Old Second Nat'l Bank, N.A. v. Sanfratello (In re Sanfratello), Case No. 17 B 242
| Decision Date | 01 June 2018 |
| Docket Number | Adv. No. 17 A 206,Case No. 17 B 242 |
| Parties | In re: JOSEPH A. SANFRATELLO, Debtor. OLD SECOND NATIONAL BANK, N.A., Plaintiff, v. JOSEPH A. SANFRATELLO, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
MEMORANDUM OPINION
This matter comes before the court following trial on the complaint filed by Old Second National Bank ("Bank" or "Plaintiff") against Joseph A. Sanfratello ("Sanfratello" or "Defendant"). In its complaint, the Bank sought denial of Sanfratello's discharge in two counts. Count I, brought under 11 U.S.C. § 727(a)(2)(A), alleged that Sanfratello "transferred, or permitted to be transferred, approximately $233,000 with the intent to hinder, delay, or defraud his creditors." Count II, brought under 11 U.S.C. § 727(a)(4), alleged that Sanfratello "knowingly and fraudulently, and in connection with this bankruptcy case, made material omissions, false oaths and accounts in his Schedules and SOFA, including, but not limited to, the failure to disclose the existence of his two checking accounts at JPMorgan Chase Bank."
A trial was held on March 5, 2018. After the parties rested, the court noted that the Bank had introduced no evidence regarding fraudulent transfers, which had been the basis for Count I. Instead, the Bank's evidence centered on concealment, which had not been alleged in the complaint and is a different basis for denial of discharge under § 727(a)(2)(A).
The Bank made an oral motion to amend its complaint. The court suggested that the motion should be put in writing. Although the Bank's attorney stated that he would "get my motion to amend on file at the same time as my post-trial brief," Tr. at 82, lines 11-13, the Bank filed an amended complaint on April 2 without filing a motion to amend and without leave of court.
As for Count II, the Bank's attorney stated at the close of evidence that Plaintiff would not seek denial of discharge pursuant to 11 U.S.C. § 727(a)(4). Indeed, the amended complaint contains only Count I, and in its post-trial brief, the Bank stated that it voluntarily dismissed Count II.
Aside from the deletion of Count II, the only change from the original to the proposed amended complaint appears to be the following additional paragraph in Count I:
In the twelve months preceding the Petition Date, defendant concealed the Funds with the intent to hinder, delay, or defraud his creditors, including Old Second, by failing to produce financial documents, or provide testimony, required by the Citation.
For all of the reasons stated below, the oral motion to amend the complaint is denied. Judgment will be entered in favor of Defendant Joseph Sanfratello on Count I. The court will dismiss Count II.
Joseph Sanfratello grew up in the restaurant industry, started a pizza franchise business, and has owned restaurants throughout his career. Tr. at 12. He also has a business degree from DePaul University. Tr. at 11.
He borrowed money from Old Second National Bank, the loan went into default, and the Bank sued him, obtaining a judgment in the amount of $34,281.28. Tr. at 12; Pl. Ex. A.
The Bank had an alias Citation to Discover Assets issued on Sanfratello, requiring him to appear in Will County Court on June 1, 2015. Pl. Ex. A.1 He knew that the citation concerned the Bank, and that it was trying to collect money from him. Tr. at 13. Although the Bank submitted the alias citation and certificate of service as Exhibit A, it did not include a copy of the income asset form or citation rider that was supposedly attached.
Sanfratello did not appear in court on June 1. The Will County judge issued a Rule to Show Cause ordering Sanfratello to appear on August 3, 2015. Pl. Ex. B.
Sanfratello appeared in court on August 3. Tr. at 16. He agreed to a continuation of the citation to September 14, and understood that he was supposed to furnish financial documents and an affidavit to the Bank's attorney. Tr. at 17; Pl. Ex. C.
Sometime in the late summer or early fall of 2015, Sanfratello moved from Crete, Illinois to Frankfort, Illinois. Tr. at 55.
On October 5, 2015, the Bank's attorneys submitted a warrant application for Sanfratello's arrest. Pl. Ex. E. The Will County court ordered a warrant on the same date, and he was arrested. He posted bond of $500. Tr. at 19. No testimony was heard as to why the Bank made the application or why the warrant was issued, nor does the application submitted as Exhibit E answer these questions. The Bank filed a motion for turnover several weeks later, and alleged that Sanfratello did not appear in court on September 14 or October 5. Pl. Ex. G. Sanfratello next appeared in court on December 10, 2015. Although he was present, the Bank's attorneys were not. The judge set the case over to January 4, 2016. Tr. at 19; Pl. Ex. F. When asked at this trial whether he had been prepared to answer questions if opposing counsel had been present, Sanfratello answered, "No." Tr. at 52, line 2.
From mid-December 2015 through mid-February 2016, Sanfratello was in Arizona opening a franchise location. Tr. at 20-21. So he did not appear in court on January 4, and a body writ issued in the amount of $1,000. Tr. at 21-22; Pl. Ex. H. At some point after he returned to Illinois from Arizona, and before June 2016, Sanfratello was arrested. Tr. at 24.
He appeared in court on June 22, 2016. Both he and his wife were given copies of the riders to the citation as well as income/asset affidavits; they had not yet turned over tax returns, bank statements or the affidavit. Tr. at 25. The Sanfratellos were ordered to do so by the next court date of July 27, 2016. Pl. Ex. K.
The Sanfratellos hired an attorney, Timothy Edmier. On July 26, 2016, Edmier sent the following documents to the Bank's attorney:
Pl. Ex. L.
The next day, the Will County court continued the citation proceedings by agreement of the parties. Although Sanfratello was not present, his attendance was not required. Tr. at 27.Pursuant to the agreed order continuing the citation, depositions were to be conducted on both Sanfratellos prior to the next court date of September 9, 2016. Pl. Ex. M.
This was the first time that a deposition is mentioned in one of the Will County court orders. The Bank's attorney asked Sanfratello at trial whether it had been trying to set up a deposition for months:
Tr. at 26, lines 3-14.
The Bank's attorneys noticed a deposition for Sanfratello on September 1, 2016. Pl. Ex. N. They mailed a copy of the deposition notice to Sanfratello, but not to attorney Timothy Edmier. Id.; Tr. at 27.
Sanfratello was asked at trial whether he appeared for the September 1 deposition.
Tr. at 27, lines 11-14.
The Sanfratellos did not appear in court on September 9. The Will County court issued a Rule to Show Cause ordering them to appear on October 18. Pl. Ex. O.
At the October 18 hearing, Sanfratello appeared. The Will County judge asked why it was taking so long to complete the citation. Sanfratello's lawyer advised the court that there had been a miscommunication between her office and Sanfratello's bankruptcy counsel over who would be covering the citation. "I certainly could present my client for deposition now that we know it will be my office representing him in the deposition rather than bankruptcy counsel." Pl. Ex. P, pp. 3-4. In response, the Bank's attorney asked that Sanfratello be held in contempt and taken into custody.
After asking about the nature of Sanfratello's business, the Will County judge noted that "that kind of situation can present 1 think some rather extensive documentation issues, but I don't think Mr. Sanfratello has made much of an effort here to get through this." Pl. Ex. P., p. 9. The judge then indicated that he wanted this matter to move forward, and was inclined to award fees to the Bank. Meanwhile, the rule to show cause was continued to November 9, 2016. Sanfratello was again ordered to present himself for a deposition. Pl. Ex. Q.
The Bank noticed another deposition for November 2. This time it served Sanfratello's attorney with a copy of the notice. Pl. Ex. R. Sanfratello appeared for his deposition on November 2 and testified. Tr. at 32. The Bank's attorney had all the financial documents that Sanfratello had submitted, and "spent a fair amount of time" asking him questions about his financial transactions. Tr. at 33, line 15.
After the deposition, the Bank moved for an order of contempt against Sanfratello. Pl. Ex. S. The motion was noticed for November 9, and then continued to December 5, 2016, because of the judge's absence. Pl. Ex. T.
Sanfratello attended court on December 5. The Bank asked for sanctions, and after hearing from Sanfratello's counsel, the judge stated:
This is one of those situations that is going to probably take an evidentiary hearing as to his willfulness towards violating the order. 1 mean, on its face, yeah, it looks like he violated the order, but in terms of an appropriate attempt . . . In terms of his willfulness, what happened here, so -
Pl. Ex. U, p. 5. The Bank's...
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