In re Whitlock-Young

• Decision Date: 10 August 2017
• Docket Number: Case No. 17bk05030
• Citation: In re Whitlock-Young, 571 B.R. 795 (Bankr. N.D. Ill. 2017)
• Parties: IN RE: Trina D. WHITLOCK–YOUNG, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

571 B.R. 795

IN RE: Trina D. WHITLOCK–YOUNG, Debtor.

Case No. 17bk05030

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

August 10, 2017

Attorney for Debtor: Asisat Y. Williams, Williams Law Office, Chicago, IL

Attorney for Planet Home Lending: Caleb J. Halberg, Potestivo & Associates, P.C., Chicago, IL

MEMORANDUM DECISION

TIMOTHY A. BARNES, Judge.

Before the court is the Debtor's Motion to Approve the Setting Aside/Vacate [sic] of Judicial Sale [Dkt. No. 47] (the "Motion ") filed by Trina D. Whitlock–Young (the "Debtor "). The Motion seeks to vacate a postpetition sale and acts relating thereto conducted by Planet Home Lending, LLC ("PHL ") of property on which the Debtor and a third-party are co-obligated, as the sale and such acts violated the co-debtor stay. By further filing, the Debtor also seeks sanctions against PHL for violating the co-debtor stay and the later-imposed automatic stay.

The Motion raises a number of questions that are matters of first impression for the court. As a result, briefing beyond that normally provided on such motions was sought and received by the court. Upon review of that briefing and those questions, the court finds that the postpetition judicial sale violated the co-debtor stay and that the sale is void. The court further finds that the Debtor has standing to and may enforce the co-debtor stay with respect to the sale and subsequent acts relating thereto. The Debtor has, however, failed to demonstrate an entitlement to damages. As a result, the Debtor's motion is GRANTED insofar as it seeks to have the sale and subsequent acts in relation thereto determined to be void but, in all other respects, is DENIED.

JURISDICTION

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) ; In re Radco Merch. Servs., Inc. , 111 B.R. 684, 686 (N.D. Ill. 1990). 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).

Matters concerning the automatic stay and the co-debtor stay are matters solely arising out of the bankruptcy case itself. As such, those matters are core proceedings and within the court's statutory and constitutional authority. 28 U.S.C. § 157(b)(2)(G) ; In re Mahurkar Double Lumen Hemodialysis Catheter Patent Litig. , 140 B.R. 969, 976–77 (N.D. Ill. 1992). Such authority includes the granting of declaratory relief in relation thereto. See , e.g. , In re Ace Track Co., Ltd. , 556 B.R. 887, 899 (Bankr. N.D. Ill. 2016) (Barnes, J.) ("Granting such a request [for declaratory judgment] under section 105 is clearly within the court's authority); see also 11 U.S.C. § 105(a) ; 28 U.S.C. § 2201 (the Federal Declaratory Judgment Act) (affording "any court of the United States" the power of declaratory judgment); In re Caesars Entm't Operating Co., Inc. , 808 F.3d 1186, 1188 (7th Cir. 2015) ( section 105"grants the extensive equitable powers that bankruptcy courts need in order to be able to perform their statutory duties"); U.S. Lines, Inc. v. Am. S.S. Owners Mut. Prot. & Indemnity Assoc., Inc. (In re U.S. Lines, Inc. ), 197 F.3d 631 (2d Cir. 1999) (bankruptcy court, in a core proceeding, may decide declaratory judgment), cert. denied 529 U.S. 1038, 1038, 120 S.Ct. 1532, 146 L.Ed.2d 347 (2000).

Further, each party has voluntarily submitted itself to this court's jurisdiction (the Debtor by petitioning for chapter 13 relief, and PHL by filing a proof of claim)¹ or has impliedly consented to this court's jurisdiction, and thus the court may constitutionally hear and determine the matters as core matters. Radco Merch. Servs., Inc. , 111 B.R. at 686 ; see also 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).

Accordingly, determination of the Motion is within the scope of the court's jurisdiction and constitutional authority.

SUMMARY OF ISSUES PRESENTED

As noted above, the Motion presents a number of questions that are issues of first impression before the court. With respect to standing, the Motion raises the question of a debtor's role in enforcing the co-debtor stay, especially when that debtor is statutorily without automatic stay protection due to repeated bankruptcy filings. With respect to the co-debtor stay, the Motion raises the question of whether a quasi in rem foreclosure proceeding under Illinois law violates the limited scope of the co-debtor stay. Finally, with respect to damages, the Motion raises the question of what damages, if any, a debtor is entitled to with regard to a co-debtor stay violation.

To better understand these questions, it is first necessary to consider the context in which they arise.

PROCEDURAL HISTORY

In assessing the Motion, the court has considered the arguments of parties at hearings on the Motion on April 27, 2017, June 29, 2017 and August 3, 2017 (collectively, the "Hearings ") and has reviewed the Motion and each of the following related filings:

(1) Application to Set Hearing on Emergency Motion [Dkt. No. 45] (the "Application for Emergency Hearing ");

(2) Order Denying Application to Set Hearing on Emergency Motion [Dkt. No. 46];

(3) [Scheduling] Order [Dkt. No. 50];

(4) Response to Debtor's Motion to Approve the Setting Aside/Vacate [sic] of Judicial Sale [Dkt. No. 55] (the "Response ");

(5) Debtor's Reply in Support of a Finding That Creditor Planet Home Funding Violated the Co–Debtor's Stay under 11 U.S.C. § 1301 [Dkt. No. 58] (the "Reply ");

(6) [Scheduling] Order [Dkt. No. 62] (the "Supplemental Scheduling Order ");

(7) Supplemental Response to Debtor's Motion to Approve the Setting Aside/Vacate [sic] of Judicial [Dkt. No. 63] (the "Creditor's Supplement ");

(8) Debtor's Supplemental Brief in Support of Her Motion to Vacate the Judicial Sale [Dkt. No. 64] (the "Debtor's Supplement "); and

(9) Exhibit F [Dkt. No. 65] (the "Motion to Approve Sale ").

The court has also taken into consideration any and all exhibits submitted in conjunction with the foregoing. In addition to the foregoing, the court has also reviewed and found to be of relevance the following filings in the Debtor's case:

(10) Official Form 101, Voluntary Petition for Individuals Filing for Bankruptcy [Dkt. No. 1] (the "Petition ");

(11) Notice of Motion and Motion to Impose Automatic Stay [Dkt. No. 12];

(12) Notice of Motion and Motion to Impose Automatic Stay (Amended) [Dkt. No. 16] (the "Motion to Impose Stay ");

(13) Order Imposing Automatic Stay [Dkt. No. 22] ("Order Imposing Automatic Stay ");

(14) Notice of Motion and Motion to Confirm Existence of Co–Debtor's Automatic Stay [Dkt. No. 25];

(15) Order [Denying Motion to Confirm Existence of Co–Debtor's Automatic Stay] [Dkt. No. 30];

(16) LBL Chapter 13 Model Plan, Modified Chapter 13 Plan dated 4/20/17 [Dkt. No. 41] (the "Plan ");

(17) Order Confirming Plan [Dkt. No. 43] ("Confirmation Order "); and

(18) PHL's Proof of Claim.

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. See Levine v. Egidi , No. 93C188, 1993 WL 69146, at *2 (N.D. Ill. Mar. 8, 1993) (authorizing a bankruptcy court to take judicial notice of its own docket); In re Brent , 458 B.R. 444, 455 n.5 (Bankr. N.D. Ill. 2011) (Goldgar, J.) (recognizing same).

BACKGROUND

The issue before the court represents the latest in the push and pull between a secured lender seeking to enforce its rights in collateral and a debtor intent on preventing the same. The collateral in question is real property, commonly known as 15300 South Evers, Dolton, IL 60419 (the "Property "). The Debtor owns the Property as a tenant in the entirety with her spouse, Glenn Young (the "Co–Debtor "). The Property is encumbered by a mortgage originally in favor of Fremont Investment & Loan that was recorded on October 27, 2005 and signed by both the Debtor and the Co–Debtor as wife and husband.² As noted in footnote 2, supra , that mortgage has had a series of Lenders associated with it.

It appears that, beginning in 2012, the Debtor began using the bankruptcy system to prevent the Lenders' collections efforts. The Debtor attempted five bankruptcy cases in the five years preceding this case.³ PHL or one of the then present Lenders was noticed in each case, and in the three cases that made it beyond the...