Muhammad v. Reed (In re Reed)
| Decision Date | 22 June 2015 |
| Docket Number | Adversary Proceeding No. 13ap01294,Case No. 13bk30975 |
| Citation | 532 B.R. 82 |
| Parties | In re: Byron F. Reed, Debtor. Hassan A. Muhammad, Plaintiff, v. Byron F. Reed, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Hassan A. Muhammad, Chicago, IL, pro se
Jennifer M. Hill, Esq., Anthony J. Peraica, Esq., Selwyn M. Skevin, Esq., Anthony J. Peraica & Associates, Ltd., Chicago, IL, for Defendant
The matter before the court arises out of the Amended Motion to Dismiss Pursuant to Rule 15 of the Federal Rules of Civil Procedure (the “Amended Motion to Dismiss ”) filed by Byron Reed (the “Defendant ”), seeking dismissal of the Complaint Objecting to Discharge of Debt Owed to A & H Caring Connections, Inc., under 11 U.S.C. § 523(a)(2)(A) and (a)(6) and 11 U.S.C. § 727(a) (the “Complaint ”), filed pro se by Hassan A. Muhammad (the “Plaintiff ”). Also before the court is the Plaintiff's fully briefed Motion to Strike and Deem Facts Admitted (the “Motion to Strike ”). The court will rule on the Motion to Strike at the hearing scheduled for June 23, 2015.
The Amended Motion to Dismiss argues that, pursuant to Federal Rule of Civil Procedure 12(b)(6) (“Rule 12(b)(6) ”), the Plaintiff has failed to state a claim upon which relief may be granted. This conclusion rests upon the Defendant's conclusion that the Plaintiff lacks standing, as the underlying assignment is void as a matter of public policy and as a violation of 705 ILCS 220/2,1 the “Corporation Practice of Law Prohibition Act,” and Illinois law prohibiting “champerty” and “maintenance.” The Defendant also asserts that the Plaintiff's past pattern of litigating without a license violates public policy and bolsters the conclusion that the Plaintiff is violating public policy by prosecuting the Complaint. The Defendant therefore asks that the court preclude the Plaintiff from proceeding with this action and dismiss the Complaint with prejudice.
For the reasons set forth herein, the court finds that the Defendant has failed to satisfy his burden with respect to a motion to dismiss the Complaint under Rule 12(b)(6). The Defendant's Amended Motion to Dismiss is denied.
The federal district courts have “original and exclusive jurisdiction” of all cases under title 11 of the United States Code (the “Bankruptcy Code ”). 28 U.S.C. § 1334(a). The federal district courts also have “original but not exclusive jurisdiction” of all civil proceedings arising under the Bankruptcy Code, or arising in, or related to cases under title 11. 28 U.S.C. § 1334(b). District courts may, however, refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).
A bankruptcy judge to whom a case has been referred may enter final judgment on any core proceeding arising under the Bankruptcy Code, or arising in a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(1). All of the counts in the Complaint are based on sections 523 and 727 of the Bankruptcy Code. A proceeding to determine the dischargeability of a particular debt arises in a case under title 11 and is specified as a core proceeding. 28 U.S.C. § 157(b)(2)(I) ; Birriel v. Odeh (In re Odeh ), 431 B.R. 807, 810 (Bankr.N.D.Ill.2010) (Wedoff, J.). An objection to a debtor's discharge may only arise in a case under title 11 and is specified as a core proceeding. 28 U.S.C. § 157(b)(2)(A) & (J) ; Kontrick v. Ryan, 540 U.S. 443, 452, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) ; Hunt v. O' Neal (In re O'Neal ), 436 B.R. 545, 550 (Bankr.N.D.Ill.2010) (Schmetterer, J.). It follows, therefore, that a motion to dismiss such a proceeding is also a core proceeding.
As to constitutional authority, while discharge and dischargeability actions may turn on state law, determining the scope of a debtor's discharge is a fundamental part of the bankruptcy process. See De i tz v. Ford (In re Deitz ), 469 B.R. 11, 20 (9th Cir. BAP 2012). As observed by one bankruptcy court, “there can be little doubt that [a bankruptcy court], as an Article I tribunal, has the constitutional authority to hear and finally determine what claims are non-dischargeable in a bankruptcy case.” Farooqi v. Carroll (In re Carroll ), 464 B.R. 293, 312 (Bankr.N.D.Tex.2011) ; see also De i tz, 469 B.R. at 20 ; White Eagle, Inc. v. Boricich (In re Boricich ), 464 B.R. 335, 337 (Bankr.N.D.Ill.2011) (Schmetterer, J.).
Accordingly, final judgment is within the scope of the court's authority.
In considering the Amended Motion to Dismiss, the court has considered the arguments of the parties at the April 15, 2015 hearing (the “Hearing ”), has reviewed the Amended Motion to Dismiss [Adv. Dkt. No. 122], the attached exhibits submitted in conjunction therewith, and has reviewed and considered the following filed documents in the above-referenced adversary proceeding:
Though the foregoing items do not constitute an exhaustive list of the filings in the bankruptcy case and the adversary proceeding, the court has taken judicial notice of the contents of the dockets in these matters. See Levine v. Egidi, No. 93C188, 1993 WL 69146, at *2 (N.D.Ill. Mar. 8, 1993) (); In re Brent, 458 B.R. 444, 455 n. 5 (Bankr.N.D.Ill.1989) (Goldgar, J.) (recognizing same).
This adversary proceeding arises out of a monetary judgment (the “Judgment ”) entered by the Cook County Circuit Court in case no. 09L000930 (the “State Court Action ”) against the Defendant and in favor of A & H Caring Connections, Inc. (“A & H ”) in an action for breach of contract, fraud and deceptive practices. The Defendant did not appeal.
As a result of financial difficulties including the Judgment debt, the Defendant filed a voluntary petition for bankruptcy relief under chapter 7 of the Bankruptcy Code on August 2, 2013. On August 17, 2013, A & H filed a proof of claim for $412,622, representing the unpaid amount of the Judgment. On November 8, 2013, the Plaintiff filed the Complaint, which is an action based on the Judgment. The Plaintiff asserts standing to do so based on the A & H Caring Connections Inc. Assignment of Interests (the “Assignment ”) executed by Alice Jackson (“Jackson ”) in her capacity as President of A & H, dated three days prior to the Complaint, November 5, 2013, and notarized by Maria Bailey (“Bailey ”), who is also the Plaintiff's wife.
The Defendant filed the First Motion to Dismiss on December 16, 2013, seeking dismissal of the Complaint under Rule 12(b)(6) on the grounds that the Plaintiff had failed to plead sufficient facts to satisfy Federal Rules of Civil Procedure 8(a) & 9(b). The Plaintiff filed a response to the First Motion to Dismiss, as well as a motion for entry of default against the Defendant for failure to respond to the Complaint, on December 17, 2013. While the motion for default was later withdrawn on January 7, 2014, the general tenor that would guide the proceedings had, however, been established.
The First Motion to Dismiss was denied in an oral ruling delivered by the court on February 25, 2014, as was the Defendant's request for alternate relief through a motion for summary judgment on the Complaint that the Defendant had raised in a reply in support of the First Motion to Dismiss. The Defendant was ordered to file an answer to the Complaint, but granted leave to file a separate motion for summary judgment. On April 2, 2014, the Defendant filed an Answer and on April 11, 2014, he filed the Motion for Summary Judgment.
In the Motion for Summary Judgment, the Defendant argued that the Complaint was barred by res judicata and collateral estoppel on the grounds that the Cook County Circuit Court made no explicit finding of fraud in the State Court Action and that the bankruptcy court's review of those findings in determining dischargeability under sections 523 and 727 is an unauthorized exercise of appellate jurisdiction in violation of the Rooker –Feldman doctrine. Rooker v. Fid. Trust Co., 263 U.S. 413, 416, 44 S.Ct. 149, 68 L.Ed. 362 (1923) ; D.C....
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