Isringhausen Imports, Inc. v. Union Pacific Railroad Company
OPINION: Defendant's Motion to Dismiss or For More Definite Statement (d/e 4 ) is GRANTED IN PART and DENIED IN PART. Plaintiff has sufficiently pleaded a claim for mutual mistake. Plaintiff's fraud claim is DISMISSED without prejudice and with leave to replead. Plaintiff shall file an Amended Complaint, if any, on or before October 7, 2016. (SEE WRITTEN OPINION) Entered by Judge Sue E. Myerscough on 9/20/2016. (GL, ilcd)
Tuesday, 20 September, 2016 03:41:16 PM
Clerk, U.S. District Court, ILCD
IN THE UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
ISRINGHAUSEN IMPORTS, INC.,
UNION PACIFIC RAILROAD CO.,
SUE E. MYERSCOUGH, U.S. District Judge.
This cause is before the Court on the Motion to Dismiss or for
More Definite Statement (d/e 4) filed by Defendant Union Pacific
Railroad Company. The Motion is GRANTED IN PART and
DENIED IN PART. Plaintiff has sufficiently pleaded a claim for
mutual mistake. Plaintiff’s fraud claim is DISMISSED without
prejudice and with leave to replead.
In April 2016, Plaintiff Isringhausen Imports, Inc. filed a
Complaint in the Circuit Court of the Seventh Judicial Circuit,
Sangamon County, Illinois. Defendant was served with the
Complaint on May 9, 2016. On June 8, 2016, Defendant timely
filed a Notice of Removal (d/e 1). Plaintiff did not object to
removal. See Pl.’s Consent to Removal (d/e 6).
The following facts come from Plaintiff’s Complaint and are
accepted as true at the motion to dismiss stage. Tamayo v.
Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).
Plaintiff operates a business at 229 East Jefferson,
Springfield, Illinois. Defendant operates a railroad along Third
Street in Springfield.
On March 11, 2004, the parties entered into a lease of a
7,500 square foot parcel of Third Street between Washington and
Jefferson Streets, adjacent to Plaintiff’s facility. Compl. ¶ 3. The
purpose of the lease was to allow Plaintiff to park vehicles on the
parcel and use the parcel for ingress and egress to Plaintiff’s
When the lease was entered, Defendant asserted it owned the
parcel or otherwise had the exclusive right to possession of the
parcel. Consequently, Defendant required Plaintiff to pay rent to
use the parcel. The initial rent under the lease was $750 per
month. Between March 11, 2004 and September 30, 2015,
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Plaintiff paid rent to the Defendant in increasing monthly
amounts, totaling $123,116 in rent during that time.
On September 15, 2015, Defendant sent Plaintiff a proposed
new lease agreement for $1,385 per month. In October 2015,
Plaintiff learned that Defendant did not own or otherwise have the
exclusive right to possession of the parcel and had no right to
charge Plaintiff rent. Specifically, Plaintiff investigated the original
1851 City of Springfield grant of right of way to the railroad and
learned that the right of way excluded a strip of land 10 feet wide
on each side of Third Street. In addition, subsequent ordinances
first passed in 1865 provided that all railroads making use of the
streets in the City of Springfield were required to leave open and
unobstructed for public access those parts of the street on either
side of the railroad tracks. Plaintiff contacted Defendant with this
information, but Defendant has been unwilling to reimburse
Plaintiff for the rent previously paid.
Plaintiff asserts that the lease is voidable because of the
parties’ mutual mistake that Defendant owned or otherwise had
the right to exclusive possession of the parcel and was entitled to
rent for Plaintiff’s use of the parcel. Alternatively, Plaintiff alleges
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that, if Defendant was not mistaken, the lease is voidable because
Defendant fraudulently induced Plaintiff to pay rent. Plaintiff
alleges that Defendant falsely represented it owned or otherwise
had the right to exclusive possession of the parcel and was entitled
to rent for Plaintiff’s use of the parcel, knew such representation
was false, that such representation was intended to induce and did
induce Plaintiff to pay rent, and that Plaintiff was damaged by
paying rent to Defendant that Defendant was not entitled to
receive. Compl. ¶ 12. Plaintiff seeks judgment against Defendant
in the amount of $123,116 plus interest.
On June 8, 2016, Defendant filed its Motion to Dismiss or for
More Definite Statement.
This Court has subject matter jurisdiction pursuant to 28
U.S.C. § 1332(a). Specifically, complete diversity exists between
the parties. Plaintiff is an Illinois corporation with its principal
place of business in Springfield, Illinois. Compl. ¶ 1. Defendant is
incorporated under the laws of the State of Delaware and has its
principal place of business in Omaha, Nebraska. Notice of
Removal ¶ 2(b). In addition, the amount in controversy exceeds
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$75,000 exclusive of interest and costs. In the Complaint, Plaintiff
seeks the amount of rent payments at issue, which totals
$123,116. Compl. ¶ 7, Prayer for Relief.
Venue is proper in this district because a substantial part of
the events or omissions giving rise to the claim occurred in this
judicial district or a substantial part of the property that is the
subject of the action is situated in this district. 28 U.S.C.
§ 1391(b)(2). Moreover, removal to this Court was proper because
it is “the district and division embracing the place” where the state
court action was pending. 28 U.S.C. § 1441(a).
III. LEGAL STANDARD
A motion under Rule 12(b)(6) challenges the sufficiency of the
complaint. Bonnstetter v. City of Chi., 811 F.3d 969, 973 (7th Cir.
2016). To state a claim for relief, a plaintiff need only provide a
short and plain statement of the claim showing that the plaintiff is
entitled to relief and giving the defendant fair notice of the claims.
Tamayo, 526 F.3d at 1081.
When considering a motion to dismiss under Rule 12(b)(6),
the Court construes the complaint in the light most favorable to
the plaintiff, accepting all well-pleaded allegations as true and
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construing all reasonable inferences in plaintiff’s favor. Id.
However, the complaint must set forth facts that plausibly
demonstrate a claim for relief. Bell Atlantic Corp. v. Twombly, 550
U.S. 544, 547 (2007). A plausible claim is one that alleges factual
content from which the Court can reasonably infer that the
defendant is liable for the misconduct alleged. Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). Merely reciting the elements of a cause
of action or supporting claims with conclusory statements is
insufficient to state a cause of action. Id.
A heightened pleading standard applies to allegations of fraud
and mistake. Under Rule 9(b) of the Rules of Civil Procedure, a
party alleging fraud or mistake must “state with particularity the
circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
That is, the party “must describe the who, what, when, where, and
how of the fraud[.]” United States v. Acacia Mental Health Clinic,
LLC, --- F. 3d ----, 2016 WL 4555648, at *4 (7th Cir. Sept. 1, 2016)
(citations and quotations omitted).
Defendant argues that Plaintiff fails to allege any facts to
support Plaintiff’s conclusory allegations. Defendant further
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argues that Plaintiff’s Complaint, which alleges mutual mistake
and fraudulent inducement, does not comply with Federal Rule of
Civil Procedure 9(b), which requires that a party state with
particularity the circumstances constituting fraud or mistake.
Under Illinois law, which the parties appear to agree applies
in this case, a mutual mistake of fact may make a contract
voidable. Jordan v. Knafel, 378 Ill. App. 3d 219, 234 (2007).
Specifically, “if a mistake by both parties ‘as to a basic assumption
on which the contract was made has a material effect on the
agreed exchange of performances, the contract is voidable by the
adversely affected party unless he bears the risk of the mistake.’”
Id. (quoting Restatement (Second) of Contracts, § 152, at 385
(1981)). The mistake must relate to a past or present fact material
to the contract. United City of Yorkville v. Village of Sugar Grove,
376 Ill. App. 3d 9, 23-24 (also noting that predictions do not
qualify as present facts).
To state a claim for fraud, Plaintiff must plead (1) a false
statement of material fact; (2) known or believed to be false by
Defendant; (3) made to induce Plaintiff to act; (4) that Plaintiff
acted on the statement in reasonable reliance on the truth of the
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representation; and (5) damages. See 23-25 Bld. P’ship v. Testa
Produce, Inc., 381 Ill. App. 3d 751, 758 (2008); Krilich v . Am. Nat’l
Bank & Trust Co. of Chi., 334 Ill. App. 3d 563, 570 (2002).
As noted above, Rule 9(b) requires fraud and mistake be
pleaded with particularity. That means that Plaintiff must “state
with particularity the circumstances constituting fraud or
mistake,” which includes stating “the identity of the person making
the misrepresentation, the time, place, and content of the
misrepresentation, and the method by which the
misrepresentation was communicated to the plaintiff.” United
States ex rel. Hanna v. City of Chi., --- F. 3d ---, 2016 WL
4434559, at * 3 (7th Cir. Aug. 22, 2016) (internal quotation marks
and citations omitted).
Plaintiff fails to adequately plead fraud as required by Rule 9.
Paragraph 12, which contains the majority of Plaintiff’s fraud
claim, only recites the elements of a cause of action, which is
insufficient to state a claim. See Iqbal, 556 U.S. at 678. Plaintiff
does not allege how the alleged false statement was communicated,
by whom it was communicated, or the time, place, or method of
the communication to Plaintiff. See Rocha v. Rudd, 826 F.3d 905,
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911 (7th Cir. 2016) (finding fraud claim properly dismissed where
the plaintiff failed to provide “the specific names, dates, times or
content of the misrepresentations that give rise to the alleged
Plaintiff does, however, allege with sufficient particularity the
circumstances constituting the purported mutual mistake. See
G.T. Laboratories, Inc. v. Cooper Cos., Inc., No. 92 C 6647, 1994
WL 274982, at *2 (N.D. Ill. June 17, 1994) (noting that the plaintiff
must plead with particularity the circumstances constituting the
mistake and finding that the plaintiff did so by alleging the time
period when the mistake was allegedly made and the names of the
persons who made the agreement and the mistake); but see also
Bankers Trust Co. v. Old Republic Ins. Co., 959 F.2d 677, 683 (7th
Cir. 1992) (questioning the particularized pleading requirement for
mistake claims). Plaintiff identifies the parties, the property at
issue, the lease, the relevant lease terms, and the purported
mutual mistake, namely that Defendant owned the property in
question. Plaintiff alleges that Plaintiff only recently learned that
Defendant purportedly did not own the property in question when
the lease was executed. The Court can reasonably infer from the
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allegations that Defendant likewise was not aware that Defendant
did not own the property in question when the lease was entered.
Plaintiff has plausibly set forth a mutual-mistake-of-fact claim with
sufficient particularity. See, e.g., Cogniplex, Inc. v. Ross, No. 00 C
7463, 00 C 7933, 2001 WL 436210, at *6 (N.D. Ill. Apr. 27, 2001)
(finding claim of mutual mistake of fact alleged where the plaintiff
alleged the parties mistakenly believed that the plaintiff had an
ownership interest in certain documents although he did not have
an ownership interest and also finding that whether the plaintiff
exercised due care was not suitable for review on a motion to
dismiss); Jordan, 378 Ill. App. 3d at 234-35 (involving alleged
mutual mistake of fact pertaining to paternity, affirming summary
judgment, and finding the plaintiff “had no duty to attempt
independent verification of the information especially where, here,
ascertainment of the true fact was more readily available” to the
defendant than to the plaintiff).
Defendant also argues that, in Illinois, a tenant is estopped
from questioning the title of his landlord. Def. Mot. at 5 (citing
Doty v. Burdick, 83 Ill. 473, 477 (1876) and Tedens v. State, 1 Ill.
Ct. Cl. 258 (1902)). However, even if that proposition applied in
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this case, courts have recognized an exception where the tenant
has been induced by fraud, artifice, or mistake to accept the lease.
See Carter v. Marshall, 72 Ill. 609, 611 (1874); Freeman Coal
Mining Corp. v. Burton, 388 Ill. 604, 613 (1944) (citing Carter).
For the reasons stated, Defendant’s Motion to Dismiss or For
More Definite Statement (d/e 4) is GRANTED IN PART and
DENIED IN PART. Plaintiff has sufficiently pleaded a claim for
mutual mistake. Plaintiff’s fraud claim is DISMISSED without
prejudice and with leave to replead. Plaintiff shall file an Amended
Complaint, if any, on or before October 7, 2016.
ENTER: September 20, 2016
FOR THE COURT:
s/Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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