510 B.R. 854
Bankr. N.D. Ill.2014Background
- Debtors filed two Chapter 11 petitions, consolidated for administrative purposes.
- TIC 0 is a 30-story Chicago building owned by 33 single-purpose LLCs as tenants in common, including TIC O and TIC Member.
- The dispute centers on whether TIC 0 had authority to file for bankruptcy and whether Thomases are members of TIC 0 or TIC Member.
- TIC 0’s operating agreement requires unanimous member consent to file for bankruptcy; TIC Member allegedly had consent, while Thomases argue they are direct members of TIC 0.
- Thomases invoked 11 U.S.C. § 1112(b) to seek dismissal, arguing lack of authority; debtors argue TIC Member consent sufficed and that Thomases are not misidentified as TIC 0 members.
- The court dismisses TIC 0’s bankruptcy for lack of authority but denies dismissal for TIC Member’s case; laches is addressed but does not bar the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TIC 0 lacked authority to file for bankruptcy | Thomas argues he and others are TIC 0 members and thus TIC 0 lacked consent. | Debtors contend TIC Member alone could consent; Thomases’ status as TIC 0 members is disputed. | TIC 0 lacked authority; dismissal granted. |
| Whether Thomases are members of TIC 0 or TIC Member | Thomas asserts membership in TIC 0 via private placement, subscription, and certificates. | Debtors contend certificates were issued to TIC Member or altered; TIC O structure changed. | Evidence supports Thomases as not properly authorized TIC 0 members; TIC 0 not authorized. |
| Whether laches bars the motion to dismiss | Thomas argues no express time limit; delay six months is not prejudicial. | Debtors assert potential prejudice from delay; RSA deadlines discussed. | Laches not a bar; timely under circumstances. |
| Authority of TIC Member to file for bankruptcy | If Thomases are TIC 0 members, TIC Member’s consent may be sufficient. | TIC Member’s consent is not needed if Thomases are not TIC 0 members; TIC 0 lacked authority regardless. | TIC Member not required to grant authority; TIC 0’s authority remains lacking. |
Key Cases Cited
- Price v. Gurney, 324 U.S. 100 (1945) (agency authority and corporate filing power under state law)
- In re Avalon Hotel Partners, LLC, 302 B.R. 377 (Bankr.D.Ore. 2003) (LLC authority to file bankruptcy under state law)
- In re ComScape Telecommunications, Inc., 423 B.R. 816 (Bankr.S.D.Ohio 2010) (burden to prove lack of authority to file)
- In re Quad-C Funding LLC, 496 B.R. 135 (Bankr.S.D.N.Y. 2013) (threshold burden and purpose of bankruptcy filing)
- Shea & Gould, 214 B.R. 739 (Bankr.S.D.N.Y. 1997) (equitable tolling/laches considerations in §1112(b) motions)
- Nal-bandian v. Hanson Restaurant & Lounge Inc., 369 Mass. 150, 338 N.E.2d 335 (Mass. 1975) (agency/authority of undisclosed principal)