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Judge Jacqueline P. Cox - Opinions

Description Date Issued
In re Tiffany Armstrong

14 B 18107
In this unpublished decision, the Court denied the Motion of Oasis Legal Finance, LLC (“Oasis”) to Alter or Amend portions of its Order disapproving a reaffirmation agreement where (1) Oasis appeared to tie enforcement of its claim to the Debtor’s receipt of a workers compensation award when Illinois law prohibits liens on such awards; (2) Oasis failed to answer in the Reaffirmation Cover sheet whether the subject debt was nondischargeable and 3) the reaffirmation agreement required the Debtor to repay Oasis $4,125 when only $1,025 of the debt was potentially nondischargeable under section 523(a)(2)(C)(i)(II) - cash advances made within 70 days of filing for bankruptcy relief.

The Court concluded that Oasis failed to present any newly discovered evidence and failed to show that the Court made a manifest error of law in reaching its decision.

11/07/2014
In re Luis Medina, Jr.

14 B 27755
In this Chapter 11 proceeding, the Debtor’s sixth bankruptcy filing in four years, the Court dismissed Debtor’s case for cause under 11 U.S.C. § 1112(b)(1), finding that the Debtor’s financial circumstances made it clear that he would be unable to propose a confirmable plan of reorganization without modifying the rights of a secured creditor, in violation of 11 U.S.C. § 1123(b)(5) .

The Court also imposed a one-year bar to refiling under 11 U.S.C. § 349(a), finding that the successive filings were an intentional abuse of the protections afforded debtors under the Bankruptcy Code.

11/07/2014
In re Castle Home Builders, Inc., et al.

11 B 19428 (jointly administered)
In this post-confirmation Chapter 11 proceeding, the Reorganized Debtor filed a Motion to Enforce Confirmation Order and For the Imposition for Sanctions, arguing that notwithstanding the modified mortgage terms set forth in its Confirmed Plans, Everhome Mortgage continued to bill the Reorganized Debtor for prepetition mortgage debt without making changes to the principal amount, new interest rate, new amortization period or new borrower name.

    The Court granted the Motion, finding that Everhome’s refusal to conform its payment coupons and loan files to the economic terms of the Confirmed Plans some 15 months after confirmation, were done in blatant disregard of bankruptcy law and the terms of the Reorganized Debtor’s Plans.  The Court determined that Everhome’s conduct warranted the imposition of sanctions in the amount of $100,000 and ordered that Everhome pay the Reorganized Debtor $35,839 in attorneys' fees.

10/21/2014
In re Arturo Vazquez

13 B 32174
In this Chapter 7 proceeding, the Debtor scheduled a 2013 federal tax refund in the amount of $10,576, of which he claimed $3,000 as an exempt public assistance benefit under 735 ILCS 5/12-1001(g)(1).

Trustee David Leibowitz objected, arguing that the child tax credit does not qualify as a “public assistance benefit” under the Illinois statute which allows debtors to exempt such.  In 2003 a bankruptcy court ruled that the nonrefundable portion of the child tax credit was not a public assistance benefit because it was available to higher income taxpayers and that the refundable additional child tax credit was a public assistance benefit that could be exempted because it benefited lower income taxpayers.  The Illinois statute does not limit or condition the exemption.

The Court overruled the Trustee’s objection, rejecting the argument that the Illinois statute was meant to benefit lower income individuals only and declined to make the policy choice that a debtor who claimed five personal exemptions/dependents on his tax return while reporting income of $68,824 was too affluent to benefit from the child tax credit.  The Illinois exemption statute provides for the exemption of public assistance benefits, without regard to whether they are refundable or are available only to lower income debtors. The Court explained that it is the role of the legislature, rather than the court, to limit the availability of the exemption.

09/08/2014
Estate of Stanley Cora v. John C. Jahrling (In re John C. Jahrling)

12 B 50628, 13 A 00688
In this Chapter 7 proceeding, Plaintiff, the Estate of Stanley Cora, filed an amended adversary proceeding against the Debtor, John C. Jahrling, under sections 523(a)(4), 523(a)(6), 727(a)(3) and 727(a)(5) of the Bankruptcy Code asking that a debt be held nondischargeable and that the debtor be denied a discharge of all debts. Under the 523(a)(4) claim, Plaintiff sought to except from debtor’s discharge a $26,000 debt incurred while the debtor, a licensed attorney, served in a fiduciary capacity as Stanley Cora’s attorney at a real estate transaction.  Jahrling was hired to represent Cora, then 90 years of age, in the sale of his home.
Cora’s home was sold for $35,000, about one-third of its value, and the transaction did not provide for the retention a life estate promised to Stanley Cora.  After the home was sold, Cora was evicted.

A judgment for $26,000 was entered in state court against the debtor in 2007 on a legal malpractice claim.

The Court entered judgment in favor of the Plaintiff on Count I, and determined that Jahrling’s conduct in representing Cora in the sale of his home without talking to him to discern what Cora wanted and how to accomplish his goal, was a gross deviation from the standard of conduct that a law-abiding person as well as any Illinois attorney would observe in Jahrling’s situation.  The court also found that Jahrling acted recklessly and in brazen disregard of his fiduciary duty when he ignored his basic duty to communicate with the client, to prepare for the engagement and to pursue his client’s interests diligently.

The Court entered Judgment in favor of the debtor-defendant on the remaining counts, finding that Plaintiff failed to meet its burden of proof on claims under section 523(a)(6) for wilful and malicious injury and section 727 for failure to maintain records and to account for a deficiency or loss of assets.

08/21/2014
Philip V. Martino, Trustee v. Eugenia Miszkowicz, Mark Miszkowicz and Miszkowicz Investment Limited Partnership (In re Steven Miszkowicz and Connie Gipple)

11 B 40844, 13 A 00927
In this adversary proceeding, the Trustee sought  recovery of $101,787 in preferential transfers made by the Debtor to his mother and brother in repayment of private loans. The Defendants asserted the ordinary course defense to preference liability under section 547(c)(2), arguing that the transfers at issue were not “loans,” but were advances made from a family investment partnership to the Debtor on account of his limited partnership interest.  The Debtor and his mother and brother were general partners of the partnership.
 The Court rejected the ordinary course defense, finding that the Defendants did not meet the statute’s threshold requirement that the debt being repaid was incurred in the ordinary course of business or financial affairs of the Debtor and the Defendants.  The evidence established that the transactions were personal loans made between family members with checks drawn on the Defendants' personal bank accounts, not the partnership's bank account.
The Defendants' Answer admitted that the transfers to the Debtor were loans.  In a later pleading the Defendants said that the transfers to the Debtor were advances from the Debtor's partnership interest.  The Court granted a Motion to Strike the inconsistent assertions.

07/24/2014
In re Veronica Aguilar and Jose E. Aguilar; Robert J. Sargis v. Veronica and Jose E. Aguilar

10 B 38275, 13 A 00299
In this Adversary Proceeding, Plaintiff sought a determination that a $32,994 debt owed by Debtors was nondischargeable under 11 U.S.C. § 523(a)(2)(A). Plaintiff alleged that Debtors, through their agent, made false representations in procuring a second mortgage loan needed to finance a Property purchased by the Debtor for a family member. The Court determined that the Debtors’ mortgage broker acted as their authorized agent in procuring the financing under an apparent agency theory of liability. The Court also determined that Debtors' agent made false representations when he informed the Plaintiff that the Debtors would reside at the Property and repay the loan when he knew this to be untrue.

06/09/2014
In re Daniel Adam Zarco, Sr.

13 B 25463
In this Chapter 7 proceeding, the Court sanctioned Debtor’s counsel for repeatedly seeking turn over of Debtor’s checking account without providing notice to J.P. Morgan Chase, a party in interest, as required by Federal Rule of Bankruptcy Procedure 9014(b) and Local Bankruptcy Rule 9013-1(A)(3).  He was also sanctioned for falsely stating that there were no funds in the bank account.

03/25/2014
Morris Senior Living, LLC, Morris Real Estate Holdings II, LLC

12 B 05364
In this Chapter 11 proceeding, the Court denied Movants’ Motion for Leave to File a Claim Against Trustee’s Counsel For Fraudulent Inducement.  Movants sought leave to sue the trustee’s counsel for statements allegedly made regarding a Skilled Living Facility Certificate owned by Movant, Morris Healthcare.  In denying the request, the Court held that the Movants offered insufficient legal grounds and no evidence to carry their burden to demonstrate that their claim is not without foundation, i.e., that their claim is well-founded.

01/24/2014
In re Brown’s Chicken & Pasta, Inc.; Popgrip, LLC v. Brown’s Chicken & Pasta, Inc. and Howard Korenthal, not individually but solely as Liquidating Trustee of Brown’s Chicken & Pasta, Inc., Joli Inc., Life A.B., LLC and Just Toni’s v.

09 B 49094, 11 A 2395
This matter involves the former principals of Brown’s Chicken & Pasta (“Debtor”), the franchisor of Brown’s Chicken restaurants in the Chicago area. Following the dissolution of the principals’ business relationship, litigation ensued and a judgment was entered against the Debtor in the amount of $882,000,which led to the Debtor’s bankruptcy filing in 2009.
At issue in this adversary proceeding is what property was sold in a section 363 sale of Debtor’s assets. In Count I, the Plaintiff accuses the Defendants of conversion of equipment purchased in the sale, valued at $25,582.25.  The Defendants claims that although the equipment was mistakenly included in Debtor’s schedules, it had previously been sold, and therefore, was not property of the bankruptcy estate. In Count II, Plaintiff requests declaratory relief, arguing that it properly assumed and accepted a 15-year franchise agreement between the Debtor and franchisee, Joli Inc. The Defendants counter that a subsequent 15-month franchise agreement is the operative document which was been terminated in accordance with its terms.
As to Count I, the Court ruled that Plaintiff justifiably relied on the representation in Schedule B that the equipment listed therein belonged to the Debtor. The Court noted that Schedule B was never amended to reflect the purported change in ownership, and concluded that the equipment was sold to Plaintiff in the section 363 sale.
As to Count II, the Court expressed doubts as to the authenticity of the shorter, 15-month franchise agreement, and concluded that the 15-year term franchise agreement had been properly assumed and assigned by the Plaintiff in accordance with the requirements of the Bankruptcy Code.

12/16/2013
In re Edison Mission Energy, et al.

12 B 49219 (jointly administered)
The Sierra Club filed a motion seeking entry of an order confirming that the automatic stay was not in effect due to the police power exception of Bankruptcy Code section 362(b)(4), or, in the alternative, granting relief from the automatic stay to continue a regulatory action pending against Debtor, Midwest Generation, LLC before the Illinois Pollution Control Board. The Court held that the police power exception was not applicable, noting that the Sierra Club is not a “governmental unit” as defined by Section 101(27) of the Bankruptcy Code. The Court also noted that neither the Illinois Attorney General, nor the Illinois EPA intervened in the proceeding initiated by the Sierra Club. The Court determined that cause existed to lift the stay, after employing a balancing test as instructed by the Seventh Circuit in In re Fernstrom,938 F.2d 731, 735 (7th Cir. 1991). The court also considered the impact of the alleged environmental violations on the residents of Illinois.

11/19/2013
In re 1555 Wabash LLC

11 B 51502

Evans Construction Company (“Evans”) filed a secured Mechanics Lien claim in the amount of $398,937.00 which represented amounts that were owed directly to Evans’ subcontractors. The Lender, Debtor's successor, objected to the claim, asserting a setoff for amounts paid directly to subcontractors and for amounts paid to correct construction work alleged to be defective. The Court reduced Evans claim to reflect amounts proven to be paid directly to subcontractors. However, after hearing the testimony of several witnesses, the Court determined that the Lender’s assertion that Evans produced faulty work was not supported by the evidence, as the defects complained of were explicitly contracted for by the parties.

06/19/2013
In re Shelia L. Martin

09 B 42237

In this Chapter 13 proceeding, the Court granted the Debtor’s motion for sanctions, after a Mortgagee continued to collect the mortgage payments from both the Debtor and the Trustee despite the Court’s approval of a loan modification agreement. The Court’s opinion highlights the importance of parties examining whether loan modifications necessitate a subsequent chapter 13 plan amendment to accurately provide for treatment of mortgage arrears.

04/26/2013
In re GAC Storage El Monte, LLC, et al.

11 B 40944 (jointly administered)

In this memorandum opinion, the Court denied confirmation of the Debtor’s Third Amended Plan of Reorganization. The Court noted that to satisfy the Bankruptcy Code’s requirement that the Debtor’s Plan be fair and equitable, a plan must propose an interest rate adequate to assure the realization of the Bank’s claim. In this case, the Court determined that the interest rate advanced by the Debtor did not sufficiently capture the risk that the Debtor would not satisfy the Bank’s claim. The Court also determined that the Plan was not feasible because the Debtor failed to prove that the property would increase in value enough to give the Debtor sufficient equity to facilitate refinancing at the end of 7 years to fund a balloon payment to the Bank. Also, relying on the Seventh Circuit’s decision in In re Castleton Plaza, LP, No. 12-2639, 2013 WL 537269, and Bankruptcy Code Section 101(31)(B), the Court held that the nature of the plan warrants application of the absolute priority rule as the plan gave the Debtor’s insider preferential access to an investment opportunity in the Reorganized Debtor without allowing others to compete for that opportunity. The Court also granted the Bank’s request for relief from the automatic stay because the Debtor failed to show that there is a reasonable possibility of a successful reorganization.

03/19/2013
In re GAC Storage Lansing, LLC, et al.

11 B 40944 (jointly administered)

In this memorandum opinion, the Court denied confirmation of the Debtor’s Amended Plan of Reorganization. The Court noted that to satisfy the Bankruptcy Code’s requirement that the Debtor’s Plan be fair and equitable, a plan must propose an interest rate adequate to assure the realization of the Bank’s claim. In this case, the Court determined that the interest rate advanced by the Debtor did not sufficiently capture the risk that the Debtor would not satisfy the Bank’s claim. The Court also determined that the Plan was not feasible because the Debtor failed to prove that the property would increase in value enough to give the Debtor sufficient equity to facilitate refinancing at the end of 7 years to fund a balloon payment to the Bank. The Court also granted the Bank’s request for relief from the automatic stay because the Debtor failed to show that there is a reasonable possibility of a successful reorganization.

01/10/2013
In re Andres Gacharna and Catherine E. Lindsay

12 B 08807

In this Chapter 13 proceeding, the Court sustained Creditors’ objection to confirmation of Debtors’ Plan, holding that the Debtors’ obligations under a Settlement Agreement with a former employer (including a non-compete clause) were non-monetary in nature, and therefore were not a "claim" for bankruptcy purposes. Only claims for money can be discharged. The Settlement Agreement included language that the non-monetary provisions of Articles 3 and 4 were the essence of the agreement and that should the Debtors fail to perform the duties prescribed in those provisions, injunctive relief would be appropriate to require the Debtors to perform the duties. The Court also noted that the provision governing attorney’s fees was not a compensation remedy, but was designed to make the prevailing party whole after the resolution of disputes.

10/19/2012
In re 4100 West Grand LLC; 4100 West Grand LLC v. TY Grand LLC

11 B 42873, 11 A 02278

4100 West Grand LLC, debtor in possession, filed this adversary proceeding against defendant, TY Grand LLC, to avoid and recover a transfer alleged to be fraudulent pursuant to 11 U.S.C. §§ 544, 548 and 740 ILL. COMP. STAT. §§ 160/5 and 160/6. As a threshold matter, the Court relied on the Stern v. Marshalldecision and its progeny in determining that the Court had authority to enter a final judgment in the adversary, as the proofs of claim filed by the defendant made clear that their resolution depended on the outcome of the debtor’s fraudulent conveyance claims. Proof of claim no. 3-5 provided that if TY Grand did not prevail in the litigation, its secured claim would be $2,722,170.34. If TY Grand prevailed, it would have no claim against the Debtor. Because the fraudulent conveyance cause of action was resolved in the process of ruling on the proofs of claim, the bankruptcy court has authority to enter a final order herein. Stern v. Marshall, —U.S.—, 131 S.Ct. 2594, 2620 (2011). In the alternative, should a reviewing court find that this court lacked authority to enter a final order, the Court held that its memorandum opinion may serve as its proposed findings of fact and conclusions of law under section 157(c)1. This adversary proceeding was initiated after TY Grand LLC recorded a deed in lieu of foreclosure for Property valued at $1.115 million after 4100 West Grand LLC defaulted under the terms of the parties’ Forbearance Agreement. During the forbearance period, TY Grand also received cash payments in the amount $485,000. Pursuant to the terms of the agreement, after the recording of the deed, TY Grand LLC waived its right to sue for non-monetary defaults under the agreement, as well as the deficiency amount of $2,510,123.90. The Court entered judgment in favor of TY Grand, holding that 4100 West Grand LLC received reasonably equivalent value in exchange for the transfer. The Court determined that TY Grand LLC received value in the amount of $2,310,000, which amount represents the value of the Property transferred ($1.115 million); $485,000 in cash payments; and a claim under the Forbearance Agreement worth approximately $710,000; whereas the Debtor received a release of a $2.5 million debt

10/16/2012
In re Computer World Solutions, Inc.

Attorney Daniel A. Zazove and the Perkins Coie law firm filed a Motion and Application for Allowance of Compensation as Debtor's Attorney. Chapter 7 Trustee Steven Radtke and Robert Stein, a defendant in a related adversary, objected to Counsel’s Application for Compensation, arguing that subsequent to the entry of the retention order, Zazove and Perkins Coie received other compensation from an Assignee or Fifth Third Bank without leave of court as required by 11 U.S.C. § 330(a)(1). Mr. Zazove argued that those funds were for services rendered to the Assignee for the Benefit of Creditors, not the bankruptcy estate. Over Stein’s objection, the Court granted Counsel’s application for compensation. In the spirit of abstention, the Court declined to require the Assignee to submit to bankruptcy court jurisdiction after he was excused from the Section 543 delivery requirement. Bankruptcy Code Section 330(a)(1) governs compensation to professionals retained by a bankruptcy estate; it has no application to the payment of an assignee’s attorney for legal services rendered in the operation of an assignment for the benefit of creditors.

08/24/2012
In re Lancelot Investors Fund, L.P., et al

Defendants in eleven Lancelot-related (08-B-28225) adversary proceedings brought 17 motions for summary judgment arguing that each matter involved the straightforward application of Bankruptcy Code Sections 546(e) and (g) “safe harbor” limitations on a trustee’s avoidance powers and for that reason they were entitled to summary judgment as a matter of law regarding payments and transfers made to them. The Trustee resisted the imposition of summary judgment on two major grounds: that the safe harbor provisions do not shield payments and transfers tainted by Ponzi Scheme fraud and that avoiding the payments and transfers would not materially impact the financial markets. The Defendants suggested that the Trustee’s arguments look beyond the plain statutory text of the safe harbor provisions by reading exceptions into the Code. The Court granted summary judgment as to the Counts alleging preferential transfers and constructive fraudulent transfers under Bankruptcy Code Sections 548(a)(1)(B), 550 and 544 as well as under Illinois law, but denied summary judgment as to the actual fraudulent transfer claims asserted under Section 548(a)(1)(A). The safe harbor provisions specifically prohibit the recovery of preferential transfers, constructively fraudulent transfers and claims based on state law. The provisions do not protect actual fraudulent transfer claims. The Court declined to expand the plain meaning of the statute, and noted that Congress did not exempt all fraudulent transfers from safe harbor protection, only those involving actual fraud, claims that allege that a debtor acted “with actual intent to hinder, delay or defraud any entity” to which the debtor was indebted. Before submitting Orders on these matters, the Court invited the parties to submit supplemental briefs on whether the Orders resolve core matters on which this court may enter final orders in light of the Supreme Court’s ruling in Stern v. Marshall, 131 S.Ct. 2594 (2011) and the recent Seventh Circuit Court of Appeals ruling in Ortiz v. Aurora, 665 F.3d 906 (7th Cir. 2011).

03/07/2012
In re: Vance Shaf (10 B 51226); Dr. Duncan Dinkha v. Vance Shaf and V.E.K. Homes, LLC (11 A 00664)

The Plaintiff filed an adversary proceeding seeking a finding that a debt reflected by a judgment in the amount of $75,000 is not dischargeable under 11 U.S.C. §§ 523(a)(2)(A), 523(a)(4)(A), and 523(a)(2)(6). The complaint alleged in part that the Defendant, a real estate developer, accepted two installment payments from the Plaintiff when he knew that he could not comply with the Plaintiff’s request to occupy the premises at the time contracted for. The Court entered judgment for the Plaintiff on the section 523(a)(2)(A) claim in the amount of $75,000 and found that the Defendant’s failure to disclose long-standing zoning problems which he knew would cause the delay in the construction of a custom built home was done with the intent and purpose of deceiving the Plaintiff.

01/17/2012

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