In the

United States Court of Appeals

For the Seventh Circuit

____________

Nos. 06-4409, 08-1013

CHARLES A. CRAIG and BARBARA J. CRAIG,

Plaintiffs-Appellees,

v.

ONTARIO CORPORATION,

Defendant-Appellant.

____________

Appeals from the United States District Court 

for the Southern District of Indiana, Indianapolis Division.

No. 1:05-cv-861-LJM-JMS—Larry J. McKinney, Judge.

____________

ARGUED MAY 16, 2008—DECIDED SEPTEMBER 10, 2008

____________

Before BAUER, POSNER, and WOOD, Circuit Judges.

WOOD, Circuit Judge. Charles Craig worked for Ontario

Corporation and participated in its employee stock

option plan. Under the plan, he was entitled to transfer

some of the shares of the stock he acquired to his wife

Barbara, and he did so. The plan also provided for a

bonus distribution of stock shares upon the participant’s

retirement. When Craig retired in 2001, he offered to
2 Nos. 06-4409, 08-1013

sell his shares back to Ontario. Ontario accepted, but it

paid with three promissory notes rather than cash.

By their terms, these notes were subject to “Standby and

Subordination Agreements,” which subordinated the

Craigs’ rights to those of certain senior creditors (Fifth

Third Bank and First Merchants Bank). By December 2003,

Ontario was facing difficulties in meeting its financial

obligations. Eventually it reached an agreement with the

Craigs to suspend principal payments until December

2004. The agreement was not renewed, however, and the

Craigs sent Ontario a notice of default and sued in the

district court for the Southern District of Indiana, to

recover on the notes. They contended that their case

fell within the district court’s diversity jurisdiction,

under 28 U.S.C. § 1332(a) and (c).

The Craigs were not the only creditors trying to get

money from Ontario. Fifth Third sent Ontario a notice

of default; that claim was settled in June 2006. First Merchants also asserted that Ontario had defaulted on its

notes, but as of the time this case reached the district

court, its claim was still outstanding.

The district court entered judgment for the Craigs on

the notes, stating that even though the terms seem to

prevent any payment to them, they do not bar the Craigs

from reducing their claim to judgment. The district court

denied a motion for relief from judgment by Ontario

in November 2006, and the first appeal before us (No.

06-4409) challenges that ruling.

Subsequently, however, Ontario discovered facts that

draw the district court’s subject-matter jurisdiction into
Nos. 06-4409, 08-1013 3

question. It appears that the parties may not be of diverse

citizenship. Ontario moved under FED. R. CIV. P. 60(b)(4)

for relief from the judgment on this basis (its second

motion under Rule 60, but that detail is unimportant for

our purposes), but the district court held that it had no

jurisdiction to rule on the motion because the case was

before this court on appeal. The court further held that

it had no jurisdiction even to conduct a hearing or to

review new filings while the appeal was pending. That

ruling led to a second notice of appeal, No. 08-1013,

which we have consolidated for disposition with the

first one.

Naturally, the first question we must confront is that of

jurisdiction. Here we pause to note an oddity in the

jurisdictional statement that the Craigs filed in their

brief before this court. Appellant Ontario, which is contesting jurisdiction, asserts in its jurisdictional statement

that the Craigs had said at the outset of the litigation

that they were “residents” of Arizona, and that Ontario

is an Indiana corporation with its principal place of

business in Indiana. In fact, Ontario continues, it has

uncovered facts leading it to believe that the Craigs are

citizens of Indiana. It thus challenges the authority of the

federal courts to hear this case at all. When we looked to

the Craigs’ brief to see what response they had, all we

found was that they “state that the Jurisdictional Statement in Appellant’s Brief is complete and correct.” This

seemed like a concession either that the requirements

of diversity jurisdiction have not been satisfied, or at a

minimum a concession that a hearing is necessary to get

to the bottom of this.
4 Nos. 06-4409, 08-1013

Whether or not there was such a concession, Ontario

is correct that the facts relating to subject-matter jurisdiction must be explored here. The district court was

mistaken that it had lost all authority to do so when the

motion under Rule 60(b)(4) was presented to it. We therefore vacate the court’s judgment on the merits in No.

06-4409 and reverse the court’s order denying the Rule

60(b)(4) motion in No. 08-1013 and remand for an evidentiary hearing on subject matter jurisdiction.

I

After an appeal has been filed, the district court may

still consider a motion for relief from judgment under FED.

R. CIV. P. 60(b). See Graefenhain v. Pabst Brewing Co., 870

F.2d 1198, 1211 (7th Cir. 1989). In general, if the motion

lacks merit, the court should rule promptly and deny it;

if the court finds some merit, it should issue a short

memorandum so that the court of appeals can be informed of its views and take appropriate action. See 7TH

CIR. RULE 57; Boyko v. Anderson, 185 F.3d 672, 675 (7th Cir.

1999).

Here, the district court declined to express any tentative

view of the merits. It explicitly disclaimed jurisdiction “to

conduct a hearing or to review new filings while this

matter pends on appeal.” The Craigs somehow find in

this statement an indication that the district court thought

that it did have jurisdiction over the case and was intimating a negative view of the motion, but we see nothing of

the sort. The district court was aware of Boyko, but it

thought that Boyko was limited to habeas corpus proceed-
Nos. 06-4409, 08-1013 5

ings. The wording of Boyko does not, however, support any

such limitation; in fact, Boyko cites a wide variety of cases

for the proposition that a district court has jurisdiction

to consider or deny, but not grant, a Rule 60(b) motion. See

id. at 675 (collecting cases and discussing the best procedure); see also Bronisz v. Ashcroft, 78 F.3d 632 (7th Cir. 2004)

(applying Boyko in immigration context); Williamson v.

Indiana University, 345 F.3d 459 (7th Cir. 2003) (mentioning

“the procedure we approved in Boyko” in an employment

case).

This limited power is all the more important when

subject-matter jurisdiction is at stake. “[I]t has been the

virtually universally accepted practice of the federal

courts to permit any party to challenge or, indeed, to

raise sua sponte the subject-matter jurisdiction of the

court at any time and at any stage of the proceedings.”

Sadat v. Mertes, 615 F.2d 1176, 1188 (7th Cir. 1980). The

Federal Rules of Civil Procedure are no less insistent: “If

the court determines at any time that it lacks subjectmatter jurisdiction, the court must dismiss the action.” FED.

R. CIV. P. 12(h)(3). Subject-matter jurisdiction is so

central to the district court’s power to issue any orders

whatsoever that it may be inquired into at any time, with

or without a motion, by any party or by the court itself. The

order denying Ontario’s second motion for relief was

therefore in error, and the district court should have

taken up the issue.
6 Nos. 06-4409, 08-1013

II

The only thing that might have justified the court’s

decision to pass on the jurisdictional challenge is if Ontario’s showing were so inconsequential as to be frivolous.

But it was not. Indeed, as we understand the proffered

facts, there is a serious jurisdictional problem here. On

Ontario’s side, the facts that originally were alleged are not

contested: it is an Indiana corporation with its principal

place of business in Indiana. Matters are far less clear on

the Craigs’ side. They claim to be “residents” of Arizona—an inadequate jurisdictional claim to begin with,

as we repeatedly have reminded litigants and district

judges, see, e.g., Camico Mut. Ins. Co. v. Citizens Bank, 474

F.3d 989, 992 (7th Cir. 2007); Meyerson v. Harrah’s East

Chicago Casino, 299 F.3d 616, 617 (7th Cir. 2002); McMahon

v. Bunn-O-Matic Corp., 150 F.3d 651, 653 (7th Cir. 1998). But

even if they had properly alleged that they were citizens

of Arizona, they are in trouble. Ontario presented evidence that they may in fact be citizens of Indiana.

It was not until the Craigs began efforts to collect on their

judgment that Ontario discovered some disturbing pieces

of evidence. It correctly presented this information to

the district court in its second motion for relief:

• The 2005 and 2006 property tax records for the Craigs’

property in Arizona—which was used to allege their

residence there—listed an Indiana address in the

“taxpayer information” section.

• The Craigs purchased a second Indiana property (the

“Wentworth Property”) right before filing their complaint (February 2005), and sold another one (the
Nos. 06-4409, 08-1013 7

“Hickory Hills Property”) right after filing the complaint (July 2005).

• Barbara Craig has remained registered to vote in

Indiana, and did so in person in 2006. Under Indiana

law, a person must be resident in a precinct for 30 days

prior to the election in order to vote there, IND. CODE

§ 3-7-13-1, and if a voter moves to another state with

the intention to establish residency there, then he

or she is no longer considered an Indiana resident

for voting purposes, IND. CODE § 3-5-5-8.

• In April 2005, the Craigs received the Indiana homestead tax credit for the Wentworth Property, which

they continued to receive in 2006 and 2007. For the

purposes of the credit, a homestead is “an individual’s

principal place of residence which . . . is located in

Indiana . . . .” IND. CODE § 6-1.1-20.9-1(2). Before 2005,

the Craigs had received the homestead credit on the

Hickory Hills Property. Principal place of residence,

or domicile, is central to determining citizenship. See

Galva Foundry Co. v. Heiden, 924 F.2d 729, 730-31 (7th

Cir. 1991).

All of these facts call into question the Craigs’ citizenship,

which is their burden to prove as the litigants claiming

the right to the federal forum. They complain that the

jurisdictional criticisms were not supported by admissible

evidence, but this puts the shoe on the wrong foot: the

Craigs, as the plaintiffs, have always had the burden of

proving federal jurisdiction. They cite many cases requiring a heightened showing for a Rule 60(b) motion, but in

all of those the Rule 60(b) movant also had the burden

of proof on the issue raised. Where jurisdiction is in
8 Nos. 06-4409, 08-1013

question, the party asserting a right to a federal forum

has the burden of proof, regardless of who raises the

jurisdictional challenge and who presents the motion

under Rule 60(b). See Grafon Corp. v. Hausermann, 602 F.2d

781, 783 (7th Cir. 1979). Ontario has raised a serious

question about the Craigs’ true citizenship at the time

this case was filed (June 8, 2005), and the Craigs now

have the obligation to respond.

The Craigs’ last argument is a curious one. Perhaps not

understanding the fundamental importance of subjectmatter jurisdiction or the ban on advisory opinions, they

contend that this court should reach the merits even if it

decides to remand the case to the district court for a

hearing on jurisdiction. They think that Brown v. United

States, 976 F.2d 1104 (7th Cir. 1992), supports this

method of proceeding. But it does not; Brown was a case

in which a taxpayer, faced with the prospect of being

whipsawed by different creditors after losing to one on

summary judgment, moved for relief under Rule 60(b). All

the court did was to rule on Brown’s appeal from the

underlying judgment and remand the Rule 60(b) matter—which had nothing to do with subject-matter jurisdiction—to the district court. Nothing in Brown indicated

that subject-matter jurisdiction could or should be treated

the same way. The challenge presented here goes directly

to the district court’s fundamental power to hear the

case at all: if the parties are not diverse, then an entirely

different sovereign will be adjudicating the case.

Enough of a challenge to the district court’s power to

adjudicate was presented that it should have assured

itself that its jurisdiction was proper. We therefore
Nos. 06-4409, 08-1013 9

remand the case for an evidentiary hearing on the question

whether the parties are properly diverse. At this hearing,

the Craigs bear the burden of proving that they were

citizens of Arizona at the time the suit was filed.

III

As a final note, we observe that several thorny issues

may arise once the question of citizenship is opened up.

What happens if Charles Craig is properly diverse, but

Barbara Craig is not? She is named on some of the notes,

but it is not clear whether she is a party who must be

joined. Another complication arises from the fact that

Arizona is a community property state, but Indiana is

not. It is possible, even if Charles Craig turns out to be a

citizen of Arizona and Barbara Craig has remained a

citizen of Indiana, that a non-diverse party may have a onehalf interest in the notes.

These are questions that the district court must answer

first. Ontario properly called the problem to the district

court’s attention, and the court had the power to consider the motion under Rule 60(b), even though an appeal

had already been filed. Indeed, it is under a continuing

obligation to assure itself of subject-matter jurisdiction, no

matter how the issue is raised. We VACATE the judgment

on the merits in No. 06-4409, REVERSE the denial of Ontario’s second Rule 60(b) motion in No. 08-1013 and

REMAND for further proceedings in accordance with

this opinion.

9-10-08