Opinion
CV-N-99-559-ECR (RAM).
September 29, 2000
KEVIN MIRCH and MARIE MIRCH, of Mirch Mirch, Reno, NV, for plaintiffs.
JEREMY NORK of Hale, Lane, Peek, Dennison, Howard Anderson, Reno, NV, for defendant.
MINUTE ORDER IN CHAMBERS
The defendant has filed a motion (#4) to dismiss the second and seventh claims for relief and for an order for more definite statement. The plaintiffs filed an opposition (#6) and the defendant replied (#8). The Court now addresses this motion.
Background
This lawsuit arises out of a banking relationship that began in 1984 between defendant Bank of America, Cascade, and Mr. Ferguson and his then wife Mrs. Ferguson. In June 1984, these parties entered into a series of loans which are currently in default. The complaint alleges that in August of 1997, Bank of America entered into an agreement to sell its rights in the loans to Cascade and that the bank subsequently breached this agreement. In addition, the complaint alleges that the bank discouraged other potential investors from becoming involved in the project and that the bank allowed the properties in question to pollute water resources in Lake Tahoe.
The plaintiffs have asserted seven claims for relief: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) negligence; (4) intentional interference with prospective contractual relationships; (5) negligent misrepresentation; (6) slander; and (7) breach of fiduciary duty. The defendant moves to dismiss the second claim, breach of the covenant of good faith and fair dealing, and the seventh claim, breach of fiduciary duty.
Issues
I. Second and Seventh Claims for Relief
A. Breach of Covenant of Good Faith and Fair Dealing
The tort action for breach of the implied covenant of good faith and fair dealing requires a special element of reliance or fiduciary duty.See Great American Ins. Co. v. General Builders, Inc., 113 Nev. 346, 354 (1997). The tort action is limited to "rare and exceptional cases." See id. Nevada courts have recognized this type of reliance in various relationships, including those formed by employment, bailment, insurance, and partnerships. There must exist a special relationship between the tort victim and the tortfeasor. See A.C. Shaw Constr. v. Washoe County, 105 Nev. 913 (1989).
The Ninth Circuit has stated that the characteristics of such a special relationship are:
(1) the contract must be such that the parties are in inherently unequal bargaining positions; (2) the motivation for entering the contract must be a nonprofit motivation, i.e., to secure peace of mind, security, future protection; (3) ordinary contract damages are not adequate because (a) they do not require the party in the superior position to account for its actions, and (b) they do not make the inferior party "whole"; (4) one party is especially vulnerable because of the type of harm it may suffer and of necessity places trust in the other party to perform; and (5) the other party is aware of this vulnerability.Denholm v. Houghton Mifflin Co., 912 F.2d 357, 361 (9th Cir. 1990) (citing Wallis v. Superior Court, 160 Cal.App.3d 1109, 1118 (Ct.App. 1984)).
Courts have held that there is no special relationship between a debtor-creditor or a bank and its loan customers sufficient to satisfy a tort claim for a breach of the covenant of good faith and fair dealing.See, e.g, Price v. Wells Fargo Bank, 213 Cal.App.3d 465, 475-6 (Ct.App. 1989); Mitsui Mfrs. Bank v. Superior Court, 212 Cal.App.3d 726, 733 (Cal.App. 1989) (holding that a lender and commercial borrower do not share a special relationship sufficient to satisfy a tort claim) (Travel Servs. Network, Inc. v. Presidential Financial Corp., 959 F. Supp. 135, 144 (D. Conn. 1997). These courts have held that no fiduciary duty exists in a lender-debtor relationship unless evidence is presented that the relationship was more than an arm's-length business transaction. See e.g., Price, 213 Cal.App.3d at 475-6; Mitsui Mfrs. Bank, 212 Cal.App.3d at 733. The factors courts have considered in determining the existence of a fiduciary relationship mirror those stated by the Wallis court. These factors focus on the knowledge of each party, the parties' business capacity, the adequacy of contract damages, and the reliance by one party on another. See Travelers Servs. Network, 959 F. Supp. at 145; see also, Mitsui Mfrs. Bank, 212 Cal.App.3d at 733 (finding that the nature of the contract between the parties is critical and that the factors to be considered include the adequacy of ordinary contract damages, public interest, and whether financial dependence of one party has been entrusted to the other).
The plaintiffs argue that a special relationship existed between the parties beyond that of a regular borrower-lender relationship. The plaintiffs contend that because the bank controlled the property, its sale and had entered into an agreement to sell the property to Cascade the parties had a special relationship. The plaintiffs argue that "the Bank was more than just a lender. [The bank] had become a participant in the sale and caretaker of the property." (Plaintiff's Opposition, p. 7, 11.9-11).
We find that the plaintiffs have failed to establish that the relationship between the bank and the plaintiffs was more than just a normal lender-borrower relationship. The relationship in the instant case fails to meet any of the factors considered by courts. Plaintiffs and Defendant were of equal bargaining stature. Both parties are sophisticated business entities. The plaintiffs have not shown that the defendant had any superior knowledge or control in the negotiations. Both sides were entering into the relationship for prof it reasons. Furthermore, the plaintiffs offer no evidence as to the inadequacy of ordinary contract damages, nor have they shown that they were in any way vulnerable. We find no evidence of a special relationship creating reliance or a fiduciary duty.
B. Breach of Fiduciary Duty
The plaintiff's seventh claim for relief seeks damages for the bank's breach of its fiduciary duty. The elements for this cause of action require (1) the existence of a fiduciary relationship; (2) a breach of that duty; and (3) damages proximately caused by such a breach. Fidelity Deposit Co. v. Curtis Day, 1993 WL 128073 (N.D.Cal. 1993).
As we stated above, the law does not recognize a fiduciary relationship between a lender and a borrower. See Price v. Wells Fargo Bank, 213 Cal.App.3d 465, 475-6 (Ct.App. 1989) (stating that "[a] debt is not a trust and there is not a fiduciary relation between debtor and creditor as such" and further stating that the "same principal should apply with even greater clarity to the relationship between a bank and its loan customers"). There is no fiduciary duty between a lender and borrower and the plaintiffs have not shown that a special relationship existed that created a fiduciary duty. Therefore, the plaintiffs' seventh claim for relief must fail.
II More Definite Statement
The defendant also argues that an order for a more definite statement is necessary with regards to plaintiffs' slander and intentional interference with prospective contractual relationships claims.
Under Rule 12(e)of the Federal Rules of Civil Procedure, a party may move for a more definite statement before interposing a responsive pleading if "a pleading to which a responsive pleading is permitted is so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading." The rule requires that the motion for a more definite statement identify the defects and the details desired.
A. Intentional Interference with Prospective Contractual Relationships
We agree with the defendant that a more definite statement is required by the plaintiffs with regards to their claim of intentional interference with prospective contractual relationships. In the complaint, the plaintiffs have failed to identify the prospective contractual relations the defendant allegedly interfered with and how the defendant interfered with these relationships. The complaint simply states that the defendant discouraged investors interested in the project and allowed the property in question to pollute water sources in Lake Tahoe. The complaint then states that the defendant "was aware of these prospective contractual relationships at the time they interfered with the same." (Complaint, p. 10, 11. 11-13) We find that these allegations are insufficient to give the defendant sufficient notice so that it may respond. The plaintiffs have not identified the relationships at issue, with whom they had these prospective relationships, and how the bank interfered.
B. Slander
The defendant alleges. that a more definite statement is required by the plaintiffs on their slander claim. The defendant claims that the plaintiffs have not identified the dates, times, places and names of the persons who allegedly made the slanderous statements. We find that the plaintiffs have sufficiently plead their claim for slander so as to give the defendant notice of the claim and allow them to respond.
The complaint states that the slanderous statements were made by Mr.Guzman and other bank officials. it identifies what the statement was, to whom the statement was made, and provides a time frame in which the statement was made. We think the information stated in the complaint is sufficient. The plaintiffs are only required to plead their claims with sufficient detail to put the other party on notice of the conduct leading to the claim. The plaintiffs have provided sufficient information to put the defendant on notice.
Conclusion
We find that the plaintiffs have failed to establish that a special relationship beyond the normal lender-borrower relationship existed between the parties. Therefore, there was no fiduciary relationship between the parties. In addition, we hold that a more definite statement is required by the plaintiffs with regards to their claim of intentional interference with prospective contractual relationships.
IT IS THEREFORE HEREBY ORDERED THAT defendant's motion (#4) to dismiss and motion for a more definite statement is GRANTED IN PART AND DENIED IN PART .
The motion to dismiss the plaintiffs' second claim for breach of the covenant of good faith and fair dealing and seventh claim for breach of fiduciary duty IS GRANTED .
The motion for a more definite statement on plaintiffs' claim for slander IS DENIED .
The motion for a more definite statement on plaintiffs' claim for intentional interference with prospective contractual relationships is GRANTED . The plaintiffs shall have 15 days within which to file a more definite statement on such claim. The statement shall identify the prospective contractual relationships with which the defendant allegedly interfered, the parties with whom the plaintiffs had these potential contractual relationships, and what conduct the defendant engaged in that interfered with these relationships.