The Shahbazian Family Trust v. O'Neil et al

Filing 73

ORDER signed by Judge Benjamin H. Settle granting 32 Motion for Summary Judgment; denying 36 Motion to continue; denying 49 Motion for Leave to File; and granting 51 Motion for Summary Judgment. Steven L Simmons, Ocean Shores Real Estate, Inc. (as Washington corporation) and "Jane Doe" Simmons (husband and wife and the marital community of them composed) terminated. (TG)

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1 2 3 4 5 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA 6 7 8 THE SHAHBAZIAN FAMILY TRUST, Plaintiff, 9 10 v. DENNIS O’NEIL, et al., 11 Defendants. CASE NO. C16-5477 BHS ORDER GRANTING DEFENDANTS’ MOTIONS FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION TO CONTINUE AND MOTION FOR LEAVE TO AMEND 12 13 This matter comes before the Court on (1) the motion for summary judgment of 14 Defendants Ocean Shores Real Estate, Inc., Steven L. Simmons, and “Jane Doe 15 Simmons” (collectively “Broker Defendants”) (Dkt. 32); (2) the motion for summary 16 judgment of Defendants Carol and Dennis O’Neil (collectively “O’Neil Defendants”) 17 (Dkt. 51); (3) the motion to continue of Plaintiff the Shahbazian Family Trust 18 (“Plaintiff”) (Dkt. 36); and (4) Plaintiff’s motion to amend (Dkt. 49). The Court has 19 considered the pleadings filed in support of and in opposition to the motions and the 20 remainder of the file and hereby finds and rules as follows: 21 22 ORDER - 1 1 2 I. PROCEDURAL HISTORY On June 14, 2016, Plaintiff filed its complaint in this action, asserting claims of 3 fraud, negligent misrepresentation, and unjust enrichment against the O’Neil Defendants 4 and the Broker Defendants (collectively “Defendants”). Dkt. 1. Plaintiff also asserts a 5 claim against the O’Neil Defendants for breach of contract. Id. 6 7 On March 16, 2017, Plaintiff moved to substitute counsel. Dkt. 26. The Court granted the motion. Dkt. 27. 8 On May 4, 2017, the Broker Defendants moved for summary judgment on 9 Plaintiff’s claims. Dkt. 32. On May 11, 2017, Plaintiff moved to continue the summary 10 judgment motion pending further discovery. Dkt. 36. On May 22, 2017, the Broker 11 Defendants responded to the motion to continue. Dkt. 36. The same day, Plaintiff 12 responded to the Broker Defendant’s motion for summary judgment. Dkt. 43. On May 13 25, 2017, the Broker Defendants replied. Dkt. 47. 14 On June 1, 2017, Plaintiff moved for leave to file an amended complaint. Dkt. 49. 15 Also on June 1, 2017, the O’Neil Defendants moved for summary judgment on Plaintiff’s 16 claims. Dkt. 51. On June 12, 2017, Defendants responded to Plaintiff’s motion for leave 17 to amend. Dkts. 56, 60. On June 16, 2017, Plaintiff replied. Dkt. 62. 18 19 On June 19, 2017, Plaintiff responded to the O’Neil Defendant’s motion for summary judgment. Dkt. 63. On June 23, 2017, the O’Neil Defendants replied. Dkt. 66. 20 21 22 ORDER - 2 1 2 II. FACTUAL BACKGROUND This case involves a dispute over the Plaintiff’s purchase of vacant oceanfront 3 property located at 870–876 Mt. St. Helen’s Loop, Ocean Shores, Washington 98569, 4 from the O’Neil Defendants. 5 In 2013, Mr. Hossein Shahbazian (“Shahbazian”) wanted to retire and move to the 6 Pacific Northwest and planned to purchase, through the plaintiff family trust, a property 7 near the Washington coast to build a new home. Dkt. 44 at 2. Shahbazian did not intend 8 to build a home immediately. Dkt. 52-1 at 27–28. While visiting Ocean Shores, 9 Shahbazian found and visited the subject property which was listed for sale. Dkt. 44 at 2. 10 When visiting the property, Shahbazian spoke with a neighbor who put him in 11 contact with the O’Neil Defendants. Dkt. 52-1 at 18–19. Shahbazian spoke with the 12 O’Neil Defendants on the phone saying that he liked the property and would like to place 13 an offer of $150,000 on it. Id. at 21, 26. The O’Neil Defendants directed Shahbazian to 14 their real estate agent, Mr. Steven Simmons (“Simmons”), who Shahbazian then 15 contacted by phone. Id. at 21. 16 On July 16, 2013, Plaintiff and the O’Neil Defendants executed a purchase and 17 sale agreement, including addenda, for the property. Dkt. 33-1 at 18–31. The Broker 18 Defendants acted as a listing broker and represented both the O’Neil Defendants and 19 Plaintiff. Id. at 18. As provided in the purchase and sale agreement, Plaintiff purchased 20 the property for a total of $150,000, including a $30,000 down payment and the 21 remainder to be paid to the O’Neil Defendants in monthly mortgage installments with 22 interest. Id. at 28. ORDER - 3 1 The purchase and sale agreement incorporated a “form 17” seller disclosure 2 statement, Dkt. 33-1 at 23, which had been previously executed in April of 2012, Dkt. 33- 3 2 at 2–6. The form 17 disclosure indicated that (1) the O’Neil Defendants did not know 4 whether the property was located in a flood zone, (2) the property had suffered material 5 damage from “fire, wind, floods, beach movements, earthquake, expansive soils, or 6 landslides,” (3) and that the O’Neil Defendants had previously submitted a permit 7 application to construct a bulkhead. Dkt. 33-2 at 4–5 (emphasis added). Plaintiff 8 acknowledged receipt of the form 17 disclosure at the time the purchase and sale 9 agreement was executed on July 16, 2017. Dkt. 33-2 at 6. 10 At some unspecified point, the O’Neil Defendants provided Shahbazian with an 11 old publicly recorded map of the neighborhood showing the shoreline as being located 12 east of the property’s eastern border. Dkt. 44 at 3, 7. However, in reality, erosion had 13 moved the shoreline so that it was located to the west of the property’s eastern border. 14 Also, at the time of sale, Simmons had in his possession aerial photography showing the 15 shoreline’s current position relative to the property’s boundaries and noting applicable 16 setbacks and a flood zone designation. Id. at 41. Simmons did not provide this aerial 17 photograph or otherwise disclose this information to Shahbazian. Id. at 3. 18 The sale of the property to Plaintiff closed in August of 2013. Dkt. 52-1 at 38. 19 Shahbazian did not conduct any investigation of the property or its conditions prior to 20 closing other than his initial visit to the property prior to making an offer. 21 22 In the summer of 2015, Plaintiff was somehow placed on notice that the property might be subject to building restrictions. Dkt. 52-6. Shahbazian then investigated the ORDER - 4 1 condition by visiting the City of Ocean Shores’ office and requesting information about 2 the property. Dkt. 52-1 at 38–42. The city office produced records showing the current 3 setbacks, flood zone designation, and the shoreline erosion history. Id. at 41–42. 4 In August of 2015, Plaintiff ceased making mortgage payments on the property, 5 Dkt. 52-1 at 50, and Shahbazian informed the O’Neil Defendants that he would like to 6 rescind the purchase of the property, see Dkt. 52-6. On August 27, 2015, Shahbazian 7 again contacted the O’Neil Defendants by email to discuss “unwinding the deal.” Id. at 8 2–3. On September 14, 2015, Shahbazian sent a follow-up email stating that he wanted to 9 “unwind the deal” because of setback issues and because “[a] good portion of the two lots 10 were washed away before [he] purchased them . . . and this was not disclosed.” Id. at 2. 11 In response to Plaintiff’s cessation of mortgage payments, the O’Neil Defendants 12 commenced non-judicial foreclosure proceedings on the property. See Dkt. 11. A 13 trustee’s sale was eventually scheduled for July 29, 2016. Id. at 2. After this action was 14 commenced, Plaintiff and the O’Neil Defendants entered a stipulation staying the 15 trustee’s sale pending the final resolution of this case. Id. 16 17 18 III. A. DISCUSSION Motion to Continue On May 11, 2017, Plaintiff moved to continue summary judgment proceedings 19 pursuant to Rule 56(d) pending the review of recently disclosed documents and a 20 deposition of Simmons. Dkt. 36. A party may seek to continue summary judgment 21 proceedings in order to conduct additional discovery by showing “(1) that they have set 22 forth in affidavit form the specific facts that they hope to elicit from further discovery, (2) ORDER - 5 1 that the facts sought exist, and (3) that these sought-after facts are ‘essential’ to resist the 2 summary judgment motion.” State of Cal., on Behalf of California Dep’t of Toxic 3 Substances Control v. Campbell, 138 F.3d 772, 779 (9th Cir. 1998). See also Fed. R. Civ. 4 P. 56(d). Since requesting the continuance, Plaintiff has had the opportunity to review the 5 recently disclosed documents, depose Simmons, and rely on Simmons’s deposition in its 6 response to summary judgment. See Dkts. 43, 46. Therefore, it appears that the motion to 7 continue is moot. More importantly, despite requesting additional time to depose a 8 witness, Plaintiff failed to identify any particular facts that it needed additional time to 9 discover, that would be essential to resisting the summary judgment motion that it seeks 10 to continue. See Dkt. 36. Accordingly, the Court denies the motion to continue. 11 B. Summary Judgment 12 1. 13 Summary judgment is proper only if the pleadings, the discovery and disclosure Standard 14 materials on file, and any affidavits show that there is no genuine issue as to any material 15 fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). 16 The moving party is entitled to judgment as a matter of law when the nonmoving party 17 fails to make a sufficient showing on an essential element of a claim in the case on which 18 the nonmoving party has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 323 19 (1986). There is no genuine issue of fact for trial where the record, taken as a whole, 20 could not lead a rational trier of fact to find for the nonmoving party. Matsushita Elec. 21 Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (nonmoving party must 22 present specific, significant probative evidence, not simply “some metaphysical doubt”). ORDER - 6 1 See also Fed. R. Civ. P. 56(e). Conversely, a genuine dispute over a material fact exists if 2 there is sufficient evidence supporting the claimed factual dispute, requiring a judge or 3 jury to resolve the differing versions of the truth. Anderson v. Liberty Lobby, Inc., 477 4 U.S. 242, 253 (1986); T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 5 626, 630 (9th Cir. 1987). The Court must construe any factual issues of controversy in 6 favor of the nonmoving party. Scott v. Harris, 550 U.S. 372, 378 (2007). 7 2. 8 The O’Neil Defendants move for summary judgment on Plaintiff’s claims against 9 Summary Judgment Motion by O’Neil Defendants them for negligent misrepresentation and fraud. Dkt. 51. The O’Neil Defendants argue 10 that they are entitled to judgment as a matter of law because (1) Plaintiff cannot show that 11 the O’Neil Defendants made any false representations; (2) Plaintiff cannot show that it 12 acted reasonably in relying, or had a right to rely, upon the allegedly false 13 representations; (3) the Court lacks subject matter jurisdiction over this matter because 14 the amount in controversy does not exceed $75,000; and (4) Plaintiff lacks standing or is 15 not the real party in interest. 16 a. 17 Absence of a False Representation The O’Neil Defendants move for summary judgment against Plaintiff’s fraud and 18 negligent misrepresentation claims on the basis that they did not make any false 19 representations to Plaintiff. Dkt. 51 at 9–11. 20 The elements of both fraud and negligent misrepresentation claims require that the 21 defendant make a false representation to the plaintiff. Adams v. King Cty., 164 Wn.2d 22 640, 662 (2008) (quoting Stiley v. Block, 130 Wn.2d 486, 505 (1996) (“The elements of ORDER - 7 1 the fraud include: (1) representation of an existing fact . . . (3) falsity . . . .”); Ross v. 2 Kirner, 162 Wn.2d 493, 499 (2007) (“A plaintiff claiming negligent misrepresentation 3 must prove by clear, cogent, and convincing evidence that . . . the defendant supplied 4 information for the guidance of others in their business transactions that was false . . . .”). 5 Generally, “[a]n omission alone cannot constitute negligent misrepresentation, since the 6 plaintiff must justifiably rely on a misrepresentation.” Austin v. Ettl, 171 Wn. App. 82, 88 7 (2012) (quoting Ross, 162 Wn.2d at 499). For an omission to constitute negligent 8 misrepresentation, a party must also have a duty to disclose the omitted information. Van 9 Dinter v. Orr, 157 Wn.2d 329, 333 (2006) (“If a party has a duty to disclose information, 10 11 the failure to do so can constitute negligent misrepresentation.”). Plaintiff’s complaint attributes two false statements to the O’Neil Defendants. 12 First, Plaintiff claims that the O’Neil Defendants stated that the subject property 13 consisted of 0.47 usable acres. Dkt. 11 at 3. Second, Plaintiff claims that the O’Neil 14 Defendants represented that the property was not located in a flood zone. Id. 15 Despite Plaintiff’s assertions in his complaint, he has failed to produce any 16 evidence indicating that the O’Neil Defendants made the above-described 17 representations. In fact, Plaintiff’s own deposition testimony reveals that the O’Neil 18 Defendants never made any such statements: 19 20 21 Q: So no one told you the size of the lot? A: Absolutely not. Even it’s not in the contract. Q: And what about whether the property was under water? A: Nobody told me that. Q: Did you ever talk with Mr. and Mrs. O’Neil or Ocean Shores broker— 22 ORDER - 8 1 10 A: Yes, I have. I contact them, and even one of the letter responded. The Ocean Shores said that it’s only bushes in the back. It’s a normal lot size by the water. That’s how they are. That was their response from the broker house. Q: And let me finish the question on this just to make sure I’m conveying it fully. So did you ever talk with Mr. and Mrs. O’Neil or the agents about where the property line on the waterside was located? A: Never did. I only—I never even meet Mr. O’Neil. The only conversation I had with him—I talked with the neighbor, then he knew him. . . . So that was our only conversation. I said, “Hi. How are you, Mr. O’Neil?” And that was the extent of that. *** Q: So the other allegation in the complaint I would like to discuss, 2.5 and 2.7. And what these statements say is that Mr. and Mrs. O’Neil and the Ocean Shores agent defendants represented that the property was not in a flood zone. A: We never got to the flood zone. I find out myself it was in the flood zone, not because—if they would have—they put on there—even in statement of the information, they didn’t put it clearly. 11 Dkt. 52 at 12–14. Additionally, in the seller disclosure statement, the O’Neil Defendants 12 specifically informed Plaintiff that they did not know whether the property was located in 13 a flood zone. Dkt. 33-2 at 4. 2 3 4 5 6 7 8 9 14 Plaintiff argues that the O’Neil Defendants are liable for false representations that 15 they provided to third party intermediaries, such as a sales agent, that subsequently 16 reached Plaintiff, notwithstanding the fact that the O’Neil Defendants never directly 17 communicated any misrepresentations to Plaintiff. See Dkt. 63 at 6–8. Plaintiff fails to 18 cite any authority for this proposition. Id. 1 More importantly though, even if the Court 19 accepted Plaintiff’s argument as a proper statement of the law without any supporting 20 1 21 22 While Plaintiff has failed to support this argument with any legal authority or evidence, it should nonetheless be noted that the purchase and sale agreement states that Plaintiff and the O’Neil Defendants agree that “all representations and information regarding the Property and the transaction are solely from the Seller or Buyer, and not from any Broker.” Dkt. 33-1 at 22. ORDER - 9 1 authority, Plaintiff still fails to produce evidence to create a genuine dispute of whether 2 the O’Neil Defendants ever supplied a misrepresentation to a third party intermediary. 3 To support its position that the O’Neil Defendants supplied false information to a 4 third party intermediary, Plaintiff points to a MLS listing and a broker’s real estate blog 5 representing that the subject property included “side-by-side buildable lots” totaling 0.47 6 acres. Dkt. 63 at 7–8. See also Dkt. 64 at 6–7, 13–14. However, Plaintiff has failed to 7 illustrate how the information in the MLS listing or real estate blog was false. There is 8 nothing on the record to suggest that the lots do not include 0.47 acres as described. 9 Moreover, the only evidence regarding “buildability” is that construction on the lots may 10 require the use of pylons. See Dkt. 51-2 at 41. Although Plaintiff attempts to construe the 11 information in the MLS listing and real estate blog as misrepresentations regarding the 12 “dry lot size,” see Dkt. 63 at 8, such a reference to “dry lot size” is nowhere to be found 13 in the listing or blog. See Dkt. 64 at 6–7, 13–14. 14 Plaintiff has failed to produce evidence that the O’Neil Defendants made any false 15 representations or withheld information that they had a duty to disclose. Accordingly, its 16 claims against the O’Neil Defendants for fraud and negligent misrepresentation must fail. 17 18 b. Absence of Reasonable Reliance or Right to Rely The O’Neil Defendants also argue that they are entitled to summary judgment 19 because it would be unreasonable for Plaintiff to rely on the alleged misrepresentations. 20 “[T]o prevail on a claim of negligent misrepresentation, a plaintiff must prove by clear, 21 cogent, and convincing evidence that he or she justifiably relied on the information that 22 the defendant negligently supplied.” Lawyers Title Ins. Corp. v. Baik, 147 Wn.2d 536, ORDER - 10 1 545 (2002). Likewise, “[i]n a fraud claim, the plaintiffs must establish that they had a 2 right to rely on the representation.” Jackowski v. Borchelt, 174 Wn.2d 720, 738 (2012). 3 A real estate buyer is not justified in relying on a negligent misrepresentation claim if the 4 seller disclosed any potential encumbrances and the buyer failed to exercise due diligence 5 after receiving the disclosure. Austin, 171 Wn. App. at 91 (“[W]hen a seller discloses 6 potential encumbrances as required by statute, a buyer is not justified in failing to 7 exercise due diligence after receiving the disclosure.”). Similarly, “[t]he ‘right to rely’ 8 element of fraud is intrinsically linked to the duty of the one to whom the representations 9 are made to exercise diligence with regard to those representations.” Alejandre v. Bull, 10 11 159 Wn.2d 674, 690 (2007). The record shows that Plaintiff failed to exercise due diligence by investigating the 12 potential encumbrances that were set forth in the O’Neil Defendants’ form 17 13 disclosures. In their disclosures, the O’Neil Defendants clearly stated that (1) they did not 14 know whether the property was located in a flood zone, (2) the property had suffered 15 material damage from “fire, wind, floods, beach movements, earthquake, expansive soils, 16 or landslides,” (3) and that the O’Neil Defendants had previously submitted a permit 17 application to construct a bulkhead. Dkt. 33-2 at 4–5. Additionally, the purchase and sale 18 agreement clearly sets forth the following terms: 19 20 21 22 It is Buyer’s responsibility to verify before the Feasibility Contingency Expiration Date . . . whether or not the property can be platted, developed, and/or built on (now or in the future) and what it will cost to do this. BUYER SHOULD NOT RELY ON ANY ORAL STATEMENTS concerning this made by the Seller, Listing Broker or Selling Broker. Buyer should inquire at the city or county, and water, sewer or other special districts in which the property is located. Buyer’s inquiry should include, ORDER - 11 1 2 3 4 but not be limited to: . . . any special building requirements, including setbacks . . . [and] whether the Property is affected by a flood zone . . . . *** Buyer shall have 10 days after mutual acceptance to verify all information provided from Seller or Listing Firm related to the Property. This contingency shall be deemed satisfied unless Buyer gives notice identifying the materially inaccurate information within 10 days of mutual acceptance. 5 Dkt. 33-1 at 22 (emphasis in original). Additionally, an addendum to the purchase and 6 sale agreement refutes any prior representations on the accuracy of the represented lot 7 size while clarifying that all measurements are “based solely on the County Assessors 8 Records, which are not guaranteed to be either correct or accurate.” Id. at 23. The 9 addendum also expressly incorporates the form 17 disclosure statement while stating that 10 “Buyer should not solely rely upon the Seller Real Property Disclosure Statement 11 (NWMLS For 17 or 17C) as a substitute for an inspection . . . .” Id. 12 Despite Plaintiff’s burden to exercise due diligence in inspecting the property 13 under the terms of the purchase and sale agreement’s feasibility provision, and despite the 14 O’Neil Defendants’ disclosures regarding damage from beach movements and a prior 15 application for a bulkhead, Plaintiff still failed to properly investigate the property. Dkt. 16 51-2 at 27–28, 36–37. That the information was readily available by even the slightest 17 investigation is shown by the ease with which Plaintiff received the information upon its 18 trustee’s untimely trip to the city records office. See id. at 38–47. Rational minds could 19 not differ in determining that the O’Neil Defendants disclosed the potential 20 encumbrances that fomented this lawsuit and that Plaintiff failed to exercise due diligence 21 after receiving the disclosure. Even if the information in the MLS listing or real estate 22 blog could be construed as misrepresentations, Plaintiff cannot show that it acted ORDER - 12 1 reasonably or had a right to rely on the statements therein when making the decision to 2 purchase the property. Therefore, the Court concludes that this serves as an additional 3 basis for granting the O’Neil Defendants’ motion for summary judgment. 4 5 c. Subject Matter Jurisdiction The O’Neil Defendants also move for summary judgment on the basis that the 6 amount in controversy is insufficient to confer diversity subject matter jurisdiction. Dkt. 7 51 at 19–20. District courts have original jurisdiction of all civil actions “where the 8 matter in controversy exceeds the sum or value of $75,000, exclusive of interest and 9 costs, and is between citizens of different States . . . .” 28 U.S.C. § 1332. The diversity of 10 11 the parties is conceded. “In actions seeking declaratory or injunctive relief, the amount in controversy is 12 measured by the value of the object of the litigation.” Hunt v. Wash. St. Apple Adver. 13 Comm’n, 432 U.S. 333, 347 (1977). Plaintiff claims damages and seeks rescission of a 14 purchase agreement between itself and the O’Neil Defendants. “In actions for rescission, 15 Courts have used the value of the object of the contract as the value of the rescission 16 claim for the amount-in-controversy determination.” Diaz v. Carmax Auto Superstores 17 California, LLC, 1:15-CV-00523-AWI, 2015 WL 3756369, at *3 (E.D. Cal. June 16, 18 2015), report and recommendation adopted, 1:15-CV-00523-AWI, 2015 WL 4138995 19 (E.D. Cal. July 8, 2015) (citing Garcia v. Citibank, N.A., No. 2:09–cv–03387–JAM– 20 DAD, 2010 WL 1658569, at *2 (E.D. Cal. Apr. 23, 2010); Rosen v. Chrysler Corp., 205 21 22 ORDER - 13 1 F.3d 918, 921 (6th Cir. 2000)). 2 In this case, the Court agrees with that approach. The 2 total price of the property under the purchase agreement was $150,000, of which $30,000 3 would be offered in down payment while the O’Neil Defendants would receive $1,017.13 4 monthly payments on the remaining $120,000 under a 6 percent annual interest rate. If 5 the contract is rescinded, the value of relief would be at least $150,000. Accordingly, the 6 Court has jurisdiction under 28 U.S.C. § 1332 because Plaintiff has established that the 7 object of the litigation satisfies the requisite amount in controversy. 8 9 d. Standing and Real Party in Interest The O’Neil Defendants also move for summary judgment on the basis that 10 Plaintiff lacks standing to bring this action because, as a trust, it is not the real party in 11 interest. Their argument blurs the distinction between the real party in interest 12 requirement and the constitutional standing requirement, which are distinct doctrines. See 13 Wright & Miller, 6A Fed. Prac. & Proc. Civ. § 1542 (3d ed.). 14 Despite listing the Article III standing requirements, the O’Neil Defendants fail to 15 offer any substantive discussion on how those requirements are not satisfied by Plaintiff’s 16 allegations. The Court finds that the standing elements of particularized injury, causal 17 connection, and likelihood of redress by a favorable decision are all adequately 18 established. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). The fact that the 19 20 21 22 2 Notably, the Ninth Circuit has not yet expressly adopted this view of the amount in controversy when dealing with rescission claims. See Kuxhausen v. BMW Fin. Servs. NA LLC, 707 F.3d 1136, 1140 (9th Cir. 2013) (citing Rosen, 205 F.3d at 921; Savarese v. Edrick Transfer & Storage, Inc., 513 F.2d 140, 142 (9th Cir. 1975)) (“We need not decide whether to endorse this view, though, because even using the full contract price as the amount in controversy, we conclude that Kuxhausen’s original complaint was not removable on its face.”). ORDER - 14 1 Plaintiff trust itself is not the real party in interest does not mean that the standing 2 elements are not established. 3 As for the fact that Plaintiff, as a trust, is not the real party in interest, the Court 4 agrees. However, this alone cannot be dispositive of the case. As stated in the Federal 5 Rules of Civil Procedure: 6 8 The court may not dismiss an action for failure to prosecute in the name of the real party in interest until, after an objection, a reasonable time has been allowed for the real party in interest to ratify, join, or be substituted into the action. After ratification, joinder, or substitution, the action proceeds as if it had been originally commenced by the real party in interest. 9 Fed. R. Civ. P. 17(a)(3). This is the first time that an objection has been raised that 10 Plaintiff is not the real party in interest. Additionally, Plaintiff has already moved to 11 amend the complaint in order to substitute the trust for the trustee. Dkt. 49. Defendants 12 have made no argument regarding the statute of limitations, relation back, or the 13 statement in Rule 17 that the action should proceed as if originally commenced by the 14 real party in interest after a substitution is made. Accordingly, the Court denies the 15 O’Neil Defendants’ motion for summary judgment to the extent that it argues lack of 16 standing or a violation of the real party in interest rule. 7 17 3. Summary Judgment by Broker Defendants 18 The Broker Defendants move for summary judgment on Plaintiff’s claims of 19 negligent misrepresentation, fraud, and breach of fiduciary duty. Dkt. 32. The Broker 20 Defendants argue that they are entitled to summary judgment because (1) Plaintiff cannot 21 show that it acted reasonably in relying, or had a right to rely, upon the allegedly false 22 ORDER - 15 1 representations and (2) Plaintiff’s breach of fiduciary duty claim has been abrogated by 2 RCW 18.86.110. 3 a. Absence of Justifiable Reliance or Right to Rely 4 The Broker Defendants’ argument on Plaintiff’s negligent misrepresentation and 5 fraud claims is identical to the argument made by the O’Neil Defendants. Dkt. 32 at 12– 6 19. As discussed in relation to the O’Neil Defendants’ motion for summary judgment, 7 Plaintiff’s fraud and negligent misrepresentation claims fail as a matter of law because 8 the potential encumbrances of which Plaintiff complains were clearly disclosed in the 9 form 17 disclosure statement and Plaintiff failed to exercise any level of diligence after 10 receiving the disclosure. See Austin, 171 Wn. App. at 91 (affirming dismissal because 11 “after receiving the Form 17, which indicated that two LIDs had been proposed along 12 with their proposed LID numbers, Austin needed only to contact the City of Tacoma to 13 inquire about the potential cost of the LIDs.”). Therefore, for the same reasons discussed 14 above, the Broker Defendants are similarly entitled to summary judgment on Plaintiff’s 15 claims for fraud and negligent misrepresentation. b. 16 17 18 Breach of Fiduciary or Statutory Duties The Broker Defendants next argue that Plaintiff’s breach of fiduciary duty claim fails as a matter of law because the claim was abrogated in 2013 by RCW 18.86.110. 19 A claim for breach of fiduciary duty is, for all practical purposes, simply a 20 negligence claim premised on the breach of a legal duty that arises from a special 21 fiduciary relationship under common law principles of agency. To prevail on such a 22 claim, a plaintiff must show (1) the existence of a duty owed from a fiduciary to the ORDER - 16 1 plaintiff, (2) breach of that duty, (3) resulting injury, and (4) proximate causation. Micro 2 Enhancement Int’l, Inc. v. Coopers & Lybrand, LLP, 110 Wn. App. 412, 433–34 (2002). 3 In 1997, the Washington State legislature codified the obligations that real estate 4 professionals owe to their clients. See RCW 18.86. See also Sing v. John L. Scott, Inc., 5 134 Wn.2d 24, 31 n. 3 (1997) (“[T]he Legislature enacted comprehensive legislation 6 which redefined the duties of real estate brokers”). Then, in 2013, the legislature enacted 7 RCW 18.86.110, which states: 8 The duties under this chapter are statutory duties and not fiduciary duties. This chapter supersedes the fiduciary duties of an agent to a principal, under the common law. The common law continues to apply to all the parties in all other respects. 9 10 RCW 18.86.110 (emphasis added). As a result of the statutory framework set out in RCW 11 18.86 et seq.,“[i]n place of common law fiduciary duties, the Washington State 12 legislature has prescribed statutory duties that real estate brokers owe their clients.” 13 Pence v. John L. Scott, Inc. BI, C13-5837 RBL, 2013 WL 6096233, at *2 (W.D. Wash. 14 Nov. 20, 2013). Therefore, the Court concludes that Plaintiff’s claim for breach of 15 fiduciary duties fails as a matter of law. 3 16 C. Motion for Leave to Amend 17 In response to the motion for summary judgment, Plaintiff has also moved for 18 leave to file an amended complaint. Dkt. 49. Plaintiff explains that the reasons for 19 20 3 21 22 To the extent that Plaintiff argues that his claim should be construed as a claim for breach of statutory duties, the Court finds that such a claim would also be subject to summary judgment. Because Plaintiff has moved for leave to amend, the Court’s basis for this finding is explained in its analysis regarding the futility of amendment. ORDER - 17 1 amendment include: (1) correcting the caption to reflect the real parties in interest, (2) 2 changing the claims based on affirmative misrepresentation to instead state claims based 3 on intentional omissions, and (3) rephrasing the breach of fiduciary duty claim as a claim 4 for breach of statutory duties. Id. at 4–5. Additionally, not mentioned by Plaintiff in its 5 brief, it also seeks to expand its breach of contract cause of action so that it asserts a 6 claim against the Broker Defendants. See Dkt. 50. Defendants oppose the amendment. 7 Dkts. 56, 60. 8 9 The O’Neil Defendants first oppose amendment on the basis that the proposed amended complaint was not properly submitted in accordance with the Court’s local 10 rules. Dkt. 60 at 7–8. As they point out, Plaintiff has failed to properly delineate how the 11 proposed amended complaint is distinguishable from the original. See W.D. Wash. Local 12 Rules LCR 15. However, the differences between the original complaint and the 13 proposed amended complaint are so substantial and comprehensive that compliance with 14 the Court’s local rules on demarcation seems pointless, as it would require bracketing or 15 highlighting almost the entire proposed complaint. The Court declines to refuse 16 amendment on the basis that the proposed amended complaint was not properly 17 demarcated and instead analyzes the merit of amendment pursuant to Federal Rule of 18 Civil Procedure 15. 19 “Rule 15(a) is very liberal and leave to amend shall be freely given when justice 20 so requires.” AmerisourceBergan Corp. v. Dialysist West, Inc., 465 F.3d 946, 951 (9th 21 Cir. 2006) (internal quotation marks omitted). In assessing the propriety of an amended 22 complaint, courts consider the following factors: (1) undue delay; (2) bad faith or dilatory ORDER - 18 1 motive; (3) repeated failure to cure deficiencies by amendments previously permitted; (4) 2 prejudice to the opposing party; and (5) futility of amendment. United States v. 3 Corinthian Colleges, 655 F.3d 984, 995 (9th Cir. 2011). “Unless undue prejudice to the 4 opposing party will result, a trial judge should ordinarily permit a party to amend its 5 complaint.” Howey v. United States, 481 F.2d 1187, 1190 (1973). The party opposing 6 amendment bears the burden of showing why leave to amend should not be granted. See 7 DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987). Balancing these 8 factors, the Court concludes that Plaintiff’s motion for leave to amend should be denied. 9 10 1. Delay, Bad Faith, and Dilatory Motive Although leave to amend “shall be freely given when justice so requires,” Fed. R. 11 Civ. P. 15(a), “[t]he timing of the motion [for leave to amend], after the parties had 12 conducted discovery and a pending summary judgment motion had been fully briefed, 13 weighs heavily against allowing leave.” Schlacter-Jones v. General Tel., 936 F.2d 435, 14 443 (9th Cir. 1991). Indeed, “[a] motion for leave to amend ‘is not a vehicle to 15 circumvent summary judgment.’” Ennis v. Sigurdson, 185 F.3d 866 (9th Cir. 1999) 16 (quoting Schlacter-Jones, 936 F.2d at 443). Nonetheless, “delay, by itself, is insufficient 17 to justify denial of leave to amend.” DCD Programs, 833 F.2d at 186. 18 Defendants argue that undue delay weighs in favor of denying leave to amend 19 because Plaintiff did not request leave until twenty-seven days after Defendants moved 20 for summary judgment and six days after the motion had been fully briefed. See Dkts. 32, 21 43, 47, 49. Indeed, the timing of Plaintiff’s request for leave to amend is conspicuously 22 inopportune for Defendants and suggests that the proposed amendment is merely an ORDER - 19 1 attempt to avoid summary judgment. This perception is further supported by the fact that 2 the proposed complaint seeks to add an entirely new breach of contract claim against the 3 Broker Defendants, even though the added claim would have been just as adequately 4 supported by the facts alleged in the original complaint as it is by the allegations in the 5 proposed amendment. See Dkt. 50 at 10–11. 6 Plaintiff nonetheless asserts that the amended complaint is necessary because 7 “information has come to counsel’s attention that requires an amendment of Plaintiff’s 8 original complaint.” Dkt. 49 at 1. Specifically, Plaintiff states that it has come “to 9 counsel’s attention that . . . the original Complaint premised its causes of action on 10 affirmative misrepresentations, when, in fact, the misrepresentations that form the basis 11 of Plaintiff’s Complaint are by way of intentional omission as opposed to affirmative 12 statements.” Dkt. 49 at 4. Plaintiff further states that such amendment is necessary for its 13 complaint “to conform to proof as uncovered through the discovery process.” Id. 14 Despite vaguely implying that the information that it relies upon to justify 15 amendment is somehow new, Plaintiff fails to explain how any information supporting 16 legal theories based on omissions, as opposed to affirmative false statements, was 17 unavailable to it at the time of the original complaint. The only evidence that the Court 18 can decipher from the parties’ briefings as being recently discovered is the deposition of 19 Simmons, which occurred on May 11, 2017. See Dkt. 46. However, while that deposition 20 addressed some information that would be relevant to legal theories based on a failure to 21 disclose known conditions of the property, Plaintiff has failed to articulate any reason 22 why it previously lacked sufficient evidence or information to support the same theories ORDER - 20 1 for the purpose of bringing them in its original complaint. In fact, the original complaint 2 itself claimed an omission on the part of the Broker Defendants by asserting that they 3 “failed to accurately disclose the condition of the Property.” Dkt. 1 at 7. 4 Despite Plaintiff’s attempt to cast its proposed amendment as an attempt to more 5 accurately “conform to proof,” there is nothing on the record to indicate that the proposed 6 amendment is supported by recent discovery or information that was previously 7 unavailable to Plaintiff. This fact, coupled with the timing of the motion for leave to 8 amend, leads the Court to conclude that the factors of undue delay and bad faith or 9 dilatory motive weigh against Plaintiff’s motion for leave to amend. 10 2. 11 The Court finds that it would be futile to amend the complaint to assert claims Futility 12 based on omissions, as opposed to affirmative statements. The complaint already 13 indicates that the conditions that form the basis of its claims include the property’s 14 location in a flood zone and the fact that the property is partially beyond the shoreline. As 15 the Court has discussed above, fraud and negligent misrepresentation claims encompass 16 both affirmative false statements and material omissions. See Van Dinter, 157 Wn.2d at 17 333. Accordingly, the Court has already assessed Plaintiff’s claims to the extent that they 18 are based on alleged omissions and has found that Defendants are entitled to summary 19 judgment on those claims as a matter of law. 20 Additionally the Court finds that it would be futile to amend the complaint to 21 rephrase its professional negligence claim based on breach of “fiduciary duties” as a 22 claim based on a violation of the Broker Defendants’ “statutory duties.” See Dkt. 43 at 6– ORDER - 21 1 7. Plaintiff’s professional negligence claim was set out in the original complaint as 2 follows: 3 7 .1 Plaintiff realleges and incorporates paragraphs 1.1 through 6.10 herein. 4 5 6 7 7.2 As an agent for Plaintiff, the Agent Defendants owed Plaintiff a fiduciary duty. 7.3 When the Agent Defendants materially misrepresented, or failed to accurately disclose the condition of the Property, they breached their fiduciary duties to Plaintiff. 7.4 As a direct and proximate result of the Agent Defendants’ breach, Plaintiff was injured in an amount to be proven at trial. 8 Dkt. 1 at 7 (emphasis added). The original complaint’s “failure to accurately disclose” 9 language coupled with a negligence claim based on breach of “fiduciary duties” that were 10 superseded by the now applicable “statutory duties” was sufficient to place the Broker 11 Defendants on notice that the basis of the claim is that they failed “[t]o disclose all 12 existing material facts known by the broker and not apparent or readily ascertainable to a 13 party.” RCW 18.86.030(1)(d). 14 However, the statutory duty to disclose material facts extends only to conditions 15 that are not “apparent or readily ascertainable to a party.” Id. As discussed above, the 16 record indisputably shows that: (1) the potential encumbrances of which Plaintiff 17 complains were in fact disclosed to him in the form 17 disclosure statement, Dkt. 33-2 at 18 4–5; and (2) under the terms of the purchase and sale agreement, “all representations and 19 information regarding the Property and the transaction are solely from the Seller or 20 Buyer, and not from any Broker,” Dkt. 33-1 at 22. As demonstrated by Plaintiff’s 21 eventual discovery of the conditions of which it now complains, these conditions were 22 recorded in the applicable public offices and were ascertainable with the slightest ORDER - 22 1 exercise of diligence. Moreover, if Plaintiff were allowed to amend its complaint as 2 proposed, it still has failed to allege (let alone cite to evidence on the record) that the 3 allegedly undisclosed conditions were not apparent or readily ascertainable. Accordingly, 4 even if Plaintiff were allowed to amend its complaint to state a claim based on a breach 5 of the Broker Defendants’ statutory duty of disclosure, such a claim would fail as a 6 matter of law. 7 Plaintiff has also suggested that the Broker Defendants violated RCW 8 18.86.030(1)(a), which “imposes the duty of exercising reasonable skill and care,” when 9 Simmons “didn’t advise [Plaintiff] about the significance of [the bulkhead or the 10 property’s history of erosion] or advise [Plaintiff] to consult with an experts [sic] or 11 investigate the matter further.” Dkt. 43 at 4, 6. However, the Court cannot find this theory 12 or any factual allegations to suggest or support it in either the original or the proposed 13 amended complaints. See Dkt. 1; Dkt. 50 at 4–12. “A party need not plead specific legal 14 theories in the complaint, so long as the other side receives notice as to what is at issue in 15 the case.” Miller v. European Film Enterprises, Inc., 117 F.3d 1425 (9th Cir. 1997) 16 (quoting American Timber & Trading v. First Nat’l Bank, 690 F.2d 781, 786 (9th Cir. 17 1982)). Nonetheless, for plaintiffs to argue a theory of recovery at summary judgment, it 18 is “required either (1) to plead the . . . theory in their complaints, or (2) to make known 19 during discovery their intention to pursue recovery on the . . . theory omitted from their 20 complaints.” Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294 (9th Cir. 2000). Plaintiff 21 has failed to argue or cite any evidence to suggest that it placed Defendants on notice of 22 this theory prior to summary judgment proceedings. Because this theory has surfaced for ORDER - 23 1 the first time in Plaintiff’s response to the Broker Defendants’ summary judgment 2 motion, it is not appropriate for the Court to consider it. Moreover, because neither this 3 theory nor facts to support it appear anywhere in the proposed amended complaint, this 4 theory would not be saved by amendment. See Dkt. 50 at 4–12 5 Finally, the Court also finds that it would be futile to allow Plaintiff to add a 6 breach of contract claim against the Broker Defendants. Plaintiff’s proposed amendment 7 does not specify any aspect or provision of a contract that was allegedly breached by the 8 Broker Defendants. Instead, the proposed amendment simply reasserts a professional 9 negligence claim; namely, that the Broker Defendants failed to adequately inform 10 Plaintiff of material aspects of the sale and that they placed the interests of the O’Neil 11 Defendants above those of Plaintiff. Dkt. 1 at 10–11. As discussed above, Plaintiff is 12 unable to show that the Broker Defendants made any affirmative misrepresentations or 13 failed to disclose a condition that was not readily ascertainable. 14 15 Based on the foregoing, the Court concludes that the factor of futility weighs against Plaintiff’s request for leave to file an amended complaint. 16 3. 17 To the extent that Plaintiff seeks to amend its complaint to reflect the real party in Prejudice 18 interest and to rephrase its professional negligence claim, the Court does not find that 19 such amendments would be prejudicial to Defendants. Defendants have failed to show 20 how they would be adversely affected by re-captioning the case to reflect the proper 21 party. Additionally, while poorly drafted to refer to “fiduciary duties,” the original 22 complaint’s “failure to accurately disclose” language, coupled with a professional ORDER - 24 1 negligence claim based on breach of “fiduciary duties,” adequately placed Broker 2 Defendants on notice that the basis of Plaintiff’s claim was a breach of RCW 3 18.86.030(1)(d). 4 Nonetheless, the Court finds that Defendants would be unfairly prejudiced if the 5 Court granted Plaintiff leave to amend in order to (1) assert an entirely new breach of 6 contract claim against the Broker Defendants, or (2) recast the underlying allegations in 7 the lawsuit as misrepresentations other than the property’s “dry lot size” or location in a 8 flood zone. See, e.g., Dkt. 50 at 7–8 (raising additional theory of Defendants’ failure to 9 disclose a history of erosion problems). But see Dkt. 33-2 at 4–5 (disclosing that property 10 suffered material damage from beach movements). As already discussed, Plaintiff waited 11 to amend its complaint until nearly a month after the Broker Defendants had filed their 12 motion for summary judgment and less than a month from the long-established discovery 13 deadline. Defendants have already spent considerable resources in conducting discovery, 14 including depositions, and defending this case based on the allegations presented in the 15 original complaint. The discovery deadline has already passed and the scheduled trial 16 date is just three months away. Lockheed Martin Corp. v. Network Solutions, Inc., 194 17 F.3d 980, 983, 986 (9th Cir. 1999) (“A need to reopen discovery and therefore delay the 18 proceedings supports a district court’s finding of prejudice from a delayed motion to 19 amend the complaint”); Solomon v. N. Am. Life & Cas. Ins. Co., 151 F.3d 1132, 1139 20 (9th Cir. 1998) (affirming the denial of leave to amend where the motion was made “on 21 the eve of the discovery deadline”). 22 ORDER - 25 1 2 Because a substantial part of Plaintiff’s proposed amendment would be prejudicial to Defendants, the Court finds that this factor also weighs against leave to amend. 3 IV. ORDER 4 Therefore, it is hereby ORDERED as follows: 5 1. 6 7 The Broker Defendants’ motion for summary judgment (Dkt. 32) is GRANTED and the claims against them are DISMISSED; 2. The O’Neil Defendants’ motion for summary judgment (Dkt. 51) is 8 GRANTED and the claims against them for fraud and negligent misrepresentation are 9 DISMISSED; 4 10 3. Plaintiff’s motion to continue (Dkt. 36) is DENIED; and 11 4. Plaintiff’s motion for leave to amend (Dkt. 49) is DENIED. 12 Dated this 12th day of July, 2017. A 13 14 BENJAMIN H. SETTLE United States District Judge 15 16 17 18 19 20 21 4 22 The Court notes that the O’Neil Defendants did not move for summary judgment on the merits of Plaintiff’s breach of contract or unjust enrichment claims. ORDER - 26

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