Kahama VI, LLC v. HJH, LLC, Case No: 8:11-cv-2029-T-30TBM

• Decision Date: 12 September 2013
• Docket Number: Case No: 8:11-cv-2029-T-30TBM
• Parties: KAHAMA VI, LLC, Plaintiff, v. HJH, LLC, ROBERT E.W. MCMILLAN, III , WILLIAM R. RIVEIRO, JOHN BAHNG, HOWARD S. MARKS and OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY, Defendants.
• Court: U.S. District Court — Middle District of Florida

KAHAMA VI, LLC, Plaintiff,
v.
HJH, LLC, ROBERT E.W. MCMILLAN, III , WILLIAM R. RIVEIRO, JOHN
BAHNG, HOWARD S. MARKS and OLD REPUBLIC NATIONAL TITLE
INSURANCE COMPANY, Defendants.

Case No: 8:11-cv-2029-T-30TBM

UNITED STATES DISTRICT COURT MIDDLE DISTRICT OF FLORIDA TAMPA DIVISION

Dated: September 12, 2013

ORDER

THIS CAUSE comes before the Court upon Defendant Howard S. Marks' Motion and Memorandum of Law to Dismiss Complaint (Dkt. #93) and Defendant Old Republic National Title Insurance Company's Motion to Dismiss Counts IV and VI through IX of Plaintiff's Second Amended Complaint and Incorporated Memorandum of Law (Dkt. #95), Plaintiff's Response in Opposition (Dkt. #126) and Plaintiff's Response to Motion to Dismiss of Old Republic (Dkt. #127) and Defendant Howard S. Marks' Objection to Plaintiff's Request for Judicial Notice (Dkt # 129). The Court, having considered the parties' arguments and being otherwise advised in the premises, concludes that Defendant Howard S. Marks' Motion should be granted in part and denied in part and Defendant Old Republic National Title Insurance Company's Motion should be granted.

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Background

Plaintiff, Kahama VI, LLC ("Kahama") filed an action to enforce a promissory note against the borrower, HJH, LLC ("HJH") and four individual guarantors; Robert E. W. McMillan, III, John Bahng, William Riveiro, and Kirsten L. Riveiro.¹ Kahama filed for foreclosure against HJH in the case styled Kahama VI, LLC v. HJH, LLC, M.D. Fla. Case No.:6:12-cv-01922-T30-TBM which the Court consolidated with this action. The property at issue in the foreclosure action is undeveloped beachfront property located in New Smyrna Beach, Florida (the "Property").

In its Second Amended Complaint, Kahama added Howard S. Marks ("Marks") and Old Republic National Title Insurance Company ("Old Republic") as defendants, alleging causes of action for abuse of process, fraudulent transfer, slander of title, unjust enrichment, breach of contract/good faith and fair dealing, and breach of fiduciary duty. Marks served as counsel for HJH in the foreclosure action and other proceedings related to the Property. His prior firm also acted as the title insurance agent for the title insurance policies issued to HJH (the "Owner's Title Policy") and Kahama (the "Lender's Title Policy"). The policies are attached to the complaint as Exhibit 7 and 8, respectively. Old Republic was the underwriter for these policies.

HJH became involved in a dispute with the City of New Smyrna Beach (the "City") and Volusia County (the "County") regarding an alleged easement on the east 150 feet of the Property. The City would not authorize HJH to build beachfront

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condominiums because of the easement. HJH made a claim on its Owner's Title Policy; in response Old Republic filed a complaint against the City and County in the case styled HJH, LLC v. Volusia County, Florida, et. al., Volusia County Circuit Court Case No. 2008-20156-CINS-02 (the "Quiet Title Action"). Old Republic retained Marks as counsel for HJH in the Quiet Title Action. The City paid HJH $100,000 to settle the claim. The County did not join in the settlement, and the Quiet Title Action is currently set for trial.

Kahama's claims against Marks are primarily based on his actions as counsel for HJH in the Quiet Title Action, and as a member of the law firm that acted as title insurance agent for the title policies issued by Old Republic. Kahama's claims against Old Republic are primarily based on the title policy issued to Kahama's predecessors in interest, and its involvement with the Quiet Title Action. Generally, Kahama claims that Marks and Old Republic pursued an invalid title claim, and have used the Quiet Title Action for the fraudulent purpose of delaying the foreclosure action and thwarting Kahama's collection efforts against HJH and the guarantors.

Discussion

I. Standard for Motion to Dismiss

To warrant dismissal of a complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure, it must be "clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Blackston v. State of Alabama, 30 F.3d 117, 120 (11th Cir. 1994) (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)). "When considering a motion to dismiss, all facts set forth in the plaintiff's complaint are to be accepted as true and the court limits its consideration to the pleadings

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and exhibits attached thereto." Grossman v. Nationsbank, N.A., 225 F.3d 1228, 1231 (11th Cir. 2000) (internal citations and quotations omitted).

"Federal Rule of Civil Procedure 8(a)(2) requires only 'a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to 'give the defendant fair notice of what the ... claim is and the grounds upon which it rests.' " Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007) (quoting Fed.R.Civ.P. 8; Conley v. Gibson, 355 U.S. 41, 47 (1957)). However, "a plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 127 S.Ct. at 1964-65. "[T]he tenet that a court must accept a complaint's allegations as true is inapplicable to threadbare recitals of a cause of action's elements, supported by mere conclusory statements." Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). "Factual allegations must be enough to raise a right to relief above the speculative level ... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 127 S.Ct. at 1965. Absent the necessary factual allegations, " the-defendant-unlawfully-harmed-me accusation[s]" will not suffice. Ashcroft, 129 S.Ct. at 1949.

Further, exhibits are part of a pleading "for all purposes." Fed.R.Civ.P. 10(c); see Solis-Ramirez v. U.S. Dep't of Justice, 758 F.2d 1426, 1430 (11th Cir. 1985) (per curiam) ("Under Rule 10(c) Federal Rules of Civil Procedure, such attachments are considered part of the pleadings for all purposes, including a Rule 12(b)(6) motion."). See also Griffin Indus., Inc. v. Irvin, 496 F.3d 1189, 1205-06 (11th Cir. 2007). Therefore,

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Kahama's requests that the Court take judicial notice of the exhibits attached to the Second Amended Complaint is denied as unnecessary.

II. Dismissal as to Counts IV, V, VI, VII, VIII, and IX

a. Count IV - Abuse of Process

A cause of action for abuse of process requires proof that: (1) the defendant made an illegal, improper, or perverted use of process; (2) the defendant had an ulterior motive or purpose in exercising the illegal, improper, or perverted process; and (3) the plaintiff was injured as a result of defendant's action." Hardick v. Homol, 795 So. 2d 1107, 1111 n. 2 (Fla. 5th DCA 2001) (citing Thomson McKinnon Securities, Inc. v. Light, 534 So. 2d 757, 760 (Fla. 3d DCA 1988); Della-Donna v. Nova Univ., Inc., 512 So. 2d 1051 (Fla. 4th DCA 1987)).

Courts in Florida have made it clear, however, that an abuse of process claim requires more than the issuance of process for an improper motive. See McMurray v. U-Haul Co., Inc., 425 So. 2d 1208, 1209-10 (Fla. 4th DCA 1983); Blue v. Weinstein, 381 So. 2d 308, 310 (Fla. 3d DCA 1980). Instead, a claimant must allege "an act which constituted misuse of the process after it was issued." McMurray, 425 So. 2d at 1209. "Ulterior motive alone is insufficient; there is no abuse of process where it is confined to its regular and legitimate function in relation to the cause of action in the complaint." Id. See also Scozari v. Barone, 546 So. 2d 750, 751 (Fla. 3d DCA 1989) ("There is no abuse of process, however, when the process is used to accomplish the result for which it was created, regardless of an incidental or concurrent motive of spite or ulterior purpose.").

In this case Kahama essentially alleges that Marks and Old Republic engaged in an abuse of process by: (1) filing the Quiet Title Action for the purpose of interfering

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with Kahama's right to enforce its mortgage and promissory note against HJH and (2) receiving and concealing the settlement funds on behalf of HJH. The act of filing the Quiet Title Action on its own is not enough; the alleged act that constitutes "abuse" must occur after the filing of the complaint. See McMurray, 425 So. 2d at 1209. Kahama also points to the counterclaim filed by Marks on behalf of HJH in the foreclosure action as further evidence of abuse. Kahama does not point to any legal or factual basis as to why Marks or Old Republic should have revealed to Kahama, a non-party to the action, that HJH received funds pursuant to a settlement agreement.

Assuming all of Kahama's well pled allegations are true, Kahama does not state a cause of action for abuse of process because it fails to allege sufficient facts to show illegal, improper or perverted process. The allegations amount to only a claim of improper or ulterior motive for filing the Quiet Title Action, which is not sufficient to sustain this cause of action. See McMurray, 425 So. 2d at 1209.

Kahama also fails to state a claim against Old Republic for abuse of process because Old Republic is not a party to the Quiet Title Action; and unlike Marks, has not appeared in that action. Kahama's claim of abuse of process against Old Republic is too attenuated. There are not sufficient facts alleged from which the Court can draw any reasonable inferences to allow this claim to stand. Accordingly, this claim is dismissed without prejudice to Kahama to amend the Second Amended Complaint to include sufficient allegations.

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b. Count V Fraudulent Transfer²

To plead a cause of action for violation of the Florida Uniform Fraudulent Transfer Act ("FUFTA") under § 726.105, Florida Statutes plaintiffs must allege: (1) they were creditors who were defrauded, (2) that defendant intended to commit the fraud, and (3) that...