Cervac v. Littman (In re Littman)

• Decision Date: 18 August 2015
• Docket Number: No. 11-38875,14 C 9274,Appeal from: No. 12 A 155,11-38875
• Citation: 551 B.R. 355
• Parties: In re Kimberly A. Littman, Debtor. Susan K. Cervac, Plaintiff–Appellee, v. Kimberly A. Littman, Defendant–Appellant.
• Court: U.S. District Court — Northern District of Illinois

551 B.R. 355

In re Kimberly A. Littman, Debtor.

Susan K. Cervac, Plaintiff–Appellee

v.Kimberly A. Littman, Defendant–Appellant.

No. 11-38875

14 C 9274

Appeal from: No. 12 A 155

United States District Court, N.D. Illinois, Eastern Division.

Signed August 18, 2015

Kimberly Ann Littman, Chicago, IL, pro se.

Jeffrey Kimball Paulsen, William Jeffrey Factor, Factorlaw, Sara E. Lorber, The Law Office of William J. Factor Ltd., Chicago, IL, for Defendant–Appellant.

Joel A. Schechter, Law Offices of Joel A. Schechter, Chicago, IL, for Plaintiff–Appellee,

Memorandum Opinion and Order

Gary Feinerman

, United States District Judge

This appeal is from the bankruptcy court's award of summary judgment against the debtor in an adversary proceeding. For the following reasons, the bankruptcy court's judgment is vacated and the case remanded for further proceedings.

Background

Except where noted, the background is taken from the bankruptcy court's opinion. 517 B.R. 847 (Bankr.N.D.Ill.2014)

(reproduced at Doc. 1–11 at 484–85 and Doc. 1–12 at 1–20).

Kimberly Littman (the debtor), Susan Cervac, and Joseph Cervac are the children of Norma Cervac. In 1999, Norma created a living trust and appointed Kimberly as trustee, instructing her to administer the trust for the benefit of all three children upon Norma's death. Norma died in 2006. In January 2009, Susan and Joseph sued Kimberly, alleging that she misappropriated trust assets. Around that time, Susan began making phone calls to Kimberly and Kimberly's daughters and friends. According to Kimberly, Susan repeatedly accused her of stealing from their mother's estate and threatened her with jail. Susan wrote emails to Kimberly's daughter “stating things that no daughter should hear about her mother from her aunt.” Doc. 12 at p. 7, ¶ 24. Apparently the abuse took its toll. “At the time of the harassment,” Kimberly says, her “emotional state was very difficult; she was trying to deal with [Susan]'s issues and ... get [Susan] out of her life.” Id . at p. 8, ¶ 35.

In October 2009, Kimberly attended a meeting with her two daughters, her son, a close friend, and a cousin. Kimberly claims that she agreed to give Susan three storage units' worth of furniture, artwork, porcelain, and other family memorabilia. Susan was not present at the meeting, but she later cleaned out the storage units with the help of several family members, including Kimberly's son. Susan placed some of the items from the storage units in an empty house so they could be staged and sold by Leslie Hindman Auctioneers. This property netted approximately $3,500. Susan also sold a silver set and some dishware for $1,000 and collected $1,527 more at garage sales. A few pieces of property were abandoned during the loading process, including a large steel abstract sculpture by the artist Jene Highstein. See www.guggenheim.org/new-york/collections/collection-online/artists/bios/1011/ Jene?ighstein. Kimberly's son ultimately left the sculpture next to the dumpster because it was too heavy to load onto the truck; it has since vanished. Some other property, including a lamp, a statute, and a food processor, remained in Susan's possession.

Approximately one month after Susan took away the items from the storage units, the siblings settled their state court lawsuit. Kimberly, who was not represented by counsel, signed an agreed order prepared by Susan and Joseph's lawyer. While the parties do not give precise dates, they agree that the property transfer from Kimberly to Susan predated the agreed order. Doc. 13 at 10; Doc. 12 at p. 18, ¶ 171. The order provided that, within two years, Kimberly would pay total restitution to Susan of $49,451.60: $21,286.60 for improperly disbursed estate funds; $13,955 for attorney fee and costs; $14,000 for an outstanding loan; and $300 for landscaping services. Doc. 1–3 at p. 22, ¶¶ 2, 5. The order also provided that Kimberly would pay Joseph $24,426.60. Doc. 1–3 at p. 22, ¶ 3. The order required Kimberly to “allocate twenty percent (20%) of her net monthly income to the restitution payments” and “to sell whatever assets she may have to satisfy” her obligations. Id . at pp. 22–23, ¶¶ 4, 7. Kimberly never sold any assets or made monthly payments as a percentage of her income. However, in January 2011, she did assign a portion of two asbestos settlements to Susan.

In September 2011, shortly before the two-year restitution period had run, Kimberly declared bankruptcy. She listed the $49,451.60 debt to Susan as a disputed claim. In November and December 2011, Kimberly sent Susan three checks totaling $700, which she later said was an attempt to stop Susan from further harassing her.

On January 31, 2012, Susan initiated an adversary proceeding to declare the $49,561.60 nondischargeable under 11 U.S.C. § 523(a)(2)(A)

(debt obtained by false pretenses or fraud), § 523(a)(4) (debt for fraud or defalcation while acting in a fiduciary capacity), and § 523(a)(6) (debt for willful and malicious injury to another). Kimberly answered Susan's complaint and twice moved unsuccessfully to dismiss the adversary proceeding. Kimberly's counsel then withdrew. The bankruptcy court instructed Kimberly that she would be responsible for complying with all procedural rules and deadlines, but agreed to stay the proceedings for 21 days to give her time to find a new lawyer. Kimberly elected to continue pro se .

Susan moved for summary judgment. The bankruptcy court set a briefing schedule and once again instructed Kimberly that she was responsible for complying with the court's procedural rules. Kimberly did not file a brief in opposition to summary judgment and did not appear at the status hearing once the briefing schedule was complete. The bankruptcy court granted Susan partial summary judgment, finding that $35,241.60—the portion of the debt attributable to the improperly disbursed funds and attorney fees—was nondischargeable but that the rest of the debt could be discharged. Doc. 1–8 at 42–48. The court entered judgment for Susan in the amount of $35,241.60. Doc. 1–12 at 27.

The following day, Kimberly, who had retained new counsel, filed a motion to vacate the judgment on account of excusable neglect. Her excuse was that she had understood the court to be ordering her to file her summary judgment response in person, and that she had arrived with papers in hand only to find a dark courtroom. Kimberly said that she then called chambers and learned of the post-briefing hearing, but wrote down the wrong date in her journal. When she finally learned of the correct date, she attempted to retain counsel on short notice but was unhappy with their proposed retention agreement; she could not attend the hearing herself because she could not get away from work. Doc. 1–8 at 50–51.

The court denied the motion to vacate, noting that it had warned Kimberly about following procedural rules and that she had confirmed that she understood the briefing schedule. Id . at 56–60. Kimberly then filed a second motion to vacate accompanied by a notice of appeal. The bankruptcy court held a three-day evidentiary hearing at which Susan, Kimberly, Kimberly's children, and others testified. Doc. 8 at 1–488. After post-hearing briefing, the court denied the second motion. 517 B.R. at 860–68

. The court credited Kimberly for the value of the property that Susan had auctioned or sold, but applied those sums to the dischargeable portion of Kimberly's debt. Id . at 868. The court also ordered Susan to return any unsold property to Kimberly. Id . at 868–69.

This appeal followed, with Kimberly, the appellant, once again proceeding pro se . Jurisdiction is proper under 28 U.S.C. § 158(a)(1)

, which grants the district court jurisdiction to hear appeals from bankruptcy court final judgments entered in cases referred under 28 U.S.C. § 157. See

Zedan v. Habash, 529 F.3d 398, 402 (7th Cir.2008) (“[T]he test we have utilized to determine finality under § 158(d) is whether an order resolves a discrete dispute that, but for the continuing bankruptcy, would have been a stand-alone suit by or against the trustee.... [T]he final disposition of any adversary proceeding falls within our jurisdiction.”); Fifth Third Bank v. Edgar Cnty. Bank & Trust, 482 F.3d 904, 905 (7th Cir.2007)

(“A final resolution of any adversary proceeding is appealable, as it is equivalent to a stand-alone lawsuit.”).

Discussion

As permitted by Federal Rule of Bankruptcy Procedure 8002(b)(3)

, Kimberly filed an amended notice of appeal challenging both the entry of summary judgment and the denial of her second motion to vacate the judgment. Doc. 1 at 6–7. Although Kimberly's Rule 8006 statement of issues lists seventeen different issues on appeal, id . at 16–18, her brief discusses only four, none of which focus on the summary judgment decision itself. The other thirteen issues are forfeited. See

Batson v. Live Nation Entm't, Inc., 746 F.3d 827, 833 (7th Cir.2014) (“[A]s the district court found, the musical diversity argument was forfeited because it was perfunctory and underdeveloped.”). Her brief's contents are lifted almost entirely from proposed findings of fact and conclusions of law submitted by Kimberly's previous lawyers on the second motion to vacate the judgment. Compare Doc. 12 with Doc. 1–11 at 2–33. Specifically, Kimberly contends that the bankruptcy court should have vacated or amended its judgment because: (1) her transfer to Susan of property from the storage units was an accord and satisfaction of the underlying debt, Doc. 12 at 25–29; (2) the state court judgment was the product of moral duress and therefore is void, id . at 30–31; (3) even if there was no accord and satisfaction, the transfer satisfied the debt because the property—including the Highstein sculpture, which Kimberly faults Susan for losing—was worth more than $46,000, id . at 31–32; and (4) Kimberly's failure to oppose the summary judgment motion was due to excusable neglect, id . at 32.

The motion to vacate was brought pursuant to...