Liberty Nat'l Bank v. Tri-County Cmty. Action Comm'n for Champaign
| Decision Date | 24 March 2016 |
| Docket Number | Case No. 15-CV-549 |
| Parties | LIBERTY NATIONAL BANK, Plaintiff, v. TRI-COUNTY COMMUNITY ACTION COMMISSION FOR CHAMPAIGN, LOGAN, AND SHELBY COUNTIES, et al., Defendants. |
| Court | U.S. District Court — Southern District of Ohio |
OPINION AND ORDER
Before the Court are Defendant United States of America, Department of Transportation, Federal Transit Administration's ("FTA") Motion to Dismiss for Failure to State a Claim as to Counts 1, 2, and 4 of Plaintiff's Complaint (Doc. 18), and Defendant Ohio Department of Transportation's ("ODOT," with FTA, "Defendants") Motion to do the same (Doc. 24). The Motions are briefed and ripe for review. For the reasons below, both are GRANTED.
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act ("ARRA"), which is administered in part by FTA. Pub. Law 111-5, Tit. XII, available at https://www.gpo.gov/fdsys/pkg/PLAW-111publ5/pdf/PLAW-111publ5.pdf (last accessed Mar. 10, 2016). The Act set aside federal funds to invest in transportation, environmental protection, and other infrastructure to provide long-term economic benefits. Id., Sec. 3. In order to administer and manage funds, FTA uses a Master Agreement that governs the administration of federally funded projects. (Doc. 18 at 3.) According to the Master Agreement,"Recipients" receive grants directly from FTA, and "Subrecipients" receive those grants through Recipients, one of which is ODOT. (Id.) Recipients are responsible for ensuring compliance with all applicable federal laws and regulations under grant agreements and the Master Agreement. (Id.) Under the Master Agreement, "the [federal government] "retains a [federal] interest in any real property . . . financed with Federal assistance . . . until . . . the Federal Government relinquishes its Federal interest in that . . . property." (Id. at 4.) Recipients must not encumber the property or do anything that would affect the continuing federal interest in the property without the express consent of the federal government. (Id.) Section 42 of the Master Agreement requires Recipients in the Nonurbanized Area Formula Program (such as ODOT) to enter into a written agreement with each Subrecipient setting forth the Subrecipient's responsibilities, including appropriate clauses "imposing requirements necessary to assure that the Subrecipient will not compromise the Recipient's compliance with the Federal requirements applicable to the Project and the Recipient's obligations under its Grant Agreement for the Project" and the Master Agreement. (Id.)
During fiscal year 2009, FTA awarded ODOT a grant with appropriations from ARRA. (Id. at 5.) The Grant designated $300,000 to purchase real property located at 315 Auburn Avenue West in the City of Bellefontaine in Logan County, Ohio (the "Property"). (Id.) In June of 2010, ODOT entered into a written agreement (the "Grant Contract") with Tri-County Community Action Commission for Champaign, Logan, and Shelby Counties ("Tri-County") to provide capital financial assistance to purchase land for public transportation service (the "Project"). (Id.) The parties entered into the Grant Contract in compliance with the Master Agreement, and Tri-County purchased the Property for approximately $305,876.00 in accordance with the terms of the Grant Contract. (Id. at 5, 7.)
In exchange for receiving Federal funds, Tri-County agreed to comply fully with "all federal, state, and local laws, rules, ordinances, executive orders, and other legal requirements as they apply to Public Transportation Systems and Transit Service." (Id.) Tri-County also agreed that the FTA Master Agreement was incorporated by reference in accordance with Federal law, and that any instrument to be used to convey a seller's rights, titles, and interest to purchasers must include this divestiture language:
If the Grantee herein should cease or otherwise fail to use the premises herein conveyed for and in connection with a Transit Service, as defined in Article I, Section 1.41 of a certain Grant Contract entered into by and between Grantee and the Ohio Department of Transportation, Office of Transit . . . then the Grantee herein shall be divested of any and all rights, titles, and interests hereby conveyed to it and the same shall forthwith devolve upon and become the exclusive property of the Federal Transit Administration. . ."
(Id. at 5-6.) The only way to terminate FTA's interest in the Property in the event Tri-County ceased using it in connection with transit service was for Tri-County to pay FTA the then-current fair market value of the Property. (Id. at 6.) Along with those restrictions, Tri-County agreed to provide ODOT with reports in connection with the Project and to allow ODOT, the United States Department of Transportation, and other entities to audit and examine its records. (Id.) Tri-County was also required to keep records pertaining to the Project for at least three years after all matters concerning the Project were closed. (Id.) Finally, the Grant Contract specifically prohibited Tri-County from executing any mortgage, lien, assignment, or other legal or equitable claim against the Property unless authorized by the Administrator of ODOT's Office of Transit. (Id.)
Nevertheless, Defendants Denise Birt and Robert J. Notestine,1 purporting to act on behalf of Tri-County, executed Notes totaling $300,026 with Plaintiff Liberty National Bank ("Liberty" or "Plaintiff") on October 30 and December 5 of 2012, and an Open-End Mortgage onthe Property on October 30, 2012. (Compl., Doc. 1, ¶¶ 13-15, 56.) Plaintiff was not aware of FTA's claimed interest in the Property at that time. (Id., ¶ 47.) When Plaintiff recorded the Mortgage, the Deed did not contain the required divestiture language. (Id., ¶ 36.)
Tri-County later defaulted on the Mortgage, (Id., ¶ 16), and on August 6, 2014, Plaintiff was awarded a judgment against Tri-County totaling approximately $244,000, together with interest, attorneys' fees and costs, in the Logan County Court of Common Pleas (Case No. CV-14-080257). (Id.) The judgment remained unpaid when this case was filed. (Id., ¶ 17.)
Plaintiff brought a foreclosure action on the Property in the Logan County Court of Common Pleas (the "Foreclosure Action") (Case No. CV14-09-0294). (Id., ¶ 19.) On October 21, 2014, FTA filed a Notice of Removal of the Foreclosure Action to this Court (the "Federal Action") (Case No. 14-CV-2016). (Id., ¶ 20.) FTA then filed a motion to dismiss in the Federal Action contending that the Court did not have jurisdiction to hear the Federal Action, and that Plaintiff failed to state a claim for foreclosure of the Property as it related to FTA or judicial attachment of federal property. (Id., ¶ 21.) The Federal Action was later dismissed without prejudice by agreement of the parties. (Id., ¶ 23.)
On February 6, 2015, Plaintiff filed its Complaint in the case sub judice. (Id. at 1.) Count One is brought under 28 U.S.C. § 2409(a), which provides that "[t]he United States may be named as a party defendant in a civil action under this section to adjudicate a disputed title to real property in which the United States claims an interest, other than a security interest or water rights." (Id. at 9.) Count Two is brought under 28 U.S.C. § 2410(a)(1), which provides that "the United States may be named a party in any civil action or suit in any district court . . . to quiet title to real or personal property on which the United States has or claims a mortgage or otherlien." (Id. at 10.) Finally, Count Four is brought under 28 U.S.C. § 2410(a)(2), which provides that "the United States may be named a party in any civil action or suit in any district court . . . to foreclose a mortgage or other lien upon . . . real or personal property on which the United States has or claims a mortgage or other lien." (Id. at 12.)
On April 9, 2015, FTA filed a motion under Federal Rule of Civil Procedure 12(b)(6) to dismiss the case for Plaintiff's failure to state a claim upon which relief can be granted (Doc. 18). On April 20, 2015, ODOT did the same, reiterating and incorporating FTA's arguments in their entirety. (Doc. 24).
The Court may dismiss a cause of action under Federal Rule of Civil Procedure 12(b)(6) for "failure to state a claim upon which relief can be granted." Such a motion "is a test of the plaintiff's cause of action as stated in the complaint, not a challenge to the plaintiff's factual allegations." Golden v. City of Columbus, 404 F.3d 950, 958-59 (6th Cir. 2005). Thus, the Court must construe the complaint in the light most favorable to the non-moving party. Total Benefits Planning Agency, Inc. v. Anthem Blue Cross & Blue Shield, 552 F.3d 430, 434 (6th Cir. 2008). The Court is not required, however, to accept as true mere legal conclusions unsupported by factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The allegations need not be detailed but must "give the defendant fair notice of what the claim is, and the grounds upon which it rests." Nader v. Blackwell, 545 F.3d 459, 470 (6th Cir. 2008) (quoting Erickson v. Pardus, 551 U.S. 89, 93 (2007)). In short, a complaint's factual allegations "must be enough to raise a right to relief above the speculative level," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), and it must contain "enough facts to state a claim to relief that is plausible on its face." Id. at 570.
Additionally, even if Plaintiff sufficiently states a claim for relief the Court will grant the motion to dismiss if "the undisputed facts conclusively establish an affirmative defense as a matter of law." Hensley Mfg. v. ProPride, Inc., 579 F. 3d 603, 613 (6th Cir. 2009) (...
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