Lartnec Inv. Co. v. Fort Wayne-Allen Co., Civ. No. F 84-162

• Decision Date: 08 March 1985
• Docket Number: Civ. No. F 84-162,F 84-163.
• Citation: 603 F. Supp. 1210
• Parties: LARTNEC INVESTMENT COMPANY v. FORT WAYNE-ALLEN CO. CONVENTION & TOURISM AUTHORITY; Fort Wayne Center Association, Ltd.; and Atlantic Financial Federal Savings and Loan LARTNEC INVESTMENT COMPANY v. CITY OF FORT WAYNE; Fort Wayne Center Associates, Ltd.; Bank Of America National Trust and Savings Association; and Fort Wayne National Bank.
• Court: U.S. District Court — Northern District of Indiana

603 F. Supp. 1210

LARTNEC INVESTMENT COMPANY v. FORT WAYNE-ALLEN CO. CONVENTION & TOURISM AUTHORITY; Fort Wayne Center Association, Ltd.; and Atlantic Financial Federal Savings and Loan

LARTNEC INVESTMENT COMPANY v. CITY OF FORT WAYNE; Fort Wayne Center Associates, Ltd.; Bank Of America National Trust and Savings Association; and Fort Wayne National Bank.

Civ. Nos. F 84-162, F 84-163.

United States District Court, N.D. Indiana, Fort Wayne Division.

March 8, 1985.

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John C. Theisen, James D. Streit, Gallucci, Hopkins & Theisen, Fort Wayne, Ind., for plaintiff.

Marvin S. Crell, Fort Wayne, Ind., for defendant Fort Wayne-Allen Co. Convention & Tourism Authority.

W. Paul Helmke, Jr., Fort Wayne, Ind., for defendant Fort Wayne Center Assoc., Atlantic Financial Federal, Bank of America.

Paul D. Mathias, Fort Wayne, Ind., for defendant Fort Wayne Nat. Bank.

Bruce Boxberger, Karen Walker, John J. Wernet, Fort Wayne, Ind., for defendant City of Fort Wayne.

ORDER

WILLIAM C. LEE, District Judge.

This matter is before the court on the motions to dismiss filed by all the defendants in these consolidated actions. The motions have been fully briefed. For the following reasons, the motions to dismiss will be granted.

These two cases challenge various actions taken in financing the construction of a hotel adjacent to the Grand Wayne Center in downtown Fort Wayne, Indiana. The Grand Wayne Center functions as a convention and exhibition center, and was built under the direction of the Fort Wayne and Allen County Convention and Tourism Authority ("Authority"). The Authority came to believe that construction of a hotel adjacent to the Grand Wayne Center would "greatly improve the economic viability and increase the demand for" the Center's facilities. Resolution, December 22, 1982. Fort Wayne Center Associates, Ltd. ("Associates"), an Indiana limited partnership, sought financing to build the new hotel, as the cost of construction was estimated to be 18 million dollars.

The City of Fort Wayne ("City") also desired to have the hotel built, and so became involved in the financing process. According to Special Ordinance No. S-265-83, passed by the Common Council of the City, the financing which was agreed upon had these following elements: 10 million dollars of Economic Development Revenue Bonds were to be issued by the City. E.F. Hutton & Company, Inc. agreed to purchase and/or underwrite the issuance of the Bonds provided the bonds were secured by a letter of credit issued by a AA or AAA rated financial institution. Defendant Bank of America was willing to issue such a letter of credit, but only if a standby letter of credit in the sum of six million dollars was issued and the City issued its guarantee for three million dollars. The standby letter of credit was issued by defendant Atlantic Financial Federal Savings and Loan, and Ordinance S-265-83, passed by the Common Council on December 20, 1983 and signed by the mayor on December 21, 1983, officially issued the City's Guarantee. The ordinance itself specified that the money backing up the guarantee would come from the City's Light and Power Utility Fund, a fund generated from revenues paid by a private utility to lease the City-owned utility.

At the same time, the Authority issued a Resolution dated December 22, 1983, in which the Authority agreed to subsidize the principal and interest payments of Associates on a three million dollar mortgage loan from Atlantic. The subsidy payments were to come from revenues generated by a state innkeeper's tax which the Authority collects and spends pursuant to I.C. XX-XX-X-XX.

Plaintiff ("Lartnec") is an Iowa corporation which owns and operates the Fort Wayne Holiday Inn Downtown, located in Fort Wayne, Indiana. Lartnec has filed these two actions seeking declaratory judgments that (1) the City's guarantee is unconstitutional, invalid and void, and (2) that the Authority's Resolution and subsidy commitment are unconstitutional, illegal, invalid and void. Lartnec advances two arguments against the City's guarantee. The first claims that the guarantee constitutes a loaning or pledging of the credit of the City to support a private business enterprise for profit in violation of the Constitution of the State of Indiana, article 11, § 12 and article 10, § 6. The second argues that the guarantee creates a potential obligation, indebtedness and charge against the credit of the City in violation of I.C. XX-X-XX-XX(b).

Lartnec's amended complaint urges four grounds for declaring the Authority's subsidy illegal and void. The first is that the Authority is required by I.C. XX-XX-X-XX to spend the innkeeper's tax revenues on "capital improvements." Lartnec contends that the new hotel is a private investment and thus is not a "capital improvement." Second, Lartnec argues that the subsidy violates article 11, § 12 of the Indiana Constitution. Third, Lartnec claims that the Resolution violates the United States and Indiana Constitutions by taking private property (the innkeeper's tax revenues) for other than a public purpose. Finally, the Resolution is said to violate Lartnec's equal protection rights by selectively favoring a competitor over Lartnec.

The defendants have all filed motions to dismiss, and each (either originally or by adoption of the other's arguments) asserts several grounds for dismissal. These various grounds revolve around two basic concepts: (1) justiciability of this action, which involves issues of ripeness, standing, the requirements of diversity jurisdiction, real party in interest, and statute of limitations; and (2) the merits of the claim. The court begins by examining the justiciability issues raised by the motions to dismiss.

I. Justiciability Issues

All of the defendants have raised several common issues in their motions which the court terms "justiciability issues" because they are offered as reasons for dismissal which do not involve the merits of the claim (i.e., they attempt to show that Lartnec cannot bring this action in this court). These common issues are: (1) that Lartnec is not the "real party in interest," and so cannot pursue this action; (2) the court lacks diversity subject matter jurisdiction because there is no complete diversity between the parties and Lartnec has not met the jurisdictional amount requirement; (3) the matter is not ripe for consideration; (4) Lartnec lacks standing; and (5) the action is barred by a 30 day statute of limitation.¹ The court considers each of these arguments in turn.

1. Real Party in Interest

The defendants argue that Federal Rule of Civil Procedure 17(a) requires that an action be prosecuted in the name of the "real party in interest," which defendants argue should be the owner of the Holiday Inn/Downtown. They have produced evidence that the record owner of the Holiday Inn is the Central-Walter-Sunbelt ("C-W-S") partnership, an Indiana general partnership of which Lartnec is a member. Defendants argue that C-W-S is the real party in interest, and thus should be the plaintiff here.

Lartnec responds by producing copies of agreements whereby the other partners in C-W-S have transferred their interest to Lartnec, and states that the deed showing Lartnec as owner has simply not been recorded yet.

It is clear that these facts, which are necessary to resolve this issue, go beyond the parameters of a motion to dismiss because they involve matters outside the pleadings. When matters outside the pleadings are presented to and not excluded by the court, a motion to dismiss will be converted to a motion for summary judgment under Rule 56. See Fed.R.Civ.P. 12(b)(6). However, this conversion applies only to the real party in interest issue.

Under Rule 56(c), summary judgment can be granted if there is no genuine issue of material fact existing and the moving party is entitled to judgment as a matter of law. Here, neither party disputes that C-W-S is record owner or that Lartnec is the sole remaining partner of C-W-S. Under Indiana partnership law, the last surviving partner has the right to wind up the partnership's affairs. Marksill Specialties, Inc. v. Barger, 428 N.E.2d 65, 68 (Ind.App.1982); I.C. XX-X-X-XX. Thus, Lartnec has a right to bring this action on behalf of C-W-S, so that it is the real party in interest, either by virtue of its own ownership rights or as last surviving partner of C-W-S.

2. Diversity Jurisdiction

Defendants argue that this court lacks subject matter jurisdiction because there is no diversity jurisdiction present here. The court notes that Lartnec's amended complaint in No. F 84-162 alleges two federal constitutional violations, so that this case has proper federal question subject matter jurisdiction regardless of the citizenship of the parties. Further, the lack of diversity argument is premised on C-W-S being the real party in interest. However, Lartnec is the real party in interest, and as an Iowa corporation poses no problems in terms of diversity. Finally, Lartnec's allegations concerning lost profits in excess of $10,000.00 meets the amount in controversy requirements. Thus, to the extent that diversity requirements are relevant in this action, Lartnec has satisfied them.

3. Ripeness

Defendants argue that this matter should be dismissed on the basis of ripeness. This argument is premised on the belief that because Lartnec will not be injured until sometime in the future (if ever), the case is not ripe until such injury occurs. Specifically, the Authority argues that its subsidy Resolution will not become effective unless a Certificate of Occupancy is issued for the hotel — which may never occur.

The doctrine of ripeness arises out of Article III's case or controversy requirements and the related prohibition against rendering advisory opinions. See Wisconsin's Environmental Decade, Inc. v. State Bar of Wisconsin, 747 F.2d 407, 410 (7th Cir.1984)...