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EBC Asset Investment, Inc. v. Sullivan Auctioneers, LLC

United States District Court, C.D. Illinois, Peoria Division

March 7, 2014

EBC ASSET INVESTMENT, INC., a Virginia corporation, Plaintiff,
v.
SULLIVAN AUCTIONEERS, LLC, an Illinois limited liability company, Defendant.

ORDER

MICHAEL M. MIHM, District Judge.

This matter is now before the Court on the Report and Recommendation (ECF No. 21) issued by Magistrate Judge Byron G. Cudmore regarding Plaintiff's Motion to Strike Defendant's Affirmative Defenses Pursuant to Federal Rule of Civil Procedure 12(f) (ECF No. 14). For the reasons stated below, the Report and Recommendation (ECF No. 21) is ADOPTED, and Plaintiff's Motion to Strike Defendant's Affirmative Defenses Pursuant to Federal Rule of Civil Procedure 12(f) (ECF No. 14) is GRANTED IN PART and DENIED IN PART.

JURISDICTION

Under 28 U.S.C. § 1332, "district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75, 000, exclusive of interest and costs" and is between "citizens of different states." The parties in this action meet the diversity of citizenship requirement because EBC Asset Investment, Inc. ("Plaintiff") is a Virginia corporation with its principal place of business located in Dulles, Virginia. Sullivan Auctioneers, LLC ("Defendant") is an Illinois limited liability company with its principal place of business located in Hamilton, Illinois. Defendant has three members: Daniel Sullivan, who resides in Hamilton, Illinois; James Sullivan, who resides in Hamilton, Illinois; and Joseph Sullivan, who resides in Rushville, Illinois. The amount in controversy was a matter of dispute, but this Court held that Plaintiff met the amount in controversy requirement when it denied Defendant's Motion to Dismiss for Lack of Subject Matter Jurisdiction.

Venue is proper under 28 U.S.C. § 1391 because Defendant resides in Hancock County, Illinois and a substantial part of the events or omissions that are the subject of the Complaint occurred in Hancock County, Illinois.

BACKGROUND

On June 4, 2007, Scott Hoerr and his wife, Anna Hoerr, granted to Corn Belt Bank & Trust Company ("Corn Belt") a security interest in all of the Hoerrs' "Inventory, Chattel Paper, Accounts, Equipment, General Intangibles, Crops, Farm Products, Livestock (including all increase supplies) and Farm Equipment." Complaint, Exhibit A, Agricultural Security Agreement ("Security Agreement"), at 1. The grant of a security interest included all such property "now owned or hereafter acquired." Id. At the time, the Hoerrs were indebted to Corn Belt on two promissory notes in the original principal amounts of $450, 000 and $270, 000. The $450, 000 note was renewed and replaced by another $450, 000 note dated July 18, 2008. Complaint, Exhibits C and D, Promissory Notes ("Notes"). The Notes were part of an ongoing business relationship with the Hoerrs and Corn Belt. Corn Belt had previously filed a financing statement perfecting its security interests in the Hoerrs' collateral on July 21, 2004.

On February 13, 2009, the Federal Deposit Insurance Corporation ("FDIC") closed Corn Belt. The FDIC, as receiver for Corn Belt, maintained the perfection of Corn Belt's security interest in the Hoerrs' collateral by filing a continuation of Corn Belt's financing statement with the Illinois Secretary of State on June 30, 2009. Complaint, Group Exhibit B, Financing Statements.

Plaintiff alleges that FDIC sold the Notes and assigned the security agreements to Plaintiff. The documents attached to the Complaint show that FDIC sold the Notes and assigned the security interests to CIRAS, LLC, effective August 6, 2009; and CIRAS, LLC, sold the Notes and assigned the security interest to Plaintiff effective August 25, 2009. Complaint, Exhibits C, D, and E Promissory Notes, Allonges and Assignments of Security Agreements. On June 20, 2011, financing statements were filed with the Illinois Secretary of State showing the assignments of security interests from FDIC to CIRAS, LLC, and then to Plaintiff. Complaint, Group Exhibit B, Financing Statements.

In the spring of 2010, the Hoerrs decided to end their farming operation. Scott Hoerr contacted Defendant to conduct an auction of the Hoerrs' farming equipment. The auction occurred on June 22, 2010. Neither the Hoerrs nor Defendant notified Plaintiff of the auction. Defendant conducted an auction at its place of business in Hamilton, Illinois.

Upon information and belief, Plaintiff alleges that the sale proceeds totaled $820, 545. Plaintiff alleges that the proceeds were subject to its security interest. Defendant distributed the proceeds to John Deere Credit, Scott Hoerr, and itself. Plaintiff alleges that it demanded payment of the proceeds from the sale, but Defendant refused the demand.

Plaintiff filed this action on August 13, 2013, and seeks judgment against Defendant for a portion of the sale proceeds.

STANDARD OF REVIEW

The Court may strike an insufficient defense from a pleading. Fed.R.Civ.P. 12(f); see Jackson v. Methodist Med. Ctr. of Ill., 207 WL 128001, at *1 (C.D. Ill. Jan. 11, 2007). Motions to strike, however, are generally disfavored because they are often used only to delay proceedings. Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989). "The Court is particularly reluctant to strike affirmative defenses because the assertion of an affirmative defense does not prejudice the plaintiff. A plaintiff is not required to file a responsive pleading and is deemed to have denied ...


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