In re First Premier Funding, LLC

654 B.R. 142

IN RE: FIRST PREMIER FUNDING, LLC, Debtor.

Bankr. No.: 23-00811

United States Bankruptcy Court, N.D. Illinois, Eastern Division

Signed September 29, 2023

Attorney for Debtor: Paul M. Bach.

Attorney for Movant: Umair Malik.

Memorandum Opinion on Cook County Land Bank Authority's Motion to Dismiss the Bankruptcy Case pursuant to 11 U.S.C. § 1112(b) (Dkt. 22)

Jacqueline P. Cox, United States Bankruptcy Judge

This matter comes before the court on the Motion of County of Cook d/b/a Cook County Land Bank Authority ("CCLBA," "Movant," or the "Land Bank") to Dismiss the bankruptcy case ("Mot.") filed by First Premier Funding, LLC (the "Debtor" or "First Premier") pursuant to 11 U.S.C. § 1112(b), the Debtor's Response ("Resp.") (Docket 35), and CCLBA's Reply ("Reply") (Docket 40). In its July 20, 2023 Order (Docket 32), the court also requested that the parties brief the following additional issues and submit the following additional documents:

1. The Debtor was required to submit a copy of the trust agreement and any other documents that evidence the role of First Premier Funding, LLC in relation to the real estate located at the 17100 Halsted Street, Harvey, Illinois, Property Identification Numbers 29-29-206-020-0000 and 29-29-206-024-0000 in bankruptcy case No. 23-00811 on or before August 4, 2023.

2. The parties were ordered to simultaneously file briefs on the docket of the bankruptcy case by August 4, 2023 discussing (i) whether First Premier Funding, LLC is a beneficiary of a trust in relation to the real estate in issue and (ii) whether First Premier Funding, LLC, as a beneficiary, has authority to file a bankruptcy case on the behalf of any trust.

3. The parties were also ordered to simultaneously file briefs discussing whether this bankruptcy case was filed on or behalf of a land trust and whether the filing was collaterally estopped or barred by res judicata by the court's prior orders dismissing Capital Equity's bankruptcy case, Bankr. No. 22-02580, and the related Adversary Proceeding No. 22-00037. In accordance with the order, the Movant submitted a Supplemental Brief in support of its

Motion to Dismiss ("Movant's Suppl. Br.") (Docket 42); the Debtor submitted a Supplemental Response Brief ("Debtor's Suppl. Br.") (Adv. Dkt. 29) and a copy of the trust agreement (Adv. Dkt. 29, Ex. 1) on the docket of the related adversary case. See Debtor's Suppl. Br. (Adv. Dkt. 29), Ex. 1, First Premier Funding, LLC v. Cook Cnty. Land Bank Auth., Ch. 11 Case No. 23-00811, Adv. No. 23-00045 (Bankr. N.D. Ill. filed Feb. 28, 2023) (hereinafter "First Premier v. CCLBA").

An in-person contested evidentiary hearing was held on Tuesday, August 8, 2023 at which each party was given the opportunity to testify, call witnesses, and submit exhibits. See Order (Dkt. 32).

I. Jurisdiction and Venue

The court has jurisdiction over this matter under 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This matter is a "core" proceeding under 28 U.S.C. § 157(b)(2)(A), a matter concerning the administration of the estate.

II. Background

First Premier Funding, LLC is the beneficiary of a land trust, the Capital Equity Land Trust No. 2140215 ("Capital Equity" or the "Land Trust").¹ Capital Equity previously held title to the property at 17100 Halsted Street, Harvey, IL 60426, Property Identification Numbers (PINs) 29-29-206-024-0000 and 29-29-206-020-0000 (the "subject property" or the "17100 Halsted Street Property"). See Cap. Equity, 646 B.R. at 466. However, pre-petition, on July 17, 2019, the subject property was sold to the County of Cook d/b/a Cook County Land Bank Authority via a scavenger sale after Capital Equity defaulted on paying its property taxes for several years. See Cap. Equity, 646 B.R. at 466. On October 21, 2021, in Case Nos. 2020 COTD 1321 and 2020 COTD 1369, the Circuit Court of Cook County issued orders directing issuance of tax deeds as to the subject property. Resp. (Dkt. 35), Ex. 7, pp. 2, 5, 8, First Premier. First Premier alleges that the state court orders were timely appealed. Id. at p. 2. On February 10, 2022, CCLBA filed tax deeds for the property with the Cook County Recorder of Deeds. Id. at p. 3.

Soon thereafter, on March 7, 2022, Capital Equity filed a petition for bankruptcy relief under Chapter 11. Petition (Dkt. 1), Cap. Equity, Bankr. No. 22-02580. On November 9, 2022, Capital Equity's bankruptcy case was dismissed. Order (Dkt. 38), Cap. Equity, Bankr. No. 22-02580. This court dismissed the case because it found that (1) as a land trust, Capital Equity was ineligible for bankruptcy relief under 11 U.S.C. § 109(d) and (2) there was "cause" for dismissal under § 1112(b) because the case was not filed in good faith. Cap. Equity, 646 B.R. at 466, 478. This court reasoned that the case was filed in bad faith because Capital Equity filed bankruptcy while awaiting resolution of its pending appeal of the state court tax proceeding; this suggested that its filing for bankruptcy relief was a "litigation tactic." Capital Equity failed to show it had income to fund a reorganization plan. Its position was that once it regained the property, it would lease it. Id. at 477-78. The land trust's beneficiary now argues that it will use $500,000 from a co-beneficiary to fund a plan and seek to develop the property as a hotel now that a casino is expected to be built nearby. Aug. 8, 2023 Hr'g. Tr. at 21:13-22.

On January 20, 2023, Capital Equity's beneficiary, First Premier, filed a petition for bankruptcy relief under Chapter 11. Petition (Dkt. 1), First Premier. Although neither First Premier nor Capital Equity have title to the 17100 Halsted Street property, First Premier listed the property as the location of its "principal assets" in the petition. Id., Form 201, Question 4, Dkt. 1 p.1. First Premier states that it holds a beneficial interest in the property and that it has two members: Tiffany Webb (who holds 80% of First Premier Funding, LLC) and GTR Financial LLC. Id., Form 206, Question 55.1, Dkt. 1, p. 12. First Premier valued the subject property at $2,000,000. Id.

On February 28, 2023, First Premier filed an adversary complaint against CCBLA for fraudulent conveyance seeking re-vestment of the subject property and a judgment for the difference between the value of the County's liens and the value of the property. See Complaint ("Compl.") (Adv. Dkt. 1), First Premier v. CCLBA, Adv. No. 23-00045, p. 4.² On April 20, 2023, the Debtor filed a Single Asset Real Estate (SARE) Plan of reorganization, predicated on the return of the subject property to First Premier. See Plan (Dkt. 20), First Premier.

On April 26, 2023, CCBLA filed the instant motion, alleging that First Premier's bankruptcy case was not filed in good faith because it does not have business revenue, does not own any land or assets, and the bankruptcy is being used as a litigation tactic after the state court denied Capital Equity's appeal. Mot. (Dkt. 22), pp. 4-5, First Premier; see In re Application of the Cnty. v. Capital Equity Land Trust #2140215, 2022 IL App (1st) 211511 (Ill. App. Ct. 2022).

In its Response, First Premier essentially argues that the transfer of the property to CCLBA was a taking under the 5th and 14th Amendments of the U.S. Constitution, and that, consequently, the plan should be confirmed to allow the Debtor to pay the delinquent real estate taxes to CCLBA and obtain the subject property or that CCLBA must provide compensation for the taking of the property. See Resp. (Dkt. 35), pp. 1, 9, First Premier (citations omitted). The Debtor argues that it would have revenue if it were allowed to access the property again or if it were paid just compensation. Id. The Debtor also argues that an individual, Todd Hansen, and his entity, GTR Financial, would provide the Debtor funds to consummate the plan. Id. at 3. Mr. Hansen is one the Debtor's members.

In its Reply, regarding First Premier's argument about a taking, CCLBA disputes Debtor's argument that Tyler v. Hennepin Cnty, 598 U.S. 631, 143 S.Ct. 1369, 215 L.Ed.2d 564 (2023), applies herein and argues Tyler does not demand that the bankruptcy court confirm a plan to allow the real estate taxes be paid to CCLBA or that CCLBA provide compensation for the taking of the subject property. Reply (Dkt. 40), pp. 1-3, First Premier (citations omitted). CCLBA also argues that the Debtor has failed to substantiate its claim that the property is worth $2,000,000 or, at a minimum, is valued higher than the total tax debt. Id., p. 2. In its Supplemental Brief, CCLBA argued that (1) the Debtor, First Premier, has not shown it has the authority to file a bankruptcy petition on behalf of the Debtor and (2) the current bankruptcy filing by Capital Equity's beneficiary, is barred by res judicata because this court previously dismissed the bankruptcy filing by Capital Equity. Movant's Suppl. Br. (Dkt. 42), pp. 1-3, First Premier.

In response, First Premier argued this court's prior opinion in Capital Equity's bankruptcy case suggested that First Premier, as the beneficiary of the land trust, had authority to seek bankruptcy relief. See Debtor's Suppl. Br. (Adv. Dkt. 29), p. 5, First Premier v. CCLBA (citations omitted).³ First Premier also argues res judicata does not apply because Capital Equity's bankruptcy case did not involve identical issues, since the eligibility of First Premier, Capital Equity's beneficiary, to file bankruptcy on behalf of Capital Equity was not discussed. Id. at p. 7.

Tiffany Webb signed the petition in the first-filed bankruptcy case, In re Capital Equity Land Trust # 2140215. See Bankruptcy Case 22-02580, Dkt. 1, p.5, where her signature appears as the authorizing representative of that Debtor. That document notes her title as a member of First Premier Funding, LLC/Holder of Beneficial Interest.

After the November 9, 2022 dismissal of the Capital Equity case, Tiffany Webb signed the bankruptcy...