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Jacobson v. Marino

April 12, 2011

JACOBSON
v.
MARINO



Name of Assigned Judge Amy J. St. Eve Sitting Judge if Other or Magistrate Judge than Assigned Judge

CASE TITLE

DOCKET ENTRY TEXT

Debtor-appellant Jacobson appeals the bankruptcy court's ruling that a $52,387.03 state court judgment entered against him constituted non-dischargeable debt pursuant to 11 U.S.C. § 523(a)(4). Pursuant to its authority under 28 U.S.C. § 158(a)(1), the Court considers the appeal and affirms the judgment of the bankruptcy court.

O[ For further details see text below.] Docketing to mail notices

STATEMENT

Debtor-Appellant Jeffrey Jacobson ("Jacobson") appeals a ruling issued on January 7, 2011 by the U.S. Bankruptcy Court for the Northern District of Illinois. For the following reasons, the Court affirms the bankruptcy court's ruling.

BACKGROUND

Jeffrey Jacobson is an attorney and former member of the law firm of Brunswick, Keefe & Jacobson LLC ("the Firm"). On December 7, 2001, the estate of Elinor Johnson ("Estate") retained the Firm to act as its agent with regard to certain of the Estate's assets and bank accounts. The relationship between the Estate and the Firm went sour when the Estate discovered $218,000.00 that it believed the Firm had misappropriated between January 2002 and March 2006. The Estate sued the Firm in the Circuit Court of Cook County. In connection with that lawsuit, on or about April 26, 2007, the Estate served Jacobson with a citation to recover assets wrongfully appropriated while Jacobson was a member of the Firm.*fn1 On November 30, 2009, following a trial on the citation to recover assets, the presiding judge found that the Firm unlawfully deposited five checks drawn on the Estate's bank account to its own bank account during the time period that Jacobson was a member of the Firm. The court entered judgment against Jacobson in the amount of $52,387.03. As part of its judgment, the court made the following findings:

[E]ach of the aforementioned checks was deposited into the firm's account with the intent to defraud the Estate while Respondent Jacobson was acting in a fiduciary capacity, and [] the deposit of each of the aforementioned checks into the firm's account constituted either embezzlement or larceny or a defalcation while Respondent Jacobson was acting in a fiduciary capacity.

(R. 1-3, Record on Appeal ("ROA") at 21-23, 11/30/2009 Order of the Hon. Susan Coleman, ¶ 9.) Jacobson filed a motion to reconsider, which the court denied on January 22, 2010, "finding that the Order of November 30, 2009 is based upon the evidence presented at trial and no errors in the approach or the law as applied by the court. This is a final order and there is no just cause for delay of enforcement of the Order." (ROA at 32, 1/22/10 Order on Jacobson's Mot. to Reconsider.)

On February 18, 2010, Jacobson filed a voluntary Chapter 7 bankruptcy petition ("Petition") in the U.S. Bankruptcy Court for the Northern District of Illinois. In his Petition, Jacobson listed the $52,387.03 state court judgment on his Bankruptcy Schedule F as an unsecured non-priority claim. The Estate's administrator, Herman Marino, filed an adversary complaint in bankruptcy court on June 4, 2010 opposing that designation and arguing that the state court judgment was non-dischargeable debt under 11 U.S.C. § 523(a)(4), which prohibits individual debtors from discharging "any debt for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny." The Estate contended that under the collateral estoppel doctrine, the state court's specific findings that "the deposit of ... the checks into the firm's account constituted either embezzlement or larceny or a defalcation while Respondent Jacobson was acting in a fiduciary capacity" required such a conclusion. The Estate filed a motion for summary judgment on the basis of collateral estoppel, which the bankruptcy court denied without prejudice for, inter alia, timeliness reasons. (R. 21-3, 10/22/2010 Transcript of Proceedings, 4:22-5:25; R.21-4, 1/7/2011 Trial Transcript, 13:24-25.) The case proceeded to trial, with the Estate electronically filing its motions in limine on December 31, 2010 in compliance with the court's final pretrial order. Although Jacobson filed written objections to certain of the Estate's proposed trial exhibits, he did not file any objections to the Estate's motions in limine. (ROA at 1-15, Bankruptcy Court Docket.) On January 7, 2011 the case proceeded to trial and the bankruptcy court heard oral argument on the Estate's motions in limine. At the conclusion of those arguments, and relevant to this appeal, the court granted the Estate's motion in limine #1 to bar all defense witnesses and exhibits on the basis of collateral estoppel. In accordance with that ruling, the bankruptcy court entered final judgment in favor of the Estate and against Jacobson, finding that the $52,378.03 state court judgment constituted non-dischargeable debt under § 523(a)(4).

Jacobson filed a timely notice of appeal of the bankruptcy court's ruling on February 1, 2011. Pursuant to Federal Rule of Bankruptcy Procedure 8009(a), Jacobson was to file his opening brief by February 15, 2011. On February 16, 2011, Jacobson filed a motion for additional time to file his brief, which the Court granted. In accordance with that ruling, Jacobson was to file his opening brief by no later than March 3, 2011. On March 4, 2011, Jacobson filed a motion for leave to file his opening brief instanter. The Court granted Jacobson's motion.

LEGAL STANDARD

The bankruptcy court's decision on the dischargeability of a debt is a final judgment for purposes of appellate jurisdiction. In re Marchiando, 13 F.3d 1111, 1113--14 (7th Cir. 1994). The Court has jurisdiction to review final bankruptcy court decisions. 28 U.S.C. § 158(a)(1); Fed. R. Bankr. P. 8001 and 8002. The Court reviews the bankruptcy court's conclusions of law de novo and its factual findings for clear error. In re Berman, 629 F.3d 761, 766 (7th Cir. 2011); Ojeda v. Goldberg, 599 F.3d 712, 716 (7th Cir. 2010). "If the bankruptcy court's account of the evidence is plausible in light of the record viewed in its entirety, we will not reverse its factual findings even if we would have weighed the evidence differently." Freeland v. Enodis Corp., 540 F.3d ...


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