Williams v. Jackson (In re Jackson)

625 B.R. 906

IN RE: Lucille J. JACKSON, Debtor.

John E. Williams, Jr., not personally, But as Executor of the Estate of John E. Williams, Sr., Plaintiff,

v.Lucille J. Jackson, Defendant.

Case No. 19-80915

Adv. No. 19-8073

United States Bankruptcy Court, C.D. Illinois.

Signed March 1, 2021

Sumner A. Bourne, Peoria, IL, for Plaintiff.

Dick B. Williams, East Peoria, IL, for Defendant.

OPINION

Thomas L. Perkins, United States Chief Bankruptcy Judge

This matter is before the Court after trial on the Complaint filed by the Plaintiff, John E. Williams, Jr., as Executor of the estate of his father, John E. Williams Sr., against Lucille Jackson, the Defendant, seeking a determination of nondischargeability pursuant to sections 523(a)(2)(A), (a)(4) and (a)(6) of the Bankruptcy Code. The debts in question are evidenced by two orders issued by the state probate court. The primary issue is whether any collateral estoppel effect should be accorded to either or both of those orders.

Factual Background

Lucille Jackson, the Debtor, filed a Chapter 7 petition on June 26, 2019. On her bankruptcy schedules, the Debtor listed 1017 N.E. Glendale Avenue in Peoria as her residence, solely owned by her, indicating that she had lived there for the past three years. The Debtor also disclosed ownership of a one-fourth interest in a single-family home located in Greenville, Mississippi, valuing that interest at $2,500. For many years and until his death on July 25, 2016, the Debtor was married to John E. Williams, Sr. (the Decedent). A probate estate was opened in the Circuit Court for Peoria County, Illinois and John E. Williams, Jr., one of the Decedent's sons, was appointed Executor (Executor). At some point in the proceedings, the Debtor filed a claim against the estate. An order was entered on January 11, 2019, on the Executor's motion to dismiss the claim filed by the Debtor as untimely and for sanctions against her, denying the claim and awarding the Decedent's estate a judgment against the Debtor in the total amount of $2,695, representing costs of $195 and attorney fees of $2,500, characterizing her conduct in prosecuting her claim as, among other things, willful and malicious. A second order was entered on April 12, 2019, on the Executor's amended petition for citation to recover assets, directing the Debtor to pay the Estate $15,190 within fourteen days, to deliver a 1956 Buick and its title and to return all personal property that belonged to the Decedent. The second order makes no finding of willful or malicious conduct or other characterization of the Debtor or her conduct.

In the adversary complaint filed by the Executor, brought by him "not personally but as executor of the estate of John E. Williams, Sr.," he seeks a determination of nondischargeability of the obligations imposed against the Debtor by the probate court. A trial was held on December 1, 2020. Three witnesses, including both the Debtor and the Executor, testified at trial. At the close of the evidence, the Executor withdrew Count II of the Complaint brought under section 523(a)(4). The Debtor testified that she was not aware of the probate proceedings until some point well after the estate was opened and that she did not become aware that the Decedent's son, John Jr., had been appointed Executor until later. She testified that she was represented by multiple attorneys in the probate proceedings. The Debtor explained that the administration of the probate estate was protracted. The initial focus of the matter was the marital status of the Decedent and the Debtor. The first attorneys representing the Debtor filed a claim on her behalf. She was advised by her second attorney that her claim was not time-barred. That attorney withdrew a short time later.

The Decedent was ill for a period of time prior to his death. Pursuant to a Power of Attorney he had executed, the Debtor was authorized to act as his attorney-in-fact. According to the Debtor's testimony, she and the Decedent owned rental properties prior to his death. Presumably due to his declining health, the Decedent had told her to collect the rents from the tenants, which she did both before and, for a period of time, after his death. The Debtor testified that when a tenant of one of the properties told her that the Executor had approached him to collect the rent, she advised the tenant to pay the rent to the Executor, explaining that she was not going to argue about it. Signed receipts admitted into evidence indicate that the Debtor collected monthly rent from one tenant, Mr. Brown, from August 2016 through January 2018. Nothing in the record speaks to why she ceased collecting the rent at that point in time.

Prior to his death, the Decedent and the Executor were authorized signatories on a joint checking account at South Side Bank, and their names were printed together at the top of each check. Copies of six checks are part of the record, dated within one month prior to the Decedent's death, each one bearing the indorsement of John E. Williams, the Decedent, accompanied by the Debtor's initials, indicating that she actually signed his name to the checks. The largest of the six checks is a check payable to the Debtor in the amount of $9,000, that the Debtor testified was used to pay a contractor, Dave Polnitz, for repairs made to the bathroom of their home. The check is dated July 20, 2016 but was not paid until July 27, 2016, two days after the Decedent passed away. The Debtor testified that the check was written and signed, by her, in the Decedent's presence and at his direction. According to her testimony, the check was not deposited in her CEFCU account until after the Decedent's death, as she was busy caring for him. The $9,000 amount of the check is included in the $15,190 that the probate court ordered the Debtor to repay to the estate.

The Executor testified that the probate proceeding was commenced and that he was appointed as executor within a month or two of the Decedent's death. He testified that the Decedent owned three vacant lots and one rental house on George Street, that were administered through the probate estate. At some point after his appointment, the Executor contacted William Brown, the tenant in the George Street property, to collect the rent, and was advised by Mr. Brown that the Debtor had already instructed him to pay the rent to her. The Executor did not speak specifically with the Debtor about the collection of the rent from Mr. Brown, and stated he acquiesced in her continued collection of it even though he didn't think she had the right to the rents, preferring to resolve the matter in the probate court. He told Mr. Brown to continue paying the rent payments to the Debtor but admonished him to keep receipts, which he did.

Notwithstanding that the issue of the marital status of the Decedent and the Debtor was disputed by the Executor in the probate proceeding, in his testimony at trial, the Executor conceded and acknowledged that the Decedent and the Debtor were married in 1978 and were husband and wife at the time of the Decedent's death. The Executor testified that prior to his death, the Decedent was residing at the Glendale Avenue property by himself. He testified that the Debtor was residing primarily in Mississippi in 2016, but would come to Peoria for the Christmas holidays, remaining for a couple of weeks before returning to Mississippi. The Executor stated that he would visit with the Decedent every other day during that year, denying that he observed work being done on the home but admitting that the Decedent had hired workers for home repairs. He denied knowing Dave Polnitz or that he recognized his name, admitting only that as his father had gotten older, he had maintenance and repair work done by others because he could no longer do it himself.

Dave Polnitz, testifying on behalf of the Debtor, testified that he had known the Decedent since his childhood, being friends with one of the Decedent's nephews who often stayed with the Decedent. He testified that at the Decedent's request, he had done considerable work on the George Street rental property approximately five years ago, in 2015. Several months after he completed that work, he became acquainted with the Debtor when she contacted him to work on repairing damages to the Glendale Avenue property caused by water infiltration into the house. At that time, in 2016, both the Decedent and the Debtor lived there together in apparent harmony, according to Mr. Polnitz. He regularly saw and spoke to the Decedent at the house. The Decedent never questioned the work being done or expressed any dissatisfaction. At all times Mr. Polnitz perceived that the Decedent was in agreement with having him perform the repair and remodeling work, although it was the Debtor who regularly paid him.

After Mr. Polnitz finished the first project, others followed. He was working at the house for a period of seven or eight months but never encountered the Executor there. Six invoices describing the work performed by Mr. Polnitz and the charges therefore were admitted into evidence. The first invoice is dated April 4, 2016 and the last is dated September 5, 2016. The total amount of the invoices is $59,100, including a $10,000 charge for a total upstairs bathroom remodel on the June 6, 2016 invoice, a $19,000 charge for a total kitchen remodel on the July 4, 2016 invoice, and a $23,000 charge on the September 5, 2016 invoice for a lower level basement remodel. The Executor did not dispute that Mr. Polnitz completed the work evidenced by the invoices. At the close of the evidence, the matter was taken under advisement.

Analysis

Exceptions to discharge are narrowly construed against the creditor and liberally in favor of the debtor so as to effectuate the "fresh start" policy of the Bankruptcy Code. In re Morris , 223 F.3d 548 (7th Cir. 2000). The purpose of the fresh start is to protect "honest but unfortunate" debtors. Grogan v. Garner , 498 U.S....