In Re Finkley

203 B.R. 95, 1996 Bankr. LEXIS 1667, 1996 WL 710940
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedNovember 21, 1996
Docket19-00917
StatusPublished
Cited by6 cases

This text of 203 B.R. 95 (In Re Finkley) 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 Finkley, 203 B.R. 95, 1996 Bankr. LEXIS 1667, 1996 WL 710940 (Ill. 1996).

Opinion

MEMORANDUM OF DECISION

EUGENE R. WEDOFF, Bankruptcy Judge.

This Chapter 13 case is before the court on a landlord’s motion for relief from the automatic stay. The motion seeks authorization to continue a state court eviction proceeding, in which the landlord alleges that the debt- or’s tenancy terminated due to nonpayment of rent. The debtor has responded that, under the Bankruptcy Code, she has the right to cure any default under her lease and assume it, so that relief from the stay would be inappropriate. As discussed below, the point at which a lease terminates for default in rental payments, under Illinois law, is after the giving of a proper demand for rent, the tenant’s failure to timely pay the demanded amount, and the filing of an action by the landlord to obtain possession, all without waiver of the default by the landlord. In the present case, there is a dispute as to whether these prerequisites to lease termination were met. Thus, the court cannot grant relief from the stay on the ground that the debtor’s lease terminated. Nor is there. any other ground for relief from stay.

However, viewing the landlord’s motion as a request that this court abstain from determining termination of tenancy, so as to allow the state court to rule on the issue, it appears that abstention would be an appropriate exercise of this court’s discretion under 28 U.S.C. § 1334(c)(1). Accordingly, this court will abstain from determining whether the debtor’s tenancy terminated prior to the filing of this case, and allow that issue to be determined in the pending state court action.

Jurisdiction

The pending motion for relief from the automatic stay is specifically authorized by Section 362(d) of the Bankruptcy Code, and exists only in the context of a bankruptcy ease. It is therefore a proceeding “arising under title 11” and “arising in a case under title 11,” as set forth in 28 U.S.C. § 1334(b). Michigan Employment Sec. Comm’n v. Wolverine Radio Co. (In re Wolverine Radio Co.), 930 F.2d 1132, 1144 (6th Cir.1991), cert. dismissed, 503 U.S. 978, 112 S.Ct. 1605, 118 L.Ed.2d 317 (1992). The district court has jurisdiction over such proceedings, and may refer them to bankruptcy judges, pursuant to 28 U.S.C. § 157(a). By General Rule 2.33(a), the District Court for the Northern District of Illinois has made such a reference. Bankruptcy judges are given authority to enter appropriate orders and judgments in “core proceedings” arising in bankruptcy cases by 28 U.S.C. § 157(b)(1). The pending motion is a core proceeding. 28 U.S.C. § 157(b)(2)(G). Similarly, a motion seeking abstention pursuant to 28 U.S.C. § 1334(c)(1) can arise only in the context of a bankruptcy case, and hence is a “core proceeding” arising in a case under Title 11. 28 U.S.C. § 157(b)(2)(A); see Branham v. Davis (In re Branham), 149 B.R. 406,408 (Bankr.W.D.Va.1992) (under a general order of reference from the district court, a bankruptcy judge *98 has jurisdiction to determine whether to abstain).

Findings of Fact

The debtor in this Chapter 13 case, Linda FinHey, lives in an apartment owned by the Chicago Housing Authority (“the CHA”), which she has rented under a renewable yearly lease since 1988. In early 1995, her rent was $98 per month. On February 3, 1995, the CHA served Finkley with a notice demanding payment of $1,113.20 in past due rent and charges. The notice stated that if this sum was not paid within 14 days of the service of the notice, Finkley’s lease would “be terminated on the day following the expiration of said 14 days.” Thereafter, on March 7, 1995, the CHA filed an action in state court to obtain possession of Finkley’s apartment, pursuant to 735 ILCS 5/9-101 to 5/9-321 (West 1994), the Illinois Forcible Entry and Detainer Act. Finkley responded to this action with an answer denying that the CHA was entitled to possession of her apartment and asserting several affirmative defenses and counterclaims. On January 16, 1996, the matter was settled. Finkley and the CHA agreed to entry of a court order establishing an amount of rental arrearages that Finkley would pay in installments, together with her regular monthly rental payments. The order provided for dismissal of the forcible action without prejudice; if Fink-ley defaulted in any of the payments required by the order, the CHA was authorized to reinstate the case. The order further provided that, upon a showing of such a default, the CHA “shall be granted possession” of Finkley’s apartment.

In May, 1996, Finkley did not make a payment required by the agreed order, and on, July 2, 1996, the CHA reinstated its forcible case against her. The CHA presented a motion for summary judgment in the case, which was to be heard on July 19, 1996.

On July 18,1996, Finkley filed the pending bankruptcy case, and on July 26, filed a Chapter 13 plan proposing that her lease with the CHA be assumed. On August 23, the CHA responded with the pending motion for relief from the automatic stay, seeking to continue its forcible action. This court denied relief from the stay on October 10, but gave the parties an opportunity to address a related question — whether the court should abstain from determining whether Finkley’s tenancy had terminated prior to the filing of the bankruptcy case, in favor of a determination by the state court. The parties have briefed that question, and now all of the issues raised by the CHA’s motion are ready for ruling.

Conclusions of Law

Background: the assumption of residential leases in Chapter IS; Robinson v. Chicago Housing Authority. The dispute between Linda Finkley and the CHA has its origin in Section 365(a) of the Bankruptcy Code (Title 11, U.S.C., “the Code”). That subsection generally provides that a trustee may, “subject to the court’s approval ... assume ... any ... unexpired lease of the debtor.” 1 This power to assume leases is extended to debtors in Chapter 13 eases by Section 1322(b)(7), which allows a Chapter 13 plan to provide, subject to Section 365, for assumption of “any ... unexpired lease of the debt- or,” and Finkley’s plan proposes such an assumption of her lease with the CHA. However, the CHA contends that Finkley’s lease terminated when she failed to pay the rent demanded in its notice, and that a terminated lease, being “expired,” cannot be assumed under Section 365(a). Finkley, on the other hand, argues that because there was no order of possession issued by the state court at the time she filed her bankruptcy, her lease was still in effect, unexpired, and subject to assumption.

A 1995 decision of the Seventh Circuit Court of Appeals, Robinson v. Chicago Housing Authority,

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203 B.R. 95, 1996 Bankr. LEXIS 1667, 1996 WL 710940, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-finkley-ilnb-1996.