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Gleason v. Jansen

United States Court of Appeals, Seventh Circuit

April 25, 2018

John M. Gleason, Plaintiff-Appellant,
Christopher A. Jansen, Defendant-Appellee.

          Submitted February 1, 2018 [*]

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 14 C 10286 - Joan Humphrey Lefkow, Judge.

          Before Wood, Chief Judge, and Kanne and Barrett, Circuit Judges.

          Wood, Chief Judge.

         This case began as an adversary proceeding in Christopher Jansen's chapter 7 bankruptcy case. It turned into a procedural snarl, however. We have concluded that the only part of the case properly before us is an appeal from a denial of relief under the bankruptcy equivalent of Federal Rule of Civil Procedure 60. That decision was correct, and so we affirm the judgment of the district court.


         John Gleason was one of Jansen's creditors. At an appropriate time, Gleason filed an adversary proceeding in the case to obtain a ruling that Jansen's debt to him was nondischargeable under 11 U.S.C. § 523(a)(2)(A), which covers obligations obtained by "false pretenses, a false representation, or actual fraud, other than a statement respecting the debtor's or an insider's financial condition." The debt in question was an unpaid default judgment for roughly $400, 000 that Gleason had obtained against Jansen in a case involving an allegedly phony investment scheme. See Gleason v. Jansen, 76 Mass.App.Ct. 1128 (2010) (table decision). Gleason moved for summary judgment under Federal Rule of Bankruptcy Procedure 7056, on the ground that Jansen was not entitled to relitigate the Massachusetts judgment. The bankruptcy court denied that motion and held a bench trial.

         At the trial, further details about the Massachusetts case came to light. Gleason, who at the relevant time had been working for several entities as an "M&A finder, " gave $141, 000 to Jansen's company, Baytree Investors, to cover closing costs in a business acquisition. The deal never closed, however, and Jansen never fully refunded the money to Gleason after it fell through. Gleason's checks, endorsed by "Talcott Financial Corporation D/B/A Baytree Investors, Inc., " were deposited in a bank account numbered 100-177-5. Where the money went after that is unknown, but Gleason tried pursuing Jansen in the Massachusetts litigation. Jansen later pleaded guilty to unrelated charges of wire fraud and tax evasion. Those charges concerned a corporate purchase he made, after which he skimmed substantial amounts of money from the corporation for his own benefit. Part of the scheme involved the use of a bank account in the name of Talcott Financial Corporation, an Illinois entity that was involuntarily dissolved in 1999. This court recently affirmed his conviction on those charges, with one minor adjustment to his restitution order. See United States v. Jansen, 884 F.3d 649 (7th Cir. 2018).

         Jansen defended himself pro se at the bankruptcy trial. He testified that the "Talcott Financial Corporation" that was the subject of his criminal case was a different entity from the "Talcott Financial Corporation" whose name appeared on the endorsement of the checks. The latter Talcott Financial was, he said, an unincorporated internal business unit of Baytree (despite the implication on the checks that Talcott was the primary company and Baytree was the business name). The two Talcotts, he asserted, had different bank accounts, though the only one in the record is 100-177-5, which belonged to Bay-tree/Talcott. The alleged other account (which was held by the other Talcott) was the subject of the criminal case and was closed in 2003.

         The bankruptcy court credited Jansen's story and found that Gleason had failed to establish that Baytree/Talcott and Talcott were one and the same, such that it could be presumed that Gleason was using the funds in Baytree/Talcott to cover personal expenses. It also found that even if there were only one account, Gleason had failed to prove that Jansen had defrauded him intentionally. It observed that Jansen's efforts to avoid the Internal Revenue Service by mixing personal and business funds in one account did not necessarily show that he misused Gleason's money, let alone that he obtained it fraudulently. The court concluded that Gleason had not proven the fraud and so the debt was dischargeable.

         While the bankruptcy trial was still underway, Jansen was trying to withdraw his plea of guilty in the criminal case. This complicated matters. The bankruptcy court warned him in its opinion denying summary judgment that any effort to invoke the Fifth Amendment privilege against self-incrimination could lead to an adverse inference for bankruptcy purposes. It relied on In re Fetla's Trading Post, Inc., Adv. No. 05 A 00926, 2006 WL 538802 (Bankr. N.D.Ill. Mar. 2, 2006)-a case (as the bankruptcy court explicitly noted) that Jansen knew well, because he was the party who had tried to invoke the Fifth Amendment in that very case. Notwithstanding the warning, Jansen asserted his Fifth Amendment privilege throughout the proceeding: in his answer; in discovery; and in response to questions posed at the trial.

         For his part, Gleason filed notices of appeal to the district court with abandon: first, he appealed the bankruptcy court's denial of his motion for summary judgment and its judgment after the trial; second, he appealed the bankruptcy court's dismissal of a show-cause order issued to Jansen for filing several frivolous motions to dismiss; and third, he filed a notice simply to correct the caption in the first two notices. All of these notices were docketed in the district court as case number 14 C 06878. We refer to that case as the "merits appeal."

         Shortly after he filed the merits appeal, Gleason discovered evidence that (he believes) shows that Jansen had perjured himself at the bankruptcy trial. Gleason's attorney looked at the publicly available record in Fetla's Trading Post and discovered statements for bank account 100-177-5. Those statements included images of checks paid from the account, and showed the payor on the face of the checks as "Christopher A. Jansen, President, Talcott Financial Corporation." Gleason was convinced that these records, spanning the time from June 1999 through January 2004, revealed that Jansen had used account 100-177-5 for personal expenses. From this, Gleason inferred that Jansen had lied to the bankruptcy court when he said that the account involved in the criminal case had been closed in 2003.

         Gleason rushed back to the bankruptcy court with a motion for relief from the judgment under Bankruptcy Rule 9024, which in turn incorporates Federal Rule of Civil Procedure 60(b). The materials from Fetla's Trading Post, he argued, qualified as "newly discovered evidence, " and he asserted that they demonstrated fraud or misconduct or fraud on the court, or otherwise warranted re-opening the case. See Fed.R.Civ.P. 60(b)(2), 60(b)(3), 60(d)(3), 60(b)(6). Because the case was already before the district court, however, Gleason also asked the bankruptcy court for an indicative ruling under the bankruptcy analog to Federal Rule of Civil Procedure 62.1. See Fed.R.Bankr.P. 8008 (effective shortly after Gleason made his motion). The bankruptcy court declined to issue such a ruling. In its view, the Fetla's Trading Post evidence, easily found on PACER, was far ...

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