In re Randy

• Decision Date: 08 November 1995
• Docket Number: 94 A 01195 and 95 A 00208.,Bankruptcy No. 93 B 19274. Adv. No. 94 A 01172
• Citation: 189 BR 425
• Parties: In re Michael J. RANDY, Debtor. Philip V. MARTINO, as Trustee for the Estate of Michael J. Randy, Plaintiff, v. EDISON WORLDWIDE CAPITAL, Defendant. Philip V. MARTINO, as Trustee for the Estate of Michael J. Randy, Plaintiff, v. David JOHNSTON, Defendant. Philip V. MARTINO, as Trustee for the Estate of Michael J. Randy, Plaintiff, v. Buford F. HOUCK, a/k/a Ben Houck, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

189 B.R. 425 (1995)

In re Michael J. RANDY, Debtor.

Philip V. MARTINO, as Trustee for the Estate of Michael J. Randy, Plaintiff, v. EDISON WORLDWIDE CAPITAL, Defendant.

Philip V. MARTINO, as Trustee for the Estate of Michael J. Randy, Plaintiff, v. David JOHNSTON, Defendant.

Philip V. MARTINO, as Trustee for the Estate of Michael J. Randy, Plaintiff, v. Buford F. HOUCK, a/k/a Ben Houck, Defendant.

Bankruptcy No. 93 B 19274. Adv. Nos. 94 A 01172, 94 A 01195 and 95 A 00208.

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

November 8, 1995.

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Mark P. Naughton, Elizabeth A. Graber, Rudnick & Wolfe, Chicago, IL, for Plaintiff.

Patrick A. Davis, Clearwater, FL, for Defendants Edison Worldwide Capital and David Johnston.

Buford F. Houck, Ironton, OH, Pro Se.

MEMORANDUM OPINION ON PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

JACK B. SCHMETTERER, Bankruptcy Judge.

The above-captioned Adversary proceedings each relate to the involuntary bankruptcy case filed on May 12, 1993, by creditors of Michael J. Randy ("Debtor") under Chapter 7 of the United States Bankruptcy Code, 11 U.S.C. ¶ 101 et seq. ("Code"). An order for relief was entered therein on June 17, 1993, and Philip V. Martino was appointed Trustee. Plaintiff Martino, as Chapter 7 Trustee ("Trustee" or "Plaintiff'), filed these three Adversary complaints against Defendants Ben Houck ("Houck"), David Johnston ("Johnston"), and Edison Worldwide Capital ("Edison").

In Count I of the complaints against Houck and Edison, the Trustee seeks to recover alleged fraudulent conveyances under 11 U.S.C. § 548(a)(1). The amount that the Trustee is seeking to recover from Defendant Houck under Count I is $6,132.00, plus interest and costs. Under Count I of the complaint against Edison, the Trustee seeks to recover $84,624.29 plus interest and costs. The complaint against Johnston contains only one count which is pleaded under 11 U.S.C. § 544(b). In this complaint against Johnston, the Trustee seeks to recover $1,316.11 plus interest and costs.

The Trustee pleads Count II of each complaint against Houck and Edison under 11 U.S.C. § 548(a)(2). Therein the Trustee seeks to recover the same amounts from each defendant as in the first Count.

In Count III of the complaint against Houck, the Trustee seeks to recover $5,253.30 under 11 U.S.C. § 544(b), and in Count III of the complaint against Edison, the Trustee seeks to recover $800.00 under 11 U.S.C. § 544(b).

In each count pleaded under § 544(b), the Trustee seeks recovery by reason of a transfer assertedly fraudulent under prevailing state law, in this case the Uniform Fraudulent Transfers Act as adopted in Illinois, 740 ILCS 160/2.

In each Adversary proceeding, the Trustee has separately moved for summary judgment or partial summary judgment. Against Johnston, he seeks summary judgment on the complaint filed in that case under § 544(b). Against Edison, the Trustee has moved for partial summary judgment on Counts I and III of the complaint. Against Houck, the Trustee has moved for summary judgment on all counts.

For reasons stated herein, Plaintiff Trustee's Motion for summary judgment against Defendants Houck, Johnston, and Edison are each allowed, and separate summary judgment orders will be entered.

Undisputed and Contested Facts

Local Rule 402.M of the Bankruptcy Rules adopted for this District requires the party moving for summary judgment file, among other things, a detailed statement ("402.M statement") of material facts as to which the movant contends there is no genuine issue. Local Bankr.R. 402.M.¹ The 402.M statement "shall consist of short numbered paragraphs, including, within each paragraph, specific references to the affidavits, parts of the record, and other supporting materials relied upon to support the facts set forth in that paragraph. Failure to submit such a statement constitutes grounds for denial of the motion." Id. In each of the three adversaries, the Trustee has filed a 402.M statement that complies with requirements of this Rule. In each case the Trustee filed a 402.M statement that contained numbered paragraphs setting out assertedly uncontested facts. Each paragraph in the Trustee's 402.M statement refers to affidavits, pleadings filed by the defendants, and a criminal indictment of the Debtor which led to a conviction. However, the same cannot be said of the responses by the three defendants.

The party opposing a summary judgment motion is required by Local Rule 402.N to respond ("402.N statement") to the movant's 402.M statement, paragraph by paragraph, and to set forth any material facts which would require denial of summary judgment, specifically referring to the record for support of each denial of fact. Local Bankr.R. 402.N.² The 402.N statements filed by these defendants do not comply with Local Bankr.R. 402.N. In their respective filings, defendants do not "respond to each numbered paragraph in the moving party's statements" and do not make "specific references to the affidavits, parts of the record, and other supporting materials relied upon." Local Bankr.R. 402.N.(3)(a). Instead, Defendants merely deny that the facts asserted by the Trustee are uncontested. However, this Court "should not be required to guess whether the facts asserted by the opposing parties are in direct conflict or scour the record in search of a party's evidence." Fotsch v. Eli Lilly and Co., 1995 WL 238677 at *1, n. 1 (N.D.Ill. Apr. 20, 1995). Furthermore,

Compliance with Local Rules 402.M and 402.N is not a mere technicality. The court relies greatly upon the information presented in these statements in separating the facts about which there is a genuine dispute from those about which there is none.

American Ins. Co. v. Meyer Steel Drum, Inc., 1990 WL 92882 at *7 (N.D.Ill. June 27, 1990).

However, Rule 56(e) of the Federal Rules of Civil Procedure and Local Rule 402.M deal with statements of material fact. Statements that embody conclusions, especially legal conclusions, are not the same. See Maksym v. Loesch, 937 F.2d 1237, 1243 (7th Cir.1991); and Davis v. City of Chicago, 841 F.2d 186, 189 (7th Cir.1988).

Defendant Houck

The Trustee filed against Houck both a Motion for Summary Judgment and a Request for Admissions ("Request"). To support the allegations made in the Motion for Summary Judgment, the Trustee also filed an Affidavit and submitted various exhibits. Among the exhibits were a copy of a criminal indictment against the Debtors (Exhibit A) and copies of canceled checks (Exhibits D-H).

In answer to the Trustee's Motion for Summary Judgment, Houck filed his Response in affidavit form. However, he did not answer each fact that the Trustee designated as uncontested as required by Rule 402.M. Furthermore, Houck did not file an answer to the Request for Admissions. Since Houck failed to respond to the Request for Admissions, the matters set forth in the Request for Admissions are deemed admitted pursuant to Rule 7036.³

Houck also did not answer the facts set forth by the Trustee in his Rule 402.M statement. As noted above, a non-moving party's failure to respond to the movant's 402.M statement, or his answering in improper form, warrants a court to deem such facts uncontested. Thus, the facts alleged as uncontested by the Trustee in his 402.M statement in support of summary judgment are found to be undisputed. These facts are undisputed both because they are strongly supported by the exhibits the Trustee attached to his Motion⁴ and also because of the previously enumerated procedural defects which plague Houck's Response.

The following are material facts deemed uncontested as to defendant Houck:

1. On May 12, 1993, an involuntary petition pursuant to Chapter 7 of the Bankruptcy Code was filed against Michael J. Randy ("Randy"). Request ¶ 1.

2. An order of relief was entered on June 17, 1993, and Martino was appointed trustee. Request ¶ 2. Trustee's Affidavit ¶ 2.

3. As part of an investment scheme, from December 1989 to December 1992, Randy (under the names of Canadian Trade Bank, God Isreal Church, God IsReal Church, God Is Real Church, International Brokers, Cornerstone Investments, Dental Providers, Data Sciences, UGAC Association, God is Church, C.T.B. Holdings, Inc., Canada Trade Bank Ltd., or C.T.B. Data Sciences Intl.) sold to investors ("Creditors") one to three year certificates of deposit (individually a "CD"; collectively "CD's") paying 10% to 15% interest per annum. Request ¶ 6; Supers. Indict. Count 1 ¶¶ 4-9.

4. As part of his scheme, Randy recruited persons throughout the United States to act as brokers to sell the CD's to Creditors. Randy paid each broker a commission of 10% of the face value of each CD purchased, plus an additional 10% whenever the investor rolled over the investment upon maturity. Request, ¶¶ 8-10; Supers. Indict. Count 1, ¶ 11.

5. Defendant was one of Randy's brokers. Request ¶ 11.⁵

6. On March 24, 1993, the grand jury issued a 22-count indictment against Randy based upon the investment scheme he was running. The indictment alleged mail fraud, money laundering, and racketeering. On November 30, 1993, the grand jury issued a 13-count superseding indictment ("Superseding Indictment") against Randy based upon the same investment scheme. Request ¶¶ 13, 15; Exhibit 1B.⁶ He was charged essentially with running a "Ponzi" scheme.

7. On January 4, 1994, the jury convicted Randy on all counts under the Superseding Indictment. Exhibit 1C.⁷

8. Between June 1992 and August 1992, Houck received the following payments from Randy:

                Date             Amount      Check No
                06/05/92         3,000.00    1346
                08/04/92         3,000.00    1865
                08/07/92           132.00    1894
                                 ________
                        TOTAL    6,132.00
                

Request, ¶ 20. Exhibits 1D-F.⁸

9. The payments to Houck listed above were made or incurred on or within one year before the date of filing of Randy's...