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Wesco Insurance Co. v. Tinkham

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

June 25, 2018

WESCO INSURANCE COMPANY, a Delaware Corporation, Plaintiff,
v.
GEORGE W. TINKHAM, MARK S. MILLER, and STEVEN CLARK DAVISON, Administrator of THE ESTATE OF JONATHAN ALLEN MILLER, Defendants.

          OPINION

          SUE E. MYERSCOUGH UNITED STATES DISTRICT JUDGE

         This cause is before the Court on the Motion to Dismiss for Lack of Subject Matter Jurisdiction (d/e 16) filed by Defendant George W. Tinkham. Because the Court's subject matter jurisdiction is secure, the Motion to Dismiss is DENIED.

         I. BACKGROUND

         In October 2017, Mark S. Miller and Steven Clark Davison, as administrator of the Estate of Jonathan Allen Miller, filed a complaint against George W. Tinkham in the Circuit Court of the Seventh Judicial Circuit, Sangamon County, Illinois, No. 2017-L-233 (the Underlying Lawsuit).[1] In February 2018, Plaintiff Wesco Insurance Company filed in this Court a Complaint for Declaratory Judgment against Tinkham, Mark Miller, and Davison, administrator of the Estate of Jonathan Allen Miller. Mark Miller and Davison are named as defendants solely to bind them to the judgment. Compl. ¶¶ 3, 4.

         Plaintiff's Complaint for Declaratory Judgment alleges that Plaintiff issued a Lawyers Professional Liability Policy to Tinkham, which was in effect from July 25, 2017 through July 25, 2018, with an endorsed Retroactive Date of July 25, 2008. Tinkham qualifies as an “insured” on the Policy. Compl. ¶ 14.

         Plaintiff seeks a declaratory judgment that Plaintiff owes no duty to defend or indemnify Tinkham from the Underlying Lawsuit. The Complaint alleges that the beneficiary exclusion bars coverage, no damages as defined in the Policy are sought in the underlying complaint, and there is no coverage because the insuring agreement provision was not satisfied. The Complaint specifically alleges that the underlying complaint does not seek the recovery of compensatory monetary damages. Compl. ¶ 13.

         The complaint in the Underlying Lawsuit contains claims for breach of fiduciary duty, punitive damages, constructive trust, and unjust enrichment. Specifically, the underlying complaint alleges that Tinkham, an attorney, performed legal services for the Millers and managed their farm property. Mark Miller suffers from numerous functional deficiencies, although he has average to above average intelligence. Jonathan had intellectual and behavioral problems.

         In August 2008, Tinkham created two trusts, naming himself as trustee and giving himself a remainder interest in the trusts. Jonathan Miller deeded his portion of the farm property to Tinkham as trustee (the First Trust) and Mark Miller deeded his portion of the farm property to Tinkham as trustee (the Second Trust). Tinkham did not advise the Millers to obtain independent legal counsel before executing the trust agreements, and they did not know they were conveying to Tinkham their respective interests in the property upon their deaths. The Millers did not intend to confer a remainder interest upon Tinkham.

         Jonathan Miller died in October 2013. Mark Miller continued to receive a portion of the farm income through distributions in 2013 and 2014. In December 2014, Mark Miller asked Tinkham why his distribution had not doubled after Jonathan passed away, as Mark was the only heir of Jonathan. Tinkham advised Mark that Tinkham was now the owner of Jonathan's one-half interest in the farm property. The underlying complaint further alleges that Tinkham managed all affairs for the farm property from no later than August 15, 2008 but did not provide an accounting to and did not discuss the operations with the Millers.

         The breach of fiduciary duty counts in the Underlying Lawsuit seek an accounting; complete records to trace disbursement and distribution of funds; a constructive trust on the farm property and all property of Tinkham arising from the unaccounted payments from the farm property; attorney's fees and costs to restore legal title to the property to Mark Miller; the appointment of a replacement trustee; and judgment in the amount of all unaccounted funds. The punitive damages counts seek not less than $500, 000. The constructive trust counts seek the imposition of a constructive trust upon the farm property and on all property of Tinkham arising from unaccounted payments from the farm property. The unjust enrichment counts seek a declaration that Tinkham was unjustly enriched by creating the First Trust and that Miller and Davison are entitled to the full interest in the property conveyed by the First Trust.

         On May 21, 2018, Tinkham filed a Motion to Dismiss for Lack of Subject Matter Jurisdiction (d/e 16) pursuant to Federal Rule of Civil Procedure 12(b)(1). Tinkham argues that (1) the $500, 000 in punitive damages does not count toward the jurisdictional amount; (2) Plaintiff failed to provide proof of the actual value in the remainder interest in the land; and (3) Plaintiff's basis for jurisdiction is in direct contradiction to Plaintiff's assertion that the underlying complaint does not seek any relief that constitutes “damages” as that term is defined in the Policy.

         II. LEGAL STANDARD

         Pursuant to Federal Rule of Civil Procedure 12(b)(1), a defendant may move for dismissal of a claim for lack of subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). When considering a Rule 12(b)(1) motion, the Court accepts as true all well-pleaded factual allegations and draws all reasonable inferences in favor of the plaintiff. Alicea-Hernandez v. Catholic Bishop of Chi., 320 F.3d 698, 701 (7th Cir. 2003). “The court may look beyond the jurisdictional allegations of the complaint and view whatever evidence has been submitted on the issue to determine whether in fact subject matter jurisdiction exists.” Id.

         When the defendant challenges the plaintiff's allegations regarding the amount in controversy, the plaintiff must support the allegations with competent proof. Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006). The plaintiff must prove the jurisdictional facts by a preponderance of the evidence. Id. Dismissal is appropriate only ...


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