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Federal Deposit Insurance v. Republic Title Company

April 20, 2011

FEDERAL DEPOSIT INSURANCE CORPORATION, AS RECEIVER FOR RAVENSWOOD BANK, AN
ILLINOIS BANKING CORPORATION PLAINTIFF,
v.
REPUBLIC TITLE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Magistrate Judge Geraldine Soat Brown

MEMORANDUM OPINION AND ORDER

Before the court is plaintiff Federal Deposit Insurance Corporation's Motion to Dismiss Second Amended Affirmative Defenses of Republic Title.*fn1 [Dkt 27.] FDIC is the receiver for Ravenswood Bank and was substituted for it as the plaintiff prior to the removal of the case from state to federal court. (Pl.'s Mot. Suppl. Record., Ex. A.) Both are referred to herein as "the Bank." Defendant Republic Title Company ("Republic") opposes the motion. For the reasons set forth below, the motion is granted in part and denied in part.

BACKGROUND

According to the Bank, Republic agreed on or about May 19, 2006, to provide title and escrow closing services in connection with a planned commercial real estate mortgage loan transaction scheduled to close a few days thereafter. (Notice of Rem., Ex. A, Compl. ¶3.) [Dkt 9.] The contract, entitled "Money Lender's Escrow Trust Instructions," is attached to the complaint as Exhibit A. According to the instructions, the Bank deposited funds in the amount of $474,242.80 with Republic as escrow trustee. (Compl., Ex. A. at 1.) The Bank alleges that Republic breached the contract by failing to confirm the closing status and to fax copies of specified documents to the Bank before closing and disbursing the Bank's funds. (Compl. ¶¶ 3, 5-7.) The Bank complains that, as a result, it was unable to review the settlement statement and understand the "true nature of the transaction" until after the closing and disbursement of the loan proceeds. (Id. ¶¶ 7-9.) Had it been aware of certain facts, it says, it would have refused to extend the mortgage loan to the buyer. (Id. ¶ 12.) The Bank complains that immediately after the May 22, 2006 closing, the buyer defaulted on the loan. (Id. ¶ 8.) Following a foreclosure judgment on the property, the Bank purchased it by a credit bid (reducing the balance on its unpaid loan as the purchase price) and obtained a deficiency judgment of $300,134.70. (Id.)

Republic denies many of the allegations of the complaint and asserts three affirmative defenses: implied waiver, laches and failure to mitigate. (Answer.) The Bank moved to dismiss each of Republic's affirmative defenses, but the case was removed to federal court while the motion was still pending. (See Pl.'s Mot. Suppl. Record.) In this court, the motion is considered a motion to strike the affirmative defenses under Rule 12(f) of the Federal Rules of Civil Procedure.

LEGAL STANDARD

Affirmative defenses are pleadings, and as such they are subject to the same requirements applicable to other pleadings. Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir. 1989). Each affirmative defense must therefore set forth a short and plain statement of the basis of the defense. See Fed. R. Civ. P. 8(a); Heller Fin., 883 F.2d at 1294. Under the Federal Rules of Civil Procedure, a court may "strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f). Motions to strike affirmative defenses, however, are not generally favored. Williams v. Jader Fuel Co., Inc., 944 F.2d 1388, 1400 (7th Cir. 1991). Ordinarily, affirmative defenses will not be stricken if they are sufficient as a matter of law or if they present questions of law or fact. Heller Fin., 883 F.2d at 1294. In a diversity case, the legal and factual sufficiency of an affirmative defense is evaluated with reference to state law. Williams, 944 F.2d at 1400. "It is appropriate for the court to strike affirmative defenses that add unnecessary clutter to a case." Sloan Valve Co. v. Zurn Indust., Inc., 712 F. Supp. 2d 743, 749 (N.D. Ill. 2010); Davis v. Elite Mortgage Servs., Inc., 592 F. Supp. 2d 1052, 1058 (N.D.Ill. 2009).

Courts in the Seventh Circuit generally employ a three-part analysis when evaluating a motion to strike an affirmative defense:

(1) the matter must be properly pleaded as an affirmative defense;

(2) the matter must be adequately pleaded under the requirements of Federal Rules of Civil Procedure 8 and 9; and

(3) the matter must withstand a Rule 12(b)(6) challenge - in other words, if it is impossible for defendants to prove a set of facts in support of the affirmative defense that would defeat the complaint, the matter must be stricken as legally insufficient.

Davis, 592 F. Supp. 2d at 1058; Reis Robotics USA, Inc. v. Concept Indust., Inc., 462 F. Supp. 2d 897, 905 (N.D. Ill. 2006); In re Top Flight Stairs & Rails, Ltd., 398 B.R 321, 323 (Bankr. N.D. Ill. 2008).

DISCUSSION

1. Implied ...


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