Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in granting defendant-bank’s motion to dismiss plaintiff-customer’s action, alleging that defendant breached its contract with plaintiff by charging plaintiff $25 non-sufficient funds (NSF) fee under circumstances when plaintiff’s account had sufficient funds under ledger-balance method. Dist. Ct. could properly find that language in subject contract did not require defendant to use ledger-balance method when assessing whether plaintiff had sufficient funds in her account, that defendant could use available-balance method to make such assessment, and that plaintiff did not have sufficient funds when using available-balance method. Ct. of Appeals also rejected plaintiff’s claim that defendant could not charge multiple NSF fees where individual resubmitted same check multiple times, and where said check was rejected for insufficient funds on each occasion.

Dist. Ct. did not err in granting defendants-entity and guarantor’s motions for summary judgment in action seeking to collect on 2004 loan that plaintiff gave to entity, where Dist Ct. found that instant action was filed beyond applicable 10-year limitations period. Record showed that in August and September of 2008, principal of entity sent emails to plaintiff essentially admitting inability to pay on loan, which triggered start of limitations period, and which precluded plaintiff from recovering loan proceeds from entity, where instant lawsuit was filed on November 2, 2018. Moreover, plaintiff waived any argument that November 5, 2008 forbearance agreement constituted new promise to pay, so as to start new limitations period, where plaintiff failed to raise argument in Dist. Ct. Also, Dist. Ct. could properly find that language in guaranty agreement did not waive any limitations defense, where operative language in guaranty did not waive all defenses to enforcement of guaranty obligation.

Bankruptcy Ct. did not err in granting defendants-Irish creditors’ motion to dismiss on lack of personal jurisdiction grounds debtor’s adversary complaint in his Chapter 11 bankruptcy proceeding, alleging that defendants (who are located in Ireland and conduct business there) improperly exercised control over debtor’s property located in Ireland in violation of Bankruptcy Code’s automatic stay provisions. Existence of specific personal jurisdiction cannot depend solely on actions of plaintiffs or third-parties, and record showed that only link between defendants and Illinois was fact that plaintiff lived in Illinois and unilaterally filed bankruptcy petition in Illinois forum. Fact that defendants took actions, including taking control of debtor’s property pursuant to result of litigation in Ireland that allowed defendants to dispose of debtor’s property to satisfy debts owed to defendants, that had negative result on plaintiff in Illinois was insufficient to establish personal jurisdiction over defendants. Ct. rejected debtor’s claim that personal jurisdiction over defendants could be established through Bankruptcy Ct.’s in rem jurisdiction over debtor’s property.

Dist. Ct. did not err in affirming Bankruptcy Ct. order that allowed creditor to file amended proof of claim in debtor’s Chapter 13 payment plan to include attorney’s fees generated during pendency of debtor’s Chapter 13 petition. Record showed that: (1) under terms of contract calling for debtor’s purchase of vehicle from creditor, debtor agreed to pay attorney’s fees generated to collect amounts owed under agreement; (2) after creditor submitted initial proof of claim regarding said vehicle and after Bankruptcy Ct. ordered debtor to amend his plan to require debtor to pay vehicle debt in full, parties participated in hearings to address debtor’s failure to provide for full payment of vehicle in his plan; and (3) Bankruptcy Ct. approved creditor’s attorney’s fee affidavit, which represented fees incurred after debtor’s initial failure to properly amend plan to include full payment of vehicle debt. While confirmed payment plans under Chapter 13 are generally binding on both debtors and creditors under 11 USC section 1327(a), creditor’s request for amendment to proof of claim qualified as compelling circumstance to amend proof of claim, where: (1) parties’ contract called for attorney’s fees arising out of collection of debt; (2) debtor’s counsel was aware of existence of fees prior to plan confirmation; and (3) instant fees were reasonable and were legitimately generated because of creditor’s duty to respond to pleadings filed by debtor.

Chapter 7 debtor lacked standing to appeal Dist. Ct.’s order that dismissed for lack of standing, debtor’s appeal of Bankruptcy Ct. order that approved Trustee’s $550,000 settlement of debtor’s state-court action in exchange for debtor’s dismissal of state-court action, even though debtor had valued said lawsuit at $16 million. Debtor lacked standing to challenge Bankruptcy Ct.’s order because debtor could only speculate as to value of his assets, and he could not establish that he would recover any estate assets after distribution of estate‘s assets to creditors. Moreover, record showed that debtor had at most $15 million in assets, and that he conceded that his liabilities totaled $20 million. As such, debtor could not explain for standing purposes how it was likely that any distribution from estate would likely flow to him.

Dist. Ct. did not err in dismissing plaintiff’s tort action, alleging that defendants misled plaintiff as to when it would receive payments for prior furniture orders under circumstances where plaintiff had also asserted successful breach of contract claim regarding defendants’ failure to make payments on said prior orders. Under Wisconsin law, economic loss doctrine bars recovery in tort for economic losses sustained from contractual dispute, and plaintiff’s own characterization of its fraud claim dooms instant tort action, where it alleged that defendants’ fraud induced it to continue existing contract at issue in breach of contract claim. Moreover, all fraudulent statements alleged in instant tort claim concerned promises to pay orders at issue in plaintiff’s breach of contract claim. Ct. further noted that plaintiff’s claim for lost profits or for lost business in tort claim were economic losses under Wisconsin law.

Dist. Ct. did not err in affirming Bankruptcy Ct. order dismissing as untimely creditor’s proof of claim, which was submitted five months after deadline for doing so. Record showed that: (1) debtor (USA Gymnastics) filed Chapter 11 bankruptcy petition in response to overwhelming number of claims submitted by gymnasts, who alleged that they were sexually assaulted by Larry Nassar; and (2) debtor mailed notice of deadline for filing proof of claim to individuals it viewed as potential claimants, emailed said notice to current and former members of debtor’s organization and placed information about deadline on its website, social media pages, USA Today and gymnast journals. While creditor, who also claimed that she was sexually assaulted by Nassar, stated that she did not become aware of deadline until after it had passed, and that she was entitled to actual notice of deadline, Ct. of Appeals found that creditor was entitled only to constructive notice of deadline, which debtor had provided, where creditor had failed to show that debtor had records of her medical visits with Nassar, and where Michigan law did not require that debtor possess such records. As such, creditor failed to show that she was “reasonably ascertainable creditor” for purposes of being entitled to actual notice of deadline.

Bankruptcy Ct. erred in granting debtors’ motion under Rule 60(b) to modify confirmed Chapter 13 plan by eliminating priority creditor status of State of Wisconsin and by shortening plan’s duration from 60 months to 36 months. While Rule 60(b)(1) potentially provides avenue to accommodate debtors’ request to modify confirmed Chapter 13 plan, where debtors alleged that parties and Bankruptcy Ct. were mistaken in assumption that State’s effort to recoup overpaid public benefits to debtors entitled it to priority creditor status under section 507(a)(1)(B), debtors could not use Rule 60(b)(1) to effectuate requested modification, where debtors filed modification request more than one year after confirmation of Chapter 13 plan.Moreover, Ct. found that there was no other source of authority that would allow debtors to seek instant relief.