In re Josefik
| Decision Date | 13 April 1987 |
| Docket Number | Bankruptcy No. 86 B 9406,86 A 1192. |
| Citation | 72 BR 393 |
| Parties | In re Clifford JOSEFIK, Debtor. OLD ORCHARD BANK & TRUST COMPANY, Plaintiff, v. Clifford JOSEFIK, Nancy Josefik, Western National Bank of Cicero, Freedom Federal Savings and Loan Association, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Lord, Bissell & Brook, Chicago, Ill., for Clifford Josefik.
Cooper & Cooper, Ltd., Chicago, Ill., for Nancy Josefik and Western Nat. Bank.
Matthias & Bellah, Chicago, Ill., for Old Orchard Bank.
Dennis M. Sbertoli, Brookfield, Ill., and Joseph Tecson & Associates, Chicago, Ill., for Freedom Federal.
This matter is before the Court on the defendants' motion to dismiss the complaint filed by the OLD ORCHARD BANK & TRUST COMPANY. The defendants, NANCY JOSEFIK and WESTERN NATIONAL BANK OF CICERO, and the plaintiff have each filed briefs in support of their respective positions.
As a preliminary matter, the defendants have failed to identify upon which portion of Rule 12 of the Federal Rules of Civil Procedure their motion to dismiss is predicated. It would be fair to assume that defendants seek relief under Rule 12(b)(6), Fed.R.Civ.P. Defendant, Nancy Josefik, has attached her affidavit along with a certified copy of her divorce decree to the motion to dismiss. Plaintiff has attached the depositional testimony of the debtor, Clifford Josefik, to its response. Plaintiff correctly notes that under Rule 12(b)(6), when "matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56." The conversion to a motion for summary judgment is triggered by the parties' submission of extra-pleading material, i.e., affidavits, depositions, and state court divorce decrees. Gautreaux v. Romney, 448 F.2d 731 (7th Cir.1971); see 5 C. Wright & A. Miller, Federal Practice and Procedure, Section 1366 (1969). The motion's caption is not determinative; 5 C. Wright & A. Miller, Federal Practice & Procedure, Section 1366 (1969). Therefore, the court shall consider defendants' motion as a motion to dismiss under Rule 12(b)(6), as well as a motion for summary judgment under Rule 56.
In order to grant a motion for summary judgment, this Court must be convinced that there exists ". . . no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law . . ." Fed.R.Civ.P., Rule 56(c). This Court is not permitted to try issues of fact presented by the pleadings and affidavits in deciding a motion for summary judgment. Moutoux v. Gulling Auto Electric, Inc., 295 F.2d 573 (7th Cir.1961); Carter v. Williams, 361 F.2d 189 (7th Cir.1966). Furthermore, when determining whether or not a material issue of fact exists in the present controversy, the Court must look at the record in the light most favorable to the party opposing the motion. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1961). All inferences must be construed in favor of the movant's opponent. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962).
For the reasons stated below the defendants' motion for summary judgment is denied.
In 1980, Old Orchard Bank & Trust Company Old Orchard, brought an action in the state court against the debtor, Clifford Josefik. In this lawsuit, Old Orchard sought to enforce a personal guaranty executed by the debtor in favor of Old Orchard. On October 29, 1985, Old Orchard obtained a judgment in the state court action against Mr. Josefik in the amount of $433,428.26. Of this amount, Old Orchard recovered only $1,176.00. Old Orchard then initiated post-judgment proceedings in the state court seeking to discover the nature and extent of Mr. Josefik's assets. Mr. Josefik was deposed on March 25, 1986. On June 18, 1986, Mr. Josefik filed his voluntary petition for relief under Chapter 7.
On October 22, 1986, Old Orchard filed an adversary complaint for fraudulent conveyance of property naming the debtor and his wife, Nancy Josefik, as defendants. Western National Bank of Cicero Western National was also named as an additional defendant in this lawsuit.1 Old Orchard contends that Clifford and Nancy Josefik reside at 5 Mockingbird Lane, Oak Brook, Illinois.2 This property is the subject of Old Orchard's complaint. Pursuant to a trust agreement, Western National, as trustee, is the legal titleholder of this property. Western National also holds a mortgage on the property. Prior to January 5, 1981, Mr. Josefik held a beneficial interest in the property as set forth in the trust agreement. In its complaint, Old Orchard alleges that Mr. Josefik fraudulently conveyed his beneficial interest in this property to his wife, Nancy Josefik. Old Orchard further alleges that Mr. Josefik, with the intent of defrauding his creditors, voluntarily made this conveyance while he was insolvent and that he did not receive any consideration for the conveyance. The conveyance occurred on February 5, 1981, which was the date Nancy Josefik accepted Mr. Josefik's assignment of his beneficial interest in the property.
In their motion to dismiss, Mrs. Josefik and Western National assert the statute of limitations as a defense to the action brought by Old Orchard. The defendants maintain that under Illinois law, fraud actions must be brought within five years from the time the cause of action accrued. According to the defendants, the statute of limitations started to run on February 5, 1981, which was the date Nancy Josefik accepted Mr. Josefik's assignment of his beneficial interest in the property. By this standard, Old Orchard's complaint, which was filed on October 22, 1986, was unquestionably filed after the five-year limitation period had run.
In her affidavit, defendant Nancy Josefik states that she and her husband are divorced — a fact which is never mentioned in Old Orchard's complaint. The Josefiks were married in 1956. After 24 years of marriage, Nancy Josefik filed for divorce on the grounds that she had been subjected to her husband's extreme and repeated mental cruelty. The Josefiks were separated on July 24, 1980. Their divorce became final on December 22, 1980. Nancy Josefik further alleges that she accepted Mr. Josefik's beneficial interest in the property in lieu of her right to periodic allowances for support and maintenance. The terms by which Mr. Josefik was to have conveyed his beneficial interest in the property were set forth in the divorce decree.3
In its response, Old Orchard first contends that the statute of limitations did not begin to run until its monetary claim against Mr. Josefik in the state court lawsuit was reduced to judgment. Since Old Orchard's state court claim was not reduced to judgment until October 29, 1985, Old Orchard argues that its complaint filed on October 22, 1986 comes within the limitations period.
Second, Old Orchard contends that as a matter of law the limitations period started to run at the time Old Orchard knew or should have known of the fraud. On this point, Old Orchard alleges that it first discovered the debtor had conveyed his beneficial interest in the property when it took debtor's deposition on March 25, 1986 pursuant to the post-judgment state court proceeding. Old Orchard further alleges that it could not have known of the debtor's conveyance of his beneficial interest in the property since transfers of beneficial interests in land trusts in Illinois are private transactions and are not a matter of public record.
In their reply, defendants first contend that Old Orchard could have initiated the present fraudulent conveyance action prior to reducing its claim to judgment. Second, defendants contend that Old Orchard's complaint is deficient since under Illinois law parties are required to plead in the complaint facts which would explain why the discovery of the fraud could not have occurred sooner. Therefore, the defendants conclude that the present action is barred by the statute of limitations because Old Orchard failed to make this specific pleading in its complaint.
Finally, the defendants contend that Old Orchard could have known of the debtor's conveyance of his beneficial interest in the property since the Josefiks' divorce decree — which contains the provision providing for the conveyance — is a matter of public record. In essence, the defendants are asserting that if Old Orchard had exercised due diligence it could have learned of the debtor's conveyance back in 1981, and it could have timely filed a fraud action against the debtor and the other named defendants.
The Court shall now address the issues raised by the parties.
When applying state substantive law, federal courts look to the limitations act in the forum state since there is no general federal statute of limitations. Suslick v. Rothschild Securities Corporation, 741 F.2d 1000, 1004 (7th Cir.1984). The appropriate statute of limitations for fraud actions in Illinois is the five-year limitations imposed by Ill.Rev.Stat. ch. 110, ¶ 13-205 (1981), which provides, inter alia, that "all civil actions not otherwise provided for, shall be commenced within five years next after the cause of action accrued." The Supreme Court of Illinois has held that this portion of the limitations act governs the time which fraud actions can be brought in Illinois. Rozny v. Marnul, 43 Ill.2d 54, 69, 250 N.E.2d 656, 664 (1969) () (Ill.Rev.Stat. ch. 83, § 16 1969), which was recodified as Ill.Rev.Stat. ch. 110, ¶ 13-205 (1981); see, Kinsey v. Scott, 124 Ill.App.3d 329, 79 Ill.Dec. 584, 463 N.E.2d 1359 (1984). In short, Illinois law requires that fraud actions must be brought within five years after the cause of action accrued. Ill.Rev.Stat. ch. 110, ¶ 13-205.
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