The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge
ORDER: GRANTING DEFENDANT AMERICAN EAGLE REAL ESTATE INC.'S MOTION TO DISMISS FIRST AMENDED COMPLAINT; and [Doc. No. 18] GRANTING DEFENDANT LITTON LOAN SERVICING LP'S MOTION TO DISMISS FIRST AMENDED COMPLAINT [Doc. No. 19]
Pending before the Court are Defendants Litton Loan Servicing LP's and American Eagle Real Estate, Inc.'s (respectively, "Litton" and "American Eagle," and collectively "Defendants") motions to dismiss Plaintiffs' First Amended Complaint. For the reasons stated below, the Court finds that Plaintiffs' fraud-based claims against Defendants fail to satisfy Federal Rule of Civil Procedure 9(b)'s particularity requirement. The Court further finds that Plaintiffs' fraudulent concealment and negligent misrepresentation claims fail pursuant to Federal Rule of Civil Procedure 12(b)(6) because Plaintiffs do not allege Litton owed them a duty of disclosure or care. Accordingly, the Court GRANTS the pending motions to dismiss.
On January 24, 2012, Plaintiffs Michael Bell and Zerla Bell filed a First Amended Complaint ("FAC"), alleging Defendants Federal Home Loan Mortgage Corporation ("Freddie Mac"), Litton, and American Eagle fraudulently concealed known defects during the sale of real property located in National City, California (the "Property"). Plaintiffs further allege that Freddie Mac breached the contract of sale.
Freddie Mac originally purchased the Property at a non-judicial foreclosure sale for $255,000. [FAC at ¶ 11; Ex. A to FAC, Doc. No. 17-1 at 2.]*fn1 The trustee's deed of sale was recorded on July 24, 2009, and identifies Litton as entity to whom the deed and tax statements were to be sent. [Doc. No. 17-1 at 1.]
On July 30, 2009, the San Diego County Department of Planning and Land Use ("DPLU") issued an administrative warning*fn2 to Freddie Mac for unauthorized structural additions that were built without proper permits (hereafter, "unpermitted additions"). [FAC at ¶ 13; Ex. C to FAC, Doc. No. 17-3.] The DPLU mailed the citation to Freddie Mac, care of Litton, and instructed Freddie Mac to "submit plans to code enforcement addressing all unpermitted construction to obtain required building permits [and] inspection, if possible, or remove or restore to original condition. Remove 363 square feet of unpermitted additions on the west side of dwelling" no later than August 30, 2009. [Doc. No. 17-3.]
On September 9, 2009, the DPLU issued an administrative citation, including a $100 fine, to Freddie Mac, again mailed care of Litton, reiterating that Freddie Mac must obtain permits for the unpermitted additions or remove them by October 9, 2009. [FAC at ¶ 14; Ex. D to FAC, Doc. No. 17-4.] Litton, acting as Freddie Mac's "agent on the property," instructed Freddie Mac's realtor, American Eagle, to pay the $100 fine. [FAC at ¶ 15.] In late September 2009, American Eagle issued a check for $100 to the DPLU.*fn3 [Id.; Ex. E to FAC, Doc. No. 17-5.] Litton allegedly instructed American Eagle to pay the fine in order to conceal the existence of the citations and unpermitted additions. [Id. ¶ 21.]
On September 11, 2009, Plaintiffs purchased the Property from Freddie Mac for $173,481.38. [FAC at ¶¶ 12, 18.] On October 2, 2009, Plaintiffs received a third citation from the DPLU. [Id. ¶ 16.] According to Plaintiffs, this was the first time they learned that the additions were constructed without the proper permits. [Id.] Because the additions constitute a significant portion of the kitchen and dining areas, Plaintiffs estimate it will cost approximately $135,000 to demolish and rebuild the areas with the required permits. [Id. ¶¶ 17, 19.]
Plaintiffs allege Defendants fraudulently and negligently concealed the existence of the citations and unpermitted additions in order to induce Plaintiffs to purchase the Property. [Id. ¶ 20.] They further allege they would not have purchased the Property if they had known about the unpermitted additions. [Id. ¶¶ 39, 49, 60.]
On August 1, 2011, Plaintiffs filed suit against Defendants in state court, alleging various claims based in fraud and contract. On October 28, 2011, Freddie Mac removed the action to this Court. [Doc. No. 1.] In late 2011, Litton and American Eagle moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6).
On January 10, 2012, the Court convened a hearing, entertained arguments, and dismissed Plaintiffs' claims against Litton and American Eagle. [Doc. Nos. 13-16.] Specifically, the Court dismissed with prejudice Plaintiffs' claims for breach of contract and for breach of the implied covenant of good faith and fair dealing. The Court also dismissed Plaintiffs' four fraud claims without prejudice and with leave to amend.
On January 24, 2012, Plaintiffs filed the FAC re-alleging their claims against Litton and American Eagle for (1) Fraudulent Inducement (to enter contract); (2) Fraud -- Intentional Misrepresentation; (3) Fraudulent Concealment; and (4) Fraud -- Negligent Misrepresentation.
[Doc. No. 17.] Freddie Mac has not answered or otherwise responded to the FAC. On February 7, 2012, and February 9, 2012, respectively, American Eagle and Litton filed motions to dismiss the FAC. [Doc. Nos. 18-19.] Both motions seek dismissal on the basis that Plaintiffs fail to satisfy the particularity requirement in Federal Rule of Civil Procedure 9(b). Litton seeks dismissal on the additional basis that Plaintiffs fail to allege that Litton was under a duty to disclose the existence of the unpermitted additions and DPLU citations, or that Litton owed a duty of care.