Llano Fin. Grp., LLC v. Bannec

• Decision Date: 25 February 2016
• Docket Number: Cause No.: 2:15-CV-297
• Parties: LLANO FINANCING GROUP, LLC, Plaintiff, v. RICHARD M. BANNEC and RANDALL G. PRINCE, Defendants.
• Court: U.S. District Court — Northern District of Indiana

LLANO FINANCING GROUP, LLC, Plaintiff, v. RICHARD M. BANNEC and RANDALL G. PRINCE, Defendants.

Cause No.: 2:15-CV-297

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF INDIANA HAMMOND DIVISION

February 25, 2016

OPINION AND ORDER

This matter is before the court on the motion to dismiss and memorandum in support filed by Defendant Richard Bannec on December 16, 2015 (Docket Entries 19, 20).¹ Plaintiff Llano Financing Group filed a response in opposition to the motion on December 30, 2015 (DE 22) and Bannec filed a reply on January 6, 2016 (DE 25). For the reasons discussed below, the motion to dismiss is GRANTED and this case is DISMISSED for lack of subject-matter and diversity jurisdiction.²

BACKGROUND

Llano Financing Group, a Texas limited liability corporation, filed this lawsuit against Bannec and Randall Prince, both of whom were residential real estate appraisers licensed by the State of Indiana. Complaint (DE 6), ¶¶ 1, 3. Llano states that it "is suing in its capacity as agent for Impac Funding Corporation, the master servicer, for DEUTSCHE BANK NATIONAL TRUST COMPANY, ('Trust') a national bank association, which owns the loan that is the subject of this suit. Plaintiff has an ownership interest in the subject matter of the suit." Id., ¶ 2 (capitalization in original). Llano brought this suit based on diversity jurisdiction. Id., ¶ 4. Bannec and Prince appraised a residential property in Gary, Indiana, in August of 2006 and determined that the market value of the property was $80,000.00. Id., ¶ 12; Plaintiff's Exh. A (DE 6-1), p. 2.³ Based in part on the appraisal report, the property owner obtained a loan for $64,000.00, secured, of course, by the property. Id., ¶ 16. Llano claims that the "Borrower subsequently defaulted and Plaintiff foreclosed on the Property and suffered a loss." Id., ¶ 17. Llano alleges that it "later discovered" that the appraisal report "prepared and submitted to the Lender by Defendants had been negligently prepared and contained material misrepresentations regarding the Property and that the Loan was significantly under-secured." Id., ¶ 18. Llano doesnot state in its Complaint just how undervalued the property allegedly was, but does offer that it was "far less than $64,000.00 at the time Lender funded the loan. Had Lender known the true market value of the property it would not have funded the loan." Id., ¶ 19. Based on these allegations, Llano asserts state law claims against Bannec for breach of contract, negligent misrepresentation, and professional negligence. Id., pp. 5-9. Additional facts will be discussed below as they become relevant to the court's discussion and analysis.

STANDARD OF REVIEW

A motion to dismiss for lack of subject-matter jurisdiction calls into question a court's power to decide the merits of the case before it. See Fed.R.Civ.P. 12(b)(1). When a defendant makes a jurisdictional challenge, it is the plaintiff's burden to establish that jurisdiction exists. Apex Digital, Inc. v. Sears, Roebuck, & Co., 572 F.3d 440, 443 (7th Cir. 2009). When subject-matter jurisdiction has been challenged, the court "must accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff." St. John's United Church of Christ v. City of Chicago, 502 F.3d 616, 625 (7th Cir. 2007). In addition to any jurisdictional allegations, the court may consider any evidence in the record that may help determine whether there is subject-matter jurisdiction. Id. It is the duty of the court to review its jurisdiction over the matter before it may examine the merits of the case, regardless of whether the issue is raised by the parties. See Ricketts v. Midwest Nat. Bank, 874 F.2d 1177, 1181 (7th Cir. 1989). In the event that a court concludes that subject-matter jurisdiction does not exist, "the court must dismiss the complaint in its entirety" without examining the merits of the case. Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006).

DISCUSSION

I. Lack of Subject-Matter Jurisdiction.

Bannec's motion asks the court to dismiss this case pursuant to Fed.R.Civ.P. 12(b)(1), arguing that Llano lacks standing to bring this suit and, consequently, the court lacks subject-matter jurisdiction, and subsection 12(b)(6), arguing that Llano fails to plead any valid claim. Motion to Dismiss (DE 19), p. 1. "When a motion to dismiss is brought both for lack of subject matter jurisdiction under Rule 12(b)(1) and for failure to state an actionable claim under Rule 12(b)(6), the Rule 12(b)(1) motion is addressed first." Villareal v. Snow, 1996 WL 28282, at *2 (N.D.Ill. 1996) (citing Winslow v. Walters, 815 F.2d 1114, 1116 (7th Cir. 1987)).

Bannec's motion is based on a host of arguments, as set forth below, but the standing argument boils down to this: Bannec claims that Llano is out to recover money from him for a deficiency that allegedly resulted from the defaulted loan even though Llano "did not[] request the written appraisal at issue, receive the written appraisal at issue, rely upon the allegedly deficient appraisal at issue, finance a mortgage transaction in reliance upon the appraisal at issue, or suffer any monetary damages whatsoever[.]" Motion to Dismiss, p. 2. In his memorandum in support of his motion, Bannec summarizes his position in terms that can hardly be referred to as equivocal when he writes: "Put simply, Llano buys lawsuits. Its actions are champertous and deceitful." Defendant's Memorandum, p. 1. According to Llano, that "contention is close to being libelous." Plaintiff's Response, p. 2. This is obviously a hotly contested battle, seeing as gauntlets are being thrown about; but Bannec doesn't back down, insisting that "Llano bought and paid for the claims it asserts in this lawsuit[]" and that Llano's actions are "little more than 'thinly veiled champerty . . . ." Defendant's Memorandum, p. 6-7 (citation omitted).

Bannec contends that "Llano's Complaint must be dismissed for the following reasons: (1) Llano's pursuit of this action is nothing more than the champertous purchase of an interest in litigation by a disinterested party; (2) Llano's Complaint fails to sufficiently allege diversity jurisdiction; (3) Llano's lack of standing and the nonexistence of Llano's demonstrable interest in this suit prevents this Court from asserting subject matter jurisdiction; (4) Indiana does not recognize a cause of action for negligent misrepresentation on facts such as those presented in the instant case; (5) Llano's claims are barred by the applicable statutes of limitations; and (6) Plaintiff cannot state legally or factually cognizable claims for breach of contract, negligent misrepresentation, and professional negligence." Defendant's Memorandum, pp. 5-6. Bannec's contentions (1) and (3) are intertwined serve as the foundation for his argument about standing. Whether Llano's actions in bringing this suit (and dozens or even hundreds like it across the country) are champertous is not a determination this court has to make for present purposes. But the arguments Bannec presents on that issue are indeed relevant to the issue of standing, for the reasons explained below.

Bannec summarizes his standing argument as follows:

Llano was not damaged in any way be the alleged deficiencies of the Appraisal. Llano admits that the Lender received and relied upon the Appraisal in issuing the loan. Llano has plead no facts to suggest that it was harmed by the alleged 'under-secured mortgage.' Llano has not alleged that it relied upon the Appraisal. It was not an intended beneficiary or even recipient of the alleged 'agreement' or the Appraisal. Llano inserted itself into a legal claim in which it has no interest except its alleged claim to pursue litigation on behalf of the Trust. . . . Accordingly, Llano has no standing to assert this action and it must be dismissed in its entirety.

Id., p. 7.

Bannec cites the case of Birner v. General Motors Corp., 2007 WL 269847 (C.D.Ill. Jan.26, 2007) in support of his argument. Id., pp. 6-7. In Birner, the district court held that the plaintiff lacked standing when he paid for an assignment of rights from an allegedly injured third-party in order to pursue a suit for money damages, even though the plaintiff was "a complete stranger" to the underlying transaction giving rise to the claim. Birner, 2007 WL 269847, at * 3. The court explained that "'[t]he law will not tolerate a principle which will allow a man of litigious disposition to go about the community, hunting up stale claims, or even meritorious ones, against his neighbors, either for the purpose of harassing them, or for speculation.'" Birner, 2007 WL 269847, at *2 (quoting McGoon v. Ankeny, 11 Ill. 558, 1850 WL 4273 (1850)). Bannec also points to the following information in support of his champerty argument:

Llano purchases 'assignments' of interest in which it has no stake or claim and files factually and legally baseless lawsuits to extort settlements from appraisers and appraisal companies. Many of the appraisals at issue in the most recent filings occurred nine to ten years ago. Llano and its affiliated entities have filed more than 55 lawsuits in Illinois since August 2015, including 39 cut and paste cases in Cook County, Illinois; 8 others in Will, DuPage, Kane and Lake Counties; and 9 in the Northern and Central Districts of Illinois, as of the date of this motion. . . . Llano has filed six lawsuits in Indiana federal courts, as well. . . . Of course, these numbers do not include the nearly identical 270 cases filed by Llano and its affiliates in Florida, California, New Jersey and Texas.

Id., pp. 1-2 (citing Defendant's Exh. A (DE 20-1)) (court dockets from various state and federal courts). Bannec also notes that that this information is included on a website known as appraiserlawblog.com. Id., p. 2.⁴ Bannec contends that "[t]his case shares a common thread withthe hundreds of other cases throughout the country purchased by Llano: (1) Llano has no relationship...