Drury Properties, LLC v. Flora et al

Filing 79

OPINON AND ORDER: The Court hereby ORDERS as follows: 1. The defendant's motion to dismiss for lack of subject matter jurisdiction 47 is GRANTED; 2. this matter is DISMISSED and STRICKEN from the Court's active docket; 3. the plaintiffs c laims against the defendants are DISMISSED without prejudice 4. all pending motions in this matter are DENIED as moot; 5. the documents filed at DE 74 -1 contain personal identifiers. The Clerk of Court SHALL FILE the documents under seal. Within 7 days of the entry of this order, defendants SHALL FILE redacted copies of the document & the Clerk SHALL SUBSTITUTE the redacted documents for the unreacted documents at DE 74-1; and 6. a judgment consistent with this opinion will be entered. Signed by Judge Karen K. Caldwell on 8/22/2017.(KM)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
AT LEXINGTON
DRURY PROPERTIES, LLC

CIVIL ACTION NO. 5:15-153-KKC

Plaintiffs,
V.

OPINION AND ORDER

GARY FLORA, individually and
as executor of the Florence Flora and
Melvin Owen Flora estates and
as trustee of the Melvin Owen Flora
Testamentary Trust, et al.
Defendants.

This matter is before the Court on the defendant’s motion to dismiss (DE 8)
for lack of subject matter jurisdiction. The issue on this motion is whether plaintiff
Drury Properties, LLC has sufficiently proved that Donald Drury, its sole member at
the time the complaint was filed, changed his domicile from Kentucky to Florida in
2013. Because Drury Properties has not met its burden of proof, the motion to
dismiss must be granted.
The root of this matter is a dispute between the heirs of the late Melvin and
Florence Flora. The Floras had three children: sons Gary and Bobby and daughter
Barbara Flora Drury, who is now deceased. Gary is the executor of his parents’
estates and is the trustee of the testamentary trust established by his father.
The attempt to settle Melvin and Florence’s estates has spawned multiple
lawsuits in state court involving Gary, as executor, and certain of his sister
Barbara’s heirs. One of those suits made its way to the Kentucky Supreme Court,

which noted the “incredibly complicated factual pattern” of the dispute and
summarized the background as follows:
Melvin O. Flora (“Melvin Sr.”) and his wife, Florence Flora, were the
parents of three children—sons, Gary and Bobby, and daughter,
Barbara Drury. Each executed separate Wills, with Melvin Sr. leaving
all his property to his wife Florence. He died in July 2009. Florence
had a Will and two subsequent Codicils. Her Will divided her estate
evenly among her three children. In addition, Florence’s Codicils
provided for the division of the family farms with each of her three
children receiving certain identified tracts. However, before her death
and about a year after her husband died, Florence suffered a
debilitating stroke. Not long after her stroke, on November 16, 2010,
Florence executed several documents conveying all of her property to
her daughter Barbara. One of the documents Florence executed was a
Trust which revoked her Last Will and Codicils. Florence also signed
several deeds of conveyance transferring all of the family farms to
Barbara. Leslie Dean, the wife of Florence’s grandson, Melvin, who is
also the daughter-in-law of Barbara, is a Kentucky lawyer [and is
plaintiff’s lawyer in this federal case]. She was the individual who
prepared these documents and counseled Florence to sign. As a result,
Melvin and Leslie stood to eventually inherit all of Florence’s estate,
thereby excluding Florence’s sons, Gary and Bobby, Barbara’s
brothers. Needless to say, this did not bode well for family harmony
and good will.
Drury v. Isaacs, No. 2013-SC-000815-MR, 2014 WL 7238385, at *1 (Ky. Dec. 18,
2014)
Eventually, the Woodford District Court determined that Florence was not of
sound mind at the time that she executed the trust document drafted by Dean, who
was Florence’s daughter-in-law and is also the plaintiff’s attorney in this case.
Again, that document purported to revoke Florence’s last will and codicils. It also
named Florence’s grandson, Melvin (“Melvin K.”) – attorney Dean’s husband – as
the estate administrator. Id. at *2. Florence’s will and codicils were admitted to
probate and, as provided in the will, Gary was appointed executor of Florence’s
estate. Id. It appears that neither Melvin Sr.’s nor Florence’s estate has been settled
and that both actions remain pending in probate court in Woodford County.

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Despite the complexity of the family dispute, the Court has determined that
this federal action involves a discrete issue involving a single piece of property. The
property is owned by Drury Properties, which, at least during the times relevant to
this motion, was wholly owned by Donald Drury. It appears that Donald is one of
Barbara’s heirs.
It also appears that the property at issue was previously owned by Melvin K.
In 1994, Melvin Sr. and Flora loaned Melvin K., their grandson, $52,500.00 and the
loan was secured by a mortgage on the property at issue. (DE 1-2, Mortgage.) Drury
Properties asserts that the underlying note was paid in full in 2004 and there does
not appear to be any dispute about that. Drury Properties also asserts that Gary –
executor of Melvin Sr.’s and Flora’s estates – was informed that the underlying note
has been paid but that Gary will not release the mortgage.
Drury Properties asserts that Gary has violated a Kentucky statute requiring
that mortgagees release a mortgage when the underlying note is paid in full. KRS
§ 382.365. The statute requires a lienholder to release a lien on real property within
30 days from the date that the underlying note is paid. KRS § 382.365(1).
The statute further provides for statutory damages against a lienholder who
fails to comply without “good cause.” The statute provides the lienholder is at first
liable to the property owner in the amount of $100 per day for each day “of the
violation for which good cause did not exist.” KRS § 382.365(4). If the lienholder
continues to fail to release the lien without good cause for 45 days after receiving
written notice, then the lienholder is liable to the property owner for $500 per day
for each day “for which good cause did not exist” after the 45th day from the date of
the notice. KRS § 382.365(5).

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Drury Properties claims statutory damages of $458,000. It calculates its
damages from October 12, 2012. That is the date that Gary and Drury Properties
entered into a settlement agreement through which Gary agreed to release the
mortgage. (DE 1-5, Agreement.) In addition, Drury Properties asserts claims for
breach of contract and fraud based on Gary’s failure to comply with the terms of the
settlement agreement.
In its initial complaint, Drury Properties sued only one defendant: Gary
Flora, in his individual capacity and in his capacity as the executor of Melvin and
Flora’s estate and as trustee of the Melvin Owen Flora Testamentary Trust. Drury
Properties later filed an amended complaint, naming two additional parties:
Hartford Fire Insurance Company and the Estate of Florence Flora.
Drury Properties later filed a second amended complaint. In the second and
most recent amended complaint, Drury Properties asserted that this Court has
jurisdiction over this matter pursuant to diversity jurisdiction set forth in 28 U.S.C.
§ 1332. Under that statute, this Court has jurisdiction over all matters in which the
amount in controversy exceeds $75,000 and is between citizens of different states.
For subject matter jurisdiction to exist under this statute, complete diversity of
citizenship must exist, meaning that “no party has the same citizenship as any
opposing party.” PaineWebber, Inc. v. Cohen, 276 F.3d 197, 201 (6th Cir. 2001).
There is no dispute that the amount in controversy requirement is met here.
The defendants jointly move to dismiss this action, however, arguing that there is
not complete diversity. There is no dispute that defendant Gary Flora is deemed to
be a Kentucky citizen for diversity purposes. This means that, if plaintiff Drury
Properties is also deemed to be a Kentucky citizen, then complete diversity does not
exist.

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Federal diversity jurisdiction depends on the citizenship of the parties at the
time the complaint is filed. Dole Food Co. v. Patrickson, 538 U.S. 468, 478 (2003).
An amended complaint, however, supersedes all prior complaints. Drake v. City of
Detroit, 266 F. App’x 444, 448 (6th Cir. 2008). Thus, when a plaintiff files an
amended complaint, “courts look to the amended complaint to determine
jurisdiction.” Rockwell Int’l Corp. v. United States, 549 U.S. 457, 473–74 (2007).
Drury Properties asserts in the current complaint that it was organized in
the state of Kentucky. (DE 43, Second Amended Complaint, caption, p.1.) For
purposes of diversity jurisdiction, however, a limited liability company is not deemed
a citizen of the place it was organized. Instead, it is deemed to have the citizenship
of each of its members. Delay v. Rosenthal Collins Grp., LLC, 585 F.3d 1003, 1005
(6th Cir. 2009).
In its complaint, Drury Properties asserts that Donald W. Drury is the sole
member of Drury Properties, LLC. (DE 43, Amended Complaint, ¶ 1.) Donald
testified at the hearing on this motion that, soon after filing the second amended
complaint, Drury Properties transferred 99 percent of its assets to Melvin K., who is
Donald’s nephew and attorney Dean’s husband. Donald testified that he did this
because he wanted Melvin K. to have the properties. The transfer of Drury
Properties’ assets, however, does not affect the diversity analysis because diversity
is determined at the time the complaint was filed. Thus, this Court’s diversity
jurisdiction depends on Donald’s citizenship at the time the complaint was filed
since he was the sole member of Drury Properties at that time.
The citizenship of a person is determined by his domicile. Certain Interested
Underwriters at Lloyd’s, London, England v. Layne, 26 F.3d 39, 41 (6th Cir. 1994).
There is no question here that, until at least 2013, Donald’s domicile was Kentucky.

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Drury Properties asserts, however, that in 2013, Donald changed his domicile to
Florida.
“Federal courts are courts of limited jurisdiction and the law ‘presume[s] that
a cause lies outside this limited jurisdiction.’” Vander Boegh v. EnergySolutions, Inc.,
772 F.3d 1056, 1064 (6th Cir. 2014) (quoting Kokkonen v. Guardian Life Ins. Co. of
Am., 511 U.S. 375, 377 (1994)). Thus, “[w]hen the defendant challenges subject
matter jurisdiction through a motion to dismiss, the plaintiff bears the burden of
establishing jurisdiction.” Hedgepeth v. Tennessee, 215 F.3d 608, 611 (6th Cir. 2000).
Where the plaintiff’s factual allegations supporting federal jurisdiction are attacked
as here, “no presumptive truthfulness applies to the factual allegations.” United
States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). In such situations, the Court must
weigh the relevant evidence and resolve the factual disputes. Id.
Accordingly, Drury Properties has the burden of proving by a preponderance
of the evidence that Donald changed his domicile from Kentucky to Florida in 2013.
Domicile is a combination of physical presence, along with the intent to remain
permanently in the chosen location. Mississippi Band of Choctaw Indians v.
Holyfield, 490 U.S. 30, 48 (1989).
Again, there is no question that Donald was domiciled in Kentucky until at
least 2013. He testified at the hearing in this matter that he was born in Kentucky
in 1940. He resided there until at least 2013 in a single-story ranch home located at
140 South Hill Road, Versailles, Kentucky that he purchased in 1990.
Drury Properties presents evidence that Donald bought another piece of
property in Florida in 2013. That same year, he obtained a Florida driver’s license
and registered to vote there. Drury Properties also submits Donald’s Kentucky state

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tax returns for 2013, 2014 and 2015 in which he provides a Florida mailing address
and states that he moved out of Kentucky in November 2013. In addition, Drury
Properties submits a 2013 declaration filed in Collier County, Florida, in which
Donald states that he intends to maintain the Florida property as his permanent
home. It also submits records from the Collier County property appraiser indicating
that Donald received a homestead exemption from property taxes in 2014, 2015, and
2016.
At the hearing on this matter, Donald testified that he moved to Florida in
2013 to be with his nephew, Melvin K., and attorney Dean. Donald testified that he
attends church in Florida and engages in activities in Florida like playing
shuffleboard and bingo with neighbors. Donald testified that he uses the Kentucky
home now as his “vacation home” and that he goes to Kentucky for a couple of
months at a time but that he is now in Florida at least seven months a year. He
testified that he intends to maintain a home in Florida.
The Court did not find Donald’s testimony regarding his domicile at the time
the complaint was filed credible. Donald testified that he does not rent his Kentucky
residence. He testified that a friend of his may stay all night there every once in a
while and does maintenance work there. Nevertheless, there is no evidence that any
other person currently lives at Donald’s Kentucky residence. Further, Donald
testified that he does no business out of his home in Kentucky. However, in its own
response brief, Drury Properties itself asserts that Donald has a real estate business
in Kentucky, stating that he is in Kentucky for the purpose of “conducting real
estate business at 140 South Hill Rd., Versailles, Kentucky” and for an “eviction
business conducted in Kentucky.” (DE 51, Response at 3, 4.) Donald testified that all
of the properties involved in that business are located in Kentucky. Further, he

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testified renters of his Kentucky properties send rent checks to his Kentucky
residence.
Donald testified that, at some point, he moved the principal office address of
Drury Properties from Kentucky to Naples, Florida. Nevertheless, he was not
certain the date that occurred. His counsel Dean informed the Court that she too
was not certain the date that transfer occurred and that she would have to check on
that. At this point, there is no evidence in the record that Donald conducts any
business in Florida or that he did so at the time the complaint was filed.
Further, Donald’s Kentucky real estate business is an active one and has
required his presence in the state after 2013. For example, on August 12, 2015, he
filed a small claims complaint related to his business, in which he listed 140 South
Hill Road as Drury Properties’ address. According to the small claims affidavit,
Donald signed the complaint himself in Kentucky and agreed to appear in court two
weeks later, on August 26, 2015. Likewise, on June 14, 2016, Donald filed a small
claims complaint in Kentucky state court listing his address as 140 South Hill Road.
Again, according to the affidavit, he signed the complaint himself in Kentucky and
agreed to appear in court the following month, on July 13, 2016. (DE 74-2, 74-4.)
Further, a certified copy of a state court indictment charges Donald with
sexually abusing a minor in Woodford County from August 15, 2014 to September 1,
2016 (DE 74-1, Indictment.) According to the certified copy of the criminal citation in
the case, Donald was arrested at the Kentucky residence on September 20, 2016.
(DE 74-1, Citation.) According to the certified copy of the return of service, the
Woodford County Sheriff’s office served the summons on Donald in person at the
Kentucky residence on October 13, 2016. (DE 74-1, Return of Service.) The summons
required his presence in Kentucky state court a few weeks later, on November 2,

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2016. (DE 74-1, Summons.) The certified copies of these court records are public
records under Federal Rule of Evidence 803(8) and are self-authenticating under
Rule 902(4). Drury Properties has not shown any reason the documents are not
trustworthy.
Considering all of this evidence, the Court cannot find that Drury Properties
has proved by a preponderance of the evidence that Donald changed his domicile
from Kentucky to Florida in 2013. The only evidence supporting that in the record
consists of or relies on Donald’s own statements to that effect. This includes his
driver’s license, voter registration, and certificate of domicile. While these
documents may have been sufficient to exempt Donald from certain taxes, this Court
is not bound by the determination of taxing authorities. The Court recognizes that
Donald purchased a single piece of property in Florida in 2013. But he has owned a
residence in Kentucky since 1990 and owns multiple other pieces of property here.
He continues to conduct business in Kentucky and there is evidence that he has
maintained a consistent physical presence in Kentucky since 2013. The Court
certainly believes that Donald spends time in Florida, but the Court cannot find
based on the evidence in the record that he moved there in 2013 with the intention
of remaining there.
The defendants also submit the certified copy of an affidavit filed in support
of a search warrant for Donald’s Kentucky residence. In the affidavit, Detective K.J.
Ford states that a minor’s parents informed him that Donald was entrusted to pick
up their child from school and to keep him when the parents were unable to do so.
The parents informed Detective Ford that the minor stayed all night with Donald
multiple times and that, from August 2015 to September 2016, the minor and
Donald “spent much of their time together.” Further, the parents informed Ford that

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Donald kept track of the nights the minor stayed with him on a calendars located in
Donald’s kitchen and office in the Kentucky residence.
Detective Ford also includes some personal observations in the affidavit. He
states that he and the minor placed a recorded phone call to Donald. Further,
Detective Ford personally viewed text messages between the minor and Donald and
also heard audio recordings and viewed video recordings of conversations between
the minor and Donald, all of which were located on the minor’s phone.
Detective Ford’s affidavit is a public record under Rule 803(8). See Weinstein
v. Siemens, No. 2:07-CV-15000, 2010 WL 4825016, at *2-7 (E.D. Mich. Nov. 22,
2010); Baker v. Elcona Homes Corp., 588 F.2d 551, 556 (6th Cir. 1978) (holding that
police reports containing the direct observations and recorded data of an officer in
the course of his investigation “clearly are ‘matters observed pursuant to duty
imposed by law as to which matters there was a duty to report’” and are thus not
inadmissible under the hearsay rule.) Nevertheless, Detective Ford’s affidavit
includes statements made by the minor and the minor’s parents. These statements
are themselves hearsay and there does not appear to be any applicable exception
that would permit the Court to consider them. Accordingly, the Court has not
considered any of the statements of the minor or the minor’s parents in determining
Donald’s domicile after 2013.
The Court has, however, considered Detective Ford’s personal observations of
the recorded phone call between the minor and Donald. The Court has also
considered Detective Ford’s personal observations of the text communications
between the minor and Donald and of the recorded conversations between the two
that were contained on the minor’s cell phone. Drury Properties has not shown any
reason that these observations are not trustworthy. Detective Ford’s summations of

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the recorded phone call and contents of the minor’s cell phone merely corroborate
other evidence in the record that Donald has maintained a continued physical
presence in Kentucky after 2013, the date he alleges he changed his domicile to
Florida.
For all of these reasons, the Court hereby ORDERS as follows:
1) the defendants’ motion to dismiss for lack of subject matter
jurisdiction (DE 47) is GRANTED;
2) this matter is DISMISSED and STRICKEN from the Court’s active
docket;
3) the plaintiff’s claims against the defendants are DISMISSED without
prejudice;
4) all pending motions in this matter are DENIED as moot;
5) the documents filed in the record at DE 74-1 contain personal
identifiers. The Clerk of the Court SHALL FILE the documents under
seal. Within 7 days of the entry date of this order, the defendants
SHALL FILE redacted copies of the documents and the Clerk of the
Court SHALL SUBSTITUTE the redacted documents for the
unredacted documents at DE 74-1; and
6) a judgment consistent with this opinion will be entered.
Dated August 22, 2017.

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