Nat'l Union Fire Ins. Co. of Pittsburgh v. DiMucci

34 N.E.3d 1023

NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA, as Subrogee of General American Life Insurance Company, a Missouri Corporation; and Logan And Company, Inc., Plaintiffs–Appellees

v.Anthony P. DiMUCCI, Defendant–Appellant.

No. 1–12–2725.

Appellate Court of Illinois, First District, Third Division.

March 31, 2015.

Rehearing Denied July 23, 2015.

Henry R. Simmons, Jr., of Lamont, and Adrian Vuckovich and Benjamin C. Butler, both of Collins Bargione & Vuckovich, of Chicago, for appellant.

Edward M. Kay, Kimbley A. Kearney, and Harvey R. Herman, all of Clausen Miller, P.C., of Chicago, for appellees.

OPINION

Presiding Justice PUCINSKI delivered the judgment of the court, with opinion.

¶ 1 This case presents a question of the interplay between federal bankruptcy law and the effect of bankruptcy judgments and stipulations regarding claims entered in bankruptcy court on state-court claims. For purposes of res judicata, we hold that a bankruptcy court default judgment on a state-law claim for fraudulent transfer of funds from a bankruptcy claim after the claim process is not a final judgment by a court of competent jurisdiction.

¶ 2 We hold that the circuit court nevertheless properly considered a stipulation entered into in a bankruptcy case, despite defendant's claim that his attorney did not have authority to enter into the stipulation. Stipulations are judicial admissions in the case in which they are made, but they are admissible in other cases as evidentiary admissions. Defendant never challenged that stipulation in the bankruptcy court and offered no evidence in this case other than his own self-serving conclusory affidavit. A self-serving affidavit with no other evidence does not create a genuine issue of material fact.

¶ 3 Where there is no evidence to controvert defendant's mortgagor's right to funds, the court's entry of summary judgment for the mortgagor's subrogee on its claim for unjust enrichment was proper.

¶ 4 Where a check was mistakenly sent to defendant's limited liability company (LLC) and then defendant refused to return these funds, the court's entry of summary judgment in granting a constructive trust was proper.

¶ 5 The court also did not abuse its discretion in awarding prejudgment interest where defendant knew the funds were the subject of a default judgment, a stipulation, and an assignment of rents.

¶ 6 BACKGROUND

¶ 7 Defendant, Anthony P. DiMucci, is the sole shareholder and president of DiMucci Development Corporation of Rockford (DiMucci Corporation). DiMucci Corporation, in turn, is the manager of DiMucci Development of Rockford, LLC (DiMucci LLC). Prior to 1998, DiMucci and his brother Salvatore each had a 50% interest in both the DiMucci Corporation and DiMucci LLC. After Salvatore died in July 1997, beginning in July 1998, DiMucci became the sole shareholder and president of DiMucci Corporation and the sole member of DiMucci LLC. DiMucci LLC developed and owned a shopping mall in Rockford Illinois. DiMucci Corporation, as the manager of DiMucci LLC, oversaw the construction work and maintenance of the Rockford mall.

¶ 8 Attorney Jerry H. Biederman, the managing partner of Neal Gerber & Eisenberg LLP (Neal Gerber), testified that his firm had represented DiMucci's corporation since its formation. Biederman provided legal representation to the DiMucci family and entities for approximately 20 years. Biederman was also vice president of DiMucci Corporation prior to 1998 when DiMucci became the sole shareholder. In December 1994, Montgomery Ward entered into a lease with DiMucci LLC to be the anchor tenant at the Rockford mall. In December 1996, DiMucci LLC obtained a loan from General American Life Insurance Company (GALIC) in the amount of $12,450,000 for the development of the Rockford mall. Biederman had the authority of DiMucci and his brother to negotiate the loan and execute the loan documents. DiMucci acknowledged at his deposition that, as an officer of DiMucci Corporation, Biederman personally executed the GALIC note, mortgage, and collateral assignment of lease or leases for DiMucci Corporation on behalf of DiMucci LLC. The GALIC loan was secured by a mortgage on the Rockford mall and a collateral assignment of leases.

¶ 9 Montgomery Ward defaulted on its lease and filed chapter 11 bankruptcy in 1997 in the United States Bankruptcy Court in the District of Delaware. DiMucci LLC and DiMucci Corporation retained the law firm of Neal Gerber to represent them in the Montgomery Ward bankruptcy case. Attorney Thomas Wolford was the primary lawyer at Neal Gerber responsible for representing DiMucci LLC and DiMucci Corporation in the Montgomery Ward bankruptcy case. Wolford caused a proof of claim to be filed on behalf of DiMucci LLC in the bankruptcy case in February 1998, seeking $16,391,766.59 for unpaid past and future rents on the defaulted lease. The net amount of DiMucci LLC's allowed claim in the bankruptcy case was $638,537.50.

¶ 10 DiMucci in turn defaulted on its loan from GALIC and, in November 1998, GALIC filed a complaint for foreclosure against DiMucci LLC. The property went to foreclosure sale and was purchased by GALIC. GALIC obtained a judgment of foreclosure on July 29, 1999. The judgment included an evidentiary finding that, as of July 29, 1999, DiMucci LLC owed GALIC $15,805,226.01. An order to confirm sheriff's sale, award possession, enter deficiency and deficiency judgment, approve final accounting and discharge receiver was entered September 29, 1999.

¶ 11 GALIC then filed a motion in the Montgomery Ward bankruptcy case seeking an assignment of DiMucci Corporation's claim against Montgomery Ward to GALIC. GALIC's counsel sent Wolford a draft stipulation to that effect. The stipulation was dated December 4, 2000, and was signed by counsel for Montgomery Ward, counsel for GALIC, and counsel for DiMucci Corporation. The stipulation provided that DiMucci Corporation transferred “all of its right, title and interest” in its allowed claim against Montgomery Ward to GALIC and provided that “[a]ll payments to be made on account of the Claim shall be made payable to [GALIC].” The stipulation also recited that it “has been approved by the Claims Resolution Committee.” Defendant claims that Wolford signed this stipulation without his authority.

¶ 12 On February 6, 2001, Logan and Company (Logan), the bankruptcy court's noticing agent, caused Wells Fargo Bank to issue a check for DiMucci LLC's allowed claim against Montgomery Ward in the amount of $638,537.50 to DiMucci LLC. The check was received by DiMucci LLC in February 2001. Defendant avers in his affidavit that “[t]he funds were deposited and used as a partial payment toward the payment of [a] management and construction fee” that DiMucci LLC allegedly owed to DiMucci Corporation. DiMucci averred in his affidavit that “as the sole shareholder and officer of DiMucci Development Corporation of Rockford,” he “assumed all responsibility for management of the [shopping mall] center, its tenants, rent collections and performance of necessary services for the tenants and for the common areas of the shopping center.” Attached to and incorporated in defendant's affidavit was an invoice defendant created, in his own individual name on letterhead, “Anthony DiMucci,” to “DiMucci Dvlp. Corp. of Rockford,” in the amount of $750,000. The invoice was dated January 1, 2001, after the claim was allowed and one month before DiMucci LLC received the bankruptcy claim check. There is no invoice in the record from DiMucci Corporation to DiMucci LLC for any balance for services owed by DiMucci LLC. The check was not deposited into the account for DiMucci LLC nor paid to DiMucci Corporation, however.

¶ 13 A copy of the bankruptcy claim check in the record shows that it was deposited by defendant directly into his personal account, the “Anthony DiMucci Grantor Trust” account at American National Bank. A copy of the check was attached to plaintiff's motion for summary judgment as an exhibit. In his interrogatory answers in the bankruptcy adversary case, also attached to plaintiff's motion for summary judgment, DiMucci stated that he deposited the check into this personal account.

¶ 14 The DiMucci LLC operating agreement states that all funds of DiMucci LLC shall be deposited in the LLC name in the LLC bank account. Defendant claims he had no notice that Wolford had entered into the stipulation with GALIC's counsel to transfer the allowed claim to GALIC. Defendant claims that these funds were applied as partial payment toward an outstanding “construction and management fee” owed by DiMucci LLC to DiMucci Corporation.

¶ 15 According to Biederman's deposition testimony, Wolford received a letter dated June 6, 2001 from counsel for GALIC that the payment of the claim from the Montgomery Ward bankruptcy estate had been sent to DiMucci LLC and requesting return of those funds. The Neal Gerber attorneys advised DiMucci to return the money to the bankruptcy estate. Wolford specifically advised DiMucci to return the check. DiMucci's response was that he “didn't feel that he needed to return the money.” Biederman also explained to DiMucci the legal analysis that “even in the absence of the stipulation, the assignment of rents would appear to make it difficult for any claim to successfully prevail.” DiMucci denied authorizing the stipulation and denied that there had been any assignment of rents. Biederman faxed a copy of the assignment of rents to DiMucci. DiMucci continued to deny that there was an assignment of rents. DiMucci refused to return the money.

¶ 16 In August 2001, GALIC filed an adversary complaint in the bankruptcy court in the District of Delaware alleging that the $638,535 payment of the allowed claim should have been made to GALIC as a result of the stipulation. GALIC named Montgomery Ward Holding Corporation, Logan, Wells Fargo Bank and “DiMucci Development Corporation of Rockford, LLC” as defendants. On October 18, 2001, the...