In the Matter of Peachtree Lane Associates, Limited, Debtor-Appellee

150 F.3d 788
Court of Appeals for the Seventh Circuit·Decided July 31, 1998·No. 97-2091, 97-2092·Published·Cited by 48 cases

Opinion

ILANA DIAMOND ROVNER, Circuit Judge.

The primary issue in this appeal, one that we encounter infrequently, concerns the proper venue for a reorganization proceeding under Chapter 11 of the Bankruptcy Code. Harry, Alan, and Daniel Granader (the “Granaders”) believe that venue for the Chapter 11 bankruptcy filed by Peachtree Lane Associates, Ltd. (“Peachtree”) was improper in the Northern District of Illinois because Peachtree did not maintain its principal place of business or its principal assets in that district. In asking us to find venue improper, the Granaders are indirectly challenging a judgment the bankruptcy court entered against them on an adversary complaint Peachtree filed. Because venue for the underlying bankruptcy was improper, the Gra-naders assert, the judgment entered against them in the adversary proceeding cannot stand. For the reasons that follow, we conclude that the bankruptcy court did not clearly err in finding venue proper in the Northern District of Illinois. We also cannot accept the Granaders’ contention that they were entitled to a jury trial on the issues raised in the adversary complaint and in their own counterclaims. We therefore affirm the judgment entered below.

I.

At the time of the events at issue in this case, Peachtree was a Texas limited partnership that owned and operated a 400-unit apartment complex in Webster, Texas. It filed this Chapter 11 bankruptcy in July 1994 after its largest secured creditor took steps to foreclose on the property. The bankruptcy itself was relatively straightforward. Pursuant to its plan of reorganization, Peach-tree sold the property and paid its secured *790 creditors and non-insider unsecured creditors in full. The adversary proceeding Peachtree initiated against the Granaders has been the bankruptcy’s only complicating factor. The dispute in the adversary proceeding is over an easement agreement governing the use of a private road owned by Peachtree. The Granaders are owners of a shopping center adjacent to Peachtree’s apartment complex, and under the agreement, they have a non-exclusive easement for the use of the road, which connects both the apartment complex and the Granaders’ shopping center to a public thoroughfare. Peach-tree alleged in its adversary complaint that certain parking spaces and landscaped areas that were part of the Granaders’ parking lot were encroaching upon the access road and thus violating the easement agreement. This alleged encroachment was preventing Peachtree from delivering free and unencumbered title to its property to a prospective purchaser. Thus, Peachtree sought in its adversary complaint a declaration of the parties’ rights under the easement agreement and an injunction against further encroachment upon its property. The Granaders responded with a six-count counterclaim, which alleged such' things as slander of title, commercial disparagement, and tortious interference with prospective business advantage. After concluding that the Granaders had no right to a jury trial because they had submitted a proof of claim against Peachtree’s estate, the bankruptcy court conducted a trial on the adversary complaint and the Granaders’ counterclaims, and entered a judgment for Peachtree on both. The bankruptcy court found that the Granaders were trespassing on Peachtree’s property, and the court therefore permanently enjoined the Granaders from further violations of the easement agreement. The Granaders challenged that judgment in an appeal to the district court, but that court affirmed (In re Peachtree Lane Assoc., Ltd., 206 B.R. 913 (N.D.Ill.1997)), and the Granaders have not pursued their arguments addressed to the merits of that judgment here. They instead have challenged the venue of the underlying bankruptcy, as well as the bankruptcy court’s denial of their alleged right to a jury trial.

The bankruptcy court conducted an extensive evidentiary hearing on the venue question and issued detailed findings of fact and conclusions of law. In re Peachtree Lane Assoc., Ltd., 198 B.R. 272 (Bankr.N.D.Ill.1996), aff 'd, 206 B.R. 913 (N.D.Ill.1997). Because the Granaders have not contested the factual findings underlying the venue determination, we provide here only a general overview of the facts recited in the bankruptcy court’s opinion. The facts described herein relate to the 180-day period preceding the commencement of Peachtree’s bankruptcy (the “venue period”), which ran from January 24, 1994 through July 26, 1994. See 28 U.S.C. § 1408(1).

During the venue period, Peachtree was a limited partnership whose sole asset was an apartment complex in Webster, Texas. Peachtree ultimately was controlled by what the bankruptcy court referred to as the “Kemper Group,” a series of limited partnerships and corporate entities that eventually linked Peachtree to the Kemper Corporation. The link between the two followed this trail: Kemper/Cymrot Partners PT, Ltd., Peach-tree’s sole general partner; Kilico Realty Corporation, Kemper/Cymrot’s sole general partner; KFC Portfolio Corp., Kilieo’s parent company; Kemper Financial Companies, Inc., KFC Portfolio’s parent company; and Kemper Corporation, Kemper Financial’s parent company. All of these Kemper entities were headquartered in Chicago or Long Grove, Illinois.

Peachtree’s day-to-day operations during the venue period were managed by Western National Securities (“Western National”), an entity based in Orange County, California. Kemper executives in Illinois made the decision to hire Western National approximately one month before the start of the venue period. The relationship between Peachtree and Western National was governed by a series of three agreements, which were negotiated and executed on Peachtree’s behalf by a Kemper executive in Chicago. Under the agreements, Western National was charged with leasing the apartments, collecting rent, paying suppliers, property taxes, and other authorized expenses, and with submitting various weekly, monthly, quarterly, and an *791 nual reports to the Kemper Group. Western National managed Peachtree’s property during the venue period in accordance with a draft budget that Kemper had prepared pri- or to the venue period. A final budget was to be approved by Kemper after consideration of any changes Western National might suggest, but the final budget was not ultimately approved prior to the filing of Peach-tree’s bankruptcy. Thus, despite Western National’s intimate involvement with Peach-tree’s finances, the Kemper Group retained ultimate financial control over Peachtree’s operations. Pursuant to one of the three agreements, Western National also served as a consultant to Peachtree’s efforts to sell the apartment complex, and the Western National employee who performed that consulting-work was located neither in Chicago nor in Texas, but in Orange County, California.

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In the Matter of Peachtree Lane Associates, Limited, Debtor-Appellee, 150 F.3d 788 (7th Cir. 1998).

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