In re O'Malley
| Decision Date | 22 October 1999 |
| Docket Number | No. 95-B-12972.,95-B-12972. |
| Parties | In re Bessie O'MALLEY, Debtor. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
Duane O'Malley, Centralia, IL, Pro Se.
Patricia Norum, c/o Barbara Dutton, Chicago Heights, IL, United States Trustee.
Daniel Hoseman, Max Chill & Steven R. Radtke, Chill, Chill & Radtke, P.C., Chicago, IL, for trustee.
This proceeding relates to the bankruptcy case filed by Bessie O'Malley ("Debtor") on June 28, 1995 under Chapter 7 of the Bankruptcy Code, 11 U.S.C. 101 et seq. Duane O'Malley, ("O'Malley"), Debtor's husband, has filed a claim in the sum of $1,000,000. The claim is based in part on O'Malley's alleged right to real estate of which beneficial ownership was in Debtor's name and sold in part by her pre-bankruptcy and the rest sold by the chapter bankruptcy Trustee. O'Malley alleges that he was induced to transfer his half interest in that real estate to Debtor by the allegedly fraudulent actions of one or more individuals other than Debtor and that ownership of that interest should have been returned to him.
The Trustee objected to O'Malley's claim, arguing that he did not state a cause of action against the bankruptcy estate because the alleged fraudulent activities were by nondebtors, and because of inconsistencies in O'Malley's claim. For reasons stated below, Trustee's Objection to O'Malley's claim will be overruled in part and sustained in part. Read liberally this pro se claimant is considered to plead a claim for a possible resulting trust in property interest transferred to Debtor and sold in part by her and the balance by the Trustee. That possible claim might lie to the extent of half the net sale proceeds of each such sale, as unsecured claim for the pre-petition sale and a secured claim after administrative expenses for the sale out of bankruptcy. History of Property Transfer of Record and Pleaded by O'Malley
The following history appears from filings of the parties.
At all times mentioned here, Debtor was married to O'Malley. On or about January 28, 1986, O'Malley and Debtor purchased in joint tenancy five acres of undeveloped real estate in Orland Park, Illinois. This property was later subdivided into ten lots and became known as the Whispering Pines Subdivision.
On or about July 2, 1987, Debtor and O'Malley conveyed title to that property into Land Trust No. L-1639 at Harris Bank of Hinsdale. Under terms of the Land Trust Agreement, Debtor and O'Malley were owners of 100% of the beneficial interest in that trust as joint tenants. Harris Bank accepted the conveyance into the trust and executed the Land Trust Agreement.
On April 12, 1993, O'Malley was convicted of a crime in the Circuit Court of Cook County, Illinois and incarcerated. On or about July 15, 1993 he signed an amendment to Land Trust No. L-1639 ("Amendment to Land Trust") making Debtor owner of 100% of the beneficial interest in the Whispering Pines Subdivision. As more fully discussed below, he alleges that he did this to enable her to post the real estate as a bond pending appeal to secure his release from prison if such bond were set by the Court, so as to make that step immediately possible even if he were locked up and unavailable to sign papers. Harris Bank appears to have accepted that Amendment to the Land Trust.
O'Malley alleges and argues that the sole purpose for his signing the Amendment to the Land Trust to change Debtor's beneficiary interest to 100% was to enable the obtaining of a bond pending appeal in his criminal case, on his understanding based on representations of persons who induced his signature that if bond pending appeal were to be denied the Amendment to Land Trust was to become void.
Transcripts from the bond hearing appended by O'Malley to his claim and his pleadings reveal that his attorney proposed to the state criminal court judge to assign interest in real estate to the Clerk of the Circuit Court as security for his bond. O'Malley alleges that his counsel represented to him that if he transferred his beneficial interest to Debtor's name, should appeal bond be granted while he was incarcerated, the transfer of real estate interest to the Clerk of the Circuit Court to secure the bond would be completed more expeditiously by his wife on her sole signature. In that way, there would be no need for O'Malley's signature which would be complicated by his incarceration. O'Malley's counsel allegedly told him that this would alleviate time and efforts to mail documents to O'Malley in the state prison in downstate Illinois where he was located. The criminal court judge denied O'Malley's request for bond pending appeal on May 10, 1993 and again on June 6, 1993. Those decisions were appealed to the Illinois Appellate Court on July 30, 1993 (after O'Malley had transferred the entire beneficial trust interest to his wife) and O'Malley's appeal to set bond was denied by the latter court on August 2, 1993. However, his beneficial interest was not restored to his name; the entire interest continued to be held in his wife's name.
Debtor allegedly sold six lots out of the Whispering Pines Subdivision after transfer to her of O'Malley's interest and prior to her filing in bankruptcy. When Debtor filed for bankruptcy relief on June 28, 1995, that part of Whispering Pines Subdivision still in the Land Trust of which she was still sole beneficiary of record, was included as property of her bankruptcy estate. The Trustee, in the administration of the estate and pursuant to orders of this Court, sold the remaining four lots of Whispering Pines Subdivision over O'Malley's objections.
O'Malley filed his Claim # 014 as a secured claim in the amount of $1,000,000. Trustee filed his objection thereto arguing that the claim was filed late and was defective on its face and the claim failed to state a cause of action against Debtor's estate. O'Malley filed a Response to Trustee's Objection. After initial consideration of the claim and objection, an order was entered directing O'Malley to supplement his claim for fraud with specificity on the understanding that he was asserting a fraud claim against Debtor. O'Malley filed his Supplement to his Claim # 014 pursuant to that Order, stating in part that he did not accuse Debtor of fraud. Trustee filed his reply thereto, again urging that O'Malley has not stated a cause of action for fraud recoverable from Debtor's estate; that O'Malley's claim is internally inconsistent; and that any claim for fraud which O'Malley may have is against nondebtors.
O'Malley asserts that he did not give his consent for his wife to file bankruptcy. However, she did not file a joint case under 11 U.S.C. § 302, which would have required O'Malley's consent because a joint petition must be voluntary and jointly consensual. 2 Collier on Bankruptcy ¶ 302.02 (15th ed. rev.1999). One spouse cannot take the other into a case under Title 11 U.S.C. without the other's knowledge and consent, but this Debtor filed an individual bankruptcy petition. Therefore, O'Malley's complaint to the effect that his consent was required for his wife to file in bankruptcy is without any possible merit.
In addition, O'Malley has made many allegations of conspiracy and fraud by various individuals apart from that relating to transfer of his property interest. He alleges that all claims filed by a creditor named Randy Crosson or his company Industrial Fire Protection Inc. were based on his fraud. The Trustee objected to every claim filed by Randy Crosson and none of those claims were allowed. Therefore, O'Malley's allegation concerning those claims is moot.
O'Malley also contends that his previous attorney Alan Bernstein breached his fiduciary duty to him. He further asserts that he was defrauded by his retained attorney Edward Krzyminski, who allegedly caused him to sign the Amendment to Land Trust and allegedly collected $10,000 improperly after his wife's sale of real estate pre-bankruptcy. O'Malley also tries to allege fraudulent activity on the part of his attorney Lawrence Levin who represented him in his criminal matter concerning the bond pending appeal for allegedly promising O'Malley that he would be granted bond pending appeal, and for collecting a fee of $10,000. O'Malley alleges that Harris Bank and Southwest Financial Bank breached their fiduciary duty to O'Malley by failing to verify O'Malley's signature on the assignment or authenticate documentation for its certification. (While claiming that he did sign the papers because of certain promises, the latter contention infers a contradictory suggestion that he did not sign the papers.) As discussed below, however, this Court does not have jurisdiction over O'Malley's claims against nondebtors and his conduct by others does not give rise to a claim against the estate unless it is related to the possibility of resulting trust discussed below.
Jurisdiction lies under 28 U.S.C. § 1334 and the case has been referred here under The District Court Internal Operating Procedure 15(a) U.S.D.C., N.D. Ill., effective September 1, 1999. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(B). Venue lies under 28 U.S.C. § 1409.
A filed claim in bankruptcy is prima facie evidence of the validity of that claim. Fed. R. Bankr.P. 3001(f). The burden is on the objecting party to rebut the prima facie allowability of the claim. In re Missionary Baptist Foundation of Am., 818 F.2d 1135, 1143 (5th Cir.1987). Once the objector has produced some basis for calling into question allowability of a claim, the burden then shifts back to the claimant to produce evidence to meet the objection and establish that the claim in fact is allowable. In re Chapman, 132 B.R. 132, 143 (Bankr.N.D.Ill.1991). While the burden of going forward shifts during the claims objection...
To continue reading
Request your trial