In re Mulder

• Decision Date: 07 April 2004
• Docket Number: Adversary No. 03 A 4230.,Bankruptcy No. 03 B 36574.
• Citation: 307 B.R. 637
• Court: U.S. Bankruptcy Court — Northern District of Illinois
• Parties: In re Rudy J. MULDER, Debtor. Baker Development Corporation, an Illinois corporation, Plaintiff, v. Rudy J. Mulder; North 26th Land, LLC; Lund 26th, LLC; Robert J. Lunn; Lunn Partners Cash Management, LLC; 26th & Kostner Redevelopment Group, LLC; and John Terzakis, Defendants.

Page 637

307 B.R. 637

In re Rudy J. MULDER, Debtor.

Baker Development Corporation, an Illinois corporation, Plaintiff, v. Rudy J. Mulder; North 26th Land, LLC; Lund 26th, LLC; Robert J. Lunn; Lunn Partners Cash Management, LLC; 26th & Kostner Redevelopment Group, LLC; and John Terzakis, Defendants.

Bankruptcy No. 03 B 36574.

Adversary No. 03 A 4230.

United States Bankruptcy Court, N.D. Illinois, Eastern Division.

April 7, 2004.

COPYRIGHT MATERIAL OMITTED

Joseph E. Cohen, Gina B. Krol, Linda M. Kujaca, Cohen & Krol, Chicago, IL, for Debtor.

Ariel Weissberg, John H. Redfield, Weissberg & Associates, Ltd., Chicago, IL, for Baker Development Corporation.

Abraham Brustein, Christopher Lega, DiMonte & Lizak, LLC, Park Ridge, IL, for Robert J. Lunn, Lunn 26th, LLC, and Lunn Partners Cash Management, LLC.

MEMORANDUM OPINION AND ORDER

A. BENJAMIN GOLDGAR, Bankruptcy Judge.

Plaintiff Baker Development Corporation brings this adversary proceeding to recover the benefits of a contract to purchase real estate from an entity allegedly affiliated with debtor Rudy Mulder. Mulder is named as a defendant in only two of the seven counts of Baker's complaint. The defendants in the other counts, none of them debtors in bankruptcy, are people or entities who have done business with Mulder.

Mulder moves to dismiss the counts directed at him for failure to state a claim under Rule 12(b)(6), Fed.R.Civ.P. 12(b)(6) (made applicable by Fed. R. Bankr.P. 7012). Defendants Robert J. Lunn, Lunn 26th, LLC, and Lunn Partners Cash Management, LLC (the "Lunn Parties") move to dismiss the remaining counts for lack of subject matter jurisdiction under Rule 12(b)(1), Fed.R.Civ.P. 12(b)(1) (also made applicable by Fed. R. Bankr.P. 7012). Alternatively, the Lunn Parties ask the court to abstain under 28 U.S.C. § 1334(c) in favor of two civil actions pending in the Circuit Court of Cook County, Illinois.¹

For the reasons set forth below, Mulder's motion to dismiss Counts I and II is denied, and the Lunn Parties' motion to dismiss Counts III through VII is granted.²

I. Jurisdiction

This court has subject matter jurisdiction over Mulder's bankruptcy case pursuant to 28 U.S.C. §§ 1334(a) and 157(a), and the district court's Internal Operating Procedure 15(a). In an adversary proceeding, the court separately considers whether each count of the complaint is a core proceeding, a non-core related matter, or a claim unrelated to the bankruptcy case. Halper v. Halper, 164 F.3d 830, 837 (3rd Cir.1999).

In this case, the claims under 11 U.S.C. § 523(a) in Counts I and II of the complaint fall within the court's core jurisdiction under 28 U.S.C. § 157(b)(2)(I). The court also has jurisdiction to determine whether it has jurisdiction over the remaining counts. See, e.g., United States Catholic Conf. v. Abortion Rights Mobilization, Inc., 487 U.S. 72, 79, 108 S.Ct. 2268, 101 L.Ed.2d 69 (1988); Flores-Leon v. INS, 272 F.3d 433, 437 (7th Cir.2001).

II. Background

The complaint alleges the following.³ On September 9, 2002, Baker entered into a contract with an entity called "26th and Kostner, LLC" to purchase real property located at the northwest corner of 26th Street and Kostner Avenue in Chicago (the "Property"). Compl., ¶¶ 5, 12. The contract declared the seller of the Property to be "Rudy Mulder, President and Member of 26th & Kostner, LLC." Id., Ex. 1.

According to Baker, Mulder's representations that he and "26th and Kostner, LLC" owned the Property and had authority to enter into the contract were false. Id., ¶¶ 16, 34. In fact, an outfit calling itself "North 26th Land, LLC" owned the Property. Id., ¶¶ 15, 42. Baker alleges that the name "26th and Kostner, LLC" is "a combination of the names of the true owner of the Property [North 26th Land, LLC] and the owner of a related property across the street, namely ... South Kostner Land LLC ..." Id., ¶ 42. No entity called "26th and Kostner, LLC" ever existed. Id., ¶ 13, 34.

Mulder immediately defaulted on the contract by failing to take steps to consummate the sale. Id., ¶ 17. To protect its rights, on October 18, 2002 Baker recorded the contract to purchase the Property. Id., ¶ 9. For over a year, Mulder repeatedly promised to close the sale, but he never did. Id., ¶ 19. Around November 2003, Baker discovered that Mulder did not own the Property in the first place. Id., ¶ 18.

Lunn 26th, LLC currently claims to own the Property. Id., ¶ 6. According to Baker, Mulder and the "Mulder Group" were "significantly indebted" to Robert Lunn and "the Lunn Group."⁴ Id., ¶ 48. Having learned of Baker's contract to purchase the Property, Lunn and the Lunn Group used their leverage to induce Mulder and the Mulder Group to breach the contract and sell the Property to them. Id., ¶¶ 47, 49.

III. Analysis

A. Mulder's Motion to Dismiss under Rule 12(b)(6)

Counts I and II of Baker's complaint are directed at Mulder. In Count I, Baker asks the court to find Mulder's debt nondischargeable under section 523(a)(6) of the Code, 11 U.S.C. § 523(a)(6). In Count II, Baker asks that the debt be found nondischargeable under section 523(a)(2)(A), 11 U.S.C. § 523(a)(2)(A). Because neither of Mulder's arguments for dismissing those claims has merit, his motion to dismiss those Counts will be denied.

1. CountI — 11 U.S.C. § 523(a)(6)

Baker alleges in Count I that it "had contract rights and an equitable interest in the Property," Compl., ¶ 29, and that Mulder "personally willfully and maliciously injured Baker and its Property by causing the Property to be sold by North 26th to Lunn 26th, LLC after the execution and recording of the Contract," id., ¶ 30. Baker seeks compensatory damages for the "advantages, benefits, gains and profits that would have accrued if Mulder had delivered the Property pursuant to the Contract," id., ¶ 31, as well as punitive damages, id., ¶ 32.⁵ Baker also requests a determination that the debt is nondischargeable under section 523(a)(6).

To prevail on its claim under section 523(a)(6), Baker must establish that Mulder owes it a debt (1) resulting from an injury Mulder caused to another entity, (2) that Mulder's actions in causing the injury were willful, and (3) that his actions in causing the injury were malicious. Glucona America, Inc. v. Ardisson (In re Ardisson), 272 B.R. 346, 356 (Bankr.N.D.Ill.2001). An action is "malicious" if taken "in conscious disregard of one's duties or without just cause or excuse." In re Thirtyacre, 36 F.3d 697, 700 (7th Cir.1994); Monsanto Co. v. Trantham (In re Trantham), 304 B.R. 298 (6th Cir. BAP 2004). An action is "willful," the Supreme Court clarified in Kawaauhau v. Geiger, 523 U.S. 57, 118 S.Ct. 974, 140 L.Ed.2d 90 (1998), if both the action itself and the resulting injury — "the consequences of [the] act" — are intended. Id. at 61-62, 118 S.Ct. 974; see also Berkson v. Gulevsky (In re Gulevsky), 362 F.3d 961, 2004 WL 626538 at * 2 (7th Cir. March 31, 2004); Rizzo v. Passialis (In re Passialis), 292 B.R. 346, 352 (Bankr.N.D.Ill.2003) (noting that willfulness means "intent to cause injury").

Mulder does not challenge Baker's allegations of injury or malice.⁶ He argues however, that Baker "has failed to allege either the Debtor's specific intent to harm the Plaintiff or the Debtor's specific belief that he was substantially certain to cause harm to the Plaintiff sufficient to state a cause of action under § 523(a)(6)." Mtn., ¶ 11. Mulder, in other words, contends that Baker has not alleged willfulness.

The court disagrees. Baker specifically alleges that in breaching the contract Mulder acted "willfully and maliciously." Compl., ¶ 30. True, Baker alleges no facts to support what is essentially a legal conclusion. But facts are not required under the notice-pleading regime of Rule 8, Fed.R.Civ.P. 8 (made applicable by Fed. R. Bankr.P. 7008(a)). In federal courts, a plaintiff "need not plead facts; he can plead conclusions." McCormick v. City of Chicago, 230 F.3d 319, 324 (7th Cir.2000) (quoting Jackson v. Marion County, 66 F.3d 151, 153-54 (7th Cir.1995)); see also Higgs v. Carver, 286 F.3d 437, 439 (7th Cir.2002) (declaring that complaint "cannot be dismissed on the ground that it is conclusory or fails to allege facts").

The question on a motion to dismiss is not whether the complaint alleges facts rather than conclusions, but whether the complaint alleges enough to give the defendant notice of the nature of the claim. "A complaint need only state the nature of the claim; details can wait for later stages." Alliant Energy Corp. v. Bie, 277 F.3d 916, 919 (7th Cir.2002); McCormick, 230 F.3d at 323-24 (stating that Rule 8 requires just enough "to allow the court and the defendant to understand the gravamen of the plaintiff's complaint") (internal quotation omitted). That a complaint may be missing certain facts will not warrant dismissal as long as it is "possible to hypothesize facts ... that would make out a claim." Graehling v. Village of Lombard, 58 F.3d 295, 297 (7th Cir.1995).

Baker's complaint satisfies these requirements. The complaint cites section 523(a)(6) and alleges that Mulder "willfully and maliciously" injured Baker by selling the Property to the Lunn Parties. That is enough to put Mulder on notice about the nature of the claim, allowing him to answer. Although Baker has not alleged facts to support its legal conclusions, it is not hard to hypothesize some: that Mulder intentionally breached the contract, not merely to sell the Property to the Lunn Parties, but for the specific purpose of inflicting financial harm on Baker. Therefore, Baker's allegation of willfulness, bald though it may be, is not deficient.

This is not to say, of course, that Baker's claim is likely to succeed. To prove its case, Baker will have to make the difficult showing that Mulder's design in breaching the contract had as much to do with his desire to injure Baker as with his own financial gain. At this stage, however, Baker's chances of prevailing at trial are...