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Sullivan v. Glenn

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

September 9, 2014

BRIAN T. SULLIVAN, Plaintiff-Appellant,
v.
MICHELE A. GLENN and MICHAEL R. GLENN, JR., Defendants-Appellees.

MEMORANDUM OPINION AND ORDER

JAMES B. ZAGEL, District Judge.

This matter is before me on Appellant Brian T. Sullivan's appeal from the Bankruptcy Court's Order of November 15, 2013. Mr. Sullivan sought a determination of dischargeability of debt under 11 U.S.C. § 523(a)(2)(A) against debtors Michele and Michael Glenn. The Bankruptcy Court found that the debt was indeed dischargeable as to both debtors, and Mr. Sullivan, the creditor, appealed. On appeal, I review the bankruptcy court's factual findings under the clearly erroneous standard and legal findings de novo.

BACKGROUND

Michele and Michael Glenn owned several entities that engaged in real estate development. Around 2007, the Glenn's business, like many similar real estate businesses at the time, was experiencing financial difficulties. In the fall of that year, Mr. Glenn sought a short-term loan for the business. On numerous prior occasions, he had engaged the services of Karen Chung for assistance in procuring loans for the company. On this occasion, he approached her with interest in a $250, 000 loan.

Ms. Chung contacted Mr. Sullivan to see if he would be interested in providing the loan. Mr. Sullivan ultimately agreed to loan the Glenns $250, 000, to be repaid in two to three weeks at an interest rate of $5, 000 per week. On October 31, 2007, Mr. Sullivan met with Mr. Glenn, Ms. Chung, and Ms. Chung's employee, Adrian Lopez. Ms. Chung told Mr. Sullivan that she and Mr. Lopez had recently arranged a $1 million line of credit from LaSalle Bank for the Glenns' business. The Glenns needed the Sullivan "bridge" loan because the LaSalle Bank funds would not be available for a few weeks. Once the line of credit was available, however, Mr. Glenn would be able to pay back the Sullivan Loan.

At the October 31 meeting, Mr. Sullivan inquired as to the status of the LaSalle Loan. Mr. Lopez stepped out of the room to call the bank. Upon returning, he said that he had just spoken with a representative from the bank, who confirmed that the $1 million loan had been approved.

In addition to this assurance that the LaSalle Loan was in place, Mr. Sullivan said that, as a condition of making the loan, he wanted the Glenns and Ms. Chung to execute promissory notes obligating themselves personally to the repayment of the loan. Mr. Glenn and Ms. Chung agreed, and Mr. Glenn told Mr. Sullivan he would arrange for Mrs. Glenn to sign the note as well. On November 1, 2007, Mr. Sullivan electronically transferred $250, 000 to Mr. Glenn.[1]

The loan was never repaid. In late December 2007 or early January 2008, Ms. Chung and Mr. Lopez informed Mr. Sullivan that the LaSalle loan had not been approved by the bank. Later, in the fall of 2009, Mr. Sullivan learned from LaSalle Bank that neither Ms. Chung nor Mr. Lopez had even applied for a line of credit for the Glenns' company. The representations Ms. Chung and Mr. Lopez made to Mr. Sullivan regarding the LaSalle Loan at the October 31 meeting were false. The Bankruptcy Court found that Mr. Glenn learned of these misrepresentations through Mr. Sullivan.

Mr. Sullivan filed an adversary proceeding against Ms. Chung in her bankruptcy case here in the Northern District of Illinois. (Bankr. No. 08bk15443). Pursuant to 11 U.S.C. § 523(a)(2)(A), Mr. Sullivan objected to the discharge of Ms. Chung's liability for four loans (including the loan at issue here) that he had made to her. Section 523(a)(2)(A) provides:

A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition.

After a three-day trial, the Chung Bankruptcy Court found that Ms. Chung had obtained the loans through her fraudulent behavior, and that the loans were thus non-dischargeable pursuant to § 523(a)(2)(A).

Mr. Sullivan also filed complaints against Michele and Michael Glenn, seeking essentially the same outcome in the context of the Glenns' bankruptcy. The Bankruptcy Court in the Glenns' bankruptcy, however, held that § 523(a)(2)(A) requires that the underlying fraud must have been committed by either the debtor at issue in the bankruptcy proceeding or his or her agent or partner in order for non-dischargeability to apply. The judge found that neither Michael Glenn nor Michele Glenn themselves committed fraud. The judge also found that Ms. Chung was neither Michael Glenn's nor Michele Glenn's agent. Accordingly, the Bankruptcy Judge held that § 523(a)(2)(A) did not apply, and that the Sullivan Loan was dischargeable as to Michele and Michael Glenn. In re Glenn, 502 B.R. 516 (Bankr. N.D.Ill. 2013). This appeal followed.

ANALYSIS

Most of the issues Mr. Sullivan raises on appeal are with respect to the Bankruptcy Judge's factual findings. While Mr. Sullivan clearly disagrees with the Bankruptcy Court's findings, however, he has not shown that any were clearly erroneous. The Bankruptcy Judge made express credibility determinations at trial with respect to whether Michael Glenn himself had committed fraud and found that he had not. Similarly, the Bankruptcy Court made express credibility determinations at trial with respect to whether Ms. Chung was the Glenns' agent and found that she was not. With respect to both claims, the Bankruptcy Court found that Mr. Sullivan had not carried his burden of ...


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