Danny Harris Jenkins v. Commonwealth Land Title Insurance Company, a Pennsylvania Corporation Licensed to Do Business in the State of Hawai'i
Docket: 94-16046
Court: Court of Appeals for the Ninth Circuit; September 5, 1996; Federal Appellate Court
Danny Harris Jenkins appealed the district court's judgment against him in his lawsuit against Commonwealth Land Title Insurance Company, concerning a title insurance policy. The district court had dismissed Jenkins' claims, some through summary judgment and others under Federal Rule of Civil Procedure 12(b)(6). The appeal falls under 28 U.S.C. 1291, and the Ninth Circuit affirmed in part and reversed in part.
In 1981, Jenkins purchased a parcel of land for $10,000 and received a title insurance policy from Commonwealth, insuring him against loss or damage up to that amount. In 1985, Jenkins filed a claim with Commonwealth, citing a title report that identified issues potentially affecting his ownership. Commonwealth's response indicated reluctance to act without pending adverse claims, suggesting that a legal action could complicate matters.
In 1992, Jenkins demanded action from Commonwealth, threatening to file a lawsuit if he did not receive a timely response. Commonwealth later indicated it would investigate its liability under the policy. Jenkins subsequently filed a complaint in state court in April 1993, claiming breach of contract, fraud, and other allegations, seeking punitive damages. Commonwealth offered to settle for the policy limit, which Jenkins declined, leading to the case being moved to federal court. The district court ultimately granted summary judgment on several of Jenkins' claims and dismissed his deceptive trade practices claim for failure to state a claim. Jenkins appealed all rulings except for the breach of contract claim.
Commonwealth removed the case to federal court based on diversity jurisdiction under 28 U.S.C. 1332. The district court denied Jenkins' motion to remand and allowed Commonwealth to amend its notice of removal. Jenkins appealed the determination of diversity jurisdiction. The court reviewed subject-matter jurisdiction de novo and found Jenkins' challenges to be unmeritorious. The amended notice clarified that Commonwealth is incorporated in Pennsylvania with its principal place of business there, while Jenkins conceded he is a citizen of Hawai'i, confirming diversity of citizenship.
Regarding procedural matters, Jenkins contested the district court's decision to grant Commonwealth an extension for filing its answer. Commonwealth filed for an extension in state court before the deadline, which was pending at the time of removal. Federal courts assume jurisdiction over proceedings as they were left in state court upon removal. Therefore, the federal court treated Commonwealth’s state motion as pending within the federal jurisdiction, allowing the district court discretion to extend the deadline for filing the answer under Fed. R. Civ. P. 6(b)(1).
The district court properly exercised its discretion in granting an extension for the filing of the Commonwealth's answer, supported by the Commonwealth attorney's declarations, which detailed the refusal of Jenkins to stipulate to the extension and the attorney's conflicting obligations in a multi-party case set for trial. The court's enlargement of time was justified given the circumstances.
Jenkins' appeal regarding the negligent misrepresentation claim was unsuccessful, as the court found that even if he had raised a genuine issue of material fact regarding Commonwealth's representations about the title to Parcel 29, he failed to demonstrate any damages. Under Hawai'i law, damages are a necessary element for such a claim. Jenkins did not substantiate his allegations of other negligent misrepresentations regarding Commonwealth's obligations under the policy or to quiet title, and he did not provide evidence beyond mere assertions.
Regarding the fraud claim, the district court dismissed it for not meeting the specificity requirements of Federal Rule of Civil Procedure 9(b), which necessitates details such as the time and place of the fraudulent acts. This dismissal was also affirmed on appeal. However, the court disagreed with the basis for dismissing the deceptive-practices claim, which will be remanded for further proceedings.
Jenkins contends on appeal that he should have been permitted to amend the fraud count in his complaint instead of having it dismissed. However, even with an amendment, he could not establish a valid fraud claim. His main assertion is that Commonwealth misrepresented its intention to fulfill its obligations under a title insurance policy for Parcel 29. The district court previously ruled that Commonwealth did not breach its contract with Jenkins, indicating that the representation was not false and therefore not fraudulent. As established in case law, a false statement is necessary for a claim of fraud. Consequently, the district court could have denied Jenkins' request to amend, adhering to the principle favoring amendment only if a claim could be substantiated.
Additionally, Jenkins appeals the dismissal of his claim that Commonwealth violated Hawai'i Revised Statutes § 480-22, which prohibits unfair or deceptive trade practices. The district court dismissed this claim based on the argument that it is precluded by specific provisions of the Hawai'i Insurance Code that only allow for administrative remedies. The dismissal for failure to state a claim is subject to de novo review, and a complaint should not be dismissed unless it is clear that no factual scenario could support the claim. The court found that the district court erred in determining that § 480-22 was preempted, thus remanding the case for further consideration of whether Jenkins can state a claim under any conceivable facts.
The district court's dismissal also relied on the precedent set in Genovia v. Jackson National Life Insurance Co., which held that § 480-22 does not apply to insurers, interpreting the Hawai'i Insurance Code to preempt general unfair competition laws. Specific provisions of the Insurance Code, such as § 431:1-104, state that particular regulations take precedence over general ones, and § 431:13-102 prohibits unfair practices in the insurance business.
The document analyzes the relationship between the unfair-competition provisions of the Hawai'i Insurance Code and the general unfair-competition statute, HRS 480-2. It notes that both statutes use similar language to define prohibited practices, but the Insurance Code offers detailed definitions specific to the insurance context, while HRS 480-2 lacks such definitions. Despite Genovia's conclusion that the Insurance Code preempts HRS 480-2, this view is challenged by the Hawai'i Supreme Court's ruling in Gonsalves v. First Insurance Co. of Hawaii, which did not indicate preemption and affirmed that complexity in insurance policy language does not equate to deception. Additionally, in The Best Place, Inc. v. Penn America Insurance Co., the court held that the administrative remedies in the Insurance Code do not preclude private tort claims for bad faith, implying that the remedies are not exclusive. This suggests that the Insurance Code does not preempt HRS 480-2, reinforcing the argument against Genovia's conclusion. Overall, the analysis indicates that the Hawai'i Supreme Court would likely reject the notion that the Insurance Code preempts claims under HRS 480-2 for deceptive trade practices.
Jenkins' complaint included an unfair-competition claim against Commonwealth, alleging that Commonwealth misled him into believing he had acquired good title to the property through their insurance policy. Following his claims, Commonwealth attempted to quiet title but later abandoned this effort and failed to fully inform Jenkins about the status of his claims. Given the allegations, the court determined that Jenkins sufficiently stated a claim for deceptive trade practices, and the district court's dismissal was incorrect.
Under Section 480-13 of the Hawai'i Revised Statutes, Jenkins must demonstrate actual damages to pursue a claim for unfair practices; mere violations are insufficient. Jenkins claimed to have sustained both special and general damages as a direct result of Commonwealth's actions, which was adequate to survive a motion to dismiss. However, evidence suggested Jenkins successfully conveyed the property despite title issues, and the district court must assess whether he can prove the damages necessary for his claim on remand.
The court reversed the district court's dismissal of Jenkins' deceptive trade practices claim while affirming all other rulings, with each party bearing its own costs. Additionally, Jenkins' arrangement with the actual purchasers involved a corporation that preferred anonymity, leading to his holding the title temporarily before transferring it to the corporation. This transfer and the associated dispute with Commonwealth were crucial to understanding his claim. The opinion also clarified that the amendment of Section 480-2 in 1987 did not preempt private actions under Hawai'i's general unfair-competition law, and further defined the legal framework for interpreting these unfair practices.
Jenkins cannot initiate a private action against the Commonwealth under statute 431:13-102, as established in Genovia, which determined that the statute serves a regulatory purpose enforceable exclusively by the insurance commissioner and does not provide private remedies. This interpretation was reaffirmed by the Hawai'i Supreme Court in The Best Place, Inc. v. Penn America Insurance Co., which ruled that Article 13 of the Hawai'i Insurance Code does not permit private causes of action. The document notes that the current version of statute 480-2 mirrors its 1973 predecessor, asserting that specific provisions of the insurance code take precedence over more general provisions. The current version also aligns with sections 431-641 to 431-647, which include prohibitions against unfair competition or deceptive practices. While Gonsalves did not address the preemption issue, the language of the insurance code suggests that specific provisions within the code take precedence over general provisions but not over all other Hawai'i statutes. Similar provisions exist in at least 21 other states, where some cases have applied these provisions for preemption within the insurance code and in relation to state statutes beyond it.
