In re Divine Ripe, L. L.C.

• Decision Date: 23 September 2015
• Docket Number: CASE NO: 15–70405
• Citation: 538 B.R. 300
• Parties: In re: Divine Ripe, L.L.C., Debtor(s)
• Court: U.S. Bankruptcy Court — Southern District of Texas

538 B.R. 300

In re: Divine Ripe, L.L.C., Debtor(s)

CASE NO: 15–70405

United States Bankruptcy Court, S.D. Texas, McAllen Division.

Signed September 23, 2015

Bruce W. Akerly, Cantey Hanger LLP, Dallas, TX, for Frescos Tomver S.A. DE C.V.

Antonio Martinez, Jr., Attorney at Law, McAllen, TX, for Debtor(s).

MEMORANDUM OPINION DENYING DEBTOR'S MOTION TO EXTEND STAY TO NON-DEBTOR MARCO JIMENEZ WITH RESPECT TO CERTAIN PRE-PETITION LITIGATIONS

[Resolving ECF No. 12 ]

Eduardo V. Rodriguez, United States Bankruptcy Judge

I. Introduction

This Court reviews whether it is appropriate to extend the same protections afforded to a debtor under Title 11 of the United States Code (the “Bankruptcy Code ” or “Code ”)¹ to a nondebtor who is the sole member of Divine Ripe, LLC (“Debtor ”). This Court determines that based on the Motion to Extend the Automatic Stay to Marco Antonio Jimenez a (non-debtor) With Respect To Certain Pre–Petition Litigations, [ECF No. 12], the response by Frescos Tomver, S.A. DE C.V. (“Frescos Tomver ”), [ECF No. 23], and the Debtor's Reply to Frescos Tomver's Response to Debtor's Motion To Extend Automatic Stay To Marco Jimenez With Respect To Certain Pre–Petition Litigations, [ECF No. 34], the arguments presented in an evidentiary hearing on this matter held September 15, 2015, all other evidence in the record, and relevant case law, there is insufficient justification to warrant the extension of the automatic stay, 11 U.S.C. § 362, to the non-debtor Marco Antonio Jimenez.

II. Procedural Background

On October 16, 2013, Frescos Tomver initiated a lawsuit against the Debtor and Marco Antonio Jimenez (“Jimenez ”), claiming violations under the Perishable Agricultural Commodities Act (“PACA”), 7 U.S.C. § 499a et seq.,² breach of contract, and breach of fiduciary duty in the United States District Court for the Southern District of Texas in McAllen, TX. [Case No. 7:13–cv–00577, ECF No. 1]. The Debtor filed its Motion to Extend The Automatic Stay to Jimenez With Respect to Certain Pre–Petition Litigation (“ the Motion ”), which is the subject of this opinion, on August 13, 2015. [Case No. 15–70405, ECF No. 12].

III. The Motion To Stay

The Motion filed by the Debtor seeks to have this Court extend the protections of 11 U.S.C. § 362 (“the Automatic Stay ”) to the non-debtor Jimenez. [ECF No. 12, ¶ 11]. The Debtor argues that it is necessary to extend the protections of the Automatic Stay to Jimenez in order to prevent an “adverse, and likely irreconcilable, economic effect on the Debtor's estate,” if Frescos Tomver were to be permitted to proceed with its lawsuit against Jimenez. Id.

IV. The Legal Standard

Section 362(a)(1) provides for an automatic stay of any judicial “proceeding against the debtor.” 11 U.S.C. § 362(a)(1). “Section 362(a)(3) provides that the filing of a petition ‘operates as a[n] [automatic stay] applicable to all entities, of ... any act to obtain possession of property of the estate or of property from the estate.’ ” See Matter of S.I. Acquisition, Inc., 817 F.2d 1142, 1148 (5th Cir.1987) (quoting 11 U.S.C. § 362(a)(3) ). Ordinarily, the automatic stay under § 362 does not apply to actions against a non-debtor. See In re TXNB Internal Case, 483 F.3d 292, 301 (5th Cir.2007). Courts recognize that a § 362 stay may apply to an action against non-debtor defendants depending on their relationship to the debtor. See Reliant Energy Servs., Inc. v. Enron Can. Corp., 349 F.3d 816, 825 (5th Cir.2003) (“[A] bankruptcy court may invoke § 362 to stay proceedings against nonbankrupt codefendants where ‘there is such an identity between the debtor and the third-party defendant that the debtor may be said to be the real party defendant and that a judgment against the third-party defendant will in effect be a judgment or finding against the debtor.’ ” (quoting A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir.1986) )). The party invoking the stay has the burden to show that it is applicable. See 2 WILLIAM L. NORTON, JR., NORTON BANKRUPTCY LAW AND PRACTICE § 43:4 (3d ed. Supp.2010) (noting that in bankruptcy court proceedings, “the party seeking to extend the stay will bear the burden to show that ‘unusual circumstances' exist warranting such an extension of the stay to a nondebtor”); see also Arnold v. Garlock, Inc., 278 F.3d 426, 436 (5th Cir.2001) (holding that the defendant had “no interest to establish such an identity [of interests] with [the] debtor”). This Court makes the following Findings of Fact and Conclusions of Law pursuant to Federal Rules of Bankruptcy Procedure 7052, which incorporates Fed.R.Civ.P. 52, and 9014. To the extent that any Finding of Fact constitutes a Conclusion of Law, it is adopted as such. To the extent that any Conclusion of Law constitutes a Finding of Fact, it is adopted as such.

V. Findings of Fact

1. Frescos Tomver filed suit against Debtor and Jimenez on October 16, 2013. The complaint alleged violations of PACA, breach of fiduciary duty, and breach of contract. [Case No. 7:13–cv–0577, ECF No. 1].

2. The Parties attempted to mediate the dispute with a scheduled mediation on June 4, 2014. [Case No. 7:13–cv–0577, ECF No. 35, ¶ 6]. The attorney for the Debtor and Jimenez failed to appear at the scheduled time for the mediation, but the attorney later arrived at approximately 10:30 A.M. [Case No. 7:13–cv–0577, ECF No. 35, ¶ 14]. However, Jimenez did not appear nor was his attorney able to contact him before noon that day. Id . On July 9, 2014, the District Court sanctioned the Defendants for failing to attend the court ordered mediation.

3. Jimenez filed a Motion to Dismiss Plaintiffs Complaint on July 21, 2014 pursuant to Fed.R.Civ.P. 12(b)(1). [Case No. 7:13–cv–0577, ECF No. 37].

4. Frescos Tomver filed a Motion for Summary Judgment on October 22, 2014. [Case No. 7:13–cv–0577, ECF No. 56].

5. The District Court considered the Defendant's Motion to Dismiss and the Plaintiff's Motion for Summary Judgment on November 17, 2014. The District Court heard oral arguments, denied the Motion to Dismiss, and granted Frescos Tomver's Motion for Summary Judgment.

6. The Debtor filed a Motion to Reconsider the District Court's grant of Frescos Tomver's Motion for Summary Judgment, [Case No. 7:13–cv–0577, ECF No. 68], which was considered at a status conference on February 4, 2015. The District Court denied Debtor's Motion To Reconsider the Court's granting of Frescos Tomver's Motion For Summary Judgment and noted that the liability for Jimenez was still at issue. [Case No. 7:13–cv–0577, ECF No. 77, 6:6–12].

7. Frescos Tomver filed a Motion for Final Summary Judgment on March 20, 2015, [Case No. 7:13–cv–0577, ECF No. 81], and on April 23, 2015, the Court granted the motion as to the Debtor, but not as to Jimenez.

8. The Debtor filed a voluntary petition for bankruptcy under Title 11, chapter 11 of the United States Code on August 5, 2015. [Case No. 15–70405, ECF No. 1].

9. On August 9, 2015, the Debtor filed a Motion to Use Cash Collateral, [ECF No. 6], and included with the motion a copy of the Debtor's “August–September Monthly Budget,” [Case No. 15–70405, ECF No. 6–1], that provided a brief description of projected income and expenses.

10. The Debtor filed its Motion to Extend Automatic Stay As To The Non–Debtor Jimenez, which is the subject of this opinion, on August 13, 2015. [Case No. 15–70405, ECF No. 12].

11. After the partial grant of summary judgment, Frescos Tomver filed a Motion to Sever the Debtor on August 14, 2015. [Case No. 7:13–cv–0577, ECF No. 90].

12. The District Court granted Frescos Tomver's Motion to Sever on September 1, 2015, leaving only Jimenez as a party to the case. [Case No. 7:13–cv–0577, ECF No. 93].

13. The District Court is considering Frescos Tomver's Motion for Summary Judgment against Jimenez concurrent with this Court's consideration of the Debtor's Motion to Extend the Automatic Stay As To The non-debtor Jimenez. [Case No. 7:13–cv–0577, ECF No. 93].

14. At the September 15, 2015 hearing, the Debtor offered, and the Court admitted the following exhibits relating, among others, to the operations of the Debtor and the relationship of Jimenez to the Debtor:³

15. Exhibits P–B: The documents presented were copies of Jimenez's alleged financial contributions to the Debtor.

a. Exhibit P–B 2–4 purported to be a recitation of all of the transactions between the Debtor and Jimenez from October 2005 to April 2015.

b. Exhibit P–B 1 purported to be a summary of the total contributions from Jimenez to the Debtor that amounted to $10,341,945.51, with $1,622,788.91 designated as “Personal” and the remaining $8,809,156.60 allocated as “Divine Support.”

16. Exhibits P–F: purported to be an explanation of the tomato farming operation by Jimenez in Mexico. However, the only information contained in the explanation was an unsubstantiated estimate for harvest yield, price per box, and total sales.

17. Exhibits P–G and P–H were merely copies of Frescos Tomver's Motion for Summary Judgment, [Case No. 7:13–cv–0577, ECF No. 56], styled No. 2 and No. 3, which were offered by the Debtor in support of its claim of immediacy of the need for relief from the threat presented by Frescos Tomver. Exhibit P–H corresponded with Fresco Tomver's Exhibit R–3.

18. Exhibit P–K included the Debtor's initial petition, [Case No. 15–70405, ECF No. 1], and the accompanying schedules.

19. Frescos Tomver offered and the Court admitted the following exhibits:

a. Exhibit R–1 which included the Debtor's schedules and the Statement of Financial Affairs, [Case No. 15–70405, ECF No. 21];

b. Exhibit R–3 which was the Plaintiff's Motion for Summary Judgment against Jimenez, [Case No. 7:13–cv–00577, ECF No. 91]; and

c. Exhibit R–4 which is the Partial Summary Judgment as to the Debtor, [Case No. 7:13–cv–00577, ECF No. 85].

d. Frescos Tomver did not offer any live witness testimony.

20. Notably, Jimenez did not appear to testify at the hearing. The Debtor's only live witness was Saul Zuniga. Mr. Zuniga testified to the following:

a. Mr.

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