In re Micro Marketing Intern., Inc.
| Decision Date | 08 October 1992 |
| Docket Number | Bankruptcy No. 5-90-00868,Adv. No. 5-91-0066. |
| Citation | 150 BR 573 |
| Parties | In re MICRO MARKETING INTERNATIONAL, INC., Debtor. NEW MMI CORP., Plaintiff, v. ROBEC, INC., Defendant. |
| Court | U.S. Bankruptcy Court — Middle District of Pennsylvania |
Robin A. Read, Williamsport, PA, for plaintiff.
Eric S. Goldberg, Lansdale, PA, for defendant.
This matter was originally heard by my predecessor, the Honorable Thomas C. Gibbons, on December 12, 1991. By a "Consent to Adjudication" executed by both parties, the right to a rehearing on the issue was waived and this Court was requested to render a decision based on the current state of the record.
The Plaintiff, New MMI Corporation, (hereinafter "Plaintiff") seeks an injunction against the Defendant, Robec, (hereinafter "Defendant") together with sanctions under 11 U.S.C. Section 362(h), by reason of what it alleges is the Defendant's "deliberate violation of the automatic stay provision of the Bankruptcy Code".
The Plaintiff alleges that on or about December 20, 1990, Robec filed a lawsuit against the above captioned Debtor, Micro Marketing International Inc. (hereinafter "MMI") and the Plaintiff alleging that a transfer of assets from MMI to the Plaintiff represented (1) a violation of the Pennsylvania Bulk Transfer Act, now known as Article 6 of the Uniform Commercial Code of Pennsylvania, 13 Pa.Cons.Stat. § 6101-6111, (2) a breach of contract (3) a fraud, (4) a "de facto" merger (5) a wrongful conspiracy and (6) which required punitive damages.
MMI was the subject of an involuntary bankruptcy filed on August 17, 1990 and on September 21, 1990 MMI was adjudicated a debtor and converted the petition to one under Chapter 11.
In its response to the Plaintiff's complaint, the Defendant alleges that it was unaware of the bankruptcy filing of MMI at the time it commenced its lawsuit on December 20, 1990 and accordingly it would drop MMI as a party. Nevertheless, the Defendant maintains that Defendant's Answer, Paragraph 43.
11 U.S.C. Section 362(a)(3) indicates that the petition in bankruptcy operates as a Stay, applicable, to all entities of, "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate".
The threshold question is whether this cause of action being prosecuted by the Defendant against the Plaintiff represents "property of the estate".
11 U.S.C. Section 541(a)(1) defines property of the estate as "all legal or equitable interest of the Debtor in property as of the commencement of the case".
11 U.S.C. Section 544(b) indicates that the trustee may avoid any transfer of an interest of the Debtor that is voidable under applicable law by a creditor holding an unsecured claim.
Although our Circuit has not as yet addressed this specific issue some guidance can be found from Bankruptcy Service, L.Ed. Section 5A:51 which reads as follows:
". . . An action to avoid or recover a fraudulent transfer is essentially one for property that belongs to the Debtor in which the Debtor has fraudulently transferred to a third party in an effort to put such property out of the reach of creditors; therefore, the automatic stay applies to such a cause of action and prevents a creditor from pursuing such an action against a third party."
The claim of the Defendant that the action against the Plaintiff has no impact upon MMI is clearly incorrect because the Defendant is asking that funds be transferred to it—funds that would otherwise go to the bankruptcy estate and be distributed pursuant to the Bankruptcy Code.
Having concluded that the litigation by the Defendant against the Plaintiff is a violation of the automatic stay initiated without permission of the Bankruptcy Court, we must...
To continue reading
Request your trial