Shriners Hosp. for Children v. Bauman (In re Bauman), s. 10 B 45250

• Decision Date: 08 February 2012
• Docket Number: Nos. 10 B 45250,11 A 01083.,s. 10 B 45250
• Citation: 465 B.R. 495
• Parties: In re James George BAUMAN, Debtor.Shriners Hospital for Children, Plaintiff, v. James George Bauman, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

465 B.R. 495

In re James George BAUMAN, Debtor.Shriners Hospital for Children, Plaintiff,

v.James George Bauman, Defendant.

Nos. 10 B 45250

11 A 01083.

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

Feb. 8, 2012.

Jeffrey C. Dan, Crane Heyman Simon Welch & Clar, Chicago, IL, for Plaintiff.

John V. Delgaudio, Jr., John V. Delgaudio Jr. Ltd., Markham, IL, for Defendant.

MEMORANDUM OPINION DENYING SHRINERS HOSPITAL'S MOTION TO VACATE SUMMARY JUDGMENT

JACK B. SCHMETTERER, Bankruptcy Judge.

I. INTRODUCTION

This adversary proceeding is related to the Chapter 7 Bankruptcy proceeding filed by Debtor–Defendant James George Bauman (the “Defendant”). Plaintiff Shriners Hospital for Children (the “Plaintiff”) sued in this Adversary Proceeding asserting that its claim against the Defendant should not be discharged pursuant to sections 11 U.S.C. § 523(a)(4) and (a)(6). On December 23, 2011, summary judgment in favor of the Defendant was entered. The Plaintiff has moved to vacate that decision under Rule 59 Fed.R.Civ.P. [made applicable by Rule 9034 Fed. R. Bank. P.]. The Plaintiffs motion was timely filed on January 6, 2012.

JURISDICTION

Jurisdiction lies 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). Venue is proper pursuant to 28 U.S.C. § 1409(a).

II. BACKGROUND

All of the material facts in this case either are undisputed or have been deemed admitted pursuant to Local Bankruptcy Rule 7056–2(B). Those facts are as follows.

The Plaintiff is a charitable organization that provides medical care to ill and injured children. (Def. L.R. 7056–1 Stmt. ¶ 1; Compl. ¶ 2.) In 1964, Ms. Grace Ellis (“Ellis”) executed a will (the “1964 will”) naming her parents as the beneficiaries of her estate, and named the Plaintiff and her future descendants as contingent beneficiaries. (Def. L.R. 7056–1 Stmt. ¶ 3 & Ex. 5 to Ex. F; Comp. ¶ 8). In 1999, Ellis executed a new will (the “1999 will”) naming Defendant as the sole beneficiary and her surviving heirs as contingent beneficiaries. (Def. L.R. 7056–1 Stmt.; Compl. ¶ 12.) Ellis died in 2003, with an estate of almost $2 million. (Def. L.R. 7056–1 Stmt. ¶ 4). The 1999 Will was filed the following day with the Clerk of the Circuit Court of Cook County and admitted to probate on October 29, 2003. ( Id.)

The Plaintiff first became aware of its possible interest in the 1964 Will in 2006 when the Defendant filed that earlier will with the Circuit Court as part of a will contest brought by some of Ellis' heirs at law. ( Id. ¶ 5.) Thereafter, on August 8, 2006, the Plaintiff filed a Petition to contest the 1999 Will in the Circuit Court. ( Id. ¶ 6 & Ex. 4A.) Counts I and II of that Petition contested the validity of the 1999 Will based on theories of undue influence and mental incapacity, respectively. ( Id. ¶ 7 & Ex. 4A.) Those counts requested both the vacation of the order admitting the 1999 Will to probate and the admission to probate of the 1964 Will. ( Id.) Count III of the petition alleged a tort claim for intentional interference with an expectancy of inheritance. ( Id., Ex. 4A.)

In addition to the Plaintiff's will contest, two groups of Ellis' heirs filed separate will contests that were substantially similar to that of the Plaintiff's ( Id. ¶ 11 & Exs. 4B & 4C), but they have not participated in this Adversary proceeding. During the probate litigation of all three will contests, testimony from Ellis' attending physician, friends, and lawyers was taken in four depositions. ( Id. ¶ 12 & Exs. D–G.) In all four depositions, the deponents testified that Ellis was of sound mind and memory and did not suffer from diminished mental capacity when the 1999 Will was executed. ( See id. ¶¶ 13–17.)

In response to the Plaintiffs petition, the Defendant moved to have the entire state court Complaint dismissed for untimely filing, and this motion was granted by the Circuit Court. (Def. L.R. 7056–1 Stmt. ¶ 8, 9.) The Plaintiff appealed the tort claim only, and the Illinois Court of Appeals affirmed the judgment of the Circuit Court. ( Id.) The Illinois Supreme Court reversed the judgment of the lower courts pertaining to the timeliness of the filing and remanded the issue of the tort claim to the Circuit Court. In re Estate of Ellis, 236 Ill.2d 45, 337 Ill.Dec. 678, 923 N.E.2d 237 (2009).

The Defendant filed his voluntary petition for relief under Chapter 7 of the Bankruptcy Code, and the Plaintiff filed this Adversary Complaint to bar dischargeability of its tort claim pursuant to § 523(a)(4) and (a)(6). (Def. L.R. 7056–1 Stmt. ¶ 2; Compl. ¶ 4.) Plaintiff alleged under § 523(a)(4) that the Defendant had a fiduciary duty to the Plaintiff because the Defendant was the executor of the 1999 will and the Plaintiff was Ellis' rightful heir and that Defendant breached this duty by failing to alert the Plaintiff of Ellis' death and distributing the assets of her estate to himself. (Compl.¶¶ 21–24). The Plaintiff further alleged under § 523(a)(6) that the Defendant willfully and maliciously caused injury to the Plaintiff by depriving Plaintiff of the assets of Ellis' estate. (Compl. ¶ 27.)

The Defendant moved to dismiss the case under Rule 12(b)(6) Fed.R.Civ.P. [made applicable by Rule 7012(b) Fed. R. Bankr.P.] or, in the alternative, for summary judgment under Rule 56(b) Fed.R.Civ.P. [made applicable by Rule 7056 Fed. R. Bankr.P.]. The Defendant submitted that motion with four depositions referred to earlier. The depositions were of the witnesses in the probate litigation that demonstrated Ellis' sound mental state at the time of filing the 1999 will. (Exs. D–G). According to that unanimous and uncontradicted deposition testimony from her attending physician, her friends, and her lawyers, Ellis was of sound mind and memory and did not suffer from diminished mental capacity at the time of the execution of the 1999 Will.

Specifically, Ellis' friend and one-time lawyer Donald W. Hoag (“Hoag”) testified that he played bridge with Ellis on a regular basis from 1985 until her death in 2003 and that she was “very, very with it.” (Def. L.R. 7056–1 Stmt. ¶ 13 & Ex. D at 53:3–5). Hoag described Ellis as a “very stubborn [,] ... very independent” woman with “a very strong personality.” ( Id., Ex. D at 123:13–17.) According to Hoag, “there was absolutely nothing wrong with [Ellis] physically or mentally” such that she would not have been able “to make a free choice [regarding] what she wanted to do with her assets.” ( Id., Ex. D at 106:18–21.)

Similarly, Ellis' attending physician and friend William Wehrmacher (“Wehrmacher”) testified that Ellis was of “sound and disposing mind and memory” during the many years that he treated her, including shortly before her death ( id., Ex. E at 37:15–38:9), that she was “clear and oriented” ( id., Ex. E at 41:16), “pleasant and cooperative” ( id., Ex. E at 45:14–15). Additionally, Wehrmacher stated that Ellis did not suffer from any kind of condition that would impair her memory or judgment or affect her ability to understand and make responsible decisions on August 12, 1999, just days after she executed the 1999 Will. ( Id., Ex. E at 48:4–18.) In short, Wehrmacher testified, Ellis “knew precisely what she was doing.” ( Id., Ex. E at 48:2–3.)

James M. Knox (“Knox”), Ellis' friend and attorney, testified that he drafted both the 1999 Will and the power of attorney for property for Ellis. ( Id., Ex. F at 10:2–5; 10:24–11:4.) According to Knox, Ellis was “a scrappy, smart, tough, independent lady.” ( Id., Ex. F at 52:13–14.) She was “no pushover,” Knox said, but rather “a powerful, ... interesting, educated, sophisticated woman.” ( Id., Ex. F at 52:14–16.) In order to assure himself that Ellis knew exactly what she was doing at the time of the execution of the 1999 Will, Knox testified that he observed the way Ellis looked, had her read the will, and asked her if she understood that she was leaving everything to the Defendant. ( Id., Ex. F at 23:7–20; 56:18–21.) After observing and speaking to Ellis, Knox said, he was “convinced” that the disposition of her estate to the Defendant was “consistent” with what Ellis had wanted to do for “several years.” ( Id., Ex. F at 24:3–7.)

Finally, Janine L. Knox (“Janine Knox”), Knox's wife, office manager, and legal assistant, testified that she witnessed the execution of the 1999 Will. ( Id., Ex. G at 5:23–24; 6:24–7:1; 10:7–9.) According to Janine Knox, Ellis then stated her understanding that the will would leave her entire estate to the Defendant. ( Id., Ex. G at 11:13–16.) Janine Knox also testified that she believed that Ellis was “of sound mind and memory” on the day the 1999 Will was executed and had no reason to think that the Defendant had unduly influenced her to execute the will. ( Id., Ex. G at 17:12–20.)

In its response to the Defendant's Motion for Summary Judgment, the Plaintiff argued that the Motion was filed prematurely because discovery was not completed in the probate litigation. Specifically, the Plaintiff contended witnesses who had not been deposed would dispute the facts presented in the depositions offered by the Defendant. (Mem. In Opposition to the Def. Mot. In Favor of Summary Judgment ¶ 4.) Further, the Plaintiff maintained that both the Defendant's failure to file an Answer to the Amended Complaint and the Illinois Supreme Court's decision allowing the Plaintiff to proceed with its tort claim for intentional interference with an expectancy of inheritance created genuine issues of material fact precluding the entry of summary judgment in the Defendant's favor. ( Id.) The Plaintiff did not contend that it had any evidence or affidavits at the time to contradict the evidence presented by the Defendant and it offered none. Therefore, the Motion was allowed and Summary Judgment was entered in favor of Defendant.

As reasoned in the Memorandum...