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LLC v. WBCMT 2007-C33 office 9729, LLC

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

December 16, 2013

NNN CYPRESSWOOD DRIVE 25, LLC, Appellant,
v.
WBCMT 2007-C33 OFFICE 9729, LLC, Appellee

For NNN Cypresswood Drive 25, LLC, Appellant: George P. Apostolides, Kevin H Morse, Michael Leonard Gesas, LEAD ATTORNEYS, Arnstein & Lehr, LLP, Chicago, IL; Brian Patrick Welch, Crane, Heyman, Simon, Welch & Clar, Chicago, IL.

For WBCMT 2007-C33 Office 9729, LLC, Appellee: Jill L. Nicholson, LEAD ATTORNEY, Joanne Lee, Foley & Lardner, Chicago, IL.

OPINION

Page 829

MEMORANDUM OPINION AND ORDER

Rubé n Castillo, Chief United States District Judge.

NNN Cypresswood Drive 25, LLC (" Debtor" ) brings this appeal from an order of the United States Bankruptcy Court for the Northern District of Illinois denying WBCMT 2007-C33 Office 9729, LLC's (" WBCMT" ) motion to lift the automatic stay as to non-debtor affiliates. Presently before the Court is WBCMT's motion to dismiss the appeal as moot pursuant to Rule 8011 of the Federal Rules of Bankruptcy Procedure. For the reasons stated below, the motion is granted.

BACKGROUND

Debtor owns a 3.305% interest in commercial real property located in Houston, Texas (the " Property" ) as a tenant in common, along with thirty-two other single-purpose limited liability companies (collectively with Debtor, the " TICs" ). (Bankr. R. 67, Op. at 1.)[1] WBCMT owns a mortgage upon the Property. ( Id. ) In November 2012, WBCMT declared a default against all of the TICs, including Debtor. ( Id. at 2.) The monetary defaults allegedly totaled approximately $17,500,000. ( Id. at 1.) On December 11, 2012, WBCMT notified the TICs that default had not been addressed and it would be foreclosing on the Property through a foreclosure sale to be held on January 1, 2013. ( Id. at 2.) On December 31, 2012, Debtor filed a voluntary petition of bankruptcy under Chapter 11 of the Bankruptcy Code, triggering an automatic stay of the foreclosure proceedings against Debtor's interest in the Property. ( Id. ) Debtor's sole asset is its TIC interest in the Property. ( Id. ) On January 15, 2013, WBCMT moved for relief from the automatic stay as to the non-debtor TICs and requested permission to continue foreclosing against them.[2] (Bankr. R. 16, WBCMT's Mot. Relief.) On March 6, 2013, the bankruptcy court denied WBCMT's motion and held that " the [automatic] stay does not apply to the interests

Page 830

held by the thirty-two non-debtor TICs or to any redemption rights held by the debtor." (Bankr. R. 67, Op. at 5.) The court held that because the stay only protected Debtor's interest in the Property and not the interests of the non-debtor TICs, WBCMT was free to " pursue its remedies under state law against the non-debtor TICs." ( Id. ) Following the entry of the bankruptcy court's order, WBCMT scheduled a foreclosure sale of the Property for the second time, this time set to take place on April 1, 2013. (R. 13, WBCMT's Mot. Dismiss ¶ 6.)

On March 15, 2013, Debtor filed the instant appeal from the bankruptcy court's order pursuant to 28 U.S.C. § 158(a)(1) and Federal Rules of Bankruptcy Procedure 8001 and 8002. (R. 1, Notice of Appeal.) Debtor raises three issues on appeal: (1) whether the automatic stay provided in 11 U.S.C. § 362(a) protects a debtor's interest in commercial real property as a tenant in common by prohibiting foreclosure of non-debtor tenant in common interests; (2) whether the automatic stay provided in 11 U.S.C. § 362(a) protects a debtor's equitable right of redemption in commercial real property; and (3) whether the bankruptcy court violated Federal Rule of Bankruptcy Procedure 7001(9) by granting declaratory relief without an adversary proceeding. (R. 7, Debtor's Br. at 1-2.)

On the same day it filed this appeal, Debtor moved the bankruptcy court to stay the foreclosure proceedings pending resolution of the appeal. (Bankr. R. 72, Debtor's Mot. Stay.)[3] The pendency of Debtor's motion to stay the sale pending appeal delayed the scheduled foreclosure sale, but the bankruptcy court denied the motion on April 11, 2013. (R. 13, Ex. A, Apr. 11, 2013 Tr. at 2:16-17.) Pursuant to the bankruptcy court's ruling, WBCMT scheduled a foreclosure sale of the Property for a third time to take place on May 7, 2013, at which WBCMT purchased the non-debtor TICs' interests in the Property. (R. 13, WBCMT's Mot. Dismiss ¶ 7.)

On June 21, 2013, WBCMT moved this Court to dismiss Debtor's appeal as moot pursuant to Rule 8011 of the Federal Rules of Bankruptcy Procedure. (R. 13, WBCMT's Mot. Dismiss.) On July 12, 2013, WBCMT filed a brief requesting that the Court immediately grant the motion to dismiss due to Debtor's failure to file any opposition. (R. 14, WBCMT's Br.) On that same day, Debtor moved to strike both WBCMT's motion to dismiss the appeal and WBCMT's reply brief pursuant to Local Rule 5.3. (R. 15, Debtor's Mot. Strike.) This Court denied Debtor's motion to strike on July 17, 2013. (R. 18, Min. Entry.) Debtor subsequently filed a response in opposition to WBCMT's motion to ...


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