12 B 81564
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Judge Thomas M. Lynch
August 25, 2014
Judge Jacqueline P. Cox
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.
July 24, 2014
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.
Judge Timothy A. Barnes
August 18, 2014
13 B 39194
Upon the Motion of Leticia Zaragoza for Relief from the Automatic Stay Pending Arbitration, brought by Leticia Zaragoza (the “Movant”), held: The Movant has failed to demonstrate cause for relief from stay under 11 U.S.C. § 362(d). The Movant’s assertion that the Chicago Board of Trade (the “CBOT”) is better suited to determine the Movant’s claim against the bankruptcy estate is not supported by the arguments of the parties. Further, the Movant’s assertion that a claim against the Debtor arising out of a pending arbitration matter before the CBOT is outside this court’s constitutional authority under the reasoning of Stern v. Marshall is inapposite to the actual holding of Stern and is not well taken. Nothing within Stern’s holding stands for the proposition that this court may not determine the propriety of a claim asserted against the bankruptcy estate. Such a function lies at the heart of bankruptcy jurisdiction, and is squarely within this court’s authority. The court therefore denies the Movant’s request, without prejudice to the Movant’s ability to reassert the request, if appropriate, should the circumstances underlying the request have changed materially.
Judge Donald R. Cassling
August 6, 2014
11 B 46854, 13 A 01257
13 B 16661, 13 A 00972
July 29, 2014
12 B 01108
Judge Pamela S. Hollis
12 B 15638, 12 A 00947
Ex-wife sought finding that monetary award in divorce settlement was nondischargeable pursuant to 523(a)(2)(A), (a)(5), (a)(6) and (a)(15). Ex-husband prevailed on three of the four counts: 523(a)(5) because there was no evidence that the award was in the nature of alimony, maintenance or support; 523(a)(6) because tortious conduct (such as conversion) is required for a breach of contract to result in a nondischargeable debt, and a claim for money cannot be the subject of conversion; and 523(a)(15) because the underlying bankruptcy case is a Chapter 13. Based on the very specific facts of this case, however, the award was nondischargeable under 523(a)(2)(A). The ex-husband had no intention of paying his ex-wife at the time they entered into the settlement, and his subsequent conduct was consistent with that intent.
Judge Jack B. Schmetterer
July 22, 2014
11 B 21658
Judge A. Benjamin Goldgar
July 21, 2014
11 B 26443, 13 A 1070, 13 A 1156