In re Jairath
| Decision Date | 08 March 2001 |
| Docket Number | Bankruptcy No. 98 B 31163. Adversary No. 99 A 934. |
| Citation | 259 BR 308 |
| Parties | In re Ravindra K. JAIRATH, Debtor. Jacob Bletnitsky, Plaintiff, v. Ravindra K. Jairath, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
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Russell C. Green, Parad Law Offices, Chicago, IL, for plaintiff.
James A. Chatz, Kamensky & Rubinstein, Lincolnwood, IL, for defendant.
This adversary proceeding relates to the Chapter 7 bankruptcy petition filed by Ravindra K. Jairath ("Jairath," "Defendant," or "Debtor") on October 2, 1998. Jacob Bletnitsky ("Bletnitsky" or "Plaintiff") filed a Complaint to determine whether the Debtor's debt to the Plaintiff is nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A). Bletnitsky contends that Jairath is not entitled to receive discharge of that debt because Jairath made false representations to Bletnitsky concerning the sale of an apartment building. Bletnitsky alleges that Jairath induced him to enter into a real estate contract for the property by misrepresenting the number of apartment units in the building that could lawfully be converted into condo units. Bletnitsky also claims that Jairath should not receive a discharge because he failed to keep a post-contract oral agreement to pay any additional property taxes not provided for in the contract.
Jairath moved for summary judgment. For reasons set forth below, the Debtor's Motion for Summary Judgment will be allowed by entry of separate judgment order.
On March 19, 1997 Jairath, as Seller, and Bletnitsky, as Buyer, entered into a real estate contract (the "Contract") for sale of an apartment building located at 930 Ontario in Oak Park, Illinois for a price of $3.1 million dollars. The contract closed on June 4, 1997.
The parties agree in their pleadings that Jairath represented to Bletnitsky that the building contained twenty-one apartments. Jairath's real estate broker had told Bletnitsky that the building contained twentyone units and the real estate broker's package also stated that the building contained twenty-one units.
While neither Jairath nor his realtor were shown to have stated expressly that all twenty-one units in the building were legally available to be converted to condos, Jairath's real estate broker represented that the building was suitable for conversion into condominiums. Also, the real estate broker's package provided: "for condo developer, this opportunity provides an opportunity with substantial returns." See Real Estate Broker Package, Investment Property Description.
The contract did not state the number of units in the building or warrant that the building was suitable for condominium use. In fact, the contract stated:
It is understood and agreed that the Property is being sold as is; that Buyer has or will have prior to the closing date inspected the Property; and that neither the Seller nor Agent makes any representation or warranty as to the physical condition or value of the Property or its suitability for the Buyer\'s intended use.
Real Estate Contract, ¶ 7. Bletnitsky admits in his interrogatory responses that prior to closing on the sale he and his partner, Alex Vaisman, inspected the property "two or three times", but Bletnitsky did not hire a professional inspector.
Prior to the closing on June 4, 1997, Bletnitsky received a copy of an inspection report prepared by an agency of the Village of Oak Park ("Oak Park"). The report stated that an inspection had taken place May 27, 1997, and that the apartment building contained only twenty units. On May 30, 1999, Bletnitsky wrote a letter to Jairath and indicated that he had received and read the Oak Park inspection report. In this letter, Bletnitsky stated that the inspection uncovered several violations, listed each violation, and estimated the repair costs at $88,595.
In September of 1997, Bletnitsky sought approval of Oak Park to convert all twenty-one units of the apartment building into condominiums. Oak Park informed Bletnitsky that twenty units could be converted but that unit 1E was an illegal apartment and must be demolished. Bletnitsky was unable to sell that unit as a condominium. Bletnitsky claims that he would not have paid $3.1 million dollars for the building had he known that it only contained twenty legal units. Bletnitsky claims that as a result of Jairath's representation that the building contained twenty-one units, he sustained a loss of $100,000.
On or about June 10, 1998, Bletnitsky initiated an arbitration proceeding against Jairath claiming that Jairath owed him money for the property taxes assertedly promised post-contract, and also for losses allegedly sustained due to Jairath's asserted misrepresentation. Jairath did not appear at the arbitration proceeding, and no arbitration award (if any was entered) is part of the record in this Adversary proceeding.
Jairath filed for Chapter 7 relief on October 2, 1998. The time for filing a complaint under 11 U.S.C. § 523(a)(2)(A) to determine the dischargeability of a debt is governed by Fed.R.Bankr.P. 4007(c). Under Rule 4007(c), such claim must be filed no later than 60 days after the first date set for the meeting of creditors under § 341(a) of the Code, Title 11 U.S.C. Bletnitsky filed this Adversary complaint on July 29, 1999, almost ten months after Jairath filed his bankruptcy petition. Bletnitsky waited almost ten months to file his complaint because he alleges that he did not receive any notice of the bankruptcy filing until that date, since he was not listed in the bankruptcy schedules. Defendant admits that Plaintiff was not scheduled, but denies that he lacked knowledge of the bankruptcy. However, Defendant did not move to dismiss the case under Rule 4007(c), and so Plaintiff's contention as to lack of notice was not contested.
A complaint may be considered timely even if filed after the bar date, if the creditor did not have notice of the bankruptcy case in order to request a timely determination of dischargeability. In re Dewalt, 961 F.2d 848 (9th Cir.1992); The Sophir Co. v. Heiney (In re Heiney), 194 B.R. 898 (D.Colo.1996); Shaheen v. Penrose (In re Shaheen), 174 B.R. 424 (E.D.Va.1994). See also 11 U.S.C. § 523(a)(3)(B). Here the creditor was unscheduled, so he did not have notice of the bar date, nor of the bankruptcy filing.
Further undisputed facts are set forth in the "Discussion" part of this opinion.
Jurisdiction over this matter lies under 28 U.S.C. § 1334 and 28 U.S.C. § 157, and the case is referred here by the District Court under Internal Operating Procedure 15(a). This matter constitutes a core proceeding under 28 U.S.C. 157(b)(2)(I).
Rule 56(c) of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Rule 7056 Fed.R.Bankr.P., provides that summary judgment is proper when "the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See Russo v. Health, Welfare & Pension Fund, Local 705, 984 F.2d 762 (7th Cir. 1993).
A moving party bears the burden of demonstrating absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Once the moving party has met that burden, the non-moving party must go beyond the pleadings and bring forth specific facts to establish that there is a genuine issue for trial. Becker v. Tenenbaum-Hill Assoc., Inc., 914 F.2d 107, 110 (7th Cir.1990). See also Matsushita Electric Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986). To defeat the motion, a non-moving party is required to do more than show mere existence of some possible doubt as to the material facts, but must show a factual dispute between the parties that is determinative of the outcome under applicable law. Id. at 586, 106 S.Ct. at 1356; Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986). The non-moving party may not rest on its pleadings or on conclusory allegations in affidavits. Waldridge v. American Hoechst Corp., 24 F.3d 918, 920-21 (7th Cir.1994); Cusson-Cobb v. O'Lessker, 953 F.2d 1079, 1081 (7th Cir. 1992).
In determining whether a genuine issue of material fact exists, all facts must be construed in the light most favorable to the non-moving party and all reasonable and justifiable inferences drawn in that party's favor. Popovits v. Circuit City Stores, Inc., 185 F.3d 726, 731 (7th Cir. 1999); See also Anderson, 477 U.S. at 255, 106 S.Ct. at 2513. However, not every conceivable inference must be drawn in favor of the non-moving party, only those inferences that are reasonable and present an outcome determinative disagreement between the parties. Richards v. Combined Ins. Co. of Am., 55 F.3d 247, 251 (7th Cir.1995); See also Anderson, 477 U.S. at 251-52, 106 S.Ct. at 2512.
The party seeking to establish an exception to the discharge of a debt bears the burden of proof, Selfreliance Fed. Credit Union v. Harasymiw (In re Harasymiw), 895 F.2d 1170, 1172 (7th Cir.1990), by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 291, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). Policies underlying the Bankruptcy Code require that exceptions to discharge be strictly construed against creditors and in favor of a fresh start for debtors, Goldberg Secs., Inc. v. Scarlata (In re Scarlata), 979 F.2d 521, 524 (7th Cir.1992), but the Code is intended to afford relief only to the honest but unfortunate debtor. Cohen v. de la Cruz (In re de la...
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