Date Street v. Farmers

IN THE
ARIZONA COURT OF APPEALS
DIVISION ONE

DATE STREET CAPITAL, LLC, Plaintiff/Appellant,

v.

FARMERS INSURANCE COMPANY OF ARIZONA, Defendant/Appellee.

No. 1 CA-CV 24-0534
FILED 05-06-2025

Appeal from the Superior Court in Maricopa County
No. CV2022-009830
The Honorable Jennifer C. Ryan-Touhill, Judge

AFFIRMED

COUNSEL

Law Offices of Adam B. Decker, PLLC, Tempe
By Adam B. Decker
Counsel for Plaintiff/Appellant

Jones Skelton & Hochuli PLC, Phoenix
By Ashley E. Caballero-Daltrey, Joshua M. Snell, Justin M. Ackerman
Counsel for Defendant/Appellee

OPINION

Judge Andrew M. Jacobs delivered the opinion of the Court, in which
Presiding Judge Cynthia J. Bailey and Vice Chief Judge Randall M. Howe
joined.
 DATE STREET v. FARMERS
Opinion of the Court

J A C O B S, Judge:

¶1 Plaintiff Date Street Capital, LLC (“Date Street”) challenges
the superior court’s dismissal of its complaint against defendant Farmers
Insurance Company of Arizona (“Farmers”) under Arizona Rule of Civil
Procedure (“Rule”) 12(b)(6) for failure to state a claim upon which relief can
be granted. For the following reasons, we affirm.

FACTUAL AND PROCEDURAL HISTORY

¶2 In March 2019, Jason Kentzel purchased a 2008 Dodge
Challenger, financed by Date Street. As part of the purchase agreement,
Kentzel committed to obtain insurance coverage for the Dodge that would
identify Date Street as a lienholder or loss payee.

¶3 Kentzel later obtained insurance through Farmers (the
“Policy”), and the declarations page of the Policy identified Date Street as a
lienholder. The declarations page also included Kentzel as a named
insured. The Policy provided that, in the event of a loss, Farmers “may
settle any loss with [Kentzel], the owner or the lienholder of the property
shown on the Declarations Page.”1 The Policy further stated that “[i]f a
lienholder is named in this policy, any notices we give to the lienholder may
be mailed or delivered.” Finally, the Policy provided:

It is agreed that at our option, any payment for damage to the
car listed in this policy shall be paid as interest may appear to
the named insured and the lienholder shown on the
Declarations Page, or through the repair of the damaged car.
When we provide payment to the lienholder, the payment
will be the lowest of the actual cash value of your insured car
or the existing loan balance, whichever is less. Any change in
title or ownership of the car, or error in its description shall
not void coverage afforded to the lienholder.

(Emphasis removed).

¶4 After the Dodge was damaged, Kentzel submitted a claim to
Farmers. Farmers paid Kentzel for the claim, but not Date Street.

¶5 In August 2022, Date Street filed this action in the superior
court against various defendants, later amending its complaint so Farmers

1 The Policy emphasizes defined terms in bold. We reproduce the Policy’s
language without that emphasis.

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 DATE STREET v. FARMERS
Opinion of the Court

was the only defendant. Date Street sought declaratory relief as to “its
rights and interests” under the Policy. While Date Street raised four other
claims sounding in contract, these claims all reiterate Date Street’s claim for
declaratory relief, as it conceded at argument in this Court. Date Street did
not attach the Policy to its original or amended complaints.

¶6 Farmers moved to dismiss under Rule 12(b)(6) for failure to
state a claim, attaching the Policy to its motion. After argument, the
superior court granted Farmers’ motion because the Policy did not create
an independent relationship between Date Street and Farmers, thus
limiting Date Street’s ability to claim a breach of contract.

¶7 Date Street timely appealed. We have jurisdiction. Ariz.
Const. art. 6, § 9; A.R.S. §§ 12-120.21(A)(1), -2101(A)(1).

DISCUSSION

¶8 We review de novo dismissals under Rule 12(b)(6). Coleman
v. City of Mesa, 230 Ariz. 352, 355 ¶ 7 (2012). We assume “the truth of all
well-pleaded factual allegations and indulge all reasonable inferences from
those facts, but mere conclusory statements are insufficient.” Id. at 356 ¶ 9
(citation omitted).

¶9 We generally do not consider material outside of the
pleadings without converting a motion to dismiss to a motion for summary
judgment. Id. But exhibits attached to a complaint are part of the pleading
and may therefore be considered on a motion to dismiss. Id. Here, the
Policy was not attached to the amended complaint and was not of record
until Farmers attached it to its motion to dismiss. We nevertheless consider
the Policy for two reasons. First, it is central to the complaint. See Date
Street Cap., LLC v. Clearcover Ins. Co., 256 Ariz. 430, 434 ¶ 9 (App. 2023)
(“[M]aterials that, although not appended to the complaint, are central to
the complaint may be considered without conversion.” (cleaned up)).
Second, Date Street does not object to the consideration of it, thus waiving
any issue. See Moretto v. Samaritan Health Sys., 190 Ariz. 343, 346 (App. 1997)
(holding that failure to raise claims of “procedural irregularities” in the
superior court waives the claims on appeal).

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 DATE STREET v. FARMERS
Opinion of the Court

I. Date Street Has Standing to Request Declaratory Relief as to Its
Rights Under the Policy, and the Statutory Right to Do So.

A. Date Street’s Claim of a Distinct Injury Gives It Standing.

¶10 We first consider Farmers’ claim that Date Street lacks
standing. To establish standing, a plaintiff must show “a particularized
injury to themselves.” Advanced Prop. Tax Liens, Inc. v. Othon, 255 Ariz. 60,
63 ¶ 18 (2023) (quoting Bennett v. Brownlow, 211 Ariz. 193, 196 ¶ 17 (2005));
Sears v. Hull, 192 Ariz. 65, 69 ¶ 16 (1998) (“To gain standing to bring an
action, a plaintiff must allege a distinct and palpable injury.” (citation
omitted)).

¶11 Date Street alleges a distinct injury. It alleges the Dodge is
collateral in which Date Street has an interest under its agreement with
Kentzel. Date Street alleges it should have received compensation for the
loss in value to its collateral. We treat these allegations as true. See Coleman,
230 Ariz. at 356 ¶ 9. Date Street thus has standing.

B. Arizona’s Uniform Declaratory Judgments Act Allows
Parties Thus Aggrieved to Seek Declaratory Judgments.

¶12 Arizona’s Uniform Declaratory Judgments Act empowers
courts “to declare rights, status, and other legal relations whether or not
further relief is or could be claimed.” A.R.S. § 12-1831. Any person who is
interested or whose rights are affected under a written contract “may have
determined any question of construction or validity arising under the . . .
contract . . . and obtain a declaration of rights, status or other legal relations
thereunder.” A.R.S. § 12-1832. As the holder of a lien on collateral covered
under the Policy, Date Street’s rights under the Policy are affected. Thus,
Date Street is entitled to obtain a declaration of its rights. See id.

II. Though Farmers Did Not Make Payment Consistent with the
Policy’s Loss-Payable Provision, Date Street Does Not Have a
Right to Enforce the Policy.

A. Farmers Failed to Make Payment Consistent with the
Policy’s Loss-Payable Provision.

¶13 The interpretation of an insurance policy is a question of law
we evaluate de novo. Nichols v. State Farm Fire & Cas. Co., 175 Ariz. 354, 355
(App. 1993). We construe insurance policy provisions according to their
plain and ordinary meaning. Cal. Cas. Ins. Co. v. Am. Fam. Mut. Ins. Co., 208
Ariz. 416, 418 ¶ 5 (App. 2004).

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 DATE STREET v. FARMERS
Opinion of the Court

¶14 Here, the policy’s loss-payable clause provides, “[i]t is agreed
that at our option, any payment for damage to the car listed in this policy
shall be paid as interest may appear to the named insured and the
lienholder shown on the Declarations Page, or through the repair of the
damaged car.” Based on its plain and ordinary meaning, this clause gives
Farmers two options for payments in the event of a loss. First, Farmers can
issue payment to both the named insured, Kentzel, and the lienholder, Date
Street, in proportion to their interests. Alternatively, the Policy allows
Farmers to pay vendors directly for repairs. After Kentzel submitted a
claim, Farmers elected neither option, instead paying Kentzel alone. Based
on the well pled factual allegations in the amended complaint, which we
take as true as we evaluate the motion to dismiss, see Coleman, 230 Ariz. at
356 ¶ 9, Farmers did not comply with the Policy.

¶15 But determining Farmers’ non-compliance, standing alone,
does not resolve this case. Date Street still needs to establish a right to
enforce the Policy as a lienholder—and under Arizona law, it lacks such a
right.

B. Date Street Cannot Enforce the Terms of the Policy Because
the Loss-Payable Clause Is “Simple.”

¶16 We construe insurance contracts “to ascertain and enforce the
intent of the parties.” Clearcover, 256 Ariz. at 435 ¶ 16 (cleaned up). “[A]n
insurance policy may be interpreted as assigning its benefits to a lienholder,
either through express language in the policy or through the acts of the
parties, under general principles of equity.” Id. (citation omitted). The
validity of a lienholder’s legal interest in the matter turns on the loss-
payable language contained in the insurance policy. Id. at 437 ¶ 21.

¶17 Loss-payable clauses in an insurance policy are typically
called either “standard” or “simple.” Id. at 435 ¶ 17. A standard loss-
payable clause directly assigns contractual rights to a lienholder, “thereby
insulating said lienholder from wrongdoing by the insured that would
otherwise invalidate the insurance contract.” Id. (footnote and citations
omitted). “[A] loss payee properly named in a standard loss-payable
mortgage clause is entitled to collect under an automobile insurance policy,
notwithstanding a misrepresentation by the applicant at the inception of
the contract.” Id. at 436 ¶ 18.

¶18 By contrast, a simple loss-payable clause “is less protective of
a lienholder’s rights, which are fully derivative of the insured’s rights.” Id.
at 435 ¶ 17 n.1 (citations omitted); see also Valley Nat. Bank of Ariz. v. Ins. Co.

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 DATE STREET v. FARMERS
Opinion of the Court

of N. Am., 172 Ariz. 212, 215 (App. 1992). In Clearcover, this Court defined
simple loss-payable clauses and distinguished those clauses from standard
clauses. 256 Ariz. at 435 ¶ 17 n.1. But this Court stopped short of explicitly
determining that a loss payee named in a simple loss-payable clause is not
entitled to enforce the policy because Clearcover dealt exclusively with a
standard loss-payable clause. We conclude today that a loss payee named
in a simple loss-payable clause is not entitled to the same enforcement and
recovery rights as afforded to loss payees in standard loss-payable clauses.

¶19 Here, the superior court ruled, and Date Street concedes, that
the loss-payable clause in this case is simple, not standard. By conceding
the loss-payable clause is simple, Date Street admits its rights derive
entirely from the insured’s rights. See id. This conclusion is consistent with
the remainder of the Policy. Nothing in the Policy suggests the parties
intended that Date Street’s rights be insulated from any potential wrongful
acts of the insured, underscoring that Date Street has no rights beyond
Kentzel’s. See id. at 435 ¶ 17. Date Street thus fails to show that Farmers
had an independent contractual relationship with Date Street separate from
Farmers’ obligations to its insured. Because Date Street’s rights are
derivative of Kentzel’s, Date Street has no independent claim of its own and
cannot enforce the Policy against Farmers.

C. Date Street Is Not a Third-Party Beneficiary Entitled to
Enforce the Policy.

¶20 Although Date Street has no independent right to enforce the
Policy, Date Street also claims it is a third-party beneficiary of the Policy.
Farmers disagrees, arguing “the mere fact of being named as a lienholder
in a simple loss-payable clause in an insurance policy does not transform a
lienholder into a third-party beneficiary.” We again agree with Farmers.

¶21 To recover as a third-party beneficiary, “the contracting
parties must intend to directly benefit that person and must indicate that
intention in the contract itself.” Sherman v. First Am. Title Ins. Co., 201 Ariz.
564, 567 ¶ 6 (App. 2002) (citations omitted). “[I]t is not enough that the
contract may operate to his benefit but it must appear that the parties
intended to recognize him as the primary party in interest and as privy to
the promise.” Id. (quoting Basurto v. Utah Constr. & Mining Co., 15 Ariz.
App. 35, 39 (1971) (footnote omitted)).

¶22 We agree Date Street’s status as lienholder does not make it a
third-party beneficiary. Nothing in the Policy shows that Farmers and the
Kentzels – both parties to the contract – intended Date Street to be the (or a)

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 DATE STREET v. FARMERS
Opinion of the Court

primary party in interest to the contract. To the contrary, Date Street admits
the loss-payable provision clause is a simple clause, which “is less
protective of a lienholder’s rights, which are fully derivative of the
insured’s rights.” Clearcover, 256 Ariz. at 435 ¶ 17 n.1 (citations omitted).
For this reason too, dismissal under Rule 12(b)(6) is appropriate.

CONCLUSION

¶23 For the foregoing reasons, we affirm. Farmers requests its
attorneys’ fees under A.R.S. § 12-341.01 and costs incurred on appeal, while
Date Street requests an order that on remand it could be entitled to its
appellate attorneys’ fees. In our discretion, we decline both parties’ fee
requests, but award Farmers its costs, subject to its compliance with
ARCAP 21.

MATTHEW J. MARTIN • Clerk of the Court
FILED: JR

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