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Handler v. Johnson

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

July 22, 2015

JOEL F. HANDLER, Plaintiff/Appellant,
v.
VINCENT JOHNSON, SR., and SHERRY MARTIN JOHNSON, Defendants/Appellees.

OPINION AND ORDER

SARA L. ELLIS, District Judge.

Plaintiff/Appellant Joel Handler represented Defendants/Appellees Vincent Johnson, Sr. and Sherry Martin Johnson (the "Johnsons") in litigation against the Chicago Board of Education. Receiving only partial payment for his services, he obtained a default judgment for the remainder-$21, 702.40-and then sought a declaration that the judgment amount was not dischargeable in the Johnsons' Chapter 7 bankruptcy proceeding. The parties settled Handler's adversary complaint, with the Johnsons agreeing to pay $7, 500 through installment payments due the 15th of every month. If Handler did not receive a timely payment, Handler had the option under the settlement agreement to move to reinstate the case and have judgment entered for $21, 702.40, offset by the amount already paid by the Johnsons. Handler did not receive the Johnsons' February 2014 payment in accordance with the settlement agreement and so filed a motion to reopen the adversary case and enter judgment for the entire judgment amount. The bankruptcy court denied Handler's motion, leading to this appeal. Because the Court finds that any breach of the settlement agreement was immaterial, the bankruptcy court's decision is affirmed.

BACKGROUND

In 2008, the Johnsons engaged Handler to represent them in connection with a suit against the Chicago Board of Education. The engagement agreement required the Johnsons to pay Handler for the time he spent on their matter, in addition to all other reasonable costs incurred in connection with the matter, regardless of the suit's outcome. The Johnsons made some payments to Handler, but at the conclusion of the representation, a $21, 702.40 balance remained outstanding.

To collect on the outstanding balance, Handler filed suit against the Johnsons in state court on August 23, 2011. He obtained a default judgment for $21, 702.40 on October 7, 2011. But Handler learned on October 11, 2011 that the Johnsons had filed a Chapter 7 bankruptcy petition on September 29, 2011. Handler then filed an adversary complaint against the Johnsons on December 27, 2011, objecting to the dischargeability of the Johnsons' debt to him. After some motion practice, the parties settled Handlers' adversary complaint. The Johnsons agreed to pay Handler $7, 500 in monthly installments of $100 each, to be received by Handler by the 15th of each month. The settlement agreement further provided:

In the event that HANDLER does not receive a timely payment in any given month, the entire amount of $21, 702.40 less any applicable monies paid by the JOHNSONS to HANDLER shall be due immediately. HANDLER can then move to reinstate the case and the JOHNSONS agree that a judgment will be entered against them for the outstanding monies due and owing, costs and interest retroactive to the date the judgment was entered in the Circuit Court of Cook County. Moreover, the JOHNSONS agree to be responsible for all costs, including HANDLER's time spent in order to collect the outstanding monies due and owing starting from the date of default.

App. F at 3. The adversary proceeding was dismissed on January 17, 2013, with the bankruptcy court retaining jurisdiction to enforce the settlement agreement's terms.

On May 9, 2013, Handler filed a motion to reopen the adversary proceeding and enter judgment as set forth in the settlement agreement because he received the Johnsons' April 2013 payment on April 16, 2013, one day after it was due. Although the payment was dated April 8, the envelope was postmarked April 15. The bankruptcy court denied Handler's motion, finding that the agreement did not say that time is of the essence and that any breach was immaterial.

Handler did not receive the Johnsons' February 2014 payment by the 15th of that month either. He sent a letter to the Johnsons' counsel on February 15, informing him that the Johnsons now owed Handler $21, 702.40 plus interest pursuant to the terms of the settlement agreement. On February 20, Handler filed a motion to reopen the adversary proceeding and enter judgment in his favor. Handler acknowledged in the motion that Ms. Johnson left him a voicemail on February 16 to inform him that she would send the payment on February 17, but Handler stated he had not yet received the payment. At the March 11, 2014 hearing, the Johnsons' counsel explained that Ms. Johnson was hospitalized prior to February 15, which was the reason for the late payment, and Handler represented that he had received the payment-a check dated February 17-by the time of the hearing. The bankruptcy court again denied Handler's motion, noting again that the agreement did not include a provision that time was of the essence and that the Johnsons had made the payment.[1] This appeal followed.

STANDARD OF REVIEW

On appeal, this Court reviews the bankruptcy court's factual findings for clear error and its legal conclusions de novo. Stamat v. Neary, 635 F.3d 974, 979 (7th Cir. 2011). Mixed questions of law and fact are also reviewed de novo. Id.

ANALYSIS

Handler argues that the bankruptcy court erred in finding that the settlement agreement did not contain a "time is of the essence" clause, as the settlement agreement clearly required that Handler receive payments by the 15th of each month and specified that if payment was not received, the case was to be reopened and judgment entered in Handler's favor for $21, 702.40 plus interest. The Johnsons respond that the parties did not include the phrase "time is of the essence" in the agreement, the fact that the payments were to be made on an installment basis negates any argument that time was indeed of the essence, and any breach did not prejudice Handler.

Handler contends that the bankruptcy court was wrong to base its decision on the fact that the settlement agreement did not contain the words "time is of the essence, " as these words need not appear in a contract to make timely performance an enforceable requirement. See Arnhold v. Ocean Atl. Woodland Corp., 284 F.3d 693, 699 (7th Cir. 2002) ("Timely performance often is an absolute requirement even if the contract does not contain the talismanic phrase time is of the essence'; it is well-settled that the intention of the parties as expressed by the agreement controls[.]'" (quoting Will v. Will Prods. Inc., 441 N.E.2d 343, 346, 109 Ill.App.3d 778, 65 Ill.Dec. 430 (1982))). The parties did include language that each payment must be received ...


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