In re Pocklington, 81-03493-P
| Citation | 21 BR 199 |
| Decision Date | 22 June 1982 |
| Docket Number | Adv. No. C81-1347-P.,No. 81-03493-P,81-03493-P |
| Court | United States Bankruptcy Courts. Ninth Circuit. U.S. Bankruptcy Court — Southern District of California |
| Parties | In re Cameron F. POCKLINGTON dba Valley R.V. & Auto Sales, Debtor. AUTO AUCTION, INC. dba Los Angeles Dealer Auto Auction, a California corporation, Plaintiff, v. Cameron F. POCKLINGTON dba Valley R.V. & Auto Sales, Harry Heid, Trustee, Defendants. |
Jeffrey Isaacs, Procopio, Cory, Hargreaves & Savitch, San Diego, Cal. for plaintiff Auto Auction, Inc., dba Los Angeles Dealers Auto Auction.
Cameron F. Pocklington, defendant propria persona.
Harry W. Heid, trustee pro se.
The trial of this adversary proceeding was set for November 17, 1981. At that time Cameron F. Pocklington, a Chapter 13 Debtor, moved the Court to dismiss the Chapter 13 case pursuant to 11 U.S.C. § 1307(b). The Court granted Pocklington's motion, but, because of the potential of irreparable harm to the plaintiff, AUTO AUCTION, INC., the Court retained jurisdiction over this adversary proceeding. This Memorandum is written to explain the Court's Decision.
Cameron F. Pocklington filed a Petition for Relief under Chapter 13 of the Bankruptcy Code on October 3, 1981. Although the Debtor received two extensions of time in which to file Schedules, no Schedules were ever filed. The Debtor is the owner and operator of VALLEY R.V. and AUTO SALES. In the course of that business Pocklington purchased vehicles for resale from Los Angeles Dealer Auto Auction (Auto Auction). He paid Auto Auction for the vehicles with "auto purchase sight drafts" which were dishonored at presentation by Pocklington's bank.
On October 27, 1981, Auto Auction filed a Complaint for Relief from the Automatic Stay. The complaint asked for (1) return of the vehicles, still in the Debtor's possession, for which Auto Auction held dishonored drafts; (2) a temporary restraining order to prevent Pocklington from selling or transferring the vehicles still in his possession, and prohibiting the transfer of any of the proceeds from the sale of vehicles for which Auto Auction held dishonored drafts; and (3) an order directing Pocklington to pay to Auto Auction all proceeds arising from the sale or other disposition of vehicles, and to pay Auto Auction the agreed purchase price of any vehicle which Pocklington could not redeliver to Auto Auction.
At the initial hearing the Court refused to freeze Pocklington's bank accounts, but did restrain him from taking any action to sell, transfer, remove, or otherwise dispose of Auto Auction vehicles, and any identifiable proceeds thereof. The Court also ordered Pocklington to make available to Auto Auction all records regarding sales of Auto Auction vehicles, and records of deposits made into Debtor's bank accounts within the prior 30 days. The Order was designed to give the Plaintiff the opportunity to determine whether Pocklington held identifiable proceeds from sales of Auto Auction vehicles.
On October 30, 1981, after it appeared that Pocklington was not providing information required by the original order, the Court modified the temporary restraining order and restrained Pocklington from using any funds then on deposit in his bank accounts pending a Preliminary Injunction Hearing. At the Preliminary Injunction Hearing on November 6, 1981, in response to Pocklington's contention that he could not continue to operate his business so long as he was restrained from using his bank accounts, the Court again modified its order. The modification permitted the Debtor to open and use new bank accounts for personal and business matters, but left the existing accounts frozen. The Court also issued a preliminary injunction and determined that the trial on the complaint would be bifurcated. November 17, 1981 was set as the date for trial of the issues relating to Auto Auction's claimed right to return of the vehicles still in Pocklington's possession, and December 9, 1981, was set for trial of all other issues raised by Auto Auction's complaint.
At the November 17 hearing, Pocklington, having dismissed his attorneys, appeared in propia persona and asked that his Chapter 13 case be dismissed pursuant to 11 U.S.C. § 1307(b).1 Auto Auction opposed the request for dismissal despite the fact that all stays would be automatically terminated. Auto Auction argued that its complaint should be litigated to a conclusion before the Court dismissed the Chapter 13 case. The Court dismissed the Chapter 13 case but retained jurisdiction over the adversary proceeding pursuant to 11 U.S.C. § 349.2
It is clear that Pocklington had the absolute right to dismiss the case under § 1307(b). It is also clear that the rights of Auto Auction would be prejudiced by dismissal of the adversary proceeding. Pocklington voluntarily sought the protection of the Bankruptcy Court when he filed his Chapter 13 petition. In reliance upon the existence of the Chapter 13 case, Auto Auction filed its complaint for injunctive relief and return of its property in the Bankruptcy Court. At the time the complaint was filed the Bankruptcy Court had jurisdiction pursuant to 28 U.S.C. § 1471.3 Indeed the Bankruptcy Court was the only forum available to Auto Auction when it filed its complaint.
In similar circumstances, the Bankruptcy Court for the District of Nevada held that jurisdiction over an adversary proceeding continued after dismissal of the underlying Chapter 11 case. In re Lake Tahoe Land, Co., Inc., 12 B.R. 479 (Bankr.D.Nev.1981). The Court found that jurisdiction existed at the time the complaint was filed and that the automatic stay prevented the plaintiff from filing its complaint in any court other than the Bankruptcy Court. By the time the Chapter 11 case was dismissed the statute of limitations had run on plaintiff's cause of action, thus barring the refiling of the complaint in the State Court. In maintaining its jurisdiction the Court stated: "Once jurisdiction attached in this adversary action, reason and logic require that jurisdiction continue notwithstanding the dismissal of the underlying bankruptcy case." Id. at 480.
As a practical matter, generally the dismissal of a bankruptcy case results in the dismissal of all adversary proceedings filed in that case.4 Section 349 of the Bankruptcy Code, however, reserves to the Court the power to alter the normal effects of the dismissal of a bankruptcy case if cause is shown. Section 349 empowers the Court to issue appropriate orders to protect rights acquired in reliance on the bankruptcy case. H.R. 95-595, 95th Cong., 1st Sess. 338 (1977); S.Rep. No. 95-989, 95th Cong., 2d Sess. 48-49 (1978), U.S.Code Cong. & Admin.News 1978, p. 5787.
In the present case, the Court had previously determined that Auto Auction was entitled to an order restraining Pocklington from using his bank accounts which were active during the time that Auto Auction vehicles were...
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