WFG Nat'l Title Ins. Co. v. Peniel Holdings, LLC
| Decision Date | 06 December 2016 |
| Docket Number | CIVIL ACTION NO. 3:16-CV-2366-G |
| Parties | WFG NATIONAL TITLE INSURANCE COMPANY, Plaintiff, v. PENIEL HOLDINGS, LLC, Defendant. |
| Court | U.S. District Court — Northern District of Texas |
Before the court is the defendant's motion to dismiss under Rule 12(b)(1) and, alternatively, the defendant's request for the court to abstain (docket entry 8). For the reasons stated below, the defendant's motion is denied.
On September 25, 2015, the defendant, Peniel Holdings, LLC ("Peniel") contracted to acquire real property located in Cooke County, Texas, from the property's owner, John Herlihy ("Herlihy"). Original Complaint For Declaratory Relief ("Complaint") ¶ 6 (docket entry 1). The title company, the plaintiff WFG National Title Insurance Company ("WFG"), contracted with Millennium Closing Services, LLC ("Millennium") to act as the escrow agent and to close the transaction. Id. On October 29, 2015, Peniel deposited $1,460,970.00 into Millennium's account as payment for the property. Id. ¶ 7. However, Millennium failed to deliver both Peniel's payment to Herlihy and Herlihy's deed to Peniel. Id. ¶¶ 7-8. On January 25, 2016, the 53rd Judicial District Court of Travis County, Texas placed Millennium into liquidation. Id. ¶ 9. The state court also permanently enjoined Millennium from engaging in any further business and imposed an automatic stay prohibiting actions against Millennium. Id.
On February 5, 2016, Peniel wrote to WFG demanding that WFG issue an owner's policy of title insurance. Id. ¶ 10. On May 16, 2016, Peniel filed a complaint with the Texas Department of Insurance ("TDI") reiterating the assertions in its demand letter. Id. ¶¶ 10-11. On June 13, 2016, Peniel successfully petitioned to set aside the January 25, 2016 automatic stay, thereby allowing Peniel to assert claims against WFG. Id. ¶ 12. On July 13, 2016, WFG formally responded to Peniel's complaint with the TDI. Id. ¶ 11.
On August 15, 2016, WFG commenced this declaratory judgment action against Peniel. See id. WFG seeks to have the court declare whether it is required to: (1) indemnify Peniel under an owner's policy of title insurance; (2) deliver a fee simple deed to Peniel; and (3) reimburse Peniel for any losses attributable to Millennium. Id. ¶ 5.
Article III of the United States Constitution limits federal courts' jurisdiction to "cases" and "controversies." U.S. Const. Art. III, § 2. Standing -- i.e., the need to demonstrate that the plaintiff has a direct, personal stake in the outcome of the suit -- is an "essential and unchanging part" of this case-or-controversy requirement. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).
As the Supreme Court explained in Lujan, the "irreducible constitutional minimum of standing" has three elements:
First, the plaintiff[s] must have suffered an "injury in fact" -- an invasion of a legally protected interest which is (a) concrete and particularized, and (b) "actual or imminent, not 'conjectural' or 'hypothetical.' "Second, there must be a causal connection between the injury and the conduct complained of -- the injury has to be "fairly . . . trace [able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court." Third, it must be "likely," as opposed to merely "speculative," that the injury will be "redressed by a favorable decision."
Lujan, 504 U.S. at 560 (internal citations and footnote omitted).
Lack of standing is a defect in subject matter jurisdiction. See Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987) (citing Bender v. Williamsport Area School District, 475 U.S. 534, 541 (1986)); see also Sommers Drug Stores Company Employee Profit Sharing Trust v. Corrigan, 883 F.2d 345, 348 (5th Cir. 1989) () (citing United States v. One 18th Century Colombian Monstrance, 797 F.2d 1370, 1374 (5th Cir. 1986), cert. denied, 481 U.S. 1014 (1987)).
Federal district courts have the unique power to make factual findings which are decisive of subject matter jurisdiction. See Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.) (), cert. denied, 454 U.S. 897 (1981). The district court has the power to dismiss for lack of subject matter jurisdiction -- and thus for lack of standing -- on any one of three separate bases: "(1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of disputed facts." Williamson, 645 F.2d at 413; Robinson v. TCI/US West Communications Inc., 117 F.3d 900, 904 (5th Cir. 1997); see also Haase, 835 F.2d at 907 ().
Moreover, while the burden is on the party seeking to invoke the federal court's subject matter jurisdiction to establish the requisite standing requirements, that burden need be met only by a preponderance of the evidence. See Hartford Insurance Group v. Lou-Con Inc., 293 F.3d 908, 910 (5th Cir. 2002).
Peniel contends that WFG lacks standing because WFG failed to plead that it has refused to issue the title insurance policy nor that it is entitled to do so. Defendant's Motion to Dismiss for Lack of Jurisdiction ("Peniel's Motion") at 7 (docket entry 8). Moreover, Peniel contends that it has not explicitly threatened to sue WFG for failing to issue the policy. Id. Thus, Peniel concludes, because there is no case or controversy, WFG is merely seeking an advisory opinion. Id. at 7-8.
In order to establish a case or controversy, WFG must "show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Vantage Trailers, Inc. v. Beall Corporation, 567 F.3d 745, 748 (5th Cir. 2009) (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)). Courts determine whether there is a specific and concrete threat of litigation and a practical likelihood that the controversy will become real. See Orix Credit Alliance, Inc. v. Wolfe, 212 F.3d 891, 897 (5th Cir. 2000) (); Shields v. Norton, 289 F.3d 832, 835 (5th Cir.) (), cert. denied, 537 U.S. 1071 (2002). Specifically, courts look to the conduct and communications of the parties. See, e.g., Orix Credit Alliance, Inc., 212 F.3d at 897; State of Texas v. West Publishing Company, 882 F.2d 171, 176 (5th Cir. 1989) (), cert. denied, 493 U.S. 1058 (1990); Steelplan, Ltd. v. Steel Plan Australia Pty. Ltd., No. 3:02-CV-0470-P, 2003 WL 21499303, at *5 (N.D. Tex. June 25, 2003) (Solis, J.) (); Hillwood Development Company v. Related Companies, Inc., No. 3:04-CV-1100-L, 2006 WL 1140472, at *5-6 (N.D. Tex. Apr. 28, 2006) (Lindsay, J.) (same). The purpose of the court's inquiry is to ensure that the threatened suit has "taken on final shape so that the court can see what legal issues it is deciding." Hillwood Development Company, 2006 WL 1140472, at *5 (quoting Orix Credit Alliance, Inc., 212 F.3d at 898).
Here, Peniel's demand letter -- in conjunction with its conduct -- demonstrates that there is a concrete case or controversy. Peniel's letter specifically demands that WFG: (1) issue the title policy; (2) indemnify Peniel; and (3) issue certificates of coverage. Complaint, Exh. B. Peniel further filed a complaint with the TDI reiterating its demands set forth in the February 5, 2016 letter. See Complaint ¶ 11. Moreover, WFG's complaint for declaratory relief in the instant action directly mirrors both Peniel's demand letter and its complaint with the TDI. See id. ¶ 5. The parties' actions here clearly allow the court to "see what legal issues it is deciding." See Hillwood Development Company, 2006 WL 1140472, at *5 (quoting Orix Credit Alliance, Inc., 212 F.3d at 898). Furthermore, Peniel's contention that there is no case or controversy because WFG has not refused to issue the policy is unfounded.Peniel's Motion at 7. It is clear that Peniel does not yet possess the policy despite its demands. See Complaint ¶¶ 13-15. Thus, there is a concrete dispute between the parties.
It is true, however, that Peniel's demand letter lacks any specific threats showing that litigation is imminent. See Complaint, Exh. B; see also Steelplan, Ltd., 2003 WL 21499303, at *5; Hillwood Development Company, 2006 WL 1140472, at *6. However, the court must also look to Peniel's conduct. Peniel laid the foundation for litigation when it sought to set aside the automatic stay in the state court . See Complaint ¶ 12. Given such efforts, Peniel's next practical step is to sue WFG. See Orix Credit Alliance, Inc., 212 F.3d at 897. Thus, because there is a concrete dispute with an imminent threat of litigation, WFG has standing to assert its claim against Peniel. The motion to dismiss for lack of jurisdiction is denied.
In its alternative motion for abstention, Peniel first contends that the court should abstain from exercising jurisdiction based on the doctrine announced in Louisiana Power & Light Company v. City of Thibodaux, 360 U.S. 25 (1959). Peniel's Motion at 9. Specifically, Peniel contends that this case involves state law, "the resolution of which is particularly close to the declared...
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