van der Vant v. Zielinski et al
Filing
17
MEMORANDUM OPINION and ORDER: For the reasons stated here within, the motion for leave to appeal 5 is denied, and the appeal is dismissed 8 for lack of jurisdiction. Civil case terminated. Signed by the Honorable Elaine E. Bucklo on 5/2/2022. Mailed notice (ags)
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 1 of 10 PageID #:1402
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
Arthur Van der Vant,
Individually and as a State
Court Appointed Receiver in
the Cook County Circuit Court,
State of Illinois, Case Number
2019CH04967; Providence Bank &
Trust, N.A. v. Genesis 1, LLC.
Appellant,
v.
Zane Zielinski, not
Individually but as Chapter 7
Trustee of the Bankruptcy
Estate of Genesis 1, LLC
Defendant.
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No. 21 C 6340
Memorandum Opinion and Order
Arthur
Van
der
Vant,
in
his
individual
capacity
and
as
Receiver appointed by the Circuit Court of Cook County in a
foreclosure action styled Providence Bank & Trust, N.A. v. Genesis
1, LLC, et al. Case No. 2019CH04967, seeks to appeal the bankruptcy
court’s order authorizing the Trustee to conduct an examination of
Van der Vant pursuant to Fed. R. Bankr. P. 2004. For the reasons
that follow, Van der Vant’s motion to appeal is denied, and the
Trustee’s motion to dismiss the appeal for lack of jurisdiction is
granted.
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 2 of 10 PageID #:1403
I.
In September of 2019, the Trustee filed a voluntary Chapter
7 bankruptcy petition on behalf of an entity called Genesis 1, LLC
(“Genesis”). 1
The
Trustee
had
previously
been
appointed
to
administer the individual bankruptcy estates of Genesis’s members,
Chad Cutshall and Ronald Plonis, each of whom held a 50% interest
in
Genesis.
Because
the
three
bankruptcy
cases
involved
“affiliates” as defined in the Bankruptcy Code, the cases were
consolidated
for
procedural
purposes,
although
the
debtors’
respective estates were to be administered separately as to all
assets, claims, and creditors.
At the time of it bankruptcy, Genesis owned multiple rental
properties throughout the Chicagoland area. The one at issue here
is
a
housing
encumbered
by
property
a
in
mortgage
Calumet
held
by
City,
Illinois,
Providence
Bank
which
and
was
Trust
(“Providence”). In April of 2019, Providence filed the foreclosure
action referenced above in connection with this property. The
foreclosure proceedings were automatically stayed by Genesis’s
bankruptcy, but the stay was lifted on Providence’s motion, which
also requested that the Trustee abandon the property. Because the
Trustee believed at the time (wrongly, it turned out) that Genesis
The facts summarized here are drawn primarily from the bankruptcy
court’s recitation, and nothing in the parties’ submissions
suggests that they are in dispute.
1
2
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 3 of 10 PageID #:1404
had transferred ownership of the Calumet City property prior to
its
bankruptcy, 2
he
did
not
oppose
Providence’s
motion.
The
foreclosure action thus proceeded in state court, which appointed
appellant Receiver for the property. In the exercise of his duties
as Receiver, appellant began collecting rent from tenants of the
Calumet City property.
At some point, the Trustee and Providence realized that
Genesis still owned the Calumet City property. For various reasons,
Providence asked the Trustee to sell the property, notwithstanding
his previous abandonment on behalf of the Genesis bankruptcy
estate. After finding a buyer agreeable to Providence and providing
notice to appellant, the Trustee sought and received approval for
the sale from the bankruptcy court. Appellant raised no objection
to the sale. The sale of the Calumet City property ultimately fell
through, but the Trustee found another buyer and again sought
approval from the bankruptcy court. This time, appellant objected
to the sale because he understood the terms of the transaction—
the property would be sold “free and clear” of encumbrances—to
extinguish his receiver’s lien. In subsequent hearings, however,
the Trustee expressed his intent to satisfy all obligations owed
Ownership of the property was apparently difficult to ascertain,
as Genesis’s books and records reflected that the property had
been transferred pre-petition, but no deeds or mortgages were
recorded in connection with the putative transfer. Meanwhile,
Cutshall and Plonis declined to answer questions about the
transfers in the exercise of their Fifth Amendment privilege.
2
3
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 4 of 10 PageID #:1405
to appellant in his capacity as Receiver from the sale proceeds.
Appellant withdrew his objection, and the sale was consummated on
June 16, 2021, with the receiver’s lien paid in full.
In
the
meantime,
however,
shortly
before
the
sale
was
completed, appellant obtained an order in the state foreclosure
proceedings releasing Providence from paying receiver’s fees and
assigning all money judgments he obtained from current and former
tenants as Receiver to Arthur Van Der Vant individually. After
learning from property’s buyer that appellant continued to receive
rent payments from tenants of the Calumet City property post-sale
and after his receiver’s lien was fully satisfied, the Trustee
sought to clarify the nature of these payments through a Rule 2004
examination. The order granting that motion is what appellant asks
me to review.
II.
District courts have jurisdiction under 28 U.S.C. § 158(a) to
review
“final orders” of the bankruptcy court, which may be
appealed as a matter of right, as well as interlocutory orders,
which district courts may grant leave to appeal. Additionally,
district
courts
are
authorized,
in
the
narrow
circumstances
established in Cohen v. Beneficial Industrial Loan Corporation,
337
U.S.
541
(1949),
to
review
bankruptcy
courts’
non-final
“collateral orders.” In re Dental Profile, Inc., No. 09 C 6160,
4
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 5 of 10 PageID #:1406
2010 WL 431590, at *2 (N.D. Ill. Feb. 1, 2010). These are the only
avenues to jurisdiction available in this case. 3
The Seventh Circuit, concurring with the “majority of courts
that have considered the issue,” has held that “orders granting or
denying
Rule
2004
examinations
are,
like
discovery
orders,
interlocutory.” Vance v. Lester (In re Vance), 1998 U.S. App. LEXIS
28177,
at
*3
(7th
Cir.
1998)
(citing
cases).
Nevertheless,
appellant argues that the order at issue here should be considered
final on the authority of Zedan v. Habash, 529 F.3d 398 (7th Cir.
2008), because it resolves a “discrete dispute that, but for the
continuing bankruptcy, would have been a stand-alone suit by or
against the trustee.” Id. at 402. There are several flaws in this
argument.
First, the “discrete dispute” appellant identifies is “who is
entitled to pre-closing and post-closing rents.” Appellant’s Mot.,
ECF 5 at ¶ 37. See also Appellant’s Reply, ECF 14 at ¶ 1.c (“the
underlying discrete dispute is as to who is entitled to pre-closing
and post-closing rents [ether (sic) Van der Vant or PNC Realty]”)
(emphasis and alterations in original). But the Rule 2004 order
28 U.S.C. § 158(a)(2) also empowers district courts to hear
appeals “from interlocutory orders and decrees issued under
section 1121(d) of title 11 increasing or reducing the time periods
referred to in section 1121 of such title,” but appellant does not
invoke that provision.
3
5
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 6 of 10 PageID #:1407
did not “resolve” that question; it merely authorized the Trustee
to seek information that would help him to evaluate it.
Second,
appellant’s
reliance
on
Zedan
is
misplaced.
the
question in Zedan was whether the bankruptcy court’s dismissal of
an
adversary
action
in
the
context
of
ongoing
bankruptcy
proceedings was a “final order” for purposes of § 158(a). The court
answered
that
question
in
the
affirmative,
observing
that
“adversary proceedings frequently resolve legal issues that appear
logically separate from the ordinary measures determined in the
main bankruptcy proceeding.” Id. at 403. See also id. at 402-03
(“A bankruptcy case is often a congeries of functionally distinct
cases. The clearest example is that of the adversary action[.]”)
(quoting In re Lopez, 116 F.3d 1191, 1193 (7th Cir. 1997)). An
order dismissing a self-contained adversary action is readily
distinguishable from the Rule 2004 order at issue here, which does
not amount to or even suggest a claim against appellant but merely
authorizes discovery to help determine whether payments made to
him may have affected the bankruptcy estates overseen by the
Trustee.
For similar reasons, the bankruptcy court’s Rule 2004 order
also does not fit the narrow, “collateral order” exception under
Cohen, which allows appellate courts to review an order “which
finally determine[s] claims of right separate from, and collateral
to, rights asserted in the action, too important to be denied
6
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 7 of 10 PageID #:1408
review and too independent of the cause itself to require that
appellate
jurisdiction
be
deferred
until
the
whole
case
is
adjudicated.” Cohen, 337 U.S. at 546. The order at issue here
merely authorizes discovery; it does not “finally determine” any
rights at all.
Moreover, the “collateral order” doctrine requires a showing
of “irreparable harm.” In re Dental Profile, 2010 WL 431590, at *3
(N.D. Ill. Feb. 1, 2010) (citing Matter of Devlieg, Inc., 56 F.3d
32, 34 (7th Cir. 1995) (irreparable harm is an “essential element
of the collateral order doctrine”)). Appellant’s argument in this
connection boils down to the assertion that the Rule 2004 order
involves claims of rights between third parties, not between
creditors and debtors that in the bankruptcy case. At most, this
argument challenges the relevance of the discovery the Trustee
seeks; it does not establish or even suggest that Receiver will
suffer irreparable harm if required to submit to a Rule 2004
examination.
Finally, the Rule 2004 order does not satisfy the criteria
district
courts
consider
when
deciding
whether
to
entertain
discretionary interlocutory bankruptcy appeals, which are those 28
U.S.C. § 1292(b) requires for interlocutory appeals from district
courts. See In re Dental Profile, 2010 WL 431590, at *4 (citing In
re Automotive Prof’ls, Inc., 379 B.R. 746, 751 (N.D. Ill. 2007),
and Trustee of Jartan, Inc. v. Winston & Strawn, 208 B.R. 898, 900
7
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 8 of 10 PageID #:1409
(N.D. Ill. 1997)). Section 1292(2) permits an interlocutory appeal
when the appeal: “(1) involves a controlling question of law; (2)
over which there is substantial ground for difference of opinion;
and (3) an immediate appeal from the order may materially advance
the ultimate termination of the litigation.” 28 U.S.C. § 1292(b).
With respect to the first element, appellant argues that the Rule
2004 order involves a controlling question of law because “proper
application of the controlling Illinois Mortgage Foreclosure Law”
compels the
conclusion
that
“past
rents
are
property
of
the
receivership estate, and [] present rents are the property of the
buyer, not property of the bankruptcy estate.” Appellant’s Mot. at
¶ 58. But however Illinois Mortgage law would allocate ownership
of the rents in question, the purpose of the Rule 2004 examination
is
to
investigate
the
nature
of
the
rent
payments
appellant
received so that Trustee can determine their effect, if any, on
the administration and disposition of the debtor’s assets under
bankruptcy law. That the answer may turn out to be “none,” as
appellant insists, does not, as he seems to believe, divest the
bankruptcy court of authority to allow discovery on the issue. At
all events, because I cannot determine at this stage how the
information produced in response to the Rule 2004 order will affect
the outcome of the litigation, I do not conclude that the appeal
presents a controlling question of law. See In re Dental Profile,
2010 WL 431590, at *4 (“we cannot determine how the order and the
8
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 9 of 10 PageID #:1410
consequent
Bankruptcy
Rule
2004
examination
will
affect
the
outcome of the litigation until the information sought by the order
is produced.”).
With respect to the second element—the likelihood that the
interlocutory order will be reversed on appeal—appellant’s burden
is
particularly
high
in
this
context
because
“almost
all
interlocutory appeals from discovery orders...end in affirmance
(the
district
court
possesses
discretion,
and
review
is
deferential).” Reise v. Bd. of Regents of Univ. of Wisconsin Sys.,
957 F.2d 293, 295 (7th Cir. 1992). For substantially the reasons
discussed above, I conclude for that he has not carried it.
Finally, I am not persuaded that reviewing the bankruptcy
court’s Rule 2004 order is likely to speed up the litigation. The
essence of appellant’s exegesis concerning his entitlement to
collect rent payments, which he has presented in several of his
prolific filings in the bankruptcy court and in multiple appeals
to the courts of this district, is that the issue is easily
resolved
based
on
documents
he
has
already
provided
to
the
Trustee. 4 If that is so, then he should quickly be able to eliminate
Since the bankruptcy court granted the Trustee’s motion for a
Rule
2004
order,
appellant
moved
that
court
for:
(i)
reconsideration of the Rule 2004 Order; (ii) disqualification of
the bankruptcy judge; (iii) a stay pending the instant appeal;
(iv) reconsideration of the order denying his motion to disqualify
judge; and (v) reconsideration of the order denying his motion for
a stay pending appeal. Appellant filed an appeal of the bankruptcy
court’s denial of a stay pending the instant appeal, which Judge
4
9
Case: 1:21-cv-06340 Document #: 17 Filed: 05/02/22 Page 10 of 10 PageID #:1411
any concerns the Trustee may have in the course of his Rule 2004
examination. On the other hand, uncertainty about the status of
these payments creates a risk that the Trustee will be forced to
spend additional time and money to ensure the proper administration
of the bankruptcy estate.
III.
For the foregoing reasons, the motion for leave to appeal is
denied, and the appeal is dismissed for lack of jurisdiction.
ENTER ORDER:
___
Elaine E. Bucklo
United States District Judge
Dated: May 2, 2022
Coleman of this district dismissed for lack of jurisdiction See
Case No. 22 C 653 (N.D. Ill. Mar. 11, 2022). Appellant also filed
an appeal of the bankruptcy court’s orders denying his motion to
disqualify judge and denying his motion to reconsider the denial
of his motion to disqualify. See Case No. 22 C 653 (N.D. Ill).
That appeal, currently pending before Judge Kennelly, also
features
arguments
concerning
the
appropriateness
of
the
bankruptcy court’s Rule 2004 Order.
10
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