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Stiriling v. Alliant National Title Insurance Co.

United States District Court, E.D. Missouri, Eastern Division

March 7, 2017




         This matter is before the Court on Defendant's Motion to Dismiss Plaintiffs First Amended Complaint (ECF No. 31). The motion is fully briefed and ready for disposition.


         Plaintiff originally filed this action in the Circuit Court of St. Louis County, Missouri on August 18, 2015. Defendant Alliant National Title Insurance Company ("Alliant") removed the case on September 15, 2015 based on diversity jurisdiction. On May 24, 2016, this Court granted Defendant's motion for more definite statement and ordered the Plaintiff to file a First Amended Complaint. (ECF No. 24) Plaintiff filed his First Amended Complaint on June 24, 2016, alleging claims for Declaratory Judgment (Count I); Breach of Contract (Count II); Negligence (Count III); and Punitive Damages (Count IV).

         Plaintiff claims that on February 3, 2011, he purchased the property as a homestead at 11931 Roseview Lane in St. Louis, Missouri ("Roseview property") and executed a Deed of Trust and Security Agreement in favor of Gary Stafford of G. Stafford Company (collectively "Stafford"). (First Am. Compl. ("FAC") ¶ 9, ECF No. 27) Additionally, Plaintiff asserts that he executed a Promissory Note in favor of Stafford in the amount of $57, 000. (Id. at ¶ 10) On that same date, Defendant Alliant National Title Insurance Company ("Alliant") issued an ALTA Owners Policy of Title Insurance insuring against loss or damage by reason of any defect or lien or encumbrance on the title. (Id. at ¶¶ 6-7)

         According to Plaintiff, G. Stafford Company borrowed $46, 468.96 from Sun Security Bank ("Bank") on the Roseview property and pledged the Deed of Trust as collateral on November 10, 2010. (Id. at ¶¶ 11-13) When G. Stafford defaulted on the loan, the Bank initiated foreclosure proceedings against Plaintiff. (Id. at ¶ 20) Plaintiff asserts that Defendant knew or could reasonably have known about the pattern and practice of G. Stafford's pledging deeds of trust and promissory notes of unsuspecting homeowners as collateral for a personal Gary Stafford loan, then defaulting and subjecting homeowners to foreclosure. (Id. at ¶¶ 22, 25) Plaintiff further avers that Defendant was complicit in and profited from Gary Stafford's mortgage fraud by issuing title insurance polies to G. Stafford and to homeowners whose homes were encumbered by G. Stafford loans. (Id. at ¶¶ 23, 26-28) Plaintiff contends that Alliant failed to disclose prior encumbrances to Plaintiff, causing damages. (Id. at ¶ 31)

         Plaintiffs First Amended Complaint requests declaratory judgment declaring the rights and obligations of the parties under the Title Insurance Policy ("Policy") issued by Defendant (Count I). Plaintiff further presents a claim for breach of contract for failure to take corrective action to cure the defect in Plaintiffs title (Count II); negligence for failing to discover and disclose the title defects and liens (Count III); and punitive damages for being aware of and complicit in G. Stafford's mortgage fraud by selling homeowners title insurance policies and failing to disclose liens (Count IV).

         In response, Defendant filed a Motion to Dismiss Plaintiffs First Amended Complaint (ECF No. 31). Defendant contends that Plaintiff has not alleged any facts establishing liability on part of Alliant for a purported fraud perpetrated by Stafford or for failing to disclose a lien in favor of Stafford. Further, Defendant asserts that Plaintiff cannot establish a duty because Alliant did not insure against the claimed fraud of Stafford and because the Sun Security Deed of Trust was no longer an encumbrance when Plaintiff purchased the property.[1] Defendant thus argues that the First Amended Complaint fails to state a claim upon which relief can be granted such that dismissal is appropriate.

         Legal Standards

         With regard to motions to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed if it fails to plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007) (abrogating the "no set of facts" standard set forth in Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). While the Court cautioned that the holding does not require a heightened fact pleading of specifics, "a plaintiffs 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." Id. at 555. In other words, "[f]actual allegations must be enough to raise a right to relief above the speculative level. . . ." Id. This standard simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the claim. Id. at 556.

         Courts must liberally construe the complaint in the light most favorable to the plaintiff and accept the factual allegations as true. See Id. at 555; see also Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir. 2008) (stating that in a motion to dismiss, courts accept as true all factual allegations in the complaint); Eckert v. Titan Tire Corp., 514 F.3d 801, 806 (8th Cir. 2008) (explaining that courts should liberally construe the complaint in the light most favorable to the plaintiff). Further a court should not dismiss the complaint simply because the court is doubtful that the plaintiff will be able to prove all of the necessary factual allegations. Twombly, 550 U.S. at 556. However, "[w]here the allegations show on the face of the complaint there is some insuperable bar to relief, dismissal under Rule 12(b)(6) is appropriate." Benton v. Merrill Lynch & Co., 524 F.3d 866, 870 (8th Cir. 2008) (citation omitted). Courts '"are not bound to accept as true a legal conclusion couched as a factual allegation.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). When considering a motion to dismiss, a court can "begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. at 679. Legal conclusions must be supported by factual allegations to survive a motion to dismiss. Id.


         Defendant argues that Plaintiff has failed to plead any facts which give rise to a cause of action against Alliant. Instead, Plaintiff raises claims of fraud allegedly committed by nonparties Stafford against Plaintiff. In addition Defendant contends that Plaintiff does not provide facts sufficient to state a claim against Defendant Alliant under the Policy purchased by Plaintiff because there was no defect in Plaintiffs title, and Alliant did not insure against the alleged fraud of Stafford. In response, Plaintiff contends that he has alleged facts sufficient to state a claim because Defendant failed to honor its contractual obligations under the policy by failing to discover the defects in the title and failing to indemnify Plaintiff for losses incurred while defending title to the Roseview property.

         Liberally construing Plaintiff's pro se First Amended Complaint and accepting all facts as true, the Court finds that dismissal is not warranted at this time. The crux of Defendant's argument for dismissal is that there was no defect in in Plaintiffs title because the Sun Security Deed of Trust had been foreclosed upon and purchased by G. Stafford Company prior to Plaintiffs purchase and Alliant's involvement. Alliant points to its exhibits indicating that Sun Security Bank reassigned the Deed of Trust on the Roseview property to G. Stafford Company on June 1, 2010; G. Stafford Company defaulted on the Note; the Deed of Trust was foreclosed upon in July 2010; and G. Stafford Company purchased the property and sold it to Plaintiff in 2011. What Defendant does not address is the loan to G. Stafford Company from Sun Security Bank, with the Roseview property as collateral. The exhibits attached to Plaintiffs First Amended Complaint shows that G. Stafford Company took out a $47, 000 loan on November 10, 2009, and then changed the terms of agreement in November, 2010, changing the maturity date to January 3, 2012 and securing the agreement ...

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