In re Tracy
| Decision Date | 11 April 1961 |
| Docket Number | No. 23194.,23194. |
| Citation | 194 F. Supp. 293 |
| Parties | In the Matter of Coyle John TRACY, Debtor. |
| Court | U.S. District Court — Northern District of California |
Milton Maxwell Newmark, San Francisco, Cal., for Crane Co.
McVay, Stone & Reid, Modesto, Cal., for debtor.
This is a Chapter XI arrangement proceeding. Debtor is a wholesaler of plumbing supplies. He petitioned for an arrangement under which he proposed to pay all priority debts upon the order confirming the arrangement; to pay all debts incurred in the operation of his business within 30 days of incurring them; and to pay all other unsecured debts in two installments, one 90 days after a final order of confirmation of the arrangement, and a second 180 days after such confirmation. The proceeding was referred to Referee Evan J. Hughes, who confirmed the arrangement by an order entered December 9, 1960.
Debtor owns a residence and his place of business. Each is encumbered by a first deed of trust, and by a second deed of trust. The second deed of trust secures one debt, owed to the petitioner herein, Crane Co. Debtor failed to make his periodic payments on this debt, and Crane Co. advertised his residence and place of business for sale. This circumstance precipitated the arrangement proceeding.
Debtor filed a petition for stay of the proceedings to sell the business property and residence under the deed of trust. After notice and a hearing, the Referee concluded that there was a substantial equity in the property concerned, after allowance for the amount of the indebtedness secured by the deeds of trust; that the consummation of the foreclosure sale would endanger the success of the arrangement, which otherwise might be satisfactorily carried through; and that the Debtor's equity in the residence and place of business, if it could be realized upon, would be sufficient to pay all of his debts, secured and unsecured. The Referee thereupon restrained the sale of the property in question under the deed of trust. Crane Co. then filed a petition for review of this order with this Court, timely and in proper form.
A Chapter XI proceeding may arrange only the rights of unsecured creditors, without alteration of the rights of secured creditors (Bankruptcy Act, § 306(1), Title 11 U.S.C.A. § 706(1); and Securities and Exchange Comm. v. United States Realty Co., 310 U.S. 434, 60 S.Ct. 1044, 84 L.Ed. 1293). Nevertheless, the Court may, upon notice and for cause shown, stay or enjoin any act to enforce a lien upon the property of a debtor (Bankruptcy Act, § 314, Title 11 U.S.C.A. § 714). The exercise of this power lies within the discretion of the Referee, and his decision to exercise such power must be sustained unless he has abused that discretion (In re Laufer, 2 Cir., 230 F.2d 866). The exercise of such discretion is, however, subject to equitable consideration, and care should be taken to insure that the stay will cause no substantial injury to the lienor (See Collier on Bankruptcy, 14th ed., Vol. 8, at p. 189; and Chaffee County Fluorspar Corp. v. Athan, 10 Cir., 169 F.2d 448).
A bankruptcy court is a court of equity, which may in its discretion deny relief which is within its powers, or make a grant of relief upon some condition dictated by equitable principles. It may, under certain circumstances, be an abuse of discretion for a bankruptcy court to grant relief which is within its power (Securities and Exchange Comm. v. U. S. Realty Co., supra).
This proceeding is strictly an arrangement of Debtor's difficulties with his unsecured creditors. Its objective is to pay his unsecured creditors in an orderly and expeditious manner, and to keep him, if possible, from being put out of business by his unsecured creditors. This is not a proceeding to rearrange priorities between his secured and unsecured creditors or to handle his difficulties with secured creditors. The Court has the power to restrain sale of the property in question under the deeds of trust, only if necessary to facilitate the primary purpose of this proceeding, and if it does not cause substantial injury to the lienor (See Chaffee County Fluorspar Corp. v. Athan, supra).
It seems possible, from all the facts now before this Court, that Debtor's current accounts receivable are more than ample to pay his unsecured creditors, and that all that is necessary by way of an arrangement between Debtor and his unsecured creditors is that he be given time to collect those accounts receivable. If this is so, it well may...
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IN RE PREMIER SALES COMPANY
...181, 407 P.2d 565 (1965); § 16-10-44(b) U.C.A. (Supp. 1961). 5 Cf. Featherstone v. Barash, 345 F.2d 246 (10th Cir. 1965); In Re Tracy, 194 F.Supp. 293 (N.D.Calif.1961). 6 An arrangement proceeding is not strictly an adversary proceeding but the court must exercise independent judgment no ma......
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...Life Ins. Co., 323 F.2d 566, 571 (4th Cir. 1963); Chaffee County Fluorspar Corp. v. Athan, 169 F.2d 448 (10th Cir. 1948); In re Tracy, 194 F.Supp. 293 (N.D.Calif. 1961); In re Herold Radio & Electronics Corp., 191 F.Supp. 780 (S.D.N.Y. 1961); 8 Collier, Bankruptcy ¶2.07 3 (14th Ed. However,......
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