In re Suburban W. Props., LLC

• Decision Date: 26 November 2013
• Docket Number: No. 13bk18697.,13bk18697.
• Citation: 504 B.R. 477
• Parties: In re SUBURBAN WEST PROPERTIES, LLC, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

504 B.R. 477

In re SUBURBAN WEST PROPERTIES, LLC, Debtor.

No. 13bk18697.

United States Bankruptcy Court,

N.D. Illinois,

Eastern Division.

Nov. 26, 2013.

John H. Redfield, Crane, Heyman, Simon, Welch & Clar, Chicago, IL, for Debtor/Movant.

Beverly A. Berneman, Robert R. Benjamin, Caren A. Lederer, Golan & Christie LLP, Chicago, IL, for Respondent Beach Business Bank.

Eileen Sethna, Francisco E. Connell, Chuhak & Tecson, PC, Chicago, IL, for RespondentMacon Group, LLC.

Thomas R. Fawkes, Freeborn & Peters LLP, Chicago, IL, for RespondentJohn Flanders Kennedy.

MEMORANDUM DECISION

TIMOTHY A. BARNES, Bankruptcy Judge.

The matter before the court is on the Motion of Debtor for Contempt Sanctions for Violations of the Automatic Stay and for Other Relief (the “ Sanctions Motion ”) brought by Suburban West Properties, LLC(the “ Debtor ”) against Ahad Real Estate, LLC(“ Ahad ”), Beach Business Bank (“ BBB ”), Macon Group, LLC(“ Macon ”) and the state appointed receiver John Flanders Kennedy(the “ Receiver ”).With the exception of Ahad, which did not respond, the parties timely filed separate responses and supplemental responses to the Sanctions Motion.Upon a review of the parties' respective filings and after holding a hearing on the matter, the court finds that the postpetition actions in relation to 3680 Riverside Drive, Macon, GA 31210 (the “ Property ”) and the payment made to the Receiver by the principal of the Debtor do not violate the automatic stay and accordingly denies the Sanctions Motion.

JURISDICTION

The federal district courts have “original and exclusive jurisdiction” of all cases under title 11 of the United States Code(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 title 11 of the United States Code, or arising in or related to cases under title 11. 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 Procedure15(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 title 11. 28 U.S.C. § 157(b)(1).A request for sanctions for alleged violations of the automatic stay may only arise in a case under title 11 and, therefore, is a core proceeding.11 U.S.C. § 363(k);28 U.S.C. § 157(b)(2)( o);In re Glenn,359 B.R. 200, 203(Bankr.N.D.Ill.2006)(Black, J.)(“[T]he cause of action for violating the automatic stay under section 362(k)(1)does not appear to have had a counterpart in eighteenth century England.”).

Accordingly, final judgment is within the scope of the court's authority.

PROCEDURAL HISTORY

In considering the Sanctions Motion [DocketNo. 26], the court has evaluated the arguments of the parties at the October 2, 2013 hearing on the Sanctions Motion(the “ Hearing ”), has reviewed and considered the Sanctions Motion itself, and has considered:

(1) The Receiver's Response and Statement [DocketNo. 61];

(2)BBB's Response to Debtor's Motion for Contempt Sanctions for Violations of the Automatic Stay [DocketNo. 77];

(3)Macon's Response in Opposition to Debtor's Motion for Contempt Sanctions for Violations of the Automatic Stay and for Other Relief [DocketNo. 78];

(4) The Reply of Suburban West Properties, LLC to John Flanders Kennedy's Response and Statement [DocketNo. 87];

(5) The Debtor's Reply to Beach Business Bank's Response to Debtor's Motion for Contempt Sanctions for Violations of the Automatic Stay [DocketNo. 89];

(6) The Debtor's Reply to Macon Group, LLC's Response in Opposition to Debtor's Motion for Contempt Sanctions for Violations of the Automatic Stay and for Other Relief [DocketNo. 92];

(7) Beach Business Bank's Sur–Reply in Opposition to Debtor's Motion for Sanctions[Docket No. 95–1]¹; and

(8)Macon's Supplemental Memorandum in Opposition to Debtor's Motion for Contempt Sanctions for Violations of the Automatic Stay and Other Relief [DocketNo. 115].

The court has also 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 above-captioned bankruptcy case, the court has taken judicial notice of the contents of the docket in this matter.SeeLevine v. Egidi,No. 93C188, 1993 WL 69146, at *2(N.D.Ill.Mar. 8, 1993);Inskeep v. Grosso( In re Fin. Partners ), 116 B.R. 629, 635(Bankr.N.D.Ill.1989)(Sonderby, J.)(authorizing a bankruptcy court to take judicial notice of its own docket).

FACTUAL BACKGROUND

The Debtor alleges that the automatic stay with respect to the Property has been violated by Ahad, BBB, Macon and the Receiver.

While the matter before the court is, ultimately, a disagreement between the parties as to the legal effect of certain prepetition and postpetition actions and not in essence a factual dispute, the facts in question are nonetheless integral to a ruling on the matter.As the arguments raised by the Debtor are based in large part in fact, the court considers here the facts as they have been presented:

(1) In 2010, BBB made a loan to Ahad for the purchase and operation of a Baymont Inn and Suites Hotel located on the Property.BBB took and recorded the original security deed (the “ Deed ”) to evidence and secure the loan.The Deed provides that, should Ahad default, BBB may sell the Property at its discretion after first giving notice of the time, place and terms of the sale by advertisement, published once a week for four weeks.

(2) The Debtor became associated with the Property through its principal, Kenneth Moore(the “ Principal ”).On September 11, 2012, the Principal entered into a partnership agreement with Ahad for the purpose of conducting the general business of operating the Baymont Inn and Suites Hotel located on the Property.The partnership agreement stated that if the Principal desired for the partnership to acquire legal title to the Property, and such desire was agreeable to both parties and within ninety (90) days from the execution of the partnership agreement, the Principal was required to assume fifty percent (50%) of the outstanding indebtedness to BBB.

(3) Ahad defaulted on its loan payments due in October, November and December of 2012.

(4) In December 2012, Ahad and the Debtor entered into a franchise agreement with Baymont Franchise Systems, Inc.

(5) On January 13, 2013, BBB began foreclosure on the Property pursuant to the non-judicial foreclosure procedures set forth in the Deed and applicable Georgia law.BBB began publishing the four-week notice of foreclosure sale on or about January 9, 2013, announcing that a foreclosure sale of the Property was to be held on February 5, 2013.

(6) On January 15, 2013, BBB commenced litigation against Ahad in the Superior Court of Bibb County, Georgia(the “ Superior Court ”) in a matter styled as Beach Business Bank v. Ahad Real Estate, LLC(the “ Bank Case ”), to install a temporary receiver and bar Ahad's use of the Property.

(7) On January 18, 2013, after having received notice of the foreclosure, Ahad quitclaimed its interest in the Property to itself and to the Debtor.The quitclaim deed was recorded on January 30, 2013.

(8) On February 1, 2013, Ahad sought a temporary injunction of BBB's foreclosure from the Superior Court in the Bank Case.On February 4, 2013, the Superior Court granted Ahad a temporary injunction.The parties and the behavior enjoined are not specifically identified, though the Superior Court did in the injunction order provide certain conditions on BBB outside of the injunction itself.

(9) On February 5, 2013, BBB “cried” the foreclosure sale on the steps of the courthouse, a procedure consistent with Georgia property law, and accepted the bid of the winning buyer, Macon.That sale gave rise to a Deed Under Power of Sale dated February 5, 2013 and recorded April 18, 2013, which reflects consideration of $1,200,000.

(10) On April 4, 2013, Ahad filed a separate lawsuit in the Superior Court, styled as Ahad Real Estate LLC v. Kenneth Moore, Suburban West, LLC, et al.(the “ Receiver Case ”), against the Principal, the Debtor and others, seeking a receiver to take possession of all assets and property, including the Property, from the Principal.The Receiver Case was assigned to the same judge as the Bank Case.The Superior Court entered an order that same day (the “ Order Appointing Receiver ”), temporarily restraining the Principal and appointing John Flanders Kennedy as the Receiver.

(11) On April 18, 2013, BBB and Ahad filed a stipulation dismissing the Bank Case with prejudice.

(12) That same day, the Superior Court heard in the Receiver Case the Receiver's allegation that the Principal had committed contempt by refusing to comply with the Order Appointing Receiver.Both the Debtor and the Principal were listed as defendants in the Receiver Case with respect to the contempt hearing.In that hearing, the judge, possibly unaware that the Bank Case had been dismissed earlier that day, issued an order clarifying the previous injunction and further enjoining BBB from foreclosing.This order was entered April 19, 2013.

(13) On April 22, 2013, the Superior Court ordered contempt sanctions against the Principal for refusing to comply with the Order Appointing Receiver in the Receiver Case.The Principal was ordered to pay a fine for the contempt charges.

(14) On May 1, 2013, the Debtor filed for bankruptcy, and the case was assigned to the undersigned.On May 2, 2013, the Principal filed for bankruptcy.That case is not before this judge.

(15) On May 17, 2013, the Superior Court entered an order in the...