Gladstone Glen, Matter of, 79-2224
| Court | United States Courts of Appeals. United States Court of Appeals (7th Circuit) |
| Writing for the Court | Before PELL and SPRECHER, Circuit Judges, and MARKEY; PELL |
| Citation | 628 F.2d 1015 |
| Parties | In the Matter of GLADSTONE GLEN, a partnership, Debtor. Appeal of Michael SPARKS. |
| Docket Number | No. 79-2224,79-2224 |
| Decision Date | 27 August 1980 |
Page 1015
Appeal of Michael SPARKS.
Seventh Circuit.
Decided Aug. 27, 1980.
Page 1016
David P. Leibowitz, Chicago, Ill., for appellant.
Louis W. Levit, Chicago, Ill., for appellee.
Before PELL and SPRECHER, Circuit Judges, and MARKEY, Chief Judge. *
PELL, Circuit Judge.
On September 23, 1977, Gladstone Glen, a partnership, commenced this action seeking relief under Chapter XII of the Bankruptcy Act of 1898. 1 The partnership alleges that its sole asset is an apartment complex in Wheeling, Illinois, and that it is unable to pay its debts as they mature. Among the creditors that Gladstone Glen is unable to pay are Alden Apartments and Wheeling Apartments, partnerships of which the appellant, Michael Sparks, is the general partner. During the pendency of proceedings on Gladstone Glen's petition before the bankruptcy court, the appellant filed a motion to dismiss. The appellant argued, and the bankruptcy court agreed, that because Gladstone Glen held its interest in the subject real estate in the form of a beneficial interest in an Illinois land trust, the petitioner was not a "debtor" and thus was unable to initiate arrangement proceedings under Chapter XII. Gladstone Glen appealed the bankruptcy court's action to the district court which reversed. The appellant, in turn, appeals to this court requesting that we reverse the judgment of the district court and reinstate the order of the bankruptcy court dismissing the action.
The principal issue before us is whether the beneficiary of an Illinois land trust is a "debtor" as that word is defined in section 406(6) of the Bankruptcy Act. 2 The question has yielded different answers from the district court and bankruptcy court judges in the Northern District of Illinois who have confronted it. Compare In re Romano, 426 F.Supp. 1123 (N.D.Ill.1977), appeal disposed of as moot, Nos. 77-1385 & 77-1386 (7th Cir. unpublished order dated Jan. 2, 1980) (beneficial owner is not a "debtor") with In re Gordon, 2 Bankr.Ct.Dec. 1269 (N.D.Ill.1976) (beneficial owner is a "debtor"). See also Comment, May the Beneficiary of an Illinois Land Trust Proceed Under Chapter XII of the Bankruptcy Act?, 10 J. Mar. J. Prac. & Proc. 567 (1977) (discussing the decisions cited above as well as unpublished decisions of the bankruptcy judges in the district). 3 Section 406(6) of
Page 1017
the Bankruptcy Act provides in pertinent part that " 'debtor' shall mean a person, other than a corporation as defined in this Act, . . . who is the legal or equitable owner of real property or a chattel real which is security for any debt." 11 U.S.C. § 806(6). Under Illinois law, the beneficiary of an Illinois land trust is considered to possess neither legal nor equitable title to the realty itself. Instead, the beneficiary is regarded as owning only a personal property interest in the proceeds of the realty. The issue thus presented is whether a person, who under state law, is considered to have neither legal nor equitable title to real property may, for purposes of federal law, be regarded as the realty's "legal or equitable owner."Both parties agree that the issue is ultimately one of federal law.
Federal, not state, law determines whether a debtor may invoke the jurisdiction of the bankruptcy court. See, e. g. Segal v. Rochelle, 382 U.S. 375, 379-81, 86 S.Ct. 511 (514-515,) 15 L.Ed.2d 428 (1966); Board of Trade of City of Chicago v. Johnson, 264 U.S. 1, 10, 44 S.Ct. 232 (234,) 68 L.Ed. 533 (1924); In re Romano, 426 F.Supp. 1123 (N.D.Ill.1977). On the other hand, state property law may be relevant to determining whether a particular interest qualifies a debtor as the "legal or equitable owner" of real property within the meaning of 11 U.S.C. § 806(6). As one court has stated, state law "supplies the factual matter concerning the nature of (the debtor's) interests; it delineates . . . what rights and obligations an owner of such an interest has." In re Romano, supra, 426 F.Supp. at 1127.
In re Bergman, 585 F.2d 1171, 1176 (2d Cir. 1978); see DiFoggio v. United States, 484 F.Supp. 233 (N.D.Ill.1979) (beneficiary of an Illinois land trust is pursuant to 26 U.S.C. § 6337(b) entitled to redeem realty sold to satisfy federal tax liabilities). With that in mind, we examine the characteristics of the Illinois land trust under Illinois law. 4
We need not undertake to write a treatise on Illinois land trusts here. The subject has been ably explored by numerous commentators and recently and thoroughly reviewed by the Illinois Supreme Court. See People v. Chicago Title & Trust Co., 75 Ill.2d 479, 27 Ill.Dec. 476, 389 N.E.2d 540 (1979) (and authorities cited therein). A land trust is typically
created by execution of a deed in trust transferring all legal and equitable title to a trustee. The deed specifically provides that one dealing with the trustee need not inquire about the trust agreement and stipulates that the interest of the beneficiary is personal property. The deed (is) recorded. A second document, the trust agreement, (is) simultaneously executed, though not recorded. That agreement recites that all legal and equitable title remains with the trustee with an assignable personal property interest in the beneficiary. The beneficiary retains absolute control of the management and receives all the proceeds of the property. Under the agreement, all money advanced by the trustee must be paid by the beneficiary, and the trustee is not required to pay any taxes or assessments. The beneficiary may order the land sold at any time, and the trustee may not act except on written authorization of the beneficiary.
Page 1018
Id. at 485-86, 27 Ill.Dec. at 478, 389 N.E.2d at 542. The land trust at issue here appears to differ in no material respect from the norm.
The Illinois land trust primarily serves "as a useful vehicle in real estate transactions for maintaining secrecy of...
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In re Baldin, Bankruptcy No. 90-60359
...Inc., 790 F.2d 574, 575 (7th Cir.1986); see also, In re K & L Limited, 741 F.2d 1023, 1030 n. 7 (7th Cir.1984); Matter of Gladstone Glen, 628 F.2d 1015, 1018 (7th Cir.1980). Here, however, Congress has required that we do Section 544(a) states that a trustee "shall" be able to avoid an encu......
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In Re Kraft LLC, Bankruptcy No. 07-21367 JPK.
...Inc., 790 F.2d 574, 575 (7th Cir.1986); see also, In re K & L Limited, 741 F.2d 1023, 1030 n. 7 (7th Cir.1984); Matter of Gladstone Glen, 628 F.2d 1015, 1018 (7th Cir.1980). Here, however, Congress has required that we do otherwise.Section 544(a) states that a trustee “shall” be able to avo......
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In re Edge, Bankruptcy No. 383-00637
..."deacceleration" of mortgage and reinstate original payment schedule irrespective of conflicting state law); In re Gladstone Glen, 628 F.2d 1015 (7th Cir. 1980) (Illinois characterization of beneficiary's interest in land trust as personal property is not controlling for purposes of filing ......
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Stable Invs. P'ship v. Vilsack, No. 14–1712.
...with the beneficiary. See Redfield v. Continental Cas. Corp., 818 F.2d 596, 607–09 (7th Cir.1987) (insurance); In re Gladstone Glen, 628 F.2d 1015, 1018 (7th Cir.1980) (bankruptcy); People v. Chicago Title & Trust Co., supra, 27 Ill.Dec. 476, 389 N.E.2d at 544–45 (federal estate taxes); Mat......
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In re Baldin, Bankruptcy No. 90-60359
...Inc., 790 F.2d 574, 575 (7th Cir.1986); see also, In re K & L Limited, 741 F.2d 1023, 1030 n. 7 (7th Cir.1984); Matter of Gladstone Glen, 628 F.2d 1015, 1018 (7th Cir.1980). Here, however, Congress has required that we do Section 544(a) states that a trustee "shall" be able to avoid an encu......
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In Re Kraft LLC, Bankruptcy No. 07-21367 JPK.
...Inc., 790 F.2d 574, 575 (7th Cir.1986); see also, In re K & L Limited, 741 F.2d 1023, 1030 n. 7 (7th Cir.1984); Matter of Gladstone Glen, 628 F.2d 1015, 1018 (7th Cir.1980). Here, however, Congress has required that we do otherwise.Section 544(a) states that a trustee “shall” be able to avo......
-
In re Edge, Bankruptcy No. 383-00637
..."deacceleration" of mortgage and reinstate original payment schedule irrespective of conflicting state law); In re Gladstone Glen, 628 F.2d 1015 (7th Cir. 1980) (Illinois characterization of beneficiary's interest in land trust as personal property is not controlling for purposes of filing ......
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Stable Invs. P'ship v. Vilsack, 14–1712.
...with the beneficiary. See Redfield v. Continental Cas. Corp., 818 F.2d 596, 607–09 (7th Cir.1987) (insurance); In re Gladstone Glen, 628 F.2d 1015, 1018 (7th Cir.1980) (bankruptcy); People v. Chicago Title & Trust Co., supra, 27 Ill.Dec. 476, 389 N.E.2d at 544–45 (federal estate taxes); Mat......