U.S. Bank v. Commonwealth Land Title Ins. Co.
| Decision Date | 23 March 2015 |
| Docket Number | 13 Civ. 7626 (NRB) |
| Parties | U.S. BANK, NATIONAL ASSOCIATION, Plaintiff, v. COMMONWEALTH LAND TITLE INSURANCE COMPANY, Defendant, and Third-Party Plaintiff, v. ANM FUNDING LLC, ABE KLEIN, NOAH HERSHKOVITZ, LEAH HERSHKOVITS, TSVINY HERSHKOVITZ, LOWENTHAL & KOFMAN, P.C., MARTIN KOFMAN, NORMAN TEPFER, SAMUEL GLUCKMAN, and ROLAND FIELDS, Third Party Defendants. |
| Court | U.S. District Court — Southern District of New York |
Presently before the court is a motion on behalf of third-party defendants Lowenthal & Kofman, P.C., Martin Kofman, and Norman Tepfer (collectively, the "Lowenthal defendants") to dismiss the third-party complaint brought by defendant/third-party plaintiff Commonwealth Land Title Insurance Company ("Commonwealth"). For the reasons stated herein, this motion is granted.
On November 29, 2007, plaintiff U.S. Bank National Association ("U.S. Bank") made a loan to Laura Fields, the repayment of which was to be secured by a mortgage on Fields's property. TPC ¶ 13. At the closing of the loan and mortgage, Commonwealth issued U.S. Bank a loan policy insuring the mortgage as a first lien and indemnifying U.S. Bank against losses suffered as a result of title defects. Id. ¶ 22; Cmplt. ¶¶ 16-26. However, unbeknownst to both parties, Laura Fields had in fact died one month before the closing, and her November 2007 mortgage had been signed by an imposter--a fact U.S. Bank first discovered nearly two years later, when it unsuccessfully attempted to foreclose on the mortgage after Fields appeared to default in March 2009. TPC ¶ 20; Cmplt. ¶¶ 27-29. U.S. Bank consequently submitted a title insurance claim to Commonwealth, which Commonwealth denied on March 1, 2012. Cmplt. ¶¶ 31, 33.
Commonwealth alleges that fraud on the part of several third-party defendants allowed Fields's death to go undetected and her mortgage to be signed by an imposter. Specifically, Commonwealth alleges that, before the closing, U.S. Bank's mortgage broker and several of its employees submitted false credit reports, false employment verifications, and a false property appraisal in order to induce U.S. Bank to make the loan. TPC ¶ 14. At the closing,Norman Tepfer, a notary and agent of Lowenthal & Kofman, which acted as U.S. Bank's settlement agent at the closing, allegedly fraudulently acknowledged the imposter's signature as Fields's. Id. ¶ 21. Finally, according to Commonwealth, the Lowenthal defendants submitted a false HUD-1 after the closing, knowingly omitting the payment of proceeds to third party who is believed to have laundered the funds. Id.
U.S. Bank filed a complaint on October 28, 2013, alleging that Commonwealth breached its insurance contract with U.S. Bank by denying U.S. Bank's claim, and Commonwealth answered on December 13, 2013. On July 17, 2014, after a period of discovery, Commonwealth sought leave to implead parties from whom it sought indemnification, citing the recent disclosure of a document regarding loan disbursement as the basis for the delayed impleader. On August 6, 2014, we issued an order granting Commonwealth's motion, and on August 11, 2014, Commonwealth filed a third-party complaint (the "TPC") seeking contribution and/or indemnification from several third-party defendants, including the Lowenthal defendants. The Lowenthal defendants moved to dismiss the TPC on December 24, 2014, and the motion was fully briefed on February 5, 2014.
When ruling on a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a court must accept as true all factual allegations in the complaint and draw all reasonable inferences in plaintiff's favor. Harris v. Mills, 572 F.3d 66, 71 (2d Cir. 2009); Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007). A motion to dismiss may be granted only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Still v. DeBuono, 101 F.3d 888, 891 (2d. Cir. 1996). Nevertheless, a plaintiff's "[f]actual allegations must be enough to raise a right of relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see also Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Thus, a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face," and if a plaintiff "ha[s] not nudged [his] claims across the line from conceivable to plausible, [his] complaint must be dismissed." Twombly, 550 U.S. at 570. This pleading standard applies in "all civil actions." Iqbal, 556 U.S. at 684 (internal quotation marks omitted).
First, the Lowenthal defendants assert that the TPC fails to state a claim for contribution because, under N.Y. C.P.L.R. § 1401, parties may not seek contribution for purely economic loss and thus may not seek contribution where, as here, the underlying action is one for breach of contract. See Conestoga Title Ins. Co. v. ABM Title Servs., Inc., 10 Civ. 3017 (CM), 2012 WL 2376438, at *6 (S.D.N.Y. June 20, 2012) ().1 Commonwealth concedes that its claim for contribution is not available under New York law. See Def's Br. at 6. Commonwealth's claim for contribution is thereby dismissed.
Second, the Lowenthal defendants argue that the TPC fails to state a claim for indemnification because Commonwealth cannot be found liable to U.S. Bank without having been found itself at fault, thereby barring it from receiving indemnification.
In the absence of contractual right to recovery--which neither party has here asserted--a "party who has itself actually participated to some degree in the wrongdoing cannot receive the benefit of the doctrine [of implied indemnification]." 17 Vista Fee Assoc. v. Teachers Ins. And Annuity Ass'n of Am., 259 A.D.2d 75, 80 (App. Div. 1st Dep't 1999). See also Monaghan v. SZS 33 Associates, L.P., 73 F.3d 1276, 1285 (2d Cir. 1996) (); id. ().
Consequently, where the underlying action is one for breach of contract, a defendant may not seek indemnification because the defendant, if found liable to the plaintiff in the underlyingaction, will have necessarily participated in the wrongdoing by breaching the contract. See, e.g., Knight v. H.E. Yerkes & Associates, Inc., 675 F. Supp. 139, 143 (S.D.N.Y. 1987) ( ); Intesa Sanpaolo S.p.A. v. Piliero, 08 Civ. 2223 (LLS), 2008 WL 3465032, at *1 (S.D.N.Y. Aug. 12, 2008) (); Highland Capital Mgmt., L.P. v. Schneider, 533 F. Supp. 2d 345, 354-55 (S.D.N.Y. 2008) (PKL) ( ); Amusement Indus., Inc. v. Stern, 693 F. Supp. 2d 319, 326-27 (S.D.N.Y. 2010) (LAK) ( ).
The TPC, which seeks indemnification for an underlying breach of contract, thus necessarily fails to state a claim for indemnification. Because Commonwealth must have itself breached the contract to have been found liable to U.S. Bank, it cannot be said to have incurred damages purely as a result of vicarious liability or by operation of law. As a result, the TPC does not provide a scenario under which Commonwealth could be found both liable for damages to U.S. Bank and at the same time free from fault, thereby barring Commonwealth from receiving the benefit of implied indemnification.
Notably, Commonwealth does not rebut this principle, but rather reasserts that Commonwealth is entitled to indemnification as a result of Tepfer's wrongful notarization of the imposter's signature. Specifically, Commonwealth argues that Tepfer is liable--and the other Lowenthal defendants are vicariously liable--in indemnification to Commonwealth pursuant to N.Y. Exec. Law §135, which states...
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