In re Cahill
| Decision Date | 15 August 2022 |
| Docket Number | Case No. 16 B 1529 |
| Citation | 642 B.R. 813 |
| Parties | IN RE: Marie A. CAHILL, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Attorney for Debtor: David P. Lloyd, David P. Lloyd, Ltd., 615B S. LaGrange Rd., LaGrange, IL 60525.
Attorney for Trustee, David P. Leibowitz : David P. Leibowitz, Linda Green, Law Offices of David P Leibowitz LLC, 3478 N. Broadway, Ste Unit 207, Chicago, IL 60657-2516.
Attorney for Surgery Partners: James W. Kapp, III, McDermott Will & Emery LLP, 444 West Lake Street, Suite 4000, Chicago, IL 60606-0029, Darren Azman, McDermott Will & Emery LLP, One Vanderbilt Avenue, New York, NY 10017.
U.S. Trustee, Patrick S. Layng : Office of the U.S. Trustee, Region 11, 219 S Dearborn St, Room 873, Chicago, IL 60604.
This matter comes before the court on the motion of Surgery Partners, Inc. ("Surgery Partners") for entry of an order compelling the chapter 7 Trustee ("Trustee") to comply with his duties under 11 U.S.C. § 704(a) ("Motion to Compel"). The Trustee filed an objection to the Motion to Compel ("Objection"), and Debtor Marie A. Cahill ("Debtor") filed a response in opposition. Surgery Partners filed a reply ("Reply"). Having reviewed the papers and heard the arguments of the parties, the court will: (1) grant the Motion to Compel to the extent Surgery Partners seeks to compel the Trustee to provide information regarding certain litigation; (2) deny the Motion to Compel to the extent it seeks a determination that Trustee's special counsel has a conflict that was not properly disclosed at the time the court approved its employment; and (3) deny the Motion to Compel to the extent Surgery Partners seeks a finding that this is a surplus estate.
Debtor filed for relief under chapter 7 of the Bankruptcy Code on January 19, 2016. Among other items in her schedules, Debtor stated that: (1) the value of her household goods and furnishings is $2,700; (2) she made payments totaling more than $600 to U.S. Bank Home Mortgage and to Michael J. Marcuccilli within 90 days of her petition date; (3) she did not transfer any property within two years of filing for relief under the Bankruptcy Code; and (4) she did not give any gifts with a value of more than $600 within two years of the petition date. See EOD 1, pp. 11, 35-38.
On February 18, 2016, the Trustee conducted the meeting of creditors under 11 U.S.C. § 341(a). He adjourned the meeting to March 1, 2016. See EOD 10. The same day as the continued meeting, Debtor amended her schedules and Statement of Financial Affairs to provide: (1) the value of her household goods and furnishings "including antique furniture Debtor uses in home" was $15,000 rather than $2,700; (2) in addition to U.S. Bank and Marcuccilli, Debtor made payments of $1,500 each to Wendy R. Morgan and Lester Barclay; (3) she signed a disclaimer of inheritance rights on March 17, 2015; and (4) she gave her daughter, Katrina Bellocchio ("Bellocchio"), a 1.12 karat diamond ring on April 18, 2013. See EOD 12 and 13.
On March 23, 2016, Debtor amended Schedules A and B for a second time. She reduced the value of her household goods and furnishings from $15,000 to $5,565 and attached an appraisal supporting the new valuation dated as of March 20, 2016. See EOD 16. A few weeks later, the Trustee adjourned the 341 meeting to April 21, 2016. See EOD 17.
On April 18, 2016, the Trustee filed a motion to extend time to object to Debtor's exemptions and discharge (the "First Extension Motion"). See EOD 19. He alleged that the Id. , ¶ 6. The court granted the First Extension Motion. See EOD 22.
On May 9, 2016, the Trustee entered an initial report of assets on the case docket. See EOD 23. Three weeks later, the Debtor amended her schedules for the third time, modifying her answer to Question 28 on Schedule B and indicating that she expected tax refunds in the amount of $3,938. See EOD 26.
The same day Debtor filed her third amended schedules, the Trustee filed an application to retain himself and his law firm (the "Application") in order to pursue "the Debtor's fraudulent transfer of a diamond ring to her daughter, the Debtor's transfer of property to her sister, and the liquidation of Debtor's antique furniture." See EOD 27, ¶ 7. He also filed a motion for Rule 2004 examination (the "Rule 2004 Motion") seeking further information regarding the two transfers as well as "the Debtor's pleading in state court on February 19, 2016, claiming she made payments in excess of $250,000 to Wendy Morgan." See EOD 28, ¶ 6.
The court approved the Application and granted the Rule 2004 Motion on June 14, 2016. See EOD 29 and 31. On the same day the court signed those orders, the Trustee filed a second motion to extend time to object to Debtor's exemptions and discharge (the "Second Extension Motion"). See EOD 30. He asked for additional time because he "has not, as yet, received satisfactory answers to his questions about the Debtor's assets, nor has the Debtor complied with his request to turnover an unscheduled diamond ring." Id. , ¶ 7. The court granted the Second Extension Motion. See EOD 32.
On August 8, 2016, the Trustee filed a complaint against Bellocchio. 16 A 517, EOD 1 (the "Complaint"). In the Complaint, the Trustee alleged that "Debtor transferred the Ring to her daughter as a result of her problematic financial situation and the magnitude of her debts, in order to prevent the Ring from being available to satisfy her creditors’ claims." Id. , ¶ 16. The Trustee also alleged that, upon information and belief, the diamond ring had an appraised value of $10,000. See id. , ¶ 13.
A week later, the Trustee filed a third motion to extend time to object to Debtor's exemptions and discharge (the "Third Extension Motion"). See EOD 35. He asserted that he needed additional time to investigate because he was looking into "the true nature of Debtor's assets[.]" Id. , ¶ 6. The court granted the Third Extension Motion. See EOD 39.
On August 22, 2016, the Debtor filed a motion to compel abandonment (the "Abandonment Motion"), alleging that her household goods and furnishings had minimal value to the estate, and that pursuit of the assets would be burdensome and of inconsequential benefit to the estate. She asked the court to compel the Trustee to abandon the estate's interest in her furniture and household items. See EOD 37. That same day, Debtor also filed a motion seeking authority to submit restricted documents (the "Restricted Motion"), stating that she held an asset that had been unknown on the petition date. EOD 36, ¶ 2. She sought leave to file an amended Schedule B as a "restricted document" pursuant to Local Bankruptcy Rule 5005-4.1 Id. , ¶ 3.
At the court hearing on August 30, 2016, the Debtor withdrew the Restricted Motion. See EOD 40. The court continued the Abandonment Motion to November 15, 2016.
On September 6, 2016, the Debtor amended her schedules for the fourth time. She added to Schedule B a "[p]otential claim against third party" with an unknown value. See EOD 42, p. 5. The Trustee eventually filed litigation based on this potential claim (the "Qui Tam Action").
The Trustee filed his first Individual Estate Property Record and Report on October 8, 2016 (the "2016 Report"). See EOD 44. He estimated the gross value of the remaining assets in the estate to be $57,558.75. In the 2016 Report, the Trustee wrote:
Debtor has generally been evasive and untruthful/incomplete in her disclosures to the Trustee. Trustee has reason to believe she has hidden assets .... The Trustee continues to investigate these hidden assets. To date, the Trustee has received Debtor's 2015 state and federal tax refunds. He will demand the turnover of the non-exempt funds in Debtor's bank accounts. 2004 examinations to be conducted. Complaint to be filed re: diamond ring.
On October 14, 2016, Trustee filed a fourth motion to extend time to object to exemptions and discharge (the "Fourth Extension Motion"). See EOD 47. The court granted the Fourth Extension Motion. See EOD 48.
A few days later, Bellocchio filed a paper titled "Motion to Compel Abandonment of Asset." See 16 A 517, EOD 10. She asserted that the subject of the Complaint was a diamond, not a ring, and that Debtor had promised to give her the diamond "when I turned eighteen (18) years of age many years ago." Id. , ¶ 7. She stated that the Debtor gave it to her in April 2013. See id. , ¶ 9. Bellocchio also filed a "response" to the Complaint. See 16 A 517, EOD 11. Both filings were done pro se.
On November 9, 2016, the Debtor filed a motion for Rule 2004 examination (the "Debtor Rule 2004 Motion"). She asked the court to authorize the Trustee to conduct a Rule 2004 examination regarding the "potential claim" (which eventually became the Qui Tam Action) on her fourth amended Schedule B. See EOD 49.
The Debtor desires to disclose the details of the claim to the Trustee, but is limited by law in her ability to do so without protecting the confidential nature of the claim.... The Debtor desires to attend a Rule 2004 examination to provide details of the claim, with disclosure of the claim limited by order of this Court. The Debtor has attached a proposed order that would provide for an examination and protect the information regarding the claim.
Id. , ¶¶ 3, 5.
The court granted the Debtor Rule 2004 Motion on November 22, 2016, see EOD 53, and on the same day also granted the Abandonment Motion, see EOD 52.
The court entered the...
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