United States District Court, W.D. Virginia, Charlottesville Division
K. MOON SENIOR UNITED STATES DISTRICT JUDGE.
matter is before the Court upon Defendant Closure Title &
Settlement Company's (“Closure Title”) motion
to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) and Fed.R.Civ.P.
12(b)(6). (Dkt. 6). Closure Title issues title insurance
policies underwritten by Plaintiff Stewart Title Guaranty
Company (“Steward Title”). Underlying errors in
title policies issued by Closure Title sparked litigation
that resulted in a settlement funded by Stewart Title.
Stewart Title filed suit against Closure Title in this Court
for breach of contract. Closure Title now moves to dismiss,
arguing that (1) the Court cannot exercise diversity
jurisdiction pursuant to 28 U.S.C. § 1332 because the
parties' agreement and Virginia's voluntary payment
doctrine preclude Stewart Title from recovering over $75,
0000 in damages; and (2) Stewart Title fails to state a claim
for breach of contract under Virginia law.
arguments fail. Closure Title has not met its burden of
establishing, to the point of legal certainty, that Stewart
Title cannot recover damages in excess of $75, 000. Thus, the
Court finds that the amount in controversy is sufficient for
it to exercise diversity jurisdiction. Moreover, Stewart
Title pleads sufficient factual allegations to state a claim
for breach of contract. Accordingly, the motion to dismiss
will be denied in full.
motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(1) tests a
district court's subject matter jurisdiction. Typically,
the Court must accept as true all material factual
allegations in the complaint and construe the complaint in
the plaintiff's favor. Warth v. Seldin, 422 U.S.
490, 501 (1975). However, when the factual basis for subject
matter jurisdiction is challenged, “the burden of
proving subject matter jurisdiction is on the
plaintiff.” Richmond, Fredericksburg & Potomac
R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.
1991). A court “may consider evidence outside the
pleadings without converting the proceeding into one for
summary judgment, ” but the “moving party should
prevail only if the material jurisdictional facts are not in
dispute and the moving party is entitled to prevail as a
matter of law.” Id. (citation omitted).
motion to dismiss pursuant to Fed R. Civ. P. 12(b)(6) tests
the legal sufficiency of a complaint to determine whether a
plaintiff has properly stated a claim; it “does not
resolve contests surrounding the facts, the merits of a
claim, or the applicability of defenses.”
Republican Party of N.C. v. Martin, 980 F.2d 943,
952 (4th Cir. 1992). The Court must take all facts and
reasonable inferences in favor of the plaintiff, disregard
any legal conclusions, and not credit any formulaic
recitations of the elements. Iqbal v. Ashcroft, 556
U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555, 557 (2007).
Facts As Alleged
Stewart Title is a title insurance underwriter incorporated
in Texas, with its principal place of business in Houston,
Texas. Defendant Closure Title is a limited liability company
organized in Virginia, with its principal place of business
in Charlottesville, Virginia. (Complaint ¶¶ 1-2).
Closure Title specializes in closing real estate transactions
2007, Stewart Title and Closure Title entered into a Title
Insurance Underwriting Agreement (“the
Agreement”) authorizing Closure Title to issue title
insurance policies underwritten by Stewart Title.
(Id. ¶ 17). Under the Agreement, Closure Title
has several duties, including (but not limited to) issuing
title policies “according to the recognized
underwriting practices”; issuing title policies
“based on a written report of title resulting from a
complete search and examination of the public records,
surveys, and inspections”; and taking
“appropriate exception in title policies for liens,
defects, encumbrances and/or objections disclosed by a
complete search and examination of title.”
(Id. ¶ 18(a)-(e); dkt. 1-2 at 1-2, 4).
suit stems from two real estate transactions in Albemarle
County, Virginia: the “Lot C3” transaction and
the “Lot C6” transaction. On March 5, 2015, BD
Land Properties, LLC (“BD Land”) sold “Lot
C3” to Willow Lake Land Trust (“Willow
Lake”). (Complaint ¶¶ 20- 21). On June 17,
2015, BD Land sold “Lot C6” to Willow Lake.
(Id. ¶ 29-30). To fund construction costs for
both lots, Willow Lake secured two $240, 000 loans from
Friendly Rehab Funds (“Friendly Rehab”), a
Virginia-based private real estate lending business, in
exchange for a first priority deed of trust in each lot.
(Id. ¶ 22, 31).
Title conducted the closing for both transactions, each time
issuing a lender's title policy underwritten by Stewart
Title to Friendly Rehab. (Id. ¶ 24, 33).
Following both transactions, Closure Title recorded a deed of
trust for the benefit of Friendly Rehab, but each deed
erroneously listed the grantor as JB River Properties,
instead of Willow Lake. (Id. ¶ 26, 34-35).
After Closure Title recorded these deeds, two deeds of trust
were subsequently filed for each lot, one by Closure Title
for the benefit of BD Land and the other by Richmond Masonry
Company (“Richmond Masonry”) for its own benefit.
(Id. ¶¶ 27-28, 36-37). All four of
these deeds correctly listed Willow Lake as the
one year after the sale of Lot C3, Friendly Rehab commenced
foreclosure proceedings against Lot C3 and scheduled a
foreclosure sale. (Id. ¶ 38). Richmond Masonry
did the same and sent Friendly Rehab a notice that its deed
of trust was defective. (Id. ¶¶ 39-40).
After receiving this notice, Friendly Rehab cancelled its
foreclosure sale and, with the aid of legal counsel funded by
Stewart Title, moved unsuccessfully for an injunction
prohibiting Richmond Masonry from proceeding with its
foreclosure sale. (Id. ¶¶ 41-44). In late
September 2016, Biringer Builders, Inc., an affiliate of
Richmond Masonry, purchased Lot C3 at Richmond Masonry's
foreclosure sale. (Id. ¶¶ 45-46).
later, in October 2016, Friendly Rehab-again using legal
counsel funded by Stewart Title-filed suit in Albemarle
County Circuit Court seeking a declaration that (1) Biringer
Builders held title to Lot C3 subject to a constructive trust
for the benefit of Friendly Rehab, and (2) Friendly Rehab
held title to Lot C6. (Id. ¶ 49). After two
years of litigation, the case settled. The Circuit Court
entered a consensual final order determining as a matter of
law that (1) the errors in both the Lot C3 and Lot C6 deeds
of trust were “scrivener's error[s]”
committed by attorneys employed by Friendly Rehab; (2)
Friendly Rehab held title to Lot C3 subject to BD Land's
deed; and (3) Friendly Rehab held title to Lot C6 subject to
various constructive trusts and liens. (Id. ¶
54). Stewart Title funded a settlement in the amount of $120,
000 and paid $72, 786.98 in attorneys' fees.
(Id. ¶¶ 55-56).
Title has now sued Closure Title for breach of contract,
alleging that Closure Title breached its duties under the
Agreement by issuing lender's title policies in which the
owner of the C3 and C6 lots did not match the owner listed on
Friendly Rehab's two deeds of trust. As a result of these
alleged breaches, Stewart Title asserts that it suffered
$192, 786.98 in losses due to the Albemarle County
litigation. Stewart Title alleges that, under the Agreement,
Closure Title is obligated to indemnify Stewart Title for
these losses. (Id. ¶¶ 57-62).
Title moves to dismiss under both Fed.R.Civ.P. 12(b)(1) and
Fed.R.Civ.P. 12(b)(6). Applying Virginia law to its
interpretation of the parties' Agreement,  ...