United States District Court, S.D. California
CAMILA S. RUVALCABA, Plaintiff,
OCWEN LOAN SERVICING, LLC, et al., Defendants.
ORDER: (1) GRANTING EQUITY TITLE COMPANY'S MOTION
TO DISMISS; AND (2) DENYING EQUITY TITLE COMPANY'S MOTION
TO STRIKE [ECF No. 107]
Cynthia Bashant United States District Judge
Camila Ruvalcaba filed her Third Amended Complaint
(“TAC”) alleging one count of negligence against
Equity Title Company. (ECF No. 99.) In response, Equity Title
filed a Motion to Dismiss and a Motion to Strike. (ECF No.
107.) Plaintiff opposes both motions. (ECF No. 115.)
Court finds Equity Title's motions suitable for
determination on the papers submitted and without oral
argument. See Fed. R. Civ. P. 78(b); Civ. L.R.
7.1(d)(1). For the following reasons, the Court GRANTS Equity
Title's Motion to Dismiss and DENIES its Motion to
entered into a mortgage loan with Ocwen Loan Servicing, LLC
(“Ocwen”). (TAC ¶ 37.) In August 2013,
Plaintiff decided to refinance the Ocwen loan with Prospect
Mortgage, LLC (“Prospect”). (Id. ¶
44.) People's Escrow Inc., an escrow company, and Equity
Title, a title company, assisted with the refinance.
(Id. ¶ 53.) People's Escrow's role was
to ensure Prospect sent Equity Title the proper payoff amount
and, in turn, Equity Title sent the proper payoff amount to
Ocwen. (Id.) As for Equity Title, it was responsible
for ensuring that: “(1) Ocwen would release and
discharge [its] Deed of Trust for the Property; (2) a Deed of
Trust would be recorded for the Property on behalf of
Prospect; and (3) therefore, Prospect would then have a first
position lien on the Property following Plaintiff's
Refinance.” (Id. ¶ 92.)
November 21, 2013, Prospect sent Lender's Closing
Instructions to Equity Title. (TAC ¶ 91.) The Lender's
Closing Instructions state: “You Are Not Authorized to
Close this Loan if . . . You have not verified within
forty-eight (48) hours prior to closing, the payoff amount .
. . .” (Id. ¶ 93.) Around four days
later, Equity Title sent Prospect a Closing Protection
Letter. (Id. ¶ 89.) The Closing
Protection Letter states that Equity Title will reimburse
Prospect for actual losses incurred due to Equity Title's
failure to comply with the Lender's Closing Instructions.
November 27, 2013, escrow closed and Prospect wired $284,
247.23 to Equity Title for Ocwen's payoff (“Payoff
Funds”) and $1, 420.00 to Equity Title for its
insurance services. (TAC ¶ 97.) The Payoff Funds were
about $4, 000.00 less than the amount listed on the final
payoff quote that Ocwen sent to Prospect on November 22,
2013. (Id. ¶ 83.) Escrow did not receive the
final payoff quote. (Id. ¶ 85.) Thus, the
Payoff Funds instead reflected a payoff quote that Ocwen sent
to Prospect on November 20, 2013, which Escrow did receive.
(Id. ¶¶ 81-82.)
December 2, 2013, Equity Title wired the Payoff Funds to
Ocwen. (TAC ¶ 112.) Equity Title also recorded a grant
deed for Plaintiffs interest and a deed of trust in favor of
Prospect. (Id. ¶ 105.) But as a result of
receiving an incorrect payoff amount, Ocwen allegedly never
executed a release and discharge of its prior deed of trust.
(Id. ¶ 96.) Consequently, Prospect did not hold
a valid first lien on the property. (Id. ¶
143.) Meanwhile, Plaintiff started making mortgage payments
to Prospect instead of Ocwen because she believed the Ocwen
loan was paid off. (Id. ¶ 146.) A dispute then
arose, leading to Ocwen sending “debt collection
communications to Plaintiff ranging from delinquency notices
to foreclosure threats” and reporting
“outstanding delinquencies concerning the disputed
alleged debt on Plaintiffs credit reports, which led to
Plaintiff suffering severe emotional distress.”
(Id. ¶ 147.)
on these actions, Plaintiff alleges Equity Title
“purposely or negligently failed to verify the proper
payoff amount to Ocwen within forty-eight (48) hours prior to
closing, which was noncompliant with Prospect's Closing
Instructions.” (TAC ¶ 95.) Additionally, the
Lender's Closing Instructions required Equity Title to
send a Lender's Title Policy to Prospect by December 27,
2013. (Id. ¶ 133.) Plaintiff alleges a drafted
Lender's Title Policy would have revealed to Equity Title
that Ocwen never released and discharged its deed of trust.
(Id.) Accordingly, Plaintiff alleges Equity Title
failed to take any remedial action to fix the deficiency in
the payoff amount. (Id. ¶ 135.)
motion to dismiss pursuant to 12(b)(6) of the Federal Rules
of Civil Procedure tests the legal sufficiency of the claims
asserted in the complaint. Fed.R.Civ.P. 12(b)(6); Navarro
v. Block, 250 F.3d 729, 732 (9th Cir. 2001). The court
must accept all factual allegations pleaded in the complaint
as true and must construe them and draw all reasonable
inferences from them in favor of the non-moving party.
Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38
(9th Cir. 1996). To avoid a Rule 12(b)(6) dismissal, a
complaint need not contain detailed factual allegations;
rather, it must plead “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A
claim has facial plausibility when the plaintiff pleads
factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009) (citing Twombly, 550 U.S. at 556).
“Where a complaint pleads facts that are ‘merely
consistent with' a defendant's liability, it
‘stops short of the line between possibility and
plausibility of entitlement to relief.'”
Id. (quoting Twombly, 550 U.S. at 557).
plaintiff's 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.”
Twombly, 550 U.S. at 555 (alteration in original)
(quoting Papasan v. Allain, 478 U.S. 265, 286
(1986)). A court need not accept “legal
conclusions” as true. Iqbal, 556 U.S. at 678.
Despite the deference the court must pay to the
plaintiff's allegations, it is not proper for the court
to assume that “the [plaintiff] can prove facts that it
has not alleged or that the defendants have violated the . .
. law in ways that have not been alleged.” Assoc.
Gen. Contractors of Cal., Inc. v. Cal. State Council of
Carpenters, 459 U.S. 519, 526 (1983).
general rule, a court freely grants leave to amend a
complaint that has been dismissed. Fed.R.Civ.P. 15(a);
Schreiber Distrib. Co. v. Serv-Well Furniture Co.,
806 F.2d 1393, 1401 (9th Cir. 1986). However, leave to amend
may be denied when “the court determines that the
allegation of other facts consistent with the challenged
pleading could not possibly cure the deficiency.”
Schreiber, 806 F.2d at 1401 (citing Bonanno v.
Thomas, 309 F.2d 320, 322 (9th Cir. 1962)).
Title raises three arguments to dismiss Plaintiff's
negligence claim: (1) Equity Title does not owe a duty of
care to Plaintiff; (2) Equity Title's actions do not
constitute a breach of duty; and (3) Plaintiff's claim is
time-barred. (ECF No. 107.) The Court agrees with reasons one
and three. First, Plaintiff's factual allegations
do not establish that Equity Title owed a duty to Plaintiff.
Second, from the face of her pleading, Plaintiff's claim
Duty of Care
order to state a claim for negligence, Plaintiff must allege
that: (1) Equity Title owed her a duty to exercise due care;
(2) the company breached that duty; (3) causation; and (4)
damages. See Merrill v. Navegar, Inc., 26 Cal.4th
465, 477 (2001). The Court will first analyze whether Equity
Title owed a duty of care to Plaintiff under the liability
standards for escrow companies. The Court then addresses two
competing theories Plaintiff raises in her Opposition for
establishing Equity Title owed her a duty.
of an Escrow Company
escrow holder is an agent and fiduciary of the parties to the
escrow.” Summit Fin. Holdings, Ltd. v. Cont'l
Lawyers Title Co., 27 Cal.4th 705, 711 (2002). Its
“obligations are limited to compliance with the
parties' instructions.” Id. The escrow
holder is generally not liable for a “failure to do
something not required by the terms of the escrow or for a
loss incurred while obediently following [its] escrow
instructions.” Axley v. Transamerica Title Ins.,
Co., 88 Cal.App.3d 1, 9 (1978) (quoting Lee v. Title
Ins. & Tr. Co., 264 Cal.App.2d 160, 163 (1968)).
Additionally, an escrow holder “has no general duty to
police the affairs of its depositors.” Summit,
27 Cal.4th at 711. However, “[a]n escrow holder is a
fiduciary and like any other fiduciary is under a duty to
communicate to [its] principal knowledge acquired in the
course of [its] agency with respect to material facts which
might affect the principal's decision as to a pending
transaction.” Axley, 15188 Cal.App.3d at 9
(citing Contini v. W. ...