450 B.R. 769
N.D. Ill.2011Background
- Brittwood Creek, LLC owned a residential development project in Oak Brook, Illinois pledged to Bridgeview Bank Group as collateral for a construction loan totaling about $25 million.
- Bank filed a foreclosure action in DuPage County and recorded a lis pendens on the Property; Arrow Road recorded a mechanic's lien for $81,723.24 after lis pendens.
- Debtor filed a Chapter 7 petition inadvertently just before a sheriff's sale; shortly after, a Chapter 11 petition was filed minutes later.
- Bank sought relief from automatic stay in Chapter 11; the court granted an Agreed Lift Stay to proceed with foreclosure.
- Foreclosure sale occurred with a $20 million bid by the Bank; property later sold to a third party; Chapter 11 case was dismissed; Chapter 7 case was subsequently dismissed.
- Arrow Road moved to vacate the foreclosure judgment in July 2010, arguing the stay voided the sale; the Bank sought nunc pro tunc annulment of the stay to the date of the lift stay order in Chapter 11.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Bankruptcy Court had authority to retroactively annul the stay | Arrow Road argues no retroactive annulment; stay voids sale. | Bank asserts § 362(d) and § 105(a) authorize annulment cum equity. | Yes; § 362(d) authorizes retroactive relief and equities favor annulment. |
| Whether § 105(a) provides authority to grant annulment | Arrow Road contends § 105(a) is not a substantive grant for annulment. | Bank relies on § 105(a) as enabling tool to enforce the Code with § 362(d). | Yes; § 105(a) used within Code confines supports annulment. |
| Whether Rule 60(b) relief supports the Annulment Order | Arrow Road contends no exceptional circumstances. | Bank argues unusual but warranted equitable relief. | Yes; Rule 60(b) relief appropriate given unusual circumstances. |
| Whether Bank acted willfully in violating the stay | Arrow Road claims conscious violation by Bank. | Bank acted inadvertently and promptly moved to cure. | No; Bank did not act willfully. |
| Whether balancing equities favors retroactive annulment | Arrow Road seeks to void foreclosure to protect lien. | Foreclosure sale would prejudice a bona fide purchaser; Arrow Road had notice and failed to act. | Balance weighed in favor of Bank and third-party purchaser. |
Key Cases Cited
- In re Volpert, 110 F.3d 494 (7th Cir.1997) (authority of § 105(a) and relief mechanisms within the Code)
- In re UAL Corp., 412 F.3d 775 (7th Cir.2005) (§ 105(a) as enforcement tool within the Code)
- Gouveia v. Tazbir, 37 F.3d 295 (7th Cir.1994) (§ 105(a) power bounded by the Code)
- In re C & S Grain Co., Inc., 47 F.3d 233 (7th Cir.1995) (stay relief must be within § 362(d) discretion)
- In re Will, 303 B.R. 357 (Bankr.N.D.Ill.2003) (retroactive annulment and equities balancing)
- In re Syed, 238 B.R. 133 (Bankr.N.D.Ill.1999) (bankruptcy courts have wide latitude to grant relief from stay)
- In re Mitan, 573 F.3d 237 (6th Cir.2009) (retroactive relief proper under § 105(a))
- E. Refractories Co. Inc. v. Forty Eight Insulations Inc., 157 F.3d 169 (2d Cir.1998) (modification nunc pro tunc well within § 362(d) powers)
- Albany Partners, Ltd. v. Westbrook (In re Albany Partners, Ltd.), 749 F.2d 670 (11th Cir.1984) (annulling stay retroactive)
- First Sec. Bank of Idaho v. Ricks (In re Ricks), 26 B.R. 134 (Bankr.Idaho 1983) (§ 105(a) use to validate foreclosure sale nunc pro tunc)