In re Ggsi Liquidation Inc.
| Decision Date | 07 September 2006 |
| Docket Number | Bankruptcy No. 01 B 31751.,Adversary No. 03 A 03888. |
| Citation | 351 B.R. 529 |
| Parties | In re GGSI LIQUIDATION INC., et al., Debtors. Gus A. Paloian, not individually but solely in his capacity as the Chapter 7 trustee of the Above captioned bankruptcy estates, Plaintiff, v. Grupo Serla S.A. de C.V. a/k/a Grupo Empresarial Serla, S.A. de C.V.; Editorial Comercial, S.A. de C.V.; Sergio Eduardo Guarneros Trujillo; Bank One individually and as successor-in-interest to First National Bank of Chicago, a national banking, association, and Union Industrial Mexicana, S.A. de C.V., Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
Mark A. McDermott, Skadden, Arps, Slate, McAgher and Flo, Chicago, IL, for Debtors.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
Following trial, the following Findings of Fact and Conclusions of Law are made and to be entered:
FINDINGS OF FACT
1. Goss Graphic Systems, Inc., n/k/a GGSI Liquidation, Inc. ("Debtor" or "Goss") manufactured and sold offset printing press systems, among other things, for the newspaper, advertising, and commercial printing markets. It filed under Chapter 11 of the Bankruptcy Code, an action later converted to Chapter 7.
2. Plaintiff Gus A. Paloian (the "Trustee" or "Plaintiff') is the Chapter 7 Trustee of the Bankruptcy Estate of Goss and was appointed as such on or about February 27, 2002.
3. Plaintiff sued as Chapter 7 Trustee by filing this Adversary Complaint against Grupo Serla SA de C.V. ("Grupo Serla"), Editorial Comercial ("Editorial Comercial"), Union Industrial Mexicana SA de CV ("Union Industrial"), Sergio Eduardo Guarneros Trujillo ("Guarneros"), and Bank One (the "Bank" or "Bank One").
Defendant Sergio Eduardo Guarneros Trujillo ("Guarneros")
4. Guarneros was the General Administrator, or Chief Executive Officer, and President of Editorial Comercial and Grupo Serla at the time the events underlying this suit took place.1 Guarneros is a resident of Mexico.
Defendant Editorial Comercial, S.A. de C.V. ("Editorial Comercial")
5. Editorial Comercial is a business entity organized under the laws of Mexico with its principal place of business in Mexico.
Defendant Grupo Serla, S.A. de C.V.A. a/k/a Grupo Empresarial Serla, S.A. de C.V. ("Grupo Serla")
6. Grupo Serla is a business entity organized under the laws of Mexico with its principal place of business in Mexico.
Defendant Union Industrial Mexicana, S.A. de C.V. ("Union Industrial")
7. Union Industrial is a business entity organized under the laws of Mexico. Union Industrial is related to Guarneros and His Companies.
8. Bank One was a national banking association organized under laws of the United States of America at the time this action was brought. It has since merged into J.P. Morgan Chase Bank, N.A. (Bank One's Answer at ¶ 17.)2
9. This Adversary proceeding relates to the bankruptcy case of Goss Graphic Systems, Inc., n/k/a GGSI Liquidation, Inc. ("Goss" or "Debtor").
10. In 1997, Goss sold a printing press to Editorial Comercial for the purchase price of $5,948,860.00. Grupo Serla and Editorial Comercial executed a promissory note (the "Grupo Serla Note" or the "Note") payable to the order of Goss in the principal sum of $5,370,000.00 for the printing press. Bank One financed the sale by purchasing the Grupo Serla Note from Goss. Bank One extended the financing with Goss' explicit agreement that it would remain secondarily liable on the Grupo Serla Note.
11. After the purchasers failed to pay amounts due under the Grupo Serla Note, Bank One demanded and Goss agreed to repurchase that Note. Subsequently, Goss paid Bank One $5,175,728.17 in connection with the repurchase obligation, a large portion of the total amount due. However, after Goss filed for bankruptcy protection, Bank One (being still in possession of the original Grupo Serla Note) sold and delivered the Note to an entity connected to the makers of the Note and kept all of the sale proceeds. Bank One did this without giving notice to Goss' creditors or seeking modification or relief from the automatic stay. The bankruptcy case was later converted to one under Chapter 7 and the Plaintiff Trustee was appointed.
12. In the Trustee's First Amended Complaint consisting of eight counts, he seeks the following: (Count I) a judgment in favor of Trustee and against Grupo Serla and Editorial Comercial based on their failure to pay the amounts due and owing under the Grupo Serla Note for which payments they are jointly and severally liable; (Count II) a judgment in favor of Trustee and against Guarneros based on his failure to make any payments pursuant to his personal guarantee of the Grupo Serla Note; (Count III) a judgment in favor of Trustee and against Editorial Comercial based on its failure to cure its default under the Sale and Purchase Agreement; (Count IV) a declaratory judgment declaring that Goss is the rightful owner of the Grupo Serla Note; or alternatively, declaring that Goss is the equitable owner of a majority interest in the Grupo Serla Note; (Count V) a constructive trust on any and all proceeds from the sale, assignment, disposition, or collection of the Grupo Serla Note in favor of the Trustee, an order requiring Union Industrial and/or Bank One to execute appropriate documents transferring all right, title, and interest in the Grupo Serla Note to the Trustee, and an order requiring Bank One and Union Industrial to account for any proceeds or other benefits generated by the Grupo Serla Note and to pay at least 80% of such funds to the bankruptcy estate; (Count VI) a rescission of the December 15, 2000 Agreement; (Count VII) a declaration that the transfer of the Grupo Serla Note to Union Industrial is void under 11 U.S.C. § 549; and (Count VIII) a judgment in favor of the Trustee and against Bank One and Union Industrial in the amount of actual damages incurred as a result of the violation of the automatic stay, including attorney fees, costs, and punitive damages.
13. In response, Bank One argued the following: (1) the Grupo Serla Note belonged to Bank One and was not property of the Goss bankruptcy estate; (2) Bank One protected and preserved Goss' interests when it sold the Grupo Serla Note; (3) Bank One cannot be held to have violated the automatic stay because it acted under a claim of ownership; (4) no interest of the estate was impaired or foreclosed; and (5) even if Bank One violated the automatic stay, the Trustee has failed to establish damages to the Estate.
14. Bank One also asserted the following affirmative defenses: (1) equitable estoppel bars the Trustee's claims; (2) Goss and the Trustee waived any right to pursue claims against Bank One; (3) the Trustee lacks standing to bring for violation of the automatic stay; (4) the Trustee's claims are barred by the doctrine of laches; (5) Goss failed to mitigate any alleged damages; (6) any award is subject to set-off; and (7) Goss ratified the conduct that the Trustee now claims was wrongful.
15. The Trustee seeks a judgment against the Foreign Defendants based on their breach of contract obligations pursuant to the sale and Promissory Note. The Trustee also requests judgment in his favor against Guarneros for all damages available pursuant to applicable law based on his personal guarantee of the Promissory Note.
16. In response, the Foreign Defendants argued: (1) they never accepted the printing press; (2) the printing press did not meet specifications called for in the Sale and Purchase Agreement; (3) Goss cannot enforce the Promissory Note because Goss does not own or hold it; (4) Goss was already paid by Bank One; and (5) Guarneros and Editorial Comercial are no longer bound by the Promissory Note or any other agreement because of a handwritten settlement agreement between Goss and Grupo Serla.
17. Following trial and with agreement of the parties, final arguments were submitted in writing through filings of proposed Findings of Fact and Conclusions of Law. For reasons stated below and pursuant to separate judgment order to be entered, judgment will be entered in favor of Plaintiff against Bank One for damages based on Bank One's willful violation of the automatic stay. A separate judgment will enter in favor of Plaintiff against Bank One for damages based on Bank One's breach of its duty as a secured party pursuant to § 9-207 of the Uniform Commercial Code as adopted in Illinois, 810 ILCS 5/9-207, and for its transfer of the Goss property interest in the Note during bankruptcy, under 11 U.S.C. § 549. Judgment will also separately enter in favor of Plaintiff and against the Foreign Defendants jointly and severally for breach of contract based on their failure to pay Goss on the Promissory Note given when purchasing the printing press, and against Guarneros for breach of his personal guarantee. Other issues presented will be discussed below.
18. In December of 1996, Grupo Serla issued a letter of intent to purchase a Goss Universal 45 printing press from Goss. (Pl.Ex. 1; citations to Trustee's Trial Exhibits will hereinafter be referred to as "Pl.Ex. ___".) In the letter of intent, Grupo Serla acknowledged that it "thoroughly reviewed" the printing press and found its "capability to meet our requirements." (Pl.Ex. 1.)
19. On March 19, 1997, Editorial Comercial and Goss entered into a Sale and Purchase Agreement (the "Contract To Sell The Press") as amended in which Goss agreed to sell and Editorial...
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