800 S. Wells Commercial LLC v. Gouletas (In re Gouletas)
| Decision Date | 25 September 2018 |
| Docket Number | Case No. 16bk01335,Adv. No. 16ap00141 |
| Citation | 590 B.R. 494 |
| Parties | IN RE: Nicholas S. GOULETAS, Debtor. 800 South Wells Commercial LLC, Plaintiff, v. Nicholas S. Gouletas, Defendant. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Attorney for Plaintiff: F. Dean Armstrong, Armstrong Law Firm, Frankfort, IL
Attorneys for Debtor/Defendant: Richard H. Fimoff & Robert J. Trizna, Robbins, Salomon & Patt, Ltd., Chicago, IL
TIMOTHY A. BARNES, JudgeBefore the court are two competing partial motions for summary judgment (together, the "Motions") in the above-captioned adversary proceeding (the "Adversary Case"):
In the Adversary Case, the Plaintiff, an Illinois limited liability company owned in part by the Defendant, seeks both a determination of nondischargeability with regard to a debt owed by the Defendant to the Plaintiff and a denial of the Defendant's discharge generally. See Complaint Objecting to Dischargeability of Debt to Plaintiff and Discharge of Debtor [Adv. Dkt. No. 1] (the "Complaint").
The Defendant has answered the Complaint, see Nicholas S. Gouletas' Answer and Affirmative Defenses to Complaint Objecting to Dischargeability of Debt to Plaintiff and Discharge of Debtor [Adv. Dkt. No. 7] (the "Answer"), and in so doing, has asserted as an affirmative defense (the "Affirmative Defense") that the Plaintiff "lacks standing" to prosecute the Complaint. More specifically, the Defendant alleges that the Plaintiff initiated the Adversary Case at the direction of a lender who lacked authority to manage the Plaintiff. The crux of the Defendant's argument is that an applicable statute of limitations prevents the lender from continuing to act in a management capacity with respect to the Plaintiff. As a result, the Defendant alleges that the Adversary Case is infirm.
The Plaintiff, in turn, asks the court to strike the Affirmative Defense. The Plaintiff contends that the plain language of the applicable documents affords the lender the right to manage the Plaintiff. The Plaintiff also contends that no statute of limitations has run.
For the reasons set forth more fully below, upon review of the respective filings, the court concludes that the Affirmative Defense fails as a matter of law and that the Plaintiff is therefore entitled to summary judgment on the Affirmative Defense. The Plaintiff's Motion will, therefore, by separate order issued concurrently with this Memorandum Decision, be granted. The Defendant's Motion will be denied and the Affirmative Defense will be stricken.
The federal district courts have "original and exclusive jurisdiction" of all cases under title 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the "Bankruptcy Code"). 28 U.S.C. § 1334(a). The federal district courts also have "original but not exclusive jurisdiction" of all civil proceedings arising under the Bankruptcy Code or arising in or related to cases under the Bankruptcy Code. 28 U.S.C. § 1334(b). District courts may, however, refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).
A bankruptcy judge to whom a case has been referred may enter final judgment on any proceeding arising under the Bankruptcy Code or arising in a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(1). Bankruptcy judges must therefore determine, on motion or sua sponte , whether a proceeding is a core proceeding or is otherwise related to a case under the Bankruptcy Code. 28 U.S.C. § 157(b)(3). As to the former, the court may hear and determine such matters. 28 U.S.C. § 157(b)(1). As to the latter, the bankruptcy court may hear the matters, but may not decide them without the consent of the parties. 23 U.S.C. §§ 157(b)(1), (c). Instead, the bankruptcy court must "submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1).
In addition to the foregoing considerations, a bankruptcy judge must also have constitutional authority to hear and determine a matter. Stern v. Marshall, 564 U.S. 462, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011). Constitutional authority exists when a matter originates under the Bankruptcy Code or, in noncore matters, where the matter is either one that falls within the public rights exception, id. at 493, 131 S.Ct. 2594, or where the parties have consented, either expressly or impliedly, to the bankruptcy court hearing and determining the matter. See, e.g. , Wellness Int'l Network, Ltd. v. Sharif , ––– U.S. ––––, 135 S. Ct. 1932, 1939, 191 L.Ed.2d 911 (2015) (); Richer v. Morehead , 798 F.3d 487, 490 (7th Cir. 2015) ().
As a proceeding to determine the dischargeability of a debt is a matter arising under the Bankruptcy Code and a proceeding to deny debtor's discharge may only arise in a case under the Bankruptcy Code, the Adversary Case is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (I) & (J). It follows that a motion for summary judgment under Rule 56 of the Federal Rules of Civil Procedure, made applicable by Rule 7056 of the Federal Rules of Bankruptcy Procedure in the Adversary Case, is also a core proceeding pursuant to 28 U.S.C. §§ 157(b)(1) & (2).1 Further, in accordance with Stern , 564 U.S. at 499, 131 S.Ct. 2594, the bankruptcy court has constitutional authority to decide matters of nondischargeability, as the debtor's discharge and the dischargeability of a particular debt necessarily stem from the bankruptcy itself. Parkway Bank & Tr. v. Casali(In re Casali) , 526 B.R. 271, 274 (Bankr. N.D. Ill. 2015) (Schmetterer, J.); see also Wan Ho Indus. Co., Ltd. v. Hemken(In re Hemken) , 513 B.R. 344, 350 (Bankr. E.D. Wis. 2014). Each of the parties has also either expressly or impliedly consented to this court's exercising authority over this matter. In light of the foregoing, the court concludes that it has constitutional authority to finally decide the Motions either directly or through the parties' consent.
Accordingly, the court has the jurisdiction, statutory authority and constitutional authority to hear and determine the Motions.
The following background reflects the undisputed facts contained in the submissions of the Parties and the uncontroverted facts contained in the Plaintiff's Counter-Statement of Facts in Opposition to Defendant's Motion for Summary Judgment on Limitations and in Support of Plaintiff's Cross-Motion for Summary Judgment on Limitations [Adv. Dkt. No. 86-6] (the "Plaintiff's Statement").2 Bankr. N.D. Ill. R 7056-2; Frankfurt v. Friedman(In re Friedman) , 531 B.R. 741, 743 (Bankr. N.D. Ill. 2015) (Schmetterer, J.).
The Plaintiff was the owner of certain leasehold interests (the "Leasehold") in a commercial space and underground parking located at 800 South Wells Street in downtown Chicago. Resp., at p. 3. The Leasehold was subject to two mortgages, the lesser of which (the "Second Mortgage") secured certain notes by the Plaintiff (collectively the "Notes") for a $5,900,000.00 debt owed to CIB Bank ("CIB"). Id. ; Pl.'s Stmt., at p. 3; Pl.'s Stmt., Exh. 190 () (the "Notes Judgment"). As further collateral for the debt, CIB received a security interest (the "Security Interest") in all the existing membership interests in the Plaintiff. Resp., at p. 3; Pl.'s Stmt., at p. 3; Def.'s Stmt., Exh. 2-B, at ¶¶ 1.1, 2.1-2.2 () (the "Security Agreement").
In March 2005, CIB assigned its interest in the debt to D.A.N. Joint Venture III, L.P. ("DJV"). Resp., at p. 3. In addition to the note and second mortgage position, DJV also holds an assignment of the Security Interest from CIB. Id. ; Pl.'s Stmt., at p. 4.3
The Security Agreement provides that CIB—and then DJV—could take control of the Plaintiff upon default on the underlying debt. Resp., at pp. 3-4; Pl.'s Stmt., at p. 4; Sec. Agreement, at ¶¶ 1-2, 4.8, 4.12, 5-7. The Security Agreement further provides that upon default on the underlying debt and written notice to the owners of the Plaintiff, DJV may exercise the voting rights in the Plaintiff. Sec. Agreement, at ¶ 6.1.
Should those two conditions occur, an irrevocable power of attorney and proxy to vote the membership interests in the Plaintiff, coupled with the Security Interest, will vest in favor of DJV. Id. ; see also id. , at ¶ 4.8 (). These rights and the power of attorney continue in existence until one condition is met—full payment of the underlying debt. Sec. Agreement, at ¶¶ 4.8, 6.1 ().
The Plaintiff defaulted shortly after DJV took on the loan. Resp., at pp. 3-4; Pl.'s Stmt., at p. 4. By the end of 2005, the Plaintiff owed DJV approximately $10 million on the Second Mortgage and Notes. Pl.'s Stmt., at p. 4. The...
To continue reading
Request your trial
-
D.A.N. Joint Venture III, L.P. v. Touris
...him that resulted from 800 SWC's action for breach of fiduciary duty, the rights to which Plaintiff DJV possessed. See In re Gouletas, 590 B.R. 494, 500 (Bankr. N.D.Ill. 2018).[1] B. Local Rule 56.1 The Court addresses first the parties' proffered “undisputed” facts. Local Rule 56.1(a)(2) r......