United States District Court, D. Hawaii
THORIN JOHN LINDSTROM and KRISTIN KATHLEEN LINDSTROM, Plaintiffs,
MOFFETT PROPERTIES; WILLIAM B. MOFFETT; and MICHAEL REID, Defendants.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT
MICHAEL REID'S MOTION TO DISMISS
Derrick K. Watson, United States District Judge
Thorin John Lindstrom and Kristin Kathleen Lindstrom allege
various state-law claims arising out of their purchase of
undeveloped real property from seller Michael Reid and
realtor Defendants William B. Moffett and Moffett Properties.
The Lindstroms claim that they were unable to build on the
property because of grading and fill work that defendants did
the Complaint sufficiently states claims against Reid for
breach of contract and negligent misrepresentation, the
Motion to Dismiss is DENIED IN PART as to those causes of
action. For the reasons detailed below, Reid's Motion is
GRANTED IN PART with respect to the Lindstroms' claims
for breach of warranties, rescission, tortious breach of
contract, intentional misrepresentation and/or fraud. The
Lindstroms are GRANTED LEAVE TO AMEND only their intentional
misrepresentation and/or fraud claims.
case arises from the Lindstroms' purchase of Lot 35 A,
located at 108 A Pua Niu Way, Lahaina, Hawaii 96791
(“Property”), from Reid for the sum of $1, 227,
444.25. Complaint ¶ 7. Following an initial offer and
counter offer, the Lindstroms and Reid entered into a
Purchase Contract for the Property, with the sale closing on
April 15, 2014. Complaint ¶¶ 7, 10, Ex. A
(2/26/2014 Counter Offer), Dkt. No. 1; Mem. in Supp. of Mot.,
Declaration of Michael Reid, Ex. A (Purchase Contract), Dkt.
No. 23-3. Moffett Properties acted as the real estate broker
for both buyer and seller in the transaction under a dual
agency agreement. Complaint ¶ 22. Defendant William B.
(“Buz”) Moffett, an employee of Defendant Moffett
Properties, showed the Lindstroms the Property. Complaint
¶ 8. Non-party George Van Fischer, another employee of
Moffett Properties, represented Reid in the sale.
See Complaint, Ex. A (Counter Offer); Ex. B (3/7/14
Seller Disclosure), Dkt. No. 1.
Lindstroms submitted an offer on February 25, 2014. Reid
countered on February 26, 2014. Reid's Counter Offer
included an “As Is” Condition Addendum and
Seller's Real Property Disclosure Statement. See
Counter Offer; Seller Disclosure; Purchase Contract; see
also Pls.' Mem. in Opp'n, Ex. A
to Seller Disclosure), Dkt. No. 30-1; Reply, Ex. A (Addendum
to Seller Disclosure), Dkt. No. 34-2. The Counter Offer
provided that fill existed on the Property and that it was
being sold “as is” without warranties. For their
part, the Lindstroms allege that-
As part of the contract, Reid provided a Seller's
Real Property Disclosure Statement (“Disclosure
Statement”) to Plaintiffs pursuant to H.R.S.,
Chapter 508D, Exhibit B. The Disclosure Statement dated March
7, 2014 stated there was filled land on the Property;
however, the Disclosure Statement failed to disclose the
extent of the actual grading and fill. Further the Disclosure
Statement failed to disclose the grading and fill were
substantially in excess of what was permitted by the grading
permit (G-RS 2005/202) previously filed with the Maui
Complaint ¶ 9.
to the Lindstroms, “[a]s an inducement to [them] to
purchase the Property, Moffett showed the Property to [the
Lindstroms] and deliberately and intentionally failed to
disclose a hidden and dangerous defect in and on the Property
resulting from the improper grading and fill of the
Property.” Complaint ¶ 8. The Lindstroms allege,
“[o]n information and belief, [Defendants] knew or
should have known of [(1)] the hidden defect on the Property
due to the excess and improper grading and fill on the
Property[, ]” Complaint ¶ 16, and “[(2)] the
failure to conduct the proper soil investigation and the
failure to obtain the proper grading permit, as well [as] the
grading and fill on the Property without any grading permit
or in excess of what the grading permit allowed.”
Complaint ¶ 17.
closing, the Lindstroms hired Marty Cooper, a Maui architect,
to prepare plans and specifications to build a residence on
the Property. Complaint ¶ 10. Following the submission
of the plans and specifications to the Maui Building
Department for a building permit, the Lindstroms' permit
application was denied and they were informed, allegedly for
the first time, that there was improper grading and fill
located on the only feasible building area on the Property.
Complaint ¶ 11. The Lindstroms also hired Kenneth
Stewart, a geotechnical engineer, who conducted a survey of
the Property, and found that no soil investigation was
performed as required by the Maui Grading Code. Moreover,
according to the Lindstroms, the Maui Public Works Department
denied any soil report having been submitted to that
department. Complaint ¶ 12.
Complaint alleges that excessive and improper grading and
fill has resulted in a very high probability of future
settlement of the filled soil, as well as a high probability
of ground movement due to the lack of proper materials and
compaction of the materials used for the fill. The Property
accordingly has a value substantially less than the price the
Lindstroms paid to Reid based on the defective condition. The
Lindstroms claim that the cost to remedy the defective
condition is substantial and, even if remedial work is done,
it is unknown if the condition could be remedied. Complaint
Lindstroms filed their Complaint on February 23, 2016,
asserting the following causes of action: (1) breach of
contract against Reid (Count I); (2) breach of contract and
fiduciary duty against Moffett Properties (Count II); (3)
breach of express and implied warranties against Reid (Count
III); (4) rescission (Count IV); (5) tortious breach of
contract against Reid (Count V); (6) intentional and
negligent misrepresentation against all Defendants (Count
VI); (7) fraud against all Defendants (Count VII); and (8)
unfair and deceptive trade practices against Moffett
Properties (Count VIII).
seeks dismissal of the claims brought against him. No other
Defendant has joined in Reid's Motion.
Rule of Civil Procedure 12(b)(6) authorizes the Court to
dismiss a complaint that fails “to state a claim upon
which relief can be granted.” Rule 12(b)(6) is read in
conjunction with Rule 8(a), which requires only “a
short and plain statement of the claim showing that the
pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2).
The Court may dismiss a complaint either because it lacks a
cognizable legal theory or because it lacks sufficient
factual allegations to support a cognizable legal theory.
Balistreri v. Pacifica Police Dep't., 901 F.2d
696, 699 (9th Cir. 1988).
to Ashcroft v. Iqbal, “[t]o survive a motion
to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.'” 555 U.S. 662, 678
(2009) (quoting Bell Atlantic Corp. v. Twombly, 550
U.S. 554, 570 (2007)). “[T]he tenet that a court must
accept as true all of the allegations contained in a
complaint is inapplicable to legal conclusions.”
Id. Accordingly, “[t]hreadbare recitals of the
elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Id. (citing
Twombly, 550 U.S. at 555). Rather, “[a] claim
has facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550
U.S. at 556). Factual allegations that only permit the court
to infer “the mere possibility of misconduct” do
not constitute a short and plain statement of the claim
showing that the pleader is entitled to relief, as required
by Rule 8(a)(2). Id. at 679.
may consider certain documents attached to a complaint, as
well as documents incorporated by reference into a complaint
“if the plaintiff refers extensively to the document or
the document forms the basis of the plaintiff's
claim.” United States v. Ritchie, 342 F.3d
903, 909 (9th Cir. 2003); see also Id. at 908 (A
court may “consider certain materials-documents
attached to the complaint, documents incorporated by
reference in the complaint, or matters of judicial
notice-without converting [a Rule 12(b)(6)] motion to dismiss
into a motion for summary judgment.”).
moves to dismiss the claims against him with prejudice.
Because the Lindstroms sufficiently state claims for breach
of contract (Count I) and negligent misrepresentation (Count
VI), the Motion is denied as to those claims. The Motion is
granted with respect to Count III (Breach of Express and
Implied Warranties), Count IV (Rescission), and Count V
(Tortious Breach of Contract)-those claims are dismissed with
prejudice. The Lindstroms' claims for intentional
misrepresentation (Count VI) and fraud (Count VII) are
dismissed with leave to amend, with instructions below.
Count I (Breach of Contract)
moves to dismiss Count I both because it fails to allege the
elements of a breach of contract cause of action and because
any such claim is barred as a matter of law by the terms of
the Purchase Contract itself. The Court disagrees on both
accounts. Because the Lindstroms sufficiently state a claim
for breach of contract, the Motion is denied as to Count I.
Count I States A Claim For ...