In re Peachtree Lane Associates, Ltd., 96 C 5090
| Decision Date | 18 March 1997 |
| Docket Number | 96 C 5092,96 C 7454.,No. 96 C 5090,96 C 5090 |
| Citation | 206 BR 913 |
| Parties | In re PEACHTREE LANE ASSOCIATES, LTD. |
| Court | U.S. District Court — Northern District of Illinois |
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Jeffrey Wayne Finke, Thomas E. Raleigh, Paul Andrew Sundberg, Raleigh and Helms, Chicago, IL, for Appellants.
Mark P. Naughton, Jr., Rudnick & Wolfe, Chicago, IL, for Appellee.
This case, which consumed the time and apparently endless patience of Judge Barliant in the Bankruptcy Court for almost two years, is now before us for the third time in as many years. The appellants no doubt hope that this appeal will prove the truth of the old saw "third time is a charm." Unfortunately, after carefully reviewing the record and the briefs on appeal, we conclude that the saying has no application here. For the reasons set forth below, we affirm the decisions of the Bankruptcy Court.
A brief summary of the cases follows. For a much more detailed treatment of the facts, see the factual findings of Judge Barliant, reported at In re Peachtree Lane Assocs., Ltd., 198 B.R. 272, 274-80 (Bankr.N.D.Ill. 1996), and our previous opinion, In re Peachtree Lane Assocs., Ltd., 188 B.R. 815, 819-21 (N.D.Ill.1995) ("Peachtree II").
On July 26, 1994, Peachtree Lane Associates ("Peachtree" or "Debtor"), a Texas limited partnership, filed for bankruptcy under chapter 111 in this district. The Debtor's principal asset was an apartment complex located in the town of Webster, Texas. Shortly after filing under Chapter 11, the Debtor filed an adversary action against Harry, Alan and Daniel Granader, the owners of a shopping center bordering the Peachtree apartment complex, to determine the extent of the bankruptcy estate. At issue was an easement over part of Peachtree's property, used by shopping center patrons for access and parking. The Debtor sought a declaratory judgment determining the parties' rights under the easement and a permanent injunction preventing any encroachment. The Debtor contended that the Granaders' shopping center parking lot contained parking spaces and landscaped islands that improperly trespassed upon the Debtor's property, which included a private road used by Peachtree residents as an access road to the apartment complex. The Granaders filed an answer and a six-count "conditional" counterclaim,2 and moved for withdrawal of reference pursuant to 28 U.S.C. § 157(d).
Soon after filing the motion for withdrawal of reference in this court, the Granaders filed a motion in the Bankruptcy Court for an enlargement of time with respect to the bar date — the date by which all claims against the bankruptcy estate must be filed. The Bankruptcy Court granted that motion on October 25, 1994, and subsequently the Granaders' counterclaim was treated as a proof of claim in the bankruptcy proceedings. On November 18, 1994, this court denied the motion for withdrawal of reference, holding that the adversary action was a "core" proceeding subject to the Bankruptcy Court's jurisdiction and that the Granaders had no Seventh Amendment right to a jury trial in that action. See Peachtree Lane Assocs., Ltd. v. Granader, 175 B.R. 232, 237-38 (N.D.Ill.1994) ("Peachtree I").
During the fall of 1994, the Granaders raised a number of challenges to the Bankruptcy Court's authority to hear the adversary action, including jurisdiction, venue, and abstention. The Bankruptcy Court denied the various motions to dismiss, abstain, or transfer venue in oral rulings. As part of its ruling on the venue issue, the Bankruptcy Court held (prior to our ruling that the counterclaim was a proof of claim against the estate that rendered the adversary action a core proceeding) that the Granaders lacked standing to challenge the venue of the bankruptcy case3 because they were not creditors of the estate or other "interested parties."
Trial in the adversary action was held on several dates in November and December, 1994. The Bankruptcy Court issued an oral ruling on December 22, 1994, and a judgment order and permanent injunction on January 6, 1995. The court entered judgment in favor of the Debtor on its claims, finding that the Debtor owned the property over which the easement ran, and that certain portions of the Granaders' parking lot encroached upon the Debtor's property in a manner not permitted by the easement, which was for ingress and egress only. The court found that the Granaders had failed to meet their burden of establishing the numerous defenses that they asserted, including among others the defenses of laches, estoppel, and waiver. The court also concluded that the Granaders had not presented sufficient evidence to support their various counterclaims. About the same time, the court wrapped up the bankruptcy case, entering an order confirming the Debtor's second amended liquidating plan of reorganization dated November 30, 1994 (as modified December 21, 1994), and another order approving the sale of the apartment complex.
The Granaders timely appealed both the bankruptcy orders denying the Granaders standing to challenge the venue of the bankruptcy case, and the adversary action judgment ruling against them on the easement-related claims, to this court. We held that the Granaders did have standing to challenge venue in the bankruptcy case and remanded both cases to Judge Barliant for further proceedings on the venue issue. See Peachtree II, 188 B.R. at 831. In the course of these proceedings, which took place during the spring of 1996, the Bankruptcy Court held that certain discovery sought by the Granaders would not be permitted, venue in the Northern District of Illinois was proper in the bankruptcy case, and transfer of the case to Texas was not appropriate. This consolidated appeal by the Granaders from both the bankruptcy case and the adversary action followed.
The Granaders raise several issues on appeal. Their first and most lengthy contention is that the bankruptcy judge erred in finding that the Debtor's principal place of business was in the Northern District of Illinois, and that venue for the bankruptcy case was therefore proper in this district. In a related vein, the Granaders argue that the Bankruptcy Court should not have denied them certain discovery they contend was relevant and important to resolving the venue question. They then attack the adversary proceedings, asserting that the adversary complaint must be dismissed because its jurisdictional allegations were deficient, and that the Bankruptcy Court erred in ruling against them in the adversary action. We address each of these points in turn.
As provided by 28 U.S.C. § 1408, a chapter 11 bankruptcy case may be commenced in any district in which the debtor had its domicile, residence, principal place of business, or principal assets, for the last 180 days preceding the filing of the case. 28 U.S.C. § 1408(1). As COLLIER and a great many other authorities note, the only venue tests that are meaningful with respect to a partnership such as the Debtor are the place where the principal assets are located and the principal place of business. 1 COLLIER ON BANKRUPTCY ¶ 4.012d (15th ed. rev.1996); see also In re Washington, Perito & Dubuc, 154 B.R. 853, 859 (Bankr.S.D.N.Y. 1993); In re Industrial Pollution Control, Inc., 137 B.R. 176, 180 (Bankr.W.D.Pa.1992); In re Nantucket Apartments Assocs., 80 B.R. 154, 156 (Bankr.E.D.Mo.1987). "Since the test is in the alternative, venue may properly lie in more than one district." Washington, 154 B.R. at 859; see also In re Pavilion Place Assocs., 88 B.R. 32, 35 (Bankr.S.D.N.Y. 1988) (). It is undisputed that the Debtor's principal asset is the apartment complex in Texas. If the principal place of business is in this district, however, venue would be proper here.
Venue is presumed to be proper in the district where a bankruptcy case is filed, and the burden of proving otherwise is on the party who has moved to transfer or dismiss the case. See In re Holiday Towers, Inc., 18 B.R. 183, 186 (Bankr.S.D.Ohio 1982) (); In re Manville Forest Prods. Corp., 896 F.2d 1384, 1390 (2d Cir.1990) (). The issue is thus whether the Granaders met their burden to prove, by a preponderance of the evidence, that the Debtor's principal place of business was not in the Northern District of Illinois.
There are two components to the Bankruptcy Court's decision that venue was proper in this district. First, the court selected the legal test for evaluating the principal place of venue, applying the "major business decisions" test that focuses on the place where a debtor's significant decisions are reached. As the determination of the proper test to apply is a conclusion of law, we review that determination de novo. Second, the Bankruptcy Court applied the test and found that, on the evidence presented, this Debtor's principal place of business was within the Northern District of Illinois. As this conclusion is a finding of fact, In re Commonwealth Oil Refining Co. Inc. "CORCO", 596 F.2d 1239, 1241 (5th Cir.1979), we review it only for clear error. In re Yonikus, 996 F.2d 866, 868 (7th Cir.1993).
In our last published opinion in this case, we noted that courts have often looked to the place where the debtor's major business decisions are made4 in determining the debtor's principal place of business. Peachtree II, 188 B.R. at 830 (citing cases). On remand for a factual finding regarding the Debtor's principal place of business, the Bankruptcy Court properly stated that it was...
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