Cuene v. Peterson (In re Peterson)
Citation | 604 B.R. 751 |
Decision Date | 09 July 2019 |
Docket Number | Adversary No. 18-2259-beh,Case No. 18-29081-beh |
Parties | IN RE: Daniel Scott PETERSON dba DC Boatlift, Dock & Trailer LLC, Debtor. Herbert J. Cuene, Jr. and DC Docks and Boatlifts, Inc., Plaintiffs, v. Daniel Scott Peterson, Defendant. |
Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Eastern District of Wisconsin |
Curtis R. Czachor, Czachor, Polack & Borchardt Law, LLC, Green Bay, WI, for Plaintiffs.
Daniel Scott Peterson, Sturgeon Bay, WI, pro se.
DECISION ON PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT
In October 2012, plaintiff Herbert Cuene purchased a business known as DC Boatlift Dock & Trailer from defendant Daniel Peterson. The parties' subsequent business relationship was anything but smooth sailing. Within a year Peterson sued Cuene and his new business (renamed "DC Docks and Boat Lifts, Inc.") in state court, seeking, among other things, replevin of personal property that Peterson alleged was not included in the sale. Cuene counterclaimed, asserting several causes of action including intentional misrepresentation and theft. Cuene succeeded on his counterclaim and was awarded a default judgment of over $400,000.
Cuene then attempted to collect on his judgment by executing against several parcels of real estate owned by Peterson. Peterson, in turn, asserted that the property was not owned by him , but by various trusts to which he had transferred the property for estate planning purposes—meaning the property could not be reached by his creditors to satisfy judgments against him. The Door County Circuit Court disagreed. It found that the trusts at issue were nothing more than Peterson's alter egos, and therefore the real property titled to them could be reached by Peterson's creditors. Shortly after Cuene tried to execute against some of this real property, Peterson filed a Chapter 7 bankruptcy.
Cuene filed a proof of claim in the bankruptcy for over $450,000. He also brought this adversary proceeding seeking an order either denying Peterson a discharge under 11 U.S.C. § 727(a)(4)(A) or, alternatively, holding that the debt owed to Cuene is non-dischargeable under 11 U.S.C. § 523(a)(2)(B) and/or (a)(6). Cuene has asked this Court to grant him summary judgment on his causes of action under sections 727(a)(4)(A) and 523(a)(2)(B). Peterson objects.
For the reasons set forth below, the Court concludes that there are no genuine issues of material fact and that Cuene is entitled to judgment as a matter of law on his claim under section 727(a)(4)(A). The Court therefore grants summary judgment to Cuene on Count III of the complaint. The Court also holds, in the alternative, that issue preclusion applies with respect to the state court default judgment against Peterson, and that, as a result, all elements of Cuene's claim under section 523(a)(2)(B), other than "reasonable reliance," have been established as a matter of law.
The Court has jurisdiction under 28 U.S.C. § 1334 and the Eastern District of Wisconsin's July 16, 1984, order of reference entered under 28 U.S.C. § 157(a). This is a core proceeding under 28 U.S.C. §§ 157(b)(2)(I) and (J). This decision constitutes the Court's findings of fact and conclusions of law under Fed. R. Bankr. P. 7052.
The following facts, taken from the parties' summary judgment briefing and other public records of which the Court may take judicial notice,1 are either undisputed, or not subject to reasonable dispute. They describe two separate state court actions, one of which was appealed, together spanning five years.
On April 24, 2013, Peterson, through an attorney, filed a lawsuit against the plaintiffs in the Circuit Court for Door County, Wisconsin, Case No. 13-CV-81. Two other entities were also plaintiffs – EZ Marketing Trust and DC Boatlift Dock & Trailer LLC. In response, Cuene and DC Docks and Boat Lifts, Inc. filed an answer and counterclaim. The parties engaged in discovery through 2015. Without his counsel, Peterson filed an amended complaint, alleging he had been assigned all rights owned by EZ Marketing Trust and DC Docks and Boat Lifts against Cuene et al. Peterson appeared at several hearings in the case, including a September 23, 2014 status conference, a November 25, 2014 hearing on Cuene's motion to compel discovery (which the circuit court judge, Peter Diltz, granted), a March 3, 2015 hearing on Cuene's motion for leave to file a second amended counterclaim (which the judge also granted), and a May 1, 2015 hearing on Peterson's attorney's motion to withdraw as counsel (which the judge also granted).
Cuene filed his second amended counterclaim on July 29, 2015. The second amended counterclaim alleged five causes of action, for: (1) intentional misrepresentation, (2) breach of contract, (3) misrepresentation under Wis. Stat. § 100.18, (4) civil theft under Wis. Stat. § 895.446, and (5) breach of implied warranty. See ECF Doc. No. 18, at 56–63, Exhibit 13. The allegations relate to a 2012 transaction in which Cuene purchased the business known as DC Boatlift Dock & Trailer from Peterson. See id. Relevant here, Cuene's second amended counterclaim alleged that:
In September 2015, Peterson, pro se , filed a motion to dismiss the second amended counterclaim. The court held a hearing on the motion on December 1, 2015 and asked the parties to brief the issue. Judge Diltz subsequently denied the motion in a March 8, 2016 decision. See ECF Doc. No. 18, at 64–65, Exhibit 14.
On April 11, 2016, Cuene filed a motion for default judgment. Judge Diltz granted the motion on April 25, 2016. The order for default judgment provided that Cuene and his business, DC Docks and Boat Lifts, Inc., were "entitled to default judgment on their second amended counterclaim jointly and severally against Daniel S. Peterson and DC Boatlift Dock & Trailer, LLC." Id. The order also provided that the court would schedule a hearing to determine the amount of damages to be awarded. Id.
The court held an evidentiary hearing on damages on August 9, 2016. Judge Donald Zuidmulder presided. The public docket for the case describes the hearing as follows:
At the August 9 evidentiary hearing, Cuene presented testimony, as well as the following documents:
After considering the evidence presented, Judge Zuidmulder made the following findings on the record:
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