First National Bank Texas v. Wells Fargo Bank

Background

On December 6, 2011, plaintiff First National Bank Texas (FNBT) and defendant Wells Fargo Bank, N.A. (doing business as Wells Fargo Funding) entered into a Loan Purchase Agreement under which FNBT would sell residential mortgage loans to Wells Fargo. That agreement incorporated the Wells Fargo Funding Seller Guide (Seller Guide), which set out representations, warranties, and covenants that FNBT had to make for each mortgage it sold. The Seller Guide gave Wells Fargo the right — in its "sole and absolute discretion" — to determine whether FNBT breached any warranty and to choose its remedy: either demanding that FNBT repurchase the loan or requiring FNBT to indemnify Wells Fargo for its losses. Wells Fargo terminated the Loan Purchase Agreement in April 2023, but a survival clause kept the remedy provisions in force for previously sold loans.

In March 2022, FNBT closed on a $270,000 residential mortgage loan secured by a property in Mount Pleasant, Texas, and sold the loan to Wells Fargo on April 12, 2022. Wells Fargo subsequently sold the loan to Freddie Mac. In January 2024, Freddie Mac foreclosed on the property and sold it for $99,662.99. In January 2025, Freddie Mac sent Wells Fargo a repurchase demand citing property repair defects and an undisclosed borrower debt. Wells Fargo notified FNBT and asked for information to potentially contest the demand, stating that if the information was insufficient, FNBT would need to repurchase the loan. FNBT responded, but Wells Fargo was apparently unsuccessful in its appeal to Freddie Mac, and in March 2025, Wells Fargo told FNBT it would need to repurchase the loan.

On the morning of July 29, 2025, FNBT's Executive Vice President Anthony Gerakos emailed a Wells Fargo Credit Risk Senior Manager to request the "transfer packet" needed for the repurchase. Wells Fargo employee Kelly Sims responded at 1:11 p.m. with a Service Transfer template. Eight minutes later, at 1:19 p.m., Wells Fargo employee Tamela Robinson sent a separate email stating the bill was "for a make-whole, not a repurchase." Robinson attached an invoice explicitly identifying the demand as an indemnification in the amount of $195,131.37, and also attached Freddie Mac's Repurchase Loss Statement, which showed the property had already been sold. FNBT returned the completed transfer form on August 13, 2025, and wired Wells Fargo the full invoice amount on August 19, 2025. When FNBT followed up in September 2025 asking about the status of the loan transfer back to FNBT, Wells Fargo clarified that the payment was for indemnification, not repurchase, and no loan would be returned.

FNBT filed this lawsuit on December 30, 2025, originally in the Eastern District of Texas. The case was transferred to the District of Minnesota on April 14, 2026. FNBT asserted claims for fraud, fraudulent inducement, breach of contract, unjust enrichment, and money had and received (which the court treated as duplicative of the unjust enrichment claim under Minnesota law). Wells Fargo moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6) — the rule allowing dismissal when a complaint fails to state a legally sufficient claim.

Evidentiary Preliminary Matter: Wells Fargo's Exhibits

FNBT objected to Wells Fargo attaching emails and other documents to its motion to dismiss, arguing they were outside the pleadings. Courts generally cannot consider documents beyond the complaint on a 12(b)(6) motion. However, courts may consider documents that are "embraced by the complaint" — meaning their contents are alleged in the complaint and their authenticity is not questioned — without converting the motion into one for summary judgment.

The court found all three exhibits embraced by the complaint. The January 9, 2025 notice (Exhibit C) and the Sims email thread (Exhibit D1) were both referenced and described in the complaint. The Robinson email thread (Exhibit D2), including the Invoice and the Freddie Mac Repurchase Loss Statement, was also embraced because the complaint specifically alleged receiving the Invoice by email on July 29, 2025, and at the hearing, FNBT acknowledged both attachments were authentic and that the court could consider them. The court therefore considered all exhibits without converting the motion to one for summary judgment.

Breach of Contract

To state a breach of contract claim under Minnesota law, a plaintiff must plausibly allege: (1) a valid contract existed; (2) the plaintiff performed any required conditions; and (3) the defendant breached the contract.

FNBT argued that Wells Fargo's failure to convey the loan back after receiving payment constituted a breach. FNBT also appeared to argue that the August 2025 payment transaction created a separate, standalone contract. The court rejected both theories. The Seller Guide expressly gave Wells Fargo "sole and absolute discretion" to determine whether FNBT had breached a warranty and to choose between repurchase and indemnification as its remedy. Wells Fargo's shift from initially discussing repurchase to ultimately demanding indemnification was a contractually permitted exercise of that discretion. FNBT identified no provision in the Loan Purchase Agreement or Seller Guide prohibiting Wells Fargo from changing its chosen remedy.

FNBT also raised — only in its opposition brief, not in the complaint — the implied covenant of good faith and fair dealing, which requires that neither party "unjustifiably hinder" the other's performance. The court noted that Minnesota law generally requires this to be pleaded as a separate claim, which FNBT failed to do. Even setting that aside, the court found the claim would fail on the merits: Minnesota's implied covenant does not override bargained-for contract terms, and FNBT could not invoke it to undo Wells Fargo's exercise of discretion that the contract expressly authorized. The court quoted prior precedent noting that FNBT "cannot contract away judicial review" of Wells Fargo's determinations "only to later ask a court to independently review" them.

Fraud and Fraudulent Inducement

Independent Duty Rule

Minnesota's "independent duty" rule (also called the economic loss rule) bars a party from recovering tort damages — such as fraud damages — when those claims arise from a contractual relationship and the alleged duty the defendant breached was created by and governed by the contract. A fraud claim can survive only if it is based on a misrepresentation "outside of or collateral to the contract."

FNBT argued Wells Fargo misrepresented the nature of its demand by initially calling it a repurchase when it was actually an indemnification. The court found this characterization unpersuasive. Wells Fargo's demand — whether for repurchase or indemnification — was an exercise of its contractual rights. FNBT itself acknowledged in the complaint that the Seller Guide gave Wells Fargo rights over fees, purchase demands, and related matters. More fundamentally, the court found that FNBT owed payment to Wells Fargo under the Loan Purchase Agreement regardless of which remedy Wells Fargo chose. Because the alleged misrepresentation was not outside or collateral to the contract, but rather arose directly from Wells Fargo exercising contract rights, Minnesota's independent duty rule barred the fraud claims as a matter of law.

Reasonable Reliance

Even if the independent duty rule did not apply, the court found FNBT's fraud claims independently fail because FNBT did not plausibly allege reasonable reliance on any misrepresentation. Under Minnesota law, a plaintiff must show its reliance on a false representation was reasonable given its intelligence, experience, and opportunity to investigate.

The court acknowledged that before Robinson's email, FNBT may have plausibly relied on Wells Fargo's earlier representations that the demand was for repurchase. However, Robinson's 1:19 p.m. email on July 29, 2025 — received before FNBT took further action — unambiguously stated the invoice was "for a make-whole, not a repurchase." The attached invoice further explicitly and repeatedly identified the demand as indemnification. Additionally, the Freddie Mac Repurchase Loss Statement attached to Robinson's email showed the property had already been sold in September 2024, making it apparent that Wells Fargo could not reconvey the loan. Given this clear and unambiguous written notice, the court found it implausible that FNBT — described as a sophisticated commercial entity — could reasonably have continued to believe it was paying for a repurchase when it wired funds on August 19, 2025. The court therefore dismissed the fraud and fraudulent inducement claims on this additional ground.

Unjust Enrichment

Unjust enrichment is an equitable remedy available when a defendant unjustly retains a benefit at the plaintiff's expense and no valid contract governs the relationship. Under Minnesota law, unjust enrichment does not apply when an enforceable contract covers the conduct at issue.

Because the Loan Purchase Agreement was a valid, enforceable contract that expressly governed Wells Fargo's right to demand indemnification — the very conduct at the heart of FNBT's complaint — FNBT's unjust enrichment claim (including the duplicative "money had and received" claim) failed as a matter of law. The court similarly dismissed this claim.

Disposition

The court granted Wells Fargo's motion to dismiss in its entirety and dismissed FNBT's complaint without prejudice.