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Republic Bank of Chicago v. Desmond

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

July 17, 2015

Republic Bank of Chicago, Plaintiff,
v.
Michael Desmond, as Trustee, et al., Defendant.

MEMORANDUM OPINION AND ORDER

JOHN ROBERT BLAKEY, District Judge.

This is an adversary proceeding from the Bankruptcy Court that concerns the use of certain property under the terms of a lease that was purportedly assigned to Plaintiff Republic Bank by the FDIC. Currently before the Court are the following motions: (1) Defendant Delta Trading Company's motion for an entry of final judgment under Fed.R.Civ.P. 54(b) [74]; (2) Plaintiff Republic Bank's motion for interlocutory appeal under 28 U.S.C. ยง 1292(b) [80]; (3) Defendant Trustee's motion for judgment of possession of property under Count II of its Amended Counterclaim [57]; and (4) Plaintiff Republic Bank's motion to dismiss Count II of the Amended Counterclaim as moot. Each motion will be addressed in detail below.

I. Background

On October 8, 2009, the debtor, R&G Properties ("RG"), filed a voluntary petition for Chapter 11 bankruptcy before the U.S. Bankruptcy Court for the Northern District of Illinois. The debtor's assets included real property located at 5700 North Central Avenue in Chicago (the "Property"). In 2002, Citizens Bank ("Citizens") entered into a lease for the Property with a term of October 1, 2002 to September 30, 2007 (the "Lease"). The Lease also provided for up to five renewal terms of five years. On November 15, 2007, Citizens notified RG of its election to exercise its option to renew the Lease for a five year term from October 1, 2007 to September 30, 2012. On April 23, 2010, Citizens was closed and placed into receivership with the FDIC. That same day, Republic Bank ("Republic") entered into an agreement whereby it acquired substantially all assets and liabilities associated with the deposits held by Citizens. Republic also acquired an exclusive option to assume the Lease. That Lease included a purchase option that has become the focus of this litigation (the "Purchase Option").

Republic took possession of the Property in April 2010, and on January 31, 2010, it issued a notice to RG purporting to exercise the Purchase Option. RG's counsel allegedly acknowledged the right to exercise the Purchase Option, but haggled over the price. On June 20, 2012, Michael Desmond was named as the Trustee for the bankruptcy of RG and Mr. Desmond notified Republic of his intent not to honor the Purchase Option because, in his view, it was not assignable. The Trustee then ordered Republic to vacate the Property on September 30, 2012.

On October 1, 2012, Republic filed a complaint against the Trustee seeking declaratory relief and specific performance regarding Republic's rights under the Purchase Option. The complaint also named Delta Trading Company ("Delta") as a defendant, because Delta purports to have acquired a mortgage on the Property after execution of the Lease. On November 12, 2012, the Trustee filed a counterclaim against Republic seeking damages for breach of the Lease, possession of the Property, and damages resulting from Republic's holdover tenancy of the Property from October 1, 2012 onward.

Republic and the Trustee filed cross motions for summary judgment on Republic's adversary complaint. On April 21, 2014, Judge Guzman granted the Trustee's motion for summary judgment and denied Republic's motion. The Court found that the language of the option to purchase precluded its assignment, and therefore Republic, as assignee of the Lease, could not exercise the option [16]. Although the Order disposed of all of Republic's claims, it did not dispose of the Trustee's counterclaim. On May 21, 2014, the Trustee filed an amended counterclaim, which remains pending.

On March 10, 2015, Delta filed a mortgage foreclosure suit in the Circuit Court of Cook County, against Republic, the Trustee and others, to foreclose its mortgage on the Property. That state court action remains pending.

On May 28, 2015, Republic filed a motion to dismiss that mortgage foreclosure action, pursuant to 735 ILCS 5/2-619(3). The basis of Republic's motion to dismiss is that there allegedly is "another action pending for the same cause." That other action is alleged to be this adversary proceeding. To rectify this situation, and allow it to proceed on the mortgage foreclosure in Cook County, Delta filed a motion for entry of final judgment in this Court, and Republic responded with a motion for interlocutory appeal. Both motions seek to allow appeal of this Court's ruling on summary judgment.

II. Delta Trading Company's Motion for Entry of Final Judgment

Delta's motion requests an entry of final judgment on the April 21, 2014 summary judgment Order [16] pursuant to Fed.R.Civ.P. 54(b). Under Rule 54(b), "when an action presents more than one claim for relief - whether as a claim, counterclaim, cross claim, or third-party claim - or when multiple parties are involved, the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay." Rule 54(b) authorizes the district court to enter a final judgment "on a single claim only if that claim is separate from the claim or claims remaining for decision in the district court-separate not in the sense of arising under a different statute or legal doctrine... but in the sense of involving different facts." Ty, Inc. v. Publications Int'l Ltd., 292 F.3d 512, 515 (7th Cir. 2002).

This emphasis on only allowing entry of judgment on "separate claims" is intended to prevent piecemeal litigation. ITOFCA, Inc. v. Megatrans Logistics, Inc., 235 F.3d 360, 364 (7th Cir. 2000). As the Seventh Circuit explained, "the retained and the appealed claims must be factually distinct" and the "fact that one claim appears in the complaint and another in a counterclaim... does not make them different claims for purposes of Rule 54(b)." Olympia Hotels Corp. v. Johnson Wax Dev. Corp., 908 F.2d 1363, 1366 (7th Cir. 1984). Finally, "it is an abuse of discretion for a district judge to grant a motion for a Rule 54(b) order when the motion is filed more than thirty days after the entry of the adjudication to which it relates." Schaeffer v. First Nat. Bank of Lincolnwood, 465 F.2d 234, 236 (7th Cir. 1972); C&F Packing Co. v. IBP, Inc., No. 93 C 1601, 1994 WL 484630, at *1 (N.D. Ill. Sept. 2, 1994).

Accordingly, Delta's motion for entry of final judgment is denied because: (1) it was not timely filed; and (2) the claim on which Delta seeks appeal is not a "separate claim" from the claims that would remain before this Court. First, Delta's motion was filed fourteen months after the Court's Order on summary judgment [16] and without any adequate explanation for the delay. The motion is therefore denied as untimely under Schaeffer and its progeny. Schaeffer, 465 F.2d 234, 236 (7th Cir. 1972) (delay of sixty plus days before filing Rule 54(b) motion was untimely).

Second, the claim Delta seeks to appeal (regarding the Purchase Option), and those that remain pending (regarding breach of the Lease), are not separate claims. Here, the issues addressed in the summary judgment Order that will be the subject of Republic's appeal, and the claims still being pursued by the Trustee before this Court, arise from the same Lease and the same set of facts. Further, the Trustee's remaining claims logically arise from the Court's conclusion that the FDIC could not assign the Purchase Option. Had the Court agreed with Republic's position, then the Trustee's claims for holdover rent and ...


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