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RUSCITTI v. ATCHISON

November 24, 1997

RAY S. RUSCITTI, as assignee of Wellington Dormitory Corporation, an Illinois corporation, Waynoka Corporation, an Illinois corporation, Ft. Madison Corporation, an Illinois corporation, and Belen Corporation, an Illinois corporation, Plaintiffs,
v.
THE ATCHISON, TOPEKA, AND SANTA FE RAILWAY COMPANY, a Delaware corporation, and INTERMOTEL LEASING INC., a Minnesota corporation, now known as CONTRACT LODGING, a Minnesota corporation, Defendants.



The opinion of the court was delivered by: WILLIAMS

 Plaintiff Ray Ruscitti ("Ruscitti") filed a ten count complaint against defendants Atchison, Topeka, and Santa Fe Railway Co. ("Santa Fe") and Intermotel Leasing *fn1" ("Intermotel"). Pursuant to Federal Rule of Civil Procedure 12(b)(6), Santa Fe moves to dismiss counts I-VI of Ruscitti's Third Amended Complaint for failure to state a claim upon which relief can be granted. In a separate motion, Intermotel moves to dismiss counts VII-IX of Ruscitti's complaint for failure to state a claim upon which relief can be granted. For the reasons set forth below, the court grants both motions.

 Background

 This case relates to portable housing units ("dormitories"). These dormitories are movable structures that include sleeping units equipped with such necessary furnishings as beds, linens, heat and air conditioning, and towels. (See Management Agreements.) Santa Fe railroad used these dormitories to house employees whose shifts ended when their assigned train had taken them to a remote location. (Santa Fe Mem. at 2-3.) After housing crew members overnight in a dormitory, Santa Fe typically assigned those employees to work on a train returning to the employees' point of origin. (Id.)

 Four parties play roles in this litigation. Ruscitti, the plaintiff, is an Illinois citizen and the sole shareholder of four corporations: Wellington Dormitory Corporation, Waynoka Corporation, Ft. Madison Corporation, and Belen Corporation ("Ruscitti's corporations"). (Count I, P 4.) All of Ruscitti's corporations are incorporated in the state of Illinois and have their principal places of business in different states: (1) Wellington, Kansas; (2) Waynoka, Oklahoma; (3) Ft. Madison, Iowa; and (4) Belen, New Mexico. (Count I, PP 1-2.) Ruscitti's corporations own land in each of these cities and engaged in the business of providing specialized lodging services to Santa Fe's employees. (Santa Fe's Mem. at 2-3.)

 Norlease, Inc. ("Norlease") is not a party to this action. However, Norlease played a significant role in this case. For a period of time, Norlease owned the portable dormitories that are the subject of this litigation. Norlease leased these dormitories to Santa Fe who used them to house its employees. The court does not know where Norlease is incorporated nor the location of its principal place of business. Now that the court has introduced the parties, we begin the arduous task of describing the several contractual relationships that existed among these parties.

 In 1978, Ruscitti entered into four land leases with Norlease ("the lease agreements"). (Count IV, PP 10 and 11.) Under these lease agreements, Norlease occupied Ruscitti's four properties in Wellington, Kansas; Waynoka, Oklahoma; Ft. Madison, Iowa; and Belen, New Mexico. Each of these properties is located near a railroad operated by Santa Fe. The leases provided that Norlease could place temporary dormitories on each of Ruscitti's four properties. (Id. at P 1.)

 Ruscitti leased each of the four properties to Norlease at a rent of $ 15 for the 15 1/2 year term of the lease. (See Leases, PP 1 and 2.) However, as additional financial consideration, the lease agreements provide that any dormitories remaining on Ruscitti's land at the termination of the four leases become Ruscitti's personal property. (Id.) The lease agreements also state that Norlease makes no "representations or warranties to the effect that the [dormitories] will be placed on the [properties], nor . . . the condition [of the dormitories] at the termination of the lease term." (Id.)

 Shortly after entering the lease agreements with Ruscitti, Norlease assigned its interests in all four lease agreements to Santa Fe. *fn2" (Count IV, PP 10 and 11.) After Santa Fe assumed the lease agreements, Ruscitti and Santa Fe entered into four separate management agreements ("the management agreements"). (Id.) Under the management agreements, Ruscitti promised to operate and maintain the dormitories on all four properties in exchange for monthly cash payments from Santa Fe. Additionally, Santa Fe agreed to reimburse Ruscitti for any monthly operating expenses. (Id. at P 2.) In 1984, Ruscitti sold his entire interest in the management agreements to Intermotel. (Count X, P 15.) Intermotel therefore took on the responsibility of managing and maintaining the portable dormitories.

 The day after assuming Ruscitti's obligations under the management agreements, Intermotel, Santa Fe, and Ruscitti executed four assignment contracts ("the assignment contracts"). In the assignment contracts, Santa Fe approved Ruscitti's assignment of the management agreements to Intermotel. (Id.) Intermotel again agreed to operate and maintain the dormitories on Ruscitti's properties. (Id.) And Ruscitti again recognized that Intermotel assumed all of his management responsibilities. (Id.)

 When the lease agreements expired, Santa Fe left the dormitories on all four of Ruscitti's properties. Therefore, under the lease agreements, these dormitories became Ruscitti's personal property. (Leases P 2.) However, 15 1/2 years of use by Santa Fe employees caused significant damage to the dormitories. (Counts I-II, PP 15, 12.) After Ruscitti acquired the dormitories and realized how extensively damaged they had become, Ruscitti sued both Santa Fe and Intermotel.


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