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Winner Road Properties, LLC v. BMO Harris Bank, N.A.

United States District Court, E.D. Missouri, Eastern Division

September 28, 2017

BMO HARRIS BANK, N.A., as trustee of Mount Washington Cemetery trusts, and individually, Defendant.



         This matter is before the Court on defendant BMO Harris Bank, N.A.'s motion to dismiss. Plaintiff Winner Road Properties, LLC has responded to the motion, and it is fully briefed. For the following reasons, the Court will grant in part and deny in part BMO Harris Bank, N.A.'s motion. The Court finds plaintiff's Counts I and IV are barred by the doctrine of res judicata, and Count IV does not state a claim for relief that is plausible on its face. The Court will grant the motion to dismiss as to Counts I and IV. The Court cannot find that Counts II and III are barred by the statute of limitations, and the Court will deny the motion as to these Counts.


         On June 13, 2016, plaintiff Winner Road Properties, LLC (“Winner Road”) filed this action in the Circuit Court of Jackson County, Missouri, against defendant BMO Harris Bank, N.A. (“BMO”), seeking declaratory relief and restitution. BMO removed the case to federal court, and it was transferred to this Court on a motion of change of venue under 28 U.S.C. § 1404(a), based primarily on the litigation history between the parties in this Court, specifically in Jo Ann Howard & Assocs., P.C. v. Cassity, 4:09-CV-1252 ERW (E.D. Mo. filed Aug. 6, 2009) (the “Jo Ann Howard” litigation).

         Winner Road owns a cemetery in Jackson County, Missouri, the Mount Washington Cemetery, and asserts it is the beneficiary of preneed trusts related to the Cassity-family preneed funeral services business, National Prearranged Services (“NPS”) (Compl. Intro., ¶ 1.) NPS sold preneed funeral contracts to consumers through funeral homes whereby the consumers would pay a fixed price for funeral services before the need for those services arose. In Missouri, the Cassity family placed the funds received from these sales in various trusts, which it then manipulated into purchasing life insurance policies from a Cassity-controlled insurance company named Lincoln Memorial Insurance Company (“Lincoln Memorial”). The Cassity family then stole from the insurance policies held in the trusts. When NPS and the Cassity insurance companies were ultimately declared insolvent, the policies in the preneed trusts were worthless. (Compl. Intro., ¶¶ 7-8.)

         Winner Road, through a judicial foreclosure sale, is the successor in interest to three Mount Washington Cemetery preneed trusts: the Merchandise and Services Trust, the Endowed Care Trust, and the Special Care Trust (collectively the “Mount Washington Cemetery trusts”).[1]These trusts had a series of trustees during the Cassity fraud scheme. (Compl. at 3.) Defendant BMO, through its predecessor Marshall & Ilsley Trust Company, first became trustee of the trusts in 2005. By this time, the Merchandise and Services Trust had already been stripped of its cash assets-assets that had been replaced with Lincoln Memorial insurance policies by a prior trustee. These insurance policies, with the collapse of the Cassity fraud scheme, were worthless. Winner Road alleges BMO allowed more than $7 million of trust assets to disappear, specifically from the Merchandise and Services Trust.

         Winner Road brings its complaint in four counts: Determination of Rights in and Representation for the Merchandise and Services Trust: Request for Restoration of Trust Assets and Other Relief (Count I); Determination of Rights in and Representation for the Endowed Care Trust and Request for Trust Administration Rulings (Count II); Determination of Rights in and Representation for the Special Care Trust and Request for Trust Administration Rulings (Count III), and; (4) Petition for Restitutionary Award Against Trustees for Breaching Trustee Duties Relating to Preneed Funeral and Cemetery Trusts (Count IV). With respect to the Mount Washington Merchandise and Services trust (Count I), Winner Road alleges this trust was depleted of $7.3 million in assets. Winner Road seeks trust administration or remedies for the Mount Washington Cemetery trusts, such as restoration of the functionality of the Mount Washington Cemetery trusts by an accounting, a finding of breach of trust, a report to beneficiaries, and a return or replacement of trust assets.

         The Jo Ann Howard Litigation

         In its motion to dismiss, BMO contends Winner Road's Counts I and IV are precluded by a settlement agreement entered in the Jo Ann Howard litigation. In May 2008, a Texas Court entered a joint liquidation plan for NPS and Lincoln Memorial. The liquidation plan established the authority of a Special Deputy Receiver (“SDR”) to collect money to pay NPS's creditors. (Compl. at ¶ 37.) Under the liquidation plan, state guaranty associations, who had guaranteed payments under Lincoln Memorial insurance policies, were assigned all claims by present or future recipients of benefits under the insurance policies in the trust accounts. (Compl., Ex. H, Liquidation Plan ¶ 9.1.)

         The state guaranty associations and the SDR then brought the Jo Ann Howard litigation, a $600 million lawsuit, in this District Court against defendant trustee banks, including BMO and its predecessors. (Compl., Ex. J.) The SDR was the court-appointed representative to bring claims on behalf of funeral homes and consumers for losses under the trusts arising from alleged breaches of fiduciary duty by BMO.

         The Jo Ann Howard plaintiffs' claims for breach of fiduciary duty, negligence, and gross negligence by trustee banks were brought by “the individual state guaranty associations from Missouri . . . and the SDR on behalf of NPS, funeral homes, and consumers.” (Ex. J. ¶¶ 32.19-32.20.) This explicitly included claims against bank trustees for losses to the Mount Washington Merchandise and Services trust. (Id. at ¶¶ 197.8-197.9.)

         In Jo Ann Howard, the Court ruled that the SDR had standing to bring such claims:

The final argument asserted by the Trustees is the Trustees cannot be liable for claims related to the Mount Washington and CSA trusts because the SDR does not have standing to bring claims related to those trusts. The Trustees claim NPS is not the settlor or beneficiary of these trusts and the SDR is asserting claims only on behalf of NPS, funeral homes, and consumers. Plaintiffs argue NPS was the pre-need seller for these trusts and as such is a beneficiary of the trusts . . . . NPS sold the contracts in the trust and was the actual seller. As the seller, even though not named in the trust agreement, NPS is a beneficiary of the trusts in practice. The SDR has standing to bring claims related to the Mount Washington and CSA pre-need trusts.

Jo Ann Howard, 79 F.Supp.3d at 1020-21 (emphasis added). BMO states the settlement of all claims by the plaintiff SDR and Missouri guarantee associations in the Jo Ann Howard litigation acts to bar Winner Road's Counts I and IV by the doctrine of res judicata.

         BMO also moves to dismiss Counts I through III as time barred by Missouri's one-year statute of limitations. As to Count IV, BMO moves to dismiss this Count for the additional reason that it had no duty to Winner Road that can support a breach of duty or negligence claim, and Winner Road has not stated a claim that is plausible on its face.

         Legal Standard

         To survive a motion to dismiss under Rule 12(b)(6) for failure to state a claim upon which relief can be granted, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). A claim is plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. In making this determination, the Court must grant the plaintiff all reasonable inferences that can be drawn from the complaint's factual allegations. See Lustgraaf v. Behrens, 619 F.3d 867, 872-73 (8th Cir. 2010).

         The Court can take judicial notice of public records and consider them on a motion to dismiss. Stahl v. U.S. Dep't of Agric., 327 F.3d 697, 700 (8th Cir. 2003). Here, the Court has considered certain matters of public record-the Jo Ann Howard case file-as well as documents that are necessarily embraced by the complaint-the Mount Washington Cemetery trust agreements and the SDR liquidation plan.[2] See Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (holding that, when considering a motion to dismiss, the court “may consider some materials that are part of the public record or do not contradict the complaint, as well as materials that are necessarily embraced by the pleadings”) (citations and internal quotation marks omitted); see also Knutson v. City of Fargo, 600 F.3d 992, 1000 (8th Cir. 2010) (“[W]e see no reason why the District Court, like this Court, could not take judicial notice of the publicly available state-court argument, particularly where the issue at hand is possible preclusion of a federal claim as a result of those same state-court proceedings.”); see also Germain Real Estate Co., LLC v. HCH Toyota, LLC, 778 F.3d 692, 695 (8th Cir. 2015).


         A. Res Judicata

         BMO argues Counts I and IV should be dismissed under the doctrine of res judicata. To establish that a claim is barred by res judicata, BMO must show “(1) the first suit resulted in a final judgment on the merits; (2) the first suit was based on proper jurisdiction; (3) both suits involve the same parties (or those in privity with them); and (4) both suits are based upon the same claims or causes of action.” Yankton Sioux Tribe v. United States Dep't of Health & Human Servs., 533 F.3d 634, 639 (8th Cir. 2008) (internal quotations omitted). “Dismissal on the basis of res judicata at the pleading stage is appropriate if the defense is apparent on the face of the complaint.” Magee v. Hamline Univ., 775 F.3d 1057, 1058-59 (8th Cir. 2015) (per curiam).

         (1) Final ...

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