Judge Jacqueline P. Cox - Opinions / Outlines

Judge Jacqueline P. Cox

13 B 01449, 13 A 01050
Prepetition, the parties to the medical malpractice suits participated in a mediation conference presided over by a former Chief Judge of the Circuit Court of Cook County, Illinois. The mediation was successful, and resulted in the entry of a July 21, 2008 settlement order in state court.  Prior to the mediation session, one Plaintiff's claim proceeded to trial in state court, where a jury returned a verdict of $30,000,000 against the Debtor and other defendants.

The crux of the Complaint is that the Debtor falsely stated that the settlement would be secured by property at 1101 Dodge, Evanston, Illinois (“Dodge Property”) in violation of 11 U.S.C. § 523(a)(2)(A) which excepts from discharge debts incurred fraudulently under certain circumstances.  The Debtor did not arrange for the Dodge Property to be titled in a land trust as required by the 2008 court order.  The Plaintiffs also allege that the Debtor wilfully and maliciously injured them in violation of 11 U.S.C. § 523(a)(6).

The Court entered judgment in favor of the Plaintiffs, finding that the Debtor intentionally misled the Plaintiffs when he represented that he would pledge the Dodge Property to secure the settlement amount, and that fraud created the debt.  In so ruling, the Court relied, in part, on Dr. Eisenstein's admission at trial that he had no intention of having the property placed into a land trust to secure payment of the $1.275 million settlement until a formal settlement agreement got executed.  The July 21, 2008 order did not condition the settlement on the entry of a subsequent agreement.

 

11 B 41826
In this post-confirmation Chapter 11 proceeding, Michael Bahary & Steven Bahary Partnership (“the Reorganized Debtor”) filed a Motion for a Rule to Show Cause requiring Napleton Enterprises, LLC (“Napleton”) and its counsel to show cause why they should not be held in contempt for suing to enforce Napleton’s purported Right of First Refusal as to certain real property (the "Grand Avenue Property") in a state court action regarding transactions that ensued in this bankruptcy case in 2012. The Reorganized Debtor asserted that Napleton’s actions were inconsistent with the terms of the confirmed Amended Plan of Reorganization and in violation of the Bankruptcy Code’s discharge injunction, set forth in 11 U.S.C. § 524(a)(2).  
Pursuant to the Reorganized Debtor's Confirmed Plan, the Reorganized Debtor surrendered the Grand Avenue Property to Banco Popular by executing a Deed in Lieu of Foreclosure to satisfy Banco Popular’s secured claim. Napleton was not scheduled as a creditor in the Reorganized Debtor’s bankruptcy.
In the offending state court action, Napleton alleged that its Right of First Refusal was an executory contract that survived confirmation of the Plan because its claim was not scheduled therein by the Debtor and it did not get notice of the bankruptcy case.  Napleton also asserted that the Deed in Lieu of Foreclosure was a “bona fide” offer that gave it a basis to exercise its Right of First Refusal.  
The Court issued the Rule to Show Cause, and determined that although Napleton was not included in the Debtor’s bankruptcy schedules, Napleton is neither a debtor, a trustee, an indenture trustee nor a creditor to whom a debt is owed as defined by 11 U.S.C. § 101 (10) (creditor is defined as an entity who holds a claim against the debtor or the bankruptcy estate).  Napleton is neither a creditor/claim holder nor a party to an executory contract because its Right of First Refusal remained inchoate because no third party made a bona fide offer, which it could match within five days.  
The Court denied Napleton’s request to alter or amend its prior December 29, 2014 judgment under Federal Rule of Bankruptcy Procedure 9024.

 

13 B 29753, 14 A 00674
In this Chapter 13 adversary proceeding, the Debtor-Plaintiff, Samuel Brimmage, alleges that the Defendants, Quatnum3 Group LLC and Elite Recovery Acquisition, LLC, violated the Fair Debt Collection Practices Act (FDCPA) by filing a proof of claim on a debt that is otherwise time-barred. Elite Recovery Acquisition is a national debt buyer and Quantum3 Group is its agent.
The Defendants moved to dismiss the adversary proceeding by arguing that 1) filing a proof of claim is not a debt collection action subject to FDCPA and 2) that if it was a debt collection action then it would be impossible to comply with both the Bankruptcy Code and the FDCPA, and that the Code should therefore control.
The Court denied the motion, concluding that filing a proof of claim is a form of debt collection. The Seventh Circuit has held that while the statutes do overlap, enforcement of both is possible where “any debt collector can comply with both simultaneously.” Randolph v. IMBS, Inc., 368 F.3d 726, 730 (7th Cir. 2004). Agreeing with a similar decision out of the Southern District of Indiana, the Court determined that the Defendants could easily comply with both the Code and the FDCPA by simply not filing a proof of claim on a time-barred debt. See also Patrick v. PYOD,LLC, 2014 WL 4100414 (S.D.Ind. 2014). As such, the Court will be able to enforce both the FDCPA and the Code in this situation.

13 B 38149, 14 A 00177
In this Chapter 7 adversary proceeding, Plaintiff Kenneth Wians, as Independent Administrator of the Estate of Clara Wians, filed a Motion for entry of Summary Judgment against Defendant Dennis Wians on a complaint seeking to except a debt from discharge under 11 U.S.C. § 523(a)(4).  The Plaintiff alleged that the Defendant converted assets belonging to his elderly and disabled mother, while he held powers of attorney for healthcare and property.

In support of his Motion, the Plaintiff asserted that the doctrine of collateral estoppel precluded the Defendant from relitigating the issues previously resolved in a prior state court matter, which proceeded to final judgment, creating the $196,000 debt at issue herein.

The Court granted the Motion, finding that the prior state court order contained specific findings establishing that a fiduciary relationship existed between the Defendant and his mother, within the meaning of § 523(a)(4) and that Defendant committed acts of defalcation with the requisite state of mind, as required by the Supreme Court in Bullock v. BankChampaign N.A.,133 S. Ct. 1754, 1759 (2013).

In re Luis Medina, Jr.
November 7, 2014

14 B 27755
In this Chapter 11 proceeding, the Debtor’s sixth bankruptcy filing in four years, the Court dismissed Debtor’s case for cause under 11 U.S.C. § 1112(b)(1), finding that the Debtor’s financial circumstances made it clear that he would be unable to propose a confirmable plan of reorganization without modifying the rights of a secured creditor, in violation of 11 U.S.C. § 1123(b)(5) .

The Court also imposed a one-year bar to refiling under 11 U.S.C. § 349(a), finding that the successive filings were an intentional abuse of the protections afforded debtors under the Bankruptcy Code.

In re Tiffany Armstrong
November 7, 2014

14 B 18107
In this unpublished decision, the Court denied the Motion of Oasis Legal Finance, LLC (“Oasis”) to Alter or Amend portions of its Order disapproving a reaffirmation agreement where (1) Oasis appeared to tie enforcement of its claim to the Debtor’s receipt of a workers compensation award when Illinois law prohibits liens on such awards; (2) Oasis failed to answer in the Reaffirmation Cover sheet whether the subject debt was nondischargeable and 3) the reaffirmation agreement required the Debtor to repay Oasis $4,125 when only $1,025 of the debt was potentially nondischargeable under section 523(a)(2)(C)(i)(II) - cash advances made within 70 days of filing for bankruptcy relief.

The Court concluded that Oasis failed to present any newly discovered evidence and failed to show that the Court made a manifest error of law in reaching its decision.

11 B 19428 (jointly administered)
In this post-confirmation Chapter 11 proceeding, the Reorganized Debtor filed a Motion to Enforce Confirmation Order and For the Imposition for Sanctions, arguing that notwithstanding the modified mortgage terms set forth in its Confirmed Plans, Everhome Mortgage continued to bill the Reorganized Debtor for prepetition mortgage debt without making changes to the principal amount, new interest rate, new amortization period or new borrower name.

    The Court granted the Motion, finding that Everhome’s refusal to conform its payment coupons and loan files to the economic terms of the Confirmed Plans some 15 months after confirmation, were done in blatant disregard of bankruptcy law and the terms of the Reorganized Debtor’s Plans.  The Court determined that Everhome’s conduct warranted the imposition of sanctions in the amount of $100,000 and ordered that Everhome pay the Reorganized Debtor $35,839 in attorneys' fees.

In re Arturo Vazquez
September 8, 2014

13 B 32174
In this Chapter 7 proceeding, the Debtor scheduled a 2013 federal tax refund in the amount of $10,576, of which he claimed $3,000 as an exempt public assistance benefit under 735 ILCS 5/12-1001(g)(1).

Trustee David Leibowitz objected, arguing that the child tax credit does not qualify as a “public assistance benefit” under the Illinois statute which allows debtors to exempt such.  In 2003 a bankruptcy court ruled that the nonrefundable portion of the child tax credit was not a public assistance benefit because it was available to higher income taxpayers and that the refundable additional child tax credit was a public assistance benefit that could be exempted because it benefited lower income taxpayers.  The Illinois statute does not limit or condition the exemption.

The Court overruled the Trustee’s objection, rejecting the argument that the Illinois statute was meant to benefit lower income individuals only and declined to make the policy choice that a debtor who claimed five personal exemptions/dependents on his tax return while reporting income of $68,824 was too affluent to benefit from the child tax credit.  The Illinois exemption statute provides for the exemption of public assistance benefits, without regard to whether they are refundable or are available only to lower income debtors. The Court explained that it is the role of the legislature, rather than the court, to limit the availability of the exemption.

12 B 50628, 13 A 00688
In this Chapter 7 proceeding, Plaintiff, the Estate of Stanley Cora, filed an amended adversary proceeding against the Debtor, John C. Jahrling, under sections 523(a)(4), 523(a)(6), 727(a)(3) and 727(a)(5) of the Bankruptcy Code asking that a debt be held nondischargeable and that the debtor be denied a discharge of all debts. Under the 523(a)(4) claim, Plaintiff sought to except from debtor’s discharge a $26,000 debt incurred while the debtor, a licensed attorney, served in a fiduciary capacity as Stanley Cora’s attorney at a real estate transaction.  Jahrling was hired to represent Cora, then 90 years of age, in the sale of his home.
Cora’s home was sold for $35,000, about one-third of its value, and the transaction did not provide for the retention a life estate promised to Stanley Cora.  After the home was sold, Cora was evicted.

A judgment for $26,000 was entered in state court against the debtor in 2007 on a legal malpractice claim.

The Court entered judgment in favor of the Plaintiff on Count I, and determined that Jahrling’s conduct in representing Cora in the sale of his home without talking to him to discern what Cora wanted and how to accomplish his goal, was a gross deviation from the standard of conduct that a law-abiding person as well as any Illinois attorney would observe in Jahrling’s situation.  The court also found that Jahrling acted recklessly and in brazen disregard of his fiduciary duty when he ignored his basic duty to communicate with the client, to prepare for the engagement and to pursue his client’s interests diligently.

The Court entered Judgment in favor of the debtor-defendant on the remaining counts, finding that Plaintiff failed to meet its burden of proof on claims under section 523(a)(6) for wilful and malicious injury and section 727 for failure to maintain records and to account for a deficiency or loss of assets.

11 B 40844, 13 A 00927
In this adversary proceeding, the Trustee sought  recovery of $101,787 in preferential transfers made by the Debtor to his mother and brother in repayment of private loans. The Defendants asserted the ordinary course defense to preference liability under section 547(c)(2), arguing that the transfers at issue were not “loans,” but were advances made from a family investment partnership to the Debtor on account of his limited partnership interest.  The Debtor and his mother and brother were general partners of the partnership.
 The Court rejected the ordinary course defense, finding that the Defendants did not meet the statute’s threshold requirement that the debt being repaid was incurred in the ordinary course of business or financial affairs of the Debtor and the Defendants.  The evidence established that the transactions were personal loans made between family members with checks drawn on the Defendants' personal bank accounts, not the partnership's bank account.
The Defendants' Answer admitted that the transfers to the Debtor were loans.  In a later pleading the Defendants said that the transfers to the Debtor were advances from the Debtor's partnership interest.  The Court granted a Motion to Strike the inconsistent assertions.

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