Bancorp Bank v. Lawyers Title Ins. Corp., CIVIL ACTION NO. 13-6103
| Decision Date | 08 July 2014 |
| Docket Number | CIVIL ACTION NO. 13-6103 |
| Parties | THE BANCORP BANK, Plaintiff, v. LAWYERS TITLE INSURANCE CORPORATION, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
On September 19, 2013, The Bancorp Bank ("Bancorp" or "Plaintiff") filed the present action against Lawyers Title Insurance Corporation and Fidelity National Title Insurance Company ("Defendants") in the Court of Common Pleas of Philadelphia. (Doc. No. 1-5.) Defendants removed the case to this Court based upon diversity of citizenship jurisdiction, 28 U.S.C. § 1332(a). (Doc. No. 1.) On April 18, 2014, Plaintiff filed an Amended Complaint, alleging breach of contract (Count I); bad faith (Count II); and negligence (Count III). (Doc. No. 19.) On May 9, 2014, Defendants filed a partial Motion to Dismiss, which is now before the Court for disposition.1 (Doc. No. 21.)
The following facts are taken from the Amended Complaint and must be accepted as true for purposes of the Motion to Dismiss. In or about February 2006, 6205-6207 Cortez RoadWest, LLC and/or its affiliate and predecessor (the "Borrower" or "Cortez Road") requested a loan in the amount of $1,750,000 from Bancorp to finance the purchase of a commercial building located at 6205-6207 Cortez Road West, Bradenton, Florida 34210 (the "Property"). (Doc. No. 19 at ¶ 16.) The loan application submitted to Bancorp listed the purchase price of the Property as $2,100,000. (Id. at ¶ 18.) Based upon this purchase price, Bancorp agreed to lend the Borrower $1,750,000, approximately 83% of the purchase price. (Id. at ¶¶ 19-20.) A first lien mortgage on the Property and an assignment of leases and rents were the collateral for the loan. (Id. at ¶ 22.)
On or about March 2, 2006, PA/NJ Abstract, Inc., the authorized Issuing Agent for Defendant Lawyers Title Insurance Corporation ("Lawyers Title"), delivered to Bancorp a commitment for title insurance for the principal loan amount of $1,750,000. (Id. at ¶ 36.) This title insurance policy covered Bancorp in the event of a loss. The Issuing Agent also gave Bancorp a copy of a separate commitment for title insurance that was issued to the Borrower insuring $2,100,000, the purported purchase price of the Property. (Id.)
On March 10, 2006, Lawyers Title issued a Closing Protection Letter (the "CPL") to Bancorp in connection with the title insurance policy. (Id. at ¶ 37.) The CPL stated that Lawyers Title would reimburse Bancorp for losses incurred in connection with the closing of the real estate transaction under the following circumstances:
1.) Failure of said Issuing Agent or Approved Attorney to comply with your written closing instructions to the extent that they relate to (a) the status of title to said interest in land or the validity, enforceability and priority of the lien of said mortgage on said interest in land, or (b) the obtaining of any other document, specifically required by you, but not to the extent that said instructions require a determination of the validity, enforceability or effectiveness of such other document, or the collection and payment of funds due you, or2.) Fraud dishonesty of said Issuing Agent or Approved Attorney in handling your funds or documents in connection with such closing. . . .
(Id., Ex. E.) On March 24, 2006, the Bancorp title insurance policy took effect. (Id. at ¶ 42.)
In or about August 2008, the Borrower defaulted on the loan. (Id. at ¶ 28.) At the time, the Borrower owed $1,762,192.59. (Id.) On December 2, 2009, the Superior Court of the State of Delaware entered judgment against the Borrower and in favor of Bancorp in the amount of $1,762,192.59. (Id., Ex. K.) After this default, one of the members of Cortez Road advised Bancorp that the sale price for the Property had been $1,750,000, rather than $2,100,000 as alleged. (Id. at ¶ 31.) This meant that Bancorp actually loaned the Borrower 100% of the purchase price, not 83%. (Id.) Upon investigation, Bancorp learned that Lawyer's Title's Issuing Agent prepared closing documents that falsely listed $2,100,000 as the purchase price of the Property. (Id. at ¶ 32.) However, a HUD-I Settlement Statement confirmed that the Borrower only paid $1,750,000. (Id. at ¶ 33.)
On June 10, 2009, Bancorp sent a claim (the "CPL Claim") to Lawyers Title based on the Issuing Agent's alleged fraud, a triggering event in the CPL that would require indemnification to Bancorp. (Id. at ¶ 44.) Pursuant to the CPL, Bancorp sought recovery on the grounds that it incurred a loss on the loan transaction as a result of the Issuing Agent's fraud and dishonesty. (Id. at ¶ 45.) Defendant Fidelity National Title Insurance Company ("Fidelity National") handled Bancorp's CPL Claim exclusively.2 (Id. at ¶ 48.) On July 31, 2011, Fidelity National denied the CPL Claim. (Id. at ¶ 54.) Fidelity National refused to compensate Bancorp, asserting that a loss would not be realized until the Property was sold for an amount less than the balance owed on the loan. (Id.)
In August 2010, Bancorp eventually foreclosed on the mortgage. (Id. at ¶ 30.) On November 12, 2011, the Property was sold at a Sheriff's Sale, and Bancorp was the only bidder. (Id. at ¶ 55.) On March 22, 2012, the Manatee County Court in Florida, where the foreclosure action was filed, established the value of the Property at the time of the sale as $1,083,130.77 and entered a final deficiency judgment in the amount of $775,000. (Id. at ¶ 56.) On August 27, 2012, Bancorp sold the Property for $740,000 and net $677,217.25 after reductions and adjustments were paid. (Id. at ¶ 57.) On January 15, 2013, after the Property was sold for an amount less than the balance owed on the loan, Bancorp contacted Fidelity National and again demanded compensation on the CPL Claim. (Id. at ¶ 58.) Bancorp alleged that it was entitled to recoup $1,511,083.193 from Lawyers Title based on the Issuing Agent's alleged fraud in connection with the March 16, 2006 closing and loan transaction. (Id., Ex. K.) To date, Fidelity National has refused to compensate Bancorp for the losses it suffered due to the Issuing Agent's fraud and dishonesty. (Id. at ¶ 59.)
As noted previously, on September 19, 2013, Bancorp filed suit against Defendants in the Philadelphia Court of Common Pleas. (Doc. No. 1-5.) On October 18, 2013, Defendants removed the case to this Court based upon diversity of citizenship jurisdiction, 28 U.S.C. § 1332(a). (Doc. No. 1.) On November 21, 2013, Defendants filed a partial Motion to Dismiss. (Doc. No. 7.) A hearing on the Motion was held on March 19, 2014, and the Court granted Bancorp leave to file an Amended Complaint. (Doc. No. 17.) On April 18, 2014, Bancorp filedan Amended Complaint, asserting the following claims against Defendants: breach of contract (Count I); bad faith (Count II); and negligence (Count III). (Doc. No. 19.) On May 9, 2014, Defendants filed another Motion to Dismiss, seeking dismissal of Counts II and III. (Doc. No. 21.) Bancorp opposes the Motion. (Doc. No. 24.) For reasons that follow, the Court will grant the Motion to Dismiss.
The motion to dismiss standard under Federal Rule of Civil Procedure 12(b)(6) is set forth in Ashcroft v. Iqbal, 556 U.S. 662 (2009). After Iqbal it is clear that "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not suffice" to defeat a Rule 12(b)(6) motion to dismiss. Id. at 663; see also Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007). "To 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." Ethypharm S.A. France v. Abbott Labs., 707 F.3d 223, n.14 (3d Cir. 2013) (citing Sheridan v. NGK Metals Corp., 609 F.3d 239, n.27 (3d Cir. 2010)). "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. Applying the principles of Iqbal and Twombly, the Third Circuit in Santiago v. Warminster Twp., 629 F.3d 121 (3d Cir. 2010), set forth a three-part analysis that a district court in this Circuit must conduct in evaluating whether allegations in a complaint survive a 12(b)(6) motion to dismiss:
First, the court must "tak[e] note of the elements a plaintiff must plead to state a claim." Second, the court should identify allegations that, "because they are no more than conclusions, are not entitled to the assumption of truth." Finally, "where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."
Id. at 130 (quoting Iqbal, 556 U.S. at 675, 679). "This means that our inquiry is normally broken into three parts: (1) identifying the elements of the claim, (2) reviewing the complaint to strike conclusory allegations, and then (3) looking at the well-pleaded components of the complaint and evaluating whether all of the elements identified in part one of the inquiry are sufficiently alleged." Malleus v. George, 641 F.3d 560, 563 (3d Cir. 2011).
A complaint must do more than allege a plaintiff's entitlement to relief, it must "show" such an entitlement with its facts. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234-35 (3d Cir. 2008)). "[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not 'shown' — 'that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679. The "plausibility" determination is a "context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id.
When determining whether a claim is plausible, a district court may also consider any affirmative defenses raised by the moving party. "Technically, the Federal Rules of...
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