In re Air Nat. Aircraft Sales and Service, Inc.
| Decision Date | 23 September 1985 |
| Docket Number | Bankruptcy No. 185-50219-260. |
| Parties | In re AIR NATIONAL AIRCRAFT SALES AND SERVICE, INC., Debtor. |
| Court | United States Bankruptcy Courts. Second Circuit. U.S. Bankruptcy Court — Eastern District of New York |
Gary Ginsburg, Teitelbaum & Gamberg, P.C., New York City, for Salenia.
Abner T. Zelman, Breed, Abbott & Morgan, New York City, for United Aviation Co., Inc.
Patrick J. Monaghan, Jr., New York City, for debtor.
DECISION
These proceedings, spawned by a bankruptcy case fraught with a multitude of complicated problems involving the debtor, both before and after it filed its petition for relief under Chapter 11, is typical of those where the bankruptcy court is required to engage in a full examination and analysis of the debtor's affairs in the course of its decision. As will be seen as the saga of its problems enfolds, the debtor, which is engaged in the business of operating aircraft for charter tours, has been in courts in almost as many cities in this country in which it may have landed its planes in the relatively short period of its existence. When it finally found that the bankruptcy court here is where it should have gone to in the first place, its corporate existence was in such a precarious condition that it was required to seek, on very short notice, emergency relief which is the subject of this decision.
The principal relief sought by the debtor was the enforcement of the benefits of the automatic stay provisions of the bankruptcy law so as to enjoin and prevent the interference and the use by it of its major asset, a leased aircraft, to enable it to effect a reorganization of its affairs. Because the circumstances surrounding the application for relief required this court to provide for an expedited hearing, it proceeded without delay, heard all of the parties, made findings and conclusions upon the completion of the argument, and rendered an oral decision which denied the debtor's application. This court's findings and conclusions of law as well as its bench decision is contained in the transcript of the hearing on the application. However, inasmuch as this court has been informed that the debtor has appealed the decision, this written opinion is rendered to provide any appellate reviewing tribunal with the essential facts so as to enable it to conclude whether or not the facts as found by this court and its conclusions of law were properly applied in the determination of the issues involved.
This is a motion brought by way of an order to show cause by Air National Aircraft Sales and Service, Inc. (the "debtor") for an order pursuant to § 105 and § 362 of the Bankruptcy Code staying the continuation of proceedings by Salenia A.B. of Norlands Gaton, Stockholm, Sweden (the "lessor") against the debtor in an action brought by the lessor in the Circuit Court of Platte County of the State of Missouri. The action arose out of a lease of a certain aircraft from the lessor to the debtor as lessee. The motion further seeks to stay the implementation of an order of that court which declared that the debtor has no interest under the lease, declaring that the order is void and in violation of the automatic stay provisions of § 362 of the Bankruptcy Code, directing the lessor post a bond in the sum of $1,000,000, permitting the debtor to assume the lease, and holding the lessor in contempt for violation of the § 362 automatic stay. As appears at the outset of this opinion, the motion was orally denied. This written opinion reaffirms that decision.
This bankruptcy case, which gave rise to the application before this court was originally commenced in the United States Bankruptcy Court, Western District of Texas, San Antonio Division, when the debtor filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code there on September 12, 1984. The case was transferred to Honorable Bert W. Thompson, United States Bankruptcy Judge. As will be seen later in the course of this opinion after considering various matters relating to the debtor, Judge Thompson entered an order on January 8, 1985 transferring the venue of the case from the Western District of Texas to the Southern District of New York. The transfer to that court was apparently based on a misapprehension by counsel that the debtor's premises at Kennedy Airport were located in the Southern District of New York, when in fact they were located in the Eastern District of New York. The case was then transferred here to the Eastern District of New York where it is presently pending. Inasmuch as this court received from the Bankruptcy Court in Texas its entire file relating to this case as well as documents with respect to litigation and transactions between the debtor and the lessor, all of which were reviewed in the course of making its findings of fact which gave rise to its conclusions of law, this court provides the following background which it considered in its determination that the requested relief should not be granted and which resulted in the denial of the debtor's application.
Prior to the commencement of its bankruptcy case which arose from the filing of its petition for relief under Chapter 11 filed in Texas, which was ultimately transferred to this court as appears above, the debtor was a charter airline operating a Boeing 747 aircraft bearing Luxembourg registration, under a Certificate of Convenience and Necessity issued by the Civil Aeronautics Board. The aircraft, which is the subject of the debtor's application, was leased by the debtor from the lessor pursuant to a formal written Aircraft Lease Agreement and Addendum dated May 22, 1984. Following a dispute between the debtor and the lessor, the latter commenced a series of proceedings long before the bankruptcy to recover the aircraft. The initial proceeding which was in the state court in Florida, was dismissed for lack of personal jurisdiction. Thereafter, and again prior to the institution of the bankruptcy case, the lessor commenced an action in the United States District Court for the Western District of Missouri, to recover the aircraft. On July 19, 1984, the lessor moved in that action for a Declaratory Judgment and Writ of Prejudgment Attachment. However, before the court could move on the motion, the action was removed to the Circuit Court of Platte County of the State of Missouri, where it was referred to Honorable John M. Yeaman, a Judge of that court. The lessor then moved for a Declaratory Judgment and a Writ of Prejudgment Attachment in that action. On July 26, 1984, Judge Yeaman entered a Prejudgment Order attaching the aircraft.
On July 31, 1984, Judge Yeaman denied the debtor's motion to dissolve the Writ of Attachment after a hearing at which the parties were represented by counsel and evidence was presented. He ordered that the debtor could regain possession of the aircraft if it complied with the terms of the Lease Agreements, as well as with additional requirements which he imposed. These included the payment of monies due to Trans World Airlines ("TWA") for services rendered the lessee, the prevention of lapses of insurance on the aircraft, the deposit with his court of $500,000 as security, and the payment of the monthly rental arising under the Lease in the sum of $306,666.60 on or before August 1, 1984.
On August 2, 1984 Judge Yeaman found that the debtor had failed to comply with his aforesaid order of July 31, 1984. Consequently, on August 3, 1984, he signed an order granting the lessor "unfettered use and possession of the . . . aircraft" upon its compliance with the following conditions:
On August 8, 1984, the lessor entered into an agreement with TWA discharging a mechanic's lien in its favor in an amount in excess of $255,000 in satisfaction of its claim against the aircraft. On that date, the lessor also filed the $1,000,000 surety bond with the Clerk of the Court in accordance with Judge Yeaman's order of August 3, 1984, the same to be forfeited to the debtor if the repossession proved wrongful. Subsequent to August 8, 1984, and in compliance with Judge Yeaman's order of August 3, 1984, the lessor took possession of the aircraft at the Kansas City International Airport and flew it to Luxembourg. The action in the Circuit Court of Platte County remained on the Court's calendar for the purpose of determining the ultimate rights and liabilities of the parties.
Following the lessor's seizure of the aircraft, the debtor was unable to meet its contractual obligations to its passengers or obtain a substitute aircraft. As a result, and at long last on September 12, 1984, it filed its petition for relief under Chapter 11 of the Bankruptcy Code in the Western District of Texas, as has already been noted. The basis for venue there was the debtor's expressed intention to move its principal place of business to that District, coupled with the convenience of the parties and witnesses and in the interest of justice. As has further been noted, the case was referred to Bankruptcy Judge Thompson.
On October 31, 1984, the debtor made a "Motion for Approval of Assumption of Executory Contract" before Judge Thompson in the bankruptcy court, wherein it sought to assume the lease affecting the aircraft. In its moving papers, it also requested that the lessor forfeit the $1,000,000 bond posted in the state court action in accordance with Judge Yeaman's order of August 3, 1984. The motion makes reference to § 365 of the Bankruptcy Code.1 Among other things, it stated that the lessor had interfered with the debtor's "quiet use and enjoyment of the aircraft" by telexing to it "Notices of Default and Demands for Possession of the aircraft on June 2, 15, and 19, 1984." (Para. VII at p.p. 3-4 of the debtor's application in support of the motion). It also stated that the debtor was ready, willing and able...
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