Lefkas General Partners, Numbers 1017, 1018, & 1020, Matter of

• Decision Date: 01 May 1997
• Docket Number: 1018,Nos. 1017,No. 96-2396,s. 1017,96-2396
• Citation: 112 F.3d 896
• Parties: In the Matter of LEFKAS GENERAL PARTNERS,, & 1020, Debtors. Appeal of O'BRIEN & ASSOC., INC.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 896

112 F.3d 896

In the Matter of LEFKAS GENERAL PARTNERS, Nos. 1017, 1018, & 1020, Debtors Appeal of O'BRIEN & ASSOC., INC.

No. 96-2396.

United States Court of Appeals Seventh Circuit.

Argued Dec. 11, 1996.

Decided May 1, 1997.

David G. Harding (argued), Chicago, IL, for Appellant.

David K. Welch, Steven D. Schneiderman, Glenn R. Heyman, Dannen, Crane, Heyman & Simon, Chicago, IL, for appellee Glenn R. Heyman.

John Collen (argued), Mark W. Page, Sonnenschein, Nath & Rosenthal, Chicago, IL, for appellee Sius of Illinois Corp.

Norman B. Newman, Much, Shelist, Freed, Denenberg & Ament, Chicago, IL, for debtor Lefkas General Partners, Nos. 1017, 1018 and 1020.

Before BAUER, WOOD, Jr. and DIANE P. WOOD, Circuit Judges.

BAUER, Circuit Judge.

This appeal stems from an order of the bankruptcy court granting summary judgment in favor of SIUS of Illinois Corporation and Glenn R. Heyman, the Examiner with Expanded Powers, and denying summary judgment for O'Brien and Associates, Inc. O'Brien had sought leave to file proof of claim against the bankruptcy Debtors and to modify the order approving Debtors' Chapter 11 reorganization plan, in the hope that O'Brien could collect payment on its judgment against First National Real Estate & Development Company, Inc. ("FNR"). The district court affirmed the bankruptcy court's decision. We affirm.

I. Background

A. The Village and FNR Enter into the Crestwood Redevelopment Agreement.

On December 15, 1988, the Village of Crestwood, Illinois entered into the Crestwood Redevelopment Agreement ("the Agreement") with FNR for the development of 168 acres collectively known as RiverCrest. Under the Agreement, the Village was required to issue bonds in order to raise money to buy or lease the ten parcels of land which comprised RiverCrest. The Village had to purchase seven of these parcels, designated "Airport Property," and lease the remaining three.

The Agreement named FNR as the developer of the project. In that capacity, FNR was responsible for securing commitments from nominees for the development of the parcels. FNR could choose itself as a nominee. Once FNR delivered a commitment for any particular parcel to the Village, the Village had to determine whether the nominee's commitment satisfied the Village's established criteria before the Village was obligated to convey its ownership or leasehold interest to FNR or FNR's nominee. The Agreement contemplated that FNR would then enter into development agreements with land trusts, whose beneficial owners would be the nominees chosen by FNR. These land trusts were required to join in and agree to be bound by the Agreement.

The Village also imposed deadlines on FNR for delivery of all commitments. These deadlines varied depending on whether the commitment was for a Phase I or a Phase II parcel. Phase I consisted of the four parcels of Airport Property. Phase II consisted of the remaining six parcels of RiverCrest. FNR had to deliver the commitments for the Phase I parcels by July 1, 1989. If FNR did not deliver the commitments by this date, the Village was required to sell all four parcels and distribute the proceeds in accordance with a local bond ordinance. FNR had to deliver commitments for the Phase II parcels by July 1, 1992. The Phase II parcels are not in issue in this case.

B. Debtors Are Created.

On July 15, 1989, three single-purpose Illinois general partnerships, known as Lefkas General Partners Nos. 1017, 1018, and 1020, were formed to construct and manage the RiverCrest Shopping Center located within the redevelopment's project area. These three general partnerships are the debtors (hereinafter "Debtors") in this case. Debtors own 100% of the beneficial interest in three Illinois land trusts which were formed on that same day.

C. The Village Conveys the Phase I Parcels--The Conveyance in Controversy.

At some point, the Village conveyed all of the Phase I parcels to FNR's nominee, land trust number 106489-05 at American National Bank & Trust Company of Chicago. On October 24, 1989 and November 8, 1989, land trust number 106489-05 conveyed the Phase I parcels to Debtors' respective land trusts. Debtors soon found themselves in need of a construction loan. To assist in obtaining the loan from the Taiyo Kobe Bank Ltd. ("Taiyo"), the Village, joined by FNR, wrote a letter to Taiyo stating that the Village had no right, title, or interest in the Phase I parcels. The Village and FNR further notified Taiyo that all of the conditions precedent in the Agreement had been met or waived in the conveyance of the Phase I parcels to Debtors' land trusts. Specifically, they told Taiyo that the July 1, 1989 deadline for delivering Phase I commitments had been extended by Village ordinance. The Village and FNR also assured Taiyo that the Village had waived the Agreement's requirement that Debtors' land trusts join in the execution of the Agreement. On November 21, 1989, Taiyo made a construction loan to Debtor's land trusts and took a mortgage on the Phase I parcels. Debtors proceeded to develop the property, which eventually became the RiverCrest Shopping Center.

D. O'Brien's Claim Against FNR Arises.

In 1989, O'Brien & Associates, an engineering firm, periodically performed services for FNR at various sites throughout Illinois and Michigan. FNR failed to pay for these services, and O'Brien sued FNR. On September 30, 1991, O'Brien procured a judgment against FNR in the Circuit Court of Cook County, Illinois, in the amount of $63,193.19, plus costs. That same day, O'Brien recorded the judgment with the Cook County Recorder of Deeds, thereby obtaining a judicial lien against all real property owned by FNR in Cook County.

E. Debtors File for Bankruptcy and Develop a Liquidation Plan.

On October 4, 1991, Debtors filed petitions under Chapter 11 of the United States Bankruptcy Code. The three partnerships' cases were substantively consolidated. In their schedules of assets, Debtors listed their ownership interests in the Phase I parcels of RiverCrest as their most valuable assets. In their schedule of creditors, Debtors listed FNR as having an unsecured claim of $200,000 against each Debtor for administrative fees incurred in connection with RiverCrest. Debtors did not include O'Brien in their schedule of creditors. The bankruptcy court set July 13, 1992 as the deadline for filing pre-petition creditors' claims and December 30, 1992 as the deadline for filing mechanics' lien claims. Debtors sent no notice of either filing date to O'Brien. O'Brien filed no proofs of claim against Debtors before either deadline passed. ¹

On May 11, 1992, pursuant to an order of the bankruptcy court, the United States Trustee appointed Glenn Heyman as Examiner With Expanded Powers for all three Debtors. On May 9, 1993, Debtors and the Sakura Bank Ltd., Taiyo's successor in interest, proposed a joint plan for Debtors' liquidation. Under the plan, Debtors would transfer their remaining assets and businesses free and clear of liens to SIUS of Illinois Corporation, Sakura Bank's assignee. As a condition precedent to confirmation of Debtors' joint liquidation plan, FNR was required to sign an "Acknowledgment Regarding Rights Under Crestwood Redevelopment Agreement," which stated that FNR had no further rights in the property once Debtors had acquired the property from the Village. ² Sakura Bank then assigned its claims against Debtors to SIUS and transferred RiverCrest to SIUS free and clear of liens in June and July of 1993.

F. O'Brien Attempts to Satisfy Its Judgment Against FNR through the RiverCrest Shopping Center.

On September 3, 1993, O'Brien filed a motion for leave to file its proof of claim and to modify the order confirming Debtors' Chapter 11 reorganization plan so that the order would provide for payment of the balance of O'Brien's judgment against FNR. O'Brien believed that it was entitled to this leave of court because of its prior judicial lien against any real property interest of FNR in Cook County. In cross motions for summary judgment, the Examiner and SIUS contended that O'Brien's claim was against FNR, not Debtors. They further argued that O'Brien's claim was untimely. O'Brien countered that under the doctrine of equitable conversion, the Agreement gave FNR an equitable ownership interest in the Phase I parcels. O'Brien claimed that even though it occurred nearly two years before O'Brien's judicial lien had attached to FNR's real estate interests, the Village's conveyance of the Phase I parcels to Debtors' land trusts was ineffective to sever FNR's equitable interest in the land because FNR and the Village had not satisfied some of the Agreement's conditions precedent. The bankruptcy court granted the Examiner and SIUS's motion for summary judgment. The district court affirmed. O'Brien now appeals. We affirm, but on grounds different from those stated by the district court.

II. Analysis

In a second appeal from a bankruptcy court decision, we utilize the same standard of review as that used by the district court below: we uphold a bankruptcy court's findings of fact unless clearly erroneous and we review a bankruptcy court's legal conclusions de novo. In re Marrs-Winn Co., Inc., 103 F.3d 584, 589 (7th Cir.1996). As it is a conclusion of law, we review a district court's grant of summary judgment de novo. McGinn v. Burlington N.R.R. Co., 102 F.3d 295, 298 (7th Cir.1996) (citations omitted). We will uphold an entry of summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Id. (citations omitted).

O'Brien characterizes the Agreement as a contract of sale between the Village and FNR. He stresses that the parties did not meet the Agreement's requirements because FNR never gave the Village formal written instructions to convey the Phase I...