Opinion
Case No. 2:03-CV-00290 PGC
December 10, 2003
ORDER DENYING MOTION TO DISMISS UNDER 12(B)(6) AND GRANTING LEAVE TO AMEND COMPLAINT
Third-party defendant, CentraLand Title Company, filed a motion to dismiss third-party plaintiff Chicago Title's second cause of action for promissory and equitable estoppel, third cause of action for negligent misrepresentation, and fourth cause of action for subrogation (#37-1). Chicago Title Insurance Company responded and filed a motion seeking leave to file an amended answer and third-party complaint (#43-1). The court DENIES the motion to dismiss the causes of action, and GRANTS the motion to amend. I. Economic Loss Rule
The economic loss rule, under both Utah and Texas law, essentially bars a tort suit where a contract has defined the rights and responsibilities of the parties. The economic loss rule provides integrity to contracts by supporting the contractual definitions of the rights and responsibilities of the parties.
See Trans-Gulf Corp. v. Performance Aircraft Services. Inc., 82 S.W.3d 691, 695 (App. Texas 2002); SME Industries, Inc. v. Thompson, Ventulett, Stainback and Associates, Inc., 28 P.3d 669, 680 (Utah 2001).
CentraLand argues that Chicago Title's second cause of action for promissory and equitable estoppel and third cause of action for negligent misrepresentation are barred by this rule. There are, however, exceptions to the economic loss rule. Utah law allows claims in tort where a "independent duty of care" exists under tort law. Texas law recognizes that "contracts creating fiduciary relationships create relationships that may give rise to duties enforceable as torts."
See Hermansen v. Tasulis, 48 P.3d 235, 240 (Utah 2002) (quoting Grynberg v. Agri. Tech, Inc., 10 P.3d 1267, 1269 (Colo. 2000)).
Castle Texas Production Ltd. Partnership v. Long Trusts, 2003 WL 21771718 at *4 (Tex.Civ.App. July 31, 2003).
On a motion to dismiss under Rule 12(b)(6), "all well-pleaded factual allegations in the . . . complaint are accepted as true and viewed in the light most favorable to the nonmoving party." According to the third-party complaint, CentraLand Title acted as the escrow agent for Chicago Title in the Middleton transaction. Under Utah law, "escrow" means "any agreement . . . that provides for one or more parties to deliver or entrust . . . any money . . . or other property . . . to another person to be held, paid or delivered in accordance with the terms and conditions prescribed in the agreement." Texas law indicates an escrow officer is "an attorney . . . or bona fide employee of a title insurance agent whose duties include . . . signing escrow checks [and] closing the transaction." Under both Utah and Texas law, escrow agents are fiduciaries and held to a high standard of care when handling transactions.
Pirraglia v. Novell, Inc., 339 F.3d 1182, 1186 (10th Cir. 2003) (citations omitted)
Utah Code Ann. § 7-22-101 (10(a)(2003).
Tex. Ins. Code Ann. Art. 9.02(g) (Vernon 2003).
See Freegard v. First Western Nat'l Bank, 738 P.2d 614, 616 (Utah 1987); and Gonzales v. American Title Co. of Houston, 104 S.W.3d 588, 598 (Tex.Civ.App. 2003).
Viewing the facts in the light most favorable to Chicago Title, and for purposes of this motion only, the complaint properly alleges CentraLand had fiduciary obligations to Chicago Title. Chicago Title's causes of action for negligent misrepresentation and promissory and equitable estoppel are based on this fiduciary relationship. Though the relationship may also, in some sense, arise from the contract with CentraLand, for purposes of this motion there is sufficient independence from the contract to escape the bar of the economic loss rule. Though more may be needed to overcome a motion for summary judgment, the motion to dismiss these claims under Rule 12(b)(6) is denied. II. Subrogation
CentraLand also argues that Chicago Title's fourth cause of action for subrogation must be dismissed because the complaint does not indicate that Chicago Title paid a debt involuntarily. The elements of a subrogation claim are "1) that a party on whose behalf the claimant discharged a debt was primarily liable on the debt, and 2) that the claimant paid the debt involuntarily." Essentially what CentraLand seeks is a determination in this case of Chicago Title's liability, followed by a second, separate lawsuit to resolve CentraLand's subrogation liability. If judgment is entered against Chicago Title and in fact paid by Chicago Title all of the elements for subrogation will be met. In light of CentraLand's role as a third-party defendant on three other claims in the third-party complaint and the inevitability of CentraLand's participation in this litigation, it makes no sense for the court to require a second separate lawsuit in this matter. Accordingly, all of the relevant facts to the subrogation will be resolved in this case, and the motion to dismiss the fourth cause of action is denied.
Argonaut Ins. Co. v. Allstate Ins. Co., 869 S.W.2d 537, 542 (App. Texas 1994), see also Educators Mut. Ins. Ass'n. v. Allied Property and Cas. Ins. Co., 890 P.2d 1029, 1030 (Utah 1995).
III. Leave to Amend
Chicago Title has filed a motion seeking leave to amend its third-party complaint. Rule 15 states that "leave shall be freely given when justice so requires." Chicago Title filed this motion well within the January 2004 deadline for amendments. The court grants the motion to amend.
Conclusion
The court DENIES the motion by CentraLand to dismiss the second, third and fourth causes of action in the third party complaint (#37-1). The court GRANTS the motion by Chicago Title to amend its third-party complaint (#43-1). DATED this day of December, 2003.