Judge Janet S. Baer - Opinions

Judge Janet S. Baer

16 B 28526, 16 A 00624
Plaintiff Old Republic National Title Insurance Company (“Old Republic”) filed an adversary complaint against debtor Fares Fakhuri (“Fakhuri”), seeking a determination that a debt owed to it by Fakhuri by virtue of a state court judgment was not dischargeable pursuant to §§ 523(a)(2)(A) and (a)(2)(B).  Old Republic subsequently filed a motion for summary judgment on both counts of its complaint.  No material facts were in dispute.  Old Republic contended that the state court made findings that Fakhuri committed fraud and that Fakhuri falsely represented that the title to his property was clear, while concealing the fact that there was a lien on the property.  Fakhuri failed to contest these arguments.  The Court found that the state court’s default judgment was not preclusive as it made no findings of fact, but that Old Republic established that Fakhuri made false representations in connection with the title to the property within the meaning of § 523(a)(2)(A).  As §§ 523(a)(2)(A) and (a)(2)(B) are mutually exclusive causes of action, judgment could not also be granted as to § 523(a)(2)(B).  Accordingly, the Court granted Old Republic’s motion as to the § 523(a)(2)(A) count, entered judgment on that count in its favor, and dismissed the § 523(a)(2)(B) count.

13 B 09806, 13 A 00917
Jacob Thazhathuputhenpurac (the “Plaintiff”) filed an adversary complaint against former business partner Thomas Abraham (the “Debtor”), seeking a determination that a debt owed to him by the Debtor by virtue of a state court judgment was not dischargeable pursuant to §§ 523(a)(2)(A) and (a)(4) and objecting to the Debtor’s discharge under § 727(a)(3).  Both parties subsequently filed cross-motions for summary judgment, the Plaintiff on the two nondischargeability counts and the Debtor on all three.  No material facts were in dispute.  The Plaintiff argued that the Debtor was precluded from re-litigating the factual issues decided by the state court under the doctrine of collateral estoppel.  The Debtor contended that the elements needed to prevail pursuant to the statute under which the state court complaint had been brought were not identical to those required under §§ 523(a)(2)(A) and (a)(4) and that, thus, collateral estoppel was not applicable.  The Court found that the factual issues sought to be precluded were the same as those that came before the state court for purposes of collateral estoppel and that the state court’s findings of fact established, as a matter of law, all of the elements required for nondischargeability under §§ 523(a)(2)(A) and (a)(4).  Accordingly, the Court granted the Plaintiff’s motion, entered judgment in his favor, and denied the Debtor’s motion.

15 B 07325, 15 A 00866
Plaintiffs Estate of Rose M. Drabik, Mary Elizabeth Smith, Mary Katherine Paul, and chapter 7 trustee Brenda Porter Helms (collectively, the “Plaintiffs”) filed an adversary complaint against James T. Drabik (the “Debtor”), seeking a denial of the Debtor’s discharge pursuant to 11 U.S.C. §§ 727(a)(3) and (a)(4).  The Plaintiffs argued that the Debtor was not entitled to a discharge because he failed to keep or preserve information from which his financial condition could be ascertained and because he provided false, misleading, or inaccurate information in his initial bankruptcy petition, schedules, and statement of financial affairs.  After conducting an evidentiary hearing, the Court found that, given the documentary evidence and testimony at trial, the Debtor’s records were inadequate to allow the Court, the trustee, and the Debtor’s creditors to trace his financial dealings with any kind of accuracy and that the Debtor did not offer any reasonable justification for his failure to keep or preserve financial records.  Thus, the Court held that that failure supported denial of the Debtor’s discharge under 11 U.S.C. § 727(a)(3).  The Court further found that the Plaintiffs established that the Debtor “made a false oath or account” by filing initial bankruptcy documents with misstatements and omissions and that, together, those misrepresentations established a pattern of reckless indifference to the truth.  Accordingly, the Court also held that the Debtor was not entitled to a discharge pursuant to 11 U.S.C. § 727(a)(4)(A).  Based on these findings, the Court entered judgment in favor of the Plaintiffs and against the Debtor and, as such, denied the Debtor’s discharge.

17 B 11668
The chapter 13 trustee filed a motion to dismiss the case of Christopher V. Pratola pursuant to 11 U.S.C. § 1307(c).  The trustee asserted that there was cause for dismissal because Pratola owed educational debt of approximately $591,223 which exceeded the noncontingent, liquidated, unsecured debt limit of $394.725 set forth in 11 U.S.C. § 109(e).  Pratola argued that the educational debt was contingent and not subject to the debt limit because it was being paid under an income-based repayment plan.  The income-based repayment plan required monthly payments based on discretionary income and provided for the forgiveness of any remaining balance upon completion of a twenty-five year term.  The Court found that the educational debt was noncontingent for purposes of § 109(e) because it existed before the date of the filing of the petition and no future event needed to take place to fix its existence or amount.  Nevertheless, the Court found that there was no cause for dismissal under § 1307(c). After reviewing the relevant statutory language and case law, and determining that neither clearly required dismissal of the case, the Court examined the legislative history of § 109(e). The debt limits were created to stop owners of large business from filing under chapter 13 instead of chapter 11, not to preclude individuals with large amounts of educational debt from filing under chapter 13.  Accordingly, the Court denied the trustee’s motion to dismiss for lack of cause under § 1307(c).

16 B 29319, 17 A 00176
Mark Simon filed an adversary complaint against Constantino Joseph Boccarsi and Cari Ann Coglianese (the “Debtors”), seeking a determination that a debt owed to him by the Debtors by virtue of the entry of a state court default judgment was not dischargeable pursuant to §§ 523(a)(2)(A), (a)(4), and (a)(19).  Simon subsequently filed a motion for summary judgment on his securities fraud claim under § 523(a)(19).  He argued that the state court judgment was for securities fraud and that, thus, collateral estoppel barred the relitigation of his claim.  The Debtors contended that neither element required under § 523(a)(19) had been satisfied.  According to the Debtors, they did not commit securities fraud and the fact that the state court judgment was entered in default insulated the judgment from a finding of nondischargeability.  Based on the plain language of the statutory exception, the legislative history, and the reasoning in Meyer v. Rigdon, 36 F.3d 1375 (7th Cir. 1994), the Court found that the default judgment had preclusive effect in the nondischargeability action, because § 523(a)(19) preempted common law collateral estoppel.  The Court further found that the undisputed facts demonstrated that the two requirements of § 523(a)(19) had been satisfied through the entry of the judgment in the state judicial proceeding.  As such, the Court granted Simon’s motion for summary judgment and entered judgment in his favor.

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.