Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Dimas v. Stergiadis

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

January 6, 2020




         This is a bankruptcy appeal brought by debtor Christos Dimas.[1] Dimas is challenging the bankruptcy court's decision to allow a $618, 974 claim filed by his former business partner (and now creditor) George Stergiadis. The gist of the case is that Dimas and Stergiadis started a company together. Now, Stergiadis argues that he contributed much more money ($618, 974 more, to be exact) to the company than Dimas, and that Dimas is obligated to pay him back. Dimas disagrees: he believes there was never any agreement to contribute equal amounts of money to the company, and even if there was, he put in his fair share and thus owes nothing.

         After two days of evidentiary hearings, the bankruptcy court issued an order overruling Dimas's objection to the claim. R. 20, Appellee's Appendix at ¶ 1001.[2] A few months later, the bankruptcy court issued a separate order allowing Stergiadis to increase the amount of his original claim. Appendix at ¶ 1031. Dimas now appeals both orders, but for the reasons discussed below, the orders are affirmed.

         I. Background

         A. 1600 South, LLC

         In 2006, Dimas, Stergiadis, and a third partner, Dean Theo, set out to open a fruit market at 1600 South Milwaukee Avenue in Libertyville, Illinois. Appendix at 1031. In connection with the project, they formed a limited liability company-which they eponymously named 1600 South, LLC-to serve as the vehicle for purchasing and managing the 1600 South real estate. Id. In connection with the LLC, Dimas, Stergiadis, and Theo executed an Operating Agreement. Id. at A0106. Under the terms of this contract, the three partners agreed to share equal membership interests, as well as equal profits and equal losses. Id. at A0108. What they apparently did not address explicitly, however, was the question of how they would allocate their initial capital contributions. The Operating Agreement provided space for the members to specify how much money each person would contribute to the company. Id. But in the final version of the agreement, those spaces were left blank, as this excerpt shows:


Id. Nonetheless, the parties did end up making various capital contributions to 1600 South. Dimas, for his part, contributed both cash and equity. So did Stergiadis. The exact amounts are intensely disputed and will be discussed later on.

         Eventually, the fruit market failed, the parties all lost their contributions, and so began the decade-long dispute about what each member owed to the others.

         B. State Court Contract Claim

         In 2008, Stergiadis filed a breach of contract claim in state court naming Dimas and Theo as defendants. Appendix at ¶ 0086. In the complaint, Stergiadis alleged that “the parties agreed that they would provide equal initial capital contributions to 1600 South. However, they mistakenly neglected to include this in their written Agreement.” Id. at A0088. According to Stergiadis, because Dimas “did not have sufficient funds or assets to provide [his] full share of the initial contributions, ” Stergiadis “loaned” him money to cover his “initial capital shortfalls.” Id. at A0089. In terms of remedies, Stergiadis sought reformation of the Operating Agreement based on a theory of mutual mistake and also sought to recover the funds allegedly owed by Dimas. Id. at A0094-95. The state court case remains pending.

         C. Bankruptcy Proceedings

         It would be natural to ask why the state case lingers on after ten years. At least part of the explanation is that the state case has been delayed several times by Dimas's bankruptcy filings. Specifically, Dimas has filed for Chapter 7 bankruptcy seven times since the state case was filed (thereby staying the state case each time). Appendix at ¶ 0283. Dimas finally received bankruptcy discharge in April 2016, on his seventh bankruptcy filing (and this present case). Id. at A1032.

         A few months after that, however, the United States Trustee moved to reopen the case. Appendix at ¶ 0063. In the motion to reopen, the U.S. Trustee noted that after the case had been closed, the Chapter 7 Trustee had been alerted by a creditor that Dimas had “grossly undervalued” an asset of the estate. Id. at A0065. In June 2016, the bankruptcy court granted the U.S. Trustee's motion and reopened the case. Id. at A0067.

         The following month, in July 2016, Stergiadis filed a proof of claim in the amount of $488, 760-the same amount that Dimas allegedly owed him for the initial capital contributions to 1600 South. Appendix at ¶ 0083. Dimas filed an objection to the claim in February 2017, which the bankruptcy court overruled on May 4, 2017. Id. at A0133, A0283. In that order, the bankruptcy court rejected Dimas's argument that the claim was unliquidated (because the claim was based on an unresolved state court lawsuit) and explained that it could “not state as a matter of law that the claim is not enforceable or at what amount it should be allowed and suggest[ed] that the parties return to state court to resolve the matters that court has been handling since 2008.” Id. at A0283.

         In January 2018, Dimas filed a motion to reconsider the May 2017 order. Appendix at ¶ 0288. In the motion, Dimas noted that the bankruptcy court overruled his objection without hearing any evidence. Id. at A0290. As a result, two evidentiary hearings were held on Dimas's motion to reconsider-the first on May 22, 2018 and the second a week later on May 29. Id. at A0400, A0627.

         After the second evidentiary hearing (one day after, to be precise), the bankruptcy court issued an order denying Dimas's motion to reconsider. Appendix at ¶ 1001. The bankruptcy court first found that “despite the absence of equalizing contribution language in the Operating Agreement, ” an equalization agreement could nonetheless be “implied in fact” based on “the facts and circumstances and expressions of a promisor.” Id. at A1033. Specifically, the court noted that Dimas himself had actually scheduled a similar equal-contribution claim in one of his previous bankruptcy cases, which was evidence of a general agreement for the parties to contribute equal amounts to the company. Id. at A1001. The bankruptcy court then turned to the amount of the claim and ruled that it would allow a $488, 760 claim. Id. at A1003. The court noted, however, that Stergiadis was potentially entitled to a higher claim in the amount of $618, 000, but that he had not yet amended his proof of claim, so only the original proof of claim amount was being allowed. Id.

         Stergiadis took the hint, and, in June 2018, he filed a motion to reconsider the allowance order. Appendix at ¶ 1006. In that motion, Stergiadis sought (1) to amend his proof of claim from $488, 760 to $618, 974 based on evidence presented at the May 2018 hearings, and (2) reconsideration of the May 2018 order to increase the allowed claim amount based on the amended proof of claim. Id. On October 15, 2018, the bankruptcy court granted Stergiadis's motion and allowed the claim in the higher amount of $618, 974. Id. at A1031. At this point, Dimas filed a notice of appeal directed at both the May 2018 order and the October 2018 order.[3] R. 16-7.

         II. Standard of Review

         A federal district court has jurisdiction to hear appeals from the rulings of a bankruptcy court under 28 U.S.C. § 158(a). On appeal, the district court reviews the bankruptcy court's legal findings de novo and its factual findings for clear error. In re Miss. Valley Livestock, Inc., 745 F.3d 299, 302 (7th Cir. 2014). Under the clear-error standard, the district court will not reverse simply because it would have decided the case differently; instead, the court must ask whether, considering all of the evidence, “it is left with the definite and firm conviction that a mistake has been committed.” Easley v. Cromartie, 532 U.S. 234, 242 (2001) (cleaned up).[4]

         Also, decisions left to the bankruptcy court's discretion are reviewed “only for an abuse of discretion.” Wiese v. Cmty. Bank of Cent. Wis., 552 F.3d 584, 588 (7th Cir. 2009). This is a difficult standard to meet-“a court abuses its discretion when its decision is premised on an incorrect legal principle or a clearly erroneous factual finding, or when the record contains no evidence on which the court rationally could have relied.” In re KMart Corp., 381 F.3d 709, 713 (7th Cir. 2004).

         III. ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.