MEMORANDUM
HENRY S. PERKIN, Magistrate Judge.
This matter is before the Court on Plaintiff's Motion for Summary Judgment. In conjunction with the motion, Plaintiff filed its Brief in Support of Plaintiff's Motion for Summary Judgment and exhibits thereto, as well as Plaintiff's Statement of Material, Undisputed Facts. Defendants did not file a response to motion or statement of facts, despite several reminders from the Court. Having reviewed the motion and pertinent filings pertaining to this matter, the Court is prepared to rule.
Procedural History
Plaintiff Commonwealth Land Title Insurance Company ("Commonwealth"), a title insurance underwriter, commenced this action against Defendants William Rabeh and Victoria Rabeh on December 7, 2012 by filing a Complaint in this District. According to the Complaint,
Defendants initially defaulted on the Complaint, failing for many months to answer or otherwise respond. However, after a motion for default judgment was filed by Commonwealth, and following the entry of a November 14, 2013 Order by the Honorable Lawrence F. Stengel, which directed Defendants to file an answer to the Complaint within 21 days or suffer entry of default judgment, Defendants each filed Answers to Complaint, which are identical. By Order dated December 16, 2013, Judge Stengel denied plaintiff's motion for default judgment.
On March 7, 2014, a Rule 16 conference was held on the record before Judge Stengel. Shortly thereafter, and with the consent of all parties, the action was transferred to the undersigned Magistrate Judge to conduct all proceedings and order the entry of a final judgment. A subsequent Rule 16 conference was held before the undersigned on April 10, 2014, and a Rule 16 Scheduling Order was issued by the undersigned on that same date. More specifically, the Court directed that Defendants file any Third Party Complaint on or before May 15, 2014; that discovery be completed by August 15, 2014; and that dispositive motions be filed and served on or before September 15, 2014. Although Defendants had expressed an interest in joining M&T
During the course of discovery, Commonwealth served Requests for Production of Documents and Requests for Admissions upon Defendants. On August 29, 2014, Defendants served identical responses to the Requests for Admissions, and also served objections and responses to the Commonwealth's Requests for Production of Documents. With respect to the requests for production, Defendants responded with numerous objections and promised to produce "all responsive, non-privileged documents in their possession." However, as represented by Commonwealth, as of the date of filing its motion for summary judgment, Defendants did not produce a single document, or make the required initial disclosures pursuant to Rule 26(a)(1) of the Federal Rules of Civil Procedure.
Plaintiff's Motion for Summary Judgment and Brief in Support of Plaintiff's Motion for Summary Judgment were filed on September 12, 2014.
On December 16, 2014, a bankruptcy case concerning Defendants William Rabeh and Victoria Rabeh was filed in the United States Bankruptcy Court for the Eastern District of Pennsylvania under Chapter 13 of the United States Bankruptcy Code.
On October 15, 2015, following notice and hearing, the Honorable Richard E. Fehling of the United States Bankruptcy Court dismissed the bankruptcy case filed by Defendants William Rabeh and Victoria Rabeh. By Order dated October 26, 2015, this Court removed this matter from civil suspense, and directed that Defendants William Rabeh and Victoria Rabeh file and serve their response to Plaintiff's Motion for Summary Judgment on or before November 25, 2015.
Background
By Rule 16 Scheduling Order of the undersigned dated April 10, 2014, any party in this litigation filing a motion for summary judgment was required to file a brief, together with "a separate, short and concise statement of the material facts, in numbered paragraphs, as to which the moving party contends there is no genuine issue to be tried."
In addition, this Court's Rule 16 Scheduling Order provided that any party opposing a motion for summary judgment was required to file a brief in opposition to the motion and
In this case, Commonwealth filed a concise statement of facts in support of its motion for summary judgment on September 12, 2014.
Our requirement for a concise statement and a responsive concise statement is consistent with Rule 56 of the Federal Rules of Civil Procedure. In addition Rule 83(b) of the Federal Rules of Civil Procedure provides that:
Fed.R.Civ.P. 83(b). Thus, even if our requirement for a separate concise statement is not consistent with Rule 56, we gave Defendants actual and repeated notice of our requirement, and they did not comply.
Facts
Based upon the record papers, exhibits, and Plaintiff's Statement of Material, Undisputed Facts (Docket No. 20-2), the pertinent facts are as follows:
In 1991, Defendants William Rabeh and Victoria Rabeh acquired title to the Property at 888 Pennsylvania Street, Whitehall, Pennsylvania 18052 (also referred to as 986 Congress Street) and have lived there since that time. On or about December 23, 2005, the Defendants conveyed the Property to their daughter, Diana Rabeh, for the purchase price of $215,000, by Special Warranty Deed ("the Deed"). As of December 23, 2005, the Property was encumbered by federal tax liens in excess of $100,000 in favor of the United States of America against Defendants for unpaid income, employment and unemployment taxes ("Federal Tax Liens").
Prior to the settlement date of December 23, 2005, Diana Rabeh ordered and paid for a title search and title insurance on the Property from M&T Abstract LLP, which at that time was an authorized title issuing agent of Commonwealth. M&T performed the title search on the Property. M&T's title search incorrectly failed to reveal the Federal Tax Liens.
On December 28, 2005, Commonwealth Insurance Policy No. 866-0353303 ("the Policy") was issued to Diana Rabeh ("the Insured"), pursuant to which Commonwealth agreed to insure good and marketable title to the Property, subject to the Conditions, Exclusions, and Exceptions set forth therein. The Federal Tax Liens were not listed by M&T as Exceptions from coverage under the Policy.
On or about February 5, 2009, the United States filed a civil Complaint in the United States District Court for the Eastern District of Pennsylvania against the Defendants herein, and the Insured, captioned
On or about April 12, 2012, Defendants William and Victoria Rabeh agreed, in the Federal Tax Lien Action, to the entry of a judgment against them, in favor of the United States, in the combined total of $247,170.94, plus statutory additions, as follows:
One week later, on or about April 19, 2012, Commonwealth and the Insured entered into a Settlement Agreement pursuant to which, in exchange for a payment of $250,000.00 by Commonwealth, they settled and dismissed all claims between them with respect to the Insured's claim against the Policy. The funds obtained from Commonwealth by the Insured Diana Rabeh were applied to the outstanding Federal Tax Liens, and reduced the Agreed Judgment against the Defendants. As Mr. Rabeh told Judge Stengel during the Rule 16 conference on March 7, 2014, the Federal Tax Lien Action was settled, "but not through me. . . . I think it was through the title insurance company." Following these payments, the Federal Tax Lien Action was dismissed and the United States discontinued its efforts to foreclose on the Property.
Defendants benefitted from Commonwealth's payment of $250,000 to the Insured because the United States applied these funds to the outstanding Federal Tax Liens reducing Defendants' liability to the United States. Defendants continue to reside in the Property .
Standard of Review
Summary judgment is appropriate where the record and evidence, taken in the light most favorable to the non-moving party, show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The essential inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law."
To defeat summary judgment, the non-moving party cannot rest on the pleadings, but rather that party must cite "to particular parts of materials in the record" showing that there is a genuine dispute for trial. Fed. R. Civ. P. 56(c). Similarly, the non-moving party cannot rely on unsupported assertions, conclusory allegations, or mere suspicions in attempting to survive a summary judgment motion.
Discussion
Breach of Warranty
As noted above, on or about December 23, 2005, the Defendants conveyed the Property to their daughter, the Insured, for the purchase price of $215,000, by Special Warranty Deed. The Deed from Defendants to the Insured warrants that, "said Grantor(s) will specially WARRANT AND FOREVER DEFEND the property hereby conveyed."
By Pennsylvania statute, and as correctly noted by Commonwealth, the foregoing language of the Deed gives rise to a special warranty:
21 P.S. § 6.
Under a special warranty deed, the grantor agrees to defend and hold harmless the grantee "against any adverse claimant with a superior interest in the land claiming through the grantor."
In this matter, it is undisputed that the Defendants conveyed the Property to their daughter, the Insured, under a Deed which contained a special warranty of title, ensuring that there were no encumbrances on the Property which Defendants had created or allowed. The Federal Tax Liens, however, were encumbrances upon the Property, and it is undisputed that the Federal Tax Liens existed at the time of the conveyance of the Property to the Insured.
Moreover, by virtue of its payment to Defendants' daughter, the Insured, Commonwealth is subrogated to the Insured's rights against Defendants, and stands in her shoes to sue Defendants for their breach of warranty. More specifically, the Policy provides as follows at ¶13 of the Conditions and Stipulations:
"Subrogation allows the subrogee (in this case [Commonwealth]) to step into the shoes of the subrogor (the Insured) to recover from the party that is primarily liable (the [Defendants]) any amounts previously paid by the subrogee to the subrogor. . . ."
Because we find that there are no genuine issues of material fact concerning the Defendants' breach of warranty in this matter, and because Commonwealth's right as subrogee to sue for that breach of warranty is clear as a matter of law, we conclude that Commonwealth is entitled to summary judgment in its favor in the amount of $247,170.94, which is the undisputed amount of the encumbrances, plus costs, with respect to Count I of the Complaint.
Common Law Indemnification
"The right to indemnity arises by operation of law and will be allowed where necessary to prevent an unjust result. It is a common law equitable remedy that shifts the entire responsibility for damages from a party who, without any fault, has been required to pay because of a legal relationship to the party at fault. . . . Common law indemnity . . . is a fault-shifting mechanism that comes into play when a defendant held liable by operation of law seeks to recover from a defendant whose conduct actually caused the loss."
Indemnity is available from those who are primarily liable to those who are merely secondarily or vicariously liable.
As noted above, it is undisputed that Defendants have admitted that as of December 23, 2005, the Property was encumbered by Federal Tax Liens in favor of the United States of America.
Defendants, as delinquent taxpayers, were primarily and actively responsible for the failure to pay their past due income taxes and employment taxes, as well as their failure to satisfy the government's Federal Tax Liens on the Property. We find that Commonwealth's responsibility to pay off those liens, if any, was passive and secondary and imputed solely by virtue of the Policy of title insurance it had provided to their daughter, the Insured.
Unjust Enrichment
Unjust enrichment is an equitable doctrine, and the law will imply a contract which imposes a duty on a party to pay to another the value of the benefit conferred, or restitution where the party has been unjustly enriched.
As correctly noted by Commonwealth, it has conferred a very substantial benefit upon Defendants resulting from the settlement with its Insured on or about April 19, 2012. More specifically, in exchange for a payment of $250,000.00 by Commonwealth, all claims between Commonwealth and the Insured were settled, and the funds obtained from Commonwealth by the Insured were applied to the outstanding Federal Tax Liens, thereby reducing the Agreed Judgment against the Defendants. As Mr. Rabeh told Judge Stengel during the Rule 16 conference on March 7, 2014, the Federal Tax Lien Action was settled, "but not through me. . . . I think it was through the title insurance company."
We find, based on the foregoing facts, that it would be unconscionable and unjust to allow Defendants to retain the benefit of Commonwealth's payment to the Insured, which payment served to satisfy or greatly reduce the Federal Tax Liens against the Property in which they continue to reside. Although Defendants were not Commonwealth's insureds, they were the primary beneficiaries of Commonwealth's payment under the Policy and they continue to reside in the property. Because Defendants have failed to identify any genuine issues of material fact concerning the claim of unjust enrichment, Commonwealth is entitled to summary judgment in its favor in the amount of $247,170.94, plus costs, with respect to Count III of the Complaint.
Conclusion
Plaintiff's Motion for Summary Judgment will be granted. An Order follows.
FootNotes
At the time of sale, however, Commonwealth avers that the Property was encumbered by several federal tax liens totaling $247,170.94 arising from unpaid federal taxes owed by Defendants. Commonwealth asserts that the federal tax liens either were not discovered by M&T (the company that performed the title search); or, if they were discovered by M&T, it did not except the liens from the title insurance policy, as it should have.
In 2009, the United States of America sued Defendants and their daughter, Commonwealth's insured, in this Court to foreclose its liens and obtain a judicial sale of the Property. Commonwealth contends that because the liens were not excepted from coverage, its insured's title to the Property was clouded, and she stood to lose the Property to foreclosure. Accordingly, Commonwealth paid Defendants' daughter, its insured, $250,000.00 to settle her claim against the Policy, and the daughter in turn used the proceeds to pay the federal tax liens. The foreclosure action was dismissed. Defendants still live in the Property, but their tax liens have been paid off, or paid down substantially, using funds obtained from Commonwealth.
Commonwealth contends that although it was required by the Policy to protect its insured's title, it owed no obligation to Defendants to pay off their tax delinquencies. Commonwealth avers that the Defendants and the Defendants alone are ultimately responsible for their own tax debt.
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