies for tort and
breach of contract. Remedies are often broader for tort than for breach of
contract, and claimants often seek the broader tort remedies for conduct
considered wrongful only because it violates a contractual duty. To enforce
the limits on contractual remedies, courts employ a doctrine known as the
“economic-loss rule.” See Restatement (Third) of Torts: Liability for
Economic Harm § 3 (Am. L. Inst. 2020). Under this rule, tort remedies are
ordinarily unavailable for economic losses resulting from violation of
contractual duties in the absence of an independent duty growing out of a
special relationship between the parties. Id. & cmt.g.
The overarching issue here is whether the economic-loss rule
prevents use of tort remedies for a lender’s failure to carry out its
promises. The district court answered “yes,” rejecting the plaintiff’s effort
to recover tort remedies for wrongful conduct consisting solely of alleged
contractual breaches. We agree with the district court.
1. Ms. Mary Mayotte sues for torts based on Wells Fargo’s alleged
breach of an agreement.
The claims grew out of Ms. Mary Mayotte’s mortgage with U.S.
Bank, which used Wells Fargo to service the loan. Ms. Mayotte sought
modification of the loan and alleges that Wells Fargo had agreed to modify
her loan if she withheld three payments. Based on this alleged
2
understanding, Ms. Mayotte withheld three payments. But Wells Fargo
denies agreeing to modify the loan, and U.S. Bank eventually foreclosed.
The foreclosure spurred Ms. Mayotte to sue U.S. Bank and Wells
Fargo, asserting statutory claims (violation of the Colorado Consumer
Protection Act), tort claims (negligence, negligent supervision, and
negligent hiring), and a claim for a declaratory judgment. The district court
granted summary judgment to U.S. Bank and Wells Fargo, relying in part
on the economic-loss rule and Ms. Mayotte’s failure to present evidence of
compensatory damages. 1
2. We engage in de novo review based on the summary-judgment
standard that applied in district court.
Because this is a diversity action brought in the District of Colorado,
we apply Colorado law for substantive matters and federal law for the
standard of review. Prager v. Campbell Cty. Mem’l Hosp., 731 F.3d 1046,
1060 (10th Cir. 2013). Under federal law, we conduct de novo review of
the award of summary judgment. Zahourek Sys., Inc. v. Balanced Body
Univ., LLC, 965 F.3d 1141, 1143 (10th Cir. 2020). Summary judgment is
appropriate when “there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a).
1
The district court alternatively relied on other grounds, but we need
not address those grounds.
3
3. The economic-loss rule prevents economic and declaratory relief.
Like most states, Colorado has adopted the economic-loss rule. Town
of Alma v. AZCO Const., Inc., 10 P.3d 1256, 1259–64 (Colo. 2000); see
Wiltz v. BayerCropScience, Ltd., 645 F.3d 690, 695 (5th Cir. 2011) (stating
that the economic-loss rule has been adopted in most jurisdictions). The
applicability of the economic-loss rule is an issue of law. See Town of
Alma, 10 P.3d at 1263–64 (“‘The court determines, as a matter of law, the
existence and scope of the duty’. . . . Consistent with this duty analysis, we
now expressly adopt the economic loss rule.” (quoting Taco Bell, Inc. v.
Lannon, 744 P.2d 43, 46 (Colo. 1987)); see also Haynes Trane Serv.
Agency, Inc. v. Am. Standard, Inc., 573 F.3d 947, 962 (10th Cir. 2009)
(“Whether the economic-loss rule operates to bar [the party’s] fraud
counterclaim ‘is an issue of law . . . .’” (quoting Level 3 Commc’ns, LLC v.
Liebert Corp., 535 F.3d 1146, 1162 (10th Cir. 2008))).
Under Colorado law, a plaintiff alleging an economic loss from a
breach of contract ordinarily lacks a cause of action for a tort. Town of
Alma, 10 P.3d at 1264. A tort would exist only if the wrongful action
violated a duty existing independently of the contract. Id.
4
Invoking the economic-loss rule, the district court granted summary
judgment to U.S. Bank and Wells Fargo on the claims for economic and
declaratory relief. 2 We agree with this conclusion because Ms. Mayotte
• has not shown an independent duty and
• has forfeited her new arguments on the claims for a statutory
violation and declaratory judgment.
A. No independent duty exists to support the tort claims.
When deciding whether a potential tort duty exists, Colorado courts
generally consider
• the risk involved,
• the foreseeability and likelihood of injury weighed against the
social utility of the defendant’s conduct,
• the burden of guarding against injury or harm, and
• the consequences of placing the burden on the defendant.
A.C. Excavating v. Yacht Club II Homeowners Ass’n, Inc., 114 P.3d 862,
868 (Colo. 2005).
But in the context of the economic-loss rule, a defendant can incur
liability for economic losses only if the underlying duty is “independent.”
S K Peightal Engineers, LTD v. Mid Valley Real Estate Sols. V, LLC, 342
P.3d 868, 875 (Colo. 2015). A duty is independent if it
2
The district court also relied on the economic-loss rule to bar
recovery for non-economic losses. We address those remedies separately.
5
• lies beyond the scope of contractual duties or
• arises in the context of a “special relationship,” such as an
attorney-client, physician-patient, or insurer-insured
relationship.
Id.Ms. Mayotte’s relationship with U.S. Bank was governed by a
contract, but Ms. Mayotte has not asserted a claim for breach of contract.
She instead asserts claims involving torts, violation of a statute, and
declaratory relief.
For the torts, Ms. Mayotte argues that U.S. Bank and Wells Fargo had
duties outside of the contract. We reject this argument.
In district court, Ms. Mayotte did not present an argument or
evidence about the existence of independent duties. Though she alleged
duties of care, she didn’t allege
• the creation of these duties outside of the contract or
• the existence of a special relationship with the defendants. 3
3
Ms. Mayotte did say in a subheading: “Wells Fargo and US Bank
Owed Duties Independent of the Contract with Ms. Mayotte, and Therefore
this Action Arises in Tort.” Appellant’s App’x, vol. 9, at 2367. But in the
body of the brief, Ms. Mayotte did not explain how these duties existed
independently of the contract. See Sierra Club, Inc. v. Bostick, 787 F.3d
1043, 1060 n.18 (10th Cir. 2015) (concluding that the petitioners had
failed to adequately brief an argument beyond a heading in their opening
brief).
6
On appeal, Ms. Mayotte relies on a report from her expert witness
and admissions by a Wells Fargo employee. But the existence of an
independent duty involves a matter of law, not fact. See p. 4, above.
Ms. Mayotte’s expert witness didn’t purport to opine on the banks’
legal duties. In his report, the expert witness simply opined on the facts
relating to what “a reasonably careful and ethical servicer should be able
to do.” Report of James E. McNulty at 3 (Dkt. No. 134-7). 4 This opinion
does bear on the banks’ responsibility to carry out obligations in a
commercially reasonable manner. See Report of James E. McNulty at 3
(Dkt. No. 134-7); Appellant’s App’x at 2347–55. But that duty inheres in
every contract as an implied duty of good faith and fair dealing. Amoco Oil
Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995), as modified on denial of
reh’g (Jan. 16, 1996). This duty does not exist independently of the
contract. Top Rail Ranch Estates, LLC v. Walker, 327 P.3d 321, 329 (Colo.
App. 2014).
Though the expert witness addressed matters bearing on the implied
duty of good faith and fair dealing, he didn’t purport to identify the banks’
legal duties. He couldn’t, for the existence of a legal duty lies within the
sole province of the court. See Black v. Black, 422 P.3d 592, 610 (Colo.
4
In the appendix, Ms. Mayotte did not include the copy of the expert
report attached to her summary-judgment motion. The report appears in the
appendix only as an attachment to Ms. Mayotte’s response to the
defendants’ motion to exclude expert testimony.
7
App. 2018) (stating that an expert witness’s testimony on “the correct legal
standard” would be inadmissible); see also p. 4, above. So even if the
expert witness had purported to opine on the banks’ legal duties, that
opinion could not prevent summary judgment. See Portenier v. United
States, 520 F. App’x 707, 716 (10th Cir. 2013) (unpublished) (concluding
that the plaintiff ’s “marshalling of evidence cannot create . . . a legal duty”
because the existence of a duty involves a pure issue of law). 5
Ms. Mayotte also misstates the alleged “admissions” by Wells Fargo.
On appeal, Ms. Mayotte states that “Wells Fargo admitted that it owed . . .
duties.” Appellant’s Opening Br. at 48. In support, she cites pages 2347–55
of the appendix. These pages contain testimony about Wells Fargo’s
policies. Appellant’s App’x at 2347–55. But the testimony doesn’t address
any duties, much less duties existing beyond the contract.
Ms. Mayotte also argues that she had a special relationship with the
defendants. We disagree. Colorado does not recognize a special
relationship between lenders and borrowers, so Colorado appellate courts
routinely dismiss borrowers’ negligence claims against lenders. See Miller
v. Bank of New York Mellon, 379 P.3d 342, 348 (Colo. App. 2016)
(upholding the dismissal of a negligence claim by borrowers against a
5
Portenier is persuasive but not precedential. See 10th Cir. R.
32.1(A).
8
lender because no special relationship existed); Premier Farm Credit, PCA
v. W-Cattle, LLC, 155 P.3d 504, 523 (Colo. App. 2006) (upholding the
dismissal of borrowers’ negligence claim); Centennial Square, Ltd. v.
Resolution Trust Co., 815 P.2d 1002, 1004 (Colo. App. 1991) (same), cited
by Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256, 1262 (Colo. 2000).
Given the absence of an independent duty, the economic-loss rule
bars Ms. Mayotte’s tort claims for economic damages.
B. Ms. Mayotte forfeited her argument that the economic-loss
rule doesn’t apply to the claims for violation of a statute or
for a declaratory judgment.
Ms. Mayotte argues on appeal that the economic-loss rule doesn’t
apply to her claims for violation of a state statute or for a declaratory
judgment. But she didn’t make this argument in district court.
There U.S. Bank and Wells Fargo sought summary judgment on all of
the claims, including those for violation of the Colorado Consumer
Protection Act and for a declaratory judgment. But Ms. Mayotte didn’t
argue that these claims would have triggered an exception to the economic-
loss rule. 6 So the district court didn’t have the benefit of the argument that
Ms. Mayotte has made to us.
6
In her reply brief, Ms. Mayotte argues that she preserved her
opposition to application of the economic-loss rule on the statutory claim.
But in district court, she argued only that the statutory claim was an
independent source of liability; she didn’t explain how the statutory claim
existed independently of the contract or otherwise address her statutory
claim in relation to the economic-loss rule.
9
Despite Ms. Mayotte’s failure to preserve this argument, we could
ordinarily consider it under the plain-error standard. See Richison v. Ernest
Grp., Inc., 634 F.3d 1123, 1131 (10th Cir. 2011). But Ms. Mayotte has not
urged plain error, so we decline to consider this argument. See id.
4. Ms. Mayotte failed to present any evidence of non-economic
harm.
Ms. Mayotte argues that even if the economic-loss rule bars recovery
for economic harm, she could still recover for non-economic harm (like
emotional distress). But she failed to present any evidence of non-
economic harm.
In district court, U.S. Bank and Wells Fargo urged summary judgment
based in part on a failure to prove compensatory damages. In support, U.S.
Bank and Wells Fargo
• presented evidence that Ms. Mayotte had obtained a benefit
worth $310,000 by living in her house for over ten years
without making any payments and
• argued that the damages could not have outweighed the
$310,000 benefit.
This argument triggered a burden for Ms. Mayotte to present evidence of
non-economic harm. Fed. R. Civ. P. 56(c)(1)(A), (c)(3).
Ms. Mayotte responded by pointing out that she had alleged
emotional distress. But Ms. Mayotte could not satisfy her evidentiary
burden by relying on the allegations in her complaint. Hansen v. PT Bank
Negara Indonesia (Persero), 706 F.3d 1244, 1247 (10th Cir. 2013). For
10
those allegations, she needed to present evidence. See, e.g., Tull v.
Gundersons, Inc., 709 P.2d 940, 943–45 (Colo. 1985).
On appeal, Ms. Mayotte argues that (1) the district court failed to
consider various factors and (2) she had sought summary judgment only on
liability. Both arguments are beside the point.
The district court properly relied on the evidence in the summary-
judgment record, and Ms. Mayotte didn’t present any evidence of non-
economic harm. Despite the failure to present evidence of damages, she
argues here that the district court should have considered various other
factors, such as the value of the house at the time of the foreclosure, her
payments before the foreclosure, and her emotional distress. But when she
responded to the summary-judgment motion, she didn’t identify these
factors or present any supporting evidence.
Ms. Mayotte also argues that she sought summary judgment only on
liability. But U.S. Bank and Wells Fargo sought summary judgment based
in part on Ms. Mayotte’s failure to prove compensatory damages. The
defendants’ argument for summary judgment triggered Ms. Mayotte’s
burden to respond, and the limited scope of her own summary-judgment
motions was immaterial.
5. Conclusion
In our view, the district court properly granted summary judgment to
U.S. Bank and Wells Fargo. They invoked the economic-loss rule, and Ms.
11
Mayotte failed to present any basis for recognition of a legal duty outside
of the contract. So Ms. Mayotte cannot recover damages for economic
losses. Nor can she recover other damages. U.S. Bank and Wells Fargo
denied any proof of non-economic damage, and Ms. Mayotte failed to
present evidence of such damage.
Given the economic-loss rule and failure to present evidence of non-
economic damage, we affirm the award of summary judgment to U.S. Bank
and Wells Fargo.
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