ORDER Affirming Bankruptcy Court Orders and denying 1 Bankruptcy Appeal filed by Romel E. Casab. Signed by District Judge Arthur J. Tarnow. (MLan)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
ROMEL E. CASAB,
ROMEL E. CASAB,
Case No. 14-12270
SENIOR UNITED STATES DISTRICT
JUDGE ARTHUR J. TARNOW
GRAND SKY ENTERPRISE CO., LTD.,
MAGISTRATE JUDGE R. STEVEN
ORDER AFFIRMING BANKRUPTCY COURT ORDERS
Appellee Grand Sky Enterprise Co., Ltd. (Grand Sky) won a judgment
against Appellant Romel E. Casab in Michigan state court.
subsequently filed for Chapter 7 bankruptcy, Grand Sky filed an adversary
complaint alleging that its judgment against Appellant constitutes nondischargeable debt under 11 U.S.C. § 523(a)(2)(A). The Bankruptcy Court entered
several orders denying Appellant’s motions to dismiss Grand Sky’s complaint, as
well as a final order granting summary judgment to Grand Sky.
received Appellant’s Notice of Appeal  of these orders on June 9, 2014.
Appellant filed a Brief on Appeal  on July 31, 2014. Grand Sky filed its Brief
on Appeal  on August 14, 2014.
For the reasons stated below, the Bankruptcy Court’s orders are
On July 26, 2010, Grand Sky filed a lawsuit against Appellant in Oakland
County Circuit Court. On June 2, 2011, the Circuit Court issued an order granting
Grand Sky summary disposition and scheduling an evidentiary hearing on
damages. The hearing took place on August 10, 2011. Following the hearing, the
Circuit Court directed the parties to file proposed findings of fact and conclusions
of law. Grand Sky filed its proposed findings and conclusions on August 24, 2011.
On November 21, 2011, the Circuit Court issued a final opinion and order adopting
Grand Sky’s proposed findings of fact and conclusions of law. The final order
found Grand Sky entitled to $3,464,676.91 in damages, plus interest. The Circuit
Court entered a judgment against Appellant in this amount.
Appellant appealed a portion of the judgment. On March 19, 2013, the
Michigan Court of Appeals affirmed the Circuit Court’s decision. Appellant did
not appeal the decision of the Michigan Court of Appeals.
On March 21, 2013, Appellant filed a Chapter 7 bankruptcy petition in the
United States Bankruptcy Court for the Eastern District of Michigan. On June 12,
2013, Grand Sky filed an Amended Adversary Complaint, alleging that its
judgment against Appellant is nondischargeable debt. On June 13, 2013, the
Bankruptcy Court issued a Notice of Deficient Pleading concerning the Amended
The Notice specified the following defect: “Electronic
Signature Missing or Incorrect Format ECF Procedure 11(d)(1).” The Notice also
stated that if the Amended Advisory Complaint was not corrected, “an order
striking the document may be entered by the Court.” On June 13, 2013, Grand Sky
filed a second Amended Advisory Complaint. This complaint included counsel’s
signature but omitted counsel’s phone number. The Bankruptcy Court did not
issue a Notice of Deficient Pleading concerning the second Amended Advisory
On July 11, 2013, Appellant filed a Motion to Dismiss. The Bankruptcy
Court held a hearing on the motion on August 30, 2013. At the hearing, the
Bankruptcy Court denied Appellant’s Motion to Dismiss, but directed Grand Sky
to serve Appellant with a re-issued summons and the second Amended Advisory
Complaint on or before September 13, 2013. The Bankruptcy Court issued an
order memorializing this ruling on September 27, 2013.
On October 3, 2013, Appellant filed a second Motion to Dismiss, arguing
that Grand Sky had failed to properly serve the re-issued summons and complaint
as ordered. On October 17, 2013, the Bankrupty Court issued an order denying the
motion. Appellant filed a Motion for Reconsideration on October 24, 2013. The
Bankruptcy Court held a hearing on the Motion for Reconsideration on November
25, 2013. The same day, the Bankruptcy Court issued an order granting the
Motion for Reconsideration in part, denying Appellant’s second Motion to
Dismiss, and extending the time for Grand Sky to properly serve the Amended
Advisory Complaint. Grand Sky served Appellant with the complaint.
On February 12, 2014, Grand Sky filed a Motion for Summary Judgment.
The Bankruptcy Court held a hearing on the motion on April 7, 2014. The same
day, the Bankruptcy Court issued an order granting summary judgment to Grand
Sky and ruling that Grand Sky’s judgment against Appellant is nondischargeable
debt. Appellant subsequently filed a Notice of Appeal of the Bankruptcy Court’s
order granting Grand Sky summary judgment and “all other prior interlocutory
orders,” including the three orders denying Appellant’s motions to dismiss.
STANDARD OF REVIEW
This Court reviews a bankruptcy court’s conclusions of law de novo. In re
Batie, 995 F.2d 85, 88 (6th Cir. 1993). De novo review means that this Court
reviews the law independently of the bankruptcy court and no deference is given to
the conclusions of the bankruptcy court. Myers v. IRS (In re Meyers), 216 B.R.
402, 403 (B.A.P. 6th Cir. 1998). On appeal to a district court, a bankruptcy court's
findings of fact are reversible only if they are clearly erroneous. FED. R. BANKR. P.
8013; In re Batie, 995 F.2d at 88. A factual finding is clearly erroneous when the
reviewing court is left with a definite and firm conviction that a mistake has been
made. In re AmTrust Financial Corp., 694 F.3d 741, 749 (6th Cir. 2012). “[I]f a
question is a mixed question of law and fact, then [the district court] must break it
down into its constituent parts and apply the appropriate standard of review for
each part.” In re Batie, 995 F.2d at 88.
Bankruptcy Court ECF Procedure 11(d)(1)
Appellant argues that the Bankruptcy Court should have dismissed Grand
Sky’s complaint because the complaint did not comply with the Bankruptcy
Court’s local Electronic Case Filing (ECF) Procedure 11(d)(1). That local rule
provides as follows:
A Paper filed by ECF shall be signed in the following form and shall
include the following information:
/s/ Name of Filer or User
City, State, Zip Code
Phone: (xxx) xxx-xxxx
[attorney bar number, if applicable]
The Bankruptcy Court recognized that Grand Sky’s counsel failed to strictly
comply with ECF Procedure 11(d)(1) by failing to include his phone number in the
signature block of the complaint. However, the Bankruptcy Court held that this
failure did not warrant dismissal. Appellant cites no contrary authority. Appellant
merely argues that because bankruptcy judges have previously struck documents
filed by Appellant’s counsel for failing to comply with technical requirements,
“consistency” required the Bankruptcy Court to strike Grand Sky’s complaint for
failing to comply with the phone number requirement. Since Appellant provides
no contrary authority, the Court finds that it was within the Bankruptcy Court’s
discretion to decline to dismiss Grand Sky’s complaint despite the omission of
counsel’s phone number.
Service of Process
Appellant argues that the Bankruptcy Court should have dismissed Grand
Sky’s complaint because Grand Sky never properly served it on Appellant.
Appellant asserts that Grand Sky never properly served Appellant even after the
Bankruptcy Court extended the time for service. However, Appellant states that
the alleged deficiency in Grand Sky’s post-extension service is not properly before
the Court. Thus, for purposes of this appeal, the Court assumes that Grand Sky
properly served Appellant after the Bankruptcy Court extended the time for
service. Appellant’s arguments concerning the manner of service are therefore
moot unless it was improper for the Bankruptcy Court to grant the extension.
Federal Rule of Civil Procedure 4(m) applies to service of process in
bankruptcy proceedings. FED. R. BANKR. P. 7.004(a)(1). In relevant part, Rule
4(m) provides as follows:
If a defendant is not served within 120 days after the complaint is
filed, the court—on motion or on its own after notice to the plaintiff—
must dismiss the action without prejudice against that defendant or
order that service be made within a specified time. But if the plaintiff
shows good cause for the failure, the court must extend the time for
service for an appropriate period.
FED. R. CIV. P. 4(m). At the hearing on Appellant’s motion for reconsideration, the
Bankruptcy Court correctly stated that under Rule 4(m), a court must extend the
time for service if a plaintiff shows good cause for failure to effectuate timely
service. The Bankruptcy Court neglected to note that a court has discretion to
extend the time for service under Rule 4(m) even without a finding of good cause.
See, e.g., Elec. Workers Local 58 Pension Trust Fund v. Rite Elec. Co., No. 10CV-11815, 2010 WL 4683883, at *2 (E.D. Mich. Nov. 10, 2010) (Murphy, J.)
(holding that courts have such discretion because, though the Sixth Circuit has not
squarely addressed the issue, such discretion is supported by Supreme Court dicta,
other persuasive authority, and the plain language of the Rule).
Appellant argues that the Bankruptcy Court abused its discretion by
extending the time for service. Appellant faults the Bankruptcy Court for granting
the extension sua sponte and for granting it after the 120-day deadline had expired.
However, Rule 4(m) expressly permits a court to order service “on motion or on its
own” after a defendant has not been served within the 120-day deadline. FED. R.
CIV. P. 4(m). Appellant also asserts that the Bankruptcy Court should not have
granted the extension without a finding that the timeliness of service was beyond
Grand Sky’s control. This is essentially an argument that there was no good cause
for Grand Sky’s failure to accomplish timely service. As stated above, however,
Rule 4(m) grants courts discretion to extend the time for service even in the
absence of a good cause finding. See, e.g., Elec. Workers Local 58 Pension Trust
Fund, 2010 WL 4683883, at *2. Finally, Appellant argues that the extension was
an abuse of discretion because the delay in proper service prejudiced Appellant’s
consideration of his option to attempt to convert to Chapter 11 bankruptcy or seek
dismissal. The Court finds this argument meritless and even disingenuous in light
of the Bankruptcy Court’s reasonable conclusion that Appellant had actual notice
of Grand Sky’s complaint long before the court granted the extension.1
In sum, the Bankruptcy Court acted within its discretion when it extended
the time for Grand Sky to serve Appellant. Grand Sky’s service on Appellant was
timely in light of the extension, and Appellant has stated that any deficiencies in
the manner of service post-extension are not properly before the Court. Therefore,
the Court concludes that the Bankruptcy Court did not err when it declined to
dismiss Grand Sky’s complaint on the grounds of insufficient service of process.
11 U.S.C. § 523(a)(2)(A) makes nondischargeable “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.”
In fact, the Bankruptcy Court’s exercise of discretion was even more reasonable
in light of its conclusion that Appellant knew or should have known of the
typographical error in Grand Sky’s attempts at service when he previously argued
that service was insufficient. Appellant’s failure to bring the typographical
mistake to the attention of Grand Sky and the Court suggests that Appellant may
have been less interested in receiving proper service than in exploiting the possible
consequences of improper service.
provision “encompasses any liability arising from money, property, etc., that is
fraudulently obtained, including treble damages, attorney’s fees, and other relief
that may exceed the value obtained by the debtor.” Cohen v. de la Cruz, 523 U.S.
213, 223 (1998). A creditor must show four things to establish nondischargeability
under § 523(a)(2)(A):
(1) the debtor obtained money through a material misrepresentation
that, at the time, the debtor knew was false or made with gross
recklessness as to its truth; (2) the debtor intended to deceive the
creditor; (3) the creditor justifiably relied on the false representation;
and (4) its reliance was the proximate cause of loss.
In re Grenier, 458 Fed. App’x 436, 438 (6th Cir. Jan. 31, 2012) (unpublished)
(quoting In re Rembert, 141 F.3d 277, 280–81 (6th Cir.1998)).
“Principles of collateral estoppel apply in non-dischargeability actions.” In
re Livingston, 372 Fed. App’x 613, 617 (6th Cir. April 9, 2010) (unpublished)
(citing In re Calvert, 105 F.3d 315, 318–19 (6th Cir. 1997);
Harley, 656 F.2d 224, 227 (6th Cir.1981)). When a party argues that a state court
judgment should be given preclusive effect in a non-dischargeability action, the
court must look to the law of collateral estoppel in that state. See id. Under
Michigan law, “[c]ollateral estoppel precludes relitigation of an issue in a
subsequent, different cause of action between the same parties where the prior
proceeding culminated in a valid, final judgment and the issue was (1) actually
litigated, and (2) necessarily determined.”
Id. (quoting People v. Gates, 452
N.W.2d 627, 630 (Mich. 1990)).
Grand Sky’s adversary complaint alleged that its state court judgment
against Appellant constitutes nondischargeable debt under § 523(a)(2)(A). The
Bankruptcy Court granted Grand Sky summary judgment, holding that the state
courts’ resolution of Grand Sky’s fraud claim under Michigan law precluded
litigation of the § 523(a)(2)(A) elements in the Bankruptcy Court. The Bankruptcy
Court summarized the equivalence of the issues as follows:
The Michigan Court of Appeals concluded its opinion by
making findings that relate to the elements of actionable fraud in
Michigan which, when compared to the elements under Rembert for a
523(a)(2)(A) action, line up identical to it. The Michigan Court of
Appeals found after conducting its de novo review that Mr. Casab . . .
made statements that were false, number one. Number two, the
Michigan Court of Appeals stated that Mr. Casab knew his statements
were false. Number three, it found that there is no doubt that Mr.
Casab intended for Grand Sky to rely upon his misrepresentations of
fact and that Grand Sky did rely upon it. Number [four], the Court of
Appeals found that the record does not reveal any reason to doubt that
Mr. Casab made his misrepresentation in order to induce plaintiff to
give up its money or that plaintiff relied on defendant’s assertions in
signing the Hamburg contract and Livernois agreement.
. . . If I were to just look at the final opinion and order of
[Circuit Court] Judge Bowman on November 21, 2011, I would come
to the same conclusion. Each and every element necessary to make a
debt nondischargeable under 523(a)(2)(A) was found by Judge
Bowman in his final opinion and order in which he specifically
adopted the findings of fact and conclusions of law submitted to him
by Grand Sky.
The Bankruptcy Court’s conclusion was consistent with the decisions of other
bankruptcy courts in Michigan, which “have held uniformly that the elements of a
fraud claim under Michigan law are identical to those necessary to determine nondischargeability under 11 U.S.C. § 523(a)(2)(A).”
In re Livingston, 372 Fed.
App’x at 618.
Appellant, citing non-binding authority several decades old, asserts that
“determination of nondischargeability is an exclusive function of the bankruptcy
court, unimpeded by claims of collateral estoppel or res judicata.” In re Chessen,
71 B.R. 169, 171 (Bankr. D. Haw. 1987) (citing In re Daley, 776 F.2d 834, 839
(9th Cir. 1985)). However, more recent, binding precedent holds that principles of
collateral estoppel apply. In re Calvert, 105 F.3d at 318–19.
Appellant also argues that even if collateral estoppel principles apply, the
Bankruptcy Court erred by giving preclusive effect to the state court judgment
because the § 523(a)(2)(A) elements “are not the same elements that are needed to
prove a claim for fraud in the inducement, which is the claim that [Grand Sky]
prevailed on in the state court action.” Appellant does not identify the elements for
a fraud in the inducement claim or articulate how they differ from the §
523(a)(2)(A) elements. Nor does Appellant explain how the Bankruptcy Court
mischaracterized Grand Sky’s state-court claim or the state courts’ findings. The
Court will therefore treat this argument as waived. The Court assumes, without
deciding, that the argument is meritless. See In re Jamil, 409 B.R. 866, 872
(Bankr. E.D. Mich. 2009) (giving collateral estoppel effect, in § 523(a)(2)(A)
action, to state court judgment on claims under Michigan law for fraud in the
inducement and breach of contract).
Finally, Appellant indirectly suggests that the Bankruptcy Court erred in
finding the entire state court judgment to be based in findings equivalent to the
elements of § 523(a)(2)(A). However, the Bankruptcy Court reasonably read the
Circuit Court’s opinion, affirmed by the Michigan Court of Appeals, to find that all
of Grand Sky’s damages “flow from, or, to state it another way, were obtained by
fraud.” Because the entirety of Appellant’s liability arose from his fraud, the
Bankruptcy Court correctly held that the entire judgment is nondischargeable. See
Cohen, 523 U.S. at 222 (“§ 523(a)(2)(A) bars the discharge of all liability arising
In sum, Appellant has identified no error in the Bankruptcy Court’s order
granting summary judgment to Grand Sky on its nondischargeability claim.
Grand Sky’s Informal Request for Sanctions
In its Brief on Appeal , Grand Sky requests an award of sanctions against
Appellant on the grounds that this appeal is vexatious.
misconduct by Appellant and his counsel in the bankruptcy proceedings, Grand
Sky suggests that this appeal is merely the latest step in Appellant’s “litigation
delay tactics.” Sadly, these allegations do not surprise the Court. The Court has
chastised Appellant’s counsel for his delaying tactics in another matter, which
extended to filing meritless post-judgment motions.
Love v. Select Portfolio
Servicing, Inc., No. 13-11647, 2014 WL 7011971, at *4 (E.D. Mich. Dec. 11,
2014) (unpublished).2 However, Grand Sky has not filed a formal motion for
sanctions or identified any authority supporting its request. To the extent the Court
has inherent authority to impose sanctions even without a formal motion, it
declines to do so.
For the reasons stated above,
At least one other judge in this district has also chastised Appellant’s counsel for
misconduct. Love v. Lew, No. 13-14946, 2014 WL 4926260, at *2 (E.D. Mich.
Oct. 1, 2014) (unpublished) (noting that Appellant’s counsel “has a pattern of not
complying with deadlines for filing responses to dispositive motions,” and warning
that the court would impose monetary sanctions against counsel personally if this
IT IS ORDERED that the Bankruptcy Court’s orders granting summary
judgment to Grand Sky and denying Appellant’s motions to dismiss are
Dated: February 23, 2015
s/Arthur J. Tarnow
Arthur J. Tarnow
Senior United States District Judge
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