Cardinal Financial Company, LP v. Investors Title Insurance Company et al

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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
CIVIL ACTION NO. 3:25-CV-00616-KDB-UMJ
CARDINAL FINANCIAL
COMPANY, LP,
Plaintiff,
v. MEMORANDUM AND ORDER
INVESTORS TITLE INSURANCE
COMPANY, ET AL.,
Defendants.
THIS MATTER is before the Court on Defendant Investors Title Insurance Company’s
(“Investors Title”) Motion to Dismiss (Doc. No. 12), Third-Party Defendant Merrilee Anderson’s
Motion to Appoint Counsel (Doc. No. 24) and Motion for Extension of Time to Answer (Doc. No.
29), and Consent Motion to Amend/Correct Amended Complaint as to Lawyers Mutual by
Defendant Shope Krohn Attorneys at Law (“Shope Krohn”) (Doc. No. 28). The Court has carefully
considered these motions and the parties’ briefs and exhibits. For the reasons discussed below, the
Court will in part GRANT and in part DENY the motions as follows.
I. LEGAL STANDARD
Under Federal Rule of Civil Procedure 8(a)(2), a complaint must contain “a short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2).
However, “Rule 8(a)(2) still requires a ‘showing,’ rather than a blanket assertion, of entitlement to
relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n.3 (2007). Investors Title moves to dismiss
Plaintiff’s claims under Federal Rule of Civil Procedure 12(b)(6).
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A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for “failure to state a
claim upon which relief can be granted” tests whether the complaint is legally and factually
sufficient. See Fed. R. Civ. P. 12(b)(6); Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic
Corp., 550 U.S. at 570; Coleman v. Maryland Court of Appeals, 626 F.3d 187, 190 (4th Cir. 2010),
aff’d sub nom. Coleman v. Court of Appeals of Maryland, 566 U.S. 30 (2012). In evaluating
whether a claim is stated, “[the] court accepts all well-pled facts as true and construes these facts
in the light most favorable to the plaintiff,” but does not consider “legal conclusions, elements of
a cause of action, ... bare assertions devoid of further factual enhancement[,] ... unwarranted
inferences, unreasonable conclusions, or arguments.” Nemet Chevrolet, Ltd. v.
Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009). Construing the facts in this manner,
a complaint must only contain “sufficient factual matter, accepted as true, to state a claim to relief
that is plausible on its face.” Id. (internal quotations omitted). Thus, a motion to dismiss under
Rule 12(b)(6) determines only whether a claim is stated; “it does not resolve contests surrounding
the facts, the merits of a claim, or the applicability of defenses.” Republican Party of North
Carolina v. Martin, 980 F.2d 943, 952 (4th Cir. 1992).
Also, in analyzing a Rule 12 motion, a court may consider “documents incorporated into
the complaint by reference and matters of which a court may take judicial notice.” See Tellabs,
Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007). In particular, “a court may consider
official public records, documents central to plaintiff's claim, and documents sufficiently referred
to in the complaint ... so long as the authenticity of these documents is not disputed.” Chapman v.
Asbury Auto. Grp., Inc., No. 3:15 cv 679, 2016 WL 4706931, at *1, 2016 U.S. Dist. LEXIS 121043
(E.D. Va. Sept. 7, 2016) (quoting Witthohn v. Fed. Ins. Co., 164 F. App'x 395, 396-97 (4th Cir.
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2006)); see also Goines v. Valley Cmty. Servs. Bd., 822 F.3d 159 (4th Cir. 2016). So, here, the Court
will consider the contract at issue along with the other documents attached to the pleadings.
II. FACTS AND PROCEDURAL HISTORY
This dispute arises in connection with a real estate fraud scheme spanning several states
and numerous companies and individuals, all of whom either seek to place the responsibility for
the $500,000+ loss on someone else, decline to provide insurance coverage related to the loss,
claim to be a victim of the scheme or cannot be found. In the common parlance of the tv drama it
could rival, it is “a lot.”
In the fall of 2024, Cardinal Financial Company, LP agreed to lend $510,000 to Charles J.
Strauss (“Strauss”), secured by a first priority deed of trust on his property at 17019 Hedgerow
Park Road, Charlotte, NC 28277 (the “Property”). (Doc. No. 1 at ¶¶ 7–8). Investors Title was
chosen to provide title insurance for the loan. In connection with the Strauss transaction, Investors
Title issued an ALTA Closing Protection Letter (the “CPL”) (Doc No. 1-3) and a Commitment for
Title Insurance to Cardinal (the “Commitment”) (Doc. No. 1-2). The CPL identified Shope Krohn
as the approved attorney to handle the closing and expressed Investors’ agreement to “indemnify
[Cardinal] for actual loss of Funds incurred by You in connection with the closing of the Real
Estate Transaction conducted by the Issuing Agent, Approved Settlement Provider, or Approved
Attorney.” (Doc. No. 1-3). Pursuant to the CPL, Cardinal provided instructions to Shope Krohn,
including a provision which stated that “the Agent must ensure the Loan Documents conform to
Applicable Law with respect to: … (4) Verification of the identity of the Borrower(s)… .”
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On October 28, 2024, a Deed of Trust securing the $510,000 loan was purportedly executed
by Charles and Mary Strauss in Paulding County, Georgia, before notary Wanda H. Wingfield.1
Cardinal provided copies of Charles and Mary Straus drivers’ licenses and the Deed of Trust to
Shope Krohn. (Doc. No. 17 at ⁋ 15). On November 7, 2024, Cardinal funded the loan, and Shope
Krohn recorded the deed of trust on the Property. (Doc. No. at 1 ¶¶ 19-20; Doc. No. 1-5). In
connection with the closing, Shope Krohn signed a certification stating that “[a]ll conditions and
requirements have been properly met” and that it would “return a digital copy of the clear 2006
ALTA Short Form Title Policy for this transaction.” Shope Krohn wired the net proceeds to a
Wildflower Realty, LLC (“Wildflower”) bank account at Fifth Third Bank, an account provided
by Cardinal to Shope Krohn, after recording the Deed of Trust. (Doc. No. 17 at ⁋ 16). On
November 8 and 14, 2024, Merrilee Anderson, the “manager/member” of Wildflower, wrote
hundreds of thousands of dollars of checks from Wildflower’s bank account that emptied the
account, which is now closed. (Id. at ⁋⁋ 26-29).
The scheme unraveled in December 2024 when the real Charles Strauss contacted the
North Carolina Department of Justice to complain about fraudulent activity related to the $510,000
Loan secured by a deed of trust on his property. Charles J. Strauss and Mary K. Strauss have
attested that neither authorized a loan or a lien against their Property, did not receive any of the
funds from the Loan closing, did not communicate with plaintiff, did not sign a Deed of Trust,
that they were not in Paulding County, Georgia when the Deed of Trust was purportedly signed,
1 Ms. Wingfield is not a defendant in this action. Apparently, the perpetrators of the fraud
purchased a notary stamp with Wingfield’s name from an unknown source (referenced in this
action as “ABC Corporation”) and have been impersonating Wingfield since at least June 2023.
In addition to this transaction, Wingfield’s notary stamp has been used to acknowledge signatures
of putative borrowers in Georgia, Alabama, Florida, California, Tennessee, Michigan, Mississippi,
and California, and she is a defendant in 13 lawsuits related to its use. (See Doc. No. 17 at ⁋⁋ 30-
36).
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and did not appear before the notary on the Deed of Trust. (Doc. No. 1 at ¶¶ 23-24). On June 4,
2025, Cardinal filed a Deed of Trust Release and Discharge against Charles Strauss and Mary
Strauss.
Cardinal filed this lawsuit on August 13, 2025,2 against Investors Title and Shope Krohn
asserting claims for declaratory judgment, breach of contract (as to the CPL), bad faith and unfair
or deceptive trade practices (“UDTP”) under N.C. Gen. Stat. § 75-1.1 against Investors Title and
breach of contract and professional negligence/breach of fiduciary duty against Shope Krohn.
Investors Title has moved to dismiss all of Cardinal’s claims. (Doc. No. 12). Shope Krohn has
answered the Complaint and asserted third party claims against Merrilee Anderson, Wildflower,
Lawyers Mutual Liability Insurance Company of North Carolina, John or Jane Doe and ABC
Corporation as well as a Counterclaim against Cardinal (claiming that Cardinal had a non-
delegable duty to properly identify the borrowers). Ms. Anderson, a 74-year-old resident of
Michigan, has not yet answered the Complaint, but alleges that she is the “victim of a romance
cyber scam” and requests that the Court appoint counsel to represent her because she doesn’t have
funds to pay an attorney. (See Doc. No. 24). With respect to Shope Krohn’s claims against
Lawyer’s Mutual, the parties have consented to Shope Krohn filing an Amended Third Party
Complaint. (Doc. No. 28). The motions are all ripe for the Court’s ruling.
2 This is not the only action filed related to this fraud. On September 22, 2025, Shope Krohn filed
a complaint in Forsyth County, North Carolina, captioned Shope Krohn Attorneys at Law, P.A. v.
John Doe and Jane Doe, 25CV01186-330 (“the John Doe lawsuit”). The current status of that
action is unknown and, as discussed above, Shope Krohn has asserted its own claims in this
lawsuit.
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III. DISCUSSION
A. Investors Title’s Motion to Dismiss
1. Breach of Contract (CPL)
In its breach of contract claim, Cardinal alleges that Investors Title had an obligation to
under the CPL to “indemnify [Cardinal] for actual loss of Funds incurred by [Cardinal] in
connection with the closing of the Real Estate Transaction conducted by the…Approved
Attorney.” See Doc. No. 1-3 at p. 2. Specifically, Cardinal claims it is entitled to indemnity based
on item No. 4:
Your loss is solely caused by:
a. a failure of the…Approved Attorney to comply with Your written closing
instructions that relate to: … (i)(b) the validity, enforceability, or priority of the
lien of the Insured Mortgage…
Doc. No. 1-3 at p. 3 (emphasis added). It then argues that the Complaint clearly alleges that Shope
Krohn, the “Approved Attorney,” failed to follow Cardinal’s closing instructions and that failure
is the sole cause of Cardinal’s loss. See Doc. No. 1 at ¶ 43.
Investors Title asserts that there is no obligation under the CPL because it contains an
express Exclusion for the type of fraudulent activity which led to this claim:
2. The Company is not liable under this letter for any loss arising from
any:
f. fraud, theft, dishonesty, misappropriation by anyone other than the
Company, Issuing Agent, Approved Settlement Provider or Approved
Attorney.
n. wire fraud, mail fraud, telephone fraud, facsimile fraud, unauthorized
access to a computer, network, email or document production system,
business email compromise, identity theft or diversion of Funds to a person
or account not entitled to receive the Funds…
(Doc. No. 1-3 at pp. 4–5). The Court agrees.
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Even if the CPL is analyzed as an insurance policy, which the Court need not decide, “[a]n
insurance policy is a contract and its provisions govern the rights and duties of the parties thereto.”
C. D. Spangler Constr. Co. v. Indus. Crankshaft & Eng'g Co., 326 N.C. 133, 142 (1990). Courts
apply general contract interpretation rules when interpreting an insurance policy. Accardi v.
Hartford Underwriters Ins. Co., 373 N.C. 292, 295 (2020). For example, as in other contracts, the
objective of construction of terms in an insurance policy is to arrive at the insurance coverage
intended by the parties when the policy was issued. Wachovia Bank & Tr. Co. v. Westchester Fire
Ins. Co., 276 N.C. 348, 354 (1970).
As discussed above, the governing test on a motion to dismiss is whether the Complaint
states a claim to relief that is “plausible.” The standard of “plausibility” is generous, but it is not
unbounded. Here, Cardinal’s only response to the applicability of the exclusion for loss caused by
the fraud of a third-party is that it has alleged that Shope Krohn’s conduct was the “sole cause” of
the loss and therefore is outside the exclusion. So, the question before the Court is whether that
factual allegation is plausible. It is clearly not. While the closing attorney’s negligent conduct may
have permitted the fraud to be successful (which Shope Krohn denies), in the absence of the
forgery of the loan request and documentation; that is, the underlying fraud, there would have been
no loss or loan at all. Therefore, it is not plausible that Shope Krohn’s conduct was the “sole” cause
of the loss. Accordingly, the exception for third-party fraud applies and Investors Title is entitled
to the dismissal of Cardinal’s claim that it breached the CPL.
3. Declaratory Judgment (Requiring Investors Title to issue Title Policy)
In addition to its breach of contract claim, Cardinal alleges that Investors Title has an
obligation to issue the promised title policy based, at least in part, on the “Approved Attorney’s”
certification that “[a]ll conditions and requirements have been properly met” and that it would
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“return a digital copy of the clear 2006 ALTA Short Form Title Policy for this transaction.” Doc.
No. 1 at ¶ 38; Doc. 1-4, at 6. Investors Title moves to dismiss this claim arguing that several of the
requirements to issue a title policy have not been met, including Receipt of Attorney’s Final
Certificate, along with all additional required documents. See Doc. No. 1-2 at 6; Doc. No. 1-7 at
3. On this claim, the Court agrees with Cardinal.
Cardinal has alleged that all of the requirements for the issuance of the title policy were
satisfied. Doc. No. 1 at ¶¶ 33-38. Cardinal allegedly accepted Investors’ offer to insure, satisfied
the requirements, the Approved Attorney certified and attested to the fulfillment of the
requirements and thus, according to Cardinal, coverage was bound. Investors Title disputes those
facts, but at this stage of the litigation, the Court must accept Cardinal’s pled facts as true, where
they could plausibly lead to liability. Based on, at a minimum, Shope Krohn’s certification that all
requirements had been met and statement that the title policy would be sent to Cardinal, the Court
finds Cardinal has stated a plausible claim. Therefore, the motion to dismiss will be denied as to
Cardinal’s claim for a declaratory judgment.
4. Bad Faith and UDTP Claims
The Court will also allow Cardinal’s bad faith and UDTP claims to survive at this early
stage of the lawsuit. While the Court agrees with Investors Title that Cardinal will ultimately be
required to make a substantial showing beyond a breach of contract or a reasonable disagreement
over insurance coverage to establish a bad faith or a UDTP claim, accepting Cardinal’s allegations
as true, together with all permissible inferences, the Court declines to dismiss those claims now as
a matter of law. Rather, the Court will consider the viability of the claims closely at Summary
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Judgment with the benefit of a full factual record following discovery (unless the Parties resolve
this dispute sooner).3
B. Other Motions
The remaining motions before the Court can be quickly resolved. Ms. Anderson’s Motion
to Appoint Counsel, Doc. No. 24, will be denied. While the Court is sympathetic to any litigant
who cannot afford counsel, there is no statute or program authorizing the Court to provide counsel
to a civil defendant. However, the Court will grant her Motion for Extension of Time to Answer,
Doc. No. 29, extending her time to Answer or otherwise respond to the Complaint to March 9,
2026. Shope Krohn’s Consent Motion to Amend/Correct Amended Complaint as to Lawyers
Mutual, Doc. No. 28, will be granted in the absence of an objection.
IV. ORDER
NOW THEREFORE IT IS ORDERED THAT:
1. Investors Title’s Motion to Dismiss, Doc. No. 12, is in part GRANTED and in part
DENIED as described above;
2. Merrilee Anderson’s Motion to Appoint Counsel, Doc. No. 24, is DENIED;
3. Merrilee Anderson’s Motion for Extension of Time to Answer, Doc. No. 29, is
GRANTED and her time to Answer or otherwise respond to the Complaint is
extended to March 2, 2026;
4. Shope Krohn’s Consent Motion to Amend/Correct Amended Complaint as to
Lawyers Mutual, Doc. No. 28, is GRANTED; and
3 It is the Court’s intention to consider including in the Case Management Order an order directing
the Parties to conduct an early mediation prior to full discovery. The Parties should address that
possibility in their initial attorneys’ conference and subsequent proposed case management
schedule.
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5. This case shall proceed forward towards a trial on the merits on the remaining
claims in the absence of a voluntary resolution of the dispute among the parties.
SO ORDERED ADJUDGED AND DECREED.
Signed: February 9, 2026
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