Sindesmos Hellinikes-Kinotitos of Chicago

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

In re: Case No. 18bk34548

Sindesmos Hellinikes-Kinotitos of Chicago, Chapter 11

Debtor. Judge Timothy A. Barnes

TIMOTHY A. BARNES, Judge.

MEMORANDUM DECISION

This matter comes on for consideration on the Motion for Entry of Order (I) Granting

Relief from Amended Order Approving and Authorizing the Debtor to Sell Real Estate, Free and

Clear of Liens and Encumbrances, to Assume and Assign Real Property Lease, and to Shorten

Notice, and (II) Granting Related Relief [Dkt. No. 127] (the “Rule 60 Motion”), as originally

brought by HT Preservation Society, Ltd. (“HIPS”) and as joined by certain parishioners (the so-

called “Concerned Parishioners” and together with HTPS, the “Movants”) by way of the Joinder of

Concerned Parishioners to Motion for Entry of Order (1) Granting Relief from Amended Order

Approving and Authorizing the Debtor to Sell Real Estate, Free and Clear of Liens and

Encumbrances, to Assume and Assign Real Property Lease, and to Shorten Notice, and

(H) Granting Related Relief [Dkt. No. 132] (the “Joinder”).'

In the Rule 60 Motion, without having objected to the Amended Order Approving and

Authorizing the Debtor to Sell Real Estate, Free and Clear of Liens and Encumbrances, to Assume

and Assign Real Property Lease, and to Shorten Notice [Dkt. No. 121] (the “Chicago Sale Order’),

which Chicago Sale Order contained protections under section 363(m) of title 11 of the United

States Code, 11 U.S.C. § 101, ef seg. (the “Bankruptcy Code”), and after the appeal period for the

Chicago Sale Order has passed, the Movants seek to have this court vacate the Chicago Sale Order

for lack of authority of the debtor, Sindesmos Hellinikes-Kinotitos of Chicago (the “Debtor” or the

“Holy Trinity Church”), to enter into the sale approved thereunder.

For the reasons stated more fully herein, after having set briefing on the Rule 60 Motion?

and considered all of the filings in relation thereto, and after having conducted a hearing on

October 15, 2019 (the “Hearing”) at which each of the parties discussed herein appeared and was

heard, the court concludes that the Movants have failed to establish the requirements to vacate the

Chicago Sale Order under Federal Rule of Civil Procedure 60 (“Rule 60” specifically and generally,

the “Rules”’), made applicable in this matter by Federal Rule of Bankruptcy Procedure 9024

| The Concerned Parishioners consist of John Karamitsos, Stavros Haidos, Olympia Haidos, Maria

Vlahos, George Horaites and Spiro Kezios. Joinder, at 5.

2 All further references to the Rule 60 Motion include the Joinder.

(generally, the “Bankruptcy Rules”). For that reason, the Rule 60 Motion should be, and by separate

order entered concurrently herewith will be, denied.

JURISDICTION

The federal district courts have “original and exclusive jurisdiction” of all cases under the

Bankruptcy Code. 28 U.S.C. § 1334(a). The federal district courts also have “original but not

exclusive jurisdiction” of all civil proceedings arising under the Bankruptcy Code, or arising in or

related to cases under the Bankruptcy Code. 28 U.S.C. § 1334(b). District courts may, however,

refer these cases to the bankruptcy judges for their districts. 28 U.S.C. § 157). In accordance with

section 157(a), the District Court for the Northern District of Ulinois has referred all of its

bankruptcy cases to the Bankruptcy Coutt for the Northern District of Hlinois, N.D. IIL Internal

Operating Procedure 15(a).

A bankruptcy judge to whom a case has been referred may enter final judgment on any core

proceeding arising under the Bankruptcy Code or afising in a case under the Bankruptcy Code.

28 U.S.C. § 157(b)(1). Bankruptcy judges must therefore determine, on motion or sua sponte,

whether a proceeding is a core proceeding or is otherwise related to a case under the Bankruptcy

Code. 28 U.S.C. § 157(b)(3). As to the former, the bankruptcy judge may hear and determine such

matters. 28 U.S.C. § 157(b)(1). As to the latter, the bankruptcy judge may hear the matters, but may

not decide them without the consent of the patties. 28 U.S.C. §§ 157(b)(1), (c). Instead, the

bankruptcy judge must “submit proposed findings of fact and conclusions of law to the district

court, and any final order or judgment shall be entered by the district court judge after considering

the bankruptcy judge’s proposed findings and conclusions and after reviewing de xove those matters

to which any party has timely and specifically objected.” 28 U.S.C. § 157 (c)(1).

In addition to the foregoing considerations, the bankruptcy judge must also have

constitutional authority to hear and determine a matter. See Stern 2, Marshall, 564 U.S. 462 (2011).

Constitutional authority exists when a matter originates under the Bankruptcy Code or, in noncore

matters, where the matter is either one that falls within the public rights exception, éd., or where the

parties have consented, either expressly or impliedly, to the bankruptcy judge hearing and

determining the matter. See Wellness Int'l Network, Lid. v. Sharif, 135 S. Ct. 1932, 1947 (2015) (parties

may consent expressly or impliedly to a bankruptcy court’s jurisdiction); Richer ». Morehead, 798 F.3d

487, 490 (7th Cir. 2015) (noting that “implied consent is good enough”).

The bankruptcy court, acting in the stead of the district court, has exclusive jurisdiction over

the bankruptcy estate’s assets, wherever located. 28 U.S.C. § 1334(e)(1). It follows that a motion

concerning such assets is a matter concerning the administration of the estate and is therefore a

statutorily core proceeding, 28 U.S.C. § 157(b)(2)(A), and a motion to sell such assets is expressly

core. 28 U.S.C. § 157(b)(2)(N). It further follows that a motion to reconsider an order regarding

such a motion concerning the sale of bankruptcy estate assets also arises in a case under the

Bankruptcy Code. See Fed. R. Civ. P. 60; Edseint, Inc. v. First Wis. Fin, Corp. (In re Xonics), 813 F.2d

127, 130 (7th Cir. 1987) (“Doubtless courts may enforce their own orders.” (internal citations

omitted); I” re Morrow, 495 B.R. 378, 382 (Bankr. N.D. Ill. 2013) (Barnes, J.).

Based on the foregoing, except as otherwise noted herein, the court has the jurisdiction and

statutory and constitutional authority to hear and determine this matter and to enter final orders

with respect to the Rule 60 Motion.

HISTORY

The history of this matter extends not just to the case itself, but to another, prior bankruptcy

case and the efforts, both in this court and elsewhere, of the Debtor’s major secured creditor to

collect on the obligations owed it.

The Debtor, the so-called Holy Trinity Church, is a religious corporation consisting of one

of the oldest Greek Orthodox churches in this country. As will be discussed below, the church has

existed in each of this and the previous two centuries. The Debtor’s two major assets were, prior to

the events unfolding as described herein, the church’s nave (the “Chicago Property”) and a second

property where the Debtor, ultimately by agreement with and thus through the Hellenic American

Academy Foundation (the “Academy”), operated a religious school (the “Deerfield Property” and

together with the Chicago Property, the “Properties”). In addition, adjacent to the Chicago Property

is a parking lot owed by the Debtor (the “Parking Lot”).

In 2007, the Debtor became indebted to MB Financial Bank, N.B. (“MBFB”) for more than

$8.2 million dollars. See Official Form 41 0, Proof of Claim of MB Financial Bank, N.A. (filed

March 22, 2019) {Claim 4-1] (the “Bank Claim” and generally, the “Bank Loan”). Fifth Third Bank

(“Fifth Third” and together with MBFB, the “Bank”) is the successor in interest to the Bank Claim.

According to filings by the Bank in this case, the money was borrowed to improve the Deerfield

Property. See Mot. of MB Financial Bank N.A. for Order Fxcusing Receiver from Compliance with

Sections 543(a) and 543(b) of the Bankruptcy Code, at {6 [Dkt. No. 17] (the “Receiver Motion”’).

As security for the Bank Claim, the Debtor granted the Bank mortgages and assignments of rent and

executed related documents pertaining to both of the Properties, but not pertaining to the Parking

Lot. Id. at 47.

According to MBFB, the Debtor defaulted on the Bank Loan some time in 2013 and MBFB

served notices of default in 2013 and 2014. Id at 413. In 2015, MBFB instituted foreclosure

actions against the Chicago Property, 2d. at | 14, but before a teceivet could be appointed, the

Debtor commenced its first chapter 11 bankruptcy case. Id at] 15. That case, In re Sindesmos

Hellinikes-Kinotitos of Chicago, Case No. 15bk22446 (Bankr. N.D. Ill. filed June 29, 2015) (the “Prior

Case”), was assigned to the undersigned.

For nearly three years, in the Prior Case, the Debtor attempted to formulate a plan of

reorganization. Much of the early part of the case was focused on disputes between the Bank, the

Debtor and the Academy regarding the school on the Deerfield Property. Ultimately, after the

undersigned denied the Academy’s claim, Order Sustaining Objection [Prior Case, Dkt. No. 173],

and lifted the automatic stay to allow MBFB to pursue nonbankruptcy remedies with respect to the

Properties, Order Modifying Automatic Stay [Prior Case, Dkt. No. 208}, another judge sitting in the

undersigned’s stead ruled against the Academy on certain of its alleged claims in the Deerfield

Property and, over the objection of the Academy, the court approved the sale of the Deerfield

Property for approximately $3.7 million. Order (A) Approving the Sale of Real Estate to the

Purchaser Free and Clear of Liens, Claims, Liabilities, and Encumbrances and (B) Granting Related

3 As the sale discussed herein of the Chicago Property included a sale of the Parking Lot, the court will

use the term Chicago Property to describe both parcels and differentiate when and where that may be

necessary.

Relict [Prior Case, Dkt. No. 228]. While the Academy appealed the rulings against it," the Debtor in

the meantime sought and received voluntary dismissal of the Prior Case. Order Dismissing

Chapter 11 Proceeding [Prior Case, Dkt. No. 239].

After the dismissal of the Prior Case, MBFB continued its foreclosure action against the

Chicago Property, this time obtaining the appointment of a receiver in April 2018. Receiver Mot., at

{| 18. However, on the morning of the scheduled foreclosure sale of the Chicago Property, on

December 14, 2018, the Debtor once again commenced a chapter 11 proceeding-—the above-

captioned bankruptcy case.

In this case, MBFB sought to be excused from the requirements of sections 543(a) & (b) of

the Bankruptcy Code so as to remain in legal Possession of the Chicago Property. See Receiver Mot.,

at {| 25 et passim. That request was gtanted. Supplemental Order on Motion to Excuse Receiver

from Compliance with Sections 543(a) and 543(b) of the Bankruptcy Code {Dkt. No. 35].’ Further,

the Debtor sought and received approval to offer both of the Properties and the Parking Lot for

sale. See Order Authorizing and Approving Bidding, Auction and Sale Procedures and Setting

Hearing to Approve Sale of Assets [Dkt. No. 68], as amended by Order Authorizing and Approving

Amended Bidding, Auction and Sale Procedures and Setting Hearing to Approve Sale of Assets

[Dkt. No. 79] (together, the “Sale Procedures Order’).

Under the Sale Procedures Order, the Debtor extensively marketed the Properties and the

Parking Lot and, ultimately, contracted to sell the Deerfield Property to Olympia Acquisitions LLC

for the much lower amount of $1,650,000.00. See Debtor’s Motion to Approve Sale of the Deerfield

Property Free and Clear of Liens, Claims, Liabilities, and Encumbrances and to Shorten Notice, at

15 [Dkt. No. 103] (the “Deerfield Sale Motion”). The Debtor also contracted to sell the Chicago

Property and the Parking Lot to The Universal Church, Inc. (the “Chicago Buyer”) for

$2,500,000.00. See Debtor’s Motion to Approve Sale of the Chicago Property Free and Clear of

Liens, Claims, Liabilities and Encumbrances, to Assume and Assign Real Property Lease, and to

Shorten Notice, at 417 [Dkt. No. 110] {the “Chicago Sale Motion”).

A hearing was held by the court on September 10, 2019, on both the Deerfield Sale Motion

and the Chicago Sale Motion. Despite there being an unusually full gallery of onlookers, no party

taised any objection to or other concerns regarding the two proposed sales. After considering the

requitements for sales under section 363 of the Bankruptcy Code, the unopposed allegations in the

motions and the history of this matter generally, in the absence of any objection, this court approved

both of the sales. See Amended Order Approving and Authorizing the Debtor to Sell Real Estate,

Free and Clear of Liens and Encumbrances, and to Shorten Notice [Dkt. No. 120] (the “Deerfield

Sale Order’); Chicago Sale Order.

Each of the Deerfield Sale Order and the Chicago Sale Order contained protections for the

respective buyers thereunder under section 363{m) of the Bankruptcy Code. Deerfield Sale Order,

at 4; Chicago Sale Order, at 4] 4. Each order also waived the stay of effectiveness under

4 The Academy’s appeals were dismissed by either its own stipulation or request to dismiss. [Prior

Case, Dkt. Nos. 243, 244].

5 The court mistakenly at the Hearing observed that this had not occurred. That mistake does not

affect the outcome in this matter.

Bankruptcy Rules 6004. Deerfield Sale Order, at {| 6; Chicago Sale Order, at 4{ 7; see also Fed. R.

Bankr. P. 6004(h).

Three weeks after the entry of the sale orders, after the expiration of the appeal period with

respect thereto, see Fed. R. Bank. P. 8001 (a)(1), and without any extension of that period, see Fed. R.

Bankr. P. 8001(b), on October 1, 2019, HTPS applied to this court for a hearing on an emergency

basis. App. to Set Hr’g on Emergency Mot. [Dkt. No. 125] (the “Application”). That same day, the

court granted the Application and instructed HTPS to file their motion and schedule the hearing on

such motion for October 2, 2019 (the “Emergency Hearing”). Order [Granting Application to Set

Emergency Hearing] [Dkt. No. 126]. HTPS thereafter filed the Rule 60 Motion and scheduled it to

be heard at the Emergency Hearing.

At the Emergency Hearing, HTPS appeared in support of the Rule 60 Motion. The Debtor,

Fifth Third, the Chicago Purchaser (collectively, the “Opposing Parties”), along with the United

States Trustee (the “U.S. Trustee”, all appeared and raised a varicty of arguments in opposition.

Chief among the arguments against the Rule 60 Motion was that HTPS did not have the

requisite standing to bring the Rule 60 Motion. After learning that HTPS was created by various

parishioners of the Holy Trinity Church and other concerned parties after the entry of the Chicago

Sale Order, formed for the sole purpose of bringing the Rule 60 Motion, the court ruled that HTPS

did not have standing to seek the relief requested. As an entity that did not exist at the time the

Chicago Sale Order was entered and not the possessor of the parishioners’ rights asserted in the

Rule 60 Motion, HTPS could not possibly establish that it had an interest directly affected by the

Chicago Sale Order. Iv re Andrenccetti, 975 F.2d 413, 416—17 (7th Cir. 1992).

Accordingly, at the conclusion of the Emergency Hearing, the court entered an order

permitting one or more of the parishioners to join as parties to the Rule 60 Motion before the end

of the day of the Emergency Hearing. Scheduling Order with Interim Stay [Dkt. No. 130] (the

“First Scheduling Order”). The First Scheduling Order provided that, without any joinder being

timely filed, the Rule 60 Motion would be denied, but with a joinder, the court would hold a hearing

the next day, on October 3, 2019, to address the threshold issue of whether such parishioners

themselves have standing to seck the relief requested in the Rule 60 Motion (the “Second Hearing”).

Id. Further, and as will be discussed in more detail below, the court stayed the Chicago Sale Order

until the conclusion of the Second Hearing. Later that day, pursuant to the First Scheduling Order,

the Concerned Parishioners filed the Joinder, thus necessitating the Second Heating.

At the Second Hearing on October 3, 2019, the court again took up the issue of standing,

this time with respect to the Concerned Parishioners. For the reasons more fully discussed below,

the court found that the Concerned Parishioners had established a sufficient claim to standing so as

to require the Opposing Parties to respond to the Rule 60 Motion. Accordingly, at the conclusion

of the Second Hearing, the court ordered a briefing schedule on the Rule 60 Motion, set the Hearing

on what would be then the fully briefed Rule 60 Motion, and further stayed the Chicago Sale Order

until the conclusion of the Hearing. Second Scheduling Order with Interim Stay [Dkt. No. 137] (the

“Second Scheduling Order”). The court also dismissed HTPS as a party to the Rule 60 Motion,

leaving the Concerned Parishioners as the sole movants. Id

In accordance with the Second Scheduling Order, on October 8, 2019, the Opposing Parties

each filed briefs in opposition to the Rule 60 Motion. Debtor’s Response in Opposition to the HT

Preservation Society and Certain Parishioners’ Rule 60(b) Motion to Vacate the Order Authorizing

the Sale of the Chicago Property to Universal Church, Inc. [Dkt. No. 138} (the “Debtor’s

Response”); Response of Fifth Third Bank to Motion to Vacate Sale Order [Dkt. No. 140] (the

“Bank’s Response”); The Universal Church’s Response to the Parishioner’s Motion for Relief from

Judgment or Order [Dkt. No. 141]. Three days later, on October 11, 2019, the Concerned

Parishioners filed their Reply in Support of Motion for Entry of Order (1) Granting Relief From

Amended Order Approving and Authorizing the Debtor to Sell Real Estate, Free and Clear of Liens

and Encumbrances, to Assume and Assign Real Property Lease, and to Shorten Notice, and (11)

Granting Further Relief [Dkt. No. 145] (the “Reply’”) and that same day, the Debtor and the

Concerned Parishioners jointly filed Stipulations of Fact Regarding Governance Documents [Dkt.

No. 143] (the “Stipulations”).

On October 15, 2019, the parties appeared for the Hearing. After considering the

arguments presented and the fully briefed Rule 60 Motion, the court informed the patties it would

take the matter under advisement. Accordingly, the court entered an order staying the Chicago Sale

Order once again until the resolution of the Rule 60 Motion, as addressed by this Memorandum

Decision. Third Scheduling Order with Interim Stay [Dkt. No. 146] (the “Third Scheduling

Order’).

This Memorandum Decision constitutes the court’s determination of the fully briefed

matters under advisement. In reaching the conclusions set forth herein, the court has taken into

account all of the foregoing history and filings, including any and all exhibits submitted in

conjunction with the foregoing. Though the foregoing filings do not constitute an exhaustive list of

the filings in the above-captioned bankruptcy case and the Prior Case, the court has taken judicial

notice of the contents of the docket in this case and in the Prior Case. See Levine v. Egidi, Case

No. 93C188, 1993 WL 69146, at *2 (N.D. Tl. Mar. 8, 1993) (authorizing a bankruptcy court to take

judicial notice of its own docket); Iv re Brent, 458 B.R. 444, 455 0.5 (Bankr. N.D. Ill. 2011) (Goldgar,

J.) (recognizing same).

APPLICABLE LAW

While the Rule 60 Motion raises a variety of legal issues discussed below, the Rule 60 Motion

is at its essence a request to vacate the Chicago Sale Order under Rule 60(b)(1) for an alleged lack of

authority. See Rule 60 Mot., at 33-35. The Rule 60 Motion also asserts a request under

Rule 60(b)(6) for the same reasons. See id, at 4] 39.

Rule 60, which as noted above, is applicable in bankruptcy matters by virtue of Bankruptcy

Rule 9024, states in pertinent part as follows:

(b) Grounds for Relief from a Final Judgment, Order, or Proceeding. On

motion and just terms, the court may telieve a patty or its legal representative from a

final judgment, order, or proceeding for the following reasons:

(1) mistake, inadvertence, surprise, or excusable neglect;

12.508

(6) any other reason that justifies telief.

{c) Timing and Effect of the Motion.

(1) Timing. A motion under Rule 60(b) must be made within a

reasonable time—and for reasons (1), (2), and (3) no more than a year after

the entry of the judgment or order or the date of the proceeding.

(2) Effect on Finality. The motion does not affect the judgment’s

finality or suspend its operation.

Fed. R. Civ. P. 60(6)(1), (©), (©).

Relief from a prior judgment or order under Rule 60(b) 1s an extraordinary remedy that is

gtanted only in exceptional circumstances. Be// », Eastman Kodak Co., 214 F.3d 798, 801 (7th Cir.

2000); Indus. Assocs., Inc. v. Goff Corp., 787 F.2d 268, 269 (7th Cir. 1986) (citing Klapprott v. United States,

335 U.S. 601, (1949), “Rule 60(b) motions are addressed to the discretion of the Court, and the

burden of establishing proper grounds fot such relief rests upon the movant.” Nat? Bank of Joliet v.

W. 11. Barber Oil Co., 69 F.R.D. 107, 109 (ND. IL 1975) Gnternal citations omitted); see a/so Helw v.

Resolution Tr. Corp., 84 F.3d 874, 877-79 (7th Cir. 1996).

Prior to the implementation of Rule 60, federal courts used their “inherent judicial power to

reconsider {] judgments within a reasonable time, including judgments confirming sales.” In re Met-

L-Wood Corp. 861 F.2d 1012, 1018 (7th Cir, 1988), cert. denied, 390 U.S. 1006 (1989). By

implementing Rule 60 in bankruptcy matters, the Judicial Conference of the United States codified

and replaced that traditional approach.

Rule 60(6)(1) has as its essential purpose creating a way, other than by appeal, for the court

to correct mistakes in a final judgment or order entered by the court. Mendez v. Republic Bank, 725

F.3d 651, 659 (7th Cir. 2013) (“Rule 60(b) allows a district court to cottect its own errors that could

be corrected on appeal, at least if the motion is not a device to avoid expired appellate time limits.””.

Rule 60(b)(6), on the other hand, the so-called “catchall provision,” may not be invoked as

grounds for relief for an argument that fits within the other sections of Rule 60. Indus. Assocs., 787

at 269; see also Met-L-Wood, 861 F.2d at 1018 (noting that Rule 60(b)(6) expressly refers to “any

other teason that justifies relief”) (emphasis in original), see also Lifebers v. Health Servs. Acquisition Corp.,

486 U.S, 847, 863 (1988) (Rule 60(b)(6) motion may not be “premised on one of the grounds for

relief enumerated in clauses (b)(1) through (6)(5)"); Aneta v. Battaglia, 461 F.3d 861, 865 (7th Cir.

2006) (same)."

Except possibly in relation to notice, the Rule 60(b){6) argument has essentially been abandoned by

the Concerned Parishioners. While it was raised in the original Rule 60 Motion and that motion was joined in

all respects by the Concerned Parishioners, see Joinder, at 4] 5, no mention of it has been made in the Reply or

in the arguments at the various hearings. Even if not abandoned, it is not well taken here. ‘The Rule 60

Motion makes no independent argument for relief under this subsection, again arguing that lack of authority

is grounds for relief. As such argument falls within the ambit of Rule 60(b)(1), it may not be advanced under

Rule 60(b)(6).

As discussed below, Concerned Parishioners did address certain notice arguments in the Reply

without stating how, if at all, the alleged lack of notice fits within Rule 60, See Reply, at 26-28 er passin.

Such arguments might be considered ones under Rule 60(b}(6), but as discussed fuji, those notice arguments

fail.

Regardless of the subsection, the determination of a Rule 60 motion is left to the discretion

of the trial court. Pretge/ ¢» Stouffer, Chartered v, Imperial Adjusters, Inc., 28 F.3d 42, 45 (7th Cir. 1994),

The Seventh Circuit has made clear that the trial court has broad discretion in that regard, Mendez,

725 F.3d at 657 (trial courts “are given broad discretion to deny motions for relief from judgment.”),

as the decision to grant relief “is closely related to the circumstances of the judgment and the

equities of a particular case.” Id; see also Bakery Mach, €> Fabrication, Inc. v. Traditional Baking, Ine., 570

F.3d 845, 848 (7th Cir.2009) (“The district court has great latitude in making a Rule 60(b) decision

because that decision is discretion piled on discretion.”) (internal citation and quotation marks

omitted).

With that in mind, the court turns to the matter at bar.

DISCUSSION

As noted above, while the matter before the coutt is squarely a question of whether or not to

apply Rule 60 to void a previous order of the bankruptcy court, the legal issues it presents ate

manifold.

To address those issues, the court first considers several gating questions, namely whether

the fact that the Chicago Sale Order as an asset sale order offering good faith purchaser protections

restrains this court’s consideration and whether this court’s decision to stay the Chicago Sale Order

pending determination of the Rule 60 Motion was correct.

Having considered those issues, the court next turns to the central issue plaguing this matter

from the start, standing.

Only after having considered standing does this court turn to the substantive question

concerning lack of authority, raised as grounds for the Rule 60 Motion. In considering this

substantive issue, the court examines the limitations on its review in hight of the ecclesiastical nature

of the Debtor and the rules governing the Debtor’s behavior.

After considering each of the foregoing, the court concludes by applying the issues raised to

the case at bar. The result, as has been noted earlier, does not favor the Concerned Parishionets.

A. The Gating Questions

1. How Does Section 363(m) Affect Rule 60 Motions?

One of the arguments raised by the Opposing Parties is that the court should not

countenance the Rule 60 Motion at all, as it is, for all intents and purposes, a collateral attack on an

otherwise final sale order containing protections under section 363(m) of the Bankruptcy Code.

Section 363(m) states that “[t]he reversal or modification on appeal of an authorization

under subsection (b) or (c) of this section of a sale or lease of property does not affect the validity of

a sale or lease under such authorization to an entity that purchased or leased such property in good

faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and

such sale or lease were stayed pending appeal.” 11 U.S.C. § 363(m). A finding under section 363(m)

affords the buyer an “ironclad” defense to attempts to undo the sale on appeal. Trinity 83 Dev., LLC

v. ColPin Midwest Funding, LLC, 917 F.3d 599, 603 (7th Cir. 2019). It does not, however, act to deny

a court jurisdiction to consider other challenges to a sale. Id. The Chicago Sale Order expressly

contained a section 363(m) finding of good faith. Chicago Sale Order, at 4 4.

The finality afforded sales to good faith putchasers under section 363(m) is an essential

protection for buyers of assets from bankruptcy estates. In re River W. Plaza—Chicago, LLC, 664 F.3d

668, 671 (7th Cir. 2011) (‘Because ‘purchasers are likely to demand a steep discount’ when

purchasing a bankruptcy debtor’s property if the sale can later be disturbed, In re § ax, 796 F.2d 994,

998 (7th Cir. 1986) (citation omitted), Congress has decided that bankruptcy sales are usually final.”).

The finality afforded under section 363(m), however, applies only in accordance with the

express terms of the statute. While the Opposing Parties utge this court to decline to hear the

Rule 60 Motion as it circumvents the finality of the Chicago Sale Order, such an argument is outside

the bounds of section 363(m) and at odds with the governing Seventh Circuit law in this arena.

The previously noted Me/-L-Wood case illustrates this point. There, though a bankruptcy

court had approved a sale of substantially all of a chapter 11 debtor’s assets, after conversion of the

case to one under chapter 7, the chapter 7 trustee attempted to challenge the earlier sale on the

ground that the bidding was rigged and that the bankruptcy court had engaged in improper ex parte

communications with the firm representing the debtor. Met-L-Wood, 861 F.2d at 1014-16. To do

so, the trustee brought a freestanding civil suit, separate from the underlying bankruptcy case, to

challenge the sale and also brought a Rule 60(b) (3) motion in the underlying bankruptcy case secking

the vacatur of the order authorizing the sale. Jd. at 1016. The lawsuit was dismissed and the

Rule 60(b) motion denied, the latter for violation of the express timing constraints under Rule 60(c).

Id.

On appeal, the Seventh Circuit affirmed. Jd at 1018-19. In so doing, the Circuit addressed

the interaction of appeals of sale confirmation orders and Rule 60(b) motions to vacate such orders.

The Circuit first noted that the trustee’s freestanding suit was inappropriate on preclusion principles

and that the failure to bring a timely appeal of an order approving a sale prevented such a party from

collaterally attacking such order in a separate lawsuit. Id at 1017.

The Circuit confirmed, however, that a Rule 60(b) motion is the only proper way to

challenge a final sale order outside the time to appeal such order. Id. at 1018 (“[WJe hold that

confirmed sales—which are final judicial orders——-can be set aside only under Rule 60(b).”). The

Seventh Circuit has consistently applied the ruling in Met-L-Wood in matters arising thereafter,

allowing Rule 60 reconsideration of bankruptcy sales. See, ¢, &, La Preferida, Inc. v. Cerveceria Modelo,

SA. de C. 1, 914 F.2d 900, 908 (7th Cir. 1990) (“{E]xcept for the narrow exceptions set forth in

Rule 60(b), bankruptcy sales, if they are to fulfill their role, must be final when made.”}; FutureSource

LLC Renters Lid, 312 F.3d 281, 286 (7th Cir, 2002) (“[I}he order approving a bankruptcy sale is a

yodicial order and can be attacked collaterally only within the tight limits that Fed. R. Civ. P. 60(b)

imposes on collateral attacks on civil judgments.”).

The Seventh Circuit has, however, consistently rejected the use of Rule 60 motions to

correct appealable errors outside the time for bringing appeals. See, eg, Mendez, 725 F.3d at 659

(citing numerous prior Seventh Circuit cases), In deciding Mendez, the Circuit explained that “[i]f

parties or courts could use Rule 60(b) to revive cases in which a party failed to appeal within the

standard deadline, Appellate Rule 4 would lose much of its force. That is why we have held in the

cases cited above that Rule 60(b) relief is appropriately denied when a party fails to file a timely

appeal and the relief sought could have been attained on appeal.” Id Further explaining this

position, the Circuit made clear that Rule 60 may be used “when the concern about circumventing

the deadline to appeal is absent.” Id,

This guidance is particularly germane here, where the appeal period has also passed. Further,

as section 363(m) provides for finality, but only in the instance of appeals, and as the sale has not yet

closed, the Rule 60 Motion seeks to do what even a timely appeal, assuming no stay pending appeal,’

could not, prevent the sale’s consummation. The Rule 60 Motion thus firmly wedges itself into a

loophole in the protections afforded good faith purchasers under section 363(m).

That loophole triggers just the kind of concern expressed by the Seventh Circuit in Mendes.

As the Circuit reiterated in Mer-L-Wced, “fulness bankruptcy sales are final when made, rather than

subject to being ripped open years later, high prices will not be offered for the assets of bankrupt

firms—and the principal losers (pun intended) will be unsecured creditors.” Met-L-Woed, 861 F.2d

at 1019,

There is no doubt here that the errors alleged by the Concerned Parishioners ate ones which

could have been addressed on appeal. As such an appeal would not, however, affect the validity of a

sale closed pursuant to the Chicago Sale Order, such an appeal could be meaningless. There is,

therefore, a possibility that the Rule 60 Motion may be an attempt to circumvent the finality of the

sale order under section 363(m). If true, such an attempt should no more be countenanced than an

attempt the circumvent the timing requirements of the appellate rules.

Thus, while the sale was protected under section 363(m), that does not preclude this court’s

jurisdiction over and consideration of the Rule 60 Motion. Nonetheless, that the sale was protected

under section 363(m) is meaningful, and the fact that the Rule 60 Motion was brought in the manner

and timing in which it was militates against granting the relief sought therein. As the determination

to grant Rule 60 motions is left within the discretion of the trial court, Mendez, 725 F.3d at 657 (trial

courts “are given broad discretion to deny motions for relief from judgment”), the court, in

considering the remainder of the issues before, must and will bear this concetn in mind.

2. The Stay of the Chicago Sale Order

As noted above, the sale of the Chicago Property had not closed when the Rule 60 Motion

was brought, though three weeks had passed since the entry of the Chicago Sale Order. This is

somewhat troubling as the Debtor represented to the court that the Chicago Purchaser was the only

buyer ready and willing to close in short order.

The failure to close the sale clearly attenuates the risk to the Chicago Purchaser. Had the

sale closed prior to the bringing of the Rule 60 Motion, that fact would likely decisively tip scales

against the Rule 60 Motion. Because the closing of the sale would upset the balance of

consideration on the Rule 60 Motion, no such consideration would be prudent without first

preserving the stains quo.

The simple solution in this matter was for the court to do as it did—-stay the Chicago Sale

Order pending a determination of the Rule 60 Motion. As with all things pertaining to the issue at

The imposition of a stay pending appeal is an extraordinary remedy. Kw», Ededman, 491 F.2d 684,

687 (7th Cir. 1974).

10

bar, however, the simple solution is not so simple, as the power to stay the Chicago Sale Order is

not immediately clear.

Under Bankruptcy Rule 6004, sale orders are stayed for 14 days unless the court orders

otherwise. Fed. R. Banks. P. 6004(h). Here, the court ordered otherwise in the Chicago Sale Order,

ordering Bankruptcy Rule 6004{h)’s stay to be not applicable to the sale. Chicago Sale Order, at □ □□

The patties were thus free to consummate the sale prior to the matter at bar. They did not. The

court could have, of course, reconsidered its ruling on Bankruptcy Rule 6004(h) in order to

reconsider the approval of the sale generally, but the circularity of that option is self-evident.

Barring such a stay under Bankruptcy Rule 6004, however, the rule-based authority to stay an order

is limited.

When the prospect of a stay was raised, the Bank urged the court to adopt the procedures

for a stay pending appeal, see Fed. R. Bankr. P. 8007, namely, to condition any such stay on the

issuance of a bond. Fed. R. Bankr. P. 8007(c). That approach is flawed for several reasons. First, as

is self-evident, this matter is not an appeal and thus Bankruptcy Rule 8007 does not, by its own

terms, apply. Even if it did apply, bonds under this rule ate discretionary, not mandatory. See infra.

The actual method of staying the Chicago Sale Order is found in Rule 62. Rule 62, made

applicable in bankruptcy adversary proceedings by Bankruptcy Rule 7062, authorizes a bankruptcy

court to stay its judgments pending determination of a Rule 60 motion. See, £.2., ln re Harlan, Case

No. 05-13794-H11, 2006 WL 6591974, at *4 (Bankr. $.D. Cal. Nov. 20, 2006). This, of course, is

not an adversary proceeding, so the rules in Part VII of the Bankruptcy Rules are not automatically

applicable herein. See Fed. R. Bankr. P. 7001. Rule 62 may, however, apply in other instances.

Contested matters in bankruptcy apply some of the rules of adversary proceedings

automatically, while others are left to the discretion of the bankruptcy judge. Fed. R. Bankr.

P. 9014(c). In particular, the application of Bankruptcy Rule 7062 and thus Rule 62 to contested

matters is left to the discretion of the bankruptcy judge. Id; see also id. advisory committee’s note to

1999 amendments (“Although Rule 7062 will not apply automatically in contested matters, the

amended rule permits the court, in its discretion, to order that Rule 7062 apply in a particular matter

10 COLLIER ON BANKRUPTCY 4 7062.03 (15th ed. rev, 2008).

While a sale motion is not an adversary proceeding, a sale of bankruptcy estate assets free

and clear of all liens and interests under section 363()—~as was the case here—-is a contested matter.

Fed. R. Bankr. P. 6004(c). Se too is a bankruptcy sale of any nature if objected to. Fed. R. Bankr.

P. 6004(b). It follows, therefore, that a motion under Rule 60, which is in essence an objection

brought after the fact, challenging a sale under section 363 (f), is also a contested matter.

Directing Bankruptcy Rule 7062 and thus Rule 62 to apply to this matter is therefore within

the authority conferred upon and discretion of the coutt.

Here the court believes it reasonable to order under Bankruptcy Rule 9014(c) that

Bankruptcy Rule 7062 and thus Rule 62 apply to this matter so as to preserve the status guo pending a

determination of the Rule 60 Motion. The allegations of lack of authority, if proven, call into

question the validity of the Chicago Sale Order. Allowing an inquiry into authority to be potentially

mooted by application of section 363(m) by the consummation of a sale while reconsideration is

sought is abhorrent to the purposes of obtaining a just resolution of the matters before the coutt.

11

In applying these rules, the court ordered that the Chicago Sale Order be stayed “until the

entry of an order by the court resolving the [Rule 60} Motion.” Third Scheduling Order, at 4 1.

That is within the court’s authority under the rules, which provide that orders in bankruptcy matters

to which such rules are applicable are stayed automatically for fourteen days unless the court orders

otherwise. Fed. R. Bankr. P. 7062(a); Fed. R. Civ. P. 62(a). This court’s stay 1s an order otherwise.

The court did not stay this matter lightly, given the primacy of the finality of bankruptcy

sales noted above. Given the seemingly legitimate concerns being raised by the Concerned

Parishioners and the statements of the Chicago Purchaser at the hearings that indicated a closing of

the sale was not imminent, the court determined that issuing a stay under these rules was appropriate

and in so doing balanced the parties’ positions, potential harms and chances of success on the

merits. Cf In re Fulton, 588 BR. 834, 845 (Bankr. N.D. Til. 2018) (Schmetterer, J.) (setting forth the

criteria in the Seventh Circuit for issuing stays pending appeal) (citing In re Porty-Eight Insulations, Ine.,

115 F.3d 1294, 1300 (7th Cir. 1997).

The court considered, in so doing, the Bank’s assertion that a bond was required for such a

stay to be imposed. As noted above, bonds on stays pending bankruptcy appeals are discretionary.

Fed. R. Bankr. P. 8007 (c); accord In re Carlson, 224 F.3d 716, 719 (7th Cir. 2000). Rule 62 also

references bonds and does so in much the same way as Bankruptcy Rule 8007. It does not provide

when bonds are required, only when they are not. Rule 62 thus leaves the question of a bond to the

discretion of the court. Bonds are not mandatory, as has been clarified by the Seventh Circuit when

it explained that, “[a]lthough a textual argument can be made that Rule 62(d) makes the posting of a

supersedeas bond mandatory, so that if a bond is not posted the judgment creditor can begin to

execute the judgment immediately even though an appeal is pending, we agree with the contrary

conclusion in Federal Presoription Serv., Inc. v. American Pharmacentical Ass'n, 636 F.2d 755, 757-60 (D.C.

Cir. 1980).” Ohmpia Equip. Leasing Co. ». W. Union Tel. Co., 786 F.2d 794, 796 (7th Cir. 1986). The

Seventh Circuit further clarified that “Tt]he dictum in Denevan v. Fall River Poundry Co., 696 F.2d 524,

526 (7th Cir. 1982)... is not inconsistent with Federal Prescription Service. We merely said that posting

a bond entitles the appellant to a stay of execution pending appeal; that is of course what Rule 62(d)

says; if he does not post a bond, he risks the district judge’s deciding to deny a stay.” Id.

The case law regarding exercise of that discretion is not helpful in the matter at bar, see, C.L5

Dillon v, City of Chi, 866 F.2d 902, 904 (7th Cir. 1988) (stating criteria for staying a money judgment),

as the criteria discussed by the courts do not lend themselves well to Rule 62 as directed to apply to

a sale order under Bankruptcy Rule 9014. Most cases apply instead to the appeal of monetary

judgments. In Car/son, however, the Seventh Circuit noted that a judge should not require a bond

only if the judge had “no other concern that the appellee’s rights will be compromised by a failure

adequately to secure the judgment.” Carlson, 224 F.3d at 719.

Here, as noted by the court, given the short time frame under which the Rule 60 Motion

would be heard and determined and the statements of the Chicago Purchaser that made clear that a

closing was not imminent, any concern the court might have in that regard were alleviated. The

court thus concluded that no bond would be required.

12

B. Standing

The standing of the Movants to be heard in this matter has been the most vigorously

disputed point of contention. While the court has already addressed the lack of standing of HTPS,'

in finding that the Concerned Parishioners had made a facial showing of standing—enough to merit

briefing the Rule 60 Motion rather than denying it outright—the court expressly reserved the

ultimate question of whether or not the Concerned Parishioners have standing in this matter.

As to that question, the court considers first the traditional rules of standing as they apply to

bankruptcy matters in the Seventh Circuit, followed by the argument of the Opposing Parties that

the Concerned Parishioners have no standing as they failed to object to the entry of the Chicago Sale

Order.

1. Bankruptcy Standing Generally and the Pecuniary Interest Rule

This court has addressed standing in bankruptcy matters before. In re Whitlock-Y oung, 571

B.R. 795, 803-04 (Bankr. N.D. IIL. 2017) Barnes, J.). There, the undersigned stated that “[s]tanding

questions arise on two levels: the Article III case or controversy question and the question regarding

prudential limits on a coutt’s exercise of its authority.” Id. at 804 (ating United States v. Windsor, 570

U.S. 744, 756 (2013) (criticizing an argument which “elides the distinction between two principles:

the jurisdictional requirements of Article IT] and the prudential limits on its exercise.”)); E/& Grove

Unified Sch. Dist. v. Newdow, 542 U.S. 1,11 (2004) (“[O]ur standing jurisprudence contains two

strands: Article III standing, which enforces the Constitution’s case-or-controversy requirement; and

prudential standing, which embodies “judicially self-imposed limits on the exercise of federal

jurisdiction.”) (citations omitted), abrogated on other grounds by Lexmark Int’l, Inc. v. Static Control!

Components, Inc., 572 U.S. 118 (2014); see also Lagan v. Defs. of Wildife, 504 U.S. 555, 560-61 (1992),

As to Article IIT standing, “{iJn every federal case, the party bringing the suit must establish

standing to prosecute the action.” E/é Grow, 542 US. at 11. “When standing is at issue, the central

inquiry is ‘whether the plaintiff has “alleged such a personal stake in the outcome of the

controversy” as to warrant his invocation of federal court jurisdiction and to justify exercise of the

court’s remedial powers on his behalf.” Whitlock-Y oung, 571 B.R. at 803 (quoting Simon v, Ky. Welfare

Reghts Org., 426 U.S. 26, 38 (1976) (quoting Warth v. Seldin, 422 US. 490, 498-99 (1975) (emphasis

omitted)); see also Andreuccetti, 975 F.2d at 416-17.

Some courts have stated that bankruptcy courts, as Article I courts, need not be bound by

Article HI standing. E.g,, Gibbs ¢> Bruns LLP ». Coho Exnergy Inc. (In re Coho Energy Inc.), 395 F.3d 198,

202 (Sth Cir. 2004) (“Bankruptcy courts are not authorized by Article III of the Constitution, and as

such are not presumptively bound by traditional rules of judicial standing.”) (quoting Rohm Hass

Tex., Ine. 2, Ortiz Bros. Insulation, Inc, 32. F.3d 205, 210 0.18 (th Cir. 1994)). Such courts appear to

hold that the only standing concern faced by bankruptcy courts is prudential standing, in their

words, a “person aggrieved.” Id.

8 As was noted above, the court has previously found that HTPS, as a legal entity with its own rights

and responsibility separate and apart from the parishioners of the Debtor and as an entity only created after

the entry of the Chicago Sale Order, lacks standing in this matter. See Second Scheduling Order, at] 1. Asa

result, this Memoranduin Decision discusses standing only in relation to the Concerned Parishioners.

13

This is not the approach taken in the Seventh Circuit, however, which instead treats

prudential standing more in line with that discussed in the Windsor case, as a constraint on Article □□

standing but not as a substitute for it. MazxS treet Org of Realtors v. Calumet City, 505 F.3d 742, 745

(7th Cir. 2007) (prudential standing “precludes the federal courts from exercising jurisdiction over

some types of case[s] that Article III would not forbid the courts to adjudicate.”).

In bankruptcy, there is also, however, the question of statutory standing. See Motor Vehicle

Cas. Co, 1. Thorpe Insulation Co. (In re Thorpe Insulation Co), 677 F.3d 869, 884 (9th Cir. 2012) (“To

have standing in bankruptcy court, Appellants must meet three requirements: (1) they must mect

statutory ‘party in interest’ requirements under § 1109(b) of the bankruptcy code; (2) they must

satisfy Article 11] constitutional requirements; and (3) they must meet federal court prudential

standing requirements.”). A co-debtor, for example, has a statutory tight to be heard on a motion

for relief from the co-debtor stay, even though such co-debtor is not a party-in-interest under other

provisions of the Bankruptcy Code. See, e.8, 11 U.S.C. § 1301 (d); Wbitlock-Young, 571 B.R. at 804

(noting that section 1301(d) expressly indicates that the co-debtor may object to a request for relief

from the co-debtor stay); 11 U.S.C. § 1109(b) (providing a nonexclusive list of parties in interest

with the right to be heard in chapter 11 cases as “including the debtor, the trustee, a creditors’

committee, an equity security holders’ committee, a creditor, an equity security holder, or any

indenture trustee” but not a co-debtor) (emphasis added).

Thorpe Insulation seems to go a step further than the Seventh Circuit’s blending of Article ITI

and prudential standing, stating that all three forms of standing must exist for a party to be heard.

That seems wrong. As noted above, prudential standing is a judicially imposed concept, while

statutory standing 1s imposed by Congress If Congress afforded a party a nght to be heard, it is hard

to see how that party can be denied standing and thus the very right that Congress conveyed. The

better practice is to view Article IIE standing, as possibly restrained by prudential considerations, as a

parallel to statutory standing, Of course, if the statute limits standing, as does section 1125 of the

Bankruptcy Code, that would supersede Article [II standing unless the limitation is legally unsound.

11 U.S.C. § 1125(d) (affording an agency or official whose duty is to administer or enforce

nonbankruptcy solicitation laws, rules or regulations, the right to be heard on the whether a

disclosure statement contains adequate information, but no right of appeal thereafter).

Here, the Bankruptcy Code is not helpful on who might be heard in the context of a Rule 60

motion, as the section 1109 list of parties in interest who may be heard in chapter 11 matters is

nonexhaustive. 11 U.S.C. § 1109(b); 11 U.S.C. § 102(3) “including” is “not limiting”); Inv re CP. Hall

Co., 730 F.3d 659, 661 (7th Cir. 2014) (section 1109(b) is nonexhaustive). The statute is therefore

neutral on the issue of standing in this matter.

Assuming for the moment that any party with statutory standing would be required to be

noticed of the matter, the Bankruptcy Rules might offer some guidance. Bankruptcy Rule 2002

states what parties must be given notice of a bankruptcy sale under section 363(b). Fed. R. Bankr.

P. 2002(a)(2) (requiring notice to the “debtor, the trustee, all creditors and indenture trustees”); Fed.

R. Bankr. P. 2002(d)(3) (chapter 11 notices of the sale of all or substantially all of a debtor’s assets

must also be given to equity security holders); Fed. R. Bankr. P. 2002() (Bankruptcy Rule 2002(a)

notices shall also go to committees); Fed. R. Bankr. P. 2002(k) (Bankruptcy Rule 2002(a)(2) notices

shall also go to the United States Trustee). That duty is confirmed by Bankruptcy Rule 6004(a),

14

which governs such sales.’ Service of a motion to approve a sale under section 363(f), on the other

hand, is required “on the parties who have liens or other interests in the property to be sold” if the

sale is to be free and clear of such interests. Fed. R. Bankr, P. 6004(c). The only category here in

which the Concerned Parishioners might be addressed is the last, as parties who allege an interest in

property to be sold.

The Seventh Circuit, while misapplying section 1109 in chapter 7 matters, 11 U.S.C. § 103(g)

(subchapters I, II, and II] of chapter 11 of this title apply only in a case under such chapter”), has

nonetheless offered some guidance on the standing issue in the C.P. Hal/ case. There, the Seventh

Circuit noted that “to become a party to the bankruptcy proceeding fa movant] had to show not

merely standing but that ‘a legislatively conferred cause of action encompasses’ its claim.” CP. Hail

Co., 750 F.3d at 661 (quoting Lexmark, 572 US. at 127). That, by any other terms, is statutory

standing.

Further clarifying, the Seventh Circuit stated that to be heard, a party must be “someone

who has a dgally recognized interest in the debtor’s assets,” not just someone who “may suffer collateral

damage from a ruling in a bankruptcy proceeding.” Id. (emphasis added).

The court has not yet determined if the Concerned Parishioners have an interest in the

Chicago Property (it will take up the question when discussing authority), so the court must

conclude for the moment that the question of statutory standing is unsettled.

That leaves Article III standing and its prudential limitations.

Here the Seventh Circuit precedent appears to blend these considerations into the so-called

“pecuniary interest” rule to which the parties have given much consideration. See, e.g. Cult Awareness

Network, Inc. v. Martino (in re Cult Awareness Network, Ine), 151 F.3d 605, 607 (7th Cir, 1998). In Cuét

Awareness, the Seventh Circuit stated in no uncertain terms that “[t]o have standing to object to a

bankruptcy order, a person must have a pecuniary interest in the outcome of the bankruptcy

proceedings. Only those persons affected pecuniarily by a bankruptcy order have standing to appeal

that order.” Id.

While that language appears absolute on its face, there ate several reasons not to apply it in

such stark terms here.

First, the Seventh Circuit itself has made clear that Cult Awareness does not overrule ptior

precedent of the Circuit, CP. Hall Co., 750 F.3d at 663, and such prior precedent states a broader

view of standing. Id. at 661 (citing In re James Wilson Assocs. 965 F.2d 160, 169 (7th Cir. 1992) for the

proposition that “everyone with a claim to the res [the debtor’s assets] has a right to be heard before

the resis disposed of since that disposition will extinguish all such claims.”).

Second, not all parties with a statutory right to be heard under the Bankruptcy Code have a

pecuniary interest in the outcome of a matter. A trustee, for example, has no pecuniary interest in

the outcome of a bankruptcy case, but is statutorily afforded the right to be heard. 11 U.S.C.

§ 1109(b); accord In re South Beach Sec., Inc, 606 F.3d 366, 370-71 (7th Cir. 2010) (United States

For some reason. Bankruptcy Rule 6004(a) cross references all of the Bankruptcy Rule 2002

subsections governing asset sales avpt Bankruptcy Rule 2002(d)(3), which provides for the notice to equity

security holders in chapter 11 cases.

15

Trustee has a right to be heard on all matters in bankruptcy). Where the pecuniary interest rule

conflicts with statutory standing, statutory standing must prevail. Lewark, 572 U.S. at 128 (“Just as

a court cannot apply its independent policy judgment to recognize a cause of action Congress has

denied, it cannot limit a cause of action that Congress has created merely because ‘prudence’

dictates.”) (internal citation omitted).

Third, applying the pecuniary interest rule without exception, would negate the existing law

on authority challenges, as discussed below. An out-of-the-money chapter 7 debtor would, under

such a strict application of the pecuniary interest rule, have no standing to be heard in her

bankruptcy case. Cu/t_ Awareness, 151 F.3d at 315 (“Debtors, particularly Chapter 7 debtors, rarely

have such a pecuniary interest because no matter how the estate’s assets are disbursed by the trustee,

no assets will revert to the debtor.”). How then could such a debtor seek Rule 60 relief if her

attorney made unauthorized concessions?

As the same out-of-the-money reasoning has been applied to shareholders in chapter 7

cases, In re Schultz Mfg. Fabricating Co., 956 F.2d 686, 692 (7th Car. 1992) (sharcholder of a chapter 7

debtor had no legal standing to be heard in the case), such shareholders under the pecuniary interest

rule would arguably lose their right to manage a debtor upon the filing of any bankruptcy case, not

just a chapter 7 one. That simply cannot be the case. Stockholders are afforded a statutory right to

be heard on all matters in a chapter 11 proceedings. 11 U.S.C. § 1109(b). Further, doing so would

redefine state law rights, ones not directly affected by the filing of a bankruptcy alone.

Notwithstanding the arguments of the Opposing Parties to the contrary, nothing in bankruptcy

stands for the proposition that a corporation may ignore its state law mandated rules of governance.

See In re New Orleans Paddlewheels, Inc., 350 B.R. 667, 691 (Bankr. E.D. La. 2006) (“The general rules

of corporate governance remain the purview of state law in a bankruptcy proceeding.”) (citing

Manville Corp. ». Equity See. Holders Comm. (In re Jobns~Manville Corp), 801 F.2d 60, 64 (2d Cir. 1986)).

Both the Opposing Parties and the Concerned Parishioners rely on Johns~Manville to arpue

that the Concerned Parishioners have or do not have standing, as they each read the case to mean

different things. In Johas-Manville, the Second Circuit overturned a bankruptcy court order enjoining

a debtor’s shareholders’ meeting, such order having been entered on the grounds that the meeting

would impair the reorganization of the debtor. 801 F.2d at 64. In so doing, the Second Circuit

affirmed “the shareholders’ right to govern their corporation,” stating that “the right to compel a

shareholders’ meeting for the purpose of electing a new board subsists during reorganization

proceedings.” Id.

The Concerned Parishioners, of course, read this language to mean that a debtor must

follow its corporate governance rules even while in bankruptcy. Such rules are established as a

matter of state law and continue to define the parties’ rights in bankruptcy. Accord Buiner v. United

States, 440 U.S. 48, 55 (1979) (“Property interests are created and defined by state law. Unless some

federal interest requires a different result, there is no reason why such interests should be analyzed

differently simply because an interested party is involved in a bankruptcy ptoceeding.”)

The Opposing Parties (and in particular the Chicago Purchaser) argue that Johns-Manville

leads to a different result. The parties appear to argue that, as applying state law governance rules

might lead to a debtor acting in a manner inconsistent with its duties, there is a federal interest in

abrogating such rules in bankruptcy. While such an argument does lip service to the language of

Johns-Manville, the result is the complete opposite of what Jobns~Manville actually stands for. Further,

such an argument belies the fact that nothing compels a debtor to adhere to its fiduciary obligations.

16

This court could no more order a debtor to comply with its fiduciary obligations that it could order

a debtor to sign and submit its bankruptcy schedules, something a debtor must do under the

Bankruptcy Code. As with all such duties, the debtor has free will to act in a manner inconsistent

with its statutory duties. It must, however, face the ramifications of its actions.

The Chicago Purchaser further argues that Jobus—Manville somehow stands for the

proposition that only the right to call a shareholder meeting survives a bankruptcy filing. Because, it

is argued, the Second Circuit noted that the right to govern a corporation subsists, all other rights

must fall away. The problem with that argument is twofold. First, nothing in Jobns-Manville stands

for that proposition at all. By confirming one right, the Second Circuit did not by reverse, negative

implication extinguish all others. Second, Congress showed in the Bankruptcy Code that it was

capable of interfering with and extinguishing state law tights. See, 2g, 11 U.S.C. § 365(d)(3)

(compelling a debtor to perform its state law contracts, except for so-called ipso facto clauses

abrogated by section 365(b)(2)); 11 U.S.C. § 1125(e) (providing a party soliciting votes in good faith

on a bankruptcy plan postpetition is not liable for violations of state law rules of otherwise

governing such solicitation). Section 1125(e), for example, shows a clear indication by Congress

when corporate governance rules might be ignored. No such indication exists in the context here.

The pecuniary interest rule is a judicial gloss on the judicial concept of prudential standing,

and the Seventh Circuit has cautioned against the over application of such glosses. Krieger ». Educ.

Credit Mgmt. Corp., 713 F.3d 882, 884 (7th Cir. 2013) (“It is important not to allow judicial glosses . □ □

to supersede the statute itself.”). For these reasons, the court declines to determine that the

pecuniary interest rule defeats the Concerned Parishioners’ argument that they have standing to

challenge whether the Debtor’s acts were authorized.

2. Failure to Object

The Opposing Patties also argue that the Concerned Parishioners’ failure to object to the

sale of the Chicago Property denies them standing to be heard on the Rule 60 Motion. No direct

case law to that effect was provided, however, and to the best of the court’s ability to confirm, no

such hard and fast rule exists.

While it is true that the Seventh Circuit has made clear that a Rule 60 motion should not be

used to raise arguments that could have been raised at the initial ruling, Parvati Corp. v. City of Oak

Forest, 630 F.3d 512, 516 (7th Cir. 2010) (“Rule 60(b) may not be used to propound new legal

theories that could have been raised prior to entry of judgment.”), when such arguments include-—as

they do here--~a lack of notice, to foreclose such an argument would allow a denial of due process to

go unchecked.

To be clear, the Concerned Parishioners’ atgument for lack of notice is shaky, at best. The

Concerned Parishioners simply do not comfortably fit any of the categories of Patties required to be

noticed and/or served. At best, the Concerned Parishioners are a loose analog to equity

shareholders in this context, but that is, as is further discussed below, a weak argument. In any

event, the argument of the Opposing Parties regarding notice is not one of standing, per se, but

rather one of the scope of Rule 60 consideration. That scope is also best taken up below.

For those reasons, and because the strict application of the pecuniary interest rule could

potentially foreclose the Concerned Patishioners from their rights, whatever those rights may be, the

court declines to find that that the Concerned Parishioners lack standing here.

17

C. Lack of Authority

This brings us to the essence of the Concerned Parishioners’ argument: that the Debtor

lacked the authority to request the entry of the Chicago Sale Order as the Debtor lacked the

authority to sell the Chicago Property.

1. Lack of Authority Generally

Lack of authority as grounds for reconsideration is well-established, but has been considered

most often in the context of attorneys acting without authorization for their clients. See, ¢.£., Bradford

Exch. v. Trein’s Exch, 600 F.2d 99, 102 (7th Cir. 1979) (finding a lack of authority blended allegations

of mistake and inadvertence and was grounds for a Rule 60 motion) (ting United States v. Beebe, 180

U.S. 343, 353 (1901)). It has, however, been used in broader contexts of authority. United States v.

Krich, 152 F. Supp. 2d 983, 991-92 (N.D. ILL. 2001).

The Kritch case involved a consent decree between the United States and land developers

concerming the use of wetlands and compliance with the Clean Water Act. See id at 986-90. The

developers brought a motion challenging the consent decree on the ground that the United States

had no authority to enter into the same given an alleged lack of federal jurisdiction over some of the

underlying wetlands covered by the dectee. See id The court analogized the developer’s motion to

motions under Rule 60(b)(1) to set aside settlement agreements entered into by attorneys without

client consent and held that the developers’ “w/fra vires contentions . .. may properly be classified as

being a claim of mistake of Jaw under Rule 60(b)(1).” Id. at 992 (citing Webb v, James, 147 F.3d 617, 622

(7th Cir. 1998)) (emphasis added)."”

The conclusion that lack of authority is a mistake of law, however, has greater meaning when

the Rule 60 motion claiming such is brought outside of the time for an appeal. Recall that the

Seventh Circuit has stated that Rule 60 motions should not be considered were the matters raised

could have and should have been raised on appeal. Mendez, 725 F.3d at 659. The Seventh Circuit

has even more clearly stated that proposition in the context of errors of law by the trial court. “Rule

60(b) ‘is not intended to correct mere legal blunders’ made by the district court, which are

correctable on direct appellate review.” Eskridge v. Cook Cty., 577 F.3d 806, 809 (7th Cir, 2009)

(quoting Cash v. Ii. Div. of Mental Health, 209 F.3d 695, 697 (7th Cir. 2000)).

As such, under Krifich at least, mistakes of law are not properly the subject of Rule 60

motions brought outside the time for an appeal."

itis unclear though whether the District Court in Krifich considered the importance of its

conclusion that mistaken authority is a legal conclusion and the Seventh Circuit has not spoken to

What is or is not #ifra vires with respect to a corporation is a question of state law, as state law

determines proper governance of the entities created thereunder. See, ¢,¢, Wisconsin Real Estate Inv. Tr:

Weinstein, 712 F.2d 1095, 1101 (7th Cir, 1983) ¢holding a trust’s governance to be the equivalent of state

corporate laws and finding a right under Wisconsin state law to sue for violation thereof). The court wil]

consider this concept further when it discusses the overlay of secular and sacred laws applicable to this

matter, /zfra.

u A majority of courts appear to have adopted the position that, to conserve judicial resources, an error

of law may be heard via a Rule 60 motion if the motion is brought within the time for appeal. See Somerr

of Health & Haman Sers., 625 F. Supp. 97, 99 ($.D. Ohio 1985) (citing cases from numerous Circuits).

18

this issue. The Circuit in Bradford Exchange, however, uses Janguage that might imply a different

result, Bradjord Exch., 600 F.2d at 102 (“fT}he question of authority in this respect blends into a

consideration of the allegations of mistake and inadvertence.””) (quoting Assocs. Discount Corp. □□

Goldman, 524 F.2d 1051, 1054 (3rd Cir. 1975)).

As a result, the court will take up the remaining issues before determining whether the

Concerned Parishioners’ challenge to the Chicago Sale Order is well taken.

2. Ecclesiastical Authority

The Concerned Parishioners’ lack of authority argument does not easily resolve itself into

any of the foregoing discussion of general authority. That is because the Concerned Parishioners’

argument, at its essence, relies on church doctrine.

The Debtor here is not just a church but is one of the oldest Greek Orthodox churches in

the country. See Bank’s Resp., Exh. B (the “Formation Statement”). The Formation Statement,

dated October 15, 1897, demonstrates that the Debtor was formed under the illinois Religious

Corporation Act of 1872. 805 ILCS 110/0.01 ef seq. (the “RCA”).*

Asa church, the Debtor is protected by the Constitution’s prohibition on abridging the free

exercise of religion. U.S. Const. amend. I. (“Congress shall make no law respecting an establishment

of religion, or prohibiting the free exercise thereof. . . .”). This prohibition gives rise the

ecclesiastical abstention doctrine which, put simply, forbids courts from involving themselves in

matters of religious discipline, faith, internal governance, customs, rules, or law. Watson v. Jones, 80

U.S. 679, 728-30 (1871); see alto Hosanna-Tabor Evangelical Lutheran Church & Sch, v ELELO.C, 565

U.S. 171, 182-87 (surveying history of the ecclesiastical abstention doctrine). The doctrine reflects

“a spirit of freedom for religious organizations, an independence from secular control or

manipulation—in short, power to decide for themselves, free from state interference, matters of

church government... .” Kedroff v. Saint Nicholas Cathedral of Russian Orthodox Church in N. Am., 344

94, 116 (1952),

That is not to say that this court is powerless to consider the question before it. ‘There is, as

was well outlined by the Hlinois Appellate Court, a fine line to be walked here.

The role civil courts may play in resolving church property disputes is

severely circumscribed by the first amendment’s guarantee that the right to the free

exercise of religion will not be abridged (U.S. Const., amend. I). Jones v. Wolf, 443

U.S. 595, 602, 99 S.Ct. 3020, 3025, 61 L.Ed.2d 775, 784 (1979); Hines v. Turley, 246

Ti. App.3d 405, 417, 186 Ill. Dec. 194, 615 N.E.2d 1251 (1993). Because of this

lunitation, civil courts have no authority to resolve church property disputes that

turn on matters of church doctrine, practice, polity, or administration. S¢ Mark

Coptic Orthodox Church v. Tanios, 213 iL App.3d 700, 713, 157 □□ Dec. 214, 572 F.2d

283 (1991). But, where these matters are not involved in a church property dispute,

the court may choose from a variety of approaches in resolving the dispute. 213

While the Debtor could have, as many older churches have done, reincorporated under the Hlinois

General Not for Profit Corporation Act of 1986, 805 ILCS 105 /101.01 ef seg, no evidence of such

reincorporation has been provided. As such, the court must apply the RCA to the matter.

19

Il. App.3d at 713, 157 IL Dec. 214, 572 N.E.2d 283. Among these approaches is the

“neutral principles of law” endorsed in Jones, 443 U.S. at 602-03, 99 S.Ct. at 3025, 61

L.Ed.2d at 784-85, and recognized and, where appropriate, applied in Mlinois.

Tanios, 213 Il. App.3d at 714, 157 ILDec. 214, 572 N.E.2d 283.

Apostolic New Life Church of Elgin v. Dominguez, 686 N.E.2d 1187, 1191 (IH. App. Ct. 1997).

The court need not even consider the neutral principles of law approach, Jones, 443 US. at

602-03, when examining the RCA and its contents. The RCA is secular law and its interpretation is

part of this court’s mandate.

The RCA, though, is quite deferential when it comes to matters of governance of Iinois

religious corporations, referring throughout to “the usages and customs, rules or regulations of such

congregation, church or society.” 805 ILCS 110/35. Nonetheless, the trustees appointed

thereunder, id, and replaced according to the rules, usages or by-laws of the congregation, church or

society, 805 ILCS 110/39,

shall have the care, custody and control of the real and personal property of the

corporation, subject to the direction of the congregation, church or soaely, and may, when

directed by the congregation, church or society, erect houses or buildings and

improvements, and repair and alter the same, and may, when so directed, mortgage,

incumber, se// and convey any real or personal estate of such corporation, and enter into all

lawful contracts in the name of and in behalf of such corporation ....

805 ILCS 110/43 (emphasis added).

The RCA thus empowers the trustee to sell and convey teal property but does so subject to

the direction of the congregation, church or society. Jd. That calls into question how such direction

shall be given.

Once again, the court may utilize the neutral principles of law approach to utilize relevant

by-laws, religious constitutions and state statutes to determine the ownership and control of church

property. Jones, 443 U.S. at 603-04. In so doing, however, the court must proceed with caution as

to not overstep its bounds. See zd. at 602 (“[T]he First Amendment severely circumscribes the role

that civil courts may play in resolving church property disputes.”).

Here, the parties do not contest that the Debtor is subject to the hierarchy of the Greek

Orthodox Diocese of America and is so bound by its Uniform Parish Regulations. Stipulations, at

2, "| 6—7; see also id, Exh. B (the “Uniform Regulations”). Those Uniform Regulations provide

that a

Parish may purchase real and person property, or sell, mortgage, ot otherwise

encumber its real property ... upon approval of two-thirds (2/3) of the parishioners

in good standing present at a Parish Assembly duly called (with at least ten (10) days

prior written notice) for that purpose, provided that approval from the respective

HMierarch is received... ,

Regulations, art. 16, sec. 3.

20

The Uniform Regulations define the Metropolitan as “{t]he head Hierarch of a Metropolis.”

Id. at p. tx. Here, the Metropolitan of the Metropolis containing the Debtor is Metropolitan

Nathaniel, the Metropolitan of the Greek Orthodox Church of Chicago, Debtor’s Resp., Exh. A

(the “Approval of the Metropolitan”), and Metropolitan Nathaniel has apparently given hierarchical

approval for the sale. Id.

The crux of the Concerned Parishioners’ argument is, however, that while such approval

may have been obtained, as the approval of two-thirds of the parishioners was not, the sale is

unauthorized. The Opposing Parties, on the other hand, argue that the two-thirds vote requirement

is simply a procedure to ensure that the Hierarch is not burdened with such requests. According to

the Opposing Parties, such procedure is one of convenience for the Hierarch but is not an actual

vested right of the parishioners.

Here is where neutral principles of law cease to be illuminating. To accept the Concerned

Parishioners’ argument, the court must conclude that the Archdiocese, in approving the Uniform

Regulations, intended to divest the higher authorities within the church from making decisions.

There is some evidence to support that. See Uniform Regulations, art. 10, sec. 2(M) (setting forth

the Metropolitan’s responsibilities and rights to include approving the purchase, sale, lease,

mortgaging or other encumbrance of the real property of a Parish, but procedurally in accordance

with Article 16, quoted above). This might be read to limit the Metropolitan’s authority in this

regard. It might also, however, be read as the Debtor suggests, as a procedural convenience. The

language, in this context, is ambiguous.

By the same token, for the court to conclude that the church intended to vest in its

parishioners a property right sufficient to require service under Bankruptcy Rule 6004(c) and

sufficient to create a pecuniary interest in the outcome of the sale, the court must attempt to answer

fundamental questions of the church’s treatment of its parishioners.

Interpreting that ambiguity and resolving those fundamental questions would require this

court to probe into the allocation of power within the church, to attempt to posit the church’s intent

and polity regarding the rights of its parishioners. That, quite simply, cannot happen. Serbian E.

Orthodox Diocese for U.S. €” Can. v. Milivajevich, 426 U.S. 696, 709 (1976) (“[T]o probe deeply enough

into the allocation of power within a [(jhierarchical) church so as to decide... religious law

(governing church polity) . .. would violate the First Amendment in much the same manner as civil

determination of religious doctrine.”) (quoting Md. Wa. Churches v. Sharpsburg Church, 396 U.S. 367,

369 (1970) (Brennan, J., concurring) (internal quotation marks omitted).

It should also be noted that the Uniform Regulations themselves have a dispute resolution

mechanism. Uniform Regulations, addendum B (the “Dispute Resolution Procedures”). It is very

clear from even a cursory reading of those procedures that the church anticipated its members to

use those procedures to resolve such issues. Id. (“In all Disputes that involve ecclesiastical,

theological, canonical, Church governance or Church property issues and that pertain to the life of the

Parish or Church community, each Parish and Party shall adhere to the following Dispute

Resolution Procedures.”) (emphasis added). As Mitinojevich instructs, secular courts must abstain and

defer on matters such as these to the decision of the highest court of a hierarchical church

organization. Mifivojevich, 426 U.S. at 724-25.

21 .

When questioned at the Hearing why the Concerned Parishioners had not availed

themselves of such procedures, their counsel intimated that, given time, they would. There has been

time, however.

As noted above, absent some property interest that the court cannot determine under these

circumstances, nothing in the Bankruptcy Rules required the Debtor, in seeking to sell the Chicago

Property, to give notice to the parishioners. But this is the second of two bankruptcy cases spanning

mote than four years with state foreclosure actions before and in between. In this case, the sale

procedures were first requested by the Debtor in March of this year. The sale of the Debtor has

made both local and national news." It is simply not plausible that the Concerned Parishioners did

not know of the sale or have an opportunity to exercise their rights under the Uniform Regulations

or in a timely fashion before this court.

D. Application to the Matter at Bar

In each of the foregoing inquiries, the Concerned Parishioners’ request has faced obstacles,

sometimes insurmountable ones: the standing of the Concerned Parishioners is dubious, at best; the

scope of reconsideration sought is outside of that permitted for review of legal errors raised, not on

appeal, but via Rule 60 after the time for appeal has expired; the Rule 60 Motion appears to be an

end run around the protections afforded by section 363(m); and the question presented is one that

turns on ecclesiastical law and was not pursued in the forum provided by the church for resolving

such questions.

As noted above, relief under Rule 60 is discretionary and is based on the facts and

circumstances of the case known best by the trial judge. Here, those facts and circumstances require

that the Rule 60 Motion be denied.

CONCLUSION

For all of the foregoing reasons, the court concludes that the Chicago Sale Order is not

appropriately subject to reconsideration in this matter and must, therefore, be denied. A separate

order to that effect will be issued, concurrent with this Memorandum Decision.

Dated: October 25, 2019

ss CoM

- coal el

eo □ - ee ett gt ~ :

Timothy A. Bémnes

United States Bankruptcy Judge

13 See, 0.2, ingin Mary Painting Shows ‘Tears’ at Clucago Chareh Pacing Foreclosure: Reports, Sept. 9, 2019,

https://www.foxnews.com/us/chicago-greek-orthodox-church-virgin-mary-tears-bankruptcy (last visited

Oct. 25, 2019).

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