First IC Bank v. N. Am. Title Ins. Co.

DO NOT PUBLISH

Appeal from the United States District Court for the Northern District of Georgia D.C. Docket No. 1:19-cv-05055-SDG

Before BRANCH, LUCK, and LAGOA, Circuit Judges.

PER CURIAM.

First IC Bank appeals the district court's order granting North American Title Insurance Company's motion to dismiss First IC Bank's complaint, alleging breach of contract and conversion, for failure to state a claim upon which relief can be granted. First IC Bank argues that the district court erred by holding that it was bound to the decisions of its closing attorney to obtain a new closing protection letter from a different insurer and by holding that an action for conversion could not lie. After review, we affirm the district court's ruling.

I. Background

On March 15, 2019, Ying Duan executed an agreement with Israel and Jill Malowany to purchase real property located in Johns Creek, Georgia.^[1] The parties selected Dickason Law Group

(collectively, Dickason) as the closing attorney. To finance the purchase of the property, Duan executed a loan agreement with Plaintiff First IC Bank. The loan agreement provided that a portion of the loan would be used to satisfy an existing security interest on the property held by J.P Morgan Chase Bank (Chase), thereby giving First IC Bank a first-priority interest in the property after closing.

On March 25, 2019, Dickason, as an issuing agent of North American Title Insurance Company (North American), issued a closing protection letter (CPL) and a Commitment Letter for Title Insurance to First IC Bank.^[2] The CPL described North American's offer to indemnify First IC Bank for "losses due to either (1) the failure of the Issuing Agent to follow the lender's closing instructions or (2) dishonesty of the Issuing Agent in connection with the closing," "subject to the [c]onditions and [e]xclusions"

listed in the letter, and provided that "the Company [North American] issues or is contractually obligated to issue title insurance for your [First IC Bank's] protection in connection with the closing of the Real Estate Transaction."

Thereafter, on April 15, 2019, North American terminated Dickason as an issuing agent for its CPL's and title insurance policies. Three days later, Dickason arranged to obtain a CPL and title insurance policy from a different insurance company, Investors Title Insurance Company (Investors). According to First IC Bank, Dickason did not inform it of the change in title insurance companies or send First IC Bank a copy of the Investors CPL. The Investors CPL specified that First IC Bank's "transmittal of Funds or documents to the Issuing Agent or Approved Attorney for the Real Estate Transaction constitutes Your acceptance of this letter" and that "[t]his letter supersedes and cancels any previous letter or similar agreement for closing protection that applies to the Real Estate Transaction."

On April 19, 2019, First IC Bank sent Dickason instructions to perform the closing for Duan's purchase of the Malowany's property and wired Dickason $826, 724.58 to fund the purchase. The instructions listed an "estimate of fees and costs" that included an entry for payment for title insurance and CPL fees to North American.

After the closing, Dickason sent First IC Bank a settlement statement which stated that Dickason had paid Investors, rather than North American, for the CPL and for the title insurance policy.

Notwithstanding the information in the post-closing statement, First IC Bank alleged that it did not learn of Investors involvement until May 24, 2019, when Duan notified First IC Bank that Chase's security interest had not been satisfied and Chase had demanded that the Malowanys make further mortgage payments or Chase would foreclose on the property. Additionally, First IC Bank alleged it did not learn of Dickason's termination as an issuing agent for North American until May 29, 2019, when First IC Bank received a letter from North American, backdated April 19, 2019, saying Dickason's issuing agency authority was terminated effective April 15.

According to First IC Bank's pleadings, Dickason did not use the funds First IC Bank wired to him to satisfy Chase's security interest as directed, but instead misappropriated them. The Malowanys made three mortgage payments to Chase before First IC Bank, on September 17, 2019, paid Chase $643, 363.23 to satisfy the loan. First IC Bank demanded Investors indemnify it for its losses under the Investors CPL, but Investors refused to do so.

In September 2019, First IC Bank sued North American in the State Court of Gwinnett County, Georgia. North American removed the suit to the U.S. District Court for the Northern District of Georgia. In June 2020, the district court granted First IC Bank's motion for leave to file an amended complaint.

First IC Bank's amended complaint added Investors as a named defendant, pleading in the alternative and asserting six claims for relief: three against North American (breach of contract, conversion by its agent, and attorney's fees and expenses under

O.C.G.A. § 13-6-11) and three against Investors (breach of contract, conversion by its agent, and attorney's fees and expenses under O.C.G.A. § 13-6-11).

In the amended complaint, First IC Bank alleged that North American was liable in contract because the CPL North American issued to First IC Bank on March 25 was still enforceable. In that CPL, North American expressly agreed to indemnify the plaintiff for its losses if Dickason failed to follow First IC Bank's closing instructions or for theft or fraud by Dickason in connection with the closing.

First IC Bank alleged North American was liable for Dickason's actions because North American's revocation of Dickason's status as its issuing agent did not become effective until First IC Bank received notice of it in May.

With regard to its claims against Investors, First IC Bank alleged that Dickason was an issuing agent of Investors when it issued the CPL and title insurance policy in April. Because "the only consideration required by" Investors was "acceptance of the CPL by Plaintiff, not reliance on the CPL," and because "First IC Bank accept[ed] the CPL" or would have if it had been notified by Dickason, IC Bank alleged that the Investors CPL was enforceable against Investors and that Investors was liable for its breach and its agent's conversion.

In July 2020, North American moved to dismiss First IC Bank's amended complaint and the district court granted the

motion in January 2021. In its order dismissing the amended complaint, the district court held that First IC Bank's pleaded facts confirmed that there was no valid and enforceable contract with North American. Rather, First IC Bank acknowledged in its pleading that Dickason, acting as an agent of First IC Bank, "obtained a subsequent CPL and title policy from Investors prior to closing," which the bank accepted when it wired closing funds to Dickason. And by the express terms of the Investors CPL, the North American CPL was superseded by the Investors CPL when First IC Bank accepted it.

First IC Bank did not dispute the chronology of events but alleged that it should not be bound by Dickason's action obtaining a new CPL from Investors because it had no knowledge until well after the closing that Dickason had been terminated as an issuing agent by North American or that Dickason had obtained a new title and CPL policy with Investors. The district court rejected First IC Bank's argument. Specifically, the district court noted that First IC Bank's own allegations confirmed that Dickason was acting as its agent, and under Georgia law an agent's actions are binding on the principal. And even if Dickason did not inform the bank of the change, First IC Bank was charged with constructive knowledge because, as an agent, Dickason's knowledge was imputed to principal First IC Bank. The court also rejected First IC Bank's claim for conversion because the money it was seeking to recover for the amounts it paid to satisfy the Chase loan was not a "specific, separate, identifiable fund." Thus, the district court dismissed IC

Bank's claims against North American with prejudice and ordered IC Bank to show cause why its claims against Investors should not be dismissed for failure to timely effectuate service. Thereafter, First IC Bank voluntarily dismissed without prejudice its claims against Investors. This appeal followed.

II. Discussion

First IC Bank argues that the case should have been allowed to proceed to discovery because the bank set out a viable claim for breach of contract and conversion and the trial court erred in ruling Dickason was the bank's agent as a matter of law.

"We review de novo the district court's grant of a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6), accepting the allegations in the complaint as true and construing them in the light most favorable to the...