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Judge Jacqueline P. Cox - Opinions

Description Date Issued
Coast to Coast Leasing, LLC vs. M&T Equipment Finance Corporation, et al (In re Coast to Coast Leasing, LLC)

24 BK 03056, 24 AP 00172
In this chapter 11 case, the Debtor sought a temporary restraining order (TRO) to stay litigation against third-party guarantors, the Debtor’s principals, and related entities.  The Debtor argued its principals were responsible for all management, accounting, and operations of the Debtor and intended to contribute financially to the plan.  The court granted the TRO, relying on In re Gander Partners LLC, 432 B.R. 781, 783-84, 787-89 (Bankr. N.D. Ill. 2010), finding a temporary stay of the litigation at issue was warranted because it could distract the Debtors’ principals and affiliates.  The court found the litigation could impair this court’s jurisdiction to help the Debtor reorganize, since the source of funds to use for the reorganization could be jeopardized and that there was a reasonable likelihood of a successful reorganization.  The court noted that the relief requested was not barred by the recent ruling in Harrington v. Purdue Pharma L.P., 144 S. Ct. 2071 (2024), which invalidated the practice of granting nonconsensual releases to non-debtors in chapter 11 reorganization plans.

In re We’ll Clean Incorporated

24 BK 00151
The chapter 7 trustee (the “Trustee”) moved for a determination that creditors’ pre-petition state court claims against non-Debtor third-parties for successor liability, fraudulent conveyance, and creation of a constructive trust were property of the estate.  Creditors objected to the motion.  They agreed with the trustee regarding two of the claims.  However, they argued the Trustee was barred from bringing the successor liability claim under the doctrine of in pari delicto.

Pre-petition, the creditors had extended loans to the Debtor, its President/sole shareholder, and a related entity (collectively, the “borrowers”).  Following the borrowers’ default, the lending creditors sued the borrowers and third parties that had allegedly offered the Debtor’s President debt counseling services.  The third parties included the current owner of the car wash—a corporation called Avalon—and its managers, two individuals. The creditors alleged the Debtor’s President and the third parties had engaged in a fraudulent scheme to interfere with debt negotiations between the creditors and borrowers and transferred the assets of the car wash business to the non-Debtor third parties to avoid the borrowers’ liability under the loans. The creditors brought the successor liability claim against Avalon, the corporate successor and current owner of the car wash; they asserted the fraud exception to Illinois’ general rule of successor corporate nonliability applied, arguing that Avalon should be held liable for payment of the loans due to its managers’ involvement in said fraudulent scheme. 

The court agreed with the objecting creditors, holding that the Trustee could not assert the successor liability claim, but for a different reason.  The court reasoned that the successor liability claim was a claim that was personal to the lending creditors, since it was for breach of loan agreements that were not common to all creditors, relying on Koch Ref. v. Farmers Union Cent. Exch., Inc., 831 F.2d 1339, 1348-49 (7th Cir. 1987). Since the lending creditors had also alleged that some of the Debtor’s President’s actions in facilitating the transfer of the car were taken under duress, the court found that whether in pari delictoapplied was more appropriately resolvable in state court by a judge or jury.

H & H Fast Properties, Inc. v. Toorak Capital Partners, LLC (In re H & H Fast Properties, Inc.)

23 BK 16874, 24 AP 00020
After filing for bankruptcy, the subchapter V Debtor filed an adversary proceeding, seeking an injunction to stay a creditor from enforcing a state court judgment it obtained against the Debtor’s principal on a debt she guaranteed.  The court denied the Debtor’s Motion for Preliminary Injunction since the Debtor could not show the third-party litigation would defeat or impair this court’s jurisdiction and that the injunction sought would serve the public interest.

The court reasoned the state court judgment did not and could not impair this court’s jurisdiction, since the state court had denied the Creditor’s request to enter a finding pursuant to Illinois Supreme Court Rule 304(a).  The judgment against the principal could not be enforced or appealed until the resolution of all claims.  The action was stayed as to the Debtor (the borrower under the loan) upon it filing for bankruptcy relief.  The court reasoned the Debtor could show a likelihood of success on the merits, since, although it was early in the case, there were no apparent barriers to confirmation.  However, it could not show an injunction would serve the public interest because the Debtor did not need a stay, since the judgment against its principal could not presently be enforced.

In re Dennis Molnar

19 BK 09525
A chapter 13 debtor filed a motion to substitute attorney and informed the court that his lawyer(s) of record from the Semrad Law Firm did not return his calls after he sought their help with a mortgage issue, causing him to secure other counsel.  The court entered an Order setting a hearing on a Rule to Show Cause directed to the Debtor’s former lawyers, Louis Raymond Gomes, Elizabeth Placek, and Patrick Semrad to show cause why they should not be held to have violated their flat fee agreement with the Debtor, which required them to represent the Debtor until the case closed.  Attorney Patrick Semrad testified that the Debtor called the firm, but did not explain why the Debtor did not receive the services expected, arguing instead that he just wanted to change attorneys.  The court sanctioned Debtor’s former lawyers for violating the applicable rules of professional conduct. The attorneys, jointly and severally, were ordered to return $2,000 to the Debtor.

Jones v. City of Chicago (In re Tony R. Jones)

22 AP 00206, 16 BK 26076
Six years after a chapter 7 debtor obtained a discharge and the case was closed, without moving to re-open the case, the debtor filed an adversary complaint, asserting individual and class claims against the City of Chicago.  He alleged the City violated the automatic stay under 11 U.S.C. §§ 362(a)(2), (a)(5), (a)(6) and 554(c) due to its pre-petition impoundment, repossession, and eventual disposal of his and other debtors’ vehicles.  The debtor argued the City’s possessory lien was invalid under Illinois law.  The City moved to dismiss under Fed. R. Civ. P. 12(b)(1) and (b)(6), alleging subject-matter jurisdiction was lacking because the debtor lacked standing to assert stay violations and a violation of the turnover statute.  The City argued only the chapter 7 trustee had the right to demand turnover, and since the trustee had declined the City’s offer to turn over the vehicle and did not authorize the vehicle’s release, the City did not violate the stay or turnover provisions by withholding the vehicle from him.  The Debtor had scheduled the vehicle and the City’s pre-petition lien thereon but did not claim it as exempt.

The court granted the City’s motion to dismiss with prejudice, finding the Debtor (and class plaintiffs) lacked standing because he did not credibly allege he (or the other plaintiffs) had an interest in the vehicle by claiming an exemption and could not show that the vehicle was abandoned to him under § 554 prior to the closure of the Chapter 7 case.  The court found the Debtor (and class plaintiffs) failed to state a claim because while the case was pending, the vehicle belonged to the bankruptcy estate and the City was not obligated to turn it over to the debtor.  When the case ended, the City’s lien survived the debtor’s discharge; the City rightfully maintained possession of the vehicle.  The court also found that state court would be a more appropriate forum to rule on the validity of the City’s claim that it held a possessory lien.

In re Peking Duck USA, Inc

23 BK 05135
The Subchapter V Debtor/DIP filed a motion seeking to assume a commercial lease with its landlord under 11 U.S.C. § 365, which permits assumption of “unexpired” leases.  The Debtor sought to assume the lease to continue operating its restaurant on the leased premises in Chicago’s Magnificent Mile District.  In response, its landlord argued the lease was not assumable under § 365 because the lease had terminated/expired pre-petition under Illinois law.  It was undisputed that, pre-petition, the landlord served the Debtor-tenant with a statutory five-day notice per 735 ILCS 5/9-209 stating that (i) the tenant’s rights to possession would terminate if it failed to cure the rent default (then $1,081,936.64) within five days, and (ii) “[o]nly FULL PAYMENT” of the rent demanded in the notice would waive the landlord’s right to terminate the lease, unless the landlord agreed otherwise in writing.  The parties did not dispute that the Debtor did not cure the default in full within the five-day period.  The Debtor filed for bankruptcy after the five-day period expired, but before the landlord had obtained a judgment of possession.  In the eviction action and in the bankruptcy case, the Debtor argued the landlord waived strict compliance with the lease by continuing to accept the Debtor’s partial rent payments after the five-day period expired.  This court denied the motion to assume, finding the lease was not assumable under § 365 because under Illinois law, it had terminated/expired pre-petition after the Debtor failed to cure within the five-day statutory period, relying on In re Williams, 144 F.3d 544 (7th Cir. 1998), Robinson v. Chi. Hous. Auth., 54 F.3d 316 (7th Cir. 1995), and Vill. of Palatine v. Palatine Assocs., LLC, 2012 IL App (1st) 102707 (Ill. App. Ct. 2012).

In re First Premier Funding, LLC

23 BK 00811
In November 2022, the bankruptcy case of Capital Equity Land Trust #2140215 was dismissed because the Bankruptcy Code does not allow land trusts, as opposed to business trusts, to file for bankruptcy relief.  That case was also dismissed for having been filed in bad faith.  The land trust’s beneficiary, First Premier Funding, LLC, subsequently filed for bankruptcy relief regarding the same property two months later in January 2023.

The court dismissed the later filed case on res judicata grounds and for having been filed in bad faith as a litigation tactic where Capital Equity Land Trust’s appeal of the tax deed proceeding was appealed to the Illinois Supreme Court while its beneficiary’s subsequent case proceeded in the bankruptcy court.  The Illinois Supreme Court denied the land trust’s Petition for Leave to Appeal.

Silver-Hacker v. Allen (In re Sarah Allen)

20 BK 05391, 20 AP 00214
In an adversary proceeding, the Plaintiff alleged that a debt the Defendant-Debtor owed her constituted a “willful and malicious injury” by the Debtor and thus was non-dischargeable under 11 U.S.C. § 523(a)(6).   The debt stemmed from a probate court proceeding commenced pre-petition by the Plaintiff as the Administrator of her deceased son’s (the “decedent”) estate; after multiple evidentiary hearings, the probate court found the Defendant-Debtor converted personal property of the decedent’s estate and determinized the amount of the debt (i.e., the monetary value of the converted items and Plaintiff’s legal and expert fees from the probate matter).

In a prior ruling, this court granted the Plaintiff’s motion for summary judgment in part, holding that based on collateral estoppel grounds, (1) the Debtor caused an “injury” for purposes of § 523(a)(6) and (2) the probate court’s findings about the amount of the debt precluded re-litigation of those issues; however, the court denied the motion in part, finding that a trial was necessary to determine whether the Debtor acted willfully and maliciously under § 523(a)(6) when she failed to return the items at issue.

At trial, both parties testified that the Plaintiff’s son was an artist who was living with the Defendant-Debtor in the Plaintiff’s home when he died; upon his passing, the Plaintiff asked the Defendant-Debtor to move out so she could sell the residence, which made the Debtor angry.  Two days after asking the Defendant-Debtor to move out, the Plaintiff testified that she discovered that artwork her son had made, among other items, were gone.  The Defendant-Debtor admitted taking the items and testified that she sought help from Facebook friends to remove the items and did not keep records of which items were taken or where they were stored.  The Plaintiff testified that the Defendant-Debtor returned some of the items but held on to the “important” ones (the artwork), and that the Plaintiff explained how important the missing artwork was to her.  Both parties testified that, after the Plaintiff instituted a Citation to discover assets proceeding for conversion of personal property in probate court, the probate court issued multiple court orders finding that, inter alia, the items in dispute belonged to the Plaintiff and ordering the Defendant-Debtor to return them. 

Based on the Plaintiff’s testimony showing the Defendant-Debtor’s anger she expressed when told to vacate the premise and that the Defendant-Debtor held onto the important items despite knowing how important they were to the Plaintiff, the Defendant-Debtor’s disobedience of multiple court orders requiring her to return the missing artwork, and the Defendant-Debtor’s testimony that she took the items to feel closer to the decedent, the court found her conversion of the items constituted a non-dischargeable “willful and malicious injury” under § 523(a)(6).  The court found that she acted intentionally because she took the items belonging to the probate estate without legal justification and acted with a malicious intent, since she kept the important items despite her knowledge of their importance to the Plaintiff, putting her own comfort and interests above the Plaintiff’s.

In re Todd T. Malmborg

22 BK 06603
After the claims bar date in a Chapter 13 case, an unscheduled creditor moved to vacate a confirmation order under Bankruptcy Rule 9024, arguing his due process rights were violated because he was not given notice of the bankruptcy.
Pre-petition, the creditor had sued the Debtor (his former domestic partner) in state court seeking reimbursement for payments he had made toward the Debtor’s mortgage, condominium assessments, and other home-related expenses, which he allegedly made based on Debtor’s unfulfilled promise to add creditor to the title of the condominium.  The state court case has not concluded and the Debtor disputes the creditor’s claim as to liability and damages.
The court denied the creditor’s motion, finding that his due process rights were not violated because his claim was not reduced or delayed by operation of the Bankruptcy Code.  The confirmed plan did not cover creditor’s claim, which the Debtor prefers to handle outside of bankruptcy. The court reasoned that even if the creditor had timely filed a timely proof of claim, it would permissively abstain from hearing objections to it due to concerns about the entry of conflicting judgments, forum shopping, and applying and respecting Illinois state law on domestic partnerships.  Additionally, the court reasoned that unnoticed creditors’ rights were protected in other ways, including stay relief and exception to discharge.

In re Capital Equity Land Tr., No. 2140215, No. 22-2580 (Bankr. N.D. Ill. Nov. 17, 2022)

Pre-bankruptcy the Debtor defaulted on its obligation to pay real estate taxes on its commercial property.  The  real estate was sold via a scavenger tax sale to Cook County d/b/a the Cook County Land Bank Authority.

The Debtor is an Illinois land trust, an arrangement under which the legal and equitable title to real estate is held by a trustee and the interest of the beneficiary is personal property.  The beneficiary has power to direct the trustee in dealing with the property and the right to the property’s profits.

Bankruptcy Code section 109 covers who may be a debtor. Section 109(d)states only a “person” that may be a debtor under chapter 7 may be a debtor under chapter 11.  A “person” includes corporations as provided for in Bankruptcy Code section 101(41).  Bankruptcy Code section 101(9) informs that the term corporation includes certain associations, partnerships, joint-stock companies and business trusts.

The Debtor has not asserted that it conducted any business activities pre-bankruptcy; it stated that if it regains the property (through its adversary proceeding 22 AP 00037) it will lease it.

Case law generally holds that land trusts do not conduct business activity and for that reason are not eligible for chapter 11 bankruptcy relief as business trusts.

The bankruptcy case was dismissed for ineligibility and because its filing was a litigation tactic, lacking good faith. The related adversary proceeding was also dismissed.

Caren A. Asher v. John J. Petti (In re John J. Petti and Denise A. Petti)

19 BK 00667, 19 AP 00592
The Plaintiff filed an adversary proceeding against the Defendant-Debtor, her former business partner at a failed brewery.  She alleged a $600,000 debt he owed to her, which he personally guaranteed, was non-dischargeable because it was incurred by fraud (11 U.S.C. § 523(a)(2)(A)), fraud or defalcation by a fiduciary (§ 523(a)(4)), and the Debtor willfully and maliciously injured her (§ 523(a)(6)).

She alleged she was induced into loaning $600,000 and entering the business because the Debtor made the following misrepresentations: (1) the brewery would retain distribution rights to Cook County, Illinois; (2) the Plaintiff would be appointed a Class A member of the brewery and she would review all decisions, including who retains distribution rights; and (3) the Debtor would personally guarantee the loan.  She testified that the Debtor gave away the Cook County distribution rights to a distributor behind her back without her permission and because these rights were not retained, potential investors backed out.  The Defendant-Debtor testified that it was not possible to self-distribute in Cook County because after the Plaintiff stopped funding the business, it lacked sufficient funds for marketing, advertising, employees, and truck drivers necessary for self-distribution.

The court ruled against the Plaintiff, and in favor of the Defendant, finding the debt was dischargeable because the Plaintiff could not meet her burden to prove by a preponderance of the evidence that an exception to discharge applied.  Regarding her fraud allegation under § 523(a)(2)(A), she could not show the Debtor made any false representations about the Cook County distribution rights, how the business would be run, or otherwise, since the evidence did not support her allegations.  Regarding  her § 523(a)(4) claim, she could not show an implied fiduciary relationship existed because their contract and testimony suggested the Plaintiff had at least as much power as the Debtor, if not more.  Regarding her § 523(a)(6) claim, she could not show a “deliberate or intentional injury”: it was unclear that the Defendant intentionally filed the documents that allegedly gave away the distribution rights and the parties disputed whether the Plaintiff had the right to approve any and all contracts.

In re 318 Retail, LLC

22 BK 02485
An involuntary Chapter 7 bankruptcy case was filed against the Debtor by one secured creditor with an interest in the Debtor’s real estate, a condo in a retail setting. A receiver appointed in the Debtor’s divorce case moved for dismissal or abstention. The Court denied the receiver’s motion, finding abstention under 11 U.S.C. § 305(a)(1) was not appropriate because there were no unsettled issues on non-bankruptcy law; the state-court appointed receiver had been unable to dispose of the Debtor’s real estate at issue for two years; administration of the assets by a Chapter 7 trustee would be more efficient and would not prejudice any parties; and the case served a bankruptcy purpose. The receiver also alleged the case was not eligible for involuntary bankruptcy relief because there were too few petitioning creditors. However, the court found the issue of eligibility under 11 U.S.C. § 303 was nonjurisdictional and had been waived.

In re Renee Julia Liss

The Debtor moved to reopen her bankruptcy case to avoid a judgment lien, arguing it impaired a homestead exemption in the subject property.  The Claimant objected.  The Debtor was permitted to reopen her bankruptcy case.  The request seeking lien avoidance was heard separately.  It was set for an evidentiary hearing at which the Debtor testified; the Claimant argued the Debtor lacked sufficient evidence for her valuation of the property.  Afterwards, the Court granted the Debtor’s request to avoid the lien, finding that the Claimant, as the objecting party, failed to meet its burden of proof to show the exemption was not properly claimed under Fed. R. Bankr. P. 4003(c): the Claimant failed to bring in any evidence that the property was worth more than the amount claimed by the Debtor.

In re 318 Retail, LLC

22 BK 02485 (Involuntary)
A receiver appointed in a domestic relations case to sell the husband’s assets sought leave to respond to an involuntary bankruptcy petition filed against the Alleged Debtor, a corporate entity in which the husband had an interest. A petitioning creditor, a mortgagee who had a secured interest in real estate owned by the Alleged Debtor, objected. The court ruled that the receiver could file motions to dismiss or to intervene. The receiver was not allowed to answer the involuntary petition because Bankruptcy Code section 303(a) and Bankruptcy Rule 1011(a) allow only debtors and non-petitioning general partners of debtors to do so.

Trustee v. Brown, Udell, Pomerantz & Delrahim, Ltd. (In re Michael S. Helmstetter)

19 BK 28687, 22 AP 00019
The Trustee filed an Adversary Complaint seeking to invalidate a law firm’s statutory attorney’s fees lien and to limit its recovery of fees because its purported lien failed to meet the statutory requirement to disclose its interest, the fee that the client owed the firm.  In its Motion to Dismiss, the firm asserted that it complied with the statute.  The court disagreed with the firm and denied its motion, finding that it failed to disclose the fee that the client owed.

In re Gordon Green

21 B 06189
The Chapter 7 Trustee objected to the Debtor’s claim of exemption relating to a retirement plan organized under Canadian law. The court interpreted relevant federal and Illinois statutes in sustaining the objection.  Illinois law governs exemption of assets in bankruptcy for its residents who file for bankruptcy protection.  Illinois law provides that retirement plans defined as qualified in the Internal Revenue Code are exempt.  To qualify under the Internal Revenue Code a retirement plan has to be created or organized in the United States.

In re Robert M. Kowalski

18 BK 09130
A receiver appointed by a domestic relations judge seeks over $150,000 in administrative expenses for discovering assets that did not bring value to the bankruptcy estate.  The request was denied.

Paloian v. Byline Bancorp, Inc. et al. (In re Robert M. Kowalski)

18 BK 09130, 19 AP 00626
The Trustee filed an adversary proceeding against Byline Bank alleging conversion and violation of the automatic stay because the bank cashed cashier’s checks for the Debtor and his sister that the Debtor purchased pre-petition. The sister, an attorney, claimed that the funds represented legal fees she earned representing the Debtor and entities he controlled.
The United States Attorney indicted the Debtor, his sister and others for bankruptcy fraud and other crimes. The court stayed the adversary proceeding to allow the criminal case to proceed first.  The Trustee filed a motion asking that his adversary proceeding proceed immediately.
The court denied the Trustee’s motion ruling, in part, that proceeding on this civil matter first could jeopardize the rights of the defendants in the criminal case to assert their Fifth Amendment right against self-incrimination because Byline Bank wants to depose them in this matter.

Sharif v. Horace Fox Jr., et al., (In re Richard Sharif)

09 B 05868, 20 A 00399
This adversary proceeding is Debtor Richard Sharif’s latest attempt to undo a default judgment he caused to be entered in 2010 denying him a discharge and declaring a trust to be his alter ego, making it property of the bankruptcy estate.
He alleges that the Chapter 7 Trustee Horace Fox Jr., his attorneys, a child representative in his divorce case, his estranged wife and her former attorney are civilly liable to him for violating the Racketeer Influenced and Corrupt Organizations Act, conspiracy, breach of fiduciary duty and negligence for taking his trust and other property even though the interests in issue were declared to be property of the bankruptcy estate pursuant to a default judgment entered as a sanction for his failure to comply with his discovery obligations.
The case was filed in the District Court; it was transferred to this court.
The Amended Complaint has been dismissed with prejudice.

In re Jessie M. Knight

16 B 32994
The Debtor’s attorney has been ordered to submit an accounting of $8,300 received in settlement of a Motion for Sanctions.  A creditor refused to release title/lien on a vehicle where the underlying debt had been discharged in a completed chapter 13 case.  Because the Debtor’s attorney (or his firm) had entered into the Court-Approved Retention Agreement to represent the Debtor for a flat $4,000 fee, the attorney is not entitled to receive additional legal fees absent an application to the court for such.  No one has sought additional fees.