In re Ristich
| Decision Date | 31 January 1986 |
| Docket Number | Bankruptcy No. 85B4764. |
| Citation | 57 BR 568 |
| Parties | In re Anne G. RISTICH, Debtor. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
COPYRIGHT MATERIAL OMITTED
Bennett A. Kahn, Law Offices of Melvin J. Kaplan, Chicago, Ill., for debtor.
Richard Weinberg, Antonow & Fink, Chicago, Ill., for movant First Nat. Bank of Schiller Park.
(As modified and reissued January 31, 1986)
This cause comes to be heard upon the Motion of FIRST NATIONAL BANK OF SCHILLER PARK ("bank") to Dismiss debtor's Bankruptcy proceeding, or, in the alternative, to grant Relief from the Automatic Stay. Following the hearing held, Findings of Fact and Conclusions of Law have been separately entered. This Memorandum refers to the Facts thereby found, and the Conclusions of Law rested on the reasoning of this Memorandum. For reasons set forth therein, the Motion to Modify Stay has been allowed and the alternative Motion to Dismiss has been denied, by orders entered separately.
On February 27, 1984, petitioner, First National Bank of Schiller Park, filed a Foreclosure action in the Circuit Court of Cook County, Illinois. The Complaint sought foreclosure of mortgages on debtor's properties located at 7401 Fullerton Avenue, Elmwood Park, Illinois, and, 9543 Greenwood Drive, Des Plaines, Illinois.
A Judgment of Foreclosure was entered on June 12, 1984, and the Sheriff's Sale was set for August 8, 1984. On August 7, 1984, debtor filed a petition under Chapter 13 which invoked the automatic stay and prevented the sale from proceeding.
On October 10, 1984, debtor's Chapter 13 proceeding was dismissed for failure to list certain creditors. The previously scheduled Sheriff's Sale was held on October 16, 1984, and petitioner's bids on both parcels were accepted followed by issuance of the Sheriff's Certificates of Sale.
Debtor filed a second petition under Chapter 13 on October 29, 1984, which was dismissed on Motion of petitioner on November 29, 1984.
On April 15, 1985, debtor filed her third petition under Chapter 13 which is the proceeding now pending before the Court. Petitioner alleges, and it is not controverted by debtor, that the statutory period of redemption (ILL.REV.STAT. ch. 110, ¶ 12-122) was to expire on April 17, 1985. Debtor's petition was therefore filed before issuance of the Sheriff's deed.
Debtor filed her plan on May 15, 1985, under which she proposes to pay 100% to all creditors within six months after confirmation. The plan is to be funded with monthly payments of $100 and with the net proceeds anticipated by her upon sale of the two properties which were the subject of the foreclosure action.
Petitioner filed the within Motion to Dismiss for "bad faith" or, in the alternative, relief from the automatic stay. Debtor has responded by asserting that the prior dismissals were caused by her previous attorney's failure to provide adequate representation; that the bank interfered with debtor's ability to sell the parcels by failing to cooperate with prospective purchasers; that Bankruptcy Code § 362 tolls the running of the statutory redemption period in order to allow her to dispose of the properties and cure all defaults under § 1322(b); and, in the alternative, that the sheriff's sale may be avoided as a fraudulent conveyance under 11 U.S.C. § 548(a)(2) because the fair market value of the properties far exceeds the amount of the foreclosure sale bid.
This Court conducted hearings at which it heard testimony from debtor; Steven Dimeo, president of First National Bank of Schiller Park; and Richard S. Weinberg, attorney for the bank. Evidence was also received establishing the fair market value of the properties as well as outstanding encumbrances against them.
Movant's "bad faith" argument is premised upon 11 U.S.C. § 109(f) which prevents an individual from being a debtor under Title 11 if that person was a debtor in another case under Title 11 during the preceding 180 days and the prior case was dismissed for willful failure of the debtor to appear before the Court in proper prosecution of the case.
Debtor's previous Petitions under Chapter 13 were indeed dismissed for failure to appear. However, the record offered pertaining to the previous dismissals failed to establish evidence of willfulness and movant has failed to support its contention with evidence. Therefore, the bank's contention that this Petition was filed in "bad faith" is without support by the evidence presented.
Debtor also contends that the bank interferred with her attempts to sell the properties by failing to cooperate with prospective purchasers. The evidence establishes that on February 15, 1985, debtor entered into a contract to sell the Fullerton parcel for $33,000, and on March 25, 1985, entered into a contract to sell the Greenwood parcel for $65,000.
With reference to the Fullerton parcel, Mr. Steven Dimeo, president of the First National Bank of Schiller Park, testified that debtor brought him the contract, he read it and copied it, and, told her to contact Mr. Weinberg, the bank's attorney. Mr. Richard Weinberg testified that he was contacted by debtor's attorney, Mr. Victor. Following several conversations, Weinberg agreed that the bank would consider reducing the redemption price if Mr. Victor would inform the bank of how much it would receive and also provide a breakdown of all expenses which would be paid out of the proceeds. Weinberg further testified that he never heard from Victor again. That testimony was not controverted by debtor and clearly establishes the bank did not interfere with debtor's attempt to sell the Fullerton property.
Regarding the Greenwood property, debtor testified that on the day after entering into the contract, she had a conference with the president of the bank, Dimeo. She testified she showed him the contract, which he read, and Dimeo then called Weinberg and told him to go along with the transaction.
Dimeo testified that he did have a conference with debtor but never read the contract nor did he call Weinberg in debtor's presence. He testified that he told debtor to contact Weinberg because he did not have the authority to approve any transactions regarding the property. Dimeo further testified that he later called Weinberg and told him debtor had something of interest and hopefully she would contact him.
Weinberg testified that he received a call from an attorney named Bailey, who represented the prospective purchasers of the Greenwood property. Bailey told Weinberg that his clients had entered into a contract with debtor but were not going through with it because the redemption period was expiring soon. Bailey then asked if the bank would deal with his clients and Weinberg told him the bank would consider it only after receiving a deed and possession.
The Illinois statute provides that a mortgagor has six months after the Sheriff's sale in which to obtain funds to redeem the property. ILL.REV.STAT. ch. 110, ¶ 12-122. There is no requirement that the purchaser at a Sheriff's sale aid the mortgagor in its efforts. The testimony presented only established that the bank was unwilling to do more than wait for the six month period to expire. A lack of cooperation approximately three weeks before the redemption period terminated does not rise to the level of interference.
In short, Debtor has not established the "interference" by the bank that she alleged.
Debtor has proposed a plan under which she would be given six months to sell the foreclosed properties and pay 100% to all creditors. The Bank has moved to lift the stay asserting that debtor no longer has an interest in the properties under 11 U.S.C. § 108(b). Debtor responds by asserting that the "fresh start" concept embodied in § 1322(b) cannot be fulfilled unless the automatic stay provided by § 362 is applied to toll running of the statutory redemption period.
Pursuant to 11 U.S.C. § 1322(b)(3), (5), a Chapter 13 plan may provide for the curing of a mortgage default within a reasonable time if debtor maintains his regular payments while the case is pending. The right to cure only exists if the mortgage is in default.
Under Illinois law, the purchaser at a foreclosure sale obtains no title in the property until the period for redemption expires. Kronenberger v. Heinemann, 190 Ill. 17, 18, 60 N.E. 64 (1901). However, after the sale has occurred, the lien on the property created by the mortgage is extinguished and the property is no longer subject to it. Ogle v. Koerner, 140 Ill. 170, 179, 29 N.E. 563 (1892). In order to redeem the property, the mortgagor must pay the purchaser the sale price plus interest at 10% per annum within six months from the date of sale. ILL.REV.STAT. ch. 110, ¶ 12-122 (1984). Otherwise, deed will issue after the redemption period has passed to convey title to the purchaser.
As a consequence of the foreclosure sales here, the mortgages ceased to exist and no longer encumbered the properties. Debtor filed her petition after the mortgages were extinguished so there was no longer a default which could be cured under Chapter 13. See Matter of Tynan, 773 F.2d 177 (7th Cir., 1985).
The issue of whether § 362 or § 108(b) controls tolling the redemption period was also resolved in Tynan. In that case, which was decided on similar facts, the Seventh Circuit Court of Appeals held that § 108(b) is the controlling provision. Id., at 179.
Debtor filed her petition on April 15, 1985, two days before the redemption period expired. Pursuant to § 108(b)(2), the period was extended 60 days, or until July 15, 1985. The properties were not redeemed by that date and debtor's interest thereupon terminated.
THE ASSERTED FRAUDULENT TRANSFER UNDER § 548(a)(2)
Finally, debtor argues in the alternative that this Court should avoid the foreclosure...
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