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Judge Jack B. Schmetterer

Bankruptcy No. 13 B 28022

13 B 04073

12 B 48247

Judge Jacqueline P. Cox

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 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.

Judge Timothy A. Barnes

In re Charles Walker
December 9, 2013

13 B 42168
The chapter 13 trustee filed a motion to dismiss the Debtor’s chapter 13 case pursuant to 11 U.S.C. § 1307. The Trustee alleged that the Debtor failed to meet the requirements under 11 U.S.C. § 109(h)(1) because the Debtor did not receive counseling during the 180-day period preceding the date of filing of the case. Held: The Debtor meets the requirements under 11 U.S.C. § 109(h)(1), as the Debtor received credit counseling the date of the filing of the petition. The plain language of section 109(h)(1) permits a debtor to receive credit counseling on the date of the petition. Credit counseling received on that date, though after the time of the filing of the petition, satisfies the requirements of section 109(h)(1). The court therefore denies the motion to dismiss.

13 B 18697
The Debtor brought a motion for contempt sanctions against Ahad Real Estate, LLC, Beach Business Bank, Macon Group, LLC and the receiver John Flanders Kennedy for alleged violations of the automatic stay of 3680 Riverside Drive, Macon, GA 31210. The court finds that the Debtor, as the movant and the party on whom the primary burden falls, failed to carry that burden as to establishing that an interest in 3680 Riverside Drive, Macon, GA 31210 became property of the Debtor’s bankruptcy estate, so as to afford that interest the protections of the automatic stay and allow the Debtor to seek damages arising from an alleged violation of those protections. The Debtor failed to show that the foreclosure and transfer of title of 3680 Riverside Drive, Macon, GA 31210 that occurred on February 5, 2013 did not divest the Debtor of its interests, if any. The court also finds that the Debtor’s allegations against the Receiver for coercion of funds are likewise unsubstantiated. The court therefore denies the motion for contempt sanctions against all parties.

11 B 12584 and 13 B 13374
11 A 01455 and 13 A 00687
Creditor commenced adversary proceedings against debtors husband and wife in their respective bankruptcy cases seeking a determination that a debt allegedly owed by each of the debtors to the creditor is nondischargeable under 11 U.S.C. § 523(a)(2)(A). The creditor alleged that the debtors obtained a loan from him through false pretenses, false representation and/or actual fraud. Held: Each of the debtors is obligated on the debt despite arguments to the contrary. Nonetheless, creditor failed to prove that either of the debtors obtained the loan by false pretenses, a false representation, or actual fraud, or that a third party’s fraudulent actions with respect to the debt should be imputed to either debtor under agency or other principles. As a result, the debt is dischargeable by each of the debtors.

Judge Carol A. Doyle

In re Michael A. Morawski
November 26, 2013

11 B 49587