Opinion ID: 653220
Heading Depth: 2
Heading Rank: 1

Heading: havasu's fraud claims

Text: Havasu's complaint alleged that SPFC made misrepresentations concerning its experience with time-share loans, the benefits of the tandem loan concept, and the experience and capability of Alme as a time-share marketer. Agreeing with Magistrate Gonzalez's assessment that SPFC's statements were either true, in compliance with the loan agreements or not reasonably relied upon and [Havasu has] offered no evidence or facts to support [the fraud] claims, Judge Rhoades granted SPFC summary judgment on the fraud causes of action. The grant of summary judgment is reviewed de novo. T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 629 (9th Cir.1987). A common law fraud action requires proof of (1) a false representation, (2) knowledge by the defendant of its falsity, (3) intent by the defendant to deceive the plaintiff, (4) justifiable reliance by the plaintiff on the misrepresentation, and (5) damage caused by the reasonable reliance. Globe Int'l, Inc. v. Superior Court, 9 Cal.App.4th 393, 399 (1992). Havasu has come forth with no evidence that the representation concerning SPFC's experience in the time-share industry and the viability of the tandem loan concept were false. It was Havasu's burden to do so in order to survive summary judgment. See Celotex v. Catrett, 477 U.S. 317, 324 (1986). Havasu conducted its own investigation into Alme's marketing business and concluded that he was qualified. Havasu did not justifiably rely upon any representations by SPFC regarding Alme's experience and abilities. The district court properly granted SPFC summary judgment on the fraud claims. II. HAVASU'S CLAIMS BASED UPON THE ALLEGATION THAT SPFC REQUIRED PLAINTIFFS TO EMPLOY ALME AND MAKE HIM A PARTNER IN THE PROJECT. Havasu has appealed the judgment as a matter of law which was entered on its breach of contract, breach of the covenant of good faith and fair dealing, and negligence. Havasu also appeals the breach of fiduciary duty claim which was based on the same facts and as to which the district court entered judgment on the pleadings. The standard of review for the district court's action on all of these claims is de novo. Oscar v. University Students Co-operative Ass'n, 965 F.2d 783, 785 (9th Cir.), cert. denied, 113 S.Ct. 655 (1992); In re Hawaii Federal Asbestos Cases, 960 F.2d 806, 816 (9th Cir.1992). Judgment on the pleadings is appropriate only where it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Buckey v. Los Angeles, 968 F.2d 791, 794 (9th Cir.), certs. denied, 113 S.Ct. 599, 113 S.Ct. 600 (1992). Judgment as a matter of law is proper where the evidence permits only one reasonable conclusion. Fed.R.Civ.P. 50(a); McGonigle v. Combs, 968 F.2d 810, 816 (9th Cir.), cert. dismissed sub nom, Casares v. Spendthrift Farm, Inc., 113 S.Ct. 399 (1992).
As a general rule the California courts have recognized that the relationship between a creditor and its debtor is arm's-length, encompassing no special duties. Nymark v. Heart Fed. Sav. & Loan Ass'n, 231 Cal.App.3d 1089, 1093 n. 1 (1991); Price v. Wells Fargo Bank, 213 Cal.App.3d 465, 476 (1989). Havasu has not brought forth any evidence which would indicate the existence of a special relationship with SPFC. The district court correctly granted judgment on the pleadings to SPFC on Havasu's breach of fiduciary duty cause of action. B. THE BREACH OF CONTRACT AND BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING CLAIMS. Havasu concedes that it can point to no particular provision of the lending contract which SPFC has broken. Instead, it argues that the breach of contract claim is based upon the implied covenant of good faith and fair dealing. Havasu correctly states that the covenant of good faith and fair dealing is implied into every contract and prohibits each party from do[ing] anything which injures the right of the other party to receive the benefits of the agreement. Wagner v. Benson, 101 Cal.App.3d 27, 33 (1980). Havasu claims that SPFC breached this implied covenant when it required that Alme be made a partner and the marketer of the time-share project. The requirement that Alme be made a partner and the marketer of the project was imposed prior to the existence of a contract between Havasu and SPFC. The letter of intent, the commitment letter and the lending contract all assume the existence of a partnership between Maurer, Harrison, Ferrante and Alme. Havasu makes no allegations of conduct by SPFC relating to Alme which occurred after the parties entered into a contract together. There can be no duty to act fairly and in good faith prior to the existence of a contract. Racine & Laramie, Ltd. v. California Dept. of Parks & Recreation, 11 Cal.App.4th 1026, 1032 (1992). Because Havasu can point to no other provision in the financing contract which SPFC arguably breached, the district court properly awarded SPFC judgment as a matter of law on Havasu's contract claims. C. THE NEGLIGENCE CLAIM A viable negligence claim presupposes the existence of a duty running from the defendant to the plaintiff. Nymark, 231 Cal.App.3d at 1095. In an ordinary lending relationship, a financial institution owes no particular duty to its borrower. Liability for negligence can only be imposed where the lender has actively participated in the enterprise which is the subject of the lending transaction. Id. Customary supervision of the borrowing enterprise for the purpose of protecting the lender's security interest is not active participation. Havasu has shown no more than customary supervision by SPFC. Id. at 1097 (quoting Wagner, 101 Cal.App.3d at 35).