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Immobiliare, LLC v. Westcor Land Title Insurance Co.

United States District Court, E.D. California

December 13, 2019

IMMOBILIARE, LLC, a California Limited Liability Company, Plaintiff,
v.
WESTCOR LAND TITLE INSURANCE COMPANY, a South Carolina Corporation, and DOES 1-50, Defendants. WESTCOR LAND TITLE INSURANCE COMPANY, a South Carolina Corporation, Cross-Complainant,
v.
IMMOBILIARE, LLC, a California Limited Liability Company; CORPORATE AMERICA LENDING, INC., a California Corporation, and ROES 1-20, Cross-Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING CROSS-DEFENDANT'S MOTION TO DISMISS UNDER RULES 9(B) AND 12(B)(6). (ECF NO. 13)

          LAWRENCE J. O'NEILL, UNITED STATES CHIEF DISTRICT JUDGE.

         I. PRELIMINARY STATEMENT TO PARTIES AND COUNSEL

         Judges in the Eastern District of California carry the heaviest caseloads in the nation, and this Court is unable to devote inordinate time and resources to individual cases and matters. Given the shortage of district judges and staff, this Court addresses only the arguments, evidence, and matters necessary to reach the decision in this order. The parties and counsel are encouraged to contact the offices of United States Senators Dianne Feinstein and Kamala Harris to address this Court's inability to accommodate the parties and this action. The parties are required to reconsider consent to conduct all further proceedings before a Magistrate Judge, whose schedules are far more realistic and accommodating to parties than that of any District Judge in the Eastern District of California, who must prioritize criminal and older civil cases.

         Civil trials in the Eastern District of California trail until the District Judge becomes available and are subject to suspension mid-trial to accommodate criminal matters. Civil trials are no longer reset to a later date if the District Judge is unavailable on the original date set for trial.

         II. INTRODUCTION

         After Defendant Westcor Land Title Insurance Company (“Westcor”) removed this action brought by Plaintiff Immobiliare, LLC[1] (“Immobiliare”) in the Fresno Superior Court to this Court based on diversity jurisdiction, Westcor filed a Cross-Complaint against Immobiliare and Corporate American Lending, Inc. (“CAL”) (collectively, “Cross-Defendants”) on June 7, 2019. ECF No. 1, Exh. A; id. No. 8. The Cross-Complaint asserts four causes of action: (1) fraudulent concealment, (2) breach of implied covenant of good faith and fair dealing, (3) declaratory relief, and (4) rescission. ECF No. 8. In response, CAL brought the instant Motion to Dismiss (the “Motion”) the Cross-Complaint under Federal Rule of Civil Procedure 9(b) and 12(b)(3) as to the first, third, and fourth causes of action on August 1. Id. No. 13. Westcor, however, stipulated with CAL to dismiss its third and fourth cross-claims on August 21, leaving only the first cross-claim for fraudulent concealment to be subject to this Motion. Id. No. 15. Westcor then filed its Opposition on August 21, id. No. 16, and CAL replied on August 29, id. No. 17.

         Pursuant to Local Rule 230(g), the Court finds this matter suitable for a decision on the papers. Having carefully considered the parties' submissions and the record in this case in light of the relevant law, the Court GRANTS the Motion.

         III. BACKGROUND

         The following facts are drawn from the Cross-Complaint and are accepted as true only for the purposes of this Motion. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). This entire action originates from Immobiliare's purchase of a parking lot property (the “parking lot”) located in the City of Fresno and owned by Cedar Avenue Professional Offices Owners Association (“Cedar”) through a tax sale for $11, 322 on April 28, 2015. ECF No. 8 ¶¶ 7, 10. Cedar was unaware of the tax sale had taken place because the notice of the sale was sent to an incorrect address. Id. ¶ 10.

         Cedar subsequently learned about the tax sale, and its attorney sent a letter to Immobiliare on July 30, 2015 “advising [Immobiliare] of the situation and offering to buy back” the parking lot, and if Immobiliare refused, Cedar threatened to demand arbitration to resolve their dispute pursuant to a documents for conditions, covenants and restrictions, which ran with the land and had been recorded in the Fresno County Recorder's Office. Id. ¶¶ 8, 12, 14. Immobiliare, through its agent CAL, “placed an order with Tax Title Services (‘TTS') for title insurance” on the same day Cedar sent its letter. Id. ¶¶ 15-16. When Immobiliare, through its agent CAL, submitted an application for title insurance four months later, it misrepresented that the parking lot was vacant when it was actually being used, and that it had not been made aware or advised of any threat of legal action regarding the validity of ownership of the parking lot. Id. ¶¶ 14, 16. Based on the misrepresentations, Westcor, in February 2016, “issued a title policy to Immobiliare with policy limits of $11, 322 - the amount Immobiliare paid” for the parking lot. Id. ¶ 18, 42-45.

         Because Immobiliare refused to resell the parking lot back to Cedar, Cedar filed a petition for rescission of sale of property pursuant to improperly noticed tax sale (the “petition for rescission”) on April 28, 2016. Id. ¶¶ 14, 22, 29. The Fresno County Tax Collector contacted Immobiliare about the petition for rescission sometime shortly after April 28, then again in May and on June 9, 2016. Id. ¶ 23, 26, 29. Without informing Westcor of the legal challenge to the ownership of the parking lot, Immobiliare sought, through its agent CAL, for policy limits increases twice to $150, 000 then again to $485, 000, which Westcor approved on April 15 and June 20, 2016, respectively. Id. ¶¶ 20-21, 30, 32. Westcor claims that Cross-Defendants knew about both the potential legal challenge to the ownership of the parking lot when Immobiliare applied for title insurance and the petition for rescission when it sought to increase its policy limits. Id. ¶¶ 14-32, 41.

         On July 12, 2016, Fresno County Board of Supervisors (the “Board”) held a hearing on whether to rescind the tax sale of the parking lot in which Immobiliare appeared and participated. Id. ¶ 33. After the hearing, the Board rescinded the tax sale and returned Immobiliare's $11, 793 payment. Id. ¶ 34. On August 4, Immobiliare filed with Westcor “a false claim for policy benefits in the amount of $485, 000 based on the rescission of the tax sale” stating that it “had no knowledge of any claim or the Petition prior to the day before [the July 12, 2016] hearing.” Id. ¶ 35 (internal quotation marks omitted). Westcor proceeded to investigate Immobiliare's claim only to discover the fraudulent concealment, so it brought the instant cross-action after Immobiliare had filed the original action to recover on the title insurance. Id. ¶¶ 36-37.

         IV. LEGAL STANDARD

         A motion to dismiss under Rule 12(b)(6) challenges the legal sufficiency of the opposing party's pleadings. Dismissal of an action under Rule 12(b)(6) is proper where there is either a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). When considering a motion to dismiss for failure to state a claim under Rule 12(b)(6), “[a]ll factual allegations in the complaint are accepted as true, and the pleadings construed in the light most favorable to the nonmoving party.” Doe I v. Nestle USA, Inc., 766 F.3d 1013, 1018 (9th Cir. 2014) (internal quotation marks and citation omitted). “In reviewing the sufficiency of a complaint, [courts are limited] to the ...


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