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People v. Stroman Realty

June 23, 2009

THE PEOPLE OF THE STATE OF CALIFORNIA, BY AND THROUGH JEFF DAVI, SOLELY IN HIS CAPACITY AS THE REAL ESTATE COMMISSIONER OF THE STATE OF CALIFORNIA, PLAINTIFF,
v.
STROMAN REALTY, INC., A TEXAS CORPORATION, WAYNE A. STROMAN AND DOES 1-100, INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge

MEMORANDUM AND ORDER

On October 31, 2008, Plaintiff, Jeff Davi, the California Real Estate Commissioner and Chief Executive of the California Department of Real Estate (hereinafter Commissioner) filed the present action on behalf of the People of the State of California in the Sacramento County Superior Court. On January 5, 2009, Defendants, Stroman Realty, Inc. and Wayne Stroman (hereinafter Defendants or Stroman), removed the matter to this Court.

Presently before the Court is Defendants' Motion to Dismiss Complaint. The Complaint alleges violations of the State of California's Real Estate Law as codified in California Business and Professions Code §§ 10000 et seq.*fn1 Specifically, the Commissioner brings two causes of action. The First Cause of Action alleges unlicenced broker activity in violation of Section 10130 and the Second Cause of Action alleges certain advance fee violations per Sections 10085, 10085.5 and 10146. For the reasons set forth below, Defendants' Motion to Dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6)*fn2 is DENIED.

BACKGROUND

Defendant Stroman Realty is a Texas real estate corporation specializing in the resale of timeshares for individuals.*fn3

Request for Judicial Notice in Support of Defendants' Stroman Realty, Inc. and Wayne Stroman's, Motion to Dismiss Complaint, Opinion on Summary Judgment, dated July 28, 2005 (Opinion) at 3.

Each of its agents are licensed in Texas as a real estate agent or broker, and its only office is in Conroe, Texas, its principal place of business. Id. Stroman is not licensed to practice real estate in California. Compl. ¶ 4.

The Commissioner claims that Defendants have engaged and continue to engage in the real estate business in the State of California without the requisite license to do so. In support of his claim, the Commissioner alleges that 1) Defendants mailed, or caused the mailing of, advertisements and other solicitation materials to California residents who own timeshare properties encouraging the residents to sell their properties through Stroman's Texas real estate corporation; 2) Defendants collect an advance "advertising fee" (that is currently around $599) from California residents who wish to list their timeshare properties with Defendants; 3) Defendants have not submitted any advance "advertising fee" agreements to Commissioner for approval; and 4) Defendants do not deposit advance fees of California residents into a designated trust fund. Id. ¶ 12, 14-17. The Commissioner also claims that all violations of law alleged in the complaint occurred at numerous locations throughout the State of California. Id. ¶ 3.

Now before the Court is Defendants' Motion to Dismiss challenging the sufficiency of the allegations underlying the Commissioner's causes of action. Defendants assert that the Commissioner fails to state valid claims under California Real Estate Law.

STANDARD

On a motion to dismiss for failure to state a claim under Rule 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief," in order to "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed. 2d 80 (1957). While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the "grounds" of his "entitlement to relief" requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 554-56, 127 S.Ct. 1955, 167 L.Ed. 2d 929 (2007) (internal citations and quotations omitted). Factual allegations must be enough to raise a right to relief above the speculative level. Id. at 555 (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004) ("The pleading must contain something more . . . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action").

ANALYSIS

1. for pleading purposes.

The Commissioner's First Cause of Action ...


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