Hillis Motors, Inc. v. Hawaii Auto. Dealers' Ass'n, 91-16325

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Citation997 F.2d 581
Docket NumberNo. 91-16325,91-16325
Parties1993-1 Trade Cases P 70,285, 29 Collier Bankr.Cas.2d 470, Bankr. L. Rep. P 75,331 HILLIS MOTORS, INC., and Dallas Edward Rowley, Plaintiffs-Appellants, v. HAWAII AUTOMOBILE DEALERS' ASSOCIATION, et al., Defendants-Appellees.
Decision Date28 June 1993

Page 581

997 F.2d 581
1993-1 Trade Cases P 70,285, 29 Collier
Bankr.Cas.2d 470,
Bankr. L. Rep. P 75,331
HILLIS MOTORS, INC., and Dallas Edward Rowley, Plaintiffs-Appellants,
No. 91-16325.
United States Court of Appeals,
Ninth Circuit.
Argued and Submitted Nov. 2, 1992.
Decided June 28, 1993.

Page 583

Enver W. Painter, Painter & Luria, Honolulu, HI, for plaintiffs-appellants.

Margery S. Bronster, Honolulu, HI, for defendant-appellee Servco Pacific Inc.

Lisa Munger, Goodsill, Anderson, Quinn & Stifel, Honolulu, HI, for defendant-appellee GM Corp.

Appeal from the United States District Court for the District of Hawaii.

Before: BROWNING, NORRIS, and REINHARDT, Circuit Judges.

REINHARDT, Circuit Judge:

In this case we review a district court's entry of summary judgment in an antitrust suit on the basis of the plaintiffs' lack of standing. Because we conclude that appellant Hillis Motors, Inc., has standing to bring this action, we reverse.


In June 1984 Hillis Motors, Inc., an automobile dealership, voluntarily filed a petition for relief under Chapter 11 of the Bankruptcy Code. Because of misconduct by Hillis' previous management, a trustee was appointed to conduct the corporation's affairs. One year later an Amended Plan of Reorganization, which had been proposed by the trustee, was confirmed by the bankruptcy court. In September 1986, the Hawaii Department of Commerce and Consumer Affairs ["DCCA"] mailed to Hillis' last known address a notice of its intention to dissolve the corporation for failing for two years to file annual exhibits and accompanying filing fees as required by Hawaii law. Haw.Rev.Stat. § 416-122 (1985). 1 After receiving no response from Hillis and after complying with the required statutory procedures, the DCCA officially dissolved Hillis on November 7, 1986. Hillis did not respond to the DCCA's action until July 1987. At that time Hillis argued both that the notice provided to it was inadequate and that its dissolution was in violation of the Bankruptcy Code's automatic stay provision. While the DCCA maintained that it had complied with the statutory notice requirements, it adopted Hillis' view that the automatic stay applied and granted Hillis leave to apply for reinstatement. Hillis took no action.

Nearly three and a half years later Hillis and Dallas Rowley, chief executive officer of the corporation, brought the present antitrust action alleging that the conduct of the defendants had caused Hillis' first attempt at reorganization to fail. 2 In January 1991 Hillis finally applied to the DCCA for reinstatement. The DCCA granted Hillis' application, setting aside its earlier dissolution order

Page 584

and retroactively reinstating the corporation as of November 7, 1986. One day prior to the DCCA's reinstatement order, the defendants filed motions to dismiss Hillis' antitrust suit on the ground that Hillis lacked standing because it had been dissolved and was "legally dead". 3 The district court treated these filings as motions for summary judgment and granted them on August 12, 1991. The district court held 1) that the DCCA had properly dissolved Hillis; 2) that the automatic stay was inapplicable to the DCCA's action; and, 3) that the DCCA's reinstatement of Hillis had no effect because Haw.Rev.Stat. section 416-127 required an involuntarily dissolved corporation to apply for reinstatement within ninety days of its dissolution. Accordingly, the district court determined that Hillis lacked the capacity to sue and entered summary judgment against the company. 4 Hillis filed a timely appeal of the district court's judgment. We have jurisdiction under 28 U.S.C. § 1291. 5


A. Overview

We review a grant of summary judgment de novo. E.g., S.O.S., Inc. v. Payday, Inc., 886 F.2d 1081, 1083 (9th Cir.1989). We must determine whether there are any genuine issues of material fact and whether the district court properly applied the relevant substantive law. Id. We view the evidence in the light most favorable to the nonmoving party. Id. We may affirm the district court's judgment based upon any ground supported by the record even if the district court relied on the wrong ground or employed incorrect legal reasoning. Jackson v. Southern Cal. Gas Co., 881 F.2d 638, 643 (9th Cir.1989).

Where, as here, the historical facts are undisputed, questions of standing are properly resolved on summary judgment. See Lujan v. Defenders of Wildlife, --- U.S. ----, ---- - ----, 112 S.Ct. 2130, 2136-37, 119 L.Ed.2d 351 (1992) (standing may be resolved on the pleadings, on summary judgment, or at trial). Federal Rule of Civil Procedure 17(b) provides that "[t]he capacity of a corporation to sue or be sued shall be determined by the law under which it was organized." We have previously held that Fed.R.Civ.P. 17(b) requires that we determine standing for federal antitrust actions pursuant to the pertinent provisions of state law. Community Elec. Serv. v. Nat'l Elec. Contractors Ass'n, 869 F.2d 1235, 1239 (9th Cir.), cert. denied, 493 U.S. 891, 110 S.Ct. 236, 107 L.Ed.2d 187 (1989). In Community Electric, we decided that a corporation that, under applicable state law, had been dissolved prior to the time it filed an antitrust action had no capacity to sue. Similarly, the question here is whether at the time it filed the instant antitrust action Hillis had the capacity to sue under Hawaii law. The district court's determination that Hillis lacked standing is reviewed de novo. United Union of Roofers, Waterproofers, and Allied Trades No. 40 v. Insurance Corp. of Am., 919 F.2d 1398, 1399 (9th Cir.1990).

Page 585

In this appeal, we must decide whether federal bankruptcy law prohibited the DCCA from involuntarily dissolving Hillis pursuant to state law in 1986. Hillis' principal argument is that the DCCA's dissolution action was of no effect because it violated the Bankruptcy Code's automatic stay provision. Appellees maintain that Hillis' dissolution did not violate any provision of the Bankruptcy Code and that federal law affirmatively permits state regulatory actions such as the DCCA's. Resolution of the issues presented requires an exploration of the purposes and mechanics of the Chapter 11 reorganization process and the effect of an involuntary corporate dissolution under Hawaii law. It also necessitates consideration of the careful balance between federal and state interests that bankruptcy law constructs. Because interpretations of the bankruptcy statutes involve questions of law, we review them de novo. See, e.g., Home Sav. Bank, F.S.B v. Gillam, 952 F.2d 1152, 1156 (9th Cir.1991). To the extent that state law must be interpreted, we also use the de novo standard of review. Salve Regina College v. Russell, 499 U.S. 225, ----, 111 S.Ct. 1217, 1221, 113 L.Ed.2d 190 (1991); Brooks v. Hilton Casinos, Inc., 959 F.2d 757, 759 (9th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 300, 121 L.Ed.2d 224 (1992).

B. The Automatic Stay and State Regulatory Authority

1. The DCCA's Dissolution Action Exercised Control Over

Property of the Estate.

a. Statutory Framework

The commencement of a case in bankruptcy creates an "estate", which contains all of the debtor's interests (whether legal or equitable) in property, tangible or intangible. 11 U.S.C. § 541(a); United States v. Whiting Pools, Inc., 462 U.S. 198, 203-05, 103 S.Ct. 2309, 2312-14, 76 L.Ed.2d 515 (1983). All corporate property passes to the estate. Commodity Futures Trading Comm'n v. Weintraub, 471 U.S. 343, 352-53, 105 S.Ct. 1986, 1992-93, 85 L.Ed.2d 372 (1985). The estate is represented by a trustee who acts as a fiduciary for the debtor's creditors and shareholders. 11 U.S.C. § 323(a); Weintraub, 471 U.S. at 355, 105 S.Ct. at 1994. Where a trustee is appointed, 6 he may assume control and operation of the debtor's business. 11 U.S.C. § 1108. In such circumstances the debtor corporation's directors are completely ousted and retain virtually no management powers. Weintraub, 471 U.S. at 353, 105 S.Ct. at 1993. Indeed, the Bankruptcy Code specifically provides that the role of the debtor is to cooperate with the trustee as necessary to enable the trustee to perform his duties. 11 U.S.C. § 521(3).

When a debtor files a bankruptcy petition, an automatic stay immediately arises. 11 U.S.C. § 362(a). The scope of the stay is quite broad. Stringer v. Huet (In re Stringer), 847 F.2d 549, 551 (9th Cir.1988). It is designed to effect an immediate freeze of the status quo by precluding and nullifying post-petition actions, judicial or nonjudicial, in nonbankruptcy fora against the debtor or affecting the property of the estate. Interstate Commerce Comm'n v. Holmes Transp., Inc., 931 F.2d 984, 987 (1st Cir.1991), vacated 983 F.2d 1122 (1st Cir.1993). The automatic stay plays a vital and fundamental role in bankruptcy. Midlantic Nat'l Bank v. New Jersey Dept. of Envtl. Protection, 474 U.S. 494, 106 S.Ct. 755, 88 L.Ed.2d 859 (1986); Schwartz v. United States (In re Schwartz), 954 F.2d 569, 571 (9th Cir.1992). The stay ensures that all claims against the debtor will be brought in a single forum, the bankruptcy court. Pettibone Corp. v. Easley, 935 F.2d 120, 123 (7th Cir.1991). The stay protects the debtor by allowing it breathing space and also protects creditors as a class from the possibility that one creditor will obtain payment on its claims to the detriment of all others. Treasurer of Snohomish Cty., Wash. v. Seattle First Nat'l Bank (In re Glasply Marine Indus.), 971 F.2d 391, 394-95 (9th

Page 586

Cir.1992); Stringer, 847 F.2d at 551. In this circuit, actions taken in violation of the automatic stay are void rather than voidable. Schwartz, 954 F.2d at 571; Stringer, 847 F.2d at 551.

While the automatic stay specifically enjoins eight acts, only one subsection of that provision is at issue here: 11 U.S.C. § 362(a)(3). 7 It provides:

(a) Except as provided...

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