Leventhal v. Schenberg (In re Leventhal)

• Decision Date: 09 October 2012
• Docket Number: Civil Action No. 12 C 4981.
• Citation: 481 B.R. 409
• Parties: In re Howard E. LEVENTHAL, Debtor. Howard E. Leventhal, Defendant–Appellant, v. Gene Schenberg, Plaintiff–Appellee.
• Court: U.S. District Court — Northern District of Illinois

481 B.R. 409

In re Howard E. LEVENTHAL, Debtor.Howard E. Leventhal, Defendant–Appellant,

v.Gene Schenberg, Plaintiff–Appellee.

Civil Action No. 12 C 4981.

United States District Court,

N.D. Illinois,

Eastern Division.

Oct. 9, 2012.

Howard E. Leventhal, Deer Park, IL, pro se.

Joanne Marie Denison, Denison & Assocs, P.C., Chicago, IL, for Defendant–Appellant.

Richard Huck, Michael J. McKitrick, Danna McKitrick, P.C., St. Louis, MO, Patrick G. Somers, Somers & Associates, Patrick Sean Layng, United States Attorney's Office, Chicago, IL, for Plaintiff–Appellee.

MEMORANDUM OPINION AND ORDER

SUZANNE B. CONLON, District Judge.

On April 13, 2012, the United States Bankruptcy Court for the Northern District of Illinois entered a judgment order declaring Howard Leventhal's debt to Gene Schenberg non-dischargeable pursuant to § 523(a)(3)(B) of title 11 of the United States Code. Schenberg v. Leventhal et al., 11–ap–1467, 2012 WL 1067568 (Bankr.N.D.Ill.) (Goldgar, J.), Dkt. No. 159.¹ Leventhal appeals pro se.

BACKGROUND

Howard Leventhal and ex-wife Malgorzata Kubiak–Leventhal ² voluntarily filed for chapter 7 bankruptcy protection on March 22, 2010. They attached a preliminary list of creditors to their bankruptcy petition. Gene Schenberg, a judgment creditor of Leventhal, was included on that preliminary list. The address provided for him was “Chesterfield, Missouri 63017.” Ch. 7 Pet'n, Lev. Appx. Ex. 2.

On March 25, 2010, the clerk of the bankruptcy court sent Official Form 9A by first-class mail to Leventhal's and Kubiak–Leventhal's creditors, including to Schenberg at the incomplete address provided on the preliminary list of creditors. Bankr. Dkt. No. 7. Official Form 9A listed April 30, 2010 as the date of the § 341 creditors meeting and June 29, 2010 as the deadline for creditors to file complaints objecting to the debtors' discharge or seeking a determination of dischargeability as to any debt. Id. On April 6, 2010, Leventhal and Kubiak–Leventhal filed their bankruptcy schedules as required by Federal Rule of Bankruptcy Procedure 1007(b)(1). Schenberg was listed on Official Form 6F (“Schedule F”) as a creditor holding an unsecured nonpriority claim worth approximately $284,000. His mailing address was listed “c/o Richard Huck, 7701 Forsyth Blvd., Ste. 800, St. Louis, MO 63105.” Bankr. Dkt. No. 11 at 13. Huck was Schenberg's attorney in the proceedings resulting in the $284,000 judgment debt.

Leventhal's and Kubiak–Leventhal's debts were discharged on June 30, 2010. Notice of the discharge was sent by first-class mail to Schenberg at both the “Chesterfield, Missouri 63017” and “c/o Richard Huck” addresses a few days later. Discharge Notice, Lev. Appx. Ex. 9. The bankruptcy case was closed on July 28, 2010. Over eight months later, on April 15, 2011, Schenberg moved to reopen the bankruptcy case to seek a determination that the debts Leventhal owed him were nondischargeable. His motion was granted, and the case was reopened so he could file a complaint against the debtors. Order on Mot. to Reopen, Bankr. Dkt. No. 99.

The Adversary Proceeding

On July 8, 2011, Schenberg filed a two-count adversary complaint. Count I sought a determination of dischargeability pursuant to 11 U.S.C. § 523(a)(3)(B). Section 523(a)(3)(B) provides an exception to discharge for certain debts, including debts for “willful and malicious injury” under § 523(a)(6), that are “neither listed nor scheduled” on debtor's bankruptcy forms when creditor does not have “notice or actual knowledge” of the bankruptcy in time to object or seek a determination of dischargeability. 11 U.S.C. § 523(a)(3)(B), (a)(6).

Schenberg sought this exception for a $271,895.17 judgment he obtained against Leventhal for malicious prosecution and abuse of process, entered on September 22, 2006 in the Circuit Court of St. Louis County, Missouri, Case No. 04CC–1483 (the “Missouri Judgment”). He also sought the exception for a $5,000 costs and fees award (the “Remand Order”) entered after Leventhal attempted to remove the Missouri state court case to the United States District Court for the Northern District of Illinois. He claimed both were debts for “willful and malicious injury” under § 523(a)(6). Count II, which sought a revocation of Leventhal's discharge pursuant to 11 U.S.C. § 727(d), was dismissed. Mot. to Dismiss Order, Lev. Appx. Ex. 14. Schenberg subsequently amended his complaint to assert only the surviving claim for a dischargeability determination pursuant to § 523(a)(3)(B). Am. Compl., Adv. Dkt. No. 56.

A bench trial was held on April 12, 2012, The bankruptcy judge ruled on the parties' motions in limine before trial. The bankruptcy judge granted Schenberg's request to bar collateral attacks on the Missouri Judgment and the Remand Order, finding both were valid, final orders. Trial Tr. at 5:16–22, Schen. Appx. Ex. 2. At trial, the bankruptcy judge granted the Missouri Judgment preclusive effect on the issue of “willful and malicious injury.” Id. at 20:13–21:7. The issues remaining for trial were whether (1) the Remand Order constituted a debt for willful and malicious injury for purposes of § 523(a)(6)'s discharge exception, (2) the Missouri Judgment and Remand Order were properly listed and scheduled for purposes of § 523(a)(3)(B)'s discharge exception, and (3) Schenberg had notice or actual knowledge of Leventhal's bankruptcy case for purposes of § 523(a)(3)(B)'s discharge exception. Id. at 20:13–21:20.

The Bankruptcy Court's Findings of Fact and Conclusions of Law

Following trial, the bankruptcy court declared the Missouri Judgment and the Remand Order nondischargeable under § 523(a)(3)(B). Judgment was entered against Leventhal for $276,895.17. Judgment, Adv. Dkt. No. 159. The bankruptcy court issued detailed findings of fact and conclusions of law regarding each required component of § 523(a)(3)(B).

First, the bankruptcy court stated that the debts were not properly “listed” or “scheduled” because Leventhal provided an incomplete mailing address for Schenberg on his bankruptcy forms. Although Leventhal provided the address for Schenberg's attorney of record in the malicious prosecution and abuse of process litigation on Schedule F, the schedule was not filed until after the Official Form 9A with the relevant deadlines had been sent to creditors. As such, the bankruptcy court found the debts were not listed or scheduled in time for Schenberg to seek a dischargeability determination. Findings & Conclusions at 5:13–8:10, Schen. Appx. Ex. 1. Second, the bankruptcy court held that the debts were nondischargeable under § 523(a)(6), as required for § 523(a)(3)(B)'s discharge exception. The Missouri Judgment from Schenberg's malicious prosecution and abuse of process litigation was entitled to preclusive effect on the issue of “willful and malicious injury,” and the Remand Order arose from the same willful and malicious injury. Id. at 8:11–16:20. Finally, the bankruptcy court also found that Schenberg did not have notice or actual knowledge of Leventhal's bankruptcy case prior to the discharge based on evidence presented at trial, particularly the testimony of Schenberg and his attorney. Id. at 16:21–22:21.

Post–Trial Motions and Appeal

On April 23, 2012, Leventhal moved for a new trial or to alter or amend the judgment. Adv. Dkt. No. 161. Four days later he moved for reconsideration of the bankruptcy court's order granting Schenberg's motion in limine to preclude collateralattacks on the Missouri Judgment and Remand Order. Adv. Dkt. No. 164. The bankruptcy court denied both motions on May 14, 2012. Orders, Lev. Appx. Ex. 19. Leventhal timely appealed the bankruptcy court's judgment order and post-judgment orders. Am. Notice of Appeal, Adv. Dkt. No. 181.³

STANDARD OF REVIEW

This court has jurisdiction over the bankruptcy appeal pursuant to 28 U.S.C. § 158(a)(1). A bankruptcy court's legal conclusions and mixed questions of law and fact are reviewed de novo. Mungo v. Taylor, 355 F.3d 969, 974 (7th Cir.2004). Factual findings are reviewed for clear error. Fed. R. Bankr.P. 8013. The bankruptcy court's credibility determinations shall not be overturned absent an abuse of discretion. Id.;In re Bonnett, 895 F.2d 1155, 1157 (7th Cir.1989). This is because the bankruptcy court is best situated to assess witnesses' behavior and demeanor and to weigh evidence. Anderson v. City of Bessemer City, 470 U.S. 564, 575, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985).

The clear error standard applies to the review of the bankruptcy court's dischargeability determination. See In re Bonnett, 895 F.2d at 1157. As long as the bankruptcy court's determinations are “plausible” based on the record, they will not be reversed, even if this court would have decided differently. Anderson, 470 U.S. at 573–74, 105 S.Ct. 1504;Freeland v. Enodis Corp., 540 F.3d 721, 729 (7th Cir.2008). Leventhal, as appellant, bears the burden of showing clear error. See Hower v. Molding Sys. Eng'g Corp., 445 F.3d 935, 939 (7th Cir.2006).

DISCUSSION

As an initial matter, the parties have presented different statements of the issues on appeal. After review of the parties' briefs, the issues on appeal are (1) whether Shenberg's adversary complaint was timely; (2) whether the bankruptcy court clearly erred in determining that Leventhal did not “list” or “schedule” the Missouri Judgment and Remand Order; ⁴ (3) whether the bankruptcy court clearly erred in determining Schenberg did not have “notice or actual knowledge” of the bankruptcy from Leventhal's April 5, 2010 email to Huck or his April 6, 2010 mailing; and (4) whether the bankruptcy court erred in applying Missouri preclusion law instead of federal preclusion law and in granting preclusive effect to the Missouri Judgment for the purpose of establishing a “willful and malicious injury” under § 523(a)(6). Leventhal's arguments for striking Schenberg's brief are addressed last.

I. Timeliness of the Adversary Complaint

Leventhal first challenges the...