585 F.2d 7 (1st Cir. 1978), 78-1148, In re Las Colinas Development Corp.

Docket Nº:78-1148.
Citation:585 F.2d 7
Party Name:In re LAS COLINAS DEVELOPMENT CORPORATION, Debtor. Vigdor SCHREIBMAN et al., Appellants, v. WALTER E. HELLER & COMPANY OF PUERTO RICO and Walter E. Heller & Company, Appellees.
Case Date:September 21, 1978
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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585 F.2d 7 (1st Cir. 1978)

In re LAS COLINAS DEVELOPMENT CORPORATION, Debtor.

Vigdor SCHREIBMAN et al., Appellants,

v.

WALTER E. HELLER & COMPANY OF PUERTO RICO and Walter E.

Heller & Company, Appellees.

No. 78-1148.

United States Court of Appeals, First Circuit

September 21, 1978

Submitted Sept. 7, 1978.

Vigdor Schreibman, on brief, for appellants.

Edward I. Cutler, John K. Olson, and Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P. A., Tampa, Fla., on brief, for

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Walter E. Heller & Co. of Puerto Rico and Walter E. Heller & Co., appellees.

Before COFFIN, Chief Judge, CAMPBELL and BOWNES, Circuit Judges.

BOWNES, Circuit Judge.

The central issue in this case can be stated simply: Does the nonlawyer president and majority stockholder (94%) of a corporation have a right to represent the corporation in all stages of a Chapter XI bankruptcy proceeding?

Appellants, Las Colinas Development Corporation (Development) and Vigdor Schreibman, appeal from a ruling of the bankruptcy court, affirmed by the district court, that Schreibman could not represent Development. While appellants have not directly appealed the decision on the merits, it must be noted that the bankruptcy court found in favor of the appellees, Walter E. Heller & Company of Puerto Rico and Walter E. Heller & Company (Heller), and against Development and Schreibman as a creditor of Development. The findings on the merits were also affirmed by the district court.

The facts giving rise to this case are a tangled skein enmeshed in loose threads and have their genesis in Schreibman's efforts to develop a large tract of land in Fajardo, Puerto Rico. The first official step in this lengthy and, at times, circuitous judicial odyssey began with a foreclosure suit in the Superior Court of Puerto Rico in July of 1964, brought by Banco Popular de Puerto Rico against Las Colinas, Inc., and its wholly owned subsidiary, Eastern Shore Development Corporation. Schreibman was president of both corporations and majority stockholder of Las Colinas, Inc. Three months after the filing of the foreclosure action, Las Colinas, Inc., and Eastern Shore Development filed a Chapter XI bankruptcy petition. The district court ordered the proceedings transferred to Chapter X. Schreibman appeared Pro se as an individual creditor and represented Las Colinas, Inc., in the bankruptcy and district courts and on appeal. We vacated the transfer order and remanded. Schreibman v. Mason, et al.; Las Colinas, Inc., et al. v. Mason, 377 F.2d 99 (1st Cir. 1967).

That same Chapter XI proceedings spawned another case. Las Colinas, Inc., Eastern Shore Development Corporation, and Schreibman, individually, appealed a decision of the bankruptcy court permitting the bank (Banco Popular de Puerto Rico) to sell certain of the mortgaged property at public auction to satisfy the indebtedness. Schreibman appeared Pro se and represented both corporations as "attorney-in-fact." We vacated the judgment of the district court and remanded. In Re Las Colinas, Inc., 426 F.2d 1005 (1st Cir. 1970).

In another offshoot of the same case, we affirmed the district court as to amount and type of bank line of credit and damages. In Re Las Colinas, Inc., 453 F.2d 911 (1st Cir. 1971). Schreibman appeared "pro se, for Las Colinas, Inc., and others."

There appears to have been no question raised as to Schreibman representing Las Colinas, Inc., in any of these three cases.

The case now before us started on December 6, 1972, when Las Colinas, Inc., sold to Development all of its real property (773.04 cuerdas) and improvements for $1,200,000 in cash and a purchase money mortgage note in the amount of $5,663,000. On the same day, Development purchased a one-fifth interest in a smaller tract (245.65 cuerdas) located in the southern portion of the main tract from Sucesion De Danilo de Celis Perez (de Celis) for $250,000 in cash and a purchase money mortgage of $309,400. At the same time, Development gave to Heller 1 a sixty month note in the principal sum of $2,800,000 and a thirty-six month note in the principal sum of $1,200,000 secured by a mortgage on the property acquired from Las Colinas, Inc., and de Celis. The mortgage to Las Colinas, Inc., was fully subordinated to the Heller mortgage.

Sometime in the summer of 1974 a controversy arose between Development and

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Heller as to the terms and conditions of the financing agreement. Suits by several creditors were filed against Development's property in the Superior Court of Puerto Rico. Schreibman filed a Chapter XI proceeding on behalf of Development on December 17, 1974. The first meeting of creditors was held in March, 1975. At this meeting, Heller filed a proof of claim, a motion challenging the Chapter XI petition, because it was not signed by an attorney, and sought relief from the automatic stay-of-lien enforcement pursuant to Bankruptcy Rule 11-44(a). 2 Development, on March 14, 1975, filed a complaint attacking the validity of Heller's mortgage claim and seeking damages. It combined an answer to the Heller complaint with an objection to the Heller claim.

On April 3, 1975, Bankruptcy Judge Rafael A. Rivera-Cruz issued an order holding that the Chapter XI petition "is subject to being nullified" because it was not signed by a lawyer and giving Development fifteen days to obtain counsel. This order was appealed unsuccessfully to the district court and then to us. We dismissed the appeal. In Re Las Colinas Development Corporation, Misc. No. 75-8103 (December 4, 1975). Development then petitioned us for a writ of mandamus and prohibition so that Schreibman could represent it in the bankruptcy court, which we denied. In denying a motion for reconsideration one month later, we stated:

The motion for reconsideration is denied. The fact that this court has on occasion departed from its normal practice and allowed the petitioner to be represented by its president, who is not a lawyer, does not mean that any other court is required to make a similar exception on another occasion. Petitioner's constitutional claims may be raised in an appeal from a final judgment in...

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