In re Sharif

• Court: U.S. Bankruptcy Court — Northern District of Illinois
• Writing for the Court: Hon. Jacqueline P. Cox Judge
• Docket Number: 09-05868
• Decision Date: 09 August 2022
• Citation: In re Sharif, 09-05868 (Bankr. N.D. Ill. Aug 09, 2022)
• Parties: In Re: Richard Sharif, Debtor.

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In Re: Richard Sharif, Debtor.

No. 09-05868

United States Bankruptcy Court, N.D. Illinois, Eastern Division

August 9, 2022

Chapter 7

OPINION ON THE TRUSTEE'S MOTION TO SELL INTEREST OF ESTATE IN REALTY: 36 REVERE DRIVE, SOUTH BARRINGTON AND TO SHORTEN NOTICE (DKT. NO. 730)

Hon Jacqueline P. Cox Judge

This matter comes before the court on the Motion of Horace Fox Jr., as trustee (the "Trustee"), for Authority to Sell Interest of the Estate in Realty: 36 Revere Drive, South Barrington and to Shorten Notice ("Motion") (Dkt No. 730).

Various parties objected to the Trustee's Motion. Haifa Sharifeh, the Debtor's sister, filed an objection ("Haifa's Obj.") (Dkt. No. 734); Ragda Sharifeh, also the Debtor's sister, filed an objection ("Ragda's Obj.") (Dkt. No. 735); and Richard Sharif (the "Debtor") filed an objection ("Debtor's Obj.") (Dkt. No. 736). Wells Fargo Bank, N.A. ("Wells Fargo") also filed a limited objection ("Ltd. Obj.") (Dkt. No. 737).^[1]

The Motion was heard in court on Tuesday, August 2, 2022, after due notice was given to all interested parties. At the hearing, the parties had the opportunity to call witnesses to testify and be subjected to cross-examination.

I. Jurisdiction

The court has jurisdiction to hear this matter under 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This matter is a "core" proceeding under 28 U.S.C. § 157(2)(A), (N), and (O), matters concerning the administration of the estate, orders approving the sale of property, and other proceedings affecting the liquidation of the assets of the estate.

II. Background

This matter concerns the Trustee's Motion (Dkt. No. 730) to sell the Debtor's residence at 36 Revere Drive, South Barrington, Illinois 60010 (the "residence"). The Debtor's former spouse, Luma Hambaroush, and her two minor children have been living in the residence. See Motion, Dkt. No. 730, ¶ 3. However, they have been ordered to vacate the residence by 5:00 p.m. on August 10, 2022. Order Granting Trustee's Motion to Compel Luma Hambaroush Sharifeh to Vacate Residence ("Order to Vacate"), Dkt. No. 729, Approximately thirteen years ago, on February 24, 2009, the Debtor filed for Chapter 7 bankruptcy. Petition, Dkt. No. 1. On July 6,2010, this court ruled in a related adversary proceeding, Adv. No. 09-00770, that a trust of the Debtor's, the Soad Wattar Trust, was the Debtor's alter ego ("Alter-Ego Order"). In re Sharif, 549 B.R. 485, 505 n.9 (Bankr. N.D.Ill. 2016)^[2] Pursuant to the Alter-Ego Order, the residence at 36 Revere Drive, South Barrington, Illinois is property of the bankruptcy estate. Motion, Dkt. No. 730, ¶ 3.

In 2016, Ms. Hambaroush filed the divorce case against the Debtor. See Motion to Modify the Automatic Stay, Dkt. No. 305, ¶ 6 (citing In re Marriage of Hambaroush-Sharif & Sharif No. 16 D 006459 (Ill. Cir. Ct. July 14, 2016)), Ms. Hambaroush moved to lift the automatic stay so the divorce court could rule on her motion for exclusive possession of the residence. See Motion to Modify the Automatic Stay, Dkt. No. 305, ¶¶ 3, 6-7, 10-12, On November 30, 2016, the court granted Ms. Hambaroush's motion. Dkt. No. 312.

On March 31,2022, the state court granted the Chapter 7 Trustee's Renewed Motion to Sell the Residence, authorizing him to sell the property at 36 Revere Drive, South Barrington, Illinois; it held that "[a]ll further aspects of the listing or sale of the Residence" shall be governed by the U.S. Bankruptcy Court for the Northern District of Illinois. Amended Exhibit List, Dkt. No. 742, Ex. 6: Circuit Court 3-31-22 Order (In re Marriage of Hambaroush-Sharif & Sharif No. 16 D 006459, ¶¶ 1 -2 (Ill. Cir. Ct. Mar. 31, 2022). The state court directed all parties in the proceeding to "reasonably cooperate" in the sale of the residence, including "in showing and inspections of the residence . . (including . . . keeping the residence reasonably neat and clean and vacating the residence temporarily to allow inspections and showings); and in the closing of a sale (including timely vacating the Residence and removing personal property from the Residence .. .") In re Marriage of Hambaroush-Sharif & Sharif No. 16 D 006459, ¶ 2 (Ill. Cir. Ct. Mar. 31, 2022).

On April 26, 2022, this court granted the Trustee's Application for Authority to Employ Patti Sprafka Wagner as a Real Estate Broker, authorizing Ms. Wagner to list the residence. Order at Dkt. No. 700. The court notes that from May 2022 until early July 2022, Ms. Wagner had difficulty showing the home to potential buyers due to a lack of cooperation from Ms. Hambaroush in permitting showings and inspection of the residence as well as keeping the residence in orderly condition, despite court orders instructing her to do so^[3] On July 19, 2022, the trustee filed a Motion to sell the residence. Motion, Dkt. No. 730 A hearing on the Motion was held on Tuesday, August 2, 2022; Patricia Sprafka Wagner (the Trustee's real estate broker), the Trustee, the Debtor, and Murad Atieh (a property appraiser contacted by the Debtor) testified. Of the objecting parties, only the Debtor was present at the hearing; neither Haifa nor Ragda appeared.

III. Analysis

Here, the Trustee seeks authority under 11 U.S.C. § 363(b) and (f) for approval of the prospective sale of the Debtor's residence for $587,000 and to shorten notice. Motion, Dkt. No. 730.

1. Standards for Reviewing Section 363(b) Sales

Section 363(b) permits the Trustee (or the debtor in possession) to "use, sell, or lease, other than in the ordinary course of business, property of the estate . . .." after notice and a hearing. 11 U.S.C. § 363(b)(1). The residence at issue constitutes estate property: property of the estate includes" [a]ll legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1).

Bankruptcy courts apply the so-called "business judgment" test to determine whether to approve a proposed sale under § 363(b). See In re Efoora, Inc., 472 B.R. 481,488 (Bankr. N.D.Ill. 2012) (citing 3 Collier on Bankruptcy ¶ 363.02[4] (Alan N. Resnick & Henry J. Sommer eds., 16th ed. 2012)). Hence, under § 363(b), "[a] sale is permissible and will be authorized as long as the trustee has an 'articulated business justification.'" See In re Efoora, Inc., 472 B.R. at 488 (citations omitted); see also Fulton State Bank v. Schipper (In re Schipper), 933 F.2d 513, 515 (7th Cir. 1991). The transaction must make "good business sense" and "the creditors as a whole should benefit." In re UAL Corp., 443 F.3d 565, 571 (7th Cir. 2006).

The price for which the property will be sold should be "fair and reasonable." See 3 Collier on Bankruptcy ¶ 363.02[4] (16th ed. 2012). Federal Rule of Bankruptcy Rule ("Fed. R. Bankr. P.") 6004(f)(1) provides that" [a]ll sales not in the ordinary course of business may be by private sale or by public auction." Here, the Trustee seeks permission to accept a $587,000 offer to buy the Debtor's home. Motion, Dkt. 730, Ex. ii. At the August 2, 2022 hearing, Ms. Patti Sprafka Wagner, the real estate broker the Trustee retained the sell the residence, testified that she listed the property in the Multiple Listing Service (MLS) and that they "only received the one offer." Aug. 2,2022 Hr'g Tr. at 34:18-20.

The trustee has the burden to demonstrate "a sound business justification." See In re Efoora, Inc., 472 B.R. at 488 (citing In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir. 1983)). "A party objecting to a sale, in turn, must produce 'some evidence respecting its objections.'" In re Efoora, Inc., 472 B.R. at 488-89 (citations omitted). The bankruptcy court has discretion to decide whether to approve a sale. See In re Efoora, Inc., 472 B.R, at 489 (citing Corporate Assets, Inc. v. Paloian, 368 F.3d 761, 767 (7th Cir. 2004); in re Irvin, 950 F.2d 1318, 1320 (7th Cir. 1991)).

Here, the Trustee argued the proposed sale of the residence is reasonable because due to the costs he has incurred to respond to pending litigation involving the Debtor and his family, the Trustee expects to run out of liquid assets and then default on the mortgage on the residence by October or November 2022 if the property is not sold. Aug. 2,2022 Hr' g Tr. at 3-5. At the hearing, Horace Fox, Jr., the Trustee, testified that he expects to clear $90,000 to $95,000 in equity from the sale. Aug. 2, 2022 Hr'g Tr. 52-53, 74-75^[4] His testimony was supported by bank and securities statements and a letter from Wells Fargo, among other exhibits, which were admitted into evidence. See Amended Ex. List, Dkt. No. 742, Ex. 3: Bank and Securities Statements (Excerpts), Ex. 11: Wells Fargo Payoff Letter 7-28-22. Patti Sprafka Wagner, the real estate broker the Trustee retained to list the residence, testified that she listed the property in the Multiple Listing Service (MLS) on May 10, 2022 and that they have "only received the one offer." Aug. 2, 2022 Hr'g Tr. at 21,26, 34:18-20, 35. Ms. Wagner testified that she price of the property would decrease if the property were to default on the mortgage and the property were sold via short sale or foreclosure. Aug. 2, 2022 Hr'g Tt, at 44-45. Based on the Trustee's exhibits and the supporting testimony from Ms. Wagner and the Trustee, the court finds that the Trustee met his burden to show that the proposed sale is a sound business judgment. However, the court will address each of the objecting parties' arguments opposing the sale. One of the Debtor's siblings verbally offered to pay the mortgage. That offer, if submitted to the broker, would not make sense because it would delay or deny the Trustee's effort to access the property's equity.

First they argued the sale would cause irreparable...