In re Maurice

• Decision Date: 31 March 1992
• Docket Number: Bankruptcy No. 89 B 11962,Adv. No. 90 A 0101.
• Parties: In re John A. MAURICE, Debtor. John F. DORNIK, Plaintiff, v. John A. MAURICE, Defendant.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois

138 B.R. 890 (1992)

In re John A. MAURICE, Debtor.
John F. DORNIK, Plaintiff,
v.
John A. MAURICE, Defendant.

Bankruptcy No. 89 B 11962, Adv. No. 90 A 0101.

United States Bankruptcy Court, N.D. Illinois.

March 31, 1992.

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Kenneth A. Kozel, LaSalle, Ill., for John A. Maurice, debtor/defendant.

Gerald M. Hunter, Gerald M. Hunter, Ltd., Oglesby, Ill., for John F. Dornik, plaintiff.

MEMORANDUM OPINION

JOHN H. SQUIRES, Bankruptcy Judge.

This matter comes before the Court on the complaint of John F. Dornik ("Dornik") pursuant to 11 U.S.C. § 523(a)(2) and (a)(6) for a determination of the dischargeability of a certain debt owed him by the debtor/defendant John A. Maurice (the "Debtor"), together with Dornik's motion for sanctions. For the reasons set forth below, the Court, having considered all the pleadings and evidence adduced at trial by way of testimony and exhibits, does hereby find the debt nondischargeable. The motion for sanctions is allowed.

I. JURISDICTION AND PROCEDURE

The Court has jurisdiction to entertain this adversary proceeding and 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. These matters constitute core proceedings under 28 U.S.C. § 157(b)(2)(I) and (O).

II. FACTS AND BACKGROUND

From July 1, 1978 to July 15, 1982, the parties engaged in a partnership for automobile and other vehicular repairs. In August 1982, Dornik sued the Debtor in the Circuit Court of LaSalle County, Illinois (the "circuit court") for dissolution of the partnership and an accounting of related assets and liabilities. In October 1987, the circuit court awarded a judgment against the Debtor in favor of Dornik. It found in relevant part that the Debtor used a $20,000.00 capital contribution made by Dornik to pay personal expenses after the money had been deposited in the Debtor's personal bank account. The Debtor appealed and a cross-appeal was filed by Dornik from a reduction ordered by the circuit court by reason of a capital contribution to the partnership made by the Debtor. In November 1988, the Illinois Appellate Court for the Third District (the "appellate court") affirmed most of the circuit court's ruling, but reversed the reduction, thereby imposing a $20,000.00 judgment against the Debtor. The Debtor thereafter sought leave to appeal to the Illinois Supreme Court. That appeal was denied resulting in a mandate issuing from the appellate court to the circuit court in May 1989.

The Debtor filed a Chapter 13 petition on July 20, 1989. The case was subsequently converted to Chapter 7 on August 28, 1989. An order was thereafter entered on December 4, 1989, setting February 26, 1990, as the last date for the filing of dischargeability complaints under section 523. On February 15, 1990, Dornik filed the instant adversary proceeding against the Debtor asserting that the Debtor's actions, as determined by the circuit and appellate courts, constitute fraudulent conduct violative

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of section 523(a)(2), as well as willful and malicious conversion under section 523(a)(6). The Debtor denies those contentions in his answer and raises several affirmative defenses. He asserts that this adversary proceeding is barred by the five-year statute of limitation established by Ill.Rev.Stat. ch. 110, para. 13-205 (1989). In addition, the Debtor argues that this proceeding is barred by the doctrines of res judicata and collateral estoppel

The bankruptcy case and this adversary proceeding were originally assigned to Judge David H. Coar, who conducted most of the pretrial hearings. He entered his Opinions denying the Debtor's motions to dismiss and a demand for jury trial on November 19, 1990 and April 1, 1991, respectively. On that latter date, he entered a second Prehearing Order concerning further proceedings in this matter. This order has never been vacated. Judge Coar's Prehearing Order, among other things, required the parties to exchange and file with the Court at least fourteen days prior to trial, copies of all exhibits to be offered at trial, along with a witness list and a brief summary of the witnesses' testimony. The Prehearing Order also required objections to the opponent's exhibits and witnesses to be filed at least seven days before trial, along with any proposed findings of fact and conclusions of law and any pretrial brief. The Prehearing Order further provided for sanctions for failure of a party to comply therewith, including preclusion from introducing any exhibits into evidence for failure to timely comply. It further stated that failure to object to the opponent's exhibits could constitute a waiver of objection. Among other potential sanctions included therein was the barring of any unendorsed or unlisted witnesses.

Judge Coar originally set this matter for trial for May 6, 1991, but for various reasons, continued same and reset the trial several times to May 13, 1991; August 26, 1991; October 28, 1991; and March 6, 1992. On November 15, 1991, Dornik's attorney filed pleadings in substantial compliance with the Prehearing Order which included a witness list, a brief summary of the witnesses' testimony and six exhibits. No compliance with the Prehearing Order was ever filed by the Debtor's attorney. He argues that the Prehearing Order lost its validity because of the continuances granted by Judge Coar.

Effective January 1, 1992, the Court's call for the counties of Will, Grundy, Kendall and LaSalle was reassigned from Judge Coar to the undersigned. This Judge denied all further requests for continuance of the scheduled trial. On March 6, 1992, Dornik and his attorney appeared at the scheduled time and place of trial. The Debtor's attorney appeared without the Debtor or any witnesses. The Court admitted all of Dornik's exhibits into evidence at the commencement of trial in accordance with the terms of the Prehearing Order. The Debtor's attorney orally represented that Judge Coar's Prehearing Order had been vacated, thus excusing his lack of compliance therewith. The Court then reviewed the adversary proceeding file and docket sheet and advised Debtor's counsel of same. Neither the file nor the docket sheet contained an order entered by Judge Coar vacating the Prehearing Order.

Debtor's counsel objected to the admissibility of the exhibits proffered by Dornik on hearsay and relevancy grounds, which the Court overruled. The exhibits (Plaintiff's Exhibits 1-6) consisted of certified, authenticated copies of the prior circuit court and appellate court opinions, orders and mandate. Dornik was the only witness who testified and the substance of his abbreviated testimony was that the prior state court judgment entered in his favor was unpaid to date. Dornik filed the instant motion for sanctions for the Debtor's failure to comply with the Prehearing Order, seeking to bar him from introducing any exhibits or presenting any testimony, or in the alternative, to enter judgment by default in his favor. The Court gave both parties leave to submit written closing arguments and post-trial briefs and took the matter under advisement.

III. DISCUSSION

A. MOTION FOR SANCTIONS

Dornik's motion for sanctions seeks to bar evidence or enter a directed finding and

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judgment in his favor. The former relief is allowed. The Debtor's attorney appeared without any witnesses at trial and chose not to cross-examine Dornik. In accord with the terms of the Prehearing Order, the Court refused to consider, or make part of the record, any of the Debtor's documentary evidence consisting of various exhibits not previously furnished

The Prehearing Order was based upon Federal Rule of Bankruptcy Procedure 7016 which applies Federal Rule of Civil Procedure 16. In relevant part, Rule 16(e) provides that "after any conference held pursuant to this rule, an order shall be entered reciting the action taken. This order shall control the subsequent course of the action unless modified by a subsequent order." Fed.R.Civ.P. 16(e). Moreover, Rule 16(f) makes express provision for sanctions for failure to comply with a pretrial order. It states in relevant part:

If a party or party\'s attorney fails to obey a scheduling or pretrial order, or if no appearance is made on behalf of a party at a scheduling or pretrial conference, or if a party or party\'s attorney is substantially unprepared to participate in the conference, or if a party or party\'s attorney fails to participate in good faith, the judge, upon motion or the judge\'s own initiative, may make such orders with regard thereto as are just, and among others any of the orders provided in Rule 37(b)(2)(B), (C), (D). In lieu of or in addition to any other sanction, the judge shall require the party or the attorney representing the party or both to pay the reasonable expenses incurred because of any noncompliance with this rule, including attorney\'s fees, unless the judge finds that the noncompliance was substantially justified or that other circumstances make an award of expenses unjust.

Fed.R.Civ.P. 16(f).

Rule 37(b)(2)(B), in turn, contemplates the sanction of refusing to allow the disobedient party to support or oppose designated claims or defenses, or prohibiting that party from introducing designated matters in evidence. Additionally, Rule 37(b)(2)(C) includes the alternative sanction of rendering a judgment of default against the disobedient party. See also United States of America v. Dimucci, 110 F.R.D. 263 (N.D.Ill.1986), aff'd, 879 F.2d 1488 (7th Cir.1989) (default judgment imposed for failure to comply with court ordered discovery).

From review of the record, including the docket sheet, it is patently clear that the Debtor's attorney orally misrepresented to the Court that Judge Coar's Prehearing Order had been vacated. No such order vacating the Prehearing Order is contained in the file or reflected on the docket. Only orders reduced to writing on a separate...