18 B 3134, 25 A 55
Chapter 7 trustee filed an adversary proceeding against the debtor, his wife and two mortgage companies.  The complaint alleged that the debtor had transferred an interest in his real property to his wife and granted two mortgages, all without court authority or the trustee’s knowledge.  Debtor and his wife filed a motion to dismiss, arguing that it was too late to avoid the transfer to her because it had occurred more than two years before the trustee filed his complaint.  HELD: The statute of limitations may bar a claim to avoid the transfer under 11 U.S.C. § 549 against debtor’s wife, but the debtor may be equitably estopped from raising this affirmative defense.  The transfer may also be void as a violation of the automatic stay, even though it was a voluntary act by the debtor.  The trustee’s claims for relief based on fraud, rescission and constructive trust may be barred by the statute of limitations as against debtor’s wife, but the debtor may again be equitably estopped from asserting this defense.  The motion to dismiss was granted in part and denied in part, and the trustee was granted leave to amend the complaint.

18 B 3134, 25 A 55
Chapter 7 trustee filed an adversary proceeding against the debtor, his wife and two mortgage companies.  The complaint alleged that the debtor had transferred an interest in his real property to his wife and granted two mortgages, all without court authority or the trustee’s knowledge.  One of the mortgage companies filed a motion to dismiss, arguing that it was too late to avoid the mortgage because it had occurred more than two years before the trustee filed his complaint.  HELD: The statute of limitations may bar a claim under 11 U.S.C. § 549 and the complaint does not plausibly allege that the mortgage company is equitably estopped from raising this affirmative defense.  The mortgage may also be void as a violation of the automatic stay, even though it was part of a voluntary transaction by the debtor and even though the court had granted debtor’s discharge, as the real property was still property of debtor’s estate.  At this time, laches does not bar the trustee’s claims for relief based on fraud, rescission and constructive trust.  The trustee was granted leave to amend the complaint.

24 B 2578, 24 A 70
After a tax sale for delinquent taxes related to the Debtor’s residence, Debtor filed an adversary complaint seeking to avoid the tax sale as a preferential transfer under 11 U.S.C. §§ 547(b) and 522(h) (Count I), and a fraudulent transfer under 11 U.S.C. § 548(a)(1)(B) (Count II). Debtor also brought a takings action under 42 U.S.C. § 1983 (Count III). The Defendant moved to dismiss the complaint, arguing that Debtor lacked standing to bring any of the three actions and that the court lacked subject matter jurisdiction to hear the section 1983 action. HELD: The Debtor failed to plead standing required for Count I (sections 547 and 522(h)) and Count II (section 548). In Count III (1983 Takings Action), Debtor did not establish “related to” jurisdiction over the claim. The motion to dismiss is granted and Debtor will be granted leave to amend the complaint.

24 B 14358, 25 A 133
Plaintiff filed an amended complaint in an adversary proceeding seeking relief on four causes of action: 1) objection to a claim pursuant to 11 U.S.C. § 502, 2) tortious interference with business relations, 3) breach of contract, and 4) equitable relief pursuant to 11 U.S.C. § 105. Defendant moved to dismiss the amended complaint, arguing Plaintiff failed to state a claim for relief Fed. R. Civ. P. 12(b)(6) and the court does not have jurisdiction over the claims pursuant to Fed. R. Civ. P. 12(b)(1). HELD: Plaintiff’s objection to a claim that was never filed in the bankruptcy case is unripe, moot, and non-justiciable, and the court lacks subject matter jurisdiction over Counts I and IV. Without Counts I and IV, the court does not have subject matter jurisdiction over Counts II and III because those claims were abandoned by the trustee and do not affect the value of the estate or the allocation of property to creditors. Even if the court had jurisdiction over Counts II and III, those claims are barred by the doctrine of res judicata, and the amended complaint fails to state a claim for relief for those causes of action.

23 B 8488, 23 A 387
Plaintiff filed an amended complaint in an adversary proceeding seeking to deny the Debtor a discharge under 11 U.S.C. § 727(a)(5) and seeking a finding that a debt owed to Plaintiff is nondischargeable under §§ 523(a)(2), (4), and (6).  The Debtor moved to dismiss the amended complaint, arguing that Plaintiff failed to state a claim for relief under Fed. R. Civ. P. 12(b)(6), as well as a failure to meet the heightened particularity requirements under Fed. R. Civ. P. 9.  Held: The amended complaint adequately states claims for relief.  The amended complaint adequately alleges all required elements for all counts and therefore the motion to dismiss is denied.  Throughout his motion, Defendant complained that the Amended Complaint contains nothing more than bare conclusions and must be dismissed, but ignored the fact that Plaintiff only must plead plausible claims.  Plaintiff pleaded plausible claims; proof will come at trial.

24 B 1529
Debtors filed for relief under chapter 11 on the second day of the month.  They had not paid the rent for several nonresidential real property leases that came due on the first day of the month.  Eventually, the landlords filed applications for administrative expense claims.  Among other requests, the landlords sought administrative expense priority for the “stub period” rent that accrued between the petition date and the next due date.  HELD: In the Seventh Circuit, 11 U.S.C. § 365(d)(3), which requires timely payment of all obligations under an unexpired lease of nonresidential real property, does not require payment of stub period rent.  This does not preclude landlords from seeking administrative expense priority for stub period rent under 11 U.S.C. § 503(b)(1).  Seventh Circuit authority requires a transaction with the debtor-in-possession and a benefit to the estate for a claim to qualify for administrative expense status under § 503(b)(1).  The key issue in this case was whether there was a transaction with the debtor-in-possession.  The court found that there was.  First, section 365 codifies the transactional relationship, and thus the transaction, between a landlord and the debtor-in-possession.  Second, the facts of this case showed that the Debtors induced the landlords to perform under the leases after the petition date.  Although inducement is additional evidence of a transaction with the debtor-in-possession, it is not necessary to that finding.  Obligations remained with both parties postpetition and arose under the operation of the Bankruptcy Code.  Finally, the concept of fairness to all persons having claims against a debtor, as described by the Supreme Court, supports a finding that the stub period rent is entitled to administrative expense priority.

25 B 16542
Debtor sought waiver of his filing fee.  The court denied the application, and Debtor filed a motion for reconsideration.  HELD: The standard for waiver of a chapter 7 debtor's filing fee is found in 28 U.S.C. § 1930(f)(1).  The court must determine whether a debtor's income is below a certain limit and whether the debtor is unable to pay the fee in installments.  Even if a debtor meets his burden and satisfies both requirements, waiver of the filing fee remains within the court's discretion.  Having reviewed the allegations in Debtor's motion and heard his presentation, the court found that Debtor did not satisfy his burden under 28 U.S.C. § 1930(f)(1).  Even if he had, the benefit of the waiver in comparison to the burden on the bankruptcy system would not be justified.  There was no basis to reconsider the court's original decision.

23 A 20
Plaintiffs hired Defendant as a general contractor to build a house.  In the middle of construction, they discovered that the sworn statements he had been sending with his draw requests were not accurate.  Before they could obtain a judgment in state court, Defendant filed for relief under chapter 7.  Plaintiffs sought a finding that the debt Defendant owed to them was not dischargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (a)(6).  On summary judgment, the court found no issue of fact that Defendant made false representations on which Plaintiffs relied.  The court conducted a trial on the remaining issues.  HELD: Defendant made the false representations with a reckless disregard for the truth and with the intent to deceive Plaintiffs, so his debt to them was nondischargeable as based on false representations.  The misrepresentations cheated the Plaintiffs in an unfair way, so the debt was also nondischargeable due to actual fraud.  However, Plaintiffs did not establish that the debt was incurred through willful and malicious injury.  Defendant intended to deceive Plaintiffs, but the evidence did not show that his intent was to harm them.

17 B 25014, 22 A 189
Following remand, Defendant City of Chicago filed a second motion to dismiss Plaintiff Adrienne Butler’s amended complaint seeking relief under 11 U.S.C. § 362(k) for violations of §§ 362(a)(2), (a)(4) and (a)(6).  The City argued that Butler did not have standing to assert violations of the automatic stay.  Even if she did have standing, the amended complaint failed to state a claim because, among other reasons, City of Chicago, Illinois v. Fulton, 592 U.S. 154 (2021), required that she allege an alteration of the status quo.  Butler opposed the motion on several grounds, including the contention that it was an improper successive motion to dismiss.  HELD: The motion was not an improper successive motion to dismiss.  Nevertheless, it was not well-taken.  Butler had standing to assert violations of the automatic stay.  And, even if the holding in Fultonapplied to her claims under §§ 362(a)(2), (a)(4) and (a)(6), the amended complaint plausibly alleged a claim for relief under each of those subsections.  Therefore, the court denied the second motion to dismiss.

22 B 01957, 23 A 0330
Chapter 11 individual debtor/plaintiff sued a party that filed a proof of claim as well as its attorneys, asserting claims for relief under the Fair Debt Collections Practices Act. Defendants filed a motion to dismiss. Plaintiff requested time to file an amended complaint, which the court allowed. Defendants filed a motion to dismiss the amended complaint. The court granted the motion, and then granted a motion for reconsideration and allowed Plaintiff to file a second amended complaint. Defendants filed a third motion to dismiss. HELD: Plaintiff’s second amended complaint did not contain well-pleaded allegations that each of the Defendants was a debt collector. Neither did the second amended complaint plausibly allege that the underlying debt was a consumer debt – that it arose out of a transaction incurred primarily for personal, family, or household purposes. Both of these elements are required to state a claim for relief under the FDCPA. Since Plaintiff already had an opportunity to file both an amended and a second amended complaint, the court granted the motion to dismiss with prejudice.

24 B 17304
Debtor filed for relief under the Bankruptcy Code.  Since this was his third bankruptcy case within a year, he also filed a motion to impose stay.  Debtor sent notice of the motion to impose stay to tax purchaser Newline Holdings at the address of the attorney who had appeared for Newline in his second case, even though that attorney had not yet appeared in the third case.  Newline did not object to the motion to impose or appear at the hearing, and the court granted the motion.  Newline subsequently filed a motion to vacate the order imposing stay on the grounds that it was void for lack of due process.  HELD: Motion to vacate granted.  As a known creditor, Newline was entitled to actual notice of the motion to impose.  Service on an attorney who represented a creditor in a prior bankruptcy case is not service on the creditor in a later case.  Therefore, service did not comply with due process requirements.  Neither did service comply with Fed. R. Bankr. P. 9014 regarding service of a contested matter.  While there is precedent that service is sufficient when sent to the address listed on a proof of claim, that line of reasoning applies to a proof of claim filed in the same case.

23 B 12352, 24 A 222
Chapter 11 debtor confirmed its plan, then filed an adversary proceeding against a creditor that had not participated in the bankruptcy case.  In the complaint, Debtor sought to liquidate its own claim against the creditor and also requested entry of a declaratory judgment that the creditor was estopped from asserting the defense of setoff.  The creditor responded with a motion to compel arbitration and dismiss the complaint.  HELD: When an arbitration demand is made in a bankruptcy case, the court must determine whether to enforce the bilateral arbitration agreement or its in rem jurisdiction under the Bankruptcy Code.  Here, the court granted the motion to compel to the extent that the parties’ claims against each other would be liquidated in an arbitral forum.  The court denied the creditor’s request to dismiss this adversary proceeding, however, finding that the claim for relief that the court issue a declaratory judgment regarding setoff presented questions of bankruptcy law rather than a dispute under the parties’ contract.  Once the parties’ claims were liquidated by the arbitrator, they would return to bankruptcy court for resolution of the declaratory judgment claim.

23 B 8488, 23 A 387
Plaintiff filed an adversary proceeding seeking to deny the debtor a discharge under 11 U.S.C. §  727(a)(5) and finding that a debt owed to Plaintiff is nondischargeable under § § 523(a)(2), (4), and (6).  The debtor moved to dismiss the complaint, arguing the claims were time barred and that plaintiff failed to state a claim for relief under Fed. R. Civ. Proc. 12(b)(6).  HELD: The question of the dischargeability of a debt under the bankruptcy code is governed by the limitations periods established by bankruptcy law, not by the state statute of limitations on fraud. Therefore, the motion is denied as to dismissing the complaint for being time barred. However, the complaint fails to state a claim for relief. The complaint fails to sufficiently allege at least one element required for all counts and therefore the complaint is dismissed in its entirety. Plaintiff is given leave to amend.

24 B 11314
Debtor filed his 18th bankruptcy case in 13 years.  The chapter 13 Trustee brought a motion to dismiss for unreasonable delay, and also sought a two-year bar to refiling.  HELD: Debtor did not submit tax returns, proof of identity or pay advices, so the Trustee could not hold the meeting of creditors.  Debtor did not pay any of the installments of his filing fee, and he owed filing fees from his previous cases.  He filed a plan, but it could not be administered, and he did not begin making payments under that plan.  Therefore, Debtor’s actions constituted unreasonable delay.  Additionally, this case presented an extreme situation that warranted dismissal with a bar.  This was Debtor’s 16th chapter 13 case and he had never made a single plan payment in any of those cases.  His pattern of conduct and failure to comply with the requirements of the Bankruptcy Code constituted bad faith.  The court imposed a two-year bar to refiling.

23 B 4039
Debtor sought damages for violation of the automatic stay on the grounds that, after the stay terminated under 11 U.S.C. § 362(c)(3)(A) and after U.S. Bank (“Bank”) obtained relief from the stay to pursue eviction, the Bank had exercised control over property of the estate.  HELD:  In arguing that the Bank had violated the stay after she was evicted and before she recovered items that remained in the house, Debtor relied on the reasoning in In re Jones, 339 B.R. 360 (Bankr. E.D.N.C. 2006).  Jones held that § 362(c)(3)(A) terminates the stay with respect to actions taken against the debtor and property of the debtor, but not with respect to property of the estate.  It was unnecessary for this court to take a position on whether Jones’s interpretation of § 362(c)(3)(A) is correct, because Debtor did not establish that she was injured by the Bank’s control over property of the estate.  Debtor exempted nearly all of her personal property before the Bank evicted her.  Therefore, that personal property had already returned to its status as property of the debtor, for which the stay had terminated.  Debtor did not tie together her request for damages – based on hotel and food charges – with the Bank’s exercise of control over any property that remained in the estate.

24 B 17836
Housing Authority of Cook County (“Movant”) brought a motion for relief from stay, seeking authority to continue with its unlawful detainer action against Debtor’s residence.  Debtor objected.  HELD: Motion granted for two reasons.  First, Movant obtained an order of possession prior to the petition date.  Although Debtor filed the certification described in § 362(l)(1), she did not file a further certification.  Therefore, since more than 30 days had elapsed since Debtor filed her petition, the exception to the automatic stay in 11 U.S.C. § 362(b)(22) applied.  Second, even if the exception in § 362(b)(22) did not apply, relief from the stay was warranted under § 362(d)(2).  As a tenant, Debtor did not have an equity in the leased premises.  Although in many chapter 13 cases a debtor’s home is necessary for an effective reorganization, in this case Movant had offered relocation services including an alternative residence, moving expenses and funds for new furniture.  Additionally, the Supreme Court has stated that the effective reorganization must be in prospect.  Debtor had filed a chapter 13 plan, but it was essentially blank.  Therefore, Debtor did not meet her burden of showing that the property was necessary for an effective reorganization and stay relief was appropriate.

22 B 13283, 23 A 20
Plaintiffs hired Debtor/Defendant to build a house.  During the course of construction, Defendant furnished a number of sworn contractor’s affidavits that reflected the amounts paid by Plaintiffs rather than the amounts paid to various subcontractors.  Plaintiffs filed a two-count complaint seeking a finding that Defendant’s debt to them is nondischargeable pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (a)(6), and then sought summary judgment on the complaint.  HELD: There is no issue of fact that Defendant made false representations in the contractor’s affidavits.  The purpose of the Mechanics Lien Act is to protect both property owners and subcontractors.  When a contractor demands payment and furnishes a sworn affidavit regarding the status of payments to subcontractors, that affidavit must reflect payments made to subcontractors and amounts remaining due.  Since there is a genuine issue of fact regarding Defendant’s intent, however, the court denied summary judgment on the § 523(a)(2)(A) count.  As for the claim that the debt was incurred for willful and malicious injury, the case law requires intent to cause injury.  There is an issue of fact as to Defendant’s intent when he furnished the affidavits.  This issue can best be resolved at a trial where the court can evaluate Defendant’s credibility on the witness stand.  Therefore, the court denied summary judgment on the § 523(a)(6) count as well.

24 B 2741
Creditor filed a motion to dismiss Debtor’s chapter 11 case on the grounds that Debtor had not obtained the prepetition consent of an independent manager, and therefore lacked authority to file for relief under the Bankruptcy Code.  HELD: Debtor’s LLC agreement required the consent of its independent manager prior to filing a petition.  The evidence showed that Debtor did not confer with the independent manager and did not obtain her consent.  Since Debtor did not establish that the independent manager resigned prepetition, acquiesced to the bankruptcy filing or ratified it, Debtor lacked authority to file the petition.  Additionally, Debtor’s corporate organization documents did not impermissibly restrict its right to file for relief under the Bankruptcy Code.  Therefore, cause existed to grant the creditor’s motion and dismiss the bankruptcy case.  The court denied creditor’s request to impose a bar to refiling.

24 B 6598
Debtor Zarifian Enterprises, LLC filed a motion to convert its involuntary chapter 7 case to one under Subchapter V. The chapter 7 trustee objected. Trustee argued that cause under § 1112 exists thereby preventing conversion and that Debtor’s failure to “engage in commercial or business activities” required by the definition of “debtor” in § 1182(1)(A) rendered it ineligible for conversion to Subchapter V. HELD: First, though a motion to convert to chapter 11 may be denied if the case would simply be reconverted “for cause” under § 1112(b), the trustee did not show “a substantial or continuing loss to or diminution of the estate” as an element of “cause” required by § 1112(b)(4)(A). Rather, Debtor’s receivables, inventory, lawsuit, and sale of equipment would generate revenue for the estate. Second, § 1182(1)(A) does not require that a debtor maintain its core or historical business operations on the petition date; it requires a debtor engaged in commercial or business activities. Though Debtor no longer maintained its historical business as a carpentry and millwork, it maintained significant assets, a bank account, a 4-year, and a claim against its landlord for wrongful lockout. Debtor would have been engaged in business activities while liquidating its assets had the involuntary petition not been filed, and it intends to file a Subchapter V plan of liquidation.

23 B 6782
Debtor IYS Ventures, LLC filed an adversary proceeding seeking to determine the validity, extent and priority of certain secured claims, including a claim filed by Eby-Brown Company, LLC.  Eby-Brown took the position that its claim was secured even though it had not filed a financing statement.  After trial, the court held that Eby-Brown did not hold a perfected lien securing its debt and that its interest was unsecured.  Debtor then filed a motion requesting imposition of sanctions under Fed. R. Bankr. P. 9011 and 11 U.S.C. § 105, and costs, expenses and attorneys’ fees under 28 U.S.C. § 1927.  HELD: Motion denied.  First, Debtor did not comply with the safe harbor requirements of Rule 9011.  Even if it had done so, Debtor waited too long to file the motion for sanctions.  Although Eby-Brown had not produced documents in response to Debtor’s requests for production, Debtor made the tactical decision not to pursue compliance with its discovery requests.  Finally, even if the motion had been timely, sanctions were not warranted under either Rule 9011 or 28 U.S.C. § 1927.  Although it did not prevail at trial, Eby-Brown advanced credible arguments in support of its position.