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Stewart Title Guaranty Co. v. Machado Family Limited Partnership No. 1

United States District Court, M.D. Florida, Orlando Division

August 23, 2017



          Gregory A. Presnell, Judge

         This matter comes before the Court on the Motion to Dismiss Bad Faith Claims (Doc. 25) filed by the Plaintiff, Stewart Title Guaranty Company (henceforth, “Stewart Title”), and the response in opposition (Doc. 29) filed by the Defendant, The Machado Family Limited Partnership No. 1 (the “Machado Partnership”).

         I. Background

         According to the allegations of the Defendant's Answer and Counterclaim (Doc. 22), which are accepted in pertinent part as true for purposes of resolving the instant motion, the Machado Partnership is the assignee of a $1.4 million lenders title policy (henceforth, the “Policy”) issued by Stewart Title in connection with a purchase of roughly 1, 300 acres of land (henceforth, the “Property”) in Central Florida by Joseph and Marsha O'Berry. (Doc. 22 at 8). The Machado Partnership is also the assignee of a mortgage on the Property. (Doc. 22 at 10). The legal description of the Property included in the mortgage contained errors. (Doc. 22 at 9).

         In 2011, the Machado Partnership sued the O'Berrys to foreclose on the mortgage; in 2012, while that suit was still pending, the O'Berrys filed for bankruptcy protection. (Doc. 22 at 10). In late 2013, the Bankruptcy Court approved a settlement requiring the O'Berrys to transfer the Property to the Machado Partnership. (Doc. 22 at 10). When the Machado Partnership attempted to prepare a warranty deed for the transfer, it discovered the errors in the legal description of the Property included in the mortgage. (Doc. 22 at 11). It also learned that the original lender had filed a claim with Stewart on behalf of the Machado Partnership. (Doc. 22 at 11). The Machado Partnership contacted Stewart and informed the company (1) that the errors in the legal description were blocking the transfer of the Property, and (2) that it was suffering losses that would continue to increase until the property was transferred. (Doc. 22 at 11-12). Stewart's response consisted of a handful of emails and a few telephone calls over the next three months, leading the Machado Partnership to believe the insurer had abandoned it. (Doc. 22 at 12).

         Because of the problem with the legal description of the Property, the Machado Partnership was forced to engage in additional months of litigation in Bankruptcy Court with the O'Berrys. (The O'Berrys contended that the legal description included in the warranty deed prepared by the Machado Partnership encompassed more land than the couple was required to transfer under the settlement agreement. (Doc. 22 at 13).) Throughout this litigation, Stewart would send the Machado Partnership emails to “check in” on the status of litigation, but did nothing else. (Doc. 22 at 13-14).

         In September 2015, the Bankruptcy Court ruled in favor of the Machado Partnership. Subsequently, Stewart agreed to pay (and did pay) the approximately $200, 000 in attorneys' fees the Machado Partnership had incurred defending the title to the Property. (Doc. 22 at 15). However, despite negotiations and a January 17, 2017 mediation, the parties were unable to come to an agreement regarding additional damages the Machado Partnership contends it suffered during the litigation, such as diminution of value of the Property resulting from timber taken by the O'Berrys.

         On January 30, 2017, Stewart filed the instant suit, seeking a declaration that its payment of the Machado Partnership's attorney fees had satisfied its obligations under the policy. On April 20, 2017, the Machado Partnership filed its counterclaim, asserting claims for breach of contract (Count I) and statutory bad faith (Count II). By way of the instant motion, Stewart seeks dismissal of Count II.

         II. Legal Standard

         Federal Rule of Civil Procedure 8(a)(2) requires “a short and plain statement of the claim showing that the pleader is entitled to relief” so as to give the defendant fair notice of what the claim is and the grounds upon which it rests, Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 103, 2 L.Ed.2d 80 (1957), overruled on other grounds, Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A Rule 12(b)(6) motion to dismiss for failure to state a claim merely tests the sufficiency of the complaint; it does not decide the merits of the case. Milbum v. United States, 734 F.2d 762, 765 (11th Cir.1984). In ruling on a motion to dismiss, the Court must accept the factual allegations as true and construe the complaint in the light most favorable to the plaintiff. SEC v. ESM Group, Inc., 835 F.2d 270, 272 (11th Cir.1988). The Court must also limit its consideration to the pleadings and any exhibits attached thereto. Fed.R.Civ.P. 10(c); see also GSW, Inc. v. Long County, Ga., 999 F.2d 1508, 1510 (11th Cir. 1993).

         The plaintiff must provide enough factual allegations to raise a right to relief above the speculative level, Twombly, 550 U.S. at 555, 127 S.Ct. at 1966, and to indicate the presence of the required elements, Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1302 (11th Cir. 2007). Conclusory allegations, unwarranted factual deductions or legal conclusions masquerading as facts will not prevent dismissal. Davila v. Delta Air Lines, Inc., 326 F.3d 1183, 1185 (11th Cir. 2003).

         In Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), the Supreme Court explained that a complaint need not contain detailed factual allegations, “but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do. Nor does a complaint suffice if it tenders naked assertions devoid of further factual enhancement.” Id. at 1949 (internal citations and quotations omitted). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not ‘show[n]' - ‘that the plaintiff is entitled to relief.'” Id. at 1950 (quoting Fed.R.Civ.P. 8(a)(2)).

         III. Analysis

         The Machado Partnership asserts its bad faith claim pursuant to Fla. Stat. § 624.155(1)(b)(1), ...

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