In re Werner

• Citation: 386 B.R. 684
• Decision Date: 15 April 2008
• Docket Number: Bankruptcy No. 07 B 2791.,Adversary No. 07 A 390.
• Parties: In re Bruce WERNER, Debtor. Harris Bank, N.A., Plaintiff, v. Bruce Werner, Beth Werner, Defendants.
• Court: United States Bankruptcy Courts. Seventh Circuit. U.S. Bankruptcy Court — Northern District of Illinois

386 B.R. 684

In re Bruce WERNER, Debtor.

Harris Bank, N.A., Plaintiff, v. Bruce Werner, Beth Werner, Defendants.

Bankruptcy No. 07 B 2791.

Adversary No. 07 A 390.

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

April 15, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

David Audley, Chapman and Cutler LLP, Chicago, IL, for Plaintiff.

Gregory K. Stern, Gregory K. Stern, P.C., Chicago, IL, for Bruce Werner.

Beth R. Werner, pro se.

MEMORANDUM OPINION

PAMELA S. HOLLIS, Bankruptcy Judge.

This matter comes before the court on the motion of Defendant Bruce Werner ("Werner" or "Debtor") for summary judgment on the complaint. Harris Bank, N.A., seeks to avoid a transfer of real property as a fraudulent conveyance. Werner asserts in his motion that the statute of limitations has passed and consequently the transfer cannot be attacked. Having reviewed the papers filed and heard the arguments of counsel, the court denies the motion.

STANDARD FOR SUMMARY JUDGMENT

The standard for a summary judgment motion is set forth in Fed.R.Civ.P. 56, made applicable in bankruptcy proceedings via Fed. R. Bankr.P. 7056. Summary judgment is appropriate under Rule 56 if the moving party shows that no genuine issue of material fact exists and that it is entitled to prevail in the case as a matter of law. In ruling on the motion, the court must draw all reasonable inferences from the underlying facts in the responding party's favor. Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 599, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Parkins v. Civil Constructors of Ill., Inc., 163 F.3d 1027, 1032 (7th Cir. 1998).

A factual dispute is a genuine issue for trial only if it is determinative of the outcome under applicable law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). See Frey v. Fraser Yachts, 29 F.3d 1153, 1156 (7th Cir.1994). Once the moving party has made a prima facie showing that it is entitled to judgment as a matter of law, the party opposing the motion may not rest upon the mere allegations or denials in its pleadings. Instead, its response "must set forth specific facts showing that there is a genuine issue for trial." Fed. R.Civ.P. 56(e).

FINDINGS OF FACT

Pursuant to Local Bankruptcy Rule 7056-1, a party moving for summary judgment must file a statement of undisputed material facts ("7056-1 statement"). The 7056-1 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. Local Bankr.R. 7056-1B.

The party opposing a summary judgment motion is required by Local Bankruptcy Rule 7056-2 to respond "to each numbered paragraph in the moving party's statement" and to make "specific references to the affidavits, parts of the record, and other supporting materials relied upon." Local Bankr.R. 7056-2A(2)(a). Both parties complied with the requirements of Local Bankr.R. 7056.

Werner included three additional uncontested facts in his reply (see docket # 60). There is no provision in the Local Bankruptcy Rules for submission of additional material facts by the moving party in its reply. This is in contrast to the specific language of Local Bankr.R. 7056-1 and 7056-2, which require a statement of uncontested material facts, describe how the statement must be organized, and provide for a response.

However, Harris appeared at a hearing before this court the day after the reply was filed. It did not raise any objection to the three additional facts, nor did it request time for a surreply. Additionally, these facts merely recite that certain papers were filed in state court and provide an opportunity for Werner to attach these papers for this court's review. Papers filed in a court proceeding are part of the public record and the court may take judicial notice of their existence.

Having read the statements of material undisputed facts and the supporting exhibits, and reviewed the docket both in this adversary proceeding and in the underlying bankruptcy case, the court makes the following findings of fact:

1. Harris is a banking corporation with its principal place of business located at 111 West Monroe, Chicago, Illinois.

2. The Debtor resides at 22460 South 88th Avenue, Frankfort, Illinois (the "Real Property" or the "Residence").

3. Beth R. Werner ("BRW or "Beth"), the Debtor's wife, resides at the Real Property.

4. Werner filed a lawsuit against Harris and Werner's co-obligors in September 2002 in the Circuit Court of Cook County, Illinois, seeking rescission of his guarantee liability to Harris ("Cook County Litigation").

5. The Cook County Litigation related to a series of investments by Debtor and his co-obligors, utilizing $3.2 million in loans from Harris, all guaranteed by the Debtor and his co-obligors.

6. BRW was not a named Defendant in the Circuit Court Case.

7. On January 23, 2003, the Debtor, as trustee of the Bruce A. Werner Trust dated January 1, 2000, and BRW, as trustee of the Beth R. Werner Trust dated January 1, 2000, executed a Warranty Deed Tenancy By The Entirety that was recorded on February 4, 2003, as Document No. R2003024743 with the Will County Recorder, transferring the Real Property to the Debtor and BRW as Tenants By The Entirety (the "Transfer").

8. On July 28, 2005, summary judgment was granted in favor of Harris and against the Debtor in the Cook County Litigation.

9. On February 16, 2006, a prove-up was held in the Cook County Litigation on the summary judgment previously entered, and a judgment in the amount of $840,122.37 was entered in favor of Harris and against Debtor (the "Judgment"). The Judgment contained the following language, pursuant to Illinois Supreme Court Rule 304(a): "[T]here is no just reason for delaying either the enforcement or appeal from this Order."

10. The Real Property then became subject to Harris's judicial lien by virtue of two Memoranda of Judgment entered in the Circuit Court of Cook County against Debtor in the amount of $840,122.37, and recorded on February 28, 2006, with the Will County Recorder as document numbers R200G035628 and R2006035629. One Memorandum of Judgment is recorded against the Residence and the other against an adjoining 10-acre parcel.

11. On February 24, 2006, Debtor filed his emergency motion in the Cook County Litigation to stay enforcement of the Judgment during his appeal ("Emergency Stay Motion").

12. In his Emergency Stay Motion, Werner stated that Harris "had recently orally questioned the validity of Werners' conveyance of their residence ... to tenancy by the entireties in 2003," and further noted:

That transaction, however, is not subject to being set aside under the "sole intent" standard set forth in section 12-112 of the code of civil procedure, [citations omitted]. Werner certifies that the conveyance was made in part to accomplish a survivorship objective by the manner in which the property was previously titled.

13. Werner executed a "Certification" regarding the transfer of the Residence as part of his Emergency Motion, "certifying" that the conveyance of the Residence was made "in part to accomplish a survivorship objective."

14. In his Emergency Stay Motion, Debtor offered to: (a) stipulate to a judgment of foreclosure on the adjoining 10 acre farmland mortgaged to Harris; (b) assign a note obligation to Harris; (c) provide an appeal bond; and (d) agree to an order restraining dissipation of assets outside Debtor's normal living expenses during appeal.

15. On March 6, 2006, Harris filed a Response in Opposition to Werner's Emergency Motion to Stay Enforcement of Judgment Pending Appeal ("Response to Emergency Stay Motion").

16. On March 8, 2006, the Debtor filed a Reply in Support of Motion to Stay Enforcement of Judgment Pending Appeal ("Reply to Emergency Stay Motion").

17. On March 14, 2006, the Chancery Court entered the Stay Order over Harris' objection. The Stay Order provides, inter alia, that "Werner's motion is granted and the court's judgment of February 16, 2006 against Werner is stayed pending appeal on the following conditions..."

18. Among the conditions is the requirement in paragraph 1(d) that states, "Werner to file affidavit that he shall not convey interest in residence or any other assets outside ordinary course (but may pay legal expenses) pending appeal."

19. On April 27, 2006, Harris filed a Motion for Reconsideration and/or Modification of the Stay Order ("Reconsideration Motion").

20. In its Reconsideration Motion, Harris sought permission to conduct discovery concerning the transfer of the Residence during the state court appeal "so that it may bring a proceeding that would undo this transaction, without having to wait for the appellate process to run its course."

21. In Debtor's Response in Opposition to the Reconsideration Motion, Werner stated:

There are three reasons why Harris' request for `discovery' should be denied. First, there is no action pending in which `discovery' can be taken. Harris already has a judgment. The action is concluded and a final order has been entered. Harris' ability to challenge the conveyance (if the issue is still relevant after the appeal) is protected pursuant to the provision of the [Stay Order] which restricts transfer of Werner's residence pending appeal.

Second, the issue of the transfer of the residence was considered on the prior motion [for the Stay Order]. Harris presented no new evidence or argument that the Court did not already take into account when it rendered its prior decision. The Court directed Werner to file an affidavit committing not to transfer any interest in the residence pending appeal. Werner complied with that Order.

Third, the request for "discovery" is the...