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In Re Jeffrey R. Prochnow v. Apex Properties

February 15, 2012


Appeal from the United States Bankruptcy Court, Central District of Illinois, Case No. 09-72295 Hon. Mary Gorman, Bankruptcy Judge, presiding

The opinion of the court was delivered by: Sue E. Myerscough, U.S. District Judge:

Wednesday, 15 February, 2012 11:00:03 AM Clerk, U.S. District Court, ILCD


Debtor/Appellant, Jeffrey R. Prochnow, appeals from the denial of his Motion for a Ruling Against a Creditor Based on Violations of the Automatic Stay. For the reasons set forth below, the decision of the Bankruptcy Court is AFFIRMED.


Prochnow was at all relevant times a duly licensed salesperson -- also referred to as a realtor or realtor associate -- as defined in the Real Estate Licence Act of 2000 (225 ILCS 454/1-10 (West 2008)). (Stipulation ¶ 3). Apex Properties Inc., d/b/a Remax Choice of Bloomington, Illinois (ReMax) was at all relevant times a duly licensed real estate broker. (Stipulation ¶ 4).

In August 2006, Prochnow and ReMax, through its predecessor, entered into a Broker-Realtor-Associate Contract (Associate Contract). (Stipulation ¶ 5). The compensation paid to Prochnow and other realtor-associates licensed with ReMax was arranged on a commission basis. (Stipulation ¶ 7).

The Associate Contract provided:

Broker agrees to pay Realtor-Associate as and for Realtor-Associate's compensation for services rendered on a commission basis for work done by Realtor-Associate in accordance with the commission schedule adopted by the Broker's office and in the Policy Manual. No commissions shall be considered earned or payable to Realtor-Associate until the transaction has been completed and the commission has been collected by the Broker.

The Associate Contract also provided that bills paid by ReMax that were actually the responsibility of Prochnow would be due within 30 days of receipt. The parties stipulated, however, that the arrangement on commissions (which this Court interprets as referring to the percentage of commissions) was not placed in writing and that some arrangements regarding expenses were not placed in writing. (Stipulation ¶ 9).

Initially, Prochnow received 100% of commissions, less franchise and referral fees. (Stipulation ¶ 8). Under that arrangement, Prochnow also paid rent, certain expenses (including general overhead, expenses required by the local MLS office, and advertising expenses), and interest for unreimbursed charges. (Stipulation ¶ 8). In October 2007, the parties changed the arrangement so that Prochnow would receive 70% of the commissions he earned with the remaining 30% payable to ReMax. (Stipulation ¶ 8). Under the new arrangement, Prochnow was no longer charged rent but still paid office overhead, other billed expenses, and interest on outstanding balances. (Stipulation ¶ 8).

Historically, ReMax applied a portion of the commission owed to Prochnow to Prochnow's billed expenses. (Stipulation ¶ 9). The amount of the commission applied to expenses was based on the determination of the ReMax broker, in consultation with Prochnow, and changed from time to time to allow Prochnow to retain some commission. (Stipulation ¶ 9)

On August 3, 2009, Prochnow filed his Chapter 7 bankruptcy petition. Prochnow was at that time still a realtor-associate with ReMax and continued in that capacity until January 8, 2010.

On his Schedule F, Prochnow listed an unsecured debt owed to ReMax in the amount of $51,027.47. That debt related to the expenses billed by ReMax which were unpaid at the filing of the petition. (Stipulation ¶ 13).

On his Schedule B, Prochnow affirmatively represented that he had no accounts receivable, no liquidated debts owed to him, and no contingent or unliquidated claims of any nature. On his Schedule G, Prochnow affirmatively represented that he had no executory contracts of any nature.

On September 3, 2009, the Chapter 7 Trustee filed a Report of No Distribution stating he found no assets to administer in the case. On December 3, 2009, Prochnow was granted a discharge. On January 8, 2010, Prochnow ceased working as a realtor-associate with ReMax. (Stipulation ¶ 6). On February 23, 2010, Prochnow's bankruptcy case was closed.

On June 16, 2010, Prochnow, represented by new counsel, filed a Motion to Reopen Case. In the Motion, Prochnow alleged that he became entitled to the payment of compensation from ReMax for real estate commissions from three closings occurring after August 3, 2009, the date Prochnow filed his bankruptcy petition. Prochnow alleged he was entitled those commissions but that ReMax applied the commissions to Prochnow's pre-petition indebtedness to ReMax. (The commissions were retained by ReMax after the filing of the bankruptcy petition but before discharge.) Prochnow ...

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