Judge Jacqueline P. Cox - Opinions / Outlines

Judge Jacqueline P. Cox

07 B 03856

Pro se creditor purchased a home from a third party in the debtor’s real estate development project. The creditor filed a timely proof of claim alleging repair items and building code violations. She subsequently filed several other claims after the claims bar date passed arguing that each amended her previous timely filed claim. The Court found that her attempted amendments asserted new claims that did not relate back to her original claim and that the new claims could not satisfy the excusable neglect standard for allowing a claim filed after the claims bar date. The creditor’s timely filed claim was denied because the debtor successfully met its burden in objecting the claim.

 

07 B 03856

Corporate creditor, through its vice president who is not an attorney, filed a claim against the debtor after the claims bar date passed. The debtor objected, arguing the claim was untimely filed. After obtaining counsel, the creditor argued that its claim should be allowed under the excusable neglect standard announced by the U.S. Supreme Court in Pioneer Inv. Services Co. v. Brunswick Assoc. L.P., 507 U.S. 380 (1993). The creditor specifically argued that when it filed its claim without counsel, it did not understand the complexities involved in filing a timely claim and that allowing its claim would have a de minimus impact on any potential distribution to the other creditors. The Court found that filing the claim without the aid of counsel was not excusable under the Pioneer test and that as a sophisticated business entity, the creditor should have recognized when an attorney was needed. The Court also found that allowing the claim would prejudice both the debtor and the other creditors who timely filed their claims since it would affect any distribution made.

04 B 45177, 06 A 01812

Creditor trustee filed a complaint to recover five alleged transfers made to the defendant from the debtor two months prior to the bankruptcy case. Three of the transfers were disposed via summary judgment for the defendant. A hearing was held regarding the remaining two transfers. The Court found that the remaining two transfers were made while the defendant was insolvent. The defendant asserted that the transfers were made in the ordinary course of business. This was rejected because the defendant only offered the testimony of its president who could not testify to the industry standard, and therefore, was not an expert witness. The defendant then argued that the transfers were made as part of a lease that was assumed post-petition by the debtor. The Court agreed and entered judgment for the defendant on the two remaining transfers base on the Seventh Circuit’s ruling in In re Superior Toy & Mfg. Co., Inc., 78 F.3d 1169 (7th Cir. 1996).

07 B 03856

Chapter 11 Debtor brought a motion to sell certain real estate. One principal of the Debtor had expressed his disapproval of the sale of the real estate as proposed in the motion to sell. The Court required that all principals of the Debtor must approve the sale. Debtor then moved for reconsideration of this ruling or in the alternative for an appointment of a trustee with limited power or an examiner with expanded power. On reconsideration, the Court found that all principals did not need to consent to the sale of the real estate. The Court also denied the Debtor's request for the appointment of a Trustee with limited power or an examiner with expanded power.

In re Falconridge, LLC
November 8, 2007

07 B 19200

Prior to the debtor’s bankruptcy filing, the mortgagee obtained a judgment of foreclosure in state court against the debtor, the owner of an apartment building, and its sole member. The state court also appointed a receiver to maintain the property. The debtor thereafter filed a single-asset real estate bankruptcy case before the property could be sold at a sheriff’s sale. The mortgagee brought an emergency motion under 11 U.S.C. § 543(d) seeking to excuse the receiver from having to turnover the apartment building to the debtor in accordance with 11 U.S.C. § 543(b). The court found that the Debtor’s prior mismanagement of the property and questionable business practices negated the statutory obligation of a custodian to turnover assets to a debtor in bankruptcy. The court concluded that the interests of creditors would be better served if the receiver was excused from complying with 11 U.S.C. § 543(b).

04 B 48014, 05 A 01624

Plaintiff Trustee and the Defendant filed cross-motions for summary judgment on the Trustee's adversary complaint. The adversary complaint sought avoidance under 11 U.S.C. § 544(b) and § 5 of the Illinois Uniform Fraudulent Transfer Act of the Debtor's pre-peition transfer of real estate to his wife, the Defendant. Prior to the transfer, the Debtor and his wife held the real estate as tenants by the entirety. The Trustee's adversary complaint also sought authority under 11 U.S.C. § 363(h) to sell the real estate. The Defendant argued that avoidance of the transfer will restore the property to the tenancy by the entirety estate that existed prior to the transfer being made and operate to keep the real estate beyond the reach of the Trustee's avoidance power. The Trustee argued that the tenancy by the entirety estate will not be revived once the transfer is avoided because whatever “entirety” existed prior to the transfer was voluntarily extinguished by the Debtor once the transfer was made. Moreover, even if the tenancy by the entirety comes back into existence after avoidance, 11 U.S.C. § 522(g) prohibits an exemption from being claimed in the real estate. The court granted summary judgment in favor of the Trustee and against the Defendant on all counts of adversary complaint.

In re Enyedi, et al.
July 12, 2007

06 B 08771

Debtors filed a chapter 7 bankruptcy case and obtained a discharge. The chapter 7 trustee filed a No Asset Report and the case was closed. Approximately 7 months later, the debtors’ case was re-opened for the purpose of disclosing 2 pre-petition causes of actions that were omitted from their bankruptcy schedules. The chapter 7 trustee previously assigned to the case was re-appointed as trustee. After the case was re-opened, the defendants involved in the one matter pending in state court (the other matter is a workers compensation claim) obtained an order dismissing the law suit with prejudice because the debtors failed to properly list it in the bankruptcy case. The chapter 7 trustee moved for an order of contempt against the defendants for violating the automatic stay. The court held that (1) the unscheduled lawsuit was never abandoned by the trustee and is still property of the estate protected by the automatic stay; (2) the trustee, not the debtors, hold the exclusive right to pursue the cause of action in state court; (3) the defendants violated the automatic stay and the state court order of dismissal is void ab initio; and (4) neither an order of contempt nor an award of damages were warranted based on the circumstances of the case.

07 B 03856

Chapter 11 debtors filed application to employ law firm as special litigation counsel to represent them in pending state-court litigation involving derivative claims and counterclaims the debtors’ principals filed against each other on behalf of certain debtors. The court overruled the objection from one of the debtors’ principal members and prior manager and held that the law firm’s employment was in the best interest of the estate and that the interests of the debtors’ controlling principals, who are defendants in the state court litigation, are not adverse to the estates’ interests. The court also noted that special counsel risked total denial of any requested compensation award if it failed to timely disclose the development of an adverse interest while representing the debtors.

05 B 13171, 05 A 1582

An attorney was ordered to produce documents sought by subpoena in relation to his representation of 2 debtors. The court declined to order disclosure based on the common interest exception to the attorney- client privilege because the clients did not jointly seek the attorney's professional services. However disclosure was ordered based on a finding that the crime-fraud exception to the attorney-client privilege was applicable.

In re Meridee Hodges
February 28, 2007

05 B 46676

The debtor objected to the claim of the Social Security Administration (SSA) that she owed it $38,878.40 for overpayment of disability benefits. The SSA's motion to dismiss the claim objection was granted because debtor did not exhaust her administrative remedies by first securing SSA's review of her position that she had not received more than she was entitled to. The Social Security Act allows review of SSA's final decisions via a civil action and deprives the courts of original jurisdiction of such matters. The court also found that even though the government violated the automatic stay by sending the debtor a demand letter after the bankruptcy petition was filed, it was questionable whether stay violation damages could be proven because the debtor pursued the government by filing its claim, objecting to it and seeking court review of the SSA's position.

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