Judge Janet S. Baer - Opinions

Judge Janet S. Baer

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.

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).