Opinion
Bankruptcy Case 19-82572 Adversary No. 19-96032
12-30-2020
In re: Tomasz Lemiszka, Debtor. Polish & Slavic Federal Credit Union, Plaintiff, v. Tomasz Lemiszka, Defendant.
Chapter 7 MEMORANDUM OPINION
Plaintiff Polish & Slavic Federal Credit Union (the "Credit Union") objects to the discharge of the Debtor's outstanding debt on a car loan and additionally seeks a money judgment in the amount of $13,201.43, and other relief. The several counts of its complaint allege different, alternative theories that the debt is non-dischargeable, whether under section 523(a)(2)(A) or section 523(a)(6) of the Bankruptcy Code. Before this court is the Credit Union's motion for summary judgment on Counts I, III, IV and V of its adversary complaint. (ECF No. 26, the "Motion").
Because the Credit Union has failed to demonstrate that there is no genuine dispute of material fact or that the Credit Union is entitled to judgment as a matter of law, the Motion will be denied.
I. PROCEDURAL HISTORY
The Credit Union bases its objection to discharge of the car loan debt on two events. First, it claims that the Debtor failed to deliver to it the physical certificate of title to the vehicle which was to serve as the collateral for the loan. In connection with this, it further alleges that the Debtor and failed to have the Credit Union listed as "loss payee" on the vehicle's policy of insurance. Second, in connection with a later accident that wrecked the vehicle, the Plaintiff alleges that the Debtor failed to timely notify it of the accident and remit the insurance proceeds he received. The Credit Union alleges that the Debtor was required perform to claims that the terms of the car loan agreement required these events violated the Debtor's representations to the Plaintiff and his obligations under the loan agreement.
In the first court of its complaint, the Credit Union asserts 11 U.S.C. § 523(a)(2)(A) to allege that the Debtor made a "false statement" that he "intended to pledge [the vehicle] as collateral and allow [the] Credit Union to perfect its lien upon title of [the vehicle]." Count II it alleges that the Debtor "falsely stated, in writing in the Loan Agreement, that he would pledge [the vehicle] as collateral, that [the] Credit Union's lien would be shown on title, and that he would notify [the] Credit Union if [the vehicle] was damaged" to request relief under section 523(a)(2)(B). The last three counts object to discharge under section 523(a)(6). Count III alleges, in pertinent part, that the Debtor "acted willfully and maliciously when he failed to have the Plaintiff's lien shown on the vehicle's title, and later to "provide insurance with title showing [the] Credit Union's lien after [the vehicle] was involved in an automobile accident" and then "failed to turnover [sic] insurance proceeds from said automobile accident to Credit Union." Count IV asserts that while the "Credit Union had an absolute right to the place it's lien [sic] on the title under the Loan Agreement" and the Debtor "never provided [the] Credit Union with the title." Finally, Count V alleges that the Debtor converted the insurance proceeds from the accident to which the Credit Union "had an absolute right to the insurance proceeds under the contract."
The Debtor answered the complaint and denied that the debt is non-dischargeable. (ECF No. 13.) The court granted the parties were given ample time for discovery.
With this Motion, the Plaintiff submitted its required Statement of Facts (ECF No. 26, the "Plaintiff Statement of Facts" or "Pl. SOF") to which it attached six exhibits, including signed affidavits of two of its employees. With his response the Defendant submitted his Statement of Material Facts pursuant to Bankr. N.D. Ill. R. 7056-2A. The Debtor's statement admits all of the Plaintiff's Statements of Fact except its paragraphs 20-23, 32 and 39, which are denied. The Debtor also raised seven additional statements of fact (ECF No. 27, the "Statement of Additional Facts" or "Def. SOF") and submitted several exhibits in support of his opposition to the Motion, including his own signed declaration. The Plaintiff filed a reply memorandum (ECF No. 28) but did not respond to the Statement of Additional Facts. The parties were offered but declined the opportunity for oral argument.
II. JURISDICTION
Discharge is a right that is expressly created by title 11 and would have no existence if not created by the Bankruptcy Code. Thus, proceedings on an objection to a debtor's discharge or to object to the dischargeability of a debt arise in a case under title 11. Kontrick v. Ryan, 540 U.S. 443, 447-48 (2004). Therefore, this court has subject matter jurisdiction under 28 U.S.C. § 1334(b) and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I).
III. UNDISPUTED MATERIAL FACTS
The following facts reflect the undisputed facts contained in the parties' submissions under Bankr. N.D. Ill. R. 7056-1 and 7056-2 or which are deemed admitted based on the Debtor's or Plaintiff's failure to properly controvert the facts as required by FED. R. BANKR. P. 7056(c) and the related Local Bankruptcy Rules.
Polish & Slavic Federal Credit Union is a chartered federal credit institution doing business in Illinois. On December 5, 2016, the Debtor entered into a written loan agreement (the "Loan Agreement") with the Credit Union. (Pl. SOF ¶10; Comp. Ex. A.) Under the terms of the Loan Agreement, the Debtor agreed to secure his loan by a lien on the 2010 BMW 5 Series automobile described in the Loan Agreement, to have the Credit Union's lien shown on the title, and to promptly notify the Credit Union if the vehicle was damaged. (Pl. SOF ¶12.) On the same day, the Debtor signed an additional agreement with the Credit Union authorized BMW Bank of North America to forward the vehicle title to the Credit Union upon payment in full of the that bank's existing loan. (Pl. SOF ¶13; Complaint Ex. B, Def. SOF ¶1.) That document listed a New Jersey address of the Credit Union to which the title was to be forwarded with the Bank's lien released. (Id.)
The Credit Union directly disbursed its loan proceeds to BMW Bank of North America. (Pl. SOF ¶15, Comp. Ex. C.) Subsequent to this payment, and despite the instruction to the Bank to send the title certificate of title to the Credit Union, BMW Bank sent the title to the Debtor's residence. (Def. SOF ¶3, Pl. SOF ¶¶18, 20.) The Credit Union was never listed as lien holder on the title and the Debtor has not provided it with the title certificate. (Pl. SOF ¶19, 24, Answer ¶14, 16.) When the certificate instead arrived at the Debtor's house he was not at home, and his wife put the certificate it with other documents. (Def. SOF ¶3.)
The Debtor made his loan payments to the Credit Union pursuant to the Loan Agreement for more than two years (Def. SOF ¶6) until on or around February 13, 2019, when the vehicle was involved in an accident. It "was declared a total loss." (Pl. SOF ¶¶25-26.) The Debtor did not "promptly" inform the Credit Union of the accident. (Pl. SOF ¶27.)
The Debtor does not dispute the characterization, though the record is not clear on what precisely the term "promptly" means, or when or how the Credit Union was informed of the accident.
The vehicle was insured on a policy issued by State Farm Mutual Automobile Insurance Company as of the date of the accident. The Debtor had caused State Farm to reflect the Credit Union as a loss payee on the policy. (Def. SOF ¶2.) When Mr. Lemiszka informed State Farm about the accident the State Farm representative told him that its check "would be issued solely to him, and that he could cashed the check." (Def. SOF ¶4.) State Farm issued the check for $18,095.31 solely in the name of the Debtor on or about February 21, 2019. (Pl. SOF ¶¶29, 31; Def. SOF ¶¶2, 4, 5.)
The Debtor did not remit the insurance proceeds to the Credit Union. Instead, he used at least a portion to pay outstanding debts related to his business. (Pl. SOF ¶33.) Specifically, on March 4, 2019, the Debtor used $12,500 of the proceeds to pay debt of Big Wave Bounce Park, a limited liability company he belonged to. (Pl. SOF ¶¶33-35.) The Debtor made no further voluntary payments to the Credit Union after February 4, 2019. (Pl. SOF ¶37, 41.) On May 24, 2019, the Credit Union charged off the Debtor's remaining savings account balance of $103.29 towards the balance of the Vehicle loan. (Pl. SOF ¶38.)
The Debtor filed his voluntary petition for relief under chapter 7 on November 5, 2019. Three days later, but before to receiving notice of the bankruptcy case, the Credit Union filed a complaint against the Debtor in McHenry County for "breach of contract." (Pl. SOF ¶42; Answer ¶25.) As of the petition date the Debtor owed the Credit Union the outstanding principal balance of $13,201.43, plus attorney's fees and costs. (Pl. SOF ¶43.)
IV. DISCUSSION
Standards and Procedures for Rule 56 Motions. Summary judgment is appropriate if "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a), as incorporated by FED. R. BANKR. P. 7056. On a request for summary judgment, "the court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial." Johnson v. Advocate Health & Hosps. Corp., 892 F.3d 887, 893 (7th Cir. 2018) (quoting Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003)). If no such dispute if found, summary judgment can be entered as a matter of law. 10A Charles Alan Wright, Arthur R. Miller, Mary Kay Kane, FEDERAL PRACTICE & PROCEDURE § 2725 at 416 (2016).
"The party that bears the burden of proof for an issue at trial must cite the facts which it believes [would] satisf[y] that burden and demonstrate why the record is so one-sided as to rule out the prospect of a finding in favor of the non-movant." Bunch v. United States, 880 F.3d 938, 941 (7th Cir. 2018) (alteration in original) (internal quotations omitted) (quoting Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund, 778 F.3d 593, 601 (7th Cir. 2015)). "Once the moving party meets its burden, summary judgment is proper if the non-moving party 'fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.'" Creditor's Comm. of Jumer's Castle Lodge, Inc. v. Jumer, 472 F.3d 943, 946 (7th Cir. 2007) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). "By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).
For purposes of summary judgment, a genuine dispute of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. at 248. "We consider all of the evidence in the record in the light most favorable to the non-moving party, and we draw all reasonable inferences from that evidence in favor of the party opposing summary judgment." Dunn v. Menard, Inc., 880 F.3d 899, 905 (7th Cir. 2018) (internal quotation omitted) (quoting Feliberty v. Kemper Corp., 98 F.3d 274, 276-77 (7th Cir. 1996)). The court makes this determination in light of the evidentiary standard that would be used at trial. Valley Liquors, Inc. v. Renfield Imps., Ltd., 822 F.2d 656, 659 (7th Cir. 1987) (citing Anderson, 477 U.S. at 252).
A party asserting that a fact cannot be or is genuinely disputed must support the assertion by:
(A) citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations (including those made for purposes of the motion only), admissions, interrogatory answers, or other materials; orFED. R. CIV. P. 56(c)(1). The response to the statement of facts should be "straightforward." Maxwell v. Penn Media (In re marchFirst, Inc.), 2010 Bankr. LEXIS 3480 at *2 (Bankr. N.D. Ill. Oct. 14, 2010). "All material facts set forth in the statement required of the moving party will be deemed to be admitted unless controverted by the statement of the opposing party." Bankr. N.D. Ill. R. 7056-2(B). Similarly, all "additional material facts set forth in the opposing party's" statement of additional facts filed under Local Bankruptcy Rule 7056-2 "will be deemed admitted unless controverted by a statement of the moving party filed in reply." Bankr. N.D. Ill. R. 7056-1(C). If a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the court may consider the fact undisputed for purposes of the motion or grant summary judgment if the motion and supporting materials — including the facts considered undisputed — show that the movant is entitled to it. FED. R. CIV. P. 56(e). "[A] party will be successful in opposing summary judgment only when they present definite, competent evidence to rebut the motion." United States v. Luce, 873 F.3d 999, 1008 n.31 (7th Cir. 2017) (quoting Smith v. Severn, 129 F.3d 419, 427 (7th Cir. 1997)).
(B) showing that the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact.
The Seventh Circuit has "routinely upheld [trial courts'] discretion in requiring parties to comply strictly with local rule requirements." Curtis v. Costco Wholesale Corp., 807 F.3d 215, 219 (7th Cir. 2015). This includes local rules requiring a respondent to specifically admit or deny facts as presented in the other party's statement of facts and to provide citation to admissible evidence in support of denials. Id. at 219 (discussing the district court's similar Local Rule 56.1). The purpose of the bankruptcy court's local rule, like the district court's, "is to have the litigants present to the [court] a clear, concise list of material facts that are central to the summary judgment determination." Id.
Despite filing a general reply, the Plaintiff did not file a response to the Debtor's Statement of Additional Facts as required by Local Bankruptcy Rule 7056-1(C). Therefore, all seven of the Debtor's additional statements of fact are deemed admitted for purposes of the Motion under Local Bankruptcy Rule 7056-2. Likewise, the Debtor does not dispute 37 of 43 statements contained in the Plaintiff's Statement of Facts which, too, are admitted.
Standards for Objection to Discharge. To ensure that bankruptcy affords relief to the "honest but unfortunate debtor," Lamar, Archer & Cofrin, LLP v. Appling, 138 S. Ct. 1752, 1758 (2018), the Bankruptcy Code sets forth exceptions to discharge of certain debts, including those based on malicious or fraudulent actions of a debtor. The exceptions to discharge "are confined to those plainly expressed in the Code . . . and are narrowly construed in favor of the debtor." In re Chambers, 348 F.3d 650, 654 (7th Cir. 2003).
Generally, a pre-petition claim based on a mere breach of contract which involves no deceit or breach of fiduciary duty is discharged. See, e.g., In re Potter, 616 B.R. 745, 753 (Bankr. N.D. Ill. July 6, 2020); In re Pagan, 564 B.R. 324, 326 (Bankr. N.D. Ill. 2017). The Credit Union contends, however, that the debt owed it by the Debtor is non-dischargeable under either section 523(a)(2)(A) or section 523(a)(6) of the Bankruptcy Code.
Section 523(a)(2)(A) excepts from discharge "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." 11 U.S.C. § 523(a)(2)(A). This provision encompasses three separate grounds for excepting the debt from discharge: false pretenses, false representation, and actual fraud. "A false pretense involves an implied misrepresentation or conduct that is intended to create and foster a false impression, while a false representation involves an express representation." Argyle v. Harkin (In re Harkin), 2017 Bankr. LEXIS 916, *26 (Bankr. N.D. Ill. March 31, 2017). *26. Actual fraud is broader and includes "any deceit, artifice, trick, or design involving direct and active operation of the mind, used to circumvent and cheat another." McClellan v. Cantrell, 217 F.3d 890, 893 (7th Cir. 2000). The Supreme Court has held that the "term 'actual fraud' in § 523(a)(2)(A) encompasses forms of fraud, like fraudulent conveyance schemes, that can be effected without a false representation." Husky Int'l Elecs., Inc. v. Ritz, 136 S.Ct.1581, 1586 (2016). "Scienter, or intent to deceive," is a "required element under § 523(a)(2)(A) whether the claim is for a false representation, false pretenses, or actual fraud." In re Freund, 714 F. App'x 595, 597 (7th Cir. 2018) (citing In re Yotis, 548 B.R. 485, 495 (Bankr. N.D. Ill. 2016)).
A. Issues Of Material Fact Remain Disputed And Preclude Summary Judgment For The Claims Under Section 523(a)(2)(A).
In Count I, the Credit Union alleges that it "extended the loan as a result of Defendant's false statement that the Defendant intended to pledge [the] vehicle as collateral and allow Credit Union to perfect its lien upon title." (Comp. ¶33.) Where, as here, a section 523(a)(2)(A) claim is based on false representation, the plaintiff must demonstrate "(1) that [the debtor] made a false representation or omission, which he either knew was false or made with reckless disregard for the truth; (2) that [the debtor] possessed an intent to deceive or defraud; and (3) that [the plaintiff] justifiably relied on the false representation." In re Davis, 638 F.3d 549, 553 (7th Cir. 2011). But a promise of future performance "constitutes a false representation under § 523(a)(2)(A) only if the debtor made the promise without an intention of ever keeping it." Sullivan v. Ratz, 551 B.R. 338, 345 (N.D. Ill. 2016) (citing In re Casali, 517 B.R. 835, 843 (Bankr. N.D. Ill. 2014)).
The parties' submissions, however, fail to demonstrate that there is no genuine dispute that the Debtor entered into the auto loan with the intent not to pledge the vehicle as collateral or planning to prevent the Credit Union from perfecting its lien. Indeed, the undisputed facts would suggest the opposite. The Plaintiff states that the Debtor agreed under the Loan Agreement "to have the loan secured by [a] lien upon title to the Vehicle" and "to have the Credit Union's lien shown on the title." (Pl. SOF ¶12.) In his Statement of Additional Facts, however, the Debtor alleges that as of the time he entered into the Loan Agreement he did not intend to default on any terms of the Loan Agreement nor intend to permanently deprive the Credit Union of insurance proceeds. (Def. SOF ¶7.) By failing to respond to the Debtor's Statement of Additional Facts, the Credit Union is deemed to admit for purposes of this Motion that the Debtor "did not intend to default on the loan." (Def. SOF ¶7.)
Undisputed statements in the Credit Union's own submission further undermine its section 523(a)(2)(A) claim. The Plaintiff states that when the Debtor took out the vehicle loan he signed a document instructing BMW Bank of North America — which then held the certificate — to send the certificate to the Credit Union. (Pl. SOF ¶¶13-14.) This statement by the Plaintiff contradicts its allegation that the Debtor intended at that time to prevent the Credit Union from obtaining or perfecting its lien. The Credit Union has not alleged, much less presented undisputed proof, that the Debtor caused or encouraged BMW Bank to send the title certificate directly to him or to otherwise disregard the written authorization to send it to the Credit Union. Finally, there being no response to paragraph 3 of the Statement of Additional Facts being undisputed, the Credit Union is deemed to admit the Debtor's allegation that he did not realize that the BMW Bank had sent the title certificate to his residence for approximately two years. (Def. SOF ¶3.)
The Plaintiff's additional argument the Debtor "knowingly kept the information regarding the [later] automobile accident from Credit Union" to argue for summary judgment under section 523(a)(2)(A) also is of no avail. (Pl. Mem. at 6-7 (ECF No. 26). See also Compl. ¶ 30.) Not only contradicted by the deemed admission of the Debtor's allegation that he "did not intend to default on the loan with the Credit Union" and that he had intended to continue paying the Credit Union even after the vehicle was totaled, but was unable to do so (Def. SOF ¶7), this argument also fails to show how the Debtor had any contrary intention when he obtained the loan nearly two years before the accident that wrecked the car.
In its reply memorandum, the Credit Union first responds to the Debtor's Statement of Additional Facts by arguing that the Debtor "provides no evidence in support of the allegations blaming everyone but himself." (Reply, 2.) Not only is this argument insufficient to salvage the Motion, its description of the Debtor's submission is not accurate. Each of the numbered statements in the Statement of Additional Facts cite to exhibits attached to his response or to the Plaintiff's Motion. Most reference the Debtor's own declaration signed "under penalty of perjury" and attached to his response. (ECF No. 27.) The Credit Union generally attacks the credibility of the declaration as "self-serving and uncorroborated." (ECF No. 28, 4.) However, as the Seventh Circuit has recognized, "[s]elf-serving affidavits can indeed be a legitimate method of introducing facts on summary judgment." McKinney v. Office of Sheriff of Whitley Cty., 866 F.3d 803, 814 (7th Cir. 2017) (quoting Widmar v. Sun Chemical Corp., 772 F.3d 457, 459-60 (7th Cir. 2014)). So long as "evidence meets the usual requirements for evidence presented on summary judgment — including the requirements that it be based on personal knowledge and set forth specific facts showing that there is a genuine issue for trial — self-serving testimony is an acceptable method for a nonmoving party to present evidence of disputed material facts." Johnson v. Advocate Health & Hosps. Corp., 892 F.3d 887, 901 (7th Cir. 2018).
The Debtor's declaration states that the affiant has personal knowledge of the facts stated. The Credit Union offers no explanation why the Debtor is not competent to testify as to his own state of mind, intent and actions, arguing instead that Mr. Lemiszka fails to offer "supporting evidence" with his affidavit. (Reply, 5.) But "[c]riticizing the credibility of the movant's affiants, alone, is not enough to avoid summary judgment." Waldon v. Wal-Mart Stores, Inc., Store No. 1655, 943 F.3d 818, 823 (7th Cir. 2019). On a motion for "summary judgment a court may not make credibility determinations, weigh the evidence, or decide which inferences to draw from the facts; these are jobs for a factfinder." Johnson, 892 F.3d at 893.
The Credit Union introduces in its Motion and Reply an additional argument that was not clearly articulated in the section 523(a)(2)(A) count to its complaint. It now asserts that the Debtor fraudulently transferred $12,500 of the insurance proceeds from the accident claim in March 2019 to pay business debts. As noted above, "actual fraud," as the term is used in section 523(a)(2)(A), may "encompass fraudulent conveyance schemes, even when those schemes do not involve a false representation." Husky Int'l Elecs., Inc. v. Ritz, 136 S. Ct. at 1590 (2016). The "recipient of the transfer - who with the requisite intent, also commits fraud - can 'obtai[n]' assets 'by' his or her participation in the fraud." Id. at 1589 (citing McClellan v. Cantrell, 217 F.3d 890 (7th Cir. 2000)). But "actual fraud" under section 523(a)(2)(A) does not include "constructive fraud." McClellan, 217 F.3d at 894.
Putting aside for the moment, the seeming surprise introduction of this issue in the Motion, this argument also finds insufficient support in the undisputed allegations found in its Statement of Facts. The Credit Union's Statement contain no supported allegations regarding the Debtor's motivation in paying off the debts of his business. To be sure defendants will rarely admit actual fraud, and therefore it often may be inferred from common law "badges of fraud." See, e.g., Olsen v. Paulsen (In re Paulsen), Case No. 20ap96020, 2020 WL 6929437 (Bankr. N.D. Ill. Sept. 29, 2020). But such inferences are generally the province of the finder of fact and not appropriate for summary judgment. See, e.g., In re Grube, 462 B.R. 663, 665-66 (Bankr. C.D. Ill. 2012). While this argument might conceivably fall within the "badge of concealment", that alone is not enough to win summary judgment on the issue, particularly when the Credit Union did not respond to the Debtor's declaration that he "intended to continue paying the Credit Union on the loan, even after the vehicle was totaled, but was unable to do so." (Def. SOF ¶7.)
Accordingly, the Credit Union's motion for summary judgment will be denied with respect to Count I.
B. The Credit Union Has Not Established Grounds For Summary Judgment For The Counts Under Section 523(a)(6).
Counts III, IV and V raise various theories to object to discharge under section 523(a)(6). Debts "for willful and malicious injury by the debtor to another entity or to the property of another entity" may be excepted from discharge. 11 U.S.C. § 523(a)(6). The Plaintiff bases Count IV on allegations that the Debtor's failed to "provide[ the] Credit Union with the title." Count V focuses on the Debtor's alleged failure to turn over the insurance proceeds from the accident to assert that its debt is non-dischargeable. Count III is also brought under section 523(a)(6), alleging that the Debtor "acted willfully and maliciously when he failed to turnover insurance proceeds" and "intentionally and without justification or excuse" failed to "have Credit Union's lien shown on title." However, it is unclear what is intended by Count III that is not duplicative of Counts IV and V. Perhaps the distinction lies with Count III's focus on the Debtor's failure to mark the Credit Union on the certificate of title while Count IV speaks to the Debtor's failure to deliver of the certificate to the Credit Union. Count III also alleges that the Debtor "acted willfully and maliciously when he failed to provide insurance with title showing Credit Union's lien."
To succeed under section 523(a)(6), a plaintiff must demonstrate "(1) an injury caused by the debtor (2) willfully and (3) maliciously." In re Calvert, 913 F.3d 697, 700 (7th Cir. 2019). Willfulness requires "a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury." Gerard v. Gerard, 780 F.3d 806, 811 (7th Cir. 2015) (quoting Kawaauhau v. Geiger, 523 U.S. 57, 61 (1998)) (emphasis omitted). Willfulness "is judged by an objective standard: it can be found either if the debtor's motive was to inflict the injury, or the debtor's act was substantially certain to result in injury." Id. To prove malice, the plaintiff must demonstrate that the debtor acted "in conscious disregard of [his] duties or without just cause or excuse." Calvert, 913 F.3d at 701.
Without expressly so holding, the Seventh Circuit has strongly suggested that only intentional torts fall within the ambit of section 523(a)(6). In its decision considering claims of breach of contract, tortious interference, and unjust enrichment, for example, the court noted that "only the intentional torts of interference and conversion could plausibly constitute willful and malicious injury"). First Weber Group, Inc. v. Horsfall, 738 F.3d 767, 773 (7th Cir. 2013). Numerous lower courts within this Circuit, including this court, have so held. See, e.g., In re Krook, 615 B.R. 479, 487 (Bankr. N.D. Ill. 2020); In re Pagan, 564 B.R. 324, 326-27 (Bankr. N.D. Ill. 2017); Taylor v. Snyder (In re Snyder), 542 B.R. 429, 438-44 (Bankr. N.D. Ill. 2015). As the weight of authority makes clear, a claim for breach of contract - even if the breach is allegedly "intentional" - will not sustain a non-dischargeability objection under section 523(a)(6). See, e.g., In re Pagan, 564 B.R. at 327 (listing cases holding that "a claim based on an intentional breach of contract cannot satisfy the elements of § 523(a)(6).").
The Plaintiff cites in support of its argument here a case involving conversion, an intentional tort, not breach of contract. In In re Perto, the debtor sold a vehicle owned by the plaintiff with knowledge that the vehicle was owned by the plaintiff. 2012 Bankr. LEXIS 631 (Bankr. N.D. Ill. Feb. 3, 2012). In contrast, here it has not been established that the Credit Union owned the Vehicle. To the contrary, it is undisputed that the Debtor owned the vehicle. The Credit Union is at most a lender with a security interest in the vehicle which it did not perfect. --------
The Credit Union has not demonstrated that it is entitled to summary judgment under section 523(a)(6). It is not disputed that the Debtor caused the Credit Union to be listed as a loss payee on the insurance policy covering the vehicle pursuant to the Loan Agreement, that the Debtor made more than two years of loan payments to the Credit Union, and that he only discontinued his payments after the car was damaged in an accident. It is also not contested that the Debtor signed the instructions directing BMW Bank of North America to send the title certificate to the Credit Union and that BMW Bank sent the certificate to the Debtor contrary to the written authorization. The Credit Union has not explained how the Debtor's failure to make payments on the loan, to deliver the title certificate, or failure to remit the insurance proceeds constitutes an intentional tort and is not a matter of breach of contract. Finally, the Credit Union must be deemed to have admitted for purposes of this Motion that the Debtor "did not intend to default on the loan with the Credit Union or to permanently deprive the Credit Union of the insurance proceeds." (Def. SOF ¶7.) The Plaintiff is also deemed to have admitted that the Debtor was unaware that the certificate of title had been delivered to his house rather than to the Credit Union until approximately two years later. (Def. SOF ¶3.) As such, the record will not support summary judgment in favor of the Credit under section 523(a)(6) and the Motion must be denied as to Counts III, IV and V.
V. CONCLUSION
For the foregoing reasons, the Credit Union's Motion for Summary Judgment will be denied in its entirety. A separate order shall be entered giving effect to the determinations reached herein. DATE: December 30, 2020
ENTER
/s/_________
Thomas M. Lynch
United States Bankruptcy Judge