In re Class Five, LLC
| Decision Date | 15 April 2019 |
| Docket Number | Case No. 19bk00432 |
| Citation | 600 B.R. 27 |
| Parties | IN RE: CLASS A PROPERTIES FIVE, LLC, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Attorneys for 7030-32 Huntley Road, LLC: Lauren E. Dreifus and Max A. Stein, Boodell & Domanskis, LLC, Chicago, IL
Attorney for Class A Properties Five, LLC: William S. Ryan, William S. Ryan – Attorney at Law PC, Franklin Park, IL
Before the court is the Motion of 7030-32 Huntley Road, LLC to Dismiss Second Chapter 11 Case, or, in the Alternative, to Modify the Automatic Stay to Permit the Foreclosure Action to Proceed and to Permit 7030-32 Huntley Road, LLC to Exercise its Non-Bankruptcy Law Rights and Remedies [Dkt. No. 20] (the "Motion") brought by 7030-32 Huntley Road, LLC ("Huntley"), seeking dismissal the above-captioned bankruptcy case, or, in the alternative, relief from the automatic stay. The Motion is opposed by the debtor, Class A Properties Five, LLC (the "Debtor").
The Debtor, a single-asset real estate enterprise, had previously filed for chapter 11 bankruptcy relief in this court on March 14, 2018 (Case No. 18bk07311, the "First Case"), with the apparent goal of preventing Huntley, its sole creditor, from foreclosing on the property commonly located at 7030-32 Huntley Road, Carpentersville, Illinois 60110 (the "Property"). On June 20, 2018, this court, upon finding the First Case was filed in bad faith, entered an order dismissing the First Case with prejudice. Order Finding Cause to Dismiss [Case No. 18bk07311, Dkt. No. 51] (the "Dismissal Order").1 The Motion alleges that Dismissal Order prejudices the Debtor from filing this bankruptcy case.
For the reasons set forth more fully below, upon review of the parties' respective filings and after conducting a hearing on the matter, the court finds that the Dismissal Order operated to permanently enjoin the Debtor from filing a subsequent petition for relief and thus the Debtor was precluded from filing this bankruptcy case. As a result, the court determines that dismissal of this case is proper. The Motion should be and, therefore, by a separate order entered concurrently herewith is, granted.
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 core 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. 28 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 forgoing considerations, the court must also consider its 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. , 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) ().
The dismissal of a bankruptcy case is a matter concerning the administration of the estate, and is thus a core proceeding under the Bankruptcy Code. 28 U.S.C. § 157(b)(2)(A). Additionally, as a motion to dismiss under section 1112(b) of the Bankruptcy Code"stems from the bankruptcy itself," it may constitutionally be decided by the bankruptcy court. Stern , 564 U.S. at 499, 131 S.Ct. 2594.
The court will consider in greater detail below its power to prejudice the Debtor under the Bankruptcy Code. However, there is no question that a bankruptcy court ordinarily has authority to enforce its own prior orders. Travelers Indem. Co. v. Bailey , 557 U.S. 137, 138, 129 S.Ct. 2195, 174 L.Ed.2d 99 (2009) ; Cox v. Zale Del., Inc. , 239 F.3d 910, 917 (7th Cir. 2001). Congress expressly conferred enforcement powers to the bankruptcy courts in section 105 of the Bankruptcy Code, which authorizes the court to take "any action ... necessary or appropriate to enforce or implement court orders or rules." 11 U.S.C. § 105(a) ; Owens v. LVNV Funding, LLC , 832 F.3d 726, 732 n.5 (7th Cir. 2016), cert. denied , ––– U.S. ––––, 137 S.Ct. 2157, 198 L.Ed.2d 231 (2017).
In addition to reviewing the Motion, the court has considered the arguments of the parties at the hearing on March 19, 2019 and has reviewed and considered the following documents relating to the Motion:
The court has taken into consideration any and all exhibits submitted in conjunction with the foregoing. Though these items do not constitute an exhaustive list of the filings in the contested matter, the court has taken judicial notice of the contents of the docket in this case and in the First Case. See Levine v. Egidi , Case No. 93C188, 1993 WL 69146, at *2 (N.D. Ill. Mar. 8, 1993) (); In re Brent , 458 B.R. 444, 455 n.5 (Bankr. N.D. Ill. 2011) (Goldgar, J.) (recognizing same).
Having conducted that review, except as expressly set forth herein, this Memorandum Decision constitutes the court's determination of the Motion and all related filings.
The Debtor is a single-asset real estate enterprise engaged in commercial leasing of the Property. The Property is leased to gas station tenants and is encumbered by a mortgage secured by two notes assigned to Huntley. The balance remaining on the notes constitute the debt at issue in this case.
On January 11, 2018, Huntley commenced a foreclosure action in state court after the Debtor defaulted on the underlying notes for the second time, having failed to cure a previous default by the expiration of the forbearance period. Huntley filed a motion for default judgment on March 9, 2018 after the Debtor failed to appear in the foreclosure action or respond to the complaint in the preceding months.
On March 14, 2018, four days after Huntley moved for default judgment in the foreclosure action, the Debtor filed the First Case, which was assigned to the undersigned. Huntley, now mortgagee-in-possession of the Property, was the only creditor scheduled by the Debtor in the First Case. The Debtor scheduled Huntley as a secured creditor with a claim of $ 1,842,336.00 secured by the Property, which the Debtor valued at $ 5,250,000.00.
Shortly after the Debtor filed the First Case, Huntley filed a motion seeking dismissal of the First Case with prejudice or relief from the automatic stay [Case No. 18bk07311, Dkt. No. 16] (the "First Dismissal Motion"). The First Dismissal Motion asserted a variety of arguments, each of which had at its nexus that the Debtor had filed the First Case in bad faith. With the First Dismissal Motion, Huntley included a proposed order dismissing the case with prejudice.
On June 20, 2018, the court held an evidentiary hearing on the First Dismissal Motion in the First Case (the "Evidentiary Hearing"). Jorge Rojas, a self-designated manager of the Property, appeared as a representative of the Debtor. At the Evidentiary Hearing, the evidence showed, amongst other things, that the Debtor had grossly exaggerated the value of the Property, had filed the First Case on the eve of foreclosure and had no ongoing business. The evidence also showed that Mr. Rojas was unable or unwilling to provide even a basic accounting of the Debtor's financial affairs.
At the conclusion of the Evidentiary Hearing, the court granted Huntley relief from the automatic stay under section 362(d) after finding that the Debtor could not provide adequate protection of Huntley's interest and that, although the Property may have been necessary for the Debtor, a single-asset real estate enterprise, to reorganize, the Debtor would be unable to...
To continue reading
Request your trial
-
In re LLC 1 07CH12487
...of jurisdiction and statutory authority in the context of motions to dismiss as set forth In re Class A Properties Five, LLC , 600 B.R. 27, 29–30 (Bankr. N.D. Ill. 2019) (Barnes, J.). Further, a bankruptcy court must have the jurisdiction and authority to implement an order of remand from t......
-
Leibowitz v. Kalamata Capital Grp. LLC (In re Gayety Candy Co.)
...is in the best position to clarify any apparent inconsistencies in the court's rulings."). In re Class A Properties Five, LLC , 600 B.R. 27, 33 (Bankr. N.D. Ill. 2019) (Barnes, J.) As this court stated,The court has a duty to adopt the meaning that "renders [the Dismissal Order] more reason......