In re Bahary

528 B.R. 763, 2015 WL 1538115
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedApril 1, 2015
DocketCase No. 11 B 41826
StatusPublished
Cited by4 cases

This text of 528 B.R. 763 (In re Bahary) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Bahary, 528 B.R. 763, 2015 WL 1538115 (Ill. 2015).

Opinion

Amended Memorandum Opinion on Motion For Rule to Show Cause (Dkt. No. 398)

Jacqueline P. Cox, U.S. Bankruptcy Judge

I. Background

On September 29, 2014, the Reorganized Debtor, the Michael Bahary & Steven Ba-hary Partnership (“Bahary” or “Debtor”), filed its Motion to Reopen Case and for Rule to Show Cause (“Motion”) regarding conduct of Napleton Enterprises, LLC (“Napleton”) and its attorney, Rachel A. Gould. Docket Number 398. According to the Debtor, a lawsuit filed by its attorney on Napleton’s behalf in DuPage County, Illinois is proceeding in violation of a discharge injunction and a Plan of reorganization confirmed herein on August 21, 2012. On October 3, 2014, Banco Popular North America (“Banco”) filed a motion to join the Debtor’s Motion. Docket Number 403.

On October 7, 2014, the case was reopened. On October 10; 2014, this Court enjoined the parties from proceeding with the DuPage County, Illinois case. Docket Number 410.

On December 29, 2014, this Court allowed the Rule to Show Cause to issue, requiring Napleton and its attorney, Rachel A. Gould, to show cause why they should not be held in contempt for conduct inconsistent with the Debtor’s discharge injunction and confirmed Plan of reorganization. The Court ruled therein that Na-pleton’s asserted right of first refusal did not apply to the transactions herein. See Order on Motion to Reopen and for Rule to Show Cause, Docket Number 417, pp. 7-9.

On January 13, 2015, Napleton’s motion for relief from the December 29, 2014 order was denied. Docket Number 423. See In re Michael Bahary & Steven Ba-hary Partnership, Reorganized Debtor, 523 B.R. 642 (Bankr.N.D.I11.2015). A hearing on the rule to show cause proceeded in January, 2015 to determine whether Napleton and Attorney Rachel A. Gould should be held in civil contempt for violating the discharge injunction and the August 21, 2012 order confirming the Debt- or’s Plan. 334 Grand Joint Venture, LLP (“GJV”) filed its Motion to Intervene on January 22, 2015.

To hold a party in contempt, a court “must be able to point to a decree from the court which sets forth in specific detail an unequivocal command which the party in contempt violated.” Trade Well Int’l v. United Central Bank, 778 F.3d 620, 626 (7th Cir.2015). There must be clear and convincing evidence of either a knowing or intentional violation of the discharge injunction. See In re Johnson, 148 B.R. 532, 538 (Bankr.N.D.Ill.1992) (“[I]n order to sustain a motion for civil contempt, the Court must find that the offending party knowingly violated a definite and specific court order.”); see In re Kewanee Boiler Corp., 297 B.R. 720, 736 (Bankr.N.D.Ill. 2003) (“To hold [a creditor] in contempt, [the debtor] must show that [the creditor] acted in willful violation of the discharge injunction.”). To violate the discharge injunction the creditor must have commenced or continued an action, employed process, or acted, to collect, recover or offset any debt that was subject to discharge. 11 U.S.C. § 524(a)(2). Before contempt or a sanction can be issued, “[a]t a minimum, the court must be sure of both the factual and legal basis on which it is acting.” Trade Well Int’l, 778 F.3d at 626. The burden is on the debtor “to establish by clear and convincing evidence that cred[768]*768itor violated the post-discharge injunction.” In re Pincombe, 256 B.R. 774, 782 (Bankr. N.D.Ill.2000).

Here, the Court is less than certain that there is a factual or legal basis to support a finding of contempt. Having previously-held that Napleton had no claim to assert during Bahary’s bankruptcy case because the transfer to Banco was not a desired sale to a bona fide party who made an offer to purchase the property, this Court cannot now find that there was a violation of the discharge injunction when Napleton attempted to collect on a debt that did not exist. Bahary, 523 B.R. at 648-49 (“[t]he right of first refusal covered neither the situation at hand, foreclosure by a mortgagee to realize on its collateral, nor a tax sale by a unit of government, nor any other common ways the Bahary Partnership could transfer or lose control of the property.”). No debt existed to be discharged. At best, Napleton held an inchoate interest, which it had no grounds to enforce. Because Napleton did not have notice of the bankruptcy case and the right of first refusal was not ripe, there are no grounds for findings of contempt. Neither Napleton nor its attorney Rachel A. Gould will be held in contempt or be found to have violated the discharge injunction. However, now that Napleton knows that its right of first refusal was of no consequence in the bankruptcy proceeding, this Court will order Napleton to dismiss certain parties from the DuPage County lawsuit with prejudice.

II. General Jurisdiction

This Court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1334(a) which provides that the district courts have original and exclusive jurisdiction of all cases under title 11, the Bankruptcy Code (“Code”). 28 U.S.C. § 157(a) allows the district courts to refer title 11 cases to the bankruptcy judges for their districts. The District Court for the Northern District of Illinois has promulgated Internal Operating Procedure 15(a) which refers its bankruptcy cases to the judges of this court.

As allowed by 28 U.S.C. § 157(b)(1), a bankruptcy judge to whom a case has been referred may enter final judgment on core proceedings arising in or under the Bankruptcy Code. “Arising under” jurisdiction covers matters for which a claim is made under a provision of title 11, such as claims for violation of the automatic stay under 11 U.S.C. § 362(k)(l). “Arising in” jurisdiction covers administrative matters that are not based on any right expressly- created by title 11, but nevertheless, would have no existence outside of the bankruptcy. See Matter of Wood, 825 F.2d 90, 96-97 (5th Cir.1987). Proceedings that do not arise in a bankruptcy case or under title 11 but could affect the amount of property available for distribution or the allocation of property among creditors are noneore related matters. Stern v. Marshall, — U.S. -, 131 S.Ct. 2594, 2604-05, 180 L.Ed.2d 475 (2011); In re Xonics, 813 F.2d 127, 131 (7th Cir.1987).

The distinction between core and noncore proceedings is important because it defines the contours of a bankruptcy judge’s power as either adjudicatory (core proceedings) or advisory (noncore proceedings) and determines whether the bankruptcy judge may or must abstain from hearing a matter. Phar-Mor, Inc. v. Coopers & Lybrand, 22 F.3d 1228, 1235 (3d Cir.1994) (bankruptcy judge can enter judgment in core matters only unless parties consent to adjudication)'

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Cite This Page — Counsel Stack

Bluebook (online)
528 B.R. 763, 2015 WL 1538115, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-bahary-ilnb-2015.