Mason v. Costello (In re Klarchek)

508 B.R. 386, 2014 WL 1422889, 2014 Bankr. LEXIS 1583
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedApril 10, 2014
DocketBankruptcy No. 10BK44866; Adversary No. 13ap01048
StatusPublished
Cited by17 cases

This text of 508 B.R. 386 (Mason v. Costello (In re Klarchek)) 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
Mason v. Costello (In re Klarchek), 508 B.R. 386, 2014 WL 1422889, 2014 Bankr. LEXIS 1583 (Ill. 2014).

Opinion

MEMORANDUM DECISION

TIMOTHY A. BARNES, Bankruptcy Judge.

The matters before the court are Richard J. Mason’s (the “Chapter 7 Trustee ”) Motion to Enforce the Automatic Stay as Against the Klarchek Family Trust (the “Stay Enforcement Motion ”) and the Motion to Abstain or, Alternatively, Remand Proceeding (the “Remand Motion” and together with the Stay Enforcement Motion, the “Motions ”) brought by John Costello, James Eliades and John Loguidice (the “Petitioners ”), not individually but as trustees of the Klarchek Family Trust (the “Trust ”). Each of the Motions relates to Circuit Court of Cook County Case No. 2013 CH 10658 (the “Dissolution Proceeding ”), a postpetition action to dissolve the Trust brought without stay relief in the above-captioned proceedings and subsequently removed to this court. After review of the Motions and conducting several hearings on the matter, the court finds [389]*389that, under the facts unique to this case, the commencement of the Dissolution Proceeding violated the automatic stay in this matter and the Dissolution Proceeding is, therefore, void as a matter of law. The Stay Enforcement Motion will, therefore, be granted. While the state court is the tribunal vested with the authority to dissolve the Trust and thus the best forum to hear questions regarding the propriety of dissolution, the request for abstention or remand is moot as the underlying proceeding is void. The Remand Motion must therefore be denied.

JURISDICTION

The federal district courts have “original and exclusive jurisdiction” of all cases under title 11 of the United States Code (the “Bankruptcy Code ”). 28 U.S.C. § 1334(a). The federal district courts also have “original but not exclusive jurisdiction” of all civil proceedings arising under title 11 of the United States Code, or arising in or related to cases under title 11. 28 U.S.C. § 1334(b). District courts may, however, refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157(a). In accordance with section 157(a), the District Court for the Northern District of Illinois has referred all of its bankruptcy cases to the Bankruptcy Court for the Northern District of Illinois. N.D. Ill. Internal Operating Procedure 15(a).

A bankruptcy judge to whom a case has been referred may enter final judgment on any core proceeding arising under the Bankruptcy Code or arising in a case under title 11. 28 U.S.C. § 157(b)(1). The automatic stay is a creation of federal statutory law, extant only in a bankruptcy case. As such, any motion seeking relief from, or redress regarding, the automatic stay, by definition arises under the Bankruptcy Code and is therefore a core proceeding within this court’s statutory and constitutional authority. 28 U.S.C. § 157(b)(2)(A), (G); In re Suburban West Properties, LLC, 504 B.R. 477, 479 (Bankr.N.D.Ill.2013) (Barnes, J.). A motion for remand of a proceeding removed to the bankruptcy court is also a matter arising purely within the context of a bankruptcy case, see Fed. R. Bankr.P. 9027(d), and therefore is also a core proceeding within this court’s statutory and constitutional authority. 28 U.S.C. § 157(b)(2)(A).

PROCEDURAL HISTORY

In considering the Motions, the court has considered the arguments of the parties at the November 13, 2013, January 8, 2014 and January 14, 2014 hearings on the Motions, and has reviewed and considered the following filed documents in the main case and adversary proceeding:

(1) Notice of Removal of Civil Action [Adv. Dkt. No. 1];
(2) The Remand Motion [Adv. Dkt. No. ii];
(3) Trustee’s Response in Opposition to Motion to Abstain or, Alternatively, Remand Proceeding [Adv. Dkt. No. 14];
(4) Reply in Support of Motion to Abstain or, Alternatively, Remand Proceeding [Adv. Dkt. No. 17];
(5) The Stay Enforcement Motion [Dkt. No. 620];
(6) Order Setting Briefing Schedule and Hearing Date on Motion for Abstention and Motion to Enforce Automatic Stay Against Klarchek Family Trust [Dkt. No. 623];1
[390]*390(7) Response to Trustee’s Motion to Enforce the Automatic Stay as Against the Klarehek Family Trust [Dkt. No. 629]; and
(8) Reply in Support of Trustee’s Motion to Enforce the Automatic Stay as Against the Klarehek Family Trust [Dkt. No. 633],

The court has also taken into consideration any and all exhibits submitted in conjunction with the foregoing. Though these items do not constitute an exhaustive list of the filings in the above-captioned bankruptcy case and adversary proceeding, the court has taken judicial notice of the contents of the dockets in these matters. See Levine v. Egidi, No. 93C188, 1993 WL 69146, at *2 (N.D.Ill. Mar. 8, 1993); Inskeep v. Grosso (In re Fin. Partners), 116 B.R. 629, 635 (Bankr.N.D.Ill.1989) (Sonderby, J.) (authorizing a bankruptcy court to take judicial notice of its own docket). In so doing, the court also takes judicial notice of the docket in the Dissolution Proceeding, properly now part of this court’s docket on removal.

BACKGROUND

On or about October 6, 2010, Richard J. Klarehek (the “Debtor ”), voluntarily commenced a case under chapter 11 of the Bankruptcy Code. As chairman, president and CEO of Chicago-based Capital First Realty Inc., the Debtor’s prepetition business was focused on the real estate industry, in part by holding a portfolio of manufactured-housing parks. The Debtor’s business was, prior to 2007, by many accounts successful, permitting the Debtor, among other things, to afford enough financial backing to Loyola University Chicago to have its new library named after him. But as with many real estate endeavors, the Debtor’s business took a turn for the worse with the 2007 industry-wide collapse. That, in turn, had a clear effect in the Debtor’s personal fortunes. In his bankruptcy schedules, the Debtor indicated that at the time of commencing his bankruptcy case in 2010, he possessed over $19 million in assets, but had at the same time nearly $53 million in claims against him.

But it is not the Debtor’s business, per se, that is the topic of the disputes presently before the court. It is instead the Debt- or’s relationship to the family trust — the Trust — that he created in 2001 that focuses our inquiry.

Nearly two years after the bankruptcy case was commenced, it was converted to one under chapter 7 of the Bankruptcy Code.2 The Chapter 7 Trustee thereafter appointed set about investigating the Debtor’s prepetition transactions with his businesses, his family and, at issue here, the Trust.

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Cite This Page — Counsel Stack

Bluebook (online)
508 B.R. 386, 2014 WL 1422889, 2014 Bankr. LEXIS 1583, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mason-v-costello-in-re-klarchek-ilnb-2014.