Muhammad v. Reed (In re Reed)

542 B.R. 808

In re: Byron F. Reed, Debtor.

Hassan A. Muhammad, Plaintiff,

v.Byron F. Reed, Defendant.

Case No. 13bk30975

Adversary No. 13ap01294

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

Signed December 30, 2015

Plaintiff (pro se): Hassan A. Muhammad, Chicago, IL

Attorneys for Debtor/Defendant: Anthony J. Peraica and Aleksander Djordjevich, Anthony J. Peraica & Associates, Ltd., Chicago, IL

MEMORANDUM DECISION

TIMOTHY A. BARNES, Judge

The matter before the court arises out of the Complaint Objecting to the Discharge of Debt Owed to A & H Caring Connections, Inc. [Adv. Dkt. No. 1] (the "Complaint"), filed by Hassan A. Muhammad (the "Plaintiff") in the above-captioned adversary proceeding (the "Adversary"), seeking a determination of dischargeability of debt under section 523(a) of the Bankruptcy Code (as defined below) against the debtor, Byron F. Reed (the "Debtor"), and also objecting to the discharge of the Debtor under section 727(a) of the Bankruptcy Code.

More specifically, the Complaint asserts several causes of action, some of which are numbered as counts, and some of which are not. Given that the Plaintiff is pro se, the court has examined the Complaint and has concluded that the Plaintiff is actually seeking only two independent causes of action. First, the Plaintiff is seeking a determination that a debt owed to the Plaintiff, which arose out of a state court judgment that was rendered against the Debtor, is nondischargeable under sections 523(a)(2) and (a)(6). Second, the Plaintiff is seeking a determination that the Debtor is not entitled to a discharge under sections 727(a)(4) and (a)(5) because the Debtor allegedly failed to disclose income from his businesses on his bankruptcy petition and purposely avoided disclosing his ownership of one such entity, by transferring his ownership interest in the business to his wife in order to avoid disclosing the same on his bankruptcy petition.

For the remainder of this Memorandum Decision, the court will discuss these two independent causes of action but will not reference the Plaintiff's counts specifically as they are set forth in the Complaint because the counts mix concepts in a misleading manner.¹

The matter was tried before the court in a two-day trial that took place on September 1, 2015 and September 2, 2015 (the "Trial"). For the reasons set forth herein, the court holds that the debt owed to the Plaintiff is dischargeable by the Debtor and the Debtor is entitled to a discharge.

This Memorandum Decision constitutes the court's findings of fact and conclusions of law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"). A separate order will be entered pursuant to Bankruptcy Rule 9021.

JURISDICTION

The federal district courts have "original and exclusive jurisdiction" of all cases under title 11 of the United States Code (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 title 11 of the United States Code, or arising in or related to cases under title 11. 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 title 11. 28 U.S.C. § 157(b)(1). A proceeding for determination of the dischargeability of a particular debt only may arise in a case under title 11 and is specified as a core proceeding. 28 U.S.C. § 157(b)(2)(I) ; Birriel v. Odeh (In re Odeh ), 431 B.R. 807, 810 (Bankr.N.D.Ill.2010) (Wedoff, J.); Baermann v. Ryan (In re Ryan ), 408 B.R. 143, 151 (Bankr.N.D.Ill.2009) (Squires, J.). An objection to a debtor's discharge may only arise in a case under title 11 and is also specified as a core proceeding. 28 U.S.C. § 157(b)(2)(A) and (J) ; Kontrick v. Ryan, 540 U.S. 443, 452, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) ; Hunt v. O'Neal (In re O'Neal ), 436 B.R. 545, 550 (Bankr.N.D.Ill.2010) (Schmetterer, J.).

While none of the parties have raised the issue of whether this court has constitutional authority to enter a final judgment on all counts of the Complaint in light of the United States Supreme Court's decision in Stern v. Marshall, 564 U.S. ––––, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011), this court has an independent duty to determine whether it has such authority. Rutkowski v. Adas (In re Adas ), 488 B.R. 358, 379 (Bankr.N.D.Ill.2013) (Hollis, J.).

The counts in the Complaint are based on sections 523(a)(2)(A), 523(a)(6), 727(a)(4) and 727(a)(5) of the Bankruptcy Code. Sections 523 and 727 are unequivocally bankruptcy causes of action. While such actions may turn on state law, determining the scope of a debtor's discharge is a fundamental part of the bankruptcy process. See Deitz v. Ford (In re Deitz ), 469 B.R. 11, 20 (9th Cir. BAP 2012). As observed by one bankruptcy court, "there can be little doubt that [a bankruptcy court], as an Article I tribunal, has the constitutional authority to hear and finally determine what claims are non-dischargeable in a bankruptcy case." Farooqi v. Carroll (In re Carroll ), 464 B.R. 293, 312 (Bankr.N.D.Tex.2011) ; see also Deitz, 469 B.R. at 20 ; White Eagle, Inc. v. Boricich (In re Boricich ), 464 B.R. 335, 337 (Bankr.N.D.Ill.2011) (Schmetterer, J.). A bankruptcy court also has the constitutional authority to enter final judgment on an objection to a Debtor's discharge in a bankruptcy case. Wellness Intern. Network, Ltd. v. Sharif, 727 F.3d 751, 773 (7th Cir.2013), rev'd on other grounds, ––– U.S. ––––, 135 S.Ct. 1932, 191 L.Ed.2d 911.

There is therefore no question as to the court's authority to hear and determine nondischargeability of a debt and discharge of a debtor. See generally Stern, 564 U.S. ––––, 131 S.Ct. 2594, 180 L.Ed.2d 475.

Accordingly, final judgment is within the scope of the court's authority.

PROCEDURAL HISTORY

In considering the relief sought by the Plaintiff, the court has considered the evidence and argument presented by the parties at the Trial, has reviewed the Complaint, the attached exhibits submitted in conjunction therewith, and has reviewed and found each of the following of particular relevance:

(1) Debtor's Motion to Dismiss Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure [Adv. Dkt. No. 4];

(2) Plaintiff's Motion for Default [Adv. Dkt. No. 11];

(3) Order Withdrawing Debtor's Motion for Entry of Default [Adv. Dkt. No. 15];

(4) Plaintiff's Response to Debtor's Motion to Dismiss [Adv. Dkt. No. 18];

(5) Debtor's Reply in Support of His Motion to Dismiss and, in the Alternative, Response to Plaintiff's Motion for Summary Judgment, and supporting documents [Adv. Dkt. Nos. 2124];

(6) Order Denying Debtor's Motion to Dismiss Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure [Adv. Dkt. No. 29];

(7) Plaintiff's Motion for Default [Adv. Dkt. No. 30];

(8) Debtor's Answer and Affirmative Defenses to Plaintiff's Complaint Objecting to Discharge of Debt [Adv. Dkt. No. 37];

(9) Order Denying for the Reasons Stated on the Record Plaintiff's Motion for Entry of Default [Adv. Dkt. No. 40];

(10) Debtor's Motion for Summary Judgment Pursuant to Rule 7056–1 of the Federal Rules of Bankruptcy Procedure, and supporting documents [Adv. Dkt. Nos. 43–48];

(11) Plaintiff's Response to Motion for Summary Judgment [Adv. Dkt. No. 55];(12) Debtor's Motion to Strike Plaintiff's Response to Debtor's Motion for Summary Judgment and Reply in Support of Debtor's Motion for Summary Judgment [Adv. Dkt. No. 57];

(13) Order Denying Debtor's Motion for Summary Judgment Pursuant to Rule 7056–1 of the Federal Rules of Bankruptcy Procedure [Adv. Dkt. No. 60];

(14) Plaintiff's Motion to Amended [sic] Complaint to Add Parties and Causes of Action [Adv. Dkt. No. 63];

(15) Order Denying Plaintiff's Motion to Amend Complaint to Add Parties and Causes of Action [Adv. Dkt. No. 66];

(16) Agreed-to Status Report [Adv. Dkt. No. 67] (the "Agreed-to Status Report");

(17) Final Pretrial Order Governing Complaint Objecting to Debtor's Discharge and Dischargeability of Particular Debt [Adv. Dkt. No. 70] (the "Final Pretrial Order");

(18) Amended Pretrial Order Governing Complaint Objecting to Debtor's Discharge and Dischargeability of Particular Debt [Adv. Dkt. No. 82] (the "Amended Final Pretrial Order");

(19) Plaintiff's Motion to Compel and/or for Sanctions [Adv. Dkt. No. 88];

(20) Order Withdrawing Plaintiff's Motion to Compel and/or for Sanctions [Adv. Dkt. No. 95];

(21) Plaintiff's Objections, Motion to Strike and/or Sanctions [Adv. Dkt. No. 96];

(22) Plaintiff's Objections, Motion to Strike and/or Sanctions [Adv. Dkt. No. 98];

(23) Plaintiff's Objections and Motion for Sanctions [Adv. Dkt. No. 99];

(24) Order Mooting Plaintiff's Motion to Strike and Motion for Sanctions [Adv. Dkt. No. 106];

(25) Plaintiff's Objections to Debtor's Objections to Plaintiff's Interrogatories and Production Requests and Motion for Sanctions [Adv. Dkt. No. 117];

(26) Plaintiff's Motion to Strike and Deem Facts Admitted [Adv. Dkt. No. 118];

(27) Plaintiff's Motion to Strike and Deem Facts Admitted [Adv. Dkt. No. 121];

(28) Debtor's Amended Motion to Dismiss Pursuant to Rule 15 of the Federal Rules of Civil Procedure [Adv. Dkt. No. 122];

(29) Order Mooting Plaintiff's Motion to Strike [Adv. Dkt. No. 131];

(30) Order Mooting Plaintiff's Motion for Sanctions [Adv. Dkt. No. 132];

(31) Debtor's Response to Objections to Debtor's Objections to Plaintiff's Interrogatories and Production Requests and Motion for Sanctions [Adv. Dkt. No. 134];

(32) Plaintiff's Response to Debtor's Motion to Dismiss [Adv. Dkt. No. 136];

(33)

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