In re Golden Plan of California, Inc., Bankruptcy No. 282-00571-D-11 to 282-00574-D-11

• Citation: 37 BR 167
• Decision Date: 21 February 1984
• Docket Number: Bankruptcy No. 282-00571-D-11 to 282-00574-D-11,Adv. No. 283-1700.
• Court: United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Eastern District of California
• Parties: In re GOLDEN PLAN OF CALIFORNIA, INC., a California corporation, Debtor. In re STATE LOAN SERVICING, INC., a California corporation, Debtor. In re FINANCIAL SECURITIES AGENCY, a California corporation, Debtor. In re MID-CENTRAL CALIFORNIA, INC., a California corporation, Debtor. Melvyn J. COBEN, Trustee in Bankruptcy, Plaintiff, v. William LEBRUN, Patti Lebrun, William Chisham, Peter H. Novell, M.G. Mitchell-tree, and Trust Deed Agency, Defendants.

37 B.R. 167 (1984)

In re GOLDEN PLAN OF CALIFORNIA, INC., a California corporation, Debtor In re STATE LOAN SERVICING, INC., a California corporation, Debtor In re FINANCIAL SECURITIES AGENCY, a California corporation, Debtor In re MID-CENTRAL CALIFORNIA, INC., a California corporation, Debtor Melvyn J. COBEN, Trustee in Bankruptcy, Plaintiff, v. William LEBRUN, Patti Lebrun, William Chisham, Peter H. Novell, M.G. Mitchell-tree, and Trust Deed Agency, Defendants.

Bankruptcy Nos. 282-00571-D-11 to 282-00574-D-11, Adv. No. 283-1700.

United States Bankruptcy Court, E.D. California.

February 21, 1984.

Melvyn J. Coben, Sacramento, Cal., Trustee.

Nancy S. Eichler, Deborah J. Frick, Jane H. Rabin, Sacramento, Cal., for trustee.

Peter H. Norell, Upland, Cal., for Lebrun, et al.

MEMORANDUM OPINION AND DECISION

LOREN S. DAHL, Bankruptcy Judge.

FACTS

On February 18, 1982, involuntary petitions under Chapter 11 of the Code were filed against the debtor, Golden Plan of California, Inc. and its three related entities, State Loan Servicing, Inc., Financial Securities Agency, Inc., and Mid-Central California, Inc. Thereafter, on April 9, 1982 the court entered an order for relief, appointed Melvyn J. Coben as trustee, and ordered the cases consolidated for administrative purposes. In an order filed on June 9, 1982, the court found that Certified TD Service, Inc. was an alter-ego of the debtor.

On December 1, 1982, the California Franchise Tax Board (Board) suspended Certified TD Service, Inc. and, similarly on February 1, 1983 the Board Suspended Financial Securities Agency, Inc. The Board also issued a Notice of Suspension or Forfeiture of Golden Plan of California, Inc. for the alleged non-payment of certain taxes on July 1, 1983. The trustee learned of the three suspensions in July and August 1983.

At about the same time the trustee learned about the suspensions, William L. Lebrun through his attorney, William E. Chisham, filed articles of incorporation for the three suspended entities on July 20, 1983. Lebrun formerly did business with Frank Monaco, an insider of the debtor, and Lebrun currently owns a foreclosure company. Shortly after filing the articles, Lebrun telephoned the trustee's office and indicated that he claimed ownership of the three names and that he intended to use the three corporations and their names to assist his own client-investors with foreclosures involving property of the estate. Lebrun also telephoned Byron Damiani of Pacific Trust Deed Services, who has been approved by this court's order of April 11, 1983 to process foreclosures for the trustee. According to Damiani, Lebrun warned him not to conduct any further foreclosures because of his ownership of the three corporations.

Upon the ex parte application of the trustee this court issued a temporary restraining order on August 12, 1983. And, on August 22, 1983, the court signed a preliminary injunction enjoining William and Patti Lebrun, William E. Chisham, Peter H. Norell, Trust Deed Agency, and M.G. Mitcheltree and their agents and employees from using the name of the debtor, its related entities, and alter-egos. After the most recent hearing, the court must decide whether or not a permanent injunction should be granted.

DISCUSSION

Although not raised by the parties, the court's analysis of this dispute begins with the issue whether or not the debtor's corporate name is property of the estate.

11 U.S.C. § 541(a)(1) states that the "estate is comprised of . . . all legal or equitable interests of the debtor in property as of the commencement of the case." This definition is broad and includes both tangible and intangible property. H.R.Rep. No. 595, 95th Cong., 1st Sess. 367-68 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787. The definition of property of the estate is much broader under the Code than under the Act. See United States v. Whiting Pools, Inc., ___ U.S. ___, ___ - ___, 103 S.Ct. 2309, 2312-15, 76 L.Ed.2d 515, 521-23 (1983); In re Johns-Manville Corp., 33 B.R. 254, 266-68 (Bkrtcy.S.D.N.Y.1983). Although there is now a reduced reliance on state law to determine what property will come into the estate, 4 Collier on Bankr. ¶ 541.02 at 541-9-10 (15th Ed.1983), a court must still apply state law to determine the existence and nature of a debtor's interest in property. However, once that determination is made, federal bankruptcy law dictates if the interest is property of the estate. In re Vermont Real Estate Investment Trust, 25 B.R. 813, 816 (Bkrtcy.D.Vt. 1982); In re Hackett, 23 B.R. 710, 711 (Bkrtcy.E.D.Pa.1982); In re Hurricane Elkhorn Coal Corp. II, 19 B.R. 609, 615 (Bkrtcy. W.D.Ky.1982).

At issue here is the corporate name of the debtor. A corporate name is an interest defined by state law. California law provides that the articles of incorporation must set forth a corporate name and that the Secretary of State shall not file articles which contain a name which is likely to mislead the public. Cal.Corp.Code §§ 201(b), 202(a). A business may acquire an exclusive, proprietary right to the use of a corporate name. Hooper v. Stone, 54 Cal.App. 668, 672, 202 P. 485 (1921).

Under § 70(a)(2) of the Act, tradenames were considered property of the estate. United States Ozone Co. v. United States Ozone Co. of America, 62 F.2d 881, 885-86 (7th Cir.1932); Johanna Farms Inc. v. Citrus Bowl, Inc., 468 F.Supp. 866, 874 (E.D.N.Y.1978). A tradename is akin to a corporate name because both involve the exclusive right to the use of a name. Since the definition of property of the estate under § 541 of the Code encompasses all forms of property specified in § 70(a) of the Act, H.R.Rep. No. 595, 95th Cong., 1st Sess. 367 (1977), the court finds that a debtor's corporate name is property of the estate. As such, it is entitled to the protection of the automatic stay.

11 U.S.C. § 362(a)(1) provides,

a petition filed . . . operates as a stay, applicable to all entities, of—(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title.

The scope of the automatic stay is broad and applies to both formal and informal proceedings against the debtor. 2 Collier on Bankr. ¶ 362.04 at 362-27. Any action taken in violation of the automatic stay is void. Kalb v. Feuerstein, 308 U.S. 433, 60 S.Ct. 343, 84 L.Ed. 370 (1940); In re Smith Corset Shops, Inc., 696 F.2d 971 (1st Cir. 1982).

In the present case, the state Franchise Tax Board acted pursuant to Cal.Rev. & Tax Code § 23301¹ to suspend the corporate powers of Golden Plan of California, Inc., Certified TD Service, Inc., and Financial Securities Agency, Inc. The court finds that the Board's actions do fall within the broad scope of the automatic stay and therefore, have no effect.² Since the corporate powers were never suspended, Lebrun's filing of the articles of incorporation for the three entities similarly had no effect.

Alternate grounds also exist for the granting of the permanent injunction.

11 U.S.C. § 105(a) states, "the bankruptcy court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title." Section 105(a) gives the court authority to enjoin acts that interfere with the administration of the estate. 2 Collier on Bankr. ¶ 105.02 at 105-3. See also Grover v. Palmer, 625 F.2d 321, 324 (9th Cir. 1980). Before a court can issue a permanent injunction, the plaintiff must show that the defendant's actions will cause irreparable harm and that no adequate remedy at law exists. Beacon Theatres v. Westover, 359 U.S. 500, 506, 79 S.Ct. 948, 954, 3 L.Ed.2d 988, 995 (1959).

The evidence in this case indicates that Lebrun's use of the corporate name of the debtor would interfere with the administration of...