UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

NANCY B. NUNN, formerly known as NANCY B.

DULEY, individually and ast Trustee of the Nancy B. Duley

Revocable Trust,

Plaintiff,

vs.

JAMES S. WITHERELL, individually and as Trustee of the

James S. Witherell Trust dated June 17, 1997,

Defendant.

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12 C 3384

Judge Feinerman 

MEMORANDUM OPINION AND ORDER

Nancy B. Nunn brought this suit against James S. Witherell, premising jurisdiction under the

diversity statute, 28 U.S.C. § 1332(a). Doc. 1. Conceding that the parties are diverse, but arguing that

the amount in controversy does not exceed $75,000, Witherell moves to dismiss the case under

Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. Doc. 20. The motion

is denied. 

Background

Witherell accepts as true the facts alleged in the complaint, Doc. 24 at 2-3, so his challenge to

subject matter jurisdiction is facial rather than factual. See Apex Digital, Inc. v. Sears, Roebuck &

Co., 572 F.3d 440, 443-44 (7th Cir. 2009). On a facial challenge to subject matter jurisdiction, the

complaint’s well-pleaded factual allegations are assumed to be true, with all reasonable inferences

drawn in the plaintiff’s favor. See ibid.; Patel v. City of Chicago, 383 F.3d 569, 572 (7th Cir. 2004). 

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As with a Rule 12(b)(6) motion, the court also must consider documents attached to the complaint,

documents that are critical to the complaint and referred to in it, and information subject to proper

judicial notice. See Amidax Trading Grp. v. S.W.I.F.T. SCRL, 671 F.3d 140, 145 (2d Cir. 2011);

Palay v. United States, 349 F.3d 418, 425 n.5 (7th Cir. 2003). The following facts are stated as

favorably to Nunn as permitted by the complaint and other materials that may be considered on a Rule

12(b)(1) motion.

In or around January 2006, Nunn and Witherell contributed equal sums to purchase property in

Woodstock, Illinois, which they occupied together as their principal residence. Doc. 1 at ¶¶ 5, 7. 

Nunn and Witherell acquired ownership through the vehicle of a land trust that in turn was owned in

equal shares by their respective revocable trusts. Id. at ¶ 5. On January 17, 2006, the parties entered

into a written agreement entitled “Agreement to Own and Maintain Real Estate.” Id. at ¶ 6. The

Agreement provides in relevant part:

[I]n the event that either Co-Owner wishes to permanently move out of the

Premises[,] ... such Departing Co-Owner shall provide written notice to the

remaining Co-Owner ... of its intent to move out, making specific reference to

this agreement (“withdrawal”), ... and the following shall take place: Within sixty

(60) days of the date of the Departing Co-Owner’s ... notice of moving out ...

the Remaining Co-Owner shall have the Premises appraised by a certified land

appraiser ... to ascertain the appraised value of the Premises (“Appraised

Value”). The Remaining Co-Owner shall then subtract the amount of any

outstanding mortgages, liens or other encumbrances on the property from the

Appraised Value to determine the equity value of the property (“Equity Value”). 

From and after the Departure Date, the Remaining Co-Owner shall hold the

entire beneficial interest in the Trust, and hold the sole power of direction in the

trust, and shall be solely responsible for the payment of all costs and

disbursements with regard to the upkeep of the Trust and Premises, including but

not limited to mortgage payments, from and after the date of the Departing CoOwner’s ... moving out.

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Id. at pp. 19-20.

On August 5, 2010, Nunn sent a letter to Witherell providing notification of her intent to move

out permanently and to withdraw from the land trust immediately. Id. at ¶ 16 & pp. 25-26. In

September 2010, Witherell told Nunn that he would not comply with the Agreement and would not pay

the property’s monthly carrying costs, and he demanded that Nunn continue to pay half of the

mortgage, tax, and insurance obligations. Id. at ¶ 20. To avoid harm to her credit rating that would

result from a default, Nunn has continued to make those payments. Id. at ¶ 26. The total monthly

mortgage payments are $2,100, the total annual real estate tax obligations are $7,100, and the total

annual homeowner’s insurance premiums are $1,100. Id. at ¶ 34. Since August 2010, Nunn “has

been forced to pay approximately $34,000 in mortgage and home equity loan payments, real estate tax

payments, and insurance premiums.” Id. at ¶ 53.

In this suit, Nunn seeks a declaratory judgment that Witherell is solely responsible for all future

payments associated with the property—including the $472,000 balance of the mortgage, monthly

mortgage payments of $2,100, the annual real estate taxes of $7,100, and the annual insurance

premiums of $1,100. Id. at pp. 10-11. She also seeks $34,000 in damages for the amounts she

already paid. Id. at pp. 12, 13, 15.

Discussion

“The rule governing dismissal for want of jurisdiction in cases brought in the federal courts is

that ... the sum claimed by the plaintiff controls if the claim is apparently made in good faith. It must

appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify

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dismissal.” St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 288-89 (1938) (footnotes

omitted). The Seventh Circuit has instructed:

[A] proponent of federal jurisdiction must, if material factual allegations are

contested, prove those jurisdictional facts by a preponderance of the evidence. 

Once the facts have been established, uncertainty about whether the plaintiff can

prove its substantive claim, and whether damages (if the plaintiff prevails on the

merits) will exceed the threshold, does not justify dismissal. Only if it is “legally

certain” that the recovery (from plaintiff’s perspective) or cost of complying with

the judgment (from defendant’s) will be less than the jurisdictional floor may the

case be dismissed.

Meridian Sec. Ins. Co. v. Sadowski, 441 F.3d 536, 543 (7th Cir. 2006) (citation omitted); see also

LM Ins. Corp. v. Spaulding Enters. Inc., 533 F.3d 542, 547 (7th Cir. 2008). “In suits seeking the

equitable remedies of an injunction or a declaratory judgment, the amount in controversy is determined

by the value to the plaintiff (or petitioner) of the object of the litigation.” America’s MoneyLine, Inc. v.

Coleman, 360 F.3d 782, 786 (7th Cir. 2004). The Seventh Circuit “adhere[s] to the rule that the

value of the object of the litigation is the ‘pecuniary result’ that would flow to the plaintiff ... from the

court’s granting the injunction or declaratory judgment.” Ibid. (quoting McCarty v. Amoco Pipeline

Co., 595 F.2d 389, 393 (7th Cir. 1979)). The Seventh Circuit adheres as well to the “either

viewpoint” rule, which provides that “the jurisdictional amount should be assessed looking at either the

benefit to the plaintiff or the cost to the defendant of the requested relief.” Uhl v. Thoroughbred Tech.

and Telecomms., Inc., 309 F.3d 978, 983 (7th Cir. 2002) (citing cases); see also BEM I, L.L.C. v.

Anthropologie, Inc., 301 F.3d 548, 553 (7th Cir. 2002) (“the jurisdictional minimum in diversity cases

is not the amount sought by the plaintiff but the amount at stake to either party to the suit”).

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Witherell contends that the amount in controversy is $34,000, the damages Nunn seeks for the

mortgage, tax, and insurance payments she has made since August 2010. Doc. 24 at 1-2. That figure

ignores the additional benefit that Nunn stands to gain, and that Witherell stands to lose, if Nunn

receives the declaratory relief she seeks—relief from any obligation for future mortgage payments, real

estate taxes, and insurance premiums. To resolve this motion, it is necessary to consider only the real

estate taxes, which are $7,100 per year, and the insurance premiums, which run $1,100 per year. If

being relieved of an annual $4,100 payment obligation (Nunn’s share of the annual insurance and tax

payments) is worth more than $41,000, then the amount in controversy exceeds $75,000, since

$41,000 plus the $34,000 Nunn seeks in accrued damages equals $75,000.

Nunn’s annual payment obligation is akin to an annuity, which is “an amount payable yearly or

at other regular intervals ... for a certain or uncertain period (as for years, for life, or in perpetuity).”

Rousey v. Jacoway, 544 U.S. 320, 330 (2005) (internal quotation marks omitted) (omissions in

original). Although the obligation has no fixed stopping point—Nunn and Witherell can hardly stop

paying property taxes, and the mortgage agreement with their bank presumably requires that they

maintain insurance on the property—the court will assume a twenty-year term and calculate the net

present value of her obligation over that term. See Travelers Cas. & Sur. Co. of Am., Inc. v. Nw.

Mut. Life Ins. Co., 480 F.3d 499, 501 (7th Cir. 2007) (calculating the net present value of an

insurance policy for purposes of quantifying the amount in controversy); Randall v. Goldmark, 495

F.2d 356, 361 (1st Cir. 1974) (“what must be shown is not the ultimate gross, but the present

discounted value of the future payments”). The net present value of an annuity turns on the discount

rate, the annual payment amount, and the number of years. See William L. Megginson & Scott B.

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Smart, Introduction to Corporate Finance, 2E, 102 (Jack W. Calhoun et al. eds., South-Western

2009). Thirty-year government bonds are currently auctioning at about a 3% interest rate, see Recent

Note, Bond, and TIPS Auction Results, http://www.treasurydirect.gov/RI/OFNtebnd (last visited

Sept. 17, 2012), so a 3% discount rate will be used. Cf. Jones & Laughlin Steel Corp. v. Pfeifer,

462 U.S. 523, 537 (1983) (“The discount rate [in determining the net present value of damages

consisting of a lost future stream of income] should be based on the rate of interest that would be

earned on the best and safest investments.”) (internal quotation marks omitted); In re Federal-Mogul

Global, Inc., 330 B.R. 133, 164 (Bankr. D. Del. 2005). Applying a 3% discount rate to a $4,100

annual payment over a twenty-year term yields a net present value of $60,997.65, more than enough to

satisfy the jurisdictional minimum. Substituting a 7.5% discount rate, which is high by today’s

standards, would yield a net present value of $41,797.41, still sufficient under § 1332(a).

Selecting a discount rate involves guesswork. But such guesswork is inherent is determining

whether the jurisdictional minimum is satisfied in whole or in part by an anticipated stream of payments,

and the benefit of the doubt in selecting a discount rate should be given to the proponent of federal

jurisdiction. The point is illustrated by Travelers Casualty & Surety Co. of America v.

Northwestern Mutual Life Insurance Co., supra, where the Seventh Circuit used a 5% discount rate

rather than a 10% discount rate under circumstances where only the former resulted in the jurisdictional

minimum being satisfied. 480 F.3d at 501. As the court explained, “satisfaction of the jurisdictional

minimum in the diversity statute requires merely that the plaintiff have a colorable, which is to say a

nonnegligible, prospect of being able to recover that amount in a trial.” Ibid.; see also Sadowski, 441

F.3d at 541 (“Whether damages will exceed $75,000 is not a fact but a prediction, and with respect to

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that subject the court must decide whether to a legal certainty ... the claim is really for less than the

jurisdictional amount.”) (internal quotation marks omitted) (omissions in original). Here, given the range

of potentially appropriate discount rates, there is a nonnegligible prospect that the value to Nunn of this

litigation exceeds the jurisdictional minimum.

Witherell submits that Nunn’s avoidance of annual insurance and tax payments should not count

towards the amount in controversy. Those payments, Witherell contends, are wholly dependent on

future contingencies; if the property is sold, for example, Nunn will no longer have to make the

payments. Doc. 24 at 7. The Supreme Court rejected that line of thinking in Aetna Casualty &

Surety Co. v. Flowers, 330 U.S. 464 (1947). The plaintiff in Flowers, a widow, sued her deceased

husband’s former employer and the employer’s insurer for death benefits; she invoked state law in

seeking burial expenses plus $5,000, the maximum allowable by the governing state statute, which

exceeded the then-jurisdictional minimum of $3,000; and the defendants removed the case to federal

court. Id. at 465-66. The Sixth Circuit held that the case had been improperly removed, reasoning

that the benefit would be paid in installments and that the installment payments would cease if the

plaintiff remarried or died. Id. at 467.

The Supreme Court reversed. The Court acknowledged that if “judgment could be entered

only for the installments due at the commencement of the suit, future installments could not be

considered in determining whether the jurisdictional amount was involved, even though the judgment

would be determinative of liability for future installments as they accrued.” Ibid. (citation omitted). The

Court held, however, that the widow’s suit put the entire benefit at issue, not just the installments then

due and owing. Id. at 467-68. The Court then addressed whether “the fact that it cannot be known as

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a matter of absolute certainty that the amount which may ultimately be paid, if [the widow] prevails, will

exceed $3,000 mean[s] that the jurisdictional amount is lacking.” Id. at 468. On that point, the Court

held that it had

rejected such a restrictive interpretation of the statute creating diversity

jurisdiction. It has held that a possibility that payments will terminate before the

total reaches the jurisdictional minimum is immaterial if the right to all the

payments is in issue. Future payments are not in any proper sense contingent,

although they may be decreased or cut off altogether by the operation of

conditions subsequent. And there is no suggestion that by reason of life

expectancy or law of averages the maximum amount recoverable can be

expected to fall below the jurisdictional minimum.

Ibid. (citations omitted). In support, Flowers cited Thompson v. Thompson, 226 U.S. 551 (1913),

overruled in part on other grounds, Vanderbilt v. Vanderbilt, 354 U.S. 416 (1957), which held that

future maintenance payments owed by a man to his former wife were properly considered in calculating

the amount in controversy even though the payments could be reduced or eliminated upon the

occurrence of certain events, such as the man’s death. Id. at 559-60. Along the same lines is

Meridian Security Insurance Co. v. Sadowski, supra, an insurance coverage case, where the

Seventh Circuit held that the insured’s potential monetary liability in the underlying suit counted towards

the amount in controversy even though the underlying suit had not been resolved—that is, even though

the insurer would owe no indemnity if the insured ultimately prevailed in the underlying suit. 441 F.3d at

539.

The same result obtains here. Although it is possible that the property could be sold before

Nunn’s future insurance and tax outlays exceed $41,000 (measured in current dollars), that possibility

and others like it do not warrant excluding those outlays from the amount in controversy. To support

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the contrary view, Witherell cites Monarch Life Insurance Co. v. Broches, 2004 WL 1718660 (N.D.

Ill. July 29, 2004), where an insurance company sought a declaration that it had no obligation to pay the

defendant $3,000 per month under a disability insurance policy; it also sought to recover $30,000 it had

already paid. Broches held that future payments could not be considered in calculating the amount in

controversy because neither party “dispute[d] the validity of the policy.” Id. at *3. In so holding,

Broches relied heavily on Keck v. Fidelity & Casualty Co. of New York, 359 F.2d 840 (7th Cir.

1966), which ruled that “[f]uture benefits payable under a contract of insurance may be used to

compute the sum in controversy for jurisdictional purposes only when the validity of the insurance policy

itself, and not merely the presence or absence of conditions measuring the insurer’s liability thereunder,

is the matter in dispute.” Id. at 841; see also Hawkins v. Aid Ass’n for Lutherans, 338 F.3d 801,

805 (7th Cir. 2003) (“when the validity of a policy (as opposed to the insurer’s obligation to pay) is in

dispute, the face value of that policy is a proper measure of the amount-in-controversy”).

Here, by contrast to the circumstances in Broches and Keck, Nunn’s claim does concern the

validity of the Agreement. According to Nunn, by insisting that she continue to pay one-half of the

insurance, tax, and other obligations related to the property, Witherell has effectively repudiated the

Agreement. Doc. 1 at ¶ 43; Doc. 31 at 12 (claiming that Witherell “takes a position ... that the

Agreement was somehow invalid”), 14 (claiming that Witherell “repudiated ... the Agreement”). 

Witherell vigorously denies that he has repudiated the Agreement, contending instead that his actions

affirm and properly effectuate the Agreement. Doc. 35 at 2-4. Whether Witherell actually repudiated

the Agreement by insisting that Nunn continue to pay one-half of the property’s carrying costs after

August 2010 will be resolved on the merits. All that matters at the Rule 12(b)(1) stage is that Nunn has

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claimed that Witherell’s actions constitute a repudiation; this is sufficient to allow her future payment

obligations to be considered when determining whether the jurisdictional minimum has been satisfied. 

See Davis v. Am. Foundry Equip. Co., 94 F.2d 441, 442-43 (7th Cir. 1938) (holding that the thenjurisdictional minimum of $3,000 was satisfied where the plaintiff sued for $2,000 past due on a

contract and for a declaration that the contract was valid); Interson Research Assocs., Ltd. v. Topcon

Corp., 1995 WL 535104, *4 (N.D. Ill. Sept. 1, 1995) (distinguishing Keck on the ground that the

defendant had repudiated the contract, thereby making it appropriate to consider future payments owed

under the contract in calculating the amount in controversy).

Conclusion

For the foregoing reasons, the jurisdictional minimum under 28 U.S.C. § 1332(a) is satisfied,

Nunn properly invoked the court’s diversity jurisdiction, and Witherell’s motion to dismiss is denied.

September 20, 2012 

United States District Judge

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