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Fidelity National Title Insurance Co. v. Wooden

United States District Court, N.D. Alabama, Northeastern Division

May 23, 2017




         Fidelity National Title Insurance Company filed this action against Tracy and Kristi Wooden and Smartbank, [1] seeking legal and equitable relief related to a title policy it issued to the Woodens. Federal jurisdiction is premised upon the diversity statute. 28 U.S.C. § 1332(a)(1). Relevant here, in its amended complaint, Fidelity asserts three claims against Smartbank: indemnification (Count III), breach of contract (Count IV), and breach of warranty (Count V). See doc. 16. The court has for consideration Smartbank's motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1). The motion is fully briefed, docs. 31-1; 33; 36, and ripe for review. Upon consideration, the court concludes that the motion is due to be granted as to Count III and denied as to Counts IV and V.


         Under Federal Rule of Civil Procedure 8(a)(2), a pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” “[T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations, ' but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). Mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action” are insufficient. Iqbal, 556 U.S. at 678 (citations and internal quotation marks omitted). “Nor does a complaint suffice if it tenders ‘naked assertion[s]' devoid of ‘further factual enhancement.'” Id. (citing Twombly, 550 U.S. at 557).

         Federal Rule of Civil Procedure 12(b)(6) permits dismissal when a complaint fails to state a claim upon which relief can be granted. “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (citations and internal quotation marks omitted). A complaint states a facially plausible claim for relief “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation omitted). The complaint must establish “more than a sheer possibility that a defendant has acted unlawfully.” Id.; see also Twombly, 550 U.S. at 555 (“Factual allegations must be enough to raise a right to relief above the speculative level.”). Ultimately, this inquiry is a “context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.


         Smartbank acquired a deed to a 635-acre property at a foreclosure sale. Doc. 16 at 3. The foreclosure deed included all but one lot within the property, known as “Lot 5, ” which the previous owner had transferred to a third party prior to the foreclosure sale. Id. After acquiring the deed, Smartbank entered into a contract to sell the property to the Woodens. Id. The contract stated that the current placeholder legal description of the property “would be replaced with a title company's legal description upon completion of the title examination.” Doc. 16-4 at 7. Three weeks after the execution of the sales contract, a third party drafted a description of the property that mistakenly included Lot 5. Doc. 16 at 3. As a result, when Smartbank conveyed the property to the Woodens by special warranty deed, the deed included Lot 5. Id. at 4.

         After obtaining the warranty deed, the Woodens purchased a title insurance policy from Fidelity. Id. The policy incorporated by reference both the property description in the foreclosure deed to Smartbank (which did not include Lot 5) and the property description in the special warranty deed to the Woodens (which did include Lot 5). Id. When it discovered the mistake, Fidelity presented the Woodens with a corrective instrument to reform the special warranty deed, but the Woodens refused to sign it. Id. at 5. Fidelity alleges that this “latent ambiguity” in the title insurance policy was due to mutual mistake, and concedes that Smartbank “never made any representations . . . that it owned or intended to convey Lot 5 to the Woodens.” Id. at 4.

         III. ANALYSIS

         The court turns now to Smartbank's contention that the three claims against it are due to be dismissed.

         A. Indemnification (Count III)

         Fidelity asserts that, to the extent that the court rules against it and deems the Woodens covered with regard to Lot 5, the court should require Smartbank to indemnify Fidelity for “all coverage proceeds, damages, and attorneys' fees incurred and/or paid.” Doc. 16 at 8. In its motion to dismiss, Smartbank argues under Rule 12(b)(6) that the indemnification claim is barred by the statute of limitations or, alternatively, a lack of ripeness argument under Rule 12(b)(1). Doc. 31-1 at 10-11. The contention regarding the statute of limitations is unavailing because the statute on the indemnification claim would begin to run only when Fidelity sustained a legal injury, which, in this case, would be Fidelity's payment of a claim regarding Lot 5. See Ala. Code § 6-5-221 (1975) (a cause of action accrues “when a person is injured”); Smith v. Pitts, 52 So. 402, 403 (Ala. 1910) (a surety's cause of action against a principal does not accrue until the surety has paid the debt of the principal); Matthews Bros. Constr. Co. v. Stonebrook Devs., L.L.C., 854 So.2d 573, 580 (Ala. Civ. App. 2001) (indemnification claims “generally do not accrue for the purpose of the Statute of Limitations until the party seeking indemnification has made payment to the injured person”) (citations and internal quotation marks omitted). For the same reason, however, because Fidelity has not paid any claim regarding Lot 5, the court agrees with Smartbank's alternate argument that the indemnification claim is not ripe. Accordingly, Fidelity's indemnification claim is due to be dismissed, without prejudice, pursuant to Rule 12(b)(1).

         B. Breach of Contract (Count IV)

         Fidelity also claims that Smartbank breached the July 1, 2010 sales contract when it represented and warranted that it had “good and marketable title” to the property - specifically, Lot 5. Doc. 16 at 9 (citing doc. 16-4 at 3). In its initial brief, Smartbank argues, in part, that the contract became unenforceable pursuant to the “merger doctrine, ” when the parties executed the special warranty deed. See doc. 31-1 at 8. However, Fidelity argues in opposition, and Smartbank apparently concedes, see doc. 36, that the merger doctrine is ...

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