WDH LLC v. Sobczak-Slomczewski (In re Sobczak-Slomczewskl)
| Decision Date | 05 August 2014 |
| Docket Number | Adversary No. 13 A 00972,Bankruptcy No. 13 B 16661 |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
| Parties | IN RE: ROBERT SOBCZAK-SLOMCZEWSKL Debtor. WDH LLC, Plaintiff, v. ROBERT SOBCZAK-SLOMCZEWSKI, Defendant. |
MEMORANDUM OPINION
WDH LLC (the "Plaintiff") argues on its Motion for Summary Judgment that facts previously established before two separate federal courts prove that the defendant/debtor, Robert Sobczak-Slomczewski (the "Debtor"), committed larceny and embezzlement within the meaning of 11 U.S.C. § 523(a)(4) and caused willful and malicious injury under 11 U.S.C. § 523(a)(6). Therefore, according to the Plaintiff, the $677,000 debt owed to it by the Debtor should be found non-dischargeable as a matter of law. The Court agrees.
The Debtor borrowed money from the Plaintiff's predecessor to purchase a hotel in the Wisconsin Dells. After the Debtor defaulted on the loan, the original lender commenced foreclosure proceedings in the Wisconsin state court (the "Wisconsin Foreclosure Court"). Thereceiver appointed by the Wisconsin Foreclosure Court to run the hotel removed the Debtor as a signatory on the hotel's bank account.
Beginning some months prior to the appointment of the receiver and continuing after the Debtor's removal as a signatory on the hotel's bank account, the Debtor caused the manager of the hotel to transfer large sums of money from the hotel's account to a separate corporate entity owned and controlled by the Debtor. Those transfers, all of which occurred while the Debtor was in default, eventually totaled over $677,000 and were made from hotel revenues that had been pledged as cash collateral to secure repayment of the loan.
The Wisconsin Foreclosure Court ordered that the hotel be sold. However, just before that sale was to take place, and without the consent of either the Wisconsin Foreclosure Court or the receiver, the Debtor merged the entity that owned the hotel, Dell Hospitality, Inc., into a new entity he created and controlled, Dell5 Hospitality, Inc. Immediately following this merger, the Debtor caused this new entity to file a Chapter 11 bankruptcy case.
The Dell5 Hospitality bankruptcy case was assigned to Bankruptcy Judge Jacqueline P. Cox. A motion to lift the automatic stay was filed before and granted by Judge Cox. In her ruling, Judge Cox specifically found that the Debtor had filed the bankruptcy case for Dell5 Hospitality with the intent to hinder and delay the lender in its efforts to foreclose on its mortgage on the hotel.
After Judge Cox lifted the stay, the Wisconsin foreclosure action resumed, and the hotel was sold. After discovering the Debtor's misappropriation of its cash collateral, the lender amended its complaint in the Wisconsin Foreclosure Court action to add claims for theft and conversion under Wis. Stat. § 943.20(1). The Debtor removed those new claims to the United States District Court for the Western District of Wisconsin.
The Wisconsin District Court ruled against the Debtor, finding that the Debtor had converted at least $677,000 from the Plaintiff. In making his findings, the District Court judge relied in part on the factual findings made by Judge Cox in ruling on the motion to vacate the automatic stay. The Debtor then personally filed a bankruptcy petition.
The Plaintiff, current holder of the loan documents, filed this adversary proceeding against the Debtor seeking to have the $677,000 debt owed to it found non-dischargeable under 11 U.S.C. § 523(a)(4) and (a)(6). The Plaintiff argues that it is entitled to summary judgment because all of the facts necessary to prove non-dischargeability of the debt have already been litigated in and decided previously by the Wisconsin District Court (or by Judge Cox, whose findings were incorporated by reference into the Wisconsin District Court's opinion). The Debtor seeks to relitigate all of the issues previously decided by these courts. The Court agrees with the Plaintiff that summary judgment is appropriate because there are no disputed issues of material fact and the Debtor is collaterally estopped from relitigating the prior courts' findings as to the elements establishing that the debt is non-dischargeable under § 523(a)(4) and (a)(6).
The Court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. It is a core proceeding under 28 U.S.C. § 157(b)(2)(I).
Summary judgment is appropriate when there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a) (made applicable by Fed. R. Bankr. P. 7056). On a motion for summary judgment, "the court has one task and one task only: to decide, based on the evidence of the record, whether there is any material dispute of factthat requires trial." Egan v. Freedom Bank, 659 F.3d 639, 643 (7th Cir. 2011). The movant bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The plaintiff, if it is the movant, can meet this burden by adducing evidence sufficient to make out a prima facie case on each element of its claim. See McKinney v. Am. River Transp. Co., 954 F. Supp.2d 799, 803 (S.D. Ill. 2013). If the plaintiff accomplishes this, then the defendant must adduce evidence to show some genuine issue of fact for trial Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).
Rule 56 describes not only the standard but the procedures for summary judgment motions. Sojka v. Bovis Lend Lease, Inc., 686 F.3d 394, 397 (7th Cir. 2012). The bankruptcy court's Local Rules also set out summary judgment procedures.
Under Local Rule 7056-1, the movant must submit a separate statement of material facts consisting of short numbered paragraphs with references to evidentiary material supporting each statement. L.R. 7056-1(A), (B). The Plaintiff has complied with this requirement.
The opposing party must then respond to each of the movant's statements of fact, admitting or denying the statement, and including "in the case of disagreement," references to evidentiary material. L.R. 7056-2(A)(2)(a). Failure to respond has serious consequences. In particular, facts not denied, or not denied in a permissible way, are deemed admitted. L.R. 7056-1(C), L.R. 7056-2(B); Cracco v. Vitran Express, Inc., 559 F.3d 625, 632 (7th Cir. 2009). Trial judges are entitled to enforce this requirement strictly, given "the high volume of summary judgment motions and the benefits of clear presentation of relevant evidence and law. . . ." Stevo v. Frasor, 662 F.3d 880, 886-87 (7th Cir. 2011).
The Debtor did not respond properly to the Plaintiff's statement of facts submitted under Local Rule 7056-1(A). He completely ignored the Local Rules' requirement that he file a separate response admitting or denying each of the Plaintiff's factual statements with references to supporting evidence. Instead, he submitted a "Response Brief and a supporting Affidavit. (Docket Nos. 56 & 57.)
The Court finds this Response Brief and Affidavit are not acceptable. It is not the Court's job to compare the Response Brief and Affidavit with the Plaintiff's statement of facts, determining which of the Plaintiff's facts might be disputed. See Smith v. Lamz, 321 F.3d 680, 683 (7th Cir. 2003) () The point of the Local Rules is to clarify the summary judgment presentation. The additional work required by a presentation like the Debtor's is precisely what the Local Rules are designed to avoid. Because the Debtor did not properly respond to the Plaintiff's Local Rule 7056-1(A) statement, all of the material facts in the Plaintiff's statement are deemed admitted.1
The following facts are taken from the Plaintiff's statement of facts, the pleadings, and the exhibits attached to the Plaintiff's motion.
The Plaintiff is a limited liability company organized under the laws of the State of Delaware. The Debtor is a resident of the state of Illinois. (7056-1 Statement ¶ 2; Ans. ¶ 7.)
The Debtor was the president and owner of Dells Hospitality, Inc., d/b/a Hilton Garden Inn Wisconsin Dells ("Dells Hospitality"). (7056-1 Statement ¶ 7; Aff. of Daniel J. McGarry2 ¶¶ 5 & 6, Exs. C & D.) Dells Hospitality owned and operated the Hilton Garden Inn Hotel in Lake Delton, Wisconsin (the "Hotel"). Dells Hospitality purchased the Hotel with the proceeds of a $12,600,000 loan documented by the following:
• A promissory note (the "Note") to the original lender, Bear Stearns Commercial Mortgage, Inc. ("Bear"). (7056-1 Statement ¶ 9; McGarry Aff. ¶ 5, Ex. C.)
• A mortgage and security agreement (the "Security Instrument") creating a mortgage lien on the Hotel. (7056-1 Statement ¶ 10; McGarry Aff. ¶¶ 5 & 6, Exs. C & D.)
• An Assignment of Leases and Rents and certain other documents in favor of Bear. (7056-1 Statement ¶ 11; McGarry Aff. ¶¶ 5 & 6, Exs. C & D.)
• An indemnity agreement (the "Indemnity Agreement"), executed by the Debtor, guaranteeing payment of the Note and promising to indemnify Bear from the adverse consequences of certain defaults or defalcations by or on behalf of the Hotel. (7056-1 Statement ¶ 8; McGarry Aff. ¶¶ 5 & 6, Exs. C & D.)
Hereinafter, the Note, Security Instrument, Assignment of Leases and Rents, and Indemnity Agreement, all of which were executed on November 28, 2007, are collectively referred to as the "Loan Documents."
Bear subsequently sold the Loan Documents to Maiden Lane Commercial Mortgage-Backed Securities Trust 2008-1 ("Maiden Lane"), a grantor trust of which U.S. Bank National Association is Trustee,...
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