MEMORANDUM AND ORDER RE: MOTION TO DISMISS AND MOTION
Plaintiff Federal Deposit Insurance Corporation ("FDIC") as Receiver for Indymac Bank, F.S.B. ("Indymac") brought this action against defendants Richard K. Varrasso, doing business as Richard Varrasso and Associates and AppraisalTrust.com, Premier Valley, Inc. ("Premier"), doing business as Century 21 M&M Associates, and Karen Bhatti, arising out of defendants' allegedly wrongful misrepresentations regarding the purchase of two residential properties. Presently before the court is Premier and Bhatti's motion to dismiss plaintiff's Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted and motion to strike portions of plaintiff's Complaint pursuant to Rule 12(f).
I. Factual and Procedural Background Between March 16, 2006, and October 18, 2006, the property located at 2009 Saint Theresa Way in Modesto, California (the "Weisbly Property" or "Property") was listed for sale on the Multiple Listing Service ("MLS") for different prices between $439,000 and $469,000. (Compl. ¶ 9.) No sale of the Property was finalized during this period. (Id.) The listing agent on the Property was Bhatti, who was employed by Premier. (Id.)
On October 26, 2006, a purchase contract was signed for the Property in the amount of $499,000. (Id. ¶ 10.) Plaintiff alleges that subsequent to the purchase contract being signed, Bhatti re-listed the Property on MLS for $499,000 on November 13, 2006. (Id.)
On October 28, 2006, Varrasso appraised the Weisbly Property for $520,000. (Id. ¶ 12.) Varrasso was hired by the buyer's lender, Kay-Co Investments, doing business as PRO30 Funding ("Kay-Co") to conduct the appraisal. (Id. ¶ 24.)
On December 15, 2006, Kay-Co funded and subsequently sold to Indymac two mortgages totaling $499,000 for the Property (a first mortgage of $399,200 and a second mortgage of $99,800) (the "Weisbly Loans"). (Id. ¶ 11.) The HUD-1 Settlement Statement*fn1 indicates a proration date of December 18, 2006. (DeLeon Decl. Ex. A (Docket No. 29).) The HUD-1 Settlement Statement for the Weisbly Loans indicates that the commissions paid to Bhatti and Premier were calculated based upon a sales price of $449,000, not the loan amount of $499,000. (Compl. ¶ 13.) The HUD-1 also indicates that, in addition to her percentage-based commission, an additional $25,000 of the loan proceeds were paid directly to Bhatti. (Id. ¶ 14.)
On July 11, 2008, pursuant to Order 2008-24 issued by the Office of Thrift Supervision, IndyMac was closed and the FDIC was appointed as receiver. (Opp'n to Mot. to Dismiss at 11:7-8.) IndyMac's legal claims were retained by or transferred to the FDIC. (Compl. ¶ 1.)
Plaintiff filed its Complaint in the Northern District of California on July 6, 2011, alleging six claims for relief. The court subsequently transferred the case to the Eastern District of California after finding that the interests of convenience and justice weighed in favor of the transfer. (Docket No. 24.) The moving defendants, Premier and Bhatti, are named in the third and fourth claims: a state law claim of negligence and a state law claim of negligent misrepresentation. (Compl. ¶¶ 33-44.) Premier and Bhatti now move to dismiss both claims against them and to strike plaintiff's request for attorney's fees and Item 1 from plaintiff's prayer for damages.
On a motion to dismiss, the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff must plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This "plausibility standard," however, "asks for more than a sheer possibility that a defendant has acted unlawfully," Ashcroft v. Iqbal, 556 U.S. 662, --------, 129 S. Ct. 1937, 1949 (2009), and "[w]here a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557).
A. Negligence Claim (Third Claim)
To prove a cause of action for negligence, plaintiff
must show "(1) a legal duty to use reasonable care, (2) breach of that duty, and (3) proximate cause between the breach and (4) the plaintiff's injury." Mendoza v. City of Los Angeles, 66 Cal. App. 4th 1333, 1339 (2d Dist. 1998). "The existence of a legal duty to use reasonable care in a particular factual situation is a question of law for the court to decide." Vasquez v. Residential Invs., Inc., 118 Cal. App. 4th 269, 278 (4th Dist. 2004).
The parties have presented no authority, and the court is aware of none, that directly addresses the duties a seller's real estate agent owes to subsequent purchasers of loans regarding which they have made material misrepresentations. California cases do recognize a fundamental duty on the part of a realtor to deal honestly and fairly with all parties in a real estate transaction. See, e.g., Nguyen v. Scott, 206 Cal. App. 3d 725, 735 (1st Dist. 1988). Defendants' allegedly false representation of the sale price of the Property on the HUD-1 Settlement Statement was made directly to Kay-Co, the original lender. Kay-Co was therefore a party to the real estate transaction in question. The parties agreed at oral arguments that Premier and Bhatti owed a legal duty to deal fairly and honestly with Kay-Co, as a party to the transaction.
Upon sale of the Weisbly Loans, the rights underlying the loan were transferred from Kay-Co to IndyMac, as the subsequent purchaser of the loans. The question, therefore, is whether Premier and Bhatti's duty to deal fairly and honestly with Kay-Co was thereupon transferred to IndyMac. Plaintiff alleges in its Complaint that IndyMac purchased the Weisbly Loans from Kay-Co. For the purposes of this motion to dismiss, the court accordingly infers that when IndyMac purchased the Weisbly Loans from Kay-Co, all of Kay-Co's rights and duties under the loan were assigned to IndyMac. Although not every right is assignable, assignability is the general rule and nonassignability is the exception. Goodley v. Wank & Wank, Inc., 62 Cal. App. 3d 389, 393 (2d Dist. 1976) (noting that only causes of action for personal injuries arising out of a tort and those founded upon wrongs of a purely personal nature are not assignable); see also Cal. Civ. Code § 1458 ("A right arising out of an obligation is the property of the person to whom it is due, and may be transferred as such."). As the purchaser of the Weisbly Loans, IndyMac stepped into the shoes of Kay-Co and is entitled to assert any claims ...