Bank of Am., N.A. v. Cartwright
| Decision Date | 01 September 2021 |
| Docket Number | CAUSE NO. 3:21-CV-184 DRL-MGG (consolidated cases 3:21-CV-191,3:21-CV-236) |
| Citation | 560 F.Supp.3d 1210 |
| Parties | BANK OF AMERICA, N.A., Plaintiff, v. Levering Russell CARTWRIGHT et al., Defendants. |
| Court | U.S. District Court — Northern District of Indiana |
James F. Groves, Lee Groves and Zalas, South Bend, IN, for Plaintiff.
Tammy L. Ortman, Lewis & Kappes, Indianapolis, IN, for Defendants.
Levering Russell Cartwright, an elderly man in assisted living, banks with Bank of America, N.A. (BANA). He befriended Judge Jason Cichowicz after using his services as a then-attorney in 2014. Their professional relationship ostensibly ended, but the two men grew closer over the years until Mr. Cartwright named Judge Cichowicz the primary beneficiary under his trust in 2015, reaffirmed in an amended trust in 2018. Mr. Cartwright remains estranged from his two adult children.
In 2020, Mr. Cartwright asked BANA to transfer all his trust assets to Judge Cichowicz, despite the seeming expenditure of approximately $450,000 a year (of which less than $180,000 was devoted to assisted living expenses). BANA suspected elder abuse, so it blocked the transfer under its Investment Services Agreement and later Mr. Cartwright's full access to the trust assets, except his access for daily living expenses.
This litigation ensued—now consolidating three actions. BANA pursues a declaratory judgment. The court declines and dismisses BANA's complaint, favoring the pending coercive action by Mr. Cartwright that, albeit whittled here through a partial dismissal, remains to address the issues of consequence among the parties. The Cartwright Foundation's complaint has become moot. All told, only the coercive action by Mr. Cartwright remains after today.
These facts emerge from the pleadings being challenged in the motions to dismiss, assumed true as the court must to decide the motions. Levering Russell Cartwright is 81 years old, resides in an assisted living facility, and is a customer of Bank of America (BANA). A wealthy man, he is the trustee of the Levering Russell Cartwright 1993-2 Trust (Cartwright Trust), a revocable trust that holds about $6.7 million in assets at last count. BANA is the custodian of the Cartwright Trust. The bank's obligations are outlined in an Investment Services Agreement (see ECF 21-1).
Mr. Cartwright hired Jason Cichowicz, then an attorney (now judge). They became friends, with Judge Cichowicz often visiting Mr. Cartwright to keep him company and helping him with daily needs. The relationship blossomed to where they now describe it as a father-son relationship. This description has special meaning: Mr. Cartwright is estranged from his adult children (Anne Russell Redhead and Charles Cartwright) and has no other close family. BANA harbors suspicions about this relationship and the potential for elder abuse.
Within one year of meeting Judge Cichowicz, Mr. Cartwright appointed him as co-trustee of the Cartwright Foundation, a private charitable foundation established by his father, which holds about $1.3 million in assets. Mr. Cartwright later resigned as a trustee, making Judge Cichowicz sole trustee. After Judge Cichowicz was elected as a judge in St. Joseph County, BANA says he used about $165,000 of the Cartwright Foundation's assets to improve the St. Joseph County Courthouse.
Mr. Cartwright conveyed by quitclaim deed a residence to himself and Judge Cichowicz, only to have Judge Cichowicz later convey his interest in the residence back to Mr. Cartwright by quitclaim deed. Judge Cichowicz prepared both quitclaim deeds. Later, Mr. Cartwright made Judge Cichowicz the co-owner of his personal checking account with rights of survivorship, and BANA believed the handwriting on the signature card (other than Mr. Cartwright's signature) was that of Judge Cichowicz. Mr. Cartwright's annual income from his parents’ irrevocable trusts, about $450,000, is deposited into this checking account. BANA alleges that most of this money is spent annually, though Mr. Cartwright's living expenses at the assisted living facility don't come close to this amount.
Mr. Cartwright restated the Cartwright Trust to make Judge Cichowicz the sole remainder beneficiary and successor trustee (ECF 21-2). He later restated the Cartwright Trust yet again to add Judge Cichowicz's wife and children as remainder beneficiaries (ECF 21-3). He named Judge Cichowicz attorney-in-fact over his assets, including power over the Cartwright Trust, a power of attorney that Judge Cichowicz prepared (ECF 21-4).
Judge Cichowicz regularly wrote checks on Mr. Cartwright's personal checking accounts and communicated with BANA about the Cartwright Trust assets and its cash distributions. Shortly after restating the Cartwright Trust the second time, Mr. Cartwright gifted Judge Cichowicz about $30,000 in stock from the Cartwright Trust. Though Mr. Cartwright signed the letter directing this stock gift, the return address on the letter was Judge Cichowicz's home address, according to BANA.
Later, Mr. Cartwright named Judge Cichowicz as the beneficiary of his Trusteed IRA, which holds about $357,000. He named Judge Cichowicz's spouse as the contingent beneficiary. The handwriting on the beneficiary designation form was, in BANA's opinion, that of Judge Cichowicz. BANA didn't seem to have any issues with Mr. Cartwright's and Judge Cichowicz's relationship up until then.
In 2020, BANA's view changed. Mr. Cartwright tried to transfer all his assets in the Cartwright Trust to Judge Cichowicz. Though BANA tried to dissuade him from doing so, he persisted in his request. Judge Cichowicz also communicated with BANA about Mr. Cartwright's request. Mr. Cartwright sent a direction letter and instructions to transfer all the Cartwright Trust's assets to Judge Cichowicz's personal investment account at another bank (ECF 21-5), though BANA doubted the direction letter's authenticity.
Underlying this request to transfer the Cartwright Trust assets was a shifting negotiation over proposed transactions involving Judge Cichowicz, Mr. Cartwright, and BANA. Much of this was the subject of an evidentiary hearing on a preliminary injunction request. At first, BANA explained that Mr. Cartwright's $1.7 million line of credit with the bank, secured by the trust assets, would need to be fully paid. Seven days later, Judge Cichowicz asked BANA for the account and payoff information, indicating that he planned to have Notre Dame Federal Credit Union (NDCU) wire money to pay the outstanding line of credit and that he wanted this done the next business day.
Judge Cichowicz took Mr. Cartwright to NDCU. NDCU extended a loan to Mr. Cartwright and the 1993-2 Trust as co-borrowers. Judge Cichowicz used the NDCU loan proceeds to pay BANA's line of credit. NDCU secured its $1.7 million loan with the trust assets. On December 20, 2020, Mr. Cartwright signed a written directive to BANA to transfer all trust assets to an account at NDCU, but only in Judge Cichowicz's name, not in Mr. Cartwright's name. Eight days later, and after multiple inquiries from Judge Cichowicz, BANA explained that the transfer was under legal review.
On January 7, 2021, BANA declined the transfer because it believed Judge Cichowicz may be financially exploiting Mr. Cartwright. Under its Investment Services Agreement, BANA "is not required to act on any instructions when the Bank in good faith doubts the validity or meaning of such instructions." In addition, under this agreement, BANA "is not required to comply with any direction which the Bank believes may subject [it or an affiliate] to liability or expense, or to commence or defend any action, unless the Bank consents to, and is indemnified in a manner and amount satisfactory to the Bank."
BANA filed the first lawsuit (3:21-cv-184) seeking a declaratory judgment on its rights and obligations vis-à-vis Mr. Cartwright on March 12, 2021. Frustrated in his then-current course, Mr. Cartwright changed course. He told the bank that he terminated Judge Cichowicz's power of attorney and requested that the bank terminate the judge's authority over his accounts on March 15, 2021. On March 26, 2021, he then directed BANA to close all his accounts so he could transfer them to a new bank. BANA again declined, saying it retained concerns over elder financial abuse.
Mr. Cartwright sued BANA and two of its employees with a garden-variety list of claims for the bank's refusal to allow Mr. Cartwright to withdraw his own funds (3:21-cv-191). A few days later, the Cartwright Foundation (through its trustee, Judge Cichowicz) sued BANA for its refusal to transfer the Cartwright Foundation's assets to another institution, as directed by Judge Cichowicz (3:21-cv-236). Because the suits all involved the same subject matter, they were consolidated.
The court denied a preliminary injunction. A number of motions still pend. Both Judge Cichowicz and Mr. Cartwright moved to dismiss BANA's declaratory judgment request. BANA moved to dismiss both Mr. Cartwright's second amended complaint and the Cartwright Foundation's amended complaint. Mr. Cartwright moved to dismiss the amended crossclaims of Anne Russell Redhead and Charles Cartwright. This order resolves these and other related motions.
In reviewing a motion to dismiss under Rule 12(b)(6), the court accepts all well-pleaded factual allegations as true and draws all reasonable inferences in the nonmovant's favor. Reynolds v. CB Sports Bar, Inc. , 623 F.3d 1143, 1146 (7th Cir. 2010). A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The statement must contain enough factual matter, accepted as true, to state a plausible claim, not a speculative one. Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A...
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