Polish & Slavic Fed. Credit Union v. Lemiszka (In re Lemiszka)
| Decision Date | 30 December 2020 |
| Docket Number | Adversary No. 19-96032,Bankruptcy Case 19-82572 |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
| Parties | In re: Tomasz Lemiszka, Debtor. Polish & Slavic Federal Credit Union, Plaintiff, v. Tomasz Lemiszka, Defendant. |
MEMORANDUM OPINION
Plaintiff Polish & Slavic Federal Credit Union (the "Credit Union") objects to the discharge of the Debtor's outstanding debt on a car loan and additionally seeks a money judgment in the amount of $13,201.43, and other relief. The several counts of its complaint allege different, alternative theories that the debt is non-dischargeable, whether under section 523(a)(2)(A) or section 523(a)(6) of the Bankruptcy Code. Before this court is the Credit Union's motion for summary judgment on Counts I, III, IV and V of its adversary complaint. (ECF No. 26, the "Motion").
Because the Credit Union has failed to demonstrate that there is no genuine dispute of material fact or that the Credit Union is entitled to judgment as a matter of law, the Motion will be denied.
The Credit Union bases its objection to discharge of the car loan debt on two events. First, it claims that the Debtor failed to deliver to it the physical certificate of title to the vehicle which was to serve as the collateral for the loan. In connection with this, it further alleges that the Debtor and failed to have the Credit Union listed as "loss payee" on the vehicle's policy of insurance. Second, in connection with a later accident that wrecked the vehicle, the Plaintiff alleges that the Debtor failed to timely notify it of the accident and remit the insurance proceeds he received. The Credit Union alleges that the Debtor was required perform to claims that the terms of the car loan agreement required these events violated the Debtor's representations to the Plaintiff and his obligations under the loan agreement.
In the first court of its complaint, the Credit Union asserts 11 U.S.C. § 523(a)(2)(A) to allege that the Debtor made a "false statement" that he "intended to pledge [the vehicle] as collateral and allow [the] Credit Union to perfect its lien upon title of [the vehicle]." Count II it alleges that the Debtor "falsely stated, in writing in the Loan Agreement, that he would pledge [the vehicle] as collateral, that [the] Credit Union's lien would be shown on title, and that he would notify [the] Credit Union if [the vehicle] was damaged" to request relief under section 523(a)(2)(B). The last three counts object to discharge under section 523(a)(6). Count III alleges, in pertinent part, that the Debtor "acted willfully and maliciously when he failed to have the Plaintiff'slien shown on the vehicle's title, and later to "provide insurance with title showing [the] Credit Union's lien after [the vehicle] was involved in an automobile accident" and then "failed to turnover [sic] insurance proceeds from said automobile accident to Credit Union." Count IV asserts that while the "Credit Union had an absolute right to the place it's lien [sic] on the title under the Loan Agreement" and the Debtor "never provided [the] Credit Union with the title." Finally, Count V alleges that the Debtor converted the insurance proceeds from the accident to which the Credit Union "had an absolute right to the insurance proceeds under the contract."
The Debtor answered the complaint and denied that the debt is non-dischargeable. (ECF No. 13.) The court granted the parties were given ample time for discovery.
With this Motion, the Plaintiff submitted its required Statement of Facts (ECF No. 26, the "Plaintiff Statement of Facts" or "Pl. SOF") to which it attached six exhibits, including signed affidavits of two of its employees. With his response the Defendant submitted his Statement of Material Facts pursuant to Bankr. N.D. Ill. R. 7056-2A. The Debtor's statement admits all of the Plaintiff's Statements of Fact except its paragraphs 20-23, 32 and 39, which are denied. The Debtor also raised seven additional statements of fact (ECF No. 27, the "Statement of Additional Facts" or "Def. SOF") and submitted several exhibits in support of his opposition to the Motion, including his own signed declaration. The Plaintiff filed a reply memorandum (ECF No. 28) but did not respond to the Statement of Additional Facts. The parties were offered but declined the opportunity for oral argument.
Discharge is a right that is expressly created by title 11 and would have no existence if not created by the Bankruptcy Code. Thus, proceedings on an objection to a debtor's discharge or to object to the dischargeability of a debt arise in a case under title 11. Kontrick v. Ryan, 540 U.S. 443, 447-48 (2004). Therefore, this court has subject matter jurisdiction under 28 U.S.C. § 1334(b) and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I).
The following facts reflect the undisputed facts contained in the parties' submissions under Bankr. N.D. Ill. R. 7056-1 and 7056-2 or which are deemed admitted based on the Debtor's or Plaintiff's failure to properly controvert the facts as required by FED. R. BANKR. P. 7056(c) and the related Local Bankruptcy Rules.
Polish & Slavic Federal Credit Union is a chartered federal credit institution doing business in Illinois. On December 5, 2016, the Debtor entered into a written loan agreement (the "Loan Agreement") with the Credit Union. Under the terms of the Loan Agreement, the Debtor agreed to secure his loan by a lien on the 2010 BMW 5 Series automobile described in the Loan Agreement, to have the Credit Union's lien shown on the title, and to promptly notify the Credit Union if the vehicle was damaged. (Pl. SOF ¶12.) On the same day, the Debtor signed an additional agreement with the Credit Union authorized BMW Bank of North America to forward the vehicle title to the Credit Union upon payment in full of the that bank's existing loan. (Pl. SOF ¶13; Complaint Ex. B, Def. SOF ¶1.) Thatdocument listed a New Jersey address of the Credit Union to which the title was to be forwarded with the Bank's lien released. (Id.)
The Credit Union directly disbursed its loan proceeds to BMW Bank of North America. (Pl. SOF ¶15, Comp. Ex. C.) Subsequent to this payment, and despite the instruction to the Bank to send the title certificate of title to the Credit Union, BMW Bank sent the title to the Debtor's residence. (Def. SOF ¶3, Pl. SOF ¶¶18, 20.) The Credit Union was never listed as lien holder on the title and the Debtor has not provided it with the title certificate. (Pl. SOF ¶19, 24, Answer ¶14, 16.) When the certificate instead arrived at the Debtor's house he was not at home, and his wife put the certificate it with other documents. (Def. SOF ¶3.)
The Debtor made his loan payments to the Credit Union pursuant to the Loan Agreement for more than two years (Def. SOF ¶6) until on or around February 13, 2019, when the vehicle was involved in an accident. It "was declared a total loss." (Pl. SOF ¶¶25-26.) The Debtor did not "promptly"1 inform the Credit Union of the accident. (Pl. SOF ¶27.)
The vehicle was insured on a policy issued by State Farm Mutual Automobile Insurance Company as of the date of the accident. The Debtor had caused State Farm to reflect the Credit Union as a loss payee on the policy. (Def. SOF ¶2.) When Mr. Lemiszka informed State Farm about the accident the State Farm representative told him that its check "would be issued solely to him, and that he could cashed the check."(Def. SOF ¶4.) State Farm issued the check for $18,095.31 solely in the name of the Debtor on or about February 21, 2019. (Pl. SOF ¶¶29, 31; Def. SOF ¶¶2, 4, 5.)
The Debtor did not remit the insurance proceeds to the Credit Union. Instead, he used at least a portion to pay outstanding debts related to his business. (Pl. SOF ¶33.) Specifically, on March 4, 2019, the Debtor used $12,500 of the proceeds to pay debt of Big Wave Bounce Park, a limited liability company he belonged to. (Pl. SOF ¶¶33-35.) The Debtor made no further voluntary payments to the Credit Union after February 4, 2019. (Pl. SOF ¶37, 41.) On May 24, 2019, the Credit Union charged off the Debtor's remaining savings account balance of $103.29 towards the balance of the Vehicle loan. (Pl. SOF ¶38.)
The Debtor filed his voluntary petition for relief under chapter 7 on November 5, 2019. Three days later, but before to receiving notice of the bankruptcy case, the Credit Union filed a complaint against the Debtor in McHenry County for "breach of contract." (Pl. SOF ¶42; Answer ¶25.) As of the petition date the Debtor owed the Credit Union the outstanding principal balance of $13,201.43, plus attorney's fees and costs. (Pl. SOF ¶43.)
Standards and Procedures for Rule 56 Motions. Summary judgment is appropriate if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a), as incorporated by FED. R. BANKR. P. 7056. On a request for summary judgment, "the court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial." Johnson v.Advocate Health & Hosps. Corp., 892 F.3d 887, 893 (7th Cir. 2018) (quoting Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003)). If no such dispute if found, summary judgment can be entered as a matter of law. 10A Charles Alan Wright, Arthur R. Miller, Mary Kay Kane, FEDERAL PRACTICE & PROCEDURE § 2725 at 416 (2016).
"The party that bears the burden of proof for an issue at trial must cite the facts which it believes [would] satisf[y] that burden and demonstrate why the record is so one-sided as to rule out the prospect of a finding in favor of the non-movant." Bunch v. United States, ...
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