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Summarizing by Lars Fuller

Christos Dimas v. George Stergiadis

Case Type:
Case Status:
20-1196 (7th Circuit, Sep 20,2021) Published
A bankruptcy court did not commit error when it (i) found a debtor who, among other things, concealed assets in a bankruptcy was not credible and (ii) allowed a claim for unpaid equalizing capital contributions even though the LLC's written operating agreement did not contain a capital contribution equalization clause.
Procedural context:
The debtor, Christos Dimas, originally filed bankruptcy in 2008, which stayed state-court litigation by another member of a dissolved limited liability company. In the state court action, the other member of the LLC sought a judgment against Dimas for capital contributions that Dimas allegedly failed to make. Dimas filed bankruptcy six times by 2015, never obtaining a discharge. In 2016, Dimas filed a seventh petition and a discharge was entered. The United States Trustee moved to reopen the case when it was discovered that Dimas had failed to schedule a wholly-owned company as an asset and had received $825,000 from the sale of the asset after the discharge was entered. The case was reopened, and the state court plaintiff filed a a proof of claim for the amount Dimas owed as an equalizing capital contribution. Dimas objected. Following an evidentiary hearing, at which Dimas was found not to be a credible witness, the bankruptcy court allowed the claim. Dimas appealed to the district court, which affirmed the bankruptcy court. Dimas then appealed to the Seventh Circuit.
In 2006, the debtor, Christos Dimas, and two other individuals formed an Illinois limited liability company, 1600 South, LLC. The operating agreement for 1600 South did not contain an integration clause or a statement as to each member's initial capital contribution to the LLC. 1600 South dissolved in 2009. Even before it dissolved, one member of the LLC, George Stergiadis, sued Dimas in Illinois state court. The lawsuit alleged that Dimas owed Stergiadis an amount sufficient to equalize the capital contributions of Dimas, Stergiadis and the third member of the LLC. Before the state court litigation was resolved, Dimas filed for bankruptcy. The case was dismissed, and Dimas did not receive a discharge. Dimas filed five more bankruptcies through 2015, and never received a discharge. Dimas filed a seventh bankruptcy in 2016, and received a discharge. On the chapter 7 trustee's motion, Dimas' last case was reopened when he received $825,000 from the sale of a wholly-owned, but undisclosed, business within a month of the discharge. Stergiadis filed a proof of claim for the amount sought in the 2008 state court action. Dimas objected. The bankruptcy court held an evidentiary hearing, at which Dimas, Mark Argianis, the LLC's accountant, and Stergiadis' wife testified. The bankruptcy court found that Argianis and Ms. Stergiadis testified "very credibly." The bankruptcy court further found that Dimas had "no credibility." Dimas testified that the members of the LLC did not agree that their capital contributions would be equalized, but he did schedule as an asset an equalizing contribution claim against Stergiadis and the third member of the LLC for $32,000 (which is the amount of attorney's fees for the LLC that Dimas paid). Based on the testimony and on the language of the LLC's operating agreement, the bankruptcy court found that the members of the LLC had agreed to equalize capital contributions and that Dimas owed Stergiadis $619,974.
Easterbrook, Wood, and Kirsch

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