In re Montalbano

• Decision Date: 12 February 2013
• Docket Number: No. 09 B 30477.,09 B 30477.
• Citation: 486 B.R. 436
• Parties: In re Anthony P. MONTALBANO, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

486 B.R. 436

In re Anthony P. MONTALBANO, Debtor.

No. 09 B 30477.

United States Bankruptcy Court,

N.D. Illinois,

Eastern Division.

Feb. 12, 2013.

Donna B. Wallace, Esq., Baldi Berg & Wallace, Ltd., Chicago, IL, Attorney(s) for Trustee.

Joseph A. Baldi, Baldi Berg & Wallace, Ltd., Chicago, IL, Trustee.

Howard L. Adelman, Esq., Adelman & Gettleman Ltd., Chicago, IL, Attorneys for Debtor.

Michael McGurn, pro se.

Thomas Sapienza, pro se.

MEMORANDUM DECISION

TIMOTHY A. BARNES, Bankruptcy Judge.

This matter comes before the court on the Objection to Claim No. 19 [Docket No. 385] and the Objection to Claim No. 18 [Docket No. 386] (together, the “ Objections ”) of chapter 7 trustee, Joseph A. Baldi (the “ Trustee ”) of the bankruptcy estate of Anthony Montalbano (the “ Debtor ”), wherein the Trustee seeks to disallow both Claim No. 19 and No. 18 (the “ Claims ”) filed by Michael McGurn (“ McGurn ”) and Thomas Sapienza (“ Sapienza ”), respectively (together, the “ Claimants ”). The Objections implicate sections 502 of title 11, United States Code and Rule 3007 of the Federal Rules of Bankruptcy Procedure, as well as section 13 of the Illinois Wage Payment and Collection Act (the “ Wage Act ” or the “ Act ”). ¹

JURISDICTION

The federal district courts have “original and exclusive jurisdiction” of all cases under title 11 of the United States Code (the “ Bankruptcy Code ”). 28 U.S.C. § 1334(a). The federal district courts also have “original but not exclusive jurisdiction” of all civil proceedings arising under title 11 of the United States Code, or arising in or related to cases under title 11. 28 U.S.C. § 1334(b). District courts may, however, refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).

A bankruptcy judge to whom a case has been referred may enter final judgment on any core proceeding arising under the Bankruptcy Code or arising in a case under title 11. 28 U.S.C. § 157(b)(1). A proceeding to allow or disallow to a claim arises in a case under title 11 and is specified as a core proceeding. 28 U.S.C. § 157(b)(2)(B). Lenior v. GE Capital Corp. & Penski (In re Lenior), 231 B.R. 662, 667 (Bankr.N.D.Ill.1999) (Schmetterer, J.); Knox v. Sunstar Acceptance Corp. (In re Knox), 237 B.R. 687, 693 (Bankr.N.D.Ill.1999) (Schmetterer, J.). An objection to a claim under section 502 of the Bankruptcy Code arises in a case under title 11 and is also specified as a core proceeding. 28 U.S.C. § 157(b)(2)(B); Lenior, 231 B.R. at 667;Knox, 237 B.R. at 693.

PROCEDURAL HISTORY

In considering the Objections, the court has considered the arguments of the parties at the October 30, 2012 and January 8, 2013 hearings (the “ Hearings ”), and has reviewed and considered the Objections, any exhibits submitted in conjunction therewith, as well as:

(1) The Trustee's Notice of Hearing and Objection to Claim No. 19 [Docket No. 385] and Trustee's Notice of Hearing and Objection to Claim No. 18 [Docket No. 386]; and

(2) The McGurn's Response to Trustee's Objection to Claim No. 19 [Docket No. 405] and Sapienza's Response to Trustee's Objection to Claim No. 18 [Docket No. 440].

Though the foregoing items together do not constitute an exhaustive list of the filings in the above-captioned case, the court has taken judicial notice of the contents of the docket in this matter. See Levine v. Egidi, No. 93 C 188, 1993 WL 69146 at *2 (N.D.Ill. March 8, 1993); In re Fin. Partners, 116 B.R. 629, 635 (Bankr.N.D.Ill.1989) (Sonderby, J.) (authorizing a bankruptcy court to take judicial notice of its own docket).

FACTUAL HISTORY

From the foregoing review and consideration, and for the purposes of determining whether a Trustee's Objection to a Claim is warranted only, the court assumes the following facts to be true: ²

(1) The Debtor was the 100% shareholder, sole director, Chief Executive Officer and President of Montalbano Builders, Inc. (“ MBI ”) from October 1, 2000 through May 13, 2009. In that capacity, the Debtor was the signatory to all MBI bank accounts. The Debtor handled the daily affairs of MBI and was responsible for ensuring that its employees were paid.

(2) McGurn was employed as the General Counsel of MBI from March 18, 1998 through May 12, 2009.

(3) Sapienza was employed as the Commercial Property Manager of MBI from October 1, 2000 through May 13, 2009.

(4) Though in its early years, MBI was apparently self sufficient, beginning in June 2007, the Debtor funded a portion of MBI's operations through a series of loans/capital advances.

(5) On April 22, 2009, the Debtor ceased funding MBI's shortfalls. By that time, the Debtor had advanced in excess of $36 million to MBI.

(6) Though Claimants were paid wages through April 26, 2009, on May 12, 2009, Paul Cultine, CFO of MBI, sent an email to employees of MBI indicating that the next scheduled payroll of May 14, 2009 would not be met and was rescheduled to May 21, 2009.

(7) On May 13, 2009, the remaining employees of MBI, including the Claimants,were called into a meeting and informed that due to the real estate meltdown the company could not continue, and that employment of all employees was terminated effective immediately.

(8) On May 20, 2009, the CFO of MBI sent an e-mail, on behalf of the Debtor, to all employees indicating that the rescheduled payroll of May 21, 2009 would not be met and that the company definitively intended to pay the payroll in the near future including accrued paid time off.

(9) The Debtor commenced the above-captioned case (the “ Case ”) on August 19, 2009 by filing a voluntary petition under chapter 11 of the Bankruptcy Code. On February 9, 2011 this court entered an order directing the United States Trustee to appoint a trustee in the chapter 11 case. The Trustee's appointment as trustee of the bankruptcy estate of Debtor was approved on February 16, 2011

(10) On October 7, 2009, Sapienza filed a Wage Claim Application with the Illinois Department of Labor and filed Claim No. 18 in this Case as a priority wage claim seeking $2,332.33 for unpaid wages and paid time off.

(11) On October 13, 2009 McGurn filed a Wage Claim Application with the Illinois Department of Labor and filed Claim No. 19 in this Case as a priority wage claim seeking $10,615.38 for unpaid wages and paid time off.

(12) On January 8, 2010, the Illinois Department of Labor Administrative Law Judge issued a Wage Payment Demand in favor of Sapienza and against MBI in the amount of $2,332.33 and noted that:

This decision is against the name respondent solely. The undersigned takes official notice that Anthony P. Montalbano, Sr. has filed individual bankruptcy in U.S. Bankruptcy Court for the Northern District (Chicago) of Illinois, Case No. 1:09–BK–30477. It is a responsibility claimant to ensure that a claim is filed in the bankruptcy court. Claimant is advised to contact the bankruptcy trustee regarding the proceedings.

(13) On January 22, 2010, the Illinois Department of Labor Administrative Law Judge issued a Wage Payment Demand in favor of McGurn and against MBI in the amount of $10,615.38, otherwise making the same notation as was done with respect to Sapienza.

(14) On March 8, 2011, MBI filed a voluntary petition under chapter 7 of the Bankruptcy Code and an interim trustee was appointed to administer the case. After several changes in trustee, a permanent trustee was appointed and continues to serve in that case. This court presides over the MBI case as well as this case.

(15) On November 1, 2011, the Case was converted from a case under chapter 11 of the Bankruptcy Code to a case under chapter 7 of the Bankruptcy Code and the United States Trustee appointed the Trustee to continue to administer the Debtor's bankruptcy estate as the chapter 7 trustee.

(16) On December 1, 2011, McGurn sent an e-mail to Trustee to address the Trustee's concern that while employees of MBI were owed last wages, the Debtor was not the employer of those employees. Attached to the e-mail was a Memorandum from McGurn to Trustee addressing the liability of MBI and Debtor. The Memorandum addressed and asserted that that Debtor was liable for employee wage claims under section 13 of the Wage Act.

(17) On January 20, 2012, McGurn filed Amended Claim No. 19 in this case, reflecting the Administrative Law Judge's ruling with respect to MBI and thereby seeking $10,615.38 as a priority wage claim.

(18) Thereafter, the parties proceeded to brief the matter before the court. After conducting the Hearings, the court took the matter under advisement so that the court could further consider the legal arguments made. On February 6, 2013, the court orally announced its ruling in this matter, stating that this Memorandum Decision would follow.

DISCUSSION

Claimants' arguments are founded in the Wage Act, and how the Act may expand MBI's liability to its employees (as already determined by the Administrative Law Judge) from MBI alone to MBI and the Debtor. Given the determinations by the Administrative Law Judge, this court does not reconsider whether and to what extent the Claimants are owed in wages by MBI. As to MBI, that is a matter of established law and this court has no jurisdiction to reconsider the state judge's determination. See Rooker v. Fidelity Trust Co., 263 U.S. 413, 415–16, 44 S.Ct. 149, 68 L.Ed. 362 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462, 482–86, 103 S.Ct. 1303, 75 L.Ed.2d 206 (1983). The court notes, however, that MBI is a legal entity different and distinct from the Debtor, and as such, neither MBI's bankruptcy proceedings nor the determinations of the Administrative Law Judge necessarily bind either the Debtor or the Trustee.³ Nonetheless, for the purposes of this Memorandum Decision and because the Trustee...