Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_05-cv-00636/USCOURTS-casd-3_05-cv-00636-0/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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05cv636

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

GOODRICH & PENNINGTON

MORTGAGE FUND, INC.,

Plaintiff,

v.

CHASE MANHATTAN MORTGAGE

CORPORATION,

Defendant.

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Civil No. 05-CV-636-L(POR)

ORDER GRANTING MOTION TO

DISMISS FIRST AMENDED

COMPLAINT [doc. #47]

Defendant Chase Manhattan Mortgage Corporation (“Chase”) moves to dismiss plaintiff

Goodrich & Pennington Mortgage Fund, Inc’s (“G&P”) first amended complaint (“FAC”). 

Plaintiff opposes the motion. The Court finds this matter suitable for determination on the

papers submitted and without oral argument pursuant to Civil Local Rule 7.1(d)(1). Having

fully considered the matters presented, the Court enters the following decision.

Legal Standard

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency

of the complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal of a claim

under this Rule is appropriate only where “it appears beyond doubt that the plaintiff can prove

no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355

U.S. 41, 45-46 (1957); Navarro, 250 F.3d at 732. Dismissal is warranted under Rule 12(b)(6)

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28 1 Advanta is not a named party to this action. 

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when the complaint lacks a cognizable legal theory. Robertson v. Dean Witter Reynolds, Inc.,

749 F.2d 530, 534 (9th Cir. 1984); see Neitzke v. Williams, 490 U.S. 319, 326 (1989) (“Rule

12(b)(6) authorizes a court to dismiss a claim on the basis of a dispositive issue of law.”). 

Alternatively, a complaint may be dismissed where it presents a cognizable legal theory yet fails

to plead essential facts under that theory. Robertson, 749 F.2d at 534. 

In reviewing a motion to dismiss under Rule 12(b)(6), the court must assume the truth of

all factual allegations and must construe them in the light most favorable to the nonmoving

party. Thompson v. Davis, 295 F.3d 890, 895 (9th Cir. 2002); Cahill v. Liberty Mut. Ins. Co., 80

F.3d 336, 337-38 (9th Cir. 1996). But legal conclusions need not be taken as true merely

because they are cast in the form of factual allegations. Roberts v. Corrothers, 812 F.2d 1173,

1177 (9th Cir. 1987); Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). When

ruling on a motion to dismiss, the court may consider the facts alleged in the complaint,

documents attached to the complaint, documents incorporated by reference in the complaint, and

matters of which the Court takes judicial notice. United States v. Ritchie, 342 F.3d 903, 908 (9th

Cir. 2003); Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1998).

Background

Plaintiff G&P was an originator of home mortgage loans. Under a Corporate Finance

Program, Advanta Mortgage Corportation USA (“Advanta”)1

 purchased mortgage loans from

originators like G&P and securitized them by placing them into large pools and selling interest

in the pools to investors as mortgage-backed securities. The Corporate Finance Program was

memorialized in a series of agreements between Advanta and G&P. Advanta pledged as

collateral the cash flow to certain assets known as “residual interests” to secure Advanta’s

contractual obligations to G&P. Id. at ¶ 8(e).

On February 28, 2001, Chase purchased certain assets from Advanta, including the

residual interests in which G&P claims an interest. Chase did not, however, assume Advanta’s

obligations under any agreements between Advanta and G&P. Id., Exh. F. But G&P contends

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2 In its earlier Order, the Court found that there is no contractual relationship

between Chase and plaintiff G&P.

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that without its knowledge or consent, Advanta and Chase wrongfully executed an “Agreement

Regarding Corporate Finance Program” as part of the sale of Advanta’s assets to defendant, and

as a result, is liable to G&P. The agreements between Advanta and Chase are found in two

written contracts dated January 8, 2001 and February 28, 2001.

On February 28, 2005, G&P filed a Verified Complaint in the Superior Court for the

County of San Diego, California contending that Chase has asserted control over G&P’s interest

from the subject loans contrary to G&P’s possessory interest. Chase timely removed the action

to the federal court on March 30, 2005.

Defendant moved to dismiss plaintiff’s breach of contract and conversion claims which

the Court granted finding that there was no contract between G&P and Chase. The Court

granted plaintiff leave to file an amended complaint. Plaintiff filed a FAC to which defendant

filed the present motion to dismiss the complaint in its entirety. The FAC asserts five causes of

action: declaratory relief; breach of contract to third-party beneficiary; breach of an implied-infact contract; negligent impairment of collateral; and accounting. 

Discussion

1. Third-Party Beneficiary

Plaintiff G&P contends that it is a third-party beneficiary to the Advanta/Chase

Agreements.2

 A third party to a contract, who is an express beneficiary to that contract, has

standing to enforce the contract. Cal. Civ. Code § 1559. But “[a]n intent to make the obligation

inure to the benefit of the third party must have been clearly manifested by the contracting

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

Moreover, the party claiming status as a third-party beneficiary has the burden of proving that

the “contracting parties actually promised the performance which the third party beneficiary

seeks.” Whiteside v. Tenet Healthcare Corp., 101 Cal. App. 4th 693, 708 (2002)

To assert a claim as a third-party beneficiary, "a plaintiff must plead a contract which was

made expressly for his benefit and one in which it clearly appears that he was a beneficiary . . . .

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The fortuitous fact that he may have suffered detriment by reason of the nonperformance of the

contract does not give him a cause of action" Luis v. Orcutt Town Water Co., 204 Cal. App.2d

433, 441-442 (1962); see also, Garcia v. Truck Ins. Exchange, 36 Cal.3d 426, 436 (1984)(A

third party beneficiary must show, as a matter of contract interpretation, that the contracting

parties actually intended to promise the performance which the third party beneficiary seeks.).

Plaintiff alleges in a conclusory manner that it is a third-party beneficiary under the

contracts January 8, 2001 Purchase and Sale Agreement or the February 28, 2001 Agreement

Regarding Corporate Finance Program (collectively “Chase/Advanta Agreements”). But as

defendant correctly notes, no such intent appears from the terms of the Chase/Advanta

Agreements: “In sum, the express intent to the contracts was to facilitate the sale of Advanta’s

assets and establish Chase as the servicer of mortgages under the Corporate Finance Program

with no assumed obligations to the mortgage originators, not to create contractual obligations

running from Chase to G&P.” (Reply Memorandum at 9, fn 5).

Plaintiff’s FAC fails to allege facts that show it is an intended third-party beneficiary

under the Chase/Advanta Agreements and accordingly, the Court must dismiss plaintiff’s second

cause of action. 

2. Breach of Implied Contract

An implied contract is one whose existence and terms are manifested by conduct. (Civ.

Code, § 1621) It arises from “mutual agreement and intent to promise where the agreement and

promise have not been expressed in words.” Silva v. Providence Hospital of Oakland 14 Cal.2d

762, 773 (1939). A plaintiff seeking to state a cause of action for breach of an implied contract

must allege mutual assent and consideration. Division of Lab. Law Enforcement v. Transpacific

Trans. Co., 69 Cal. App. 3d 268, 275 (1977). A complaint alleging a cause of action for breach

of implied contract must state the facts, such as a practice or course of conduct, from which the

promise is implied. California Emergency Physicians Medical Group v. PacifiCare of

California 111 Cal.App.4th 1127, 1134 (2003). 

Chase argues that the breach of an implied contract claim must be dismissed because

there is no contract between Chase and G&P based upon course of conduct. Plaintiff contends,

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however, that the “course of conduct between the parties, evidencing CHASE’S payment of

substantial sums to purchase the rights to fees for servicing G&P’s loans and receipt of income

therefrom, and G&P’s knowledge of CHASES’S assumption of loan servicing responsibilities

due to its receipt of interest statements, establishes each of the requisite elements of this

contract.” (Opp. at 9). Plaintiff’s suggestion that the receipt of interest statements is sufficient to

show a course of conduct is without merit. Moreover, there are no facts pleaded that show the

existence of consideration between Chase and plaintiff. 

Plaintiff does not allege facts from which an unexpressed mutual agreement or intent to

promise may be implied. As currently alleged, the complaint is insufficient to state a cause of

action for breach of an implied-in-fact contract.

3. Negligent Impairment of Collateral

The elements of a negligence cause of action are a duty, breach of that duty, proximate

cause, and damage. County of Santa Clara v. Atlantic Richfield Co., 137 Cal. App. 4th 292, 318

(2006)(citing Artiglio v. Corning, Inc., 18 Cal. 4th 604, 641 (1998). A contractual relationship

can give rise to a duty. J’Aire Corp. v. Gregory, 24 Cal. 3d 799, 803 (1979).

Chase argues that plaintiff cannot state a negligent impairment of collateral cause of

action because there is no contractual relationship between plaintiff and Chase based on the

allegations contained in the FAC. The Court concurs. The Court previously found that there is

no direct contractual relationship between plaintiff and Chase. Further, the Court has found that

plaintiff has not alleged a third-party beneficiary relationship or an implied-in-fact contract. 

Accordingly, based on the allegations as presented in the FAC, Chase cannot owe a duty to

plaintiff under either of the Chase/Advanta Agreements and this cause of action must be

dismissed.

4. Declaratory Relief and Accounting

Plaintiff’s first cause of action alleges that Chase is subject to an arbitration clause found

in a G&P/Advanta Agreement. "One of the threads running through federal arbitration

jurisprudence is the notion that ‘arbitration is a matter of contract and a party cannot be required

to submit to arbitration any dispute which he has not agreed so to submit.’" Textile Unlimited,

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Inc. v. A.BMH & Co., Inc., 240 F.3d 781, 786 (9th Cir. 2001) (quoting AT&T Techs., Inc. v.

Communications Workers, 475 U.S. 643, 648 (1986)). Accordingly, although there is a strong

and liberal federal policy to enforce arbitration agreements, "such agreements must not be so

broadly construed as to encompass claims and parties that were not intended by the original

contract." Thomson-CSF, S.A. v. American Arbitration Ass ’n, 64 F.3d 773, 776 (2d Cir. 1995).

Because there is no contractual relationship between Chase and plaintiff founded upon an

express contract, implied-in-fact contract or as a third-party beneficiary to a contract, Chase

cannot be subject to an arbitration clause in an agreement between G&P and Advanta. 

Plaintiff’s fifth cause of action is for an accounting. Because there is no contractual

relationship between G&P and Chase alleged in the FAC, as discussed above, there is no

obligation on Chases’s part to perform an accounting. 

Conclusion

Based on the foregoing, IT IS ORDERED granting defendant’s motion to dismiss

plaintiff’s first amended complaint. IT IS FURTHER ORDERED that should plaintiff intend

to amend the complaint in conformity with this Order, it shall do so within 10 days of the filing

of this Order. In the absence of a timely filed amended complaint, this case shall be dismissed

with prejudice. 

IT IS SO ORDERED.

DATED: February 5, 2007

M. James Lorenz

United States District Court Judge

COPY TO: 

HON. LOUISA S. PORTER

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

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