Horowitz v. Stewart Title Guaranty Company
1:16-cv-00666
D. Haw.Jun 30, 2017Background
- Royal Bloodline of David (Royal), a nonprofit religious entity, acquired property in Pahoa, HI in 2004; First American acted as escrow agent and Stewart Title issued a title policy to Royal. Royal financed the purchase with a promissory note and mortgage from C. Loran Lee.
- After judgment-related garnishment directives in 2004 and an assignment and nonjudicial foreclosure, the Overseer (Lee’s successor) foreclosed and conveyed the property through quitclaim deeds (2010, 2011). Royal later quitclaimed the property to Plaintiffs Horowitz and Kane in 2012.
- Plaintiffs (pro se individuals Horowitz and Kane) and Royal filed suit against First American and Stewart Title asserting multiple tort and statutory claims (negligence, bad faith, fraud, UDAAP, RICO, etc.) alleging failures to investigate/defend title and seeking over $6 million in damages.
- The district court reviewed lengthy, pro se Amended Complaint and motions to dismiss by First American and Stewart Title; court construes pro se filings liberally but applies pleading standards.
- Court dismissed all claims brought by Royal without prejudice because a business/entity cannot proceed pro se and must be represented by counsel; individual plaintiffs’ claims against First American and Stewart Title were dismissed for failure to plead cognizable rights or plausible claims.
- Court granted leave to amend limitedly: plaintiffs may file a second amended complaint by July 31, 2017 that (1) shows how they hold enforceable rights under the relevant title commitments/policy and (2) cures Rule 8/Iqbal/Twombly pleading defects, or the claims will be dismissed with prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Royal may be represented pro se by Horowitz and Kane | Horowitz/Kane claimed authority to represent Royal (an ecclesiastical sole) and to ‘‘wind up’’ its affairs | Local Rule 83.11 and precedent: corporate/nonprofit entities cannot appear pro se; must have licensed counsel | Court: Royal’s claims dismissed without prejudice (entity cannot proceed pro se) |
| Whether Horowitz and Kane have individual standing/rights under the title commitment/policy | Plaintiffs asserted they retained or succeeded to Royal’s insured rights (e.g., as ‘‘body corporate’’ or via winding up/assignment) | Defendants: Commitment/Policy name Royal as insured; plaintiffs have not shown assignment or succession; policy coverage ended on conveyance; plaintiffs fail to explain how they acquired insured status | Court: Individual claims against First American dismissed; individual claims against Stewart dismissed for failure to show they are insureds or otherwise have rights; dismissal without prejudice to amend |
| Sufficiency of pleading under Rule 8 and Iqbal/Twombly | Plaintiffs relied on voluminous allegations and documents, often conflating defendants and theories | Defendants: complaints are conclusory, fail to plead which defendant did what, and rely on legal conclusions; many allegations irrelevant | Court: Complaint fails to plausibly state claims; many counts dismissed for lack of particularity/causation; plaintiffs must replead consistent with Rule 8 and Iqbal/Twombly if they amend |
| Whether leave to amend should be granted and on what terms | Plaintiffs sought to proceed and renew claims; asked to be allowed to replead | Defendants sought dismissal (or dismissal without leave) given deficiencies | Court: Granted leave to amend limitedly — second amended complaint due by July 31, 2017; must plead all claims and factual bases, show entitlement to insured status, and comply with procedural rules; failure to cure results in dismissal with prejudice |
Key Cases Cited
- Bernhardt v. Los Angeles County, 339 F.3d 920 (9th Cir.) (pro se pleadings must be liberally construed)
- Daniels-Hall v. National Education Association, 629 F.3d 992 (9th Cir.) (courts may consider documents on which complaint necessarily relies in Rule 12(b)(6) review)
- Zichko v. Idaho, 247 F.3d 1015 (9th Cir.) (liberal construction of pro se filings)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S.) (pleading standard: legal conclusions insufficient; plausibility requirement)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (U.S.) (plausibility pleading standard)
- Rowland v. California Men's Colony, 506 U.S. 194 (U.S.) (corporations must appear through counsel)
- Church of the New Testament v. United States, 783 F.2d 771 (9th Cir.) (unincorporated associations/nonprofits cannot be represented by laypersons)
- Matter of Bishop, Baldwin, Rewald, Dillingham & Wong, Inc., 69 Haw. 523 (Haw. 1988) (escrow agent role as mere conduit)
- Sentinel Insurance Co. v. First Insurance Co. of Hawaii, [citation="76 Hawai'i 277"] (Haw. 1994) (insurer’s duty to defend is contractual; determined by policy language)