IN RE: ARTURO COLLAZO, Debtor.
ARTURO COLLAZO, Defendant-Appellee DANA SIRAGUSA, et al., Plaintiffs-Appellants,
January 21, 2016
from the United States District Court for the Northern
District of Illinois, Eastern Division. No. 14 C 5008 --
Jorge L. Alonso, Judge.
the Matter of: ARTURO COLLAZO, Debtor - Appellee: David
Robert Herzog, Attorney, Herzog & Schwartz, P.C., Chicago,
ROBERT SIRAGUSA, Doctor, individually and as trustee for the
Robert J. Siragusa, MD, Employee Benefit Trust, formerly:
Dermatology Associates of Bay County, PA, Defined Benefit
Trust, Dana Siragusa, Robert Joseph Siragusa, Appellants:
Patrick Gerard Cooke, Attorney, Kopon Arido Llc, Chicago, IL.
A. Chatz, Trustee, Pro se, Chicago, IL.
POSNER, EASTERBROOK, and KANNE, Circuit Judges.
Posner, Circuit Judge.
Collazo was (maybe still is) a real estate developer engaged
in buying apartment buildings, mainly although not
exclusively in Chicago, and converting the apartments to
condominiums that he and his partner, Jon Goldman, would then
sell. In 2012 Collazo petitioned for bankruptcy, seeking to
discharge his debts to, among others, Dr. Robert J. Siragusa
(a physician), Siragusa's employee benefit trust, and
Siragusa's three adult children. All five Siragusas
joined in filing an adversary action in the bankruptcy
proceeding, contending that Collazo was not entitled to a
discharge of his debts to them. The bankruptcy judge,
however, seconded by the district judge (to whom the
Siragusas appealed the adverse rulings of the bankruptcy
judge on their claims), allowed all but one of the
Siragusas' claims to be discharged. All the Siragusas
except daughter Julie appeal to us. The one claim the
bankruptcy and district judges held not to be discharged is
Collazo's debt to two of Dr. Siragusa's children,
Dana and Robert Joseph, concerning a development project in
Arizona. Collazo has not appealed that ruling.
modus operandi was to make the nominal owner of each building
that he bought a separate LLC owned by Goldman and himself.
To finance the conversion of the apartments in the buildings
to condos the partners would borrow money from financial
institutions and provide security for the loans by mortgaging
the properties. But because the lenders were slow to release
funds to the partners for their Chicago construction
projects, the partners needed short-term financing as well.
Daughter Julie happened to work for Collazo and in 2002 she
introduced her father to him. Joined by his trust and later
by all three children, Dr. Siragusa began making loans to
Collazo to help him finance his real estate projects. Collazo
promised to repay each loan as soon as he repaid any
long-term lenders, and in addition to pay interest to the
Siragusas at an annual rate of 17 to 20 percent. In 2002 and
2003 Dr. Siragusa, the trust, and another daughter, Dana,
lent Collazo a total of $830,000 for Chicago conversion
projects. (Siragusa's other two children were not parties
to these loans.)
in 2003 and continuing until 2005, Collazo transferred the
unsold condo units in the Chicago buildings to other LLCs
formed by him and Goldman, and pledged the units as security
for additional loans that the partners obtained to help
finance their conversion projects. According to the
Siragusas, the new lenders didn't realize that Collazo
was indebted to Dr. Siragusa, daughter Dana, and the trust
for their having financed the acquisition of the properties;
the transfer of the units had made the units appear
unencumbered by any preexisting debts.
Collazo testified in the bankruptcy proceeding that he had
not intended to transfer unsold condo units when he had
borrowed money from the Siragusas years earlier. But if so
his intentions changed, for by mid-2005 he had not only
transferred all the unsold condo units in the Chicago
buildings in which the Siragusas had invested; he had also
mortgaged all of them in order to obtain additional funds. He
had repaid only some of the money he'd borrowed from the
Siragusas, and such repayments as he had made had been tardy.
Though unaware of the transfers and subsequent mortgaging of
the unsold condo units, Dr. Siragusa was sufficiently alarmed
by Collazo's delays in repayment to seek an update from