In re Ryan
| Citation | 408 B.R. 143 |
| Decision Date | 14 July 2009 |
| Docket Number | Bankruptcy No. 07 B 17944.,Adversary No. 09 A 00062. |
| Parties | In re Maureen E. RYAN, Debtor. Jon R. Baermann and Lisa M.D. Baermann, Plaintiffs, v. Maureen E. Ryan, Defendant. |
| Court | United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois |
Dennis M. Sbertoli, Esq., La Grange Park, IL, for Plaintiffs.
Christopher J. Harney, Esq. and Robert R. Benjamin, Esq., Chicago, IL, for Debtor.
These matters come before the Court on the cross-motions for summary judgment pursuant to the Federal Rule of Bankruptcy Procedure 7056, which incorporates by reference Federal Rule of Civil Procedure 56, filed by Maureen E. Ryan (the "Debtor") and Jon R. Baermann and Lisa M.D. Baermann (the "Plaintiffs"). For the reasons set forth herein, the Court denies the Plaintiffs' motion for summary judgment. The Court finds that the Plaintiffs have not demonstrated that the judgment entered by the Illinois state court should be afforded preclusive effect under the doctrines of collateral estoppel and res judicata. Further, the Court grants the Debtor's motion. The Court finds that the Plaintiffs failed to timely file their complaint pursuant to Federal Rule of Bankruptcy Procedure 4007(c). Accordingly, this adversary proceeding is hereby dismissed. The trial set to commence on October 14, 2009, is hereby stricken.
The Court has jurisdiction to entertain these matters pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. They are core proceedings under 28 U.S.C. § 157(b)(2)(I).
The following facts are not in dispute. On October 1, 2007, the Debtor filed a voluntary Chapter 13 bankruptcy petition. Thereafter, on January 29, 2008, the case was converted to Chapter 7. (Debtor 7056-1 statement Ex. B; Plaintiffs' 7056-1 statement ¶ 20.) On February 8, 2008, the Clerk of the Bankruptcy Court sent out a "Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines" that scheduled the meeting of creditors under 11 U.S.C. § 341(a) for March 11, 2008. (Debtor 7056-1 statement Ex. C.) Pursuant to the Notice, parties had until May 12, 2008 to file a complaint objecting to the discharge of the Debtor or to determine the dischargeability of certain debts. (Id.)
On May 9, 2008, the Plaintiffs timely filed a complaint to determine the dischargeability of a debt under 11 U.S.C. § 523(a)(2)(A) in an adversary proceeding styled Jon R. and Lisa M.D. Baermann v. Maureen E. Ryan, No. 08 A 00268. (Debtor 7056-1 statement ¶ 7 & Ex. D; Plaintiffs' 7056-1 statement ¶ 21.) On September 8, 2008, at a pretrial conference, the Court entered a Final Pretrial Order that set the matter for trial on January 26, 2009. The Final Pretrial Order required the parties to submit exhibits and witness lists at least fourteen days prior to the trial date. The parties belatedly and partially complied with that Order. As a result of the parties' partial and late compliance, on January 26, 2009, the Court dismissed the adversary proceeding without prejudice as a sanction (the "Dismissal Order"). (Debtor 7056-1 statement ¶ 8 & Ex. E; Plaintiffs' 7056-1 statement ¶ 22.) The Dismissal Order did not grant the Plaintiffs leave to reinstate the complaint nor did it extend the time within which to file a complaint objecting to the dischargeability of a debt. (Debtor 7056-1 statement ¶ 11 & Ex. E.) The Plaintiffs did not file a motion for an extension of time to file a complaint to determine the dischargeability of a debt, and no such extension has been granted by the Court. (Debtor 7056-1 statement ¶ 10 & Ex. G.)
One day after the entry of the Dismissal Order, on January 27, 2009, the Plaintiffs filed the instant adversary proceeding. (Debtor 7056-1 statement ¶ 9 & Ex. F; Plaintiffs' 7056-1 statement ¶ 23.) This complaint mirrors the prior complaint and makes the following allegations. The Plaintiffs purchased real property located in Kane County, Illinois from the Debtor. After that purchase, the Plaintiffs sued the Debtor in the Illinois state court. The two-count state court complaint alleged claims of fraud (Count I) and violation of the Illinois Residential Real Property Disclosure Act, 765 ILL. COMP. STAT. 77/1 et seq. (Count II). The Plaintiffs asserted in the state court action that the Debtor knowingly concealed serious defects in the real property. (Id.) Specifically, the Plaintiffs contended that the disclosure report presented by the Debtor to the Plaintiffs did not reveal any of the following: leaks or material defects in the roof, ceiling, or chimney; current infestations of termites or other wood boring insects; and structural defects caused by previous infestations of termites or other wood boring insects. (Id.) After the Plaintiffs purchased the property, they discovered that it had numerous defects of the type listed above, including, but not limited to, severe damage from a leak in the roof, active wood boring insect infestation, and severe structural damage from previous wood boring insect infestation. (Id.) According to the Plaintiffs, the Debtor knew of these material defects and failed to disclose them to the Plaintiffs. (Id.) The Plaintiffs contended that they justifiably relied, to their detriment, upon the representations of the Debtor. (Id.) Finally, the Plaintiffs alleged that had they known the true condition of the real property, they would not have entered into the contract for purchase. (Id.)
After a trial in the Illinois state court on November 21, 2005, the Plaintiffs were awarded a judgment against the Debtor in the sum of $15,320.01 plus costs. (Plaintiffs' 7056-1 statement ¶ 15.) The state court made the following conclusions:
9. As to Count I, Illinois law clearly provides that "where the vendor of a used home knows facts materially affecting value or desirability of property which are known or accessible only to him and also knows that such facts are not known to or within reach of diligent attention and observation of purchaser, vendor is under duty to disclose them to purchaser."
10. Those facts must be proven by clear and convincing evidence.
11. As to Count II, the Residential Real Property Disclosure Act ("Act") requires clear and convincing evidence of a knowing violation of the Act by Defendant's failure to disclose as per the Act.
12. As to both Counts I and II, Plaintiffs have met their burden of proof based upon the evidence.
(Plaintiffs' 7056-1 statement Ex. B ¶¶ 9-12) (citation omitted).
Significantly, the underlying evidence by way of testimony and/or documents that gave rise to such conclusions drawn by the state court has not been furnished to this Court. The only portions of the state court record furnished by the Plaintiffs are the following: the state court verified complaint ; the trial court's orders dated November 17, 2005 and January 10, 2006 (Plaintiffs' 7056-1 statement Ex. B); and the Rule 23 order of the Appellate Court of Illinois Second District, dated June 29, 2007, without the referenced "bystander's report of the proceedings at trial" (Plaintiffs' 7056-1 statement Ex. C).
Subsequent to the entry of the state court judgment against her, the Debtor filed a post-trial motion that requested the trial court to reconsider its decision. The motion was denied. Thereafter, the Debtor filed an appeal before the Illinois appellate court. The appeal was denied. (Plaintiffs' 7056-1 statement Ex. C.) Throughout the state court proceedings, the Debtor was represented by counsel.
The Debtor contends in her motion for summary judgment that the instant complaint is untimely pursuant to Federal Rule of Bankruptcy Procedure 4007(c) and that it should be dismissed under Federal Rule of Bankruptcy Procedure 7041. The Plaintiffs have filed a cross-motion for summary judgment and maintain that they are entitled to judgment pursuant to the doctrines of Rooker-Feldman, res judicata, and collateral estoppel. The Plaintiffs state that the complaint at bar raises the identical issues determined in the state court action. They contend that the findings made by the Illinois state court are sufficient to meet all of the elements under § 523(a)(2)(A), and thus, the debt owed by the Debtor to the Plaintiffs is non-dischargeable.
In order to prevail on a motion for summary judgment, the movant must meet the statutory criteria set forth in Rule 56 of the Federal Rules of Civil Procedure, made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056. Rule 56(c) reads in part as follows:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
FED. R CIV. P. 56(c). See also Estate of Allen v. City of Rockford, 349 F.3d 1015, 1019 (7th Cir.2003).
The primary purpose of granting a summary judgment motion is to avoid unnecessary trials when there is no genuine issue of material fact in dispute. Trautvetter v. Quick, 916 F.2d 1140, 1147 (7th Cir.1990); Farries v. Stanadyne/Chi. Div., 832 F.2d 374, 378 (7th Cir.1987) (quoting Wainwright Bank & Trust Co. v. Railroadmens Fed. Savs. & Loan Ass'n of Indianapolis, 806 F.2d 146, 149 (7th Cir.1986)). Where the material facts are not in dispute, the sole issue is whether the moving party is entitled to a judgment as a matter of law. ANR Advance Transp. Co. v. Int'l...
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