State Resources Corp. v. Security Union Title Insurance Company

Filing 13

OPINION AND ORDER by Judge Frank H. Seay denying 5 Motion to Dismiss Case for Failure to State a Claim. (trl, Chambers)

IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF OKLAHOMA
STATE RESOURCES CORP.,

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)
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) No. CIV-12-419-FHS
)
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)
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Plaintiff,
v.
SECURITY UNION TITLE INSURANCE,
COMPANY,
Defendant.

OPINION AND ORDER
Before the Court for its consideration is the Motion to
Dismiss (Dkt. No. 5) filed by Defendant, Security Union Title
Insurance Company (“Security Union”), for failure to state a claim
upon which relief can be granted pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure.

For the reasons stated below,

Security Union’s request for dismissal is denied.
On January 13, 2010, Peter J. Mothersole and Michelle R.
Mothersole (the “Mothersoles”) executed a promissory note in favor
of The First National Bank of Davis (the “Bank”) in the amount of
$315,000.00.

This loan was secured by the Mothersoles’ execution

of a real estate mortgage with power of sale in favor of the Bank
encumbering

certain

County, Oklahoma.

real

property

(the

“Property”)

in

Hughes

On January 19, 2010, the Bank obtained title

insurance policy no. 75307-80142871 (the “Policy”) from Security
Union

in

the

mortgage-lien
Mothersoles.

amount

of

interest

$315,000.00
in

the

in

order

Property

to

protect

purchased

by

its
the

Under the policy, the Bank and its successors and/or

assigns are the named insured.

Among other things, the Policy

insures against loss or damage, not exceeding the insurance amount
1

of $315,000.00, sustained or incurred by the insured by reason of
“[t]he lack of priority of the lien of the Insured Mortgage upon
the Title over any other lien or encumbrance.”

Policy, p. 1

(Exhibit “A” to Complaint).
Subsequent

to

the

issuance

of

the

Bank’s

loan

to

the

Mothersoles it was discovered by the Federal Deposit Insurance
Corporation, as Receiver for The First National Bank of Davis (the
“FDIC”),
Property.

that
1

a

prior

recorded

mortgage

existed

against

the

This prior mortgage was executed in favor of the United

States of America, acting through the Farm Service Agency, United
States

Department

of

Agriculture

(the

“FSA”),

securing

debts

totaling $570,000.00 and was recorded in the Hughes County Clerk’s
records on September 9, 2009.

This FSA mortgage was not excepted

from coverage under Schedule B of the Policy issued by Security
Union in favor of the FDIC, through the Bank.

The FDIC requested

that the FSA subordinate its mortgage to the FDIC mortgage, but the
FSA declined to do so.

Based on its lack of priority with respect

to the FSA mortgage, the FDIC notified Security Union on February
16, 2012, of its claim and demand for payment under the Policy.
Security Union has failed to accept and pay the FDIC’s claim.

On

March 10, 2012, the FDIC filed this lawsuit against Security Union
alleging breach of contract for Security Union’s failure to pay the
FDIC’s claim under the Policy originally issued to the Bank.2

1

On March 11, 2011, the Bank was declared insolvent by the
Office of the Comptroller of the Currency and the FDIC was
appointed as the Bank’s receiver. The Bank succeeded to all
rights, titles, powers, and privileges of the Bank.
2

On March 26, 2012, the FDIC sold its right, title, and
interest in the Mothersoles’ loan to Plaintiff, State Resources
Corp. On December 4, 2012, the Court entered an Order
substituting State Resources Corp. for the FDIC as Plaintiff
herein.
2

Under Rule 8(a)(2) of the Federal Rules of Civil Procedure, a
party asserting a claim must present in its pleading “a short and
plain statement of the claim showing that [it] is entitled to
relief.”

When testing the sufficiency of a complaint, the Court

accepts the allegations of the complaint as true and views all
allegations in the light most favorable to plaintiff.

Perkins v.

Kansas Dept. of Corrections, 165 F.3d 803, 806 (10th Cir. 1999).
The pleading standard under Rule 8 “does not require ‘detailed
factual allegations,’ but it demands more than an unadorned, thedefendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 129
S.Ct. 1937, 1949 (2009)(quoting Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 570 (2007).

“Naked assertions” without any “further

factual enhancement” will not suffice.

Twombly, 550 U.S. at 557.

Likewise, “a pleading that offers ‘labels and conclusions’ or ‘a
formulaic recitation of the elements of a cause of action will not
do.’” Iqbal, 129 S.Ct. at 1949 (quoting Twombly, 550 U.S. at 555).
Under this pleading standard, “[f]actual allegations must be
enough to raise a right to relief above the speculative level[.]”
Twombly, 550 U.S. at 545.

Pursuant to Rule 8, “[t]o 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.’” Iqbal, 129 S.Ct. at 1949 (quoting Twombly,
550 U.S. at 570).

“The plausibility standard is not akin to a

‘probability requirement,’ but it asks for more than a sheer
possibility that a defendant has acted unlawfully.”
Twombly, 550 U.S. at 556).

Id. (quoting

To satisfy this standard, Plaintiff

must “nudge[] [its] claim[] across the line from conceivable to
plausible.”

Twombly, 550 U.S. at 570.

The degree of specificity

required is dependent on the context of the case.
Oklahoma, 519 F.3d 1242, 1248 (10th Cir. 2008).

3

Robbins v.

Plaintiff’s

allegations

clearly

satisfy

this

pleading

standard. Under the Policy issued, Security Union agreed to insure
Plaintiff “against loss or damage, not exceeding the Amount of
Insurance, sustained or incurred by the Insured by reason of . . .
[t]he lack of priority of the lien of the Insured Mortgage upon the
Title over any other lien or encumbrance.”

In its Complaint,

Plaintiff has set forth a plausible claim for breach of contract by
alleging

the

contractual

terms

of

the

Policy,

Plaintiff’s

subordinate position to the FSA mortgage, Security Union’s failure
to pay Plaintiff’s claim or rectify its title position, and the
loss or damages flowing from Plaintiff’s subordinate position.

Of

primary importance, Plaintiff’s allegation that its lien position
is subordinate to the FSA’s lien position constitutes a “loss or
damage” under the plain language of the Policy.

Although the term

“loss or damage” is not defined by the Policy, Plaintiff’s loss or
damage in this context is clearly its subordinate position to
another mortgage on property which, it is alleged, is not of
sufficient value to satisfy the debt the property secures.

The

nature and extent of such loss is a factual determination to be
made at a later stage of the proceedings.

The Court rejects

Security Union’s argument that before a “loss or damage” can be
established Plaintiff must necessarily allege that they paid off
the FSA lien, the Property has been sold to satisfy creditors, or
the Mothersoles are in default.

To insert an indemnification,

liquidation, or default element into this equation, as Security
Union proposes, would not only add a requirement not found in the
parties’

contractual

fundamental
Plaintiff,

purpose
i.e.

the

agreement,
of

but

the

title

primacy

of

it

would

insurance
its

also

alter

bargained

mortgage-lien

for

the
by

position.

Consequently, the Court finds Plaintiff’s allegations in connection
with its breach of contract claim against Security Union satisfy
the plausibility standard for assessing a motion to dismiss.
4

Based on the foregoing reasons, Security Union’s Motion to
Dismiss (Dkt. No. 5) is denied.
It is so ordered this 17th day of January, 2013.

5