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Zausa v. Pellin

United States District Court, N.D. Illinois, Eastern Division

August 30, 2017

TERRI ZAUSA, Plaintiff,



         Plaintiff Terri Zausa brought a citation to discover Defendant Michael Pellin's assets. (R. 31, Notice of Citation to Discover Assets.) Defendant has moved to quash or dismiss Plaintiff's citation pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). For the following reasons, the Court grants Defendant's motion to dismiss.


         This case arises from the dissolution of a business relationship between Jack Zausa (“Zausa”) and Defendant, and Defendant's subsequent failure to pay all his debts to Zausa or to Plaintiff, Zausa's successor in interest. Zausa is the former spouse of Plaintiff Terri Zausa.

         Defendant and Zausa were co-owners of United Rail Service, Inc. (“URS”), a corporation and business located at 1150 E. 145th Street, East Chicago, IN 46312. (R. 31, Citation, Ex. A, Purchase Agreement 5.) On March 31, 1990, Zausa divested all his equity and stock in URS, and pursuant to a Purchase Agreement, Pellin acquired all of Zausa's interest in URS for $1.8 million, payable to Zausa in monthly installments of $5, 000 over a 30-year period. (Id. 3.) On December 23, 2004, Zausa and Defendant executed a mutual release (the “Release”) of “all actions, claims, demands, damages, obligations, liabilities, controversies, and executions . . . whether known or unknown” arising from the 1990 Purchase Agreement and any failures to perform on that agreement. (R. 31, Citation, Ex. B, Release 1.) According to Plaintiff, Defendant executed the release for “tax purpose[s] only” and acknowledged at the time that he still owed money under the Purchase Agreement and that “he was in default when he agreed to the release.” (Id. ¶ 2.) The Release does not include any restrictions or state that it was for “tax purposes” only. Plaintiff alleges that Defendant “remained personally liable” and continued to make payments pursuant to the Purchase Agreement until November 15, 2010. (Id.; Citation, Ex. C, Check Statements.)

         On September 9, 2009, a Cook County court entered a judgment by confession against Zausa in favor of Plaintiff in the amount of $1, 885, 358. (Citation, Ex. D, Judgment and Order.) In the Turn-Over Order, the court directed Zausa to give to Plaintiff the following property: (1) 8, 300 shares of common stack of New City Bank Corp., which had been pledged as collateral at Devon Bank and was held by Devon Bank; (2) all common stock in Zausa Development; and (3) Zausa's interest in a residence at 8365 Fars Cove, Burr Ridge, Illinois, which was subject to a $2.05 million mortgage. (Id.) The Cook County court then dismissed the underlying citation and retained “jurisdiction of this matter to enforce said order.” (Id.)

         This is an enforcement action by Plaintiff via a citation to discover assets to collect money from Defendant based on a judgment against Zausa. Plaintiff invokes subject-matter jurisdiction in this Court pursuant to 28 U.S.C. § 1332(a), alleging that Plaintiff and Defendant are in complete diversity and the amount in controversy exceeds $75, 000. (R. 31, Citation 3.) Plaintiff also asserts that this Court has subject-matter jurisdiction under 28 U.S.C. § 1963, which permits a federal district court to register the judgment of another “district court.” (Id.)


         On December 18, 2016, Plaintiff, as Zausa's judgment creditor, filed a Complaint seeking to enforce the Purchase Agreement and for breach of contract. (Compl. ¶ 2-7.) Plaintiff also sought to collect a debt owed to her, as a judgment debtor, under 735 ILCS 5/2-1402(c)(6). (Id. ¶¶ 6-7.) Defendant moved to dismiss Plaintiff's Complaint, and on May 26, 2017, the Court granted Defendant's motion to dismiss Plaintiff's breach of contract and enforcement of contract claims with prejudice for lack of standing. The Court also dismissed Plaintiff's 735 ILCS 5/2-1402(c)(6) action without prejudice because she failed to properly serve Defendant, because she did not sufficiently allege that Defendant was still liable for the debt he owed Zausa, and because she failed to comply with the procedures mandated by 735 ILCS 5/2-1402. On June 26, 2017, Plaintiff filed a Citation to Discover Assets and Enforce Judgment Against Third-Party Respondent Michael Pellin (the “Citation”). (R. 31, Citation.) In the present motion, Defendant has moved to quash or dismiss Plaintiff's Citation.


         I. 12(b)(1)

         Subject-matter jurisdiction is a court's “power to decide the claim before it.” Lightfoot v. Cendant Mortg. Corp., 137 S.Ct. 553, 562 (2017). A motion to dismiss under Rule 12(b)(1) disputes the existence of the Court's subject-matter jurisdiction. Fed.R.Civ.P. 12(b)(1). There are two primary types of subject-matter jurisdiction: (1) federal question and (2) diversity. Federal question jurisdiction exists when the lawsuit “aris[es] under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Diversity jurisdiction exists when: (1) the amount in controversy for the lawsuit exceeds $75, 000, and (2) the plaintiff and defendant are citizens of different states. Id. § 1332(a)(1). The party asserting jurisdiction bears the burden of establishing that it exists. Farnik v. F.D.I.C., 707 F.3d 717, 721 (7th Cir. 2013). Challenges to subject-matter jurisdiction can be either “facial” or “factual.” See Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443-44 (7th Cir. 2009). A facial challenge to subject matter jurisdiction contends that the plaintiffs' complaint lacks sufficient factual allegations to establish standing. Silha v. ACT, Inc., 807 F.3d 169, 173 (7th Cir. 2015). “In reviewing a facial challenge, the court must accept all well-pleaded factual allegations as true and draw all reasonable inferences in favor of the plaintiff.” Id.

         II. 12(b)(6)

         “Federal Rule of Civil Procedure 12(b)(6) permits a motion to dismiss a complaint for failure to state a claim upon which relief can be granted.” Hill v. Serv. Employees Int'l Union, 850 F.3d 861, 863 (7th Cir. 2017). Under Rule 8(a)(2), a complaint must include “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). The short and plain statement under Rule 8(a)(2) must “give the defendant fair notice of what the claim is and the grounds upon which it rests.” Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007) (citation omitted). Under the federal notice pleading standards, a plaintiff's “factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. Put differently, a “complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). In determining the sufficiency of a complaint under the plausibility standard, courts must “accept as true all of the well-pleaded facts in the complaint and draw reasonable inferences in favor of [the] plaintiffs.” Hill, 850 F.3d at 863; see also Roberts v. City of Chi., 817 F.3d 561, 564 (7th Cir. 2016). In ruling ...

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