Case Type:
Case Status:
17-1615, 18-2197 & 22-2826 (7th Circuit, Apr 21,2023) Not Published
Consolidating appeals arising out of the chapter 7 case of Richard Sharif (DR), the U.S. Court of Appeals for the Seventh Circuit (Circuit) affirmed the bankruptcy court’s rulings: denying the one sister’s motion to vacate its ordered turnover of their late mother's assets, including the family home, held in a trust for which the DR was trustee; two sisters’ motion for leave to sue the estate trustee on due process grounds; and the second sister’s motion for reimbursement of home repair costs and proceeds their dad’s life insurance policy; and sanctioning both sisters and their counsel.
Procedural context:
Even as their brother, the DR, appealed the BC ruling compelling turnover of the assets of the Soad Wattar Revocable Living Trust (Trust) for which he was a trustee and which he used as a personal piggybank, his two sisters, Haifa and Ragda Scharifeh (Haifa and Ragda, respectively, and collectively, Sisters), jumped into the matter. Factually, this made sense: the Trust the DR had been controlling included every assets of their departed mother, Soad Watter, including the family home. Legally, however, matter soon got farcical, as the Sisters sued in state court first and then moved to the BC, which, by its reckoning, issued at least 10 rulings between 2010 and 2015 addressing the issue. These rulings included its denials of Haifa’s 2015 motion to vacate the turnover order; of the sisters’ joint 2016 motion for leave to sue Horace Fox, the trustee of the DR’s chapter 7 estate (TR); and Ragda’s 2016 motion for reimbursement for the costs of repairs to the family home she claimed to have made and for the proceeds of Wattar’s life insurance policy as the rightful beneficiary. It culminated in an order to show cause why the sisters and their counsel should not be sanctioned for their increasingly frivolous and deficiency filings. Eventually, as sanctions, the BC ordered their lawyer to pay $20,000 and barred the sisters from further filings in the DR’s bankruptcy. On appeal, the district court affirmed every denial and the entire sanction. The Circuit took up all three.
These appeals traced their origins to a 2009 liquidation. In that year, the DR declared bankruptcy in the U.S. Bankruptcy Court for the Northern District of Illinois (BC). At the time, he was the sole trustee for the Trust, with exclusive and complete control over its every interest. In March 2010, when Wattar died, the DR produced a will that named him executor and deposited all of Wattar’s assets in the Trust. In June 2010, as part of a creditor’s adversary proceeding against the DR, the BC found the Trust’s assets to be part of the DR’s estate, as the DR had sole control and used them as his personal property. Having so decided, the BC ordered those selfsame assets to be turned over to Horace Fox, the trustee of the DR’s chapter 7 estate (TR).
Frank H. Easterbrook; Diane P. Wood; and Thomas L. Kirsch II

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