Kontos v. Manevska (In re Manevska)

587 B.R. 517

IN RE: Denitza P. MANEVSKA, Debtor.

Anthony Kontos, Independent Administrator of the Estate of Charles Vournazos, deceased, Plaintiff,

v.Denitza P. Manevska, Defendant.

Case No. 16bk30240

Adversary No. 17ap00064

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

Signed August 8, 2018

Attorneys for Anthony Kontos: Kyle R. Kasmarick and Peter A Papoutsis, Syregelas & Kasmarick, LLC, Chicago, IL

Attorney for Denitza Manevska: Jeffrey S. Vollen, Chicago, IL

MEMORANDUM DECISION

TIMOTHY A. BARNES, Judge.

The matter before the court arises out of the Adversary Complaint Objecting to and Opposing Dischargeability of Debt [Adv. Dkt. No. 1] (the "Complaint"), filed by Anthony Kontos (the "Plaintiff"), Independent Administrator of the Estate of Charles Vournazos (the "Decedent") in the above-captioned adversary case (the "Adversary"). The Complaint seeks a determination of dischargeability of debt under section 523(a)(4) of title 11 of the United States Code, 11 U.S.C. § 101, et seq. (the "Bankruptcy Code") and objects to the discharge of Denitza P. Manevska (the "Defendant") under sections 727(a)(3), (a)(4)(D), (a)(5) and (a)(6)(A) of the Bankruptcy Code.

For the reasons more fully set forth herein, the court concludes that the Plaintiff has pled alternative grounds to establish the nondischargeability of the debt due to the Plaintiff as well as deny the Defendant her discharge. While the Plaintiff has not proven all the grounds alleged, he has satisfied at least one of the grounds for denial of the nondischargeability of debt under section 523(a)(4). The Plaintiff is therefore entitled to a finding of nondischargeability on the elements he has established. Similarly, the Plaintiff has satisfied some but not all of the allegations under section 727(a). The Defendant's discharge will also be denied for those provisions of section 727(a) that the Plaintiff has proven.

JURISDICTION

The federal district courts have "original and exclusive jurisdiction" of all cases the Bankruptcy Code. 28 U.S.C. § 1334(a). The federal district courts also have "original but not exclusive jurisdiction" of all civil proceedings arising under the Bankruptcy Code or arising in or related to cases under the Bankruptcy Code. 28 U.S.C. § 1334(b). District courts may, however, refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).

A bankruptcy judge to whom a case has been referred may enter final judgment on any proceeding arising under the Bankruptcy Code or arising in a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(1). Bankruptcy judges must therefore determine, on motion or sua sponte , whether a proceeding is a core proceeding or is otherwise related to a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(3). As to the former, the court may hear and determine such matters. 28 U.S.C. § 157(b)(1). As to the latter, the bankruptcy court may hear the matters, but may not decide them without the consent of the parties. 23 U.S.C. §§ 157(b)(1), (c). Instead, the bankruptcy court must "submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1).

In addition to the foregoing considerations, a bankruptcy judge must also have constitutional authority to hear and determine a matter. Stern v. Marshall, 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). Constitutional authority exists when a matter originates under the Bankruptcy Code or where the matter is either one that falls within the public rights exception, id. , or where the parties have consented, either expressly or impliedly, to the bankruptcy court hearing and determining the matter. See, e.g. , Wellness Int'l Network, Ltd. v. Sharif , ––– U.S. ––––, 135 S.Ct. 1932, 1939, 191 L.Ed.2d 911 (2015) (parties may consent to a bankruptcy court's jurisdiction); Richer v. Morehead , 798 F.3d 487, 490 (7th Cir. 2015) (noting that "implied consent is good enough").

As a complaint opposing dischargeability of a debt is a matter which stems from the bankruptcy case and a complaint objecting to a debtor's discharge may only arise in a bankruptcy case, this matter is expressly a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (I) & (J). In accordance with Stern , 564 U.S. at 499, 131 S.Ct. 2594, the bankruptcy court has authority to decide matters of nondischargeability, as the dischargeability of a debt is necessarily a matter that would stem from the bankruptcy itself. "A bankruptcy judge has constitutional authority to enter final judgment as to dischargeability." Parkway Bank & Tr. v. Casali (In re Casali ), 526 B.R. 271, 274 (Bankr. N.D. Ill. 2015) (Schmetterer, J.); see also Wan Ho Indus. Co., Ltd. v. Hemken (In re Hemken ), 513 B.R. 344, 350 (Bankr. E.D. Wis. 2014). Further, each of the parties has either expressly or impliedly consented to this court's exercising authority over this matter. As this court has explained, "[b]ecause the issue of whether a discharge should be revoked ‘stems from the bankruptcy itself’ ... the Court also has the constitutional authority to enter a final order[.]" Steege v. Johnson (In re Johnsson ), 551 B.R. 384, 389 (Bankr. N.D. Ill. 2016) (Barnes, J.) (quoting McDermott v. Davis (In re Davis ), 538 B.R. 368, 370 (Bankr. S.D. Ohio 2015) ).

As a result, the court has jurisdiction, statutory authority and constitutional authority to hear and enter final judgment on this matter.

BACKGROUND AND PROCEDURAL HISTORY¹

The Plaintiff filed the Complaint based on allegations surrounding the relationship of the Defendant and the Decedent prior to his death on November 3, 2013. Compl., at ¶ 3. The Plaintiff alleges that, at the conclusion of the Decedent's life, the Decedent was unable to manage his health and finances, so he enlisted the assistance of the Defendant as caregiver to assist him in those tasks. Id. at ¶ 14. The Defendant's responsibility as caregiver involved receiving and opening the Decedent's mail, paying his bills, managing his medication and planning travel. Id. In order to complete her responsibilities, the Defendant was granted access to both the Decedent's debit card pin number and access to the Decedent's checkbook. Tr. at p. 79, Apr. 25, 2018.

The Plaintiff further alleges that, prior to the Decedent's death, the Decedent became extremely forgetful and confused and was often disorientated. Compl., at ¶ 6. The Plaintiff contends that the Defendant, through the Defendant's role as caregiver, was able to exploit the access she had to the Decedent's finances by writing and cashing unauthorized checks. Id. The Plaintiff further alleges that "throughout the period of at least three years prior to this [sic] death, [the Defendant] wrote regular checks to herself from [the Decedent's] bank account including but not limited [to] those allegedly representing her claimed ‘salary.’ " Id. at ¶ 7. The Defendant allegedly wrote checks to herself in excess of $600,000.00, which totaled more than double her claimed annual salary. Id. at ¶ 8. Even after the death of the Decedent, the Defendant continued to write checks to herself from the Decedent's account totaling a combined amount of $37,500.00. Id. at ¶ 10. The Plaintiff claims that the Defendant owed a duty to the Decedent and the transfer of substantial sums of money from his accounts was a breach of such duty. Id. at ¶ 16.

After failing to succeed on a motion to dismiss the Complaint, the Defendant filed her Answer to Plaintiff's Adversary Complaint [Adv. Dkt. No. 18] (the "Answer"). Through the Answer, the Defendant denies that the Decedent had any significant medical condition affecting his mental abilities. Answer, at ¶ 4. Further, the Defendant denies signing any checks drafted against the Decedent's bank account. Id. at ¶ 8. The Defendant also denies that the Decedent could not manage his health or financial affairs during the last three years of his life and, further, that the Decedent ever entrusted the Defendant with those responsibilities. Id. at ¶ 14.

The Defendant asserts in the Joint Pre-Trial Statement [Adv. Dkt No. 23] (the "Pretrial Statement") that she had a close relationship with the Decedent, a relationship that was more significant than that of a caregiver. Pretrial Stmt., at p. 12. The Defendant claims that this relationship was the result of the Decedent making the decision to never marry, have children or maintain any significant relationships with family members. Id. The Defendant does not deny that, through this special relationship, she received a wide range of financial benefits from the Decedent. The Defendant contends that she "was a more acceptable object of [the Decedent's] generosity than relatives with whom [he] had little contact and no emotional bonds." Id. at p. 13.

On April 25, 2018, the court conducted a half-day trial on the matter (the "Trial"). At the conclusion of the Trial, the parties were directed to submit their closing arguments via post-trial briefs. See [Scheduling] Order [Adv. Dkt. No. 37]. Both the Plaintiff and the Defendant submitted their post-trial briefs, though the Plaintiff's was one day late. Despite the tardiness of the Plaintiff's filing, the court has considered both post-trial briefs in determining this matter.

FINDINGS OF FACT

From the review and consideration of the procedural background, as well as the evidence presented at the Trial and the filings in this Adversary, the court determines the salient facts to be and so finds as follows:²

a) The Decedent died on November 3, 2013 at

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