In re Leigh
| Citation | 165 BR 203 |
| Decision Date | 31 January 1994 |
| Docket Number | Bankruptcy No. 92 B 14444. Adv. No. 92 A 01300. |
| Parties | In re Keith R. LEIGH, Debtor. UNION NATIONAL BANK OF MARSEILLES, Plaintiff, v. Keith R. LEIGH, Defendant. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
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Douglas Drenk, Douglas Drenk & Associates, P.C., Wheaton, IL, for Union Nat. Bank of Marseilles, plaintiff.
Charles J. Myler, Linda M. Holzrichter, Myler, Ruddy & McTavish, Aurora, IL, for Keith R. Leigh, defendant.
This matter comes before the Court on the motion of debtor Keith R. Leigh, (the "Debtor") for summary judgment pursuant to Federal Rule of Civil Procedure 56, incorporated by reference in Federal Rule of Bankruptcy Procedure 7056, on the complaint of Union National Bank of Marseilles (the "Bank") to determine the dischargeability of a certain debt owed it by the Debtor and for relief under the Illinois Uniform Fraudulent Transfer Act. The Bank's action is based upon a debt which arose from a judgment entered by the Circuit Court of the 13th Judicial Circuit, Grundy County, Morris, Illinois, alleged here to be non-dischargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A) and 523(a)(6). For the reasons set forth herein, the Court having considered the pleadings, exhibits, and affidavit, hereby grants the Debtor's motion for summary judgment. The Court further holds that Count I of the instant complaint is not barred under the doctrine of collateral estoppel. Additionally, Count II of the complaint is not barred under the doctrine of res judicata. The Court also strikes the Bank's demand for trial by jury.
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. Count I of the complaint seeks the determination of dischargeability which constitutes a core proceeding under 28 U.S.C. § 157(b)(2)(I). Count II, which seeks to set aside certain transfers as fraudulent conveyances, invokes the Illinois Uniform Fraudulent Transfer Act, which is also a core proceeding under 28 U.S.C. § 157(b)(2)(H) to avoid and recover fraudulent conveyances. See Bay State Milling Co. v. Martin, 145 B.R. 933, 946 (Bankr.N.D.Ill.1992).
The Debtor filed under Chapter 7 of the Bankruptcy Code on June 29, 1992. Thereafter, the Debtor received a discharge under 11 U.S.C. § 727 on December 10, 1992. Prior to the bankruptcy filing, on May 14, 1992, a judgment was entered in favor of the Bank and against the Debtor by the Circuit Court of the 13th Judicial Circuit, Grundy County, Illinois. The state court judgment arises from the granting of a summary judgment motion made there by the Bank against the Debtor as guarantor of a corporate note for Timekeeper Antiques, Inc. Summary judgment was entered only on Count II of a four-count complaint. Count II of the state court complaint sought judgment against the Debtor as maker of the note. Judgment was entered on Count II on May 14, 1992. Count I of the state court complaint sought judgment against the Debtor and his former wife, Carole A. Leigh, pursuant to the Family Expense Act, 750 ILCS 65/15. Count III of the state court complaint alleged a claim for relief against Carole A. Leigh and the Debtor pursuant to the Illinois Uniform Fraudulent Transfer Act, 740 ILCS 160/1 et seq. Finally, Count IV sought to pierce the corporate veil and sought a constructive trust against Carole A. Leigh, the Debtor and the corporation. Counts I and III of the state court complaint were dismissed as moot by order dated June 4, 1991. In addition, paragraphs six and seven of Count IV of the state court complaint were also dismissed as moot that same date. Subsequently, the remainder of Count IV was voluntarily non-suited on May 14, 1992.
The Bank filed the instant two-count complaint on September 25, 1992, accompanied by a demand for a trial by jury. The Bank seeks to have a judgment debt in the sum of $285,518.17 owed it by the Debtor found non-dischargeable pursuant to sections 523(a)(2)(A) and 523(a)(6) in Count I of the complaint. Count II of this complaint is brought under the Illinois Uniform Fraudulent Transfer Act. The Bank requests that alleged transfers of assets to parties other than the Debtor be voided or attached to the extent necessary to satisfy the Bank's claim, and that the Debtor and other parties be enjoined from disposing of or transferring assets until the Bank's judgment is satisfied.
The following facts give rise to the instant dispute. The Debtor has been the sole director, officer, and shareholder of Timekeeper Antiques, Inc. since January 9, 1990. See Affidavit of Debtor, ¶ 8. Prior to that time, Carole A. Leigh was the corporate president and sole shareholder. Id. On March 31, 1989, the Debtor executed a promissory note in the amount of $205,400.00, on behalf of Timekeeper Antiques, Inc. and in favor of the Bank. Affidavit of Debtor, ¶¶ 9 and 10. The note represented the renewal of previous loans to Timekeeper Antiques, Inc., and by its terms, became due and payable on September 27, 1989. Id. The renewal of loans was solely for the use of and benefit of Timekeeper Antiques, Inc., although no express representations to this effect were ever made by the Debtor. Affidavit of Debtor, ¶ 11. The note was a renewal of certain loans made by Carole A. Leigh, the Debtor and Timekeeper Antiques, Inc. The gist of the complaint is that the Debtor utilized Timekeeper Antiques, Inc.'s funds, obtained from the Bank, as though they were his own personal funds. The Bank contends that the Debtor and Carole A. Leigh took several steps to defraud the Bank. The Debtor has denied these allegations.
The Debtor filed an answer to the complaint on April 16, 1993, and subsequently amended same on August 6, 1993. In the amended answer, the Debtor sets forth several affirmative defenses. First, he claims that Counts I and II of this complaint were fully adjudicated in the state court action, and hence, the Bank should be collaterally estopped from raising those issues in this adversary proceeding. Next, the Debtor alleges that the complaint is barred under the doctrine of res judicata. Third, the Debtor asserts as an affirmative defense that the Bank has failed to state a claim upon which relief can be granted under section 523(a)(2)(A). The last affirmative defense set forth by the Debtor is that the discharge order, which was entered on December 10, 1992, bars the Bank from asserting the instant complaint against the Debtor. The Debtor filed the motion for summary judgment on August 6, 1993. The Debtor seeks to have the Bank's jury demand stricken.
The Bank, in its response to the motion for summary judgment, argues that there are material issues of fact and, that as a matter of law, the Debtor is not entitled to judgment. Further, the Bank states that the doctrines of collateral estoppel and res judicata do not bar this adversary proceeding. In addition, the Bank takes issue with the Debtor's arguments that the Bank has not stated a claim for which relief can be granted under section 523(a)(2)(A), and that it is not entitled to a trial by jury. Last, the Bank maintains that the discharge order did not discharge the Debtor's debt to the Bank.
In order to prevail on a motion for summary judgment, the movant must meet the statutory criteria set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 56(c) reads in part:
The judgment sought shall be rendered forthwith if 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.
Fed.R.Civ.P. 56(c); see also Donald v. Polk County, 836 F.2d 376, 378-379 (7th Cir.1988).
In 1986, the United States Supreme Court decided a trilogy of cases which encourage the use of summary judgment as a means to dispose of factually unsupported claims. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "The primary purpose for granting a summary judgment motion is to avoid unnecessary trials when there is no genuine issue of material fact in dispute." Farries v. Stanadyne/Chicago Div., 832 F.2d 374, 378 (7th Cir.1987) quoting Wainwright Bank & Trust Co. v. Railroadmens Federal Sav. & Loan Ass'n., 806 F.2d 146, 149 (7th Cir.1986). The burden is on the moving party to show that no genuine issue of material fact is in dispute. Anderson, 477 U.S. at 256, 106 S.Ct. at 2514; Celotex, 477 U.S. at 322, 106 S.Ct. at 2552; Matsushita, 475 U.S. at 585-586, 106 S.Ct. at 1355-1356. There is no genuine issue for trial if the record, taken as a whole, does not lead a rational trier of fact to find for the non-moving party. Matsushita, 475 U.S. at 587, 106 S.Ct. at 1356. "If the evidence is merely colorable or is not significantly probative, summary judgment may be granted." Anderson, 477 U.S. at 249-250, 106 S.Ct. at 2511 (citations omitted); see also Valley Liquors, Inc. v. Renfield Importers, Ltd., 822 F.2d 656, 659 (7th Cir. 1987), cert. denied, 484 U.S. 977, 108 S.Ct. 488, 98 L.Ed.2d 486 (1987).
The party seeking summary judgment always bears the initial responsibility...
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