California, United States of America
The following excerpt is from SEST Consulting, Inc. v. Wachovia Bank, B195750 (Cal. App. 12/21/2007), B195750 (Cal. App. 2007):
In order for liability to exist under these circumstances, the bank must have "actively participated" in the transaction such that the financing took on ramifications beyond the usual money lenders' domain. (Wagner v. Benson, supra, 101 Cal.App.3d at pp. 34-35 [defendant was not under a duty to disclose information about the risk of investment prior to approving loan to inexperienced investors because the lender did not have extensive control and share of profits but rather participated only in protecting its security interest in the loan collateral].) But if a lender departs from the normal role of lending funds, for example, by exercising extensive control in the transaction or sharing in profits, such "active participation" may be sufficient to impose a duty of care. (Ibid.) However, the bank's alleged participation in this case is that it reviewed documents for approval of the loan assumption. There are no allegations the bank acted in any capacity beyond the domain of a mere lender. There are no extraordinary or special facts showing the bank stepped out of its capacity in processing the loan application such that a duty of care was required. Therefore, the demurrers to the seventh, eighth, ninth, and twelfth causes of action were correctly sustained on the ground the bank owed no duty of care to plaintiff.
The above passage should not be considered legal advice. Reliable answers to complex legal questions require comprehensive research memos. To learn more visit www.alexi.com.