Judge Janet S. Baer - Opinions

Judge Janet S. Baer

15 B 35358, 16 A 00727
The Debtor filed an adversary complaint against Walsh Construction Company (“Walsh”), seeking to avoid and recover certain funds deposited with the Clerk of the Circuit Court of Cook County (the “Deposited Funds”) pursuant to 11 U.S.C. §§ 547(b), 548(a), 550(a), and 553(b).  Walsh filed a motion to dismiss the complaint, arguing that under the doctrine of res judicata, the dismissal of the Debtor’s prior adversary complaint seeking a declaratory judgment that the Deposited Funds were property of the bankruptcy estate and turnover of those Funds barred any further litigation arising from a judgment order (the “Judgment Order”) entered by the Circuit Court.  In the alternative, Walsh asked the Court to abstain from making a decision because the appeal of the Judgment Order is pending in the Circuit Court.  The Court found that, although the three elements required for res judicata had been met, the “Statutory Scheme Exception” to claim splitting in § 26(1)(d) of the Restatement (Second) of Judgments precluded the application of res judicata to bar the Debtor’s adversary proceeding, and, thus, Walsh’s motion to dismiss was denied.  In its discretion, the Court abstained from conducting further proceedings in connection with the adversary until the state court renders its decision on the related appeal of the Judgment Order.

16 B 31591
The Debtor, appearing pro se, proposed to pay Hale Gardens Condominium Association (the “Association”) $857 through her chapter 13 plan. The Association objected to confirmation of the Debtor’s plan because it did not provide for full payment of the Association’s alleged $14,938.25 secured claim, which claim was comprised mostly of attorneys’ fees related to the Association’s pre-petition attempts to collect assessments and fees from the Debtor. The Debtor argued that she owed the Association only $602, which the Court considered as an objection to the Association’s claim. The Court sustained in part both parties’ objections, finding that the Association had not applied the Debtor’s payments appropriately and that most of the attorneys’ fees were unreasonably incurred by the Association. The Court allowed the Association’s secured claim in the amount of $1,303.49 and held that the Debtor’s chapter 13 plan must provide for the payment of such claim in full pursuant to 11 U.S.C. §§ 1322(b)(2) and 1325(a)(5).

14 B 13155
The Debtors claimed three exemptions against $23,000 in settlement proceeds derived from a workplace discrimination and disability lawsuit initiated by Debtor James Henry Sullivan, Jr. against his former employer.  The chapter 7 trustee (the “Trustee”) objected to the Debtors’ exemptions pursuant to Bankruptcy Rule 4003(b) on the basis that they were not properly claimed under Illinois law.  The Trustee had intervened and later settled the legal claims in the lawsuit with the authorization of the Court pursuant to Bankruptcy Rule 9019(a).  Without addressing the merits of the Trustee’s objection, the Debtors argued that they had been deprived of their due process rights with respect to the Trustee’s settlement motion.  The Court found that there was no violation of due process in connection with the settlement motion and that the Debtors had not made proper claims of exemption under Illinois law.  Thus, the Court sustained the Trustee’s objection and disallowed the Debtors’ amended claims of exemption.

In re David L. Dini
April 6, 2017

13 B 25078
In September 2016, John H. Sammarco filed a motion to dismiss debtor David L. Dini’s chapter 7 case pursuant to 11 U.S.C. § 707(a).  Relying on In re Schwartz, a decision issued by the Seventh Circuit in August 2015, Sammarco alleged that Dini’s case should be dismissed because he is living “lavishly” while refusing to pay his unsecured creditors.  The question before the Court was whether the equitable doctrine of laches barred Sammarco’s § 707(a) motion.  The Court found that Sammarco’s thirteen-month delay in filing the motion was both unreasonable and inexcusable under the circumstances of the case and that Dini suffered material prejudice as a result of that delay.  Accordingly, the Court concluded that Sammarco’s motion is barred by laches, and, as such, the motion was denied.

In re Pawel Hardej
February 15, 2017

13 B 00627
The former Debtor reopened his bankruptcy case and filed a motion for rule to show cause against the Respondents, including Metropolitan Development Enterprises, Inc. (“MDE”), an entity previously owned by the Debtor. The Debtor alleged that the Respondents violated the discharge injunction under § 524(a)(2) after MDE filed suit against him in the Circuit Court of Cook County. The Debtor sought an order enjoining the state court proceeding, a finding that the Respondents were in contempt of court, and an award of damages and attorneys’ fees. The Respondents argued that the claims for which MDE sought recovery against the Debtor were not discharged in the Debtor’s bankruptcy case pursuant to § 523(a)(3)(B). The Court found that MDE’s claims against the Debtor had been discharged because, although MDE was not scheduled as a creditor, it had reasonable notice of the Debtor’s bankruptcy case that satisfied the requirements of due process. Concluding that MDE’s actions constituted a violation of the discharge injunction, the Court enjoined MDE from pursuing the Debtor on its claims in state court but denied the Debtor’s request for damages and attorneys’ fees.

13 B 25078, 13 A 01332
In the three counts that remain at issue in the adversary complaint filed by plaintiff John H. Sammarco in the bankruptcy case of debtor-defendant David L. Dini, Sammarco sought a determination that Dini is not entitled to a discharge pursuant to various provisions of 11 U.S.C. § 727(a). In Count I, Sammarco alleged that Dini’s discharge should be denied under § 727(a)(2) because Dini transferred two vehicles less than one year prior to filing his bankruptcy petition with the intent to hinder or delay Sammarco. In Count V, Sammarco objected to Dini’s discharge pursuant to § 727(a)(7), arguing that Dini knowingly made fraudulent statements in the bankruptcy schedules of his former company National Telerep Marketing Systems, Ltd. ("NTMS") while his individual bankruptcy case was pending. Finally, in Count VII, Sammarco alleged that Dini is not entitled to his discharge under § 727(a)(4), because Dini knowingly and with fraudulent intent made false statements in connection with the debt that he owes to his friend Keith Creel (the "Creel debt"). The Court found that Sammarco failed to meet his burden to establish the elements required under the applicable provisions of § 727(a). Specifically, the Court found that the evidence did not establish that Dini intended to hinder or delay Sammarco by transferring his interest in the vehicles. The Court further found that the issue of whether Dini knowingly and with fraudulent intent made false statements in NTMS’s bankruptcy schedules was previously litigated and that Sammarco is, thus, precluded from litigating that issue again. As for the allegation in connection with the Creel debt, the Court concluded that the record did not support a finding that Dini’s statements regarding that debt were false for purposes of § 727(a)(4). Accordingly, the Court held that Dini’s discharge will not be denied.

15 B 19829, 15 A 00550
The Plaintiff filed an adversary complaint against the Debtor seeking a determination that the debt owed to the Plaintiff by the Debtor in connection with an unsecured loan is not dischargeable pursuant to §§ 523(a)(2)(A) and (a)(2)(B).  The Plaintiff argued that the loan was procured by false pretenses with respect to the purpose of the loan and through actual fraud because the Debtor had not intended to repay the loan.  The Plaintiff also argued that the Debtor misrepresented her financial condition by failing to disclose a new mortgage obligation when the loan was made.  The Court found that the Plaintiff failed to meet its burden to demonstrate fraud under any of its arguments.  Accordingly, the Court held that the debt at issue is not excepted from discharge under §§ 523(a)(2)(A) or (a)(2)(B).

13 B 43900, 15 A 00140
The chapter 7 trustee (the “Trustee”) filed a six-count adversary complaint against American Express Centurion Bank, Inc. (“American Express”), seeking to avoid and recover from American Express an allegedly preferential or fraudulent transfer made by Katina Callas, the Debtor’s non-filing spouse (“Katina”), to American Express pursuant to 11 U.S.C. §§ 547(b), 548(a)(1), and 550(a).  American Express did not challenge the avoidability of the transfer; rather, it sought summary judgment only on Counts II and V, the recovery claims of the complaint.  Asserting an affirmative defense under § 550(b)(1), American Express contended that the Trustee could not recover the transfer from American Express as an immediate or subsequent transferee of Katina.  The Court concluded that there were no genuine issues of material fact in dispute and that the uncontested facts demonstrated that American Express took the transfer for value, in good faith, and without knowledge of the voidability of the transfer.  Accordingly, the Court found that American Express established a valid affirmative defense to liability under § 550(b)(1).  As such, the Court granted American Express’s motion for partial summary judgment and entered judgment on Counts II and V of the complaint in favor of American Express.

15 B 05304, 15 A 00812
The Plaintiff filed an adversary complaint in the bankruptcy case of the Debtor, seeking a determination that a debt owed to the Plaintiff by the Debtor in connection with her car is not dischargeable and that the Debtor is not entitled to a discharge.  The car in question was impounded by the City of Chicago three times, the third time post-petition.  Experiencing financial difficulties and having no money to either repair and recover the car or get it towed from the impound lot, the Debtor filed an amended chapter 13 plan which provided for surrender of the car to the Plaintiff in full satisfaction of its claim.  The Plaintiff filed an objection to confirmation, arguing that surrender was not possible because the Debtor was not in possession of the car.  While the objection was pending, the title to the car was transferred from the Debtor’s name to a company in Illinois and then, later, two more times to other entities.  Subsequently, the Debtor converted her case to a case under chapter 7.  In its complaint, the Plaintiff argued that the debt is nondischargeable under § 523(a)(6) because the Debtor abandoned the car, knowing that it would be disposed of, and that her lack of action was willful and malicious in that it caused a total loss to the Plaintiff. The Plaintiff argued, similarly, that the Debtor is not entitled to a discharge under § 727(a)(2) because she intended to hinder, delay, and defraud the Plaintiff by “refusing” to retrieve the car from the impound lot.  The Court found that the Plaintiff failed to meet its burden to demonstrate that the Debtor’s actions were either willful or malicious as required by § 523(a)(6).  The Court further found that the Plaintiff did not prove that the Debtor intended to hinder, delay, or defraud the Plaintiff for purposes of § 727(a)(2).  Accordingly, the Court held that the debt at issue is not excepted from discharge under § 523(a)(6) and that the Debtor is entitled to her discharge.

15 B 35358, 15 A 00876
The Debtor filed an adversary complaint against Walsh Construction Company and the Clerk of the Circuit Court of Cook County, seeking:  (1) a determination that certain funds deposited with the Clerk pursuant to a judgment order entered by the Circuit Court are property of the bankruptcy estate, and (2) turnover of those funds to the Debtor.  Walsh filed a 12(b)(6) motion to dismiss the complaint.  The judgment order awarded Walsh $27,500,000 on its breach of contract claim against the Debtor, awarded the Debtor a total of about $8,300,000 on its breach of contract claim against Walsh and an interpleader claim filed by the Debtor’s subcontractor, and provided that the amounts awarded to the Debtor be set off against the amount awarded to Walsh.  The Court found that the Rooker-Feldman doctrine did not bar its jurisdiction over the adversary proceeding because the Court did not need to overturn the Circuit Court’s decision to determine the interests of the parties.  As to the substantive issue, the Court found that, based on applicable law and the language in the judgment order, the setoff was accomplished pre-petition, through and at the time of the entry of the order; the setoff therefore effectuated a transfer; the deposited funds were thus not property of the Debtor’s bankruptcy estate; and, as a result, the funds could not be turned over to the Debtor.  Accordingly, the Court held that the Debtor failed to state a claim upon which relief can be granted and, in fact, could not assert any set of facts establishing its entitlement to the relief it sought.  Therefore, the Court granted Walsh’s motion to dismiss the complaint, and the complaint was dismissed with prejudice.

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