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Reynoso v. Fidelity National Title Insurance Co.

United States District Court, Ninth Circuit

December 31, 2013

RAFAEL REYNOSO & LISA REYNOSO, Plaintiffs,
v.
FIDELITY NATIONAL TITLE INSURANCE COMPANY, Defendant.

Sandy N. Webb, LAW OFFICES OF SANDY N. WEBB, PC, Portland, Oregon, Attorney for Plaintiffs.

Matthew R. Cleverley, FIDELITY NATIONAL LAW GROUP, Seattle, Washington, Attorney for Defendant.

OPINION & ORDER

MARCO A. HERNANDEZ, District Judge.

Plaintiffs Rafael and Lisa Reynoso bring this breach of contract action against Defendant Fidelity National Title Insurance Company, contending that Defendant wrongfully denied Plaintiffs' claim under a title insurance policy issued to Plaintiffs by Defendant. Defendant requests that the Court judicially notice several documents and moves to dismiss for failure to state a claim. I grant Defendant's request for judicial notice to the extent that I judicially notice that Plaintiffs previously filed a complaint in Clackamas County which resulted in a General Judgment of Dismissal. I deny the motion to dismiss because accepting the allegations in the First Amended Complaint as true, Plaintiffs state a claim.

BACKGROUND

The facts are taken from the First Amended Complaint. Plaintiffs own real property in Estacada, Oregon pursuant to a statutory warranty deed recorded on May 20, 2010. First. Am. Compl. at ¶ 1. When they purchased the property, Plaintiffs purchased a title insurance policy from Defendant, bearing policy number XX-XXX-XX-XXXXXX. Id. at ¶ 2.

When Plaintiffs' property was for sale, Karen Anderson-Tobin, who owns adjoining property, told the selling real estate agent that the driveway for Plaintiffs' property was not entirely on Plaintiffs' property's but instead, about one-half to two-thirds of the driveway actually sat on the Anderson-Tobin property. Id. at ¶ 3.[1] Anderson-Tobin told the selling agent that she allowed the prior owner of Plaintiffs' property to use the driveway. Id. at ¶ 5. In the initial listing of Plaintiffs' property, the seller's agent noted that the driveway encroached on the neighboring lot, but that information was later erased. Id. at ¶ 6. Anderson-Tobin realized that the listing no longer contained the information about the driveway and then marked the survey stake in the driveway showing the location of the lot line with a hot pink spray paint arrow. Id . Later, the arrow was erased. Id.

When Plaintiffs saw the sale listing, it did not disclose any issues with access, driveways, lot lines, or encumbrances. Id. at ¶ 8. Plaintiffs apparently bought the property unaware of the driveway issue. Later, a tree fell on the house and as a result, Plaintiffs learned of problems with the foundation and the well. Id. at ¶ 12. Plaintiffs had to install a temporary driveway for a new house to be constructed. Id.

Plaintiffs submitted a claim under their title insurance policy on June 22, 2011. Id. at ¶ 9. Defendant denied the claim on September 29, 2011 due to the "survey exclusion." Id .; see also Ex. B1 to Compl. at 2-3 (Sept. 29, 2011 claim denial letter citing the exclusion for encroachments which would have been disclosed by a correct survey but which are not shown by public records). Plaintiffs also filed a civil lawsuit in Clackamas County Circuit Court regarding the failure of the inspection report to disclose that the home was built without a permit or proper foundation and that there were unrevealed issues with the well and the driveway. Id. at ¶ 11. That matter was ultimately settled. Id . However, Plaintiffs continue to have unreimbursed expenses of $50, 000 to build the driveway as well as $28, 940 in attorney fees and $4, 400 in expert, filing, and other fees which they believe are covered by the policy. Id. at ¶¶ 10, 11.

Plaintiffs allege that the title insurance policy at issue has an exception from coverage for items that would be disclosed by a proper survey. Id. at 16. They further allege that a survey was conducted in 1997 after the driveway and residence on their property was in place and the survey raised no issue with the driveway. Id .; Ex. C to Compl. They contend that neither the survey nor the public records would have disclosed "this matter[.]" Id. at ¶ 17. Based on these facts, they contend that Defendant breached the title insurance policy by denying their claim.

STANDARDS

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sufficiency of the claims. Navarro v. Block , 250 F.3d 729, 732 (9th Cir. 2001). "All allegations of material fact are taken as true and construed in the light most favorable to the nonmoving party." Am. Family Ass'n, Inc. v. City & Cnty. of S.F. , 277 F.3d 1114, 1120 (9th Cir. 2002). However, the court need not accept conclusory allegations as truthful. See Warren v. Fox Family Worldwide, Inc. , 328 F.3d 1136, 1139 (9th Cir. 2003) ("[W]e are not required to accept as true conclusory allegations which are contradicted by documents referred to in the complaint, and we do not necessarily assume the truth of legal conclusions merely because they are cast in the form of factual allegations") (internal quotation marks, citations, and alterations omitted).

A motion to dismiss under Rule 12(b)(6) will be granted if a plaintiff alleges the "grounds" of his "entitlement to relief" with nothing "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action[.]" Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). "Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)[.]" Id . (citations and footnote omitted).

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[, ]" meaning "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) (internal quotation marks omitted). Additionally, "only a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 679. A ...


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