Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_05-cv-00636/USCOURTS-casd-3_05-cv-00636-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

GOODRICH & PENNINGTON

MORTGAGE FUND, INC., a Delaware

Corporation,

Plaintiff,

CASE NO. 05cv636 (JLS) 

ORDER: DENYING

DEFENDANT’S MOTION TO

DISMISS IN PART

vs.

CHASE HOME FINANCE, LLC,

Defendants.

Presently before the Court are Defendant’s Motion to Dismiss Plaintiff’s Second Amended

Complaint [Doc. No. 62], Plaintiff’s Opposition [Doc. No. 68], Defendant’s Reply [Doc. No. 71], and

Defendant’s Surreply [Doc. No. 77.] For the following reasons, the Court DENIES Defendant’s

motion to dismiss Plaintiff’s first and second causes of action. 

BACKGROUND

I. G&P-Advanta Agreements

Plaintiff Goodrich & Pennington Mortgage Fund, Inc. (“G&P”) is an originator of home

mortgage loans. [Plaintiff’s Second Amended Complaint (“SAC”) ¶ 1.] As a loan originator, G&P

offered mortgage loans to the general public through third-party mortgage brokers and to a limited

extent on a retail bases. Defendant Chase Home Finance, formerly known as Chase Manhattan

Mortgage Corporation (“Chase”), is engaged in the business of servicing mortgage loans and related

Case 3:05-cv-00636-JLS-POR Document 93 Filed 03/14/08 Page 1 of 12
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 G&P would later “repay” Advanta for the initial premium (advance), by letting Advanta

deduct funds from the deferred premium payments it owed to G&P. [Id. ¶ 18.]

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banking services concerning mortgaged-backed securities in and for the County of San Diego. [Id.

¶ 2.] 

Advanta Mortgage Corporation USA (“Advanta”) previously purchased mortgage loans from

loan originators, such as G&P, in accordance with its Corporate Finance Program (“CFP”). Under

the CFP, Advanta “securitized” these loans by placing them into large pools and selling interests in

the pools to investors as mortgage-backed securities. On or about February 11, 1997, Advanta agreed

to securitize some of G&P’s loans and to “service” G&P’s mortgage loans under its “Conduit

Agreements” with G&P. “Servicing” mortgage loans involved collecting monies due from G&P’s

borrowers and taking appropriate action in the event of a default. [Id. ¶ 15-17.] 

 Advanta placed the loan pools into Advanta Trusts (“Trusts”). While in the Trusts, the loan

pools produced revenue for Advanta and G&P as the borrowers made monthly mortgage payments

of principal and interest. In total, G&P participated in eight Advanta Trusts and expected to receive

residual cash flow payments from them pursuant to the Conduit Agreements. [Id. ¶ 17.] 

Specifically, under the CFP, G&P expected to receive two forms of “premiums” as

compensation for the loans: an initial premium and a deferred premium. As borrowers made their

monthly mortgage payments, Advanta was required to pay G&P monthly income from the Advanta

Trusts. The initial premium was an “up front” payment made upon the purchase and securitization

of the loan pools. This initial premium amounted to a percentage of the expected residual value of the

loans. In essence, the initial premium was an “advance” or “loan” made by Advanta to G&P that

enabled G&P to fund its ongoing loan origination operations. [Id. ¶ 18.] 

The deferred premium was based on performance of the loan pools over time. This premium

constituted the excess residual cash flow of principal and interest that Advanta obtained from the

mortgage loans after certain expenses and costs. Thus, the amount of deferred premium G&P received

directly correlated with Advanta’s collection efforts.1 From February 1997 to February 2001, Advanta

and G&P conducted business under the Conduit Agreements, although G&P argues that Advanta’s

performance under the agreements was not in compliance with its contractual obligations. [Id. ¶¶ 18-

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2

 The Office of the Comptroller of the Currency (“OCC”), a bureau of the United States

Department of the Treasury, regulates, charters, and supervises all national banks. Comptroller of the

Currency of Administrator of National Banks, US Department of Treasury,

http://www.occ.treas.gov/aboutocc.htm; [Pl.’s Opp. at 4.] 

3

 G&P alleges that Chase has repeatedly refused to disclose a full and complete copy of this

Purchase and Sale Agreement and have only provided portions of it. [Id. at ¶ 6.] 

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19.] 

II. Advanta-OCC Agreements & Advanta-Chase Agreements

On May 31, 2000, Advanta consented to the issuance of a Consent Order by the Office of the

Comptroller of the Currency (“OCC”) (hereinafter “OCC Consent Order”).2 Pursuant to the OCC

Consent Order, the Comptroller required Advanta and its subsidiaries to develop and implement

certain policies, plans and procedures governing, among other things, its ongoing operations, capital

levels, loan loss reserves, and residual asset valuations. [SAC ¶ 5.] 

On or about January 8, 2001, following the entry of the OCC Consent Order, Advanta entered

into a Purchase and Sale Agreement with Defendant Chase. G&P alleges that in the Purchase and Sale

Agreement, Advanta agreed to sell some of its assets to Chase, including its real estate loans as well

as any ownership interest it had in certain residual assets. [Id. ¶ 6.]3

 The Purchase & Sale Agreement

states that Chase agreed to:

perform all of the obligations of [Advanta] under the Corporate Finance

Agreements, including without limitation the security agreements . . . Such

obligations include, without limitations, the obligations with respect to the

following: to make payments to the sellers under the Corporate Finance

Agreements or their successors in interest (the ‘Sellers’); to service the

mortgage loans sold subject to such agreements; to maintain reserves for the

Sellers; to provide monthly reports and other information to the Sellers

(including access to servicing and accounting records and personnel); to

maintain confidentiality with respect to information related to the Sellers[.]

[Id. ¶ 11.] 

On or about February 27, 2001, shortly after Advanta entered into the Purchase and Sale

Agreement with Chase, Advanta entered into an agreement with the OCC (“OCC Agreement”) in

furtherance of the prior OCC Consent Order provisions. [Id. ¶¶ 8-9.] The OCC Agreement stated that

the OCC had found Advanta to be in “troubled condition,” and subjected Advanta to certain

requirements. It stated: 

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4

 Under the CFP Agreement between Chase and Advanta, Advanta agreed to indemnify Chase

for claims on behalf of its clients (such as G&P), “except for any claims based upon [Chase’s]

negligence willful misconduct, bad faith, or any actions or omissions materially inconsistent with the

Advanta CFP procedures.” The CFP Agreement also stated: 

The Advanta CFP procedures also include a practice of providing detailed

information about loss mitigation activity and REO [Real Estate Owned] dispositions

to Goodrich & Pennington Mortgage Fund, Inc. (‘G&P’) and other CFS Clients, of

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Effective immediately, the Bank [Advanta] agrees that it will not enter into,

nor commence any new business activities and/or product lines (including the

origination of new mortgage loans after the closing on the Purchase and Sale

Agreement [with Chase]) without the prior written approval of the Deputy

Comptroller. 

The OCC Agreement also stated:

Pursuant to the terms of this Purchase and Sale Agreement, Advanta

Corporation has agreed to sell certain assets, including the real estate loans

owned by the Bank as well as the Bank’s ownership interests in certain

residual assets, to Chase Mortgage. The closing is expected to occur on or

before February 28, 2001. 

[Id. ¶¶ 8-10.] 

G&P alleges that this OCC Agreement reveals that: (1) the OCC pushed Advanta to exit the

loan origination and secondary market, including servicing activities; (2) upon Advanta’s exit of from

this market, Advanta sold Chase its real estate loans and its residual interest to Chase; and (3) as a

result, Chase remains liable to G&P for Advanta’s unmet contractual obligations to G&P. [Id. ¶¶ 10-

11.] 

On February 28, 2001, the day after the OCC Agreement, Advanta and Chase entered into a

second agreement regarding Advanta’s Corporate Finance Program (hereinafter “CFP Agreement”)

with clients such as G&P. The stated purpose of the CFP Agreement was to “specify the manner in

which Advanta’s Corporate Finance Program will be conducted following the consummation of the

[Purchase and Sale Agreement to Chase].” [Id. ¶ 12.] G&P alleges that in conjunction with the

Advanta-Chase CFP Agreement, Advanta provided Chase with information regarding all third parties

(“CFS Clients”) from which Advanta had purchased pools of mortgages under its Corporate Finance

Program. In particular, G&P states that Advanta disclosed to Chase that G&P was an Advanta client

and disclosed to Chase at least thirteen agreements between G&P and Advanta, including the Conduit

Agreements. [Id. ¶¶ 13-14.]4

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consulting with G&P about such matters on a regular basis and of giving G&P

certain approval rights over REO dispositions. Purchaser [Chase] will use

reasonable efforts to act consistently with such practices. 

[Id. ¶¶ 29-30.] 

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G&P alleges that under the Advanta-Chase CFP Agreement, Chase again agreed to assume

numerous obligations to Advanta clients, including G&P. G&P states that Chase agreed to service

loans, collect amounts due to Advanta, make payments to G&P, provide notices and reports and

accounting to G&P, securitize the loans in the loan pools, and to only modify the Conduit Agreements

with the consent of G&P. [Id. ¶¶ 20-22.] 

Thus, G&P argues that the Advanta-OCC Agreement, the Advanta-Chase Purchase and Sale

Agreement, and the Advanta-Chase CFP Agreement demonstrate that Chase assumed all of Advanta’s

obligations to G&P. G&P contends that by stepping into Advanta’s shoes, Chase earned over two

million dollars by collecting the securitization proceeds, servicing fees, and the amounts due from

G&P’s borrowers. [Id. ¶¶ 22-23.] G&P agrees that Chase forwarded it reports regarding the loan

pools and loan securitization from March 1, 2001 to December 31, 2006. However, G&P argues that

Chase failed to abide by the Conduit Agreements since it did not distribute residual cash flow from

the Trusts to G&P. [Id. ¶ 26.] G&P contends that by improperly taking control of the residual cash

flow belonging to G&P, Chase “wrongfully kept for itself totals [of] $8,054,839.25.” G&P also states

that Chase owes it $27,189,562.84 in “Residual Interest in Securitization.” [Id. ¶¶ 27-28.]

In sum, G&P alleges that: (1) Chase substituted Advanta with respect to the Conduit

Agreements G&P initially made with Advanta, and (2) that Chase owes a duty to G&P to satisfy its

unmet obligations under the Conduit Agreements. [Id. ¶¶ 31-32.] Accordingly, under the Second

Amended Complaint, G&P is seeking relief from Chase for: (1) breach of express contract–third party

beneficiary claim; (2) breach of implied-in-fact contract; (3) negligent impairment of collateral; (4)

accounting; (5) declaratory relief; (6) promissory estoppel; (7) constructive trust/unjust enrichment;

(8) interference with contractual relations; (9) intentional interference with prospective economic

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5

 Plaintiff also alleges in its complaint that:

CHASE has also failed and refused to comply with the mandatory arbitration clause

contained within the LPCFA, even though G&P has requested that CHASE submit

this matter to binding arbitration before the American Arbitration Association. As

a result of CHASE’s failure to submit to arbitration pursuant to the terms of the

LPCFA, G&P has had to expend significant time and money filing the instant

lawsuit, and has been required to prosecute two separate actions: to arbitrate its claim

against Advanta, and to litigate its claim against CHASE.

[SAC ¶¶ 42, 43.] The Court recognizes Ninth Circuit case law stating that nonsignatories

and third party beneficiaries may be bound by arbitration agreements. Comer v. Micor,

Inc., 436 F.3d 1098, 1100-1102 (9th Cir. 2006). Accordingly, at oral argument, the Court

asked Plaintiff’s counsel whether he was in fact requesting this Court to compel

arbitration. Plaintiff’s counsel clarified that he was not making such a request; therefore

the Court will not construe this portion of Plaintiff’s complaint as a request to compel

arbitration. 

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advantage; and (10) negligent interference with prospective economic advantage. [SAC.]5

PROCEDURAL BACKGROUND

 On February 28, 2005, G&P initiated the present action in San Diego Superior Court. [Doc.

No. 1.] On March 30, 2005, Chase removed the case pursuant to 28 U.S.C. §§ 1332, 1441, and 1446.

[Id.] On May 17, 2005, Chase moved under Rule 12(b)(6) to dismiss G&P’s breach of contract and

conversion causes of action as alleged in G&P’s verified complaint. [Doc. No. 6.] On March 6, 2006,

Judge Lorenz dismissed G&P’s causes of action for breach of contract and conversion without

prejudice. [Doc. No. 26.] On August 7, 2006, G&P filed an amended complaint and on February 5,

2007, Judge Lorenz dismissed that complaint without prejudice. [Doc. No. 57.] On February 15,

2007, G&P filed a second amended complaint and Chase has now moved to dismiss that complaint

with prejudice. [Docs. Nos. 59, 62.]

LEGAL STANDARD

A motion to dismiss pursuant to Rule 12(b)(6) tests the sufficiency of the complaint. North Star

Int’l v. Arizona Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). Dismissal of the complaint or any

claim within it “can be based on the lack of a cognizable legal theory or the absence of sufficient facts

alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th

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6

 Four days before oral argument on Defendant’s motion, Defendant filed an ex parte motion

for leave to file a memorandum regarding “new authority.” [Doc. No. 89.] The new authority was

Bell Atl. Corp. v. Twombly, __U.S.__, 127 S. Ct. 1955, 1964, 1969 (2007). As Plaintiff notes, the

Court was aware of Bell and has referenced the case in several opinions. Therefore, the Court

DENIES Defendant’s ex parte motion.

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Cir. 1990). See also Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984).

In considering a motion to dismiss for failure to state a claim, the court accepts as true all

material allegations in the complaint and construes those allegations, as well as the reasonable

inferences that can be drawn from them, in the light most favorable to the plaintiff. Hishon v. King

& Spalding, 467 U.S. 69, 73, 104 (1984); Hospital Bldg. Co. v. Trustees of Rex Hosp., 425 U.S. 738,

740 (1976); Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1989). The court must resolve

doubts in the plaintiff’s favor. Jenkins v. McKeithen, 395 U.S. 411, 421 (1969). However, the court

need not accept as true conclusory allegations, unreasonable inferences, or unwarranted deductions

of fact. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). 

For fifty years, courts have applied the Supreme Court’s statement in Conley v. Gibson, 355

U.S. 41, 45-46 (1957), that “a complaint should not be dismissed for failure to state a claim unless it

appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would

entitle him to relief.” See NOW, Inc. v. Scheidler, 510 U.S. 249, 256 (1994); Hishon, 467 U.S. at 73;

Cervantes v. City of San Diego, 5 F.3d 1273, 1274-75 (9th Cir. 1993); Palmer v. Roosevelt Lake Log

Owners Ass’n, 651 F.2d 1289, 1294 (9th Cir. 1981). The Supreme Court recently determined that the

“no set of facts” standard “is best forgotten as an incomplete, negative gloss on an accepted pleading

standard: once a claim has been stated adequately, it may be supported by showing any set of facts

consistent with the allegations in the complaint.” Bell Atl. Corp. v. Twombly, __U.S.__, 127 S. Ct.

1955, 1964, 1969 (2007). Accordingly, to state a claim on which relief may be granted, the plaintiff

must allege “enough facts to state a claim to relief that is plausible on its face.” Id. at 1974.6

 

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ANALYSIS

I. The Law-of-the-Case Doctrine Does not Mandate this Court to Adopt Judge Lorenz’s

Prior Findings

Judge Lorenz previously granted Defendant’s motion to dismiss Plaintiff’s breach of contract

claims without prejudice. Defendant argues that Plaintiff only made “cosmetic” changes to these

claims in its second amended complaint, and that as a result, Judge Lorenz’s ruling remains the “law

of the case.” This Court disagrees.

Under the law-of-the-case doctrine, a court “is generally precluded from reconsidering an issue

previously decided by the same court . . . in the identical case.” Lower Elwha Band of S'Klallams v.

Lummi Indian Tribe, 235 F.3d 443, 452 (9th Cir. 2000) (citing Milgard Tempering, Inc. v. Selas Corp.

of Am., 902 F.2d 703, 715 (9th Cir. 1990)). However the Ninth Circuit has stated:

The law of the case doctrine is not an absolute bar to reconsideration of

matters previously decided. The doctrine merely expresses the practice of

courts generally to refuse to reopen what has been decided, not a limit to

their power. Thus, the court may reconsider previously decided questions in

cases in which there has been an intervening change of controlling authority,

new evidence has surfaced, or the previous disposition was clearly erroneous

and would work a manifest injustice. 

Leslie Salt Co. v. United States, 55 F.3d 1388, 1393 (9th Cir. 1995) (internal citations and quotations

omitted) (emphasis added); Ellis v. United States, 313 F.3d 636, 648 (1st Cir. 2002) (stating

reconsideration of another judge’s ruling is appropriate in the event of newly discovered evidence).

The Ninth Circuit has also acknowledged that:

[I]nterlocutory orders and rulings made pre-trial by a district judge are

subject to modification by the district judge at any time prior to final

judgment, and may be modified to the same extent if the case is reassigned

to another judge. There is no imperative duty to follow the earlier

ruling–only the desirability that suitors shall, so far as possible, have reliable

guidance how to conduct their affairs.

Amarel v. Connell, 102 F.3d 1494, 1515 (9th Cir. 1996) (internal citations and quotations omitted).

Thus, the law-of-the-case doctrine does not mandate this Court to adopt Judge Lorenz’s prior findings.

Moreover, Plaintiff has not made “cosmetic” changes to its amended complaint, but instead, has

offered new facts and evidence, including the OCC Agreement and OCC Consent Order. Therefore,

the Court may properly deny Defendant’s motion to dismiss without violating the doctrine. 

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II. G&P Has Adequately Pled a Cause of Action for Breach of Contract as a

Third Party Beneficiary

“A contract made expressly for the benefit of a third person may be enforced by him at any

time before the parties thereto rescind it.” Cal. Civ. Code § 1559. However, just because the statute

uses the term “expressly” does not mean that the contract must identify or refer to the third party by

name. Harper v. Wausau Ins. Co., 56 Cal. App. 4th 1079, 1086 (1997); COAC, Inc. v. Kennedy

Engr’s., 67 Cal. App. 3d 916, 920 (1977). The contract need not be exclusively for the benefit of the

third party. Johnson v. Superior Court, 80 Cal. App. 4th 1050, 1064 (2000). The third party may

recover on the contract if it can show that it is a member of a class for whose benefit the contract was

made. Diamond Woodworks, Inc. v. Argonaut Ins. Co., 109 Cal. App. 4th 1020, 1042 (2003);

Outdoor Servs., Inc. v. Pabagold, Inc., 185 Cal. App. 3d 676, 681-84 (1986); Garratt v. Baker, 5

Cal.2d 745, 748 (1936); Boliver v. Surety Co., 72 Cal. App. 3d Supp. 22, 27 (1977); 1 Witkin,

Summary of Cal.Law (9th Ed; 1990) Contracts, § 666, p. 60. Plaintiff must show an intent, clearly

manifested by the contracting parties, to make the obligation inure to the benefit of the third party.

Schauer v. Mandarin Gems of California, Inc., 125 Cal. App. 4th 949, 957-58 (2005) (citing Sofias

v. Bank of America, 172 Cal. App. 3d 583, 587 (1985)). 

Generally, it is a question of fact whether a particular third person is an intended beneficiary

of a contract. Prouty v. Gores Technology Group, 121 Cal. App. 4th 1225, 1227 (2004). Express

intent to benefit a third party need not be manifested in the terms of the agreement; it can also be

inferred from the circumstances of the agreement. Such a determination involves a “construction of

the parties’ intent, gleaned from reading the contract as a whole in light of the circumstances under

which it was entered.” Neverkovec v. Fredericks, 74 Cal. App. 4th 337, 349 (1999) (internal citations

omitted); Bancomer, S.A. v. Superior Court, 44 Cal. App. 4th 1450, 1458 (1996). 

G&P has pled sufficient facts to support the allegation that Chase and Advanta intended to

benefit G&P when they drafted the Purchase & Sale Agreement and the CFP Agreement. G&P has

also pled sufficient facts to show that the circumstances giving rise to those agreements infer that

Chase assumed all of Advanta’s rights and obligations pursuant to Advanta’s agreements with G&P.

First, in the Advanta-Chase Purchase and Sale Agreement, it appears that Chase agreed to

perform all of the obligations Advanta owed to its clients (such as G&P) under its Corporate Finance

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Agreements. The obligations included: making payments, servicing the loans, maintaining reserves,

providing monthly reports, and maintaining confidentiality. [SAC ¶ 11.] While G&P was not

specifically named in the Purchase and Sale Agreement, it was a member of a class for whose benefit

the contract was made. Diamond Woodworks Inc., 109 Cal. App. 4th at 1042; Outdoor Servs., Inc.,

185 Cal. App. 3d at 681-84. 

Second, in the Advanta-Chase CFP Agreement, the parties specified the manner in which

Advanta’s Corporate Finance Program would be conducted following the consummation of the

Purchase and Sale Agreement. As part of this agreement, Advanta disclosed to Chase that G&P was

an Advanta client and disclosed the existence of thirteen agreements between G&P and Advanta,

including the Conduit Agreements. [Id. ¶¶ 13-14.] Further, the CFP Agreement tracks the Purchase

& Sale Agreement, since Chase again agrees to meet the same obligations to Advanta’s clients (such

as G&P). The obligations included servicing the loans, maintaining reserves, making payments to

clients, and providing reports and accounting. [Id. ¶¶ 20-22.] Thus, these agreements suggest an

“intent, clearly manifested by the contracting parties [Chase and Advanta], to make the obligation[s]

inure to the benefit of the third party [G&P].” Schauer, 125 Cal. App. 4th at 957-58. 

Finally, the OCC Agreement also states:

Pursuant to the terms of this Purchase and Sale Agreement, Advanta

Corporation has agreed to sell certain assets, including the real estate loans

owned by the Bank as well as the Bank’s ownership interests in certain

residual assets, to Chase Mortgage.

[SAC ¶¶ 8-10.] While Chase was not a party to this agreement, it still strengthens G&P’s argument

that: (1) the OCC pushed Advanta to exit the loan origination and secondary market, including

servicing activities; (2) upon Advanta’s exit of from this market, Advanta sold G&P’s real estate loans

and residual assets to Chase; and (3) as a result, Chase remains liable to G&P for Advanta’s unmet

contractual obligations to G&P in regards to those loans and residual assets. [SAC ¶¶ 8-11.]

Therefore, the Court finds G&P has adequately stated a claim for relief for breach of contract under

a third party beneficiary theory. 

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III. G&P Has Pled Sufficient Facts to Allege a Breach of an Implied-In-Fact Contract

The essential elements of an implied-in-fact contract and an express contract are the

same–mutual assent and consideration. Chandler v. Roach, 156 Cal. App. 2d 435, 440, (1957).

California law holds that: “A voluntary acceptance of the benefit of a transaction is equivalent to a

consent to all the obligations arising from it, so far as the facts are known, or ought to be known, to

the person accepting.” Cal. Civ. Code. § 1589. Consideration may be either a benefit conferred upon

the promisor or a detriment suffered by the promisee. Asmus v. Pacific Bell, 23 Cal. 4th 1, 31-32

(2000). 

The essential difference between an implied contract and an express contract is the mode of

proof. When a contract is implied, the party asserting it must show conduct from which a promise

may be inferred. Foley v. Interactive Data Corp., 47 Cal. 3d 654, 675 (1988); Youngman v. Nevada

Irrigation Dist., 70 Cal. 2d 240, 246 (1969); Chandler, 156 Cal. App. 2d at 440; Thompson v.

California Brewing Co.,150 Cal. App. 2d 469, 473 (1957); see also Bush v. Lane, 161 Cal. App. 2d

278, 279 (1958) (stating that an implied contract can be inferred from “the conduct, situation, or

mutual relations of the parties”); Del E. Webb Corp. v. Structural Materials Co., 123 Cal. App. 3d 593,

611 (1981) (“Whether or not an implied contract has been created is determined by the acts and

conduct of the parties and all the surrounding circumstances involved and is a question of fact.”).

In pleading a cause of action for an agreement implied from conduct, the plaintiff should allege

the facts from which the promise is implied. Youngman, 70 Cal. 2d at 246-47 (1969). For example,

in Kawasho Internat. (U.S.A.), Inc. v. Lakewood Pipe Service, Inc., 152 Cal. App. 3d 785, 789-91

(1983), the plaintiff established an implied-in-fact contract that pertained to interest owed on past-due

accounts by showing a course of conduct between the parties, including the seller’s acceptance of

special interest invoices, partial payment of interest, the continued business relationship between the

parties, and an indication by the seller that interest would be paid. See also id. at 791 (“The existence

of an implied contract is a question of fact for the trial court[.]”). 

In the present action, G&P alleges a course of conduct from which a promise could be implied.

G&P alleges that: (1) Chase deposited funds in G&P’s bank account as payments pursuant to its

obligations under the Advanta-Chase Purchase and Sale Agreement and Advanta-Chase CFP

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Agreement; (2) Chase sent G&P monthly loan pool and securitization reports for over five years; (3)

Chase received a benefit by collecting G&P’s monthly fees and service fees for over five years for

loan servicing activities; (4) based on Chase’s conduct and the agreements, G&P reasonably expected

that Chase would remit to G&P shares of loan revenue and residual cash flow payments; and (5)

Chase failed to remit such funds [SAC ¶¶ 45-50.] Thus, the Court finds that G&P has adequately

alleged a cause of action for breach of an implied-in-fact contract.

CONCLUSION

For the foregoing reasons, this Court DENIES Defendant’s motion to dismiss Plaintiff’s

first and second causes of action. The Court will rule on Defendant’s motion to dismiss Plaintiff’s

remaining claims in due course.

IT IS SO ORDERED.

DATED: March 14, 2008

Honorable Janis L. Sammartino

United States District Judge

Case 3:05-cv-00636-JLS-POR Document 93 Filed 03/14/08 Page 12 of 12