Salas v. Commonwealth Land Title Ins. Co.
| Decision Date | 05 April 2022 |
| Docket Number | 3:21-cv-890-MCR-HTC |
| Parties | CAMILO K. SALAS, III, As Trustee of the Salas Children Trust, Plaintiff, v. COMMONWEALTH LAND TITLE INS. CO., Defendant. |
| Court | U.S. District Court — Northern District of Florida |
ORDER AND REPORT AND RECOMMENDATION
Plaintiff Camilo K. Salas, III, as Trustee (the “Trustee”) of the Salas Children Trust (the “Trust”), and also counsel of record for the Trust, brings this suit for breach of a title insurance policy issued by Defendant Commonwealth Land Title Insurance Co. (“Commonwealth”), arising out of the Trust's purchase of a lot located in Alys Beach, a residential community in Walton County, Florida.
As will be discussed in further detail below, the Trustee executed a purchase agreement requiring the Trust to build on the lot within two (2) years after closing, or face certain consequences, including the ability for the developer/seller to repurchase the property and significant liquidated damages. The Trust did not build on the lot within the 2-year period, and, in 2015, the developer brought suit against the Trust for breach of the Purchase Agreement.
The Trust sought indemnification and defense from Commonwealth and Commonwealth denied coverage. After the conclusion of the Trust's litigation with the developer, the Trust brought the instant action against Commonwealth for (1) failure to provide a defense; (2) failure to indemnify; (3) abstractor contractual liability, (4) liability for transfer fee covenants; and (5) bad faith failure denial of coverage. ECF Doc. 27. The Trust seeks damages consisting of $1, 780 517.62 as attorneys' fees, costs, and damages it incurred as a result of settling the litigation.
This matter was referred to the undersigned for a report and recommendation on all pending pretrial motions. Pending before the Court are the following: (1) Defendant's motion to dismiss, ECF Doc. 29; (2) Plaintiff's motion for default and to strike the motion to dismiss, ECF Doc. 33; (3) Plaintiff's motion for summary judgment, ECF Doc. 38; and (4) Defendant's motion to stay case and reset scheduling order, ECF Doc. 40. Each of the motions have been fully briefed by the parties.
Upon careful review and consideration, and for the reasons set forth below, the undersigned recommends Plaintiff's motion for default and to strike be DENIED, Defendant's motion to dismiss be treated as a motion for summary judgment and be GRANTED, and Plaintiff's motion for summary judgment be DENIED. Accordingly, Defendant's motion to stay is MOOT.
The undersigned will first address the Trust's motion for entry of default and to strike Commonwealth's motion to dismiss. ECF Doc. 33. The Trust's motion is based on the following grounds: First, the Trust argues that by filing a motion to dismiss, rather than an answer, to the amended complaint, Commonwealth is in default. Second, the Trust argues Commonwealth's motion to dismiss should be stricken because Commonwealth failed to timely assert its affirmative defenses when it filed its answer to the original complaint. The undersigned disagrees as to both arguments. The Trustee's arguments are based on a tortuous interpretation of the civil procedural rules and are contrary to the Eleventh Circuit's disfavor of default judgments.
The Trust initially filed this suit in January 2021, in state court in Louisiana. On January 29, 2021, Commonwealth removed the matter to the United States District Court for the Middle District of Louisiana, Salas v. Commonwealth, C-703386. On February 2, 2021, Commonwealth filed a motion to transfer venue under 28 U.S.C.A. § 1404(a) (West). ECF Doc. 5. While that motion was pending, on February 12, 2021, Commonwealth filed an answer to the complaint. ECF Doc. 8. The Trust argues Commonwealth's answer was late because it should have been filed on February 4, 2021, seven (7) days after Commonwealth removed the case to the Louisiana federal court. See Fed.R.Civ.P. 81(c)(2)(C).
On July 12, 2021, the Louisiana federal court granted Commonwealth's motion to transfer venue. ECF Doc. 16. The case was transferred to this Court on July 20, 2021. ECF Doc. 18. In September 2021, the Trust filed a motion to amend its complaint, which the Court granted. ECF Docs. 24, 26, 27, 28. Rather than file an answer to the amended complaint, however, as it had done to the original complaint, on October 18, 2021, Commonwealth filed the pending motion to dismiss. ECF Doc. 29.
As an initial matter, the undersigned finds Commonwealth did not waive its ability to assert affirmative defenses to the Trust's claims by filing a belated answer to the original complaint. Regardless of whether that answer was late, the Louisiana federal court denied the Trust's motion for default and accepted the answer. ECF Doc. 9. That answer contained several affirmative defenses. ECF Doc. 8. The Trustee did not move to strike that answer or those affirmative defenses “within 21 days after being served with the pleading.” See Fed.R.Civ.P. 12(f) (setting forth deadline for filing a motion to strike from a pleading “an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter”). Indeed, the Trust did not raise the untimeliness until the motion for default and to strike in the instant case.
Regardless, even if Commonwealth had waived its affirmative defenses, the Trust reopened the pleadings by filing an amended complaint. Contrary to the Trust's description of the amended complaint, it did more than make simple minor corrections to conform the original complaint to federal court pleading requirements. Unlike the amendment in Regions Bank v. Commonwealth Land Title Ins., Co., 2012 WL 5410948 (S.D. Fla. Nov. 6, 2012), a case relied upon by the Trust, where the amended complaint “only changed the issuance date of a policy endorsement from 2006 to 2008, ”, id., at *3, the Trust's amended complaint changed the scope of the case.
The original complaint was 18 pages long. The amended complaint is 43 pages long. The original complaint sought relief for breach of contract and under specific Louisiana statutes. ECF Doc. 1-1. The amended complaint seeks relief for failure to provide a defense, failure to indemnify abstractor contractual liability, liability for transfer fee covenants, and bad faith denial of coverage. ECF Doc. 27. Thus, the amended complaint reopened the pleadings. See Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1203 (11th Cir. 2011) ().
The undersigned also finds no merit to the Trust's argument that by filing a motion to dismiss to the amended complaint, rather than an answer, Commonwealth in in default. The Trust's argument that a 12(b)(6) motion tolls the time for filing an answer applies only to the original complaint and not an amended complaint is simply not supported.
Under Rule 15(a)(3), a defendant has “14 days after service of the amended pleading, ” to make “any required response.” Fed.R.Civ.P. 15(a)(3). A “required response” can be an answer or it can be one of the motions set forth in Rule 12(b). A 12(b)(6) motion for failure to state a claim “must be made before pleading.” Fed.R.Civ.P. 12(b)(6). Under Rule 12(a)(4), if a 12(b) motion is filed - the time to answer is tolled until fourteen (14) days after the court's resolution of the motion. Fed.R.Civ.P. 12(a)(4).
Nothing in rules show that Rule 12(a)(4) was meant to apply only to original complaints. In other words, if a 12(b) motion can be filed in response to an amended complaint, it only makes sense for the time to file an answer to an amended complaint to also be tolled pending the resolution of such a motion. The analysis is no different just because an answer, rather than a 12(b) motion was filed in response to the original complaint, particularly where the pleadings were reopened. See e.g., Ello v. Brinton, 2015 WL 7016462, at *4 (N.D. Ind. Nov. 10, 2015) (); Shah v. KIK Int'l LLC, 2007 WL 1876449, at *1 (N.D. Ind. June 26, 2007) ().
In support of its position, the Trustee relies on Gen. Mills, Inc. v. Kraft Foods Glob., Inc., 487 F.3d 1368 (Fed. Cir.), decision clarified on reh'g, 495 F.3d 1378 (Fed. Cir. 2007). However, in that case the court determined a counterclaim was not pending because it had not been reasserted in response to an amended complaint, where defendant had filed only a 12(b) motion. Moreover, the court's decision in General Mills has been called into question. As one court stated, “[r]equiring an answer to an amended pleading when a motion to dismiss is pending ‘potentially results in duplicative pleadings, confusion regarding the proper scope of discovery, unnecessary expenses, and wasted time.'” Direct Enterprises, Inc. v. Sensient Colors LLC, 2017 WL 2985623, at *3 (S.D. Ind. July 13, 2017).
Indeed even when a 12(b)(6) motion to dismiss does not address every claim in a complaint, the majority of courts, including a court in this District, have found a separate answer addressing the other claims to be unnecessary because the motion to dismiss tolls the answer deadline. See e.g, Beaulieu v. Bd. of Trs. Of Univ. of W. Fla., 3:07-cv-30-RV/EMT, 2007 WL 2020161, at...
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