First American Title Insurance Company et al v. Stevenson et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF COLUMBIA
In re
DEBRA M. STEVENSON,
Debtor.
____________________________
FIRST AMERICAN TITLE
INSURANCE COMPANY,
Plaintiff,
v.
DEBRA M. STEVENSON AND
EUGENE SMITH,
Defendants.
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Case No. 06-00306
(Chapter 13)
Adversary Proceeding No.
07-10005
Not for Publication in
West’s Bankruptcy Reporter
MEMORANDUM DECISION AND ORDER DENYING MOTION TO DISMISS
The defendants have filed a motion to dismiss under Fed. R.
Civ. P. 12(b)(1) in which they contend that First American Title
Insurance Company (“First American Title”) lacks standing and
that this court therefore lacks subject matter jurisdiction
(Docket Entry (“DE”) No. 87, filed March 24, 2008). 	For reasons
explained in more detail below, the court will deny the
defendants’ Motion to Dismiss and will, by separate order, grant
The Memorandum Decision and Order below is hereby
signed. Dated: May 8, 2008.
_____________________________
S. Martin Teel, Jr.
United States Bankruptcy Judge
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1 	Alternatively, Fremont erroneously believed that Smith
intended to transfer his interest in the property to Stevenson,
thereby obviating the need to include Smith’s signature on the
deed of trust.
2
First American Title’s Motion for Leave to Amend the Complaint to
add Wells Fargo Bank (“Wells Fargo”) and Mortgage Electronic
Registration Systems, Inc. (“MERS”) as real parties in interest.
I
First American Title commenced this action by the filing of
a two-count complaint against the debtor, Debra M. Stevenson, and
her son, Eugene Smith. 	At issue is a loan that was extended by
Fremont Investment and Loan (“Fremont”) to Stevenson in order to
refinance a pre-existing loan secured by real property located at
3721 Grant Place, NE, Washington D.C. (the “Property”) owned by
Smith and Stevenson as joint tenants (the “Fremont Refinance”).
Although the lien that was discharged incident to the Fremont
Refinance encumbered both Stevenson’s and Smith’s interests in
the Property, Fremont neglected to obtain Smith’s signature on
the Fremont deed of trust. 1 	Consequently, the Fremont lien
encumbers only Stevenson’s interest in the Property. 	First
American Title was Fremont’s title insurer in the transaction,
and remains the title insurer as to Fremont’s successor in
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2 	The defendants’ motion to dismiss takes issue with First
American Title’s failure to submit proof that Wells Fargo was
Fremont’s successor in interest. 	A motion to dismiss is not the
proper vehicle for testing the sufficiency of evidence, and the
court accepts all well-pleaded factual allegations as true and
views them in the light most favorable to the non-moving party.
3 	In disposing of the parties’ cross-motions for summary
judgment, the court ruled that there is insufficient evidence to
support a finding that Smith intended to sign the deed of trust
or that he intended to be obligated on the loan. 	Accordingly,
the court granted summary judgment in favor of the defendants as
to Count I of the complaint. 	As to Count II of the complaint,
the court found that the doctrine of equitable subrogation should
apply unless the defendants prevail on a properly asserted
defense.
3
interest, Wells Fargo. 2
In Count I of the complaint, First American Title seeks
reformation of the Fremont deed of trust to include Smith’s
signature and a declaration that Smith was obligated on the loan.
In Count II of the complaint, First American Title seeks to have
Fremont’s successor in interest, Wells Fargo, equitably
subrogated to the prior lienholder’s position such that Wells
Fargo’s lien would encumber both Smith’s and Stevenson’s
interests in the property. 3
II
By seeking dismissal it appears that the defendants have
confused the question of standing with the requirement that an
adversary proceeding be prosecuted in the name of the real party
in interest, as required by Fed. R. Bankr. P. 7017, which
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4 	The defendants complain that, because First American
Title is not Fremont’s successor in interest, it lacks standing.
In disposing of a motion to dismiss for lack of subject matter
jurisdiction under Federal Rule of Civil Procedure 12(b)(1), the
court accepts all allegations as true, and may permissibly
consider materials outside the pleadings to resolve the question
of jurisdiction. 	See Jerome Stevens Pharms., Inc. v. FDA, 402
F.3d 1249, 1253-54 (D.C. Cir. 2005) (cited in Plan Committee v.
PriceaterhouseCoopers LLP, 2007 WL 1191917 (D.D.C. 2007)). 	To
establish the “irreducible constitutional minimum of standing . .
. . the plaintiff must have suffered an injury in fact - an
invasion of a legally protected interest which is (a) concrete
and particularized, and (b) actual or imminent, not conjectural
or hypothetical, . . . . there must be a causal connection
between the injury and the conduct complained of . . . . and it
must be likely, as opposed to merely speculative, that the injury
will be redressed by a favorable decision.” 	Lujan v. Defenders
of Wildlife, 504 U.S. 555, 560 (1992)(internal quotations and
citations omitted).
By requesting that the court apply the principles of
equitable subrogation to mitigate the effects of Fremont’s
failure to impose a lien on Smith’s interest in the property,
First American Title seeks adjudication of an actual controversy
and relief from an imminent injury, which injury could be avoided
by a favorable decision of this court. 	Specifically, unless the
court applies the doctrine of equitable subrogation to Wells
Fargo’s lien, First American Title, as Wells Fargo’s title
insurer, will likely bear the cost of the uncorrected defect in
Wells Fargo’s security interest. 	Rather than a question of
standing, the issue here is that any harm to First American Title
is derivative of Wells Fargo’s interests. 	Wells Fargo is the
appropriate party to pursue an action that seeks judicial
modification of its own lien, even if the financial consequences
stemming from any unfavorable ruling by the court will likely be
passed on to First American Title.
Whether First American Title should be permitted to remain a
party is academic now that Wells Fargo and MERS are being added
as plaintiffs. 	Should it become relevant whether First American
Title is properly in this adversary proceeding, the court will
decide the issue, but for the moment it does appear to be
academic and the court will not waste judicial resources
wrestling with the question at this juncture. 	First American
Title obviously has an economic stake in the outcome of this
adversary proceeding.
4
incorporates Fed. R. Civ. P. 17(a). 4 	See Richardson v. Edwards,
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5
127 F.3d 97, 99 (D.C. Cir. 1997). 	According to Fed. R. Civ. P.
17(a),
(a) Real Party in Interest.
(1) 	Designation in General. 	An action must be
prosecuted in the name of the real party in
interest. 	The following may sue in their own
names without joining the person for whose
benefit the action is brought:
(A) 	an executor;
(B) 	an administrator;
(C) 	a guardian;
(D) 	a bailee;
(E) 	a trustee of an express trust;
(F) 	a party with whom or in whose name a
contract has been made for another’s
benefit; and
(G) 	a party authorized by statute.
****
(3) 	Joinder of the Real Party in Interest. 	The
court may not dismiss an action for failure
to prosecute in the name of the real party in
interest until, after an objection, a
reasonable time has been allowed for the real
party in interest to ratify, join, or be
substituted into the action. 	After
ratification, joinder, or substitution, the
action proceeds as if it had been originally
commenced by the real party in interest.
If a party fails to timely assert that a party is not a real
party in interest, the argument is waived. 	See Rogers v. Samedan
Oil Corp., 308 F.3d 477, 482-83 (5th Cir. 2002)(real party in
interest objection waived when raised the day before trial). 	In
the instant proceeding, the court agrees with First American
Title that the defendants’ failure to timely raise this issue
simply creates further confusion in a case that has been riddled
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5 	The defendants contend that the plaintiff’s opposition to
the motion to dismiss should be stricken as untimely given that
it was filed two days after the April 15, 2008 deadline
established by the court. 	See Defs’ Amend. Reply (DE No. 108,
filed April 23, 2008); Order Granting Mot. to Extend Time (DE No.
97, entered April 14, 2008). 	It is noteworthy that at the time
the defendants filed their motion to dismiss on March 24, 2008,
the scheduling order then in place provided that all dispositive
motions be filed by no later than October 15, 2007 (DE No. 34,
entered September 28, 2007). 	A subsequent scheduling order
supplied amended dates for the briefing schedule applicable to
the parties’ cross-motions for summary judgment (DE No. 50,
entered November 2, 2007). 	Even under that scheduling order,
however, the close of briefing was December 19, 2007. 	In short,
the defendants’ motion to dismiss (DE No. 87) having itself been
filed well-beyond the motions deadlines in place at the time of
the filing, the court deems it appropriate to excuse the
plaintiff’s comparatively minor two-day delay in the filing of
its opposition.
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with procedural deficiencies. 5 	Nevertheless, the court concludes
that, consistent with Rule 17, Wells Fargo, the party whose lien
rights are directly at issue in this dispute, ought to be a named
plaintiff in this proceeding. 	Notwithstanding that the
defendants should have raised this issue at the outset of the
proceeding rather than waiting more than a year after the filing
of the complaint, the court finds that requiring First American
Title to add Wells Fargo as a plaintiff will not prejudice Wells
Fargo or First American Title, and that their stated alignment of
interests and legal representation should allow for a virtually
seamless transition. 	Rather than dismissing an adversary
proceeding based upon the failure to name the real party in
interest, the appropriate remedy under Fed. R. Civ. P. 17(a)(3)
is to permit the real party in interest to ratify, join, or be
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7	O:\Laura\OPINIONS\First American Title v Stevenson\motion to dismiss on standing\decision_motion to dismiss_standing_First American v Stevenson_v3.wpd
substituted into the action. 	It is thus
ORDERED that the defendants’ Motion to Dismiss (DE No. 87)
is DENIED.
[Signed and dated above.]
Copies to: All counsel and parties of record; Office of United
States Trustee.
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