Crown Point Partners LLC et al v. Crown Point Plan Commission et al

Filing 76

OPINION AND ORDER granting 64 Motion to Substitute Party. The Clerk is DIRECTED to substitute First Financial Bank, N.A. as plaintiff in lieu of Lauth Property Group, LLC and Crown Point Partners, LLC in this action. In light of the courts ruling, it is unnecessary to hold an oral argument, and the 65 Request for Oral Argument is DENIED. Signed by Magistrate Judge Andrew P Rodovich on 4/13/11. (mc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
CROWN POINT PARTNERS LLC;
LAUTH PROPERTY GROUP LLC,
Plaintiffs
v.
CROWN POINT PLAN COMMISSION;
CITY OF CROWN POINT, INDIANA,
Defendants

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Case No. 2:06 cv 139

OPINION AND ORDER
This matter is before the court on the Motion to Substitute
First Financial Bank, N.A. as Plaintiff [DE 64], and the Request
for Oral Argument on Motion to Substitute First Financial, N.A.
as Plaintiff [DE 65] filed by First Financial on January 26,
2011.

For the following reasons, the Motion to Substitute First

Financial Bank, N.A. as Plaintiff [DE 64] is GRANTED, and the
Request for Oral Argument on Motion to Substitute First Financial, N.A. as Plaintiff [DE 65] is DENIED.
Background
Crown Point Partners, LLC, owned approximately 56.77 acres
of real estate in Crown Point, Indiana.

Lauth Property Group,

LLC acquired the rights to develop the real estate for CPP and
sought permission from the Crown Point Plan Commission and Common
Council to re-zone the real estate from I-1 Industrial to B-3

Business so that Lauth could build a retail development.

The

Plan Commission and Common Council approved the re-zoning request
by a unanimous vote.

Lauth filed an application for site devel-

opment plan with the Plan Commission on August 23, 2005, requesting approval to build the retail center.

The Director of Plan-

ning and Building for Crown Point issued a letter on September
14, 2005, advising Lauth that the Plan Commission was deferring
action on the site plan application so it could review and conduct a public hearing, resolve the Mississippi Street entrance
and street location needs with adjoining property owners, and
review the number of entrance drives to US 231.
The retail development was intended to have two anchor
stores, one of which would be a Wal-Mart.

In an October 7, 2005

newspaper article, the mayor of Crown Point stated that a WalMart anchor would not promote the high-quality retail development
the city was expecting.

The Plan Commission proposed, and the

Common Council approved, amendments to the Crown Point Code of
Ordinances to establish a special use for retail business structures exceeding 75,000 square feet.

Lauth’s site plan applica-

tion then was denied because the proposed Wal-Mart anchor store
did not comply with the newly adopted ordinance.

Lauth and CPP

filed a complaint on March 8, 2006, seeking an injunction and
damages.

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On April 6, 2010, CPP transferred the real estate to First
Financial by a special warranty deed.

Although the agreement

disclosed this litigation, it represented that the parties had
settled and were awaiting dismissals.

At some point after

executing the agreement, CPP and Lauth stopped the development of
the real estate and abandoned all efforts associated with this
litigation and the settlement agreement among the parties.

That

agreement required Lauth and CPP to prosecute their site plan
application before the City of Crown Point Plan Commission.
First Financial now requests to be substituted as the real party
in interest because it is the present owner of the parcel.
Discussion
Federal Rule of Civil Procedure 25 provides for the substitution of parties if a party has died, become incompetent, has
transferred his interest, or if a public officer has been succeeded by someone else. Wright and Miller, 7A Federal Practice
and Procedure §1951 (1972).

Rule 25 is inapplicable if a change

of parties is desired for some other reason than one of the four
circumstances to which the rule is addressed, and if inapplicable, it is necessary to consult Federal Rule of Civil Procedure
15 or Federal Rule of Civil Procedure 17.
§1951 at p. 638.

7A Wright and Miller,

"Rule 25 does not substantively determine what

actions survive the transfer of an interest; rather, it provides

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substitution procedures for an action that does survive."

ELCA

Enterprises, Inc. v. Sisco Equipment Rental & Sales, Inc., 53
F.3d 186, 191 (8th Cir. 1995); Hilbrands v. Far East Trading Co.,
Inc., 509 F.2d 1321, 1323 (9th Cir. 1975).

"The rule is 'design-

ed to allow an action to continue unabated when an interest in a
lawsuit changes hands,' rather than requiring the initiation of
an entirely new lawsuit."

ELCA, 53 F.3d at 191 (citing General

Battery Corp. v. Globe-Union, Inc., 100 F.R.D. 258, 261 (D. Del.
1982)).

In a diversity action, the court generally will look to

state law to determine whether the claim survives after the
transfer.

Wright and Miller, 7C Federal Practice and Procedure

§1952.
The defendants argue that under Indiana law, the cause of
action does not survive the transfer of the interest in the
property because an agreement involving real estate is a personal
right.

See The Junction Railway Company v. Sayers, 28 Ind. 318

(1867); Michael v. Mitchell, 73 N.E.2d 363 (Ind. App. 1947).

The

defendants rely on Junction Railway in support of their position.
In Junction Railway, the railroad and Hamilton entered an agreement that the railroad could change the course of a stream of
water propelling a milling operation as long as the railroad
would provide an alternative channel for the water.
Railway, 28 Ind. at 318.

Junction

Hamilton subsequently conveyed the real

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estate to Sayers, and the land flooded because the railroad never
provided another channel for the water.

The court determined

that the right to sue on the covenant to construct a proper
channel was a personal right that remained with the covenantee,
Hamilton, and did not run with the real estate.
Sayers could not enforce the right.

Therefore,

Junction Railway, 28 Ind. at

318.
Whether a covenant will run with the land depends on whether
the covenant tends to directly or necessarily enhance its value
or render it more beneficial and convenient to those who own or
occupy it.

Scott v. Stetler, 27 N.E. 721, 722 (Ind. 1891)("The

right to maintain the dam adds to the value of the property, and
is, in fact, part of it."); 8 Ind. Law Encyc. Covenants §5.

It

must have a logical connection to the use and enjoyment of land.
Columbia Club, Inc. v. American Fletcher Realty Corp., 720 N.E.2d
411, 420 (Ind. App. 1999).

Courts have found covenants to pay

rent and for the erection and maintenance of fences to run with
the land, but not one to pay taxes or to make a stream channel
and levees.

Bloch v. Isham, 28 Ind. 37, 1867 WL 2929, *1 (Ind.

1867) (holding that an agreement to pay for a party wall does not
run with the land); Midland R. Co. v. Fisher, 24 N.E. 756, 757
(Ind. 1890) (finding that agreement to erect and maintain fence
runs with the land); Stover v. Harlan, 154 N.E. 882, 883 (Ind.

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App. 1927) (finding that agreement to erect and maintain fence
runs with the land); Lake Erie & W.R. Co. v. Priest, 31 N.E. 77,
78 (Ind. 1892) (agreement for farm crossing runs with the land);
Chicago I. & L. Ry. Co. v. Beisel, 106 N.E.2d 117, 120 (Ind. App.
1952) (agreement for farm crossing runs with the land); Carley v.
Lewis, 24 Ind. 23, 1865 WL 1669, *2 (Ind. 1865) (holding that a
covenant to pay rent does not run with the land); Graber v. Duncan, 79 Ind. 565 (1881)(finding a covenant to pay taxes does not
run with the land); Junction Railway, 28 Ind. at 318 (holding
that agreement to make stream channel and levees does not run
with the land).
The key inquiry is whether the objective of the covenant
concerns the intentions and relationships of the parties, or
whether it concerns the use of the land.

Scott, 27 N.E. at 722;

Columbia, 720 N.E.2d at 420 ("The 'touch and concern' requirement
is the only essential requirement for the running of covenants
which focuses on an objective analysis of the contents of the
covenant itself, rather than the intentions and relationships
between the parties").

If the right adds to the value of the

property and is in fact part of it, it runs with the land, and
successive owners can enforce it.

Scott, 27 N.E. at 722.

"The

clearest example of a covenant that 'touches and concerns' the

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land is one which calls for a party to do or refrain from doing a
physical act on the land."

Columbia, 720 N.E.2d at 420.

The settlement agreement entered by the original parties,
Lauth, CPP, and the defendants, concerned the zoning restrictions
and what could and could not be built on the property.

The

ability to construct certain structures on the land clearly
affects the value of the property, irrespective of who owns it.
Moreover, such an agreement calls for the party "to do or refrain
from doing a physical act on the land", and therefore is one of
the clearest examples of covenants that run with the land.

For

this reason, the cause of action would survive the transfer in
interest in the property.
It is within the discretion of the court to substitute a
party if it finds that allowing the substitution would facilitate
the conduct of the litigation.

7C Wright & Miller, §1958.

When

the plaintiff abandons his interest in the action to his creditor, it is proper and necessary to substitute the creditor so
that it can protect its interest.

Pacamor Bearings, Inc. v.

Minebea Co., 892 F.Supp. 347, 360 (D.N.H. 1995); 7C Wright &
Miller, §1958.

First Financial, as a creditor and transferee in

interest to the property, has a protectable interest in the outcome of this litigation and should be substituted, although its
rights do not exceed those of Lauth and CPP in this litigation.

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For the foregoing reasons, the Motion to Substitute First
Financial Bank, N.A. as Plaintiff [DE 64] filed by First Financial on January 26, 2011, is GRANTED.

The Clerk is DIRECTED to

substitute First Financial Bank, N.A. as plaintiff in lieu of
Lauth Property Group, LLC and Crown Point Partners, LLC in this
action.
In light of the court’s ruling, it is unnecessary to hold an
oral argument, and the Request for Oral Argument on Motion to
Substitute First Financial, N.A. [DE 65] is DENIED.
ENTERED this 13th day of April, 2011

s/ ANDREW P. RODOVICH
United States Magistrate Judge

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