Commercial Banking, Collections, and Bankruptcy

Bankruptcy Ct. did not err in entering default judgment in favor of creditor as sanction in adversary action in instant Chapter 7 bankruptcy case, where creditor sought to prevent discharge of debtor’s debts that included $650,000 sanction arising out of debtor’s failure to engage in discovery in prior lawsuit between instant parties. Record showed that debtor had similarly failed to respond to at least 15 of creditor’s discovery requests in adversary action, and Dist. Ct. could properly enter default judgment, even though debtor had partially complied with other discovery requests, where plaintiff had been warned of possibility of entry of default judgment for non-compliance of creditor’s discovery requests. Dist. Ct., though, lacked constitutional authority to enter default judgment on creditor’s separate claim that certain trust of which debtor was trustee was in fact debtor’s alter ego. On remand, Dist. Ct. must determine whether alter ego claim is “core or non-core” proceeding, such that if it is determined that alter ego claim was non-core proceeding, it can treat said default judgment as recommended disposition to be reviewed de novo. Otherwise, if Dist. Ct. determines that alter ego claim was core proceeding, it must conduct fresh discovery proceedings on said claim.

Record contained sufficient evidence to support Dist. Ct.’s finding, after bench trial under Texas law, that defendant did not tortiously interfere with plaintiff’s contract with third-party calling for third-party to build in-office pharmacy for plaintiff, under circumstances where third-party breached said contract and then signed similar, but more favorable contract with defendant. While plaintiff asserted that defendant had learned of plaintiff’s contract with third-party and offered third-party better deal, Dist. Ct. could properly believe defendant’s officer that he was unaware of plaintiff’s contract and reject plaintiff’s claim that defendant could have learned of said contract from plaintiff’s recorded security interest in third-party’s accounts receivables. Moreover, Dist. Ct. could credit testimony from third-party’s officer that he would have breached plaintiff’s contract regardless of defendant’s actions due to severe financial obligations imposed by said contract.

Dist. Ct. did not err in dismissing instant lawsuit by plaintiff-creditor against defendant-accountant of debtor, where plaintiff alleged that defendant failed to detect that certain directors and managers had taken money from debtor that caused plaintiff to experience monetary loss. Defendant was entitled to protection from instant lawsuit under 225 ILCS 450/30.1 that rendered defendant liable only to client (debtor) unless defendant was aware that primary intent of debtor was for defendant’s work product to benefit particular person bringing lawsuit, and instant complaint did not allege that defendant knew that client’s intent of defendant’s work product was to benefit plaintiff. Fact that defendant knew that client would furnish copies of financial statements generated by defendant to lenders did not require different result.

Dist. Ct. did not err in denying plaintiff’s request for permanent injunction in action seeking to enforce covenant not to compete against defendants-former employees of plaintiff, where defendants established competing company shortly after they had resigned from plaintiff. Plaintiff’s failure to seek preliminary injunction suggested that it had not suffered irreparable harm arising out of defendants’ conduct, and terms of covenant not to compete imposed undue hardship on defendants where: (1) any company information used by defendants fell short of trade secret or goodwill and was not subject to any confidentiality protections at plaintiff‘s company; and (2) enforcement of geographical restrictions would have precluded defendants from working anywhere in U.S. However, Dist. Ct. erred in denying defendants’ request for attorney fees where Dist. Ct. used wrong legal standard requiring proof that plaintiff initiated lawsuit in bad faith.

Bankruptcy Ct. erred in transferring debtor’s $200 per month annuity to debtor’s ex-wife when resolving instant bankruptcy petition, where debtor and ex-wife had previously entered into marital settlement agreement that debtor would pay ex-wife $200 per month in lieu of ex-wife’s interest in said annuity. Record showed that ex-wife was mere creditor of estate, such that debtor’s interest in annuity should not have been transferred to ex-wife. As such, if and when ex-wife receives payment for all of her claims filed with bankruptcy estate, she will be able to pursue any independent claim against debtor for payment obligations accruing after date that bankruptcy petition was filed.

Dist. Ct. did not err in granting second motion for summary judgment by third-party plaintiff-manufacturer of bucket truck in action seeking defense and indemnification from third-party defendant-employer of injured employee in underlying action by injured employee, who alleged damages arising out of use of bucket truck, where instant action was based on lease agreement in which third-party defendant agreed to release, indemnify and hold third-party plaintiff harmless in all claims seeking damages arising out of use of bucket truck by employees of third-party defendant. While third-party defendant argued that indemnification language in subsequent monthly invoices issued by third-party plaintiff, that required third-party defendant to train its employees on use of bucket truck, without containing specific indemnification language in lease agreement, superseded indemnification language in lease, Ct. found that third-party plaintiff could enforce indemnification clause in lease since indemnification language in invoice and lease was not inconsistent.

Dist. Ct. did not err in finding in favor of respondent-bank in instant citation to discover assets proceeding seeking to hold bank responsible for balance of debtor’s $387,931.25 debt to plaintiff where: (1) bank had been served with citation to freeze two banks accounts identified as belonging to debtors; and (2) bank unfroze said accounts that had contained over $700,000 of debtors' money after receiving copy of Dist. Ct. order that identified which of several of debtors’ bank accounts were to remain frozen. While text of Dist. Ct. order could have been more clear, bank could reasonably construe order as allowing it to unfreeze said accounts, where Dist. Ct. had identified specific accounts that were to remain frozen and limited freeze order to said accounts.