Attorneys' Title Guaranty Fund, Inc. v. Wolf (In re Wolf)

• Decision Date: 15 October 2014
• Docket Number: Adversary No. 11ap00966.,Bankruptcy No. 11bk00701.
• Parties: In re Stephen A. WOLF, Debtor. Attorneys' Title Guaranty Fund, Inc., Plaintiff, v. Stephen A. Wolf, Defendant.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois

519 B.R. 228

In re Stephen A. WOLF, Debtor.Attorneys' Title Guaranty Fund, Inc., Plaintiff,

v.Stephen A. Wolf, Defendant.

Bankruptcy No. 11bk00701.

Adversary No. 11ap00966.

United States Bankruptcy Court,

N.D. Illinois,

Eastern Division.

Signed Oct. 15, 2014.

Ariel Weissberg, Esq., Weissberg & Associates, Ltd., Chicago, IL, for Debtor.

John A. Dienner, Esq., Barry P. Kaltenbach, Esq., Steven J. Rotunno, Esq., Kubasiak, Fylstra, Thorpe & Rotunno, P.C., Chicago, IL, for Plaintiff.

MEMORANDUM DECISION

TIMOTHY A. BARNES, Judge.

The matter before the court arises out of the Third Amended Complaint [Adv. Dkt. No. 53] (the “ Complaint ”), filed by Attorneys' Guaranty Title Fund, Inc. (“ ATG ”) in the above-captioned adversary proceeding (the “ Adversary ”), seeking a determination of dischargeability of debt under 11 U.S.C. § 523(a)(2)(A) and § 523(a)(6) against the debtor Stephen A. Wolf (“ Wolf ” or the “ Debtor ”).

More specifically, the Complaint asserts the following counts:

(a) Count I: nondischargeability under 11 U.S.C. § 523(a)(2)(A) of a debt owed directly by Wolf to ATG;

(b) Count II: nondischargeability under 11 U.S.C. § 523(a)(6) of that same debt;

(c) Count III: nondischargeability under 11 U.S.C. § 523(a)(2)(A) of a debt owed by Wolf but assigned to ATG; and (d) Count IV: nondischargeability under 11 U.S.C. § 523(a)(6) of the same debt as assigned to ATG.

The matter was tried before the court in a two and one-half day trial that took place from April 14, 2014 through April 16, 2014 (the “ Trial ”). For the reasons set forth herein, the court holds that the debt is nondischargeable by the Debtor, and finds in favor of ATG on Counts I and III of the Complaint.

This Memorandum Decision constitutes the court's findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure (the “ Bankruptcy Rules ”). A separate order will be entered pursuant to Bankruptcy Rule 9021.

JURISDICTION

The federal district courts have “original and exclusive jurisdiction” of all cases under title 11 of the United States Code (the “ Bankruptcy Code ”). 28 U.S.C. § 1334(a). The federal district courts also have “original but not exclusive jurisdiction” of all civil proceedings arising under title 11 of the United States Code, or arising in or related to cases under title 11. 28 U.S.C. § 1334(b). District courts may, however, refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).

A bankruptcy judge to whom a case has been referred may enter final judgment on any core proceeding arising under the Bankruptcy Code or arising in a case under title 11. 28 U.S.C. § 157(b)(1). A proceeding for determination of the dischargeability of a particular debt arises in a case under title 11 and is specified as a core proceeding. 28 U.S.C. § 157(b)(2)(I); Birriel v. Odeh (In re Odeh ), 431 B.R. 807, 810 (Bankr.N.D.Ill.2010) (Wedoff, J.); Baermann v. Ryan (In re Ryan ), 408 B.R. 143, 151 (Bankr.N.D.Ill.2009) (Squires, J.).

None of the parties have raised the issue of whether this court has constitutional authority to enter a final judgment on all counts of the Complaints in light of the United States Supreme Court's decision in Stern v. Marshall, 564 U.S. ––––, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). This court has an independent duty to determine whether it has such authority. Rutkowski v. Adas (In re Adas ), 488 B.R. 358, 379 (Bankr.N.D.Ill.2013) (Hollis, J.).

All of the counts in the Complaint are based on sections 523(a)(2)(A) and 523(a)(6) of the Bankruptcy Code. Section 523 is unequivocally a bankruptcy cause of action. While such actions may turn on state law, determining the scope of a debtor's discharge is a fundamental part of the bankruptcy process. See Deitz v. Ford (In re Deitz ), 469 B.R. 11, 20 (9th Cir. BAP 2012). As observed by one bankruptcy court, “there can be little doubt that [a bankruptcy court], as an Article I tribunal, has the constitutional authority to hear and finally determine what claims are non-dischargeable in a bankruptcy case.” Farooqi v. Carroll (In re Carroll ), 464 B.R. 293, 312 (Bankr.N.D.Tex.2011); see also Deitz, 469 B.R. at 20; White Eagle, Inc. v. Boricich (In re Boricich ), 464 B.R. 335, 337 (Bankr.N.D.Ill.2011) (Schmetterer, J.).

Thus, even in light of the Seventh Circuit's later opinions regarding Stern, see Wellness Int'l Network, Ltd. v. Sharif, 727 F.3d 751 (7th Cir.2013); Ortiz v. Aurora Health Care, Inc. (In re Ortiz ), 665 F.3d 906 (7th Cir.2011),¹ the court concludes that it has constitutional authority to enter a final judgment in this Adversary.

Accordingly, final judgment is within the scope of the court's authority.

PROCEDURAL HISTORY

In considering the relief sought by ATG, the court has considered the evidence and argument presented by the parties at the Trial, has reviewed the Complaint, the attached exhibits submitted in conjunction therewith, and has reviewed and found each of the following of particular relevance:

(1) Wolf's Answer to Plaintiff's Third Amended Complaint Seeking a Determination of the Dischargeability of a Debt [Adv. Dkt. No. 63] (the “ First Answer ”);

(2) Wolf's Answer to Counts I and II of Plaintiff's Third Amended Complaint Seeking a Determination of the Dischargeability of a Debt [Adv. Dkt. No. 88] (the “ Second Answer ”); ²

(3) Amended Final Pretrial Order Governing Complaint Seeking a Determination of the Dischargeability of a Debt [Adv. Dkt. No. 143];

(4) Joint Pretrial Statement, including the attached exhibits submitted in conjunction therewith [Adv. Dkt. No. 144] (the “ Joint Pretrial Stmt ”);

(5) ATG's Motion in Limine to Bar Evidence, Testimony or Defenses Disputing the Issues and Finds of Fact Against Wolf in the State Court Judgment [Adv. Dkt. 146];

(6) ATG's Motion in Limine to Bar Certain Testimony by Marc Smith [Adv. Dkt. 147];

(7) Order Denying ATG's Motion in Limine to Bar Evidence, Testimony or Defenses Disputing the Issues and Finds of Fact Against Wolf in the State Court Judgment [Adv. Dkt. 149];

(8) Order Denying ATG's Motion in Limine to Bar Certain Testimony by Marc Smith [Adv. Dkt. 150];

(9) ATG's Proposed Findings of Fact and Conclusions of Law [Adv. Dkt. No. 164];

(10) ATG's post-trial Supplemental Brief and Closing Statement [Adv. Dkt. No. 165];

(11) Wolf's Proposed Findings of Fact and Conclusions of Law [Adv. Dkt. No. 167]; and

(12) Wolf's post-trial Supplemental Brief and Closing Statement [Adv. Dkt. No. 168].

At the Trial, all of ATG's offered exhibits were admitted with no objection from Wolf. The exhibits offered by Wolf were admitted without objection, over the objections of ATG or upon the withdrawal of objections by ATG, except for the following: Exhibits No. 1, 2, 4–8, 10, 17–19, 21–25, 28, 29, 32, 37, 40 and 41.

The court has considered the procedural history and previous court filings in this Adversary, including:

(1) Wolf's Motion to Dismiss Counts I and II of Plaintiff's Third Amended Complaint Seeking a Determination of the Dischargeability of a Debt and related exhibits [Adv. Dkt. No. 65];

(2) ATG's Response to Wolf's Motion to Dismiss Counts I and II of Its Third Amended Complaint [Adv. Dkt. No. 68];

(3) Wolf's Reply to ATG's Response to Wolf's Motion to Dismiss Counts I and II of Its Third Amended Complaint and related exhibits [Adv. Dkt. No. 73];

(4) Order Denying Wolf's Motion to Dismiss Counts I and II of Plaintiff's Third Amended Complaint [Adv. Dkt. No. 85];

(5) ATG's Motion for Summary Judgment and related filings [Adv. Dkt. Nos. 113, 114, and 115];

(6) Wolf's Response to Statement of Material Facts in Support of ATG's Motion for Summary Judgment and Wolf's Additional Undisputed Facts [Adv. Dkt. No. 126];

(7) Wolf's Response to ATG's Motion for Summary Judgment and related filings [Adv. Dkt. No. 128];

(8) ATG's Reply Brief in Support of its Motion for Summary Judgment [Adv. Dkt. No. 130];

(9) ATG's Reply to Wolf's Statement of Additional Undisputed Facts [Adv. Dkt. No. 131];

(10) Order Denying ATG's Motion for Summary Judgment [Adv. Dkt. No. 135];

(11) ATG's Motion to Alter or Amend This Court's Order of October 2, 2013 (Order Denying ATG's Motion for Summary Judgment) [Adv. Dkt. No. 138]; and

(12) Order Denying ATG's Motion to Alter or Amend Judgment/Order (Order Denying ATG's Motion for Summary Judgment) [Adv. Dkt. No. 139].

Though the foregoing items do not constitute an exhaustive list of the filings in the Adversary, the court has taken judicial notice of the contents of the docket in this matter. See Levine v. Egidi, No. 93C188, 1993 WL 69146, at *2 (N.D.Ill. Mar. 8, 1993); In re Brent, 458 B.R. 444, 455 n. 5 (Bankr.N.D.Ill.2011) (Goldgar, J.) (authorizing a bankruptcy court to take judicial notice of its own docket).

BACKGROUND

This case arises as the result of an apparent scheme in which the defendant Wolf, W.W. Funding, Inc. (“ W.W. Funding ”) and other parties participated in order to take three parcels of real estate from Joseph J. Gambino (“ Gambino ”), as beneficiary of three separate land trusts that held title to the three subject properties (the “ Trusts ”), through the use of fraudulent, forged legal documents including forged deeds. The subject properties are located at 7460 North Milwaukee Avenue in Niles, Illinois (the “ Niles Property ”), 2738–40 North Kedzie Avenue in Chicago, Illinois (the “ Kedzie Property ”), and 3619 North Lavergne Avenue in Chicago, Illinois (the “ Lavergne Property ”, and together with the Niles Property and the Kedzie Property, the “ Properties ”).

In conjunction with the transactions by which the Properties were taken, the plaintiff ATG issued an owner title insurance policy to Wolf and W.W. Funding and a mortgagee title insurance policy to...