In re Hardej

563 B.R. 855, 2017 Bankr. LEXIS 460, 63 Bankr. Ct. Dec. (CRR) 195
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedFebruary 15, 2017
DocketBankruptcy Case No. 13-00627
StatusPublished
Cited by5 cases

This text of 563 B.R. 855 (In re Hardej) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Hardej, 563 B.R. 855, 2017 Bankr. LEXIS 460, 63 Bankr. Ct. Dec. (CRR) 195 (Ill. 2017).

Opinion

MEMORANDUM OPINION

JANET S. BAER, United States Bankruptcy Judge

This matter is before the Court on the motion for a rule to show cause filed by former chapter 7 debtor Pawel Hardej (the “Debtor”). The Debtor alleges that Metropolitan Development Enterprises, Inc. (“MDE”) and its counsel, John P. Konva-linka and Kevin P. McJessy (collectively, the “Respondents”), have violated the discharge injunction under 11 U.S.C. § 524(a)(2) by pursuing an action against the Debtor in the Circuit Court of Cook County (the “state court”) to collect a debt that was discharged pursuant to 11 U.S.C. § 727.1 The Debtor seeks an order enjoining all proceedings in the state court, a finding that the Respondents are in contempt of court, and an award of damages, [858]*858as well as attorneys’ fees and costs, against the Respondents arising from their alleged violation of the discharge injunction. For the reasons stated herein, the pursuit of the action against the Debtor in the state court constitutes a violation of the discharge injunction, and the Respondents are ordered to cease any further pursuit of the Debtor. As for an award of damages and fees, however, the Debtor’s request is denied.

JURISDICTION

The Court has jurisdiction to determine 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. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (I), and (0).

BACKGROUND

The facts in this matter are somewhat unusual, and, therefore, they are outlined here in great detail.2 Those facts are as follows.

Prior to the filing of his chapter 7 bankruptcy case, the Debtor was the president and sole director and shareholder of MDE, an Illinois corporation in the business of real estate development. (Bankr. No. 13-00627, Docket No. 79, Ex. B, at 1-2, ¶¶ 6 & 7.)3 On April 16, 2004, MDE, as agent for 1910 N. Clark LLC, entered into a contract with Robert C. Austin and Kathryn C. Gamble for the sale of certain real estate. (Id., Ex. B, attached Ex. A.) That contract required purchasers Austin and Gamble to pay earnest money in the amount of $250,000 (the “Earnest Money”) to MDE’s attorney. (Id., Ex. B, attached Ex. A, at 1-2, ¶ 3.) Although the real estate sale was not completed, the Earnest Money was allegedly never returned to Austin and Gamble. (Id., Ex. B, at 3-4, ¶¶ 17-21.) As a result, on September 28, 2004, Austin and Gamble, through counsel John P. Konvalinka, filed suit against MDE in the state court, entitled Robert C. Austin and Kathryn C. Gamble v. Metropolitan Development Enterprises, Inc., No. 04 CH 15936, seeking, among other things, return of the $250,000 in Earnest Money (the “Austin Litigation”). (Id. at 2, ¶ 8 & Ex. A, at 3.) The Austin Litigation was lengthy and complex, involving multiple counterclaims and an appeal, and was consolidated with other actions between the parties and third parties claiming an interest in the suit, including Metropolitan Bank and Trust (the “Bank”), predecessor in interest to North Community Bank. (Id. at 2, ¶ 10; see also Docket No. 50, at 2-3, ¶ 9.)

On June 30, 2007, MDE executed' an assignment of its interest in the Earnest Money to the Bank (the “Assignment”). (Docket No. 50, Ex. A.)- The Assignment was made by MDE as security for a promissory note executed by 1910 N. Clark LLC and the Debtor to the Bank. (Id.) The intent of the Assignment was to transfer to the Bank all of MDE’s title to and interest in the funds and to confer on the Bank the right to prosecute, settle, and compromise the claims in the Austin Litigation. (Id. at 2-3, ¶ 9 & Ex. A.) The Bank alleges that, at one time prior to the Assignment, MDE’s only remaining asset [859]*859was the Earnest Money deposit but that, since the Assignment, that deposit belongs to the Bank and, thus, MDE has no remaining assets. (Id. at 3, ¶ 10).

In early 2009, while the Austin Litigation was pending, MDE ceased operations. (Docket No. 79, at 2, ¶ 11.) At that time, the Debtor alleges, MDE was insolvent and facing multiple suits by creditors. (Id.) Because the company was no longer operating, the Debtor did not renew its business license with the Illinois Secretary of State. (Id.) Thus, in early 2010, MDE was administratively dissolved by the State. (Id.)

On January 8, 2013, the Debtor filed a voluntary chapter 7 bankruptcy petition. (Docket No. 1.) In the petition, he listed twenty “other names used by the Debtor in the last [eight] years.” (Id. at 4.) Among those names were MDE and nineteen limited liability companies, including 1910 N. Clark LLC. (Id.) The Debtor’s schedules list liabilities of over $44 million to creditors holding secured claims and almost $9 million to creditors holding unsecured nonpriority claims.4 (Id. at 14-17 & 20-28.)

The Debtor did not list in his schedules an ownership interest in MDE or any of the nineteen limited liability companies. (See id. at 7-32.) .Nor did the Debtor list an ownership interest in any real estate or the ownership of any stock or interests in incorporated or unincorporated businesses. (See id.) Additionally, the Debtor did not schedule MDE or Austin and Gamble as creditors. (See id. at 14-28.) In his statement of financial affairs, the Debtor listed MDE as a real estate development business in which he had an interest from November 22, 1999 to April 12, 2012, as well as the nineteen limited liability companies identified as “other names used by the Debtor” in his petition. (Id. at 4 & 40-42.) The Debtor scheduled the Bank as a creditor holding an undisputed general unsecured claim in the amount of $200,000 described as a “Note Loan.” (Id. at 26.) The schedules do not state the date of the “Note Loan” or whether the note was executed by the Debtor individually or as an officer of an entity in which he held an interest. Nor is there any indication that the “Note Loan” scheduled is the same obligation at issue in the Austin Litigation. The record identifies that the Bank as a creditor of MDE but is silent as to whether the Bank was a creditor of the Debtor. (See Docket No. 50, at 2, ¶¶ 8 & 9; Docket No. 60, Transcript of Record, Sept. 22, 2014 (“Tr.”), at 3:19-4:4.) Nevertheless, the Bank acknowledges the listing of the $200,000 obligation in the Debtor’s schedules. (See Docket No. 50, at 2, ¶ 5.)

The Debtor’s 341 meeting of creditors was scheduled for March 4, 2013. (Docket No. 5.) The Bank received notice of the meeting because the Debtor scheduled the Bank as a creditor in his case, but Austin, Gamble, and MDE were not given such notice. (See Docket No. 9, at 3-5.)

On March 5, 2013, the day after the 341 meeting was held, chapter 7 trustee Gregg Szilagyi (the “Trustee”) filed a no-asset report. (Docket No. 15.) A discharge order was entered in the Debtor’s case on July 29, 2014 (the “Discharge Order”) (Docket No.

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Cite This Page — Counsel Stack

Bluebook (online)
563 B.R. 855, 2017 Bankr. LEXIS 460, 63 Bankr. Ct. Dec. (CRR) 195, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-hardej-ilnb-2017.