Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_10-cv-01645/USCOURTS-cand-3_10-cv-01645-2/pdf.json

Nature of Suit Code: 430
Nature of Suit: Banks and Banking
Cause of Action: 28:1441 Petition for Removal

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

MANUEL LOPEZ,

Plaintiff,

 v.

WACHOVIA MORTGAGE, A DIVISION

OF WELLS FARGO BANK, F/K/A WORLD

SAVINGS BANK (“WELLS FARGO”),

AND DOES 1 THROUGH 50, INCLUSIVE, 

Defendant. /

No. C 10-01645 WHA

ORDER GRANTING

DEFENDANT’S MOTION

TO DISMISS AND DENYING

AS MOOT DEFENDANT’S

MOTION TO STRIKE 

INTRODUCTION

In this action regarding a refinanced mortgage loan, defendant World Savings Bank moves

to dismiss all five state claims asserted against it by plaintiff Manuel Lopez. Defendant also

moves to strike portions of the complaint. Because the instant action involves a loan transaction

between plaintiff and former federal savings association World Savings Bank, this order refers to

defendant as World Savings Bank for the sake of clarity. For the reasons set forth below,

defendant’s motion to dismiss is GRANTED. Its motion to strike is DENIED AS MOOT.

STATEMENT

This dispute involves a refinanced mortgage loan made by World Savings Bank, FSB

(“WSB”) to plaintiff Manuel Lopez through Remax Real Estate Company (Compl. ¶¶ 3, 13). 

WSB was later renamed Wachovia and is now a division of Wells Fargo Bank, N.A.

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Plaintiff’s complaint named Wachovia Mortgage Corporation as defendant, but because

Wachovia is now a division of Wells Fargo, Wells Fargo certified itself as the proper defendant

(Dkt. 2). At the time plaintiff executed his loan with WSB, however, WSB was a federal savings

bank governed by the Office of Thrift Supervision (Rapkine Decl. Exh. A). 

On March 27, 2007, plaintiff refinanced his mortgage loan with WSB in order to expand

his property. Because he did not speak English, he negotiated the terms with a Remax agent

solely in Spanish. He paid $300 to have his credit checked but did not receive a copy of the

report. Defendant did not request his taxes or any type of proof of income. Two weeks later,

plaintiff was approved for the loan and met with a notary to sign the loan documents. The notary

indicated that she was in a hurry because she had left her children with a babysitter, so plaintiff

signed the documents without any explanation. He was under the impression that he was

obtaining a thirty-year fixed rate loan, but later learned that he had received a two-year fixed rate

loan. His payments began to increase an extra $200 per month. He was provided with a copy of

the loan terms written in English but not in Spanish. Defendant misrepresented and failed to

disclose material facts that, if known to plaintiff, would have led him to forego entering into the

refinance agreement. Defendant conspired to defraud plaintiff and acted toward him in a willful,

vexatious and malicious manner (Compl. ¶¶ 3–11). 

Plaintiff initiated the instant action in Alameda County Superior Court, but it was brought

to federal court via federal-question removal jurisdiction. The complaint alleges claims for: 

(1) unconscionable contract, (2) violation of Business & Professions Code § 17200, (3) violation

of California Civil Code § 1572, (4) breach of implied covenant of good faith and fair dealing,

and (5) declaratory relief (Compl. ¶¶ 20–63). 

ANALYSIS

1. STANDARD OF REVIEW.

To survive a motion to dismiss for failure to state a claim, a pleading must contain

sufficient factual matter, accepted as true, to state a claim that is plausible on its face. 

FRCP 12(b)(6); Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). A claim is facially plausible

when there are sufficient factual allegations to draw a reasonable inference that defendants are

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liable for the misconduct alleged. While a court “must take all of the factual allegations in the

complaint as true,” it is “not bound to accept as true a legal conclusion couched as a factual

allegation.” Id. at 1949-50. “[C]onclusory allegations of law and unwarranted inferences are

insufficient to defeat a motion to dismiss for failure to state a claim.” Epstein v. Wash. Energy

Co., 83 F.3d 1136, 1140 (9th Cir. 1996).

Dismissal without leave to amend is only appropriate when the court is satisfied that the

deficiencies in the complaint could not possibly be cured by amendment. Jackson v. Carey,

353 F.3d 750, 758 (9th Cir. 2003) (citation omitted). 

2. PREEMPTION.

Defendant argues that all five of plaintiff’s claims are preempted by federal law because

WSB was a federally chartered savings association regulated by the Office of Thrift Supervision

(“OTS”) pursuant to the Home Owners Loan Act (“HOLA”) at the time of the loan (Br. at 2). 

See 12 U.S.C. 1461, et seq. This order declines to find that plaintiff’s five state claims, as

alleged, are preempted, at least at this stage on this record. 

A. World Savings Bank’s Status 

As a Federal Savings Association. 

It is undisputed that plaintiff refinanced his loan from WSB on or about March 21, 2007. 

Defendant contends that WSB was a federal savings bank at that time, that WSB was renamed

Wachovia Mortgage, FSB in December 2007, and that Wachovia became a division of Wells

Fargo in 2009 (Br. at 2). In support of this contention, defendant has submitted, inter alia, public

records evidencing WSB’s initial charter, its subsequent name change, its governance by OTS,

and the certification of its conversion to a national bank with the name Wells Fargo Bank

Southwest (Rapkine Decl. Exh. A–D). Defendant has also provided a copy of the deed of trust

signed by plaintiff as Exhibit E. Defendant has requested that the Court take judicial notice of

these documents. 

In ruling on a motion to dismiss for failure to state a claim, “a court may generally

consider only allegations contained in the pleadings, exhibits attached to the complaint, and

matters properly subject to judicial notice.” Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir.

2007). FRE 201 provides, “[a] judicially noticed fact must be one not subject to reasonable

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 Section 560.2(b) provides: 

Illustrative examples. Except as provided in § 560.110 of this part, the types of

state laws preempted by paragraph (a) of this section include, without limitation,

state laws purporting to impose requirements regarding:

(1) Licensing, registration, filings, or reports by creditors;

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dispute in that it is either (1) generally known within the territorial jurisdiction of the trial court

or (2) capable of accurate and ready determination by resort to sources whose accuracy cannot

reasonably be questioned.” This order finds that these public records and government documents

are not subject to reasonable dispute and takes judicial notice of Exhibits A through E. These

judicially noticed facts show that at the time plaintiff signed his loan with WSB, that institution

was regulated by OTS. WSB later changed its name to Wachovia Mortgage, FSB, remaining

under the regulatory power of OTS, and therefore subject to HOLA. Wachovia became a division

of Wells Fargo in 2009. Thus, although Wells Fargo is a federally chartered national bank under

the National Bank Act, the instant action is governed by HOLA because the loan originated with

WSB.

B. Preemption Analysis under HOLA.

Congress enacted HOLA in 1933 as a “radical and comprehensive response to the

inadequacies of the existing state [home mortgage] systems.” Conference of Federal Sav. & Loan

Assns. v. Stein, 604 F.2d 1256, 1257 (9th Cir. 1979). In enacting HOLA, Congress established

the organization now known as the Office of Thrift Supervision and gave its director plenary

authority to issue regulations governing federal savings and loans. 12 U.S.C. 1462a.

In 1996, OTS issued 12 C.F.R. 560.2. This regulation expressly provides for federal

preemption of state law “purporting to regulate” federal savings associations:

. . . OTS hereby occupies the entire field of lending regulation for

federal savings associations. OTS intends to give federal savings

associations maximum flexibility to exercise their lending powers

in accordance with a uniform federal scheme of regulation. 

Accordingly, federal savings associations may extend credit as

authorized under federal law, including this part, without regard to

state laws purporting to regulate or otherwise affect their credit

activities.

12 C.F.R. 560.2. Section 560.2 also provides a list of the types of state laws that are preempted.1

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(2) The ability of a creditor to require or obtain private mortgage insurance,

insurance for other collateral, or other credit enhancements;

(3) Loan-to-value ratios;

(4) The terms of credit, including amortization of loans and the deferral and

capitalization of interest and adjustments to the interest rate, balance, payments

due, or term to maturity of the loan, including the circumstances under which a

loan may be called due and payable upon the passage of time or a specified event

external to the loan;

(5) Loan-related fees, including without limitation, initial charges, late charges,

prepayment penalties, servicing fees, and overlimit fees;

(6) Escrow accounts, impound accounts, and similar accounts;

(7) Security property, including leaseholds;

(8) Access to and use of credit reports;

(9) Disclosure and advertising, including laws requiring specific statements,

information, or other content to be included in credit application forms, credit

solicitations, billing statements, credit contracts, or other credit-related documents

and laws requiring creditors to supply copies of credit reports to borrowers or

applicants;

(10) Processing, origination, servicing, sale or purchase of, or investment or

participation in, mortgages; 

(11) Disbursements and repayments;

(12) Usury and interest rate ceilings to the extent provided in 12 U.S.C. 1735f-7a

and part 590 of this chapter and 12 U.S.C. 1463(g) and § 560.110 of this part; and

(13) Due-on-sale clauses to the extent provided in 12 U.S.C. 1701j-3 and part 591

of this chapter.

2

 Section 560.2(c) provides:

State laws that are not preempted. State laws of the following types are not

preempted to the extent that they only incidentally affect the lending operations

of Federal savings associations or are otherwise consistent with the purposes of

paragraph (a) of this section:

(1) Contract and commercial law; 

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OTS, however, has set forth exceptions to this broad preemption scheme. Section

560.2(c) provides that state contract, commercial, real property, and tort law, among others, are

not preempted, “to the extent that they only incidentally affect the lending operations of Federal

savings associations or are otherwise consistent with the purposes of [the regulation].”2

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(2) Real property law; 

(3) Homestead laws specified in 12 U.S.C. 1462a(f); 

(4) Tort law; 

(5) Criminal law; and 

(6) Any other law that OTS, upon review, finds: 

(i) Furthers a vital state interest; and 

(ii) Either has only an incidental effect on lending operations or is not

otherwise contrary to the purposes expressed in paragraph (a) of this

section. 

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Contract and tort claims based on unfair competition statutes have been found exempt from

HOLA preemption because they involve general laws governing all businesses, having only an

incidental effect on a loan association’s lending activities. See Branick v. Downey Sav. and Loan

Ass’n, 24 Cal. Rptr. 3d 406, 412–13 (2005). 

OTS has provided the following framework for preemption analysis:

When analyzing the status of state laws under § 560.2, the first

step will be to determine whether the type of law in question is

listed in paragraph (b). If so, the analysis will end there; the law is

preempted. If the law is not covered by paragraph (b), the next

question is whether the law affects lending. If it does, then, in

accordance with paragraph (a), the presumption arises that the law

is preempted. This presumption can be reversed only if the law

can clearly be shown to fit within the confines of paragraph

(c) [providing that state laws of general applicability only

incidentally affecting federal savings associations are not

preempted]. For these purposes, paragraph (c) is intended to be

interpreted narrowly. Any doubt should be resolved in favor of

preemption.

Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1005 (9th Cir. 2008). Furthermore, a claim or

state statute may be preempted by HOLA on an “as applied” or case-specific basis. Id. at 1006. 

Defendant contends that plaintiff’s state claims are all based upon plaintiff’s allegations

that: (1) WSB misrepresented the terms of the loan (two-year fixed rate versus thirty-year fixed

rate), (2) WSB did not adequately determine if plaintiff could pay the loan back, (3) plaintiff

signed the documents without any explanation, and (4) plaintiff did not receive the documents in

Spanish (Br. at 2). Agreeing with defendant’s characterization of the complaint, the Court finds

insufficient grounds for preemption at this stage. 

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Applying OTS’ framework, that defendant misrepresented the terms of the loan is not

preempted. Plaintiff alleges that defendant led him to believe that he was receiving a thirty-year

fixed rate and then had him sign a loan agreement, in a language he did not understand,

specifying a two-year fixed rate. As applied here, laws prohibiting blatant misrepresentation of a

loan’s terms are not expressly preempted in Section 560.2(b). While it is true that such laws

would affect lending, the presumption of preemption is reversed because they fit within the

confines of Section 560.2(c), which provides an exception for claims involving contract or tort

law. Plaintiff’s allegations as stated in the complaint are admittedly vague. But accepting them

as true, as required here, this order finds that defendant may be liable for claims based upon

breach of contract and tort laws that are of general applicability to all businesses and that only

incidentally affect lending operations. This is the same reasoning the court in Branick v. Downey

Savings and Loan Association applied in finding that the plaintiff’s claims for violation of state

unfair competition laws were not preempted by HOLA. See Branick, 24 Cal. Rptr. 3d at 412–13. 

Every decision cited by defendant has found that the plaintiffs’ allegations were expressly

preempted by 12 C.F.R. 560.2(b) and have ended their inquiries there. For example, the plaintiffs

in Silvas brought claims for unfair advertising and unfair competition against a federal savings

association under California Business and Professions Code §§ 17500 and 17200. See Silvas,

514 F.3d at 1003. The Ninth Circuit upheld the dismissal of the claims because they were based

on the types of laws listed Section 560.2(b), specifically subsections (b)(9) and (b)(5), which

involved state laws purporting to impose requirements regarding disclosure and advertising as

well as loan-related fees. Id. at 1006-07. A finding of express preemption also proved

determinative in Weiss v. Washington Mutual Bank, where the plaintiff’s claims were premised

upon a lack of disclosure regarding prepayment penalties, a lending practice expressly preempted

by 12 C.F.R. 560.2(b). 147 Cal. App. 4th 72 (2007). 

 Defendant argues that because each of plaintiff’s state claims is premised upon

allegations regarding “terms of credit,” “disclosure,” and “processing [and] origination” of

mortgages, they are expressly preempted by 12 C.F.R. 560.2(b). As explained above, however,

laws prohibiting misrepresentation of a loan’s material terms are not expressly preempted by

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Section 560.2(b). This is where the instant action sharply diverges from the cited case law. 

Unlike those decisions, this order does not find the claims at issue expressly preempted by

Section 560.2(b). Nor does it find them preempted by the other provisions of Section 560.2. 

Although this order rejects preemption at this stage, it is premature to make a final

decision on this issue until plaintiff has properly pled claims under state law. Even then, it might

be premature to rule on a preemption defense until a trial can be held to allow a record on the

incidental effects of the state rules in question on the business of lending by a federal savings

association. 

Turning to the adequacy of pleading of the state law claims, each state claim will be

DISMISSED but with leave to seek to amend. 

3. FIRST CLAIM: UNCONSCIONABLE CONTRACT.

Defendant is accused of violating California Civil Code § 1670.5 by causing plaintiff to

make an uninformed decision to enter into an unconscionable loan agreement (Compl. ¶¶ 20–29). 

Plaintiff’s complaint alleges that all of the loan documentation was written in English, even

though plaintiff only knew Spanish and negotiated the loan in Spanish. Section 1670.5 provides: 

“if the court as a matter of law finds [a] contract or any clause of [a] contract to have been

unconscionable at the time it was made the court may refuse to enforce the contract . . . .” 

Section 1670.5, however, does not create an affirmative claim but merely codifies the

defense of unconscionability. Dean Witter Reynolds, Inc. v. Superior Court, 211 Cal. App. 3d

758, 766 (1989). Plaintiff therefore states no claim for relief under this statute. That said, a

potential defendant is always entitled to seek declaratory relief to establish unconscionability as a

defense so long as the case and controversy requirement of Article III is pled and established. 

Jurisdiction to award declaratory relief exists only in case of actual controversy. American States

Ins. Co. v. Kearns, 15 F.3d 142 (9th Cir. 1994). Plaintiff has not pled that an actual, present

controversy exists regarding the enforcement of the contract. He has not pled, for example, that

someone is trying to foreclose or is threatening to do so. Until plaintiff meets the Article III

requirement an award of declaratory relief is unwarranted. 

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Plaintiff’s complaint also alleges that defendant violated California Civil Code § 1632,

which states: “Any person engaged in a trade or business who negotiates primarily in

Spanish . . . orally or in writing, in the course of entering into any of the following, shall deliver

to the other party to the contract or agreement and prior to the execution thereof, a translation of

the contract or agreement in the language in which the contract or agreement was negotiated . .

. .” This rule applies to a “loan or extension of credit for use primarily for personal, family or

household purposes where the loan or extension of credit is subject to the provisions of Article 7

(commencing with Section 10240).” Cal. Civ. Code § 1632(b)(4). Section 10240 in turn applies

to certain real estate loans secured by real property that are negotiated exclusively by a real estate

broker. Cal. Bus. & Prof. Code § 10240. 

Plaintiff fails to plead a claim against defendant for a violation of Section 1632, as he

does not allege that defendant WSB was a real estate broker and thus subject to the requirement

to provide a translation. Plaintiff alleges that Hugo De Oyos, working for Remax Real Estate

Company was the broker (Compl. ¶ 3). Accordingly, plaintiff’s claim for violation of Section

1632 is dismissed. The undersigned also notes that this claim may be barred by the applicable

statute of limitations and that plaintiff has not alleged that he has or can tender funds sufficient

to effectuate a rescission of the loan, as required by Section 1632(k). See Cal. Code Civ. Pro.

§ 340(a); Cal. Civ. Code §§ 1632(k), 1691(b).

Plaintiff has not yet met the Article III pleading requirement for declaratory relief. 

This requirement must be met if plaintiff is to receive declaratory relief for any of his state claims. 

Nor has he alleged facts sufficient for a claim under Section 1632. Accordingly, his claim for

unconscionable contract is DISMISSED. 

4. SECOND CLAIM: VIOLATION OF CALIFORNIA 

BUSINESS & PROFESSIONS CODE § 17200.

Plaintiff’s second claim alleges that defendants violated California Business & Professions

Code § 17200 (Compl. ¶¶ 30–39). To state a claim for unfair competition pursuant to

Section 17200, a plaintiff must allege that a defendant engaged in an “unlawful, unfair, or

fraudulent business act or practice” or in “unfair, deceptive, untrue or misleading advertising.” 

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Cal. Bus. & Prof. Code § 17200. The complaint fails to state a claim under all three prongs of

the statute. 

The “unlawful” prong of the statute incorporates other laws and treats violations of those

laws as unlawful business practices independently actionable under state law. Chabner v.

United Omaha Life Ins. Co., 225 F.3d 1042, 1048 (9th Cir. 2000). A defendant cannot be liable

under Section 17200 for committing “unlawful” business practices without having violated

another law. As discussed below, the complaint fails to plead sufficiently the violation of any

law. 

Plaintiff contends that defendant engaged in an “unlawful” business practice in violation

of Section 17200 by extending the loan to him without acquiring any proof of plaintiff’s income

or conducting an adequate due diligence inquiry to determine if he could pay the loan back

(Compl. ¶ 4). A financial institution, however, owes no duty of care to a borrower when the

institution’s involvement in the loan transaction does not exceed the scope of its role as a mere

money lender. Nymark v. Heart Fed. Savings & Loan Assn., 231 Cal. App. 3d 1089, 1096 (1991). 

Without factual allegations that show defendant stands in the place of plaintiff’s agent, there is no

violation alleged and dismissal is appropriate. 

To the extent that plaintiff’s Section 17200 “unlawful” business practices claim is based

on California Civil Code § 1670.5, as discussed above, he does not adequately allege a violation

of law. He similarly fails to state a claim for relief for violation of California Civil Code § 1632.

Given that the complaint fails to sufficiently allege the violation of any law, plaintiff’s

claim under the “unlawful” prong of Section 17200 fails. 

Moreover, the complaint similarly fails to state a claim under the “unfair” prong of

Section 17200. “The term ‘unfair . . . business act or practice’ . . . mean[s] deceptive conduct that

injures consumers and competitors.” Cel-Tech Commc’ns, Inc. v. Los Angeles Cellular Tel. Co.,

20 Cal. 4th 163, 195–96 (1999). The complaint fails to allege facts sufficiently demonstrating

that defendant engaged in deceptive conduct that caused plaintiff injury. The allegations in the

complaint are conclusory in nature and insufficient as they stand. 

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To the extent that plaintiff’s Section 17200 claim is predicated on the “fraudulent” prong

of the statute, it fails to state a claim for relief as well. Allegations of fraudulent conduct under

Section 17200 must satisfy the heightened pleading requirements of Rule 9(b). See Vess v.

Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103-05 (9th Cir. 2003). Rule 9(b) demands that

averments of fraud must be accompanied by ‘the who, what, when, where, and how’ of the

misconduct charged.” Id. at 1106. The plaintiff must set forth what is false or misleading about

a statement, and why it is false. Id.

 Plaintiff did not plead with the requisite particularity the specific misrepresentations that

are attributable to defendant and which individuals made them. Plaintiff’s Section 17200 claim

fails to satisfy the heightened pleading requirements of Rule 9(b) to state a cognizable claim

based on the “fraudulent” prong of the statute. 

Accordingly, plaintiff’s California Business & Professions Code § 17200 claim is

DISMISSED.

5. THIRD CLAIM: VIOLATION OF CALIFORNIA CIVIL CODE § 1572.

Plaintiff’s third claim alleges fraud under California Civil Code § 1572. The particularity

requirements of Rule 9(b) apply. Section 1572 provides: 

Actual fraud . . . consists in any of the following acts, committed by

a party to the contract, or with his connivance, with intent to

deceive another party thereto, or to induce him to enter into the

contract:

1. The suggestion, as a fact, of that which is not true, by

one who does not believe it to be true;

2. The positive assertion, in a manner not warranted by the

information of the person making it, of that which is not

true, though he believes it to be true;

3. The suppression of that which is true, by one having

knowledge or belief of the fact;

4. A promise made without any intention of performing it;

or,

5. Any other act fitted to deceive.

The complaint alleges that defendants’ misrepresentations, failures to disclose, and failure

to investigate as described above were made with the intent to induce the unsophisticated plaintiff

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to accept an unfavorable loan (Compl. ¶ 41). The complaint does not state, however, “the who,

what, when, where, and how” of the misconduct charged. See Vess, 317 F.3d at 1103–05. 

Plaintiff does not plead the specific representations that are attributable to defendants, the identity

of the employees who made the representations, their authority to speak, what they said or wrote,

and when it was said or written. Furthermore, the complaint alleges that defendants acted in a

manner that was “willful . . . and maliciously calculated,” but such conclusory, vague language

is insufficient (see Compl. ¶ 9). Rule 9(b) does not allow a complaint to merely lump multiple

defendants together and make conclusory accusations regarding their actions and intentions. 

Plaintiff requests that the pleading standard for fraud be relaxed in this instance. 

Citing Tarmann v. State Farm Mut. Auto Ins. Co., 2 Cal. App. 4th 153 (1991), he argues that

because defendant is in a greater position to know the names of the individuals who perpetrated

the fraud, plaintiff should not be forced to name them (Opp. 6–7). This exception did not apply

in Tarmann, and it does not apply here. Following Tarmann’s reasoning, defendant has no

more reason to know who made the allegedly false representations to plaintiff than plaintiff. 

See Tarmann, 2 Cal. App. 4th at 158. 

Plaintiff’s claim for fraud under California Civil Code § 1572 is thus DISMISSED. 

6. FOURTH CLAIM: BREACH OF IMPLIED COVENANT OF 

GOOD FAITH AND FAIR DEALING.

Plaintiff’s contends that defendant has breached the implied covenant of good faith and

fair dealing but does not specify whether his claim is based upon contract law or tort law. 

Under California law, a claim for breach of implied covenant under contract law is necessarily

based on the existence of an underlying contractual relationship. The essence of the covenant is

that neither party to the contract will do anything which would deprive the other of the benefits of

the contract. The duty of good faith and fair dealing, however, is “a supplement to an existing

contract, and thus it does not require parties to negotiate in good faith prior to any agreement.” 

McClain v. Octagon Plaza, LLC, 159 Cal. App. 4th 784, 799 (2008). Thus, to the extent that the

complaint’s allegations stem from the formation and negotiation of the loan, plaintiff’s claim for

breach of the covenant must be dismissed.

Case 3:10-cv-01645-WHA Document 25 Filed 07/19/10 Page 12 of 14
United States District Court

For the Northern District of California

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Moreover, no implied covenant tort is available to plaintiff. “Generally, no cause of

action for the tortious breach of the implied covenant of good faith and fair dealing can arise

unless the parties are in a ‘special relationship’ with ‘fiduciary characteristics.’” Pension Trust

Fund v. Federal Ins. Co., 307 F.3d 944, 955 (9th Cir. 2002). California courts do not invoke a

special relationship between a lender and borrower absent special circumstances with “fiduciary

characteristics.” Oaks Mgmt. Corp. v. Superior Court, 145 Cal. App. 4th 453, 466 (2006). 

The complaint does not allege facts establishing a “special relationship” between plaintiff and

defendant that could justify extending tort liability. 

As such, plaintiff’s claim for breach of the covenant of good faith and fair dealing must be

DISMISSED.

7. FIFTH CLAIM: DECLARATORY RELIEF.

Plaintiff’s complaint requests a “declaration of rights and duties of the parties herein . . . to

determine the actual status and validity of the loan, deed of trust, nominated beneficiaries, actual

beneficiaries . . .” (Compl. ¶ 63). “Declaratory relief is only appropriate (1) when the judgment

will serve a useful purpose in clarifying and settling the legal relations in issue, and (2) when it

will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the

proceeding.” Guerra v. Sutton, 783 F.2d 1371, 1376 (9th Cir. 1986). As described in section

three above, a plaintiff must plead that a present and actual controversy exists in order to receive

declaratory relief. Furthermore, declaratory relief is not warranted in a case in which a complaint

makes no case on the merits. People v. Ray, 181 Cal. App. 2d 64, 69 (1960). Plaintiff’s

complaint fails to meet the above criteria and does not allege a viable substantive claim. 

The complaint does not adequately plead why declaratory relief is appropriate, and plaintiff

makes no reference to this claim in his opposition to defendant’s motion. 

Accordingly, plaintiff’s claim for declaratory relief is DISMISSED.

CONCLUSION 

For the foregoing reasons, defendant’s motion to dismiss all claims asserted in the

complaint is GRANTED. In light of this ruling, defendant’s motion to strike is DENIED AS MOOT.

Case 3:10-cv-01645-WHA Document 25 Filed 07/19/10 Page 13 of 14
United States District Court

For the Northern District of California

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Within FOURTEEN CALENDAR DAYS, plaintiff may file a motion on the normal 35-day

track seeking to cure the foregoing deficiencies. A proposed amended complaint must be

appended to such a motion, and the motion should clearly explain why each amended claim

overcomes the deficiencies stated herein. 

The Court notes that plaintiff’s counsel failed to appear at the July 15 hearing on the

instant motion. Defendant’s counsel proceeded with argument, stating that plaintiff’s claims are

barred by the statute of frauds and parol evidence rule. This order does not decide these issues,

but plaintiff’s motion should be mindful of them. 

IT IS SO ORDERED.

Dated: July 19, 2010. WILLIAM ALSUP

UNITED STATES DISTRICT JUDGE

Case 3:10-cv-01645-WHA Document 25 Filed 07/19/10 Page 14 of 14