Jafari v. Federal Deposit Insurance Corporation et al, No. 3:2012cv02982 - Document 132 (S.D. Cal. 2015)
Court Description: ORDER denying FDIC-R's 110 Motion to Dismiss and granting FDIC-R's 110 Motion for Summary Judgment. Signed by Judge Larry Alan Burns on 6/8/15. (kas)
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Jafari v. Federal Deposit Insurance Corporation et al Doc. 132 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 12 REZA JAFARI, FIRST AMERICAN TITLE INSURANCE COMPANY, a California Corporation, 13 14 15 CASE NO. 12cv2982-LAB (RBB) ORDER DENYING MOTION TO DISMISS AND GRANTING MOTION FOR SUMMARY JUDGMENT Plaintiffs, vs. FEDERAL DEPOSIT INSURANCE CORPORATION, as Receiver for La Jolla Bank; DOES 1 through 50, inclusive, 16 Defendants. 17 18 19 20 21 22 Reza Jafari and First American Title Insurance Company brought this suit against the Federal Deposit Insurance Corporation (FDIC), in its capacity as receiver (FDIC-R), relating to Jafari's home purchase gone awry. The FDIC-R has filed a motion to dismiss for lack of jurisdiction or, in the alternative, summary judgment. (Docket no. 110.) 23 I. Factual Background 24 A. 25 26 27 28 La Jolla Bank Loan In December 2007 La Jolla Bank made a $2.45 million construction loan to ALB Properties, LLC for construction of a home located at 14747 Roxbury Terrace, Rancho Santa Fe, California. The loan was secured by a deed of trust and a personal guarantee from ALB's managing member, Birger Bacino. The deed of trust was a second lien on the -1- 12cv2982 Dockets.Justia.com 1 property, behind a first deed of trust held by Chevy Chase Bank. 2 B. 3 In 2009 Bacino began defaulting on loans, including the La Jolla Bank loan. In 4 December 2009, Bacino and ALB filed separate Chapter 7 bankruptcy petitions. On 5 February 19, 2010, the Office of Thrift Supervision closed La Jolla Bank and appointed the 6 FDIC as its receiver. Default and Bankruptcy 7 C. 8 In September 2011, Jafari entered into an agreement with Bacino to purchase the 9 Roxbury Terrace property for $4.475 million. The proposed purchase price would not pay 10 off Chevy Chase Bank as the first lienholder (which was owed more than $7.7 million), the 11 FDIC-R (which was owed $3.36 million), or several third parties that had filed mechanic's 12 liens. Thus, it was a "short sale." Proposed Short Sale of the Roxbury Terrace Property to Jafari 13 D. 14 The FDIC-R sent a letter addressed to Bacino in connection with the proposed short 15 sale. The letter confirmed that the FDIC-R would accept $135,000 for the release of its lien 16 on the Roxbury Terrace property, subject to several conditions. The conditions required: & 17 18 The FDIC-R's September 8, 2011 Letter Bacino and ALB to sign and return the letter, and thereby acknowledge that the FDIC-R was not waiving its rights against them; & 19 Bacino and ALB to provide opinion letters from their bankruptcy counsel stating 20 that the FDIC-R's release of the collateral didn't require approval of the 21 bankruptcy court and that the loan agreement and guarantee would remain 22 effective against them in subsequent litigation; 23 & An October 1, 2011 deadline for the FDIC-R's release of the collateral; 24 & That the opinion letters and signatures be provided to the FDIC-R prior to the 25 October 1, 2011 deadline; and & 26 27 /// 28 All parties to sign the letter for it to be effective. /// -2- 12cv2982 1 It explained "each of the representations, warranties, terms and conditions set forth in this 2 letter are material inducements to the FDIC-R to enter into the agreement evidenced by this 3 Letter." 4 E. 5 While Bacino signed the letter, ALB didn't. Additionally, Bacino and ALB didn't provide 6 the required opinion letters to the FDIC-R. Thus, the FDIC-R did not release its lien or 7 reconvey its deed of trust for the Roxbury Terrace property. Nonetheless, on September 23, 8 2011, Bacino, Jafari, Heritage Escrow Company, and First American closed the sale, with 9 Heritage serving as the escrow agent and First American issuing title insurance to Jafari. 10 While First American had received the FDIC-R's letter before the September 23, 2011 11 closing, it didn't confirm that the letter's requirements had been met. September 23, 2011 Closing 12 F. 13 On September 26, 2011, the FDIC-R's servicing agent received notice of a $135,000 14 wire from First American. The FDIC-R rejected the proposed payment, and advised Heritage 15 that the conditions required to release its security interest hadn't yet occurred and, therefore, 16 it wouldn't release the security interest on the property. All of the other lenders, including 17 Chevy Chase Bank, accepted the tendered funds and reconveyed their liens. Thus, the 18 FDIC-R's lien was elevated to a first priority position. On April 2, 2012, the FDIC-R recorded 19 a notice of default on the Roxbury Terrace property. Jafari's Administrative Claim and Subsequent Litigation 20 On May 21, 2012, Jafari submitted a Proof of Claim through the FDIC's administrative 21 process alleging breach of contract, unjust enrichment, rescission, and equitable 22 subrogation. The FDIC-R disallowed the claim. On August 1, 2012, the FDIC-R published 23 a notice of sale as to the Roxbury Terrace Property, and Jafari sued to enjoin foreclosure. 24 On August 27, 2012, after the Court denied Jafari's request for injunctive relief, First 25 American paid the FDIC-R $3,649,067, representing the outstanding balance on ALB's note. 26 After First American paid off ALB's note, Jafari added First American as a plaintiff and 27 Plaintiffs filed their First Amended Complaint (FAC). (Docket no. 46.) The FAC is premised 28 on the FDIC-R's September 8, 2011 letter and contends Jafari is an intended third party -3- 12cv2982 1 beneficiary of the letter. The FDIC-R moved to dismiss the FAC, contending that the claims 2 of First American must be dismissed because it hadn't gone through the FDIC's 3 administrative claims process. (Docket no. 48.) The Court denied the motion, explaining that 4 First American and Jafari stand in the same shoes because First American was the force 5 behind Jafari's claims from the beginning of this case and First American's claims against the 6 FDIC-R are the same as those that Jafari previously brought administratively. (Docket no. 7 57 at 2–4.) 8 II. Discussion 9 The FDIC-R contends that the Financial Institutions Reform, Recovery, and 10 Enforcement Act of 1989 (FIRREA), Pub. L. No. 101-73, 103 Stat. 183, strips the Court of 11 jurisdiction over Plaintiffs' claims because they failed to fully exhaust their administrative 12 remedies. See 12 U.S.C. § 1821(d)(13)(D). It also asks the Court to dismiss Plaintiffs' unjust 13 enrichment and equitable subrogation claims "to the extent that they seek coercive relief 14 beyond damages." In the alternative, the FDIC-R argues that the Court should enter 15 summary judgment against Jafari and First American. It argues that Jafari lacks any 16 damages and isn't a real party in interest because First American paid Jafari's alleged loss. 17 It also argues that neither plaintiff has a cognizable action for breach of contract, unjust 18 enrichment, or equitable subrogation—the three claims in the FAC. 19 A. 20 A party may move to dismiss a claim for lack of subject matter jurisdiction. Fed. R. 21 Civ. P. 12(b)(1). Plaintiffs have the burden of establishing that subject matter jurisdiction is 22 proper. Kokkonen v. Guardian Life Ins. Co., 511 U.S. 375, 377 (1994). Legal Standard 23 Summary judgment is appropriate where "there is no genuine issue as to any material 24 fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 25 56(c). As the moving party, the FDIC-R has the burden to demonstrate the absence of a 26 factual issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To meet this 27 burden, it may show that Jafari and First American lack evidence to support their case. Id. 28 /// -4- 12cv2982 1 at 325. If it makes this showing, Jafari and First American must go beyond the pleadings and 2 set forth "specific facts" to show a genuine issue for trial. Id. at 324. 3 B. 4 The FDIC-R contends that the Court's order permitting First American to proceed in 5 this case "reveal[s] additional jurisdictional obstacles that the Court has not addressed. . . ." 6 It contends that Jafari's administrative claims didn't exhaust the claims stated in the FAC 7 because the administrative claims were based on future harm from the FDIC-R's refusal to 8 release its lien until ALB's loan balance was paid, while the FAC is based on First American's 9 payment of the loan balance. 10 11 12 13 14 15 16 17 Motion to Dismiss for Failure to Exhaust of Administrative Remedies FIRREA strips courts of jurisdiction over claims that have not been exhausted through this process: Except as otherwise provided in this subsection, no court shall have jurisdiction over– (i) any claim or action for payment from, or any action seeking a determination of rights with respect to, the assets of any depository institution for which the [FDIC] has been appointed receiver, including assets which the [FDIC] may acquire from itself as such receiver; or (ii) any claim relating to any act or omission of such institution or the [FDIC] as receiver. 18 12 U.S.C. § 1821(d)(13)(D). When determining whether claims have been administratively 19 exhausted, courts look to whether the administratively presented claims provide the FDIC 20 with adequate notice of the claims raised in the lawsuit. Brown Leasing Co. v. FDIC, 833 21 F.Supp. 672, 675 (N.D. Ill. 1993) ("This Court simply finds that the FDIC is entitled to fair 22 notice of the facts and legal theories on which a claimant seeks relief from the failed 23 institution."); Branch v. FDIC, 833 F. Supp. 56, 60 (D. Mass. 1993) ("[T]he appropriate 24 question . . . is whether Branch's administrative claims provided the particular FDIC 25 receiverships with adequate notice of the challenged claims and with sufficient information 26 and detail about the claims to enable the FDIC expeditiously and fairly to allow or disallow 27 the claims."). "FIRREA does not limit the dollar amount of plaintiff's district court claim to that 28 which plaintiff earlier sought in its claim before the FDIC." FDIC v. Hickey, 757 F. Supp. 2d -5- 12cv2982 1 194, 197 (E.D.N.Y. 2010) (quotation omitted). Nor does it limit a plaintiff's district court case 2 to the causes of action alleged during the administrative process. Telecenter, Inc. v. FDIC 3 ex rel. First Commercial Bank of Tampa Bay, 2015 WL 403186, at *6 (M.D. Fla. Jan. 28, 4 2015). 5 The Court finds that Jafari's administrative claims provided sufficient notice of the 6 claims presented in the FAC. Indeed, the Court has already found that First American's 7 "claims against the FDIC now are the same as those that Jafari previously brought 8 administratively." (Docket no. 57 at 4.) They involve the same factual predicate and include 9 the same causes of action. The only additional fact in the FAC is that First American has 10 now paid off the FDIC-R. But payment couldn't have come as a surprise to the FDIC-R—it's 11 precisely what the FDIC-R demanded of Plaintiffs. As Jafari explained in his Proof of Claim, 12 "the FDIC-R is demanding over $3 million as the price for a reconveyance." First American's 13 payment was the natural consequence of this demand. See, e.g, Premier Tierra Holdings, 14 Inc. v. Ticor Title Ins. Co. of Florida, 2011 WL 2313206, at *3 (S.D. Tex. June 9, 2011) (If a 15 title defect is discovered, the title insurer "may pay the insured the full policy amount, take 16 affirmative action to clear the defect, or . . . purchase the indebtedness secured by the 17 insured mortgage."). The FDIC-R's motion to dismiss for failure to exhaust is DENIED. 18 C. 19 FIRREA "prevents courts from granting any equitable relief against the FDIC." Sharpe 20 v. FDIC, 126 F.3d 1147, 1154 (9th Cir. 1997); 12 U.S.C. § 1821(j). Based on this provision, 21 the FDIC-R moves to dismiss Plaintiffs' second and third causes of action for unjust 22 enrichment and equitable subrogation "insofar as these requests exceed the 'claim for money 23 damages.'" 24 subrogation claims are ultimately claims for money damages. (Docket no. 57 at 6–8.) The 25 FDIC-Rs motion to dismiss under § 1821(j) is DENIED. Motion to Dismiss Claims for Equitable Relief The Court has already found that the unjust enrichment and equitable 26 D. 27 According to the FAC, First American "paid the FDIC the entire amount owed on the 28 La Jolla Bank Note" and two days later "the FDIC executed and delivered a full reconveyance Motion for Summary Judgment on Jafari's Claims -6- 12cv2982 1 of the La Jolla Bank Deed of Trust." (Docket no. 46, ¶ 32.) Based on this allegation, the 2 FDIC-R moves for summary judgment on all of Jafari's claims, arguing that he has no 3 damages and is not a real party in interest. In response, Plaintiffs argue that: (1) Jafari has 4 been damaged because First American's payment to the FDIC-R depleted Jafari's policy 5 limits; (2) an unjust enrichment claim need not be brought by the party who incurred the loss; 6 and (3) the FDIC-R waived its real party in interest objection by not raising it earlier. 7 If the insurer has paid the entire loss suffered by the insured, it is the only real party 8 in interest and must sue in its own name. United States v. Aetna Cas. & Sur. Co., 338 U.S. 9 366, 380–81 (1949). In that case, the district court should dismiss the insured, because it 10 is no longer a real party in interest. See Hilbrands v. Far E. Trading Co., 509 F.2d 1321, 11 1322 (9th Cir. 1975) ("Since Guam Maintenance's insurer paid the entire loss suffered by that 12 employer, Guam Maintenance had no interest in the action. The district court correctly 13 dismissed the employer as substituted plaintiff and we affirm as to this dismissal."). "If [the 14 insurer] has paid only part of the loss, both the insured and insurer . . . have substantive 15 rights against the tortfeasor which qualify them as real parties in interest." Aetna, 338 U.S. 16 at 381. 17 Because it's undisputed that First American paid the entire amount owed on the La 18 Jolla Bank note, Jafari isn't a real party in interest. The Court finds no support for Plaintiffs' 19 diminution of policy limits argument, and Plaintiffs cite to none. Indeed, the real party in 20 interest rule articulated in Aetna would be eviscerated if a decrease in policy limits was 21 sufficient to make an insured a real party in interest, even though their loss had been paid 22 in full. 23 Plaintiffs' argument that an unjust enrichment claim can be brought by a party that 24 hasn't incurred a loss also lacks merit. A claim based on unjust enrichment requires "receipt 25 of a benefit and the unjust retention of the benefit at the expense of another." Kelleher v. 26 Kelleher, 2014 WL 94197, at *7 (N.D. Cal. 2014) (quotation omitted). The plaintiff must have 27 suffered the injury to maintain an unjust enrichment claim. Pelletier v. Pac. WebWorks, Inc., 28 2010 WL 4924995, at *1 & n.3 (E.D. Cal. Nov. 29, 2010); see also Bykov v. Radisson Hotels -7- 12cv2982 1 Int'l, Inc., 2006 WL 752942, at *6 (D. Minn. Mar. 22, 2006) (dismissing unjust enrichment 2 claim because plaintiff hadn't suffered a loss). 3 While Plaintiffs are correct that real party in interest objections must be raised with 4 "reasonable promptness" and can be waived, "courts have generally only found waivers 5 where the objections were raised during pretrial proceedings or on the eve of trial." In re 6 Vitamins Antitrust Litig., 2001 WL 755852, at *3 n.5 (D.D.C. June 7, 2001) (collecting cases). 7 The FDIC-R hasn't waived this objection. 8 The FDIC-R's motion for summary judgment on Jafari's claims is GRANTED. 9 E. Motion for Summary Judgment on Breach of Contract Claim 10 Plaintiffs' breach of contract claim is premised on the FDIC-R's September 8, 2011 11 letter. They contend that, pursuant to the letter, the FDIC-R is obligated to release its lien 12 on the Roxbury Terrace property in exchange for $135,000. They dismiss the remainder of 13 the conditions in the letter as immaterial, arguing that their nonperformance doesn't excuse 14 the FDIC-R's alleged obligation under the letter. The FDIC-R contends Plaintiffs have no 15 cognizable breach of contract claim because: (1) Plaintiffs are third parties to the letter with 16 no right to enforce its terms; (2) ALB never signed the letter, so the FDIC-R's obligations 17 under the letter never arose; and (3) ALB and Bacino never provided the attorney opinion 18 letters, and therefore never exercised the option in the letter. 19 1. Jafari and First American as Third Party Beneficiaries 20 Plaintiffs argue that the FDIC-R knew Bacino was contractually obligated to Jafari to 21 deliver title free and clear of all existing liens and the letter was intended to enable Bacino 22 to fulfill this contractual obligation. They contend "Jafari was not merely an intended 23 beneficiary of the Release Letter, he was a reason the contract was conceived, drafted and 24 entered." According to Plaintiffs, this shows Jafari was an intended third party beneficiary 25 of the letter, and can therefore sue to enforce its terms. 26 "[O]nly a party to a contract or an intended third-party beneficiary may sue to enforce 27 the terms of a contract or obtain an appropriate remedy for breach." GECCMC 2005-C1 28 Plummer St. Office Ltd. P'ship v. JPMorgan Chase Bank, Nat. Ass'n, 671 F.3d 1027, 1033 -8- 12cv2982 1 (9th Cir. 2012). When a government contract is at issue, plaintiffs must overcome a 2 presumption that nonparties who benefit from the contract are incidental, rather than 3 intended, beneficiaries. 4 established by "a contract's recitation of interested constituencies, vague hortatory 5 pronouncements, statements of purpose, explicit reference[s] to a third party, or even a 6 showing that the contract operates to the third parties' benefit and was entered into with them 7 in mind." Id. at 1033 (citations, brackets, and quotations omitted). Instead, the language of 8 the contract must show "a clear intent to rebut the presumption that the third parties are 9 merely incidental beneficiaries." Id. at 1033–34 (brackets omitted). Id. at 1033–34. Intended third party beneficiary status isn't 10 Here, the language of the letter indicates that the parties intended to foreclose claims 11 by non-signatories. The letter states that it "shall inure to the benefit of and bind the 12 successors, assigns, heirs, executors, and administrators of the parties." This language 13 evinces an intent to limit intended beneficiaries to the contracting parties. See Klamath 14 Water Users Protective Ass'n v. Patterson, 204 F.3d 1206, 1212 (9th Cir. 1999) (finding 15 language stating, "This contract binds and inures to the benefit of the parties hereto, their 16 successors and assigns. . ." indicated "the intent of the parties to limit intended beneficiaries 17 to the contracting parties"). Thus, while there may have been "an intention to benefit a third 18 party," Plaintiffs can't show "an intention that the third party should have the right to enforce 19 that intention." Astra USA, Inc. v. Santa Clara Cnty., 131 S. Ct. 1342, 1348 (2011) (quoting 20 9 J. Murray, Corbin on Contracts § 45.6, p. 92 (rev. ed. 2007)). Plaintiffs have failed to 21 overcome the presumption that Jafari is an incidental rather than intended beneficiary to the 22 FDIC-R's letter. 23 2. Execution of the FDIC-R's Letter 24 The FDIC-R's letter states "[t]his letter shall not be binding upon, or effective against, 25 any party signing a counterpart unless and until all parties have signed counterparts." It's 26 undisputed that ALB never signed the letter. (Docket no. 119, ¶ 10.) "In the context of the 27 document as a whole . . . [it's] difficult to conclude that the quoted sentence means anything 28 other than what it plainly says: that the agreement is not binding until all parties have signed." -9- 12cv2982 1 PSM Holding Corp. v. Nat'l Farm Fin. Corp., 339 F. App'x 693, 694 (9th Cir. 2009) (finding 2 no contract had been formed where the relevant document stated "[t]his Agreement shall 3 become binding when one or more counterparts hereof, individually or taken together, shall 4 bear the signatures of all of the parties reflected hereon as signatories," but some parties 5 didn't sign). As a result, just as in PSM Holding, the letter never became a binding contract. 6 3. Opinion Letters from Counsel 7 The FDIC-R's letter made clear that the FDIC-R's agreement was "subject to" several 8 unperformed conditions. Before the FDIC-R was required to release its lien on the Roxbury 9 Terrace property, ALB and Bacino were each required to provide opinion letters from their 10 11 12 13 14 15 counsel. The letter explained: The release of collateral must occur on or before October 1, 2011 (the "Release Date"). . . . Should the release of collateral not occur prior to the expiration of the Release Date, all of the terms, conditions, and provisions of this letter shall expire. . . . The letters from counsel for Borrower and Guarantor must be received, reviewed and approved, in the sole and absolute discretion of the FDIC-R, prior to the Release Date. Borrower and Guarantor are encouraged to provide the letters well in advance of the Release Date, as it will take the FDIC-R time to process and evaluate the letters. 16 Thus, ALB and Bacino were required to provide the attorney opinion letters before October 1, 17 2011, and if they didn't, the terms of the letter would expire. 18 The FDIC-R contends that these conditions created an unexercised and now-expired 19 unilateral option contract. An option is a contract to keep a separate contract offer open for 20 a prescribed period. 1 Witkin, Summary of Cal. Law (10th ed. 2005), Contracts § 168, p. 33. 21 The letter isn't a promise to keep a separate offer open. It's an offer to enter into a bilateral 22 contract with conditions precedent to the FDIC-R's performance obligations. Cf. Lowe v. 23 Massachusetts Mut. Life Ins. Co., 54 Cal. App. 3d 718, 729 (Ct. App. 1976) ("There is a 24 presumption in favor of interpreting ambiguous agreements to be bilateral rather than 25 unilateral."). 26 While the letter isn't an option, the unfulfilled conditions in the letter can still foreclose 27 Plaintiffs' breach of contract claim. "Under the law of contracts, parties may expressly agree 28 that a right or duty is conditional upon the occurrence or nonoccurrence of an act or event." - 10 - 12cv2982 1 Platt Pacific, Inc. v. Andelson, 6 Cal.4th 307, 313 (1993). "'Subject to' is generally construed 2 to impose a condition precedent." Rubin v. Fuchs, 1 Cal. 3d 50, 54, 459 P.2d 925, 928 3 (1969). If a condition precedent "is not fulfilled, the right to enforce the contract does not 4 evolve." Kadner v. Shields, 20 Cal.App.3d 251, 258 (1971). The "nonoccurrence of a 5 condition precedent may be excused for a number of legally recognized reasons." Platt 6 Pacific, 6 Cal.4th at 314. 7 Plaintiffs contend the opinion letter provisions are immaterial and, therefore, didn't 8 excuse the FDIC-R's performance. They also contend that the Court should excuse the 9 non-occurrence of the opinion letter provision to avoid forfeiture, which also turns on the 10 materiality of the provision. Restatement (Second) of Contracts § 229 (1981) ("To the extent 11 that the non-occurrence of a condition would cause disproportionate forfeiture, a court may 12 excuse the non-occurrence of that condition unless its occurrence was a material part of the 13 agreed exchange."); Hammes Co. Healthcare, LLC v. Tri-City Healthcare Dist., 2011 WL 14 6182423, at *9 (S.D. Cal. Dec. 13, 2011). 15 undersigned acknowledge that each of the representations, warranties, terms and conditions 16 set forth in this letter are material inducements to the FDIC-R to enter into the 17 agreement. . . ." And, "[t]he facts recited in a written instrument are conclusively presumed 18 to be true as between the parties thereto, or their successors in interest. . . ." Cal. Evid. 19 Code § 622; Fed. R. Evid. 302. Plaintiffs cannot now dispute the materiality of the opinion 20 letters requirement because, even if the letter were a binding contract, and even if Plaintiffs 21 were third party beneficiaries to the contract, third party beneficiaries have "no greater rights" 22 under a contract than the contracting parties. Hollister v. Benzl, 71 Cal. App. 4th 582, 586, 23 83 Cal. Rptr. 2d 903 (1999). 24 But the letter states that "[e]ach of the For each of these reasons, the FDIC-R's motion for summary judgment on Plaintiffs' 25 breach of contract claim is GRANTED. 26 /// 27 /// 28 - 11 - 12cv2982 1 F. 2 The FDIC-R seeks summary judgment on Plaintiffs' unjust enrichment claim because: 3 (1) it's inconsistent with their breach of contract cause of action, and (2) Plaintiffs can't show 4 unjust enrichment. 5 Motion for Summary Judgment on Unjust Enrichment Claim 1. Inconsistency with Breach of Contract Action 6 The FDIC-R argues that Plaintiffs' unjust enrichment claim should be dismissed 7 because they also assert a breach of contract action and "unjust enrichment is an action in 8 quasi-contract, which does not lie when an enforceable, binding agreement exists defining 9 the rights of the parties." Solano v. America's Servicing Co., 2011 WL 4500874, at *9 (E.D. 10 Cal. Sept. 27, 2011). However, "even though a plaintiff may not ultimately prevail under both 11 unjust enrichment and breach of contract, it may plead both in the alternative." Weingand 12 v. Harland Fin. Solutions, Inc., 2012 WL 3763640, at *4 (N.D. Cal. Aug. 29, 2012). Plaintiffs 13 affirm that they make these claims in the alternative and are not seeking to recover on both 14 claims. Thus, the breach of contract allegations in the FAC don't preclude Plaintiffs' unjust 15 enrichment cause of action. 16 2. Plaintiffs' Evidence of Unjust Enrichment 17 A "common law claim for unjust enrichment is an action for restitution" which "applies 18 where a plaintiff has no enforceable contract but nonetheless confers a benefit on the 19 defendant that the defendant has knowingly accepted under circumstances, making it 20 inequitable for the defendant to retain the benefit without paying for its value." Chasnik v. 21 Bank of Am. Home Loans Servicing LP, 2011 U.S. Dist. LEXIS 156743 (C.D. Cal. Oct. 26, 22 2011). "To the extent a claim for unjust enrichment is available, it generally requires proof 23 of receipt of a benefit and unjust retention of the benefit at the expense of another." Kelleher 24 v. Kelleher, 2014 WL 94197, at *7 (N.D. Cal. 2014) (quotation omitted). "The benefits must 25 generally be conferred by mistake, fraud, coercion, or request; otherwise, though there is 26 enrichment, it is not unjust." Id. (quotation omitted). "Benefits, such as payment of money 27 or transfer of property, conferred under duress, undue influence, or any other form of 28 /// - 12 - 12cv2982 1 coercion, may ordinarily be recovered in a quasi-contract action." 1 Witkin, Summary of Cal. 2 Law (10th ed. 2005), Contracts § 1030, p. 1121. 3 Plaintiffs contend that the FDIC-R coerced payment by threatening to foreclose on the 4 Roxbury Terrace property unless the La Jolla Bank loan was paid in full. However, "[a] 5 person who has conferred a benefit upon another in response to the institution or threat of 6 civil proceedings against him by the other . . . is not entitled to restitution merely because the 7 other has begun or threatened to begin civil proceedings against him." Restatement (First) 8 of Restitution § 71 (1937). Plaintiffs have offered no evidence to indicate that the FDIC-R 9 acted wrongfully in threatening foreclosure. They don't dispute that the FDIC-R had a valid 10 lien securing the property. The FDIC-R had no obligation to release the lien without full 11 payment, and the unexecuted contract offer made to Bacino and ALB doesn't change that. 12 Nor does Chevy Chase Bank's separate decision to settle its first priority lien. If anything, 13 First American's loss is due to its own negligence. First American could have avoided its loss 14 by declining to issue title insurance to Jafari until the requirements listed in the FDIC-R's 15 letter were met. 16 [I]t is difficult to think of a situation in which a title insurance company could not claim unjust enrichment as to someone who might inadvertently benefit by their negligence. Either they insure or they don't. It is not the province of the court to relieve a title insurance company of its contractual obligation. 17 18 19 Coy v. Raabe, 69 Wash. 2d 346, 351, 418 P.2d 728, 731 (1966). The FDIC-R's receipt and 20 retention of First American's payment is not unjust. Its motion for summary judgment on 21 Plaintiffs' unjust enrichment claim is GRANTED. 22 G. 23 The FDIC-R also moves for summary judgment on Plaintiffs' equitable subrogation 24 claim. Equitable subrogation is appropriate where: 25 (1) Payment [was] made by the subrogee to protect his own interest. (2) The subrogee [has] not . . . acted as a volunteer. (3) The debt paid [was] one for which the subrogee was not primarily liable. (4) The entire debt [has] been paid. (5) Subrogation [would] not work any injustice to the rights of others. 26 27 28 Motion for Summary Judgment on Equitable Subrogation Claim /// - 13 - 12cv2982 1 Han v. United States, 944 F.2d 526, 529 (9th Cir. 1991) (quoting Caito v. United California 2 Bank, 20 Cal.3d 694, 704 (1978)). "Equitable subrogation is a broad equitable remedy, not 3 limited to circumstances where these five factors are met, but is appropriate whenever one 4 person, not acting as a mere volunteer or intruder, pays a debt for which another is primarily 5 liable, and which in equity and good conscience should have been discharged by the latter." 6 Id. (quotation omitted). However, equitable subrogation is denied to a party who has actual 7 knowledge of an existing encumbrance. Id.; Smith v. State Sav. & Loan Assn., 175 Cal. App. 8 3d 1092, 1098 (Ct. App. 1985). "[T]he type of notice that will defeat equitable subrogation 9 should be such as to suggest the person seeking relief knowingly or with something 10 approaching gross recklessness disregarded information and seeks to capitalize on his own 11 ignorance to the detriment of an innocent third party." Bedrock Fin., Inc. v. United States, 12 2012 WL 5499403, at *5 (E.D. Cal. Nov. 13, 2012) (vacated on other grounds). 13 It's undisputed that Plaintiffs knew of the FDIC-R's security interest in the Roxbury 14 Terrace property before closing. (Docket no. 119, ¶¶ 14–15.) Thus, they had "actual 15 knowledge of" the FDIC-R's "existing encumbrance." Han, 944 F.2d at 529 (citing Smith, 175 16 Cal. App. 3d at 1098). It's also undisputed that First American received copy of the FDIC-R's 17 letter before closing, but nevertheless issued title insurance to Jafari. (Id., ¶ 16.) Thus, it 18 knowingly disregarded the FDIC-R's security interest, and now seeks to force the FDIC-R to 19 accept partial performance of its unaccepted offer. Equitable subrogation is not available to 20 Plaintiffs. The FDIC-R's motion for summary judgment on Plaintiffs' equitable subrogation 21 claim is GRANTED. 22 III. 23 24 25 26 27 28 Conclusion The FDIC-R's motion to dismiss is DENIED and its motion for summary judgment is GRANTED. IT IS SO ORDERED. DATED: June 8, 2015 Honorable Larry Alan Burns UnitedStatesDistrictCourt - 14 - 12cv2982
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