Hancock v. Chicago Title Ins. Co.

• Decision Date: 09 July 2009
• Docket Number: Civil Action No. 3:07-CV-1441-D.
• Citation: 635 F.Supp.2d 539
• Parties: Ceaser HANCOCK and Emma Benavides, individually and on behalf of all others similarly situated, Plaintiffs, v. CHICAGO TITLE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Texas

635 F.Supp.2d 539

Ceaser HANCOCK and Emma Benavides, individually and on behalf of all others similarly situated, Plaintiffs, v. CHICAGO TITLE INSURANCE COMPANY, Defendant.

Civil Action No. 3:07-CV-1441-D.

United States District Court, N.D. Texas, Dallas Division.

July 9, 2009.

COPYRIGHT MATERIAL OMITTED

Eric G. Calhoun, Dallas, TX, Edward W. Ciolko, Joseph H. Meltzer, Joseph A. Weeden, Katherine B. Bornstein, Nick S. Williams, Peter A. Muhic, Barroway Topaz Kessler Meltzer & Check LLP, Radnor, PA, Richard J. Pradarits, Jr., Travis & Calhoun, Dallas, TX, for Plaintiffs.

Karin Britt Torgerson, Locke Lord Bissell & Liddell LLP, Dallas, TX, Derek E. Diaz, Robert J. Fogarty, Robert B. Port, Steven A. Goldfarb, Hahn Loeser & Parks LLP, Cleveland, OH, for Defendant.

MEMORANDUM OPINION AND ORDER

SIDNEY A. FITZWATER, Chief Judge.

In this putative class action arising from a title insurer's alleged failure to discount premiums charged for reissue title insurance policies and its alleged sharing of premiums with title agents, the court must decide whether the title insurer is entitled to summary judgment dismissing claims brought under § 8(b) of the Real Estate Settlement Procedures Act ("RESPA"), 12 U.S.C. § 2607(b), and under Texas law. For the reasons that follow, the court dismisses plaintiffs' claims under RESPA § 8(b) and for unjust enrichment, and it otherwise denies the title insurer's summary judgment motions.

I

Plaintiffs Ceaser Hancock ("Hancock") and Emma Benavides ("Benavides") bring this putative class action against defendant Chicago Title Insurance Company ("Chicago Title"). Their claims center on Chicago Title's alleged failure to discount premiums charged for reissue title insurance policies and its alleged sharing of the premiums with title agents. Plaintiffs allege claims for violations of RESPA § 8(b), and they assert state-law claims for unjust enrichment, money had and received, and breach of implied contract.

Hancock and Benavides, each of whom purchased a reissue title insurance policy allege that Chicago Title failed to give them the reissue discount to which they were entitled under Texas law and instead split the amount of the discount with a title agent.¹ In Texas, mortgage lenders require a borrower to purchase a lender title insurance policy as a condition of making a residential loan. The policy insures the lender against certain defects in title to the property, and it remains in effect until the loan is repaid. Lenders also require borrowers to purchase title insurance policies when homeowners refinance their homes. These are sometimes referred to as "reissue" policies.

The Texas Department of Insurance ("TDI") sets the premium rates that title insurance companies can charge. The rates for original issue title insurance policies are called the "Basic Rates." TDI has also adopted mandatory rates for reissue title insurance policies, and these rates are calculated by using the Basic Rate less the "reissue discount." The reissue discount ranges from 40% to 15%, with the rate decreasing as time elapses from the date of the mortgagee policy insuring the prior mortgage. The discount rate is 40% for policies reissued within two years of the date of the mortgagee policy insuring the prior mortgage, and it is 35% for policies reissued within three years.

Hancock refinanced his home in March 2007, purchasing a reissue title insurance policy from Chicago Title. Although the reissue policy was issued within three years of the date of the mortgagee policy insuring the prior mortgage, Hancock alleges that Chicago Title did not give him the 35% discount required by Texas law. He asserts that Chicago Title split the resulting illegal profits with its title agent. Benavides refinanced her home in May 2007, and purchased a reissue title insurance policy from Chicago Title. The policy was issued within two years of the date of the mortgagee policy insuring her prior mortgage, thus she was entitled to a 40% discount under Texas law. Benavides alleges that Chicago Title failed to give her the discount, and that it instead split the premium with its title agent. Hancock and Benavides sue Chicago Title under RESPA and Texas law.

Hancock filed suit in August 2007. Chicago Title moved to dismiss under Fed. R.Civ.P. 12(b)(6), and the court denied the motion. Hancock v. Chi. Title Ins. Co., 2008 U.S. Dist. LEXIS 8621, at *8-*17 (N.D.Tex. Feb. 5, 2008) (Fitzwater, C.J.) ("Hancock I"). Chicago Title then moved for summary judgment in July 2008.² In September 2008 the court permitted Benavides to intervene as a class representative. At the time, Benavides was pursuing nearly identical claims against Chicago Title in a suit she had filed in the Western District of Texas, and she and Hancock were represented by the same counsel. Benavides' case was transferred to this court and consolidated with Hancock's case in December 2008. Before the suit was transferred, Chicago Title filed a summary judgment motion in Benavides' case. Consequently, there are two pending summary judgment motions. Because the issues and arguments presented in both are substantially similar, except as noted below,³ the court will address them together.

II

Chicago Title moves for summary judgment dismissing plaintiffs' RESPA claims, contending that plaintiffs have not adduced evidence that supports a finding that it violated RESPA § 8(b). Plaintiffs allege that Chicago Title charged more than Texas law allows for title insurance and then split the excessive charges with its title agents. Chicago Title maintains that, because both it and its title agents actually performed services in connection with issuing the title insurance policies, plaintiffs' allegations constitute mere overcharge claims that are not actionable under RESPA § 8(b).

Preliminarily, the court notes that the issue presented by Chicago Title's summary judgment motions is distinct from the ones that the court addressed in Hancock I. In Hancock I the court concluded under the Rule 12(b)(6) standard that Hancock had stated a claim under RESPA § 8(b) because he had adequately pleaded that Chicago Title had given a portion of a charge to its title agent for a settlement service that the title agent did not perform. Hancock I, 2008 U.S. Dist. LEXIS 8621, at *15-*17. The court explicitly declined to address whether the title agent had "actually performed" services that justified its fee. Id. at *16. It held that, "[f]or now, it is sufficient to hold that Hancock's complaint may be plausibly read to assert that the agent performed no services that would justify the fees under any standard." Id. at *17. The court noted that its decision was only intended to address arguments raised in the Rule 12(b)(6) motion, and "not to speak broadly about the appropriate use of RESPA or whether, after further development of the record, the court will or will not conclude that RESPA applies in this context." Id. at *17 n. 3.

But at the summary judgment stage, Chicago Title is not confined to the allegations of plaintiffs' complaints. And it is undisputed that both Chicago Title and its title agents actually performed the services for which they charged plaintiffs. Chicago Title underwrote and assumed the risk of the title insurance policies, and the title agents evaluated the title searches to determine insurability, cleared title requirements, issued the title commitments, and issued the final title insurance policies. Plaintiffs do not dispute that Chicago Title and its title agents performed these services. Nor do plaintiffs contest that these are the services for which they paid premiums.

Plaintiffs allege that, because they were not given the reissue discount and were charged more than what Texas law allows, neither Chicago Title nor its title agents performed services for the part of the charges that exceeds the allowable rate. Specifically, Hancock asserts that he paid $1,061.35 for his title insurance policy and was not given a reissue discount of $333.20, to which he was entitled under Texas law.⁴ Hancock reasons that no services were performed for the $333.20 that should have been discounted. Likewise, Benavides posits that she paid $1,329.20 for her title insurance policy and was not given a mandatory $370.40 reissue discount.⁵ She likewise maintains that no services were actually performed for the $370.40 that should have been discounted. Plaintiffs assert that Chicago Title and its title agents split the premiums, which included money that should have been discounted. They contend that these alleged facts, when presumed to be true, constitute a violation of RESPA § 8(b).

Whether the alleged fact scenario can trigger liability under RESPA § 8(b) is a legal issue. Because it is undisputed that Chicago Title and its title agents actually performed the services for which they charged plaintiffs, there are no material fact issues that prevent the court from addressing the legal issue presented by the motions for summary judgment. The specific issue the court must now decide is whether charging more for title insurance than state law allows, when the charge is split between a title insurer and title agent who each performed services in connection with the issuance of the title insurance, violates RESPA § 8(b).

III

A

Congress enacted RESPA "to protect consumers from unnecessarily high settlement charges and abusive mortgage practices." Moreno v. Summit Mortgage Corp., 364 F.3d 574, 576 (5th Cir.2004) (citing 12 U.S.C. § 2601). In particular, § 8 of RESPA prohibits kickbacks, referral fees, and unearned fees. See 12 U.S.C. § 2607; Moreno, 364 F.3d at 576. Section 8(b) provides that "[n]o person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service ... other than for services actually performed." 12 U.S.C. § 2607(b).

The scope and application of § 8(b) have been widely...