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Goodrich & Pennington Mortgage Fund, Inc. v. Chase Manhattan Mortgage Corp.

February 5, 2007

GOODRICH & PENNINGTON MORTGAGE FUND, INC., PLAINTIFF,
v.
CHASE MANHATTAN MORTGAGE CORPORATION, DEFENDANT.



The opinion of the court was delivered by: M. James Lorenz United States District Court Judge

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) 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 Corporation USA ("Advanta")*fn1 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 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-in-fact 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.*fn2 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 . . . .

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 ...


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