In re Betts

• Decision Date: 16 June 1992
• Docket Number: Adv. No. 92 A 00325.,Bankruptcy No. 91 B 21706
• Citation: 142 BR 819
• Parties: In re John A. BETTS, Debtor. ATTORNEY REGISTRATION AND DISCIPLINARY COMMISSION OF the SUPREME COURT OF ILLINOIS, Plaintiff, v. John A. BETTS, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

142 B.R. 819 (1992)

In re John A. BETTS, Debtor ATTORNEY REGISTRATION AND DISCIPLINARY COMMISSION OF the SUPREME COURT OF ILLINOIS, Plaintiff, v. John A. BETTS, Defendant.

Bankruptcy No. 91 B 21706, Adv. No. 92 A 00325.

United States Bankruptcy Court, N.D. Illinois, E.D.

June 16, 1992.

COPYRIGHT MATERIAL OMITTED

M. Scott Michel, U.S. Trustee, Chicago, Ill.

Ruthe A. Howes, Chicago, Ill., for Attorney Registration and Disciplinary Com'n of the Supreme Court of Illinois.

Kenneth A. Kozel, LaSalle, Ill., for John A. Betts, debtor.

MEMORANDUM OPINION

JOHN H. SQUIRES, Bankruptcy Judge.

This matter comes before the Court on a motion to dismiss filed by the Debtor, John A. Betts, pursuant to Federal Rule of Civil Procedure 12(b), seeking to dismiss the adversary proceeding and complaint filed by the Attorney Registration and Disciplinary Commission of the Supreme Court of Illinois ("ARDC"). For the reasons set forth herein, the Court having reviewed the pleadings, exhibits and papers attached thereto, hereby denies the motion.

I. JURISDICTION AND PROCEDURE

The Court has jurisdiction to entertain this motion pursuant to 28 U.S.C. § 1334 and General Rule 2.33(A) of the United States District Court for the Northern District of Illinois. This matter constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(I), notwithstanding the argument raised by the Debtor that this adversary proceeding is non-core.

The Debtor alleges that proceedings to determine the dischargeability of a debt are core proceedings only when the estate has assets to administer. He concludes that if there is no estate to administer, then dischargeability determinations of claims are non-core related adversary proceedings. No authority for such proposition was cited, and hence is forfeited absent any legal support or sufficient explanation. Pelfresne v. Williams Bay, 917 F.2d 1017, 1023 (7th Cir.1990). The Court summarily rejects such conclusion. Even if a matter is non-core, that point is not a proper ground for dismissal of a complaint.

28 U.S.C. § 157(b)(2) provides that core proceedings include, but are not limited to, a number of various matters which specifically include determinations as to the dischargeability of particular debts. See 28 U.S.C. § 157(b)(2)(I). More importantly, the Debtor's unsupported point misses the mark by erroneously concluding that core proceedings only involve matters wherein there is an estate for a trustee to administer. This approach ignores the two central congressional policies underlying the Bankruptcy Code, namely a fresh start for a debtor and payment of creditors' claims. Whether or not there is a bankruptcy estate to be administered is not outcome determinative of either of these two central policies, both of which are implicated in dischargeability adversary proceedings. ARDC seeks to have its claim found not to be subject to an order of discharge. The Debtor, on the other hand, opposing same, understandably does not want his fresh start impaired by the survival of any more pre-petition debts than those statutorily excepted as outlined in section 523. Thus, it is logical and at the heart of bankruptcy jurisprudence to conclude that dischargeability determinations are core proceedings, regardless of whether there is an estate for a trustee to administer.

II. FACTS AND BACKGROUND

A. HISTORY OF THE PROCEEDINGS

On October 11, 1991, the Debtor, a practicing Illinois attorney, filed a pro se Chapter 7 petition. The petition was accompanied with a list of creditors which did not include ARDC. It was not accompanied with the requisite schedules of assets and liabilities and the statement of affairs as required by Official Bankruptcy Forms 6 and 7. On October 29, 1991, a notice of commencement of the case and of the initial section 341 meeting of creditors, set for November 21, 1991, was administratively issued by the Clerk of the Bankruptcy Court and served on the Debtor at his address of record, the interim Chapter 7 trustee, and the one scheduled creditor. That notice indicated that the deadline to file a complaint objecting to discharge of the Debtor, or to determine dischargeability of certain types of debts under 11 U.S.C. § 523(a)(2), (4) or (6) had to be filed by January 21, 1992.

The required schedules and statement of affairs were filed late on February 12, 1992. Thereafter, the interim trustee filed a no asset report on February 20, 1992. The attorney for ARDC filed an appearance on March 6, 1992, at the time a hearing was had on ARDC's motion for additional time to allow the filing of objections to discharge. On March 20, 1992, ARDC filed the instant adversary proceeding to determine dischargeability of a debt pursuant to section 523(a)(7), not an objection to discharge under 11 U.S.C. § 727.

The complaint alleges, inter alia, that ARDC is the agency established by the Supreme Court of Illinois pursuant to Ill. Rev.Stat. ch. 110A, para. 751 et. seq., to investigate and prosecute allegations of attorney misconduct. The complaint alleges that the Debtor was licensed to practice law in the state of Illinois and was suspended for a six-month period back in May, 1986 for engaging in attorney misconduct and was investigated and prosecuted by ARDC. Copies of the relevant Supreme Court of Illinois opinions and orders were attached to the complaint. The complaint further alleges that Illinois Supreme Court Rule 773 provides that an attorney who is the subject of a disciplinary proceeding that results in the imposition of discipline has a duty to reimburse ARDC for costs incurred. In addition, the complaint asserts that ARDC, in conjunction with the investigation and prosecution of the matter which led to the Debtor's suspension, incurred costs in the amount of $3,833.06, which was the subject of an order by the Supreme Court of Illinois entered on June 25, 1991 assessing costs against the Debtor, entering a judgment against him in said amount, and ordering him to pay same within thirty days thereafter. Moreover, the complaint claims that the judgment is unpaid and constitutes a fine, penalty or forfeiture payable to and for the benefit of ARDC as a governmental unit, and accordingly is nondischargeable pursuant to section 523(a)(7).

B. CONTENTIONS OF THE PARTIES

The Debtor has retained separate counsel who has entered a supplemental appearance and filed the instant motion to dismiss. The Debtor argues two principal grounds in addition to the above discussed contention that the matter is non-core. First, the Debtor contends the filing of the complaint is untimely, and that the previous motion for extension of time filed by ARDC was void because allegedly made ex parte. Second, the Debtor maintains the Court lacks in personam jurisdiction because a copy of the summons purportedly served on the Debtor with the complaint was not issued by the Clerk of the Bankruptcy Court, and was undated, unsigned and did not contain the information about the assigned number and initial status hearing in the subject adversary proceeding.

In its response, ARDC contends that when the Debtor filed the case, he failed to schedule ARDC and that it did not receive actual notice of the filing of the petition and pendency of the Chapter 7 case until sometime in late January, 1992. ARDC thereafter served out its motion to extend time on the Debtor at his address of record via overnight mail which service allegedly was refused. ARDC further contends that when it filed the instant complaint, it had the Clerk issue a summons which was served on March 20, 1992, in accordance with the requirement of Federal Rule of Bankruptcy Procedure 7004(b)(1). A fully executed copy of the summons was also later served by letter of transmittal to the Debtor dated April 8, 1992. Thus, ARDC contends the dischargeability complaint was timely filed, adequately served, and states a meritorious cause of action. In reply, the Debtor reasserts the original grounds argued in the motion, adds ad hominem attacks on ARDC and its attorney, and concludes that ARDC has proceeded improperly. For purposes of deciding the motion, the Court will not reach the merits of the complaint although both sides argue same.

III. DISCUSSION

A. STANDARDS ON MOTIONS TO DISMISS

Notice pleadings filed under Rule 8 of the Federal Rules of Civil Procedure should be liberally construed. Sutliff, Inc. v. Donovan Cos., 727 F.2d 648, 653 (7th Cir.1984). Rule 8 applies in adversary proceedings filed as related matters under the Bankruptcy Code pursuant to Federal Rule of Bankruptcy Procedure 7008. "A complaint under Rule 8 limns the claim; details of both fact and law come later, in other documents. Instead of asking whether the complaint points to the appropriate statute, a court should ask whether relief is possible under any set of facts that could be established consistent with the allegations." Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir.1992).

In order for the Debtor to prevail on the motion to dismiss under Rule 12 and its bankruptcy analogue Rule 7012, it must clearly appear from the pleadings that ARDC can prove no set of facts in support of its claim which would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957); Meriwether v. Faulkner, 821 F.2d 408, 411 (7th Cir.1987), cert. denied, 484 U.S. 935, 108 S.Ct. 311, 98 L.Ed.2d 269 (1987); Doe v. St. Joseph's Hospital, 788 F.2d 411, 414 (7th Cir.1986); Swanson v. Wabash, Inc., 577 F.Supp. 1308, 1312 (N.D.Ill.1983). The Seventh Circuit has emphasized that "despite their liberality on pleading matters . . . the federal rules still require that a complaint allege facts that, if proven, would provide an adequate basis for each claim." Gray v. County of Dane, 854 F.2d 179, 182 (7th Cir.1988). It is well established that alleging mere legal conclusions, without a factual predicate, is inadequate to state a claim for relief. Briscoe v. LaHue, 663 F.2d 713, 723 (7th...