Henry v. Farmer City State Bank
| Citation | 630 F. Supp. 844 |
| Decision Date | 20 March 1986 |
| Docket Number | No. 85-3365.,85-3365. |
| Parties | John T. HENRY and Evelyn I. Henry, Plaintiffs, v. FARMER CITY STATE BANK, an Illinois Banking Corporation, George E. Drake, Dean Bright, Richard K. Drake, Robert E. Drake, Stuart B. Drake, F. Dick Maxwell, Ortheldo A. Peithman, Beryl W. Rutledge, James E. Tobin, William A. Rutledge, Ronald L. Vance, Cheryl Dawson, John N. Stevens, Stephen Peters, Donald Massey, James W. Evans, Terry Scott, City of Farmer City, a municipal corporation, Marvin Haycraft, James Richmond, Bill Perhay, Bill Perhay Chevrolet Inc., Phillip R. Lamkin, Raymond Moss, Obermeyer Transfer Co., Dennis Johnson, Oscar Ogle, and The Champaign National Bank, a National Banking Association, Defendants. |
| Court | U.S. District Court — Central District of Illinois |
Jack C. Vieley, Peoria, Ill., Carol Hansen Fines, Springfield, Ill., Howard W. Small, Champaign, Ill., Patrick J. Cadigan, Springfield, Ill., Rudasill & Rudasill, Clinton, Ill., Bruce Gammage, Gregory Gammage, Farmer City, Ill., Charles L. Palmer, Arnold F. Blockman, Jerome P. Lyke, Champaign, Ill., for plaintiffs.
Wayne L. Hanold, James Morrison, Arthur G. Greenberg, Daniel L. Johns, Peoria, Ill., Ray Moss, Clinton, Ill., James C. Kearns, Urbana, Ill., John Naylor, Bloomington, Ill., William A. Peithman, Farmer City, Ill., Howard W. Small, Champaign, Ill., Susan M. Hickman, Charles H. Cole, Springfield, Ill., for defendants.
Can this Court enjoin state proceedings on the identical facts filed after a final decision in this case has been handed down and while that final decision is on appeal?
Yes.
This case began as a common, garden variety bank foreclosure and has ended as a civil RICO action (18 U.S.C. § 1964), dismissed with prejudice by this Court.
Involved here is a bankrupt tire and service dealer who fought foreclosure in the state court and then filed a RICO action alleging that the bank, et al (FCSB) had fraudulently drawn up a letter of direction to Plaintiff's land trustees ordering them to encumber their property with a second mortgage.
Plaintiffs have appealed our dismissal to the Seventh Circuit Court of Appeals, and then—while the appeal is pending—instituted another factually identical case in the 6th Judicial Circuit Court of Illinois, alleging the same common law fraud causes of action that were the basis of the RICO action here in this Court.
On December 17, 1985, we dismissed this case on the merits by finding that no pattern of racketeering had been adequately pled, in that a single allegation of one act of forgery and fraud cannot sustain the pattern of racketeering requirement of Sedima S.P.R.L. v. Imrex Co., Inc., ___ U.S. ___, 105 S.Ct. 3275, 3285, fn. 14, 87 L.Ed.2d 346 (1985); Fleet Management Systems, Inc., d/b/a Logistic Systems v. Archer-Daniels-Midland Co., Inc., and NIMS Associates, Inc., 627 F.Supp. 550 (C.D.Ill., 1986).
It was also determined that the allegations that Defendants were collecting an illegal debt were patently false.
Thirdly, this Court found that no RICO injury, as defined by 18 U.S.C. § 1964(c), occurred because the mortgage foreclosed upon and which was alleged to have been fraudulently created was not the only encumberance on Plaintiffs' property. The Defendant Bank also held a valid assignment1 of the title to the property that could only be extinguished upon full payment of all debts owed the bank by Plaintiffs. Thus, the bank had another remedy against the Plaintiffs that would have had the same effect as the alleged fraudulent mortgage. (This issue is discussed further infra.)
Now Plaintiff has sought to do an endrun around the federal judiciary which they initially invoked. They do this by filing the state court action after our final order and during the appeal to the United States Court of Appeals for the Seventh Circuit. This they cannot do.
Plaintiff alleges that the filing of the case in the Circuit Court of Appeals divested us of jurisdiction to act.
The Plaintiff cites Lloyd v. Lawrence, 60 F.R.D. 116 (S.D.Tex.1973), which states:
When an appeal is taken from a decision of the district court, the jurisdiction of the district court terminates. That of the court of appeals attaches upon filing of adequate appeal. Cites omitted. Thereafter, the district court has no jurisdiction and accordingly no control or power over the litigants or the case except to aid the appeal...
Id. 118. (Also see In re Federal Facilities Realty Trust, 227 F.2d 651, 654 (7th Cir. 1955).) By enjoining the state court from relitigating the facts of this case, we will be doing so "to aid the appeal," by the necessity of protecting and effectuating our judgment pursuant to the Anti-Injunction Act (28 U.S.C. § 2283).2 Plaintiffs are seeking an appeal of our judgment in the state court so as to circumvent it. In doing so they are also challenging the jurisdiction of the reviewing court. If Plaintiffs can procure a different judgment than the one ruled on by this Court, the appellate court may find itself ruling upon an ineffectual judgment, unless we can protect that judgment by enjoining collateral attacks upon it in other courts. (Moreover, by so ruling we add nothing substantive to the case, which is what was attempted in Lloyd.)
The Defendants, on the other hand, cite a recent case wherein the district court successfully enjoined relitigation after it had entered a final order that was then pending on appeal to the United States Court of Appeals for the 9th Circuit. In Wood v. Santa Barbara Chamber of Commerce, Inc., 705 F.2d 1515, 1524 (9th Cir.1983), the Court stated:
A district court retains jurisdiction to enforce the judgments it enters. Dietzsch v. Huidekoper, 103 U.S. 494 26 L.Ed. 497 ... (1880); cf. 28 U.S.C. § 2283 (1976) (). The doctrines of collateral estoppel and res judicata ordinarily provide adequate assurance that one court's resolution of a controversy will be respected by other courts. Nevertheless, under the All Writs Act, 28 U.S.C. § 1651, district courts do have the power to reinforce the effects of these doctrines by issuing an injunction against repetitive litigation.
Therefore, this Court has jurisdiction to enjoin other courts from ruling on the facts of this case, even when there is an appeal pending, as the injunction is mandated by this Court's need to effectuate its judgment, which in turn aids and protects the appeal of this matter.
III
Plaintiff Henry next argues that no injunction can issue to stop state court action because of the Anti-Injunction Act, 28 U.S.C. § 2283.
As seen above, section 2283 of Title 28 of the United States Code allows injunctions of state court proceedings in order "to protect or effectuate its judgments."
"A federal court may enjoin state proceedings when res judicata would bar the same action in federal court cites omitted," pursuant to the anti-injunction act's "exception `to protect or effectuate its judgments' ..." Harper Plastics v. Amoco Chemicals Corp., 657 F.2d 939, 946-47 (7th Cir.1981). "The re-litigation exception of § 2283 applies not only when the prior federal judgment is res judicata but also when the doctrine of collateral estoppel or issue preclusion is relied on cites omitted." Samuel C. Ennis & Co., Inc. v. Woodmar Realty Co., 542 F.2d 45, 49 (7th Cir.1976).
As seen above, the Anti-Injunction Act not only does not prevent the injunction but mandates it.
Plaintiff argues that the principles of res judicata on collateral estoppel are not present because in the federal action the RICO statute (18 U.S.C. § 1964) was the basis, whereas in the present state action common law fraud.
Defendants correctly note that this is precisely the situation for collateral estoppel, for which § 2283 allows injunctions. Defendants cite Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, n. 5, 99 S.Ct. 645, 649, n. 5, 58 L.Ed.2d 552 (1979), for the definition of collateral estoppel, and that is:
Under the doctrine of collateral estoppel ... the second action is upon a different cause of action and judgment in the prior suit precludes relitigation of issues actually litigated and necessary to the outcome of the first action. cites omitted.
Thus, casting the same issues in a different cause of action will not avoid the effect of collateral estoppel, as that is precisely the practice that the doctrine is crafted to prevent.
IV
Plaintiff then argues that he is not relitigating old matters as he can show that he suffered an injury because the assignment was merged and extinguished when the letter of direction and second mortgage were executed later. Thus, if the assignment is extinguished, Plaintiff should be allowed to prove the mortgage was a fraud. We have already settled this issue in the following manner.
The Plaintiff alleges that the assignment extinguishing merger allegedly took place because a higher security (the mortgage) was accepted in lieu of a lower security (the assignment). But in fact the security stayed the same, as it was the identical property always in question, only more security arrangements were added.
The Plaintiffs seek to downgrade the assignment so that what was assigned was something less than what was actually assigned— which was the equitable title (and then upon satisfaction of the contract for deed, and merger of it with the warranty deed, the legal title to the property). Because under the doctrine of equitable conversion:
as between the parties and those claiming through them, when the owner of the land enters into a valid and enforceable contract for its sale he continues to hold the legal title, but in trust for the buyer; and the buyer becomes the equitable...
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Henry v. Farmer City State Bank
...on any set of facts arising out of the mortgage foreclosures. 4 The district court granted the requested injunction on March 10, 1986, 630 F.Supp. 844. The Henrys appeal the order issuing the II. The RICO Claims The district court concluded that the plaintiffs had failed to make out a cause......
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Issues Relating to Parallel Litigation
...an adversary from pursuing foreign litigation. 162. See, e.g., Atlantic Coast Line R.R., 398 U.S. 281; Henry v. Farmer City State Bank, 630 F. Supp. 844 (C.D. Ill.) (approving federal court injunction of state court common law fraud claim against bank by bankrupt merchant in mortgage forecl......
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Issues Relating To Parallel Litigation
...Wilson, 326 F.3d 1096, 1106-07 (9th Cir. 2003). 129 . See, e.g. , Atl. Coast Line R.R ., 398 U.S. 281; Henry v. Farmer City State Bank, 630 F. Supp. 844 (C.D. Ill. 1986) (approving federal court injunction of state court common-law fraud claim against bank by bankrupt merchant in mortgage f......