In re Advent Corp., Bankruptcy No. 81-9035.
| Decision Date | 29 November 1982 |
| Docket Number | Bankruptcy No. 81-9035. |
| Citation | 24 BR 612 |
| Parties | In re ADVENT CORPORATION, Debtor. Appeal of FIDELITY & DEPOSIT COMPANY OF MARYLAND. |
| Court | U.S. Bankruptcy Appellate Panel, First Circuit |
Harvey Weiner, Dennis P. Crimmins, Boston, Mass., for appellant.
Peabody & Arnold, Robert Somma, Robert F. Wechsler, Co-counsel to Advent Corp.
Goldstein & Manello, William F. Weld, U.S. Atty., Joseph S. Ackerstein, Asst. U.S. Atty., John deRomoet, Regional Counsel, Christopher Doherty, Asst. Regional Counsel, United States Customs Service, Boston, Mass., for appellee, United States of America.
Before VOTOLATO, Chief Judge, and JOHNSON and GOODMAN, Bankruptcy Judges.
Fidelity & Deposit Company of Maryland filed this appeal from an order of the bankruptcy court requiring it to issue a bond protecting the debtor, Advent Corporation. We vacate that order, and remand with instructions.
Advent Corporation, engaged in the manufacture and sale of audiovisual equipment, filed a voluntary chapter 11 petition on March 17, 1981. Advent regularly receives shipments of imports into the United States from abroad. Pursuant to 19 U.S.C. § 1499 (1980), in order for imported merchandise to be released from the custody of the United States Customs Service (Customs) to an importer, a bond or other security is required to be in effect. Prior to the March 17 filing date, Fidelity & Deposit Company of Maryland (F & D) had issued a $100,000 general term bond1 to cover all of Advent's imports through October 9, 1981.
On June 28, 1981, Customs received from F & D a notice of cancellation of the $100,000 general term bond. The notice set July 25, 1981 as the effective date for cancellation. On Advent's application, after a hearing, the bankruptcy court ordered F & D on July 24 to "reinstate the Bond in the amount and under the terms and conditions of the present Bond." From the record before us, it cannot be determined whether Customs received notice of, or appeared at, that hearing. That order was not appealed.
F & D attempted to comply with the court's order, but Customs refused to reinstate the $100,000 bond because of alleged "procedural problems" with their own computer programming. At oral argument, counsel admitted that had the bankruptcy court ordered Customs to "reinstate" the bond, it would have done so.
Believing (and reasonably so, based on the position taken by Customs) that the $100,000 general term bond had been terminated, Advent and F & D subsequently agreed to the issuance of five single entry bonds totalling $88,600 which covered five separate import shipments. In September, however, when Advent requested a single entry bond to cover a shipment of approximately $220,000, F & D refused to issue a bond in that amount.
On September 24, 1981, Advent filed an application with the bankruptcy court to compel F & D to issue such a bond, and notice of an emergency hearing to be held on September 29 was given to F & D and Customs. Over F & D's objection, the court ordered that upon payment by Advent of $20,306.90,2 F & D and Customs were to "issue forthwith to the Debtor, and facilitate the effectiveness of, a single entry bond in the amount of $241,600.00."
F & D moved in the bankruptcy court for a stay pending appeal or, in the alternative, for classification of any claim of F & D arising under the disputed order as an administrative expense. The bankruptcy court refused to grant the stay, but allowed the alternative relief. F & D complied with the court's order, issuing a $241,600 single entry bond, and the shipment in question was received on or before October 7, 1981.
On appeal, F & D contends that the bankruptcy judge erred in ordering F & D to issue a bond in excess of its maximum contractual liability under the "terminated" $100,000 bond. Generally, a bankruptcy court may not extend a contract beyond its original terms. The Bankruptcy Code neither enlarges the rights of a debtor under a contract, nor prevents the termination of a contract by its own terms. In re Douglas, 18 B.R. 813, 815 (Bkrtcy.W.D.Tenn.1982); In re Nashville White Trucks, Inc., 5 B.R. 112, 117, 2 C.B.C.2d 512, 517 (Bkrtcy.M.D. Tenn.1980); see also In re R.O.A.M., Inc., 15 B.R. 616, 617, 8 B.C.D. 666, 667 (Bkrtcy.D. Nev.1981) (dicta); In re Cahokia Downs, Inc., 5 B.R. 529, 532, 6 B.C.D. 925, 927, 2 C.B.C.2d 988, 992 (Bkrtcy.S.D.Ill.1980) (dicta).
Under 11 U.S.C. § 362, the filing of a petition under Title 11 stays any proceeding against the debtor. An attempt to cancel a bond is a proceeding. In re R.O.A.M., Inc., 15 B.R. at 617, 8 B.C.D. at 667. In re Young, 14 B.R. 809, 811, 8 B.C.D. 641, 641 (Bkrtcy.N.D.Ill.1981) quoting 2 Collier on Bankruptcy ¶ 362.11 (15th ed. 1979). Acts done in violation of the stay are void ab initio regardless of lack of...
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