Lake Cnty. Trust Co. v. United Consumers Club, Inc.

• Decision Date: 26 May 2015
• Docket Number: No. 45A03–1407–PL–226.,45A03–1407–PL–226.
• Parties: LAKE COUNTY TRUST CO., as Trustee for Lake County Trust 5434, James L. Gagan and Eugene H. Deutsch, Appellants, v. UNITED CONSUMERS CLUB, INC., Appellee.
• Court: Indiana Appellate Court

33 N.E.3d 1209 (Table)

LAKE COUNTY TRUST CO., as Trustee for Lake County Trust 5434, James L. Gagan and Eugene H. Deutsch, Appellants

v.UNITED CONSUMERS CLUB, INC., Appellee.

No. 45A03–1407–PL–226.

Court of Appeals of Indiana.

May 26, 2015.

Peter J. Rusthoven, Barnes & Thornburg LLP, Indianapolis, IN, Brian Custy, Merrillville, IN, Attorneys for Appellants.

F. Joseph Jaskowiak, Lauren K. Kroeger, Hoeppner, Wagner & Evans LLP, Merrillville, IN, Karl L. Mulvaney, Nana Quay–Smith, Bingham Greenebaum Doll LLP, Indianapolis, IN, Attorneys for Appellee.

MEMORANDUM DECISION

FRIEDLANDER

, Judge.

[1] This is the second iteration of a legal dispute involving property owned by Lake County Trust 5434 (the Trust) and leased by United Consumers Club (United), with the primary difference between this one and the first lawsuit being the addition of James L. Gagan and Eugene H. Deutsch (the Beneficiaries), who are beneficiaries of the Trust, as parties to the lawsuit. In both actions, the plaintiff(s) sued United for recovery of unpaid rent. In the first action, an interlocutory appeal that we shall designate as United I, the action was brought by Lake County Trust Co. (the Trustee) on behalf of the Trust. On grounds that will be explained below, this court determined that the Trust did not have standing to sue United and reversed the trial court's order denying United's motion to dismiss for lack of standing. See Lake Cnty. Trust Co. v. United Consumers Club, Inc., 45A03–1111–PL–527 (Ind.Ct.App. Sept. 11, 2012). The case was dismissed after remand on March 13, 2013 pursuant to the Trust's motion to dismiss.

[2] The present lawsuit was filed in January 2014, and is essentially the same as the first, with the exception that the Beneficiaries were added as plaintiffs. United filed a Trial Rule 12(B)(6)

to dismiss the January 2014 action on grounds of res judicata. The Beneficiaries appeal the grant of that motion, presenting a single issue for review: did the trial court err in holding that the ruling in United I constituted a dismissal on the merits against the Beneficiaries, thus barring on res judicata grounds the present case?

[3] We reverse.

[4] The underlying facts were set out in United I, as follows:

Lake County Trust 5434 (“the Trust”) sued United Consumers Club (“United”) for recovery of unpaid rent. The lawsuit was brought by the Trustee only; the trust beneficiaries were not named as plaintiffs even though the trust document explicitly provided the Trust could not collect or receive the rents from the trust property....

The document creating the Trust provides in part:

It is further expressly understood and agreed that [the Trust] has no right or power whatsoever to manage, control or operate said real estate in any way or to any extent and is not entitled at any time to collect or receive for any purpose, directly or indirectly, the rents, issues, profits or proceeds of said real estate or any mortgage or any disposition thereof.

In May of 2009, the Trust, in the name of the Trustee only and not the beneficiaries, sued United for recovery of unpaid rent. In August 2009 the Trust amended its complaint to allege United had not paid base rent, taxes, and operating expenses as required under the lease agreement. United moved to dismiss, and its motion was denied. In December 2009, United filed its amended answer and counterclaim in which it alleged, among other things, that the Trust was not the real party in interest or was otherwise “not qualified to bring these claims per the terms of the lease,” and “lacks standing to sue for the relief sought in the amended complaint.”

The parties then filed cross-motions for summary judgment, and in September of 2011 the trial court granted summary judgment for the Trust on certain issues and for United on one issue. In its summary judgment order, it concluded the Trust had standing to bring the lawsuit. The trial court certified its order for interlocutory appeal, and we accepted jurisdiction.

[5] Id., slip op. at 1 (internal citations and footnote omitted).

[6] On appeal, this court noted that an allegation of lack of standing is treated as a motion to dismiss under T.R. 12(B)(6)

. The main purpose of standing is to insure that the party before the court has a substantive right to enforce the claim that is being made in the litigation. See

Lunsford v. Deutsche Bank Trust Co. Americas as Tr., 996 N.E.2d 815 (Ind.Ct.App.2013). We further noted that “a court has no jurisdiction over a particular case unless a party with standing is participating in the case.” Lake Cnty. Trust Co. v. United Consumers Club, Inc., 45A03–1111–PL–527, slip op. at 1. Based upon the following rationale, we concluded that the Trust did not have standing to sue United for unpaid rent and therefore that its lawsuit should have been dismissed:

The trust document is explicit that the Trust “is not entitled at any time to collect or receive for any purpose, directly or indirectly, the rents, issues, profits or proceeds of said real estate,” ... and we agree with United that “[u]sing the words that the Trust had ‘no power to collect rents,’ also left the Trustee with no power to bring a lawsuit to collect rent.”

[7] Ld. (internal footnote and citations omitted).

[8] This brings us to the present case. As indicated above, this lawsuit is essentially the same as the first, with the exception of the addition of the Beneficiaries as plaintiffs. United contends that the dismissal of United I constituted a decision on the merits against the Beneficiaries of the dispute over nonpayment of rent and therefore is res judicata with respect to the present case. The trial court agreed, citing Indiana Trial Rule 41(B)

, “which provides that any dismissal other than a dismissal for lack of jurisdiction, operates as an adjudication on the merits [.]” Appellant's Appendix at 6. The Beneficiaries challenge that determination.

[9] We begin by briefly addressing the trial court's citation to T.R. 41(B)

in support of its ruling. The relevant portion of that provision states, “Unless the court in its order for dismissal otherwise specifies, a dismissal under this subdivision or subdivision (E) of this rule and any dismissal not provided for in this rule, other than a dismissal for lack of jurisdiction, operates as an adjudication upon the merits.” T.R. 41(B). Clearly, the premise of the trial court's ruling is that the dismissal of the case in United I was something “other than a dismissal for lack of jurisdiction.” Although the dismissal was based technically upon T.R. 12(B)(6), the specific reasoning for dismissal was that the Trust lacked standing to sue United for unpaid rent. As this court stated in United I, “a court has no jurisdiction over a particular case unless a party with standing is participating in the case.” Lake Cnty. Trust Co. v. United Consumers Club, Inc., 45A03–1111–PL527, slip op. at 1 (citing In re Custody of G.J., 796 N.E.2d 756 (Ind.Ct.App.2003), trans. denied ). In short, the lawsuit in United I was dismissed for lack of standing, which had jurisdictional implications. For this reason, on the facts of this case, the exception in the quoted portion of T.R. 41(B) applies and thus, as to all parties except the Trust, it did not constitute an adjudication on the merits within the meaning of T .R. 41(B).

[10] A T.R. 12(B)(6)

motion to dismiss for failure to state a claim upon which relief can be granted tests the legal sufficiency of a claim, not the facts supporting it. Godby v. Whitehead, 837 N.E.2d 146 (Ind.Ct.App.2005), trans. denied. Accordingly, we view the complaint in the light most favorable to the nonmoving party and draw every reasonable inference in that party's favor. Id. We will affirm a grant of such a motion to dismiss if it is apparent that the facts alleged in the complaint are incapable of supporting relief under any set of circumstances. Id. “In determining whether any facts will support the claim, we look only to the complaint and may not resort to any other evidence in the record.” Id. at 149. Finally, we apply a de novo standard of review in appeals from the grant of a motion to dismiss under T.R. 12(B)(6). Godby v. Whitehead, 837 N.E.2d 146.

[11] Both parties agree that this case turns on the question of whether res judicata properly applies. More specifically, the issue is whether, with respect to the Beneficiaries, the former judgment satisfies the element of res judicata that it was “rendered on the merits.”¹ The parties' competing positions on that question are as follows: quoting Schultz v. State, 731 N.E.2d 1041, 1043 (Ind.Ct.App.2000)

, trans. denied, United argues “[a] decision that a party lacks standing pursuant to Trial Rule 12(B)(6) operates as an adjudication on the merits.” This quote from Schultz cites Lake Cnty. Council v. State Bd. of Tax Comm'rs, 706 N.E.2d 270, 280 (Ind. T.C.1999)

adhered to on reconsideration sub nom.

Montgomery v. State Bd. of Tax Comm'rs, 708 N.E.2d 936 (Ind. T.C.1999), rev'd, 730 N.E.2d 680 (Ind.2000), as its source authority. Lake County Council, however, adds an important qualifier that the panel in Schultz chose not to include, i.e., “[a] decision that a party lacks standing pursuant to Trial Rule 12(B)(6) operates as an adjudication on the merits ... as to the party seeking to invoke the court's jurisdiction. ” Lake Cnty. Council v. State Bd. of Tax Comm'rs, 706 N.E.2d at 280 (emphasis supplied). In light of the full quote from Lake Cnty. Council v. State Bd. of Tax Comm'rs, the granting of United's motion in the present case clearly acted as an adjudication on the merits against the Trust. The question is, was this ruling also binding upon the Beneficiaries?

[12] “Not all judgments of dismissal on the grounds stated in Ind. Rules of Procedure, Trial Rule 12(B)

constitute an adjudication on the merits so as to bar presentation of the same issues in a subsequent action.” Ragnar Benson, Inc. v. Wm. P. Jungclaus Co., 352 N.E.2d 817, 820 (Ind.Ct.App.1976). In this case...