In re Windsor Communications Group, Inc.

• Decision Date: 15 December 1987
• Docket Number: Adv. No. 84-0714S.,Bankruptcy No. 82-03714K
• Citation: 80 BR 712
• Parties: In re WINDSOR COMMUNICATIONS GROUP, INC. t/a Norcross-Rust Craft Greeting Card Publishers, Debtor. WINDSOR COMMUNICATIONS GROUP, INC. t/a Norcross-Rust Craft Greeting Card Publishers, Plaintiff, v. METROPOLITAN CONSOLIDATED INDUSTRIES, INC., Defendant/Third Party Plaintiff, v. The CRYSTAL GROUP OF COMPANIES, Third Party Defendant/Second Third- Party Plaintiff, v. Robert E. RUNYAN and Barbara L. Runyan, h/w Second Third-Party Defendants.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

80 B.R. 712 (1987)

In re WINDSOR COMMUNICATIONS GROUP, INC. t/a Norcross-Rust Craft Greeting Card Publishers, Debtor.

WINDSOR COMMUNICATIONS GROUP, INC. t/a Norcross-Rust Craft Greeting Card Publishers, Plaintiff, v. METROPOLITAN CONSOLIDATED INDUSTRIES, INC., Defendant/Third Party Plaintiff, v. The CRYSTAL GROUP OF COMPANIES, Third Party Defendant/Second Third- Party Plaintiff, v. Robert E. RUNYAN and Barbara L. Runyan, h/w Second Third-Party Defendants.

Bankruptcy No. 82-03714K, Adv. No. 84-0714S.

United States Bankruptcy Court, E.D. Pennsylvania.

December 15, 1987.

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Albert A. Ciardi, Jr., David S. Fishbone, Philadelphia, Pa., for debtor/plaintiff.

Alan C. Gershenson, Philadelphia, Pa., for defendant/Metropolitan Consol. Industries, Inc.

Kenneth F. Carobus, Philadelphia, Pa., for third party defendant/The Crystal Group of Companies.

Susan L. Claypoole, Philadelphia, Pa., Ben Goodin, Chicago, Ill., for second third-party defendants/Robert E. and Barbara L. Runyan.

OPINION

DAVID A. SCHOLL, Bankruptcy Judge.

A. INTRODUCTION AND PROCEDURAL HISTORY

After over a year of some measure of familiarity with this long-outstanding adversarial proceeding, the principal issues of which concern claims of various parties regarding their respective rights to possession of certain films, embossing plates, and stamping discs used to manufacture greeting cards (hereinafter referred to as "the designs"), and their rights to and from damages among themselves as a result of the determination of the rights of possession, we are finally in a position to resolve all of the outstanding issues in this matter.

We adhere to our earlier holding that the Plaintiff-Debtor, WINDSOR COMMUNICATIONS GROUP, INC., t/a NORCROSSRUST CRAFT GREETING CARD PUBLISHERS (hereinafter referred to as "the Debtor"), is entitled to possession of the designs. We also hold that the original Defendant, METROPOLITAN CONSOLIDATED INDUSTRIES, INC. (hereinafter referred to as "Metro"), is liable to the Debtor in a total sum of $123,450.00 for the Debtor's loss of possession of 6,891 of the designs for a five-year period and the total loss of 2,727 of the designs, plus all costs associated with the Debtor's within action. However, in light of the fact that both parties to a transaction of July 13, 1983, in which Metro sold all of its assets to Second Third-Party Defendants ROBERT E. RUNYAN and BARBARA L. RUNYAN (hereinafter referred to as "the Runyans"), contend that the designs were not a part of the sale, we are revising our earlier conclusion that the designs were passed along to the Runyans in this transaction or in a subsequent sale by the Runyans of the stock in their business to Third-Party Defendant THE CRYSTAL GROUP OF COMPANIES (hereinafter referred to as "Crystal"), on September 18, 1985.

Therefore, the only liability which we find among the parties other than that of Metro to the Debtor is liability of Crystal over to Metro for the period in which it intentionally retained the designs, which we calculate at $13,782.00, plus part of the costs imposed upon Metro.

We also hold that Metro is liable to the Debtor in the amount of $37,942.43 on a relatively straightforward preference Count also pleaded in this action, thus rendering its total liability to the Debtor in this action as $161,374.43.

The underlying bankruptcy case was initiated by the filing of an involuntary Chapter 7 petition against the Debtor on August 5, 1982, which was converted to a Chapter 11 case on the Debtor's motion on August 25, 1982. This proceeding was not initiated until June 19, 1984. Discovery proceeded at a deliberate pace through 1985, with the Debtor being awarded monetary sanctions totalling $1,226.50 on January 28, 1985, and $420.00 on May 28, 1985, against Metro for the failure of the latter's original counsel to make adequate responses to discovery.

In October, 1985, the parties both filed Motions for partial summary judgment, which were apparently both informally denied by our predecessor, the Honorable William A. King, Jr. We first became aware of presence of this case after our appointment to the bench on August 27, 1986, when the parties requested a conference rather than try the matter on September 17, 1986, when it was listed. After a conference, we entered an Order of September 12, 1986, directing that the parties endeavor to settle the case or in the alternative prepare a Stipulation of Facts, after which a further conference would be conducted. Although the Stipulation of Facts was prepared, no further resolution was attained. However, during this period, it should be noted that none of the designs in issue had been located, and the only real area of dispute was the measure of damages for their loss.

In December, 1986, counsel for the Debtor, as had counsel for Metro, changed hands. In a conference with new counsel, we learned that Metro had located the designs in a facility now owned by Crystal, but that Crystal refused to release them. Although the Debtor initially indicated an intention to join Crystal as a party defendant, when it failed to do so, Metro itself successfully, per our Order of February 4, 1987, moved to join Crystal as a third party defendant.

When Crystal answered, on April 10, 1987, it also filed a Second Third-party Complaint against the Runyans. The Runyans filed a Motion to Dismiss for lack of personal jurisdiction and venue, which they subsequently withdrew. On May 22, 1987, at the request of all of the now-multifarious parties, we scheduled a conference. We learned that a snag had developed over what employees of the Debtor would be delegated to travel to Crystal's facility in Waukegan, Illinois, to determine whether the designs there were in fact those in issue and, if so, how many were there, and over who would pay for same. We entered an Order that day directing Crystal to permit entry to the Debtor's delegates to conduct an inspection and for Metro to advance $1,000.00 towards costs, the ultimate liability for the imposition of which would be determined at the time of disposition of the case. We also directed the Debtor to file and serve upon all interested parties, on or before June 29, 1987, a report of its delegates' investigation and scheduled a hearing on July 28, 1987, to resolve the issue of what portions of the designs were at the Waukegan facility and to prepare a schedule for disposition of all issues in this case.

The July 28, 1987, hearing was continued to August 11, 1987. At the close of that hearing, convinced that the Debtor's President, Daniel J. Coffey (hereinafter referred to as "Coffey"), had accurately reported that approximately 6,800 of the designs in question were in fact in Crystal's facility, we indicated a willingness to order that the Debtor be entitled to recover these designs immediately, as a backdrop for deciding the other issues in the case. Crystal vigorously opposed such a disposition, beginning a course of action which has consistently set Crystal at odds with all of the other parties in the action.

On August 17, 1987, we issued an Order confirming an agreed schedule for final disposition of the case, culminating in a trial on October 22, 1987, and ordering Crystal to allow the Debtor to recover the designs at the facility immediately. However, recognizing that we had not provided Crystal with any notice prior to August 11, 1987, that we might resolve the issue of the disposition of the designs at this time, we allowed Crystal to file a motion to stay this Order and scheduled a hearing on August 27, 1987, on any stay motion which it might file.

Crystal did file a stay motion. At the hearing on August 27, 1987, its principal witness was James N. Splayt (hereinafter referred to as "Splayt"), who had been, since 1975, the general manager of the facility in Waukegan, Illinois, where the designs had been located since 1979 throughout the changes in ownership of the facility and who had steadfastly denied that they were in fact located in the facility despite inquiries from the Debtor and Metro from 1984 through 1986. Splayt's testimony confirmed our belief that the designs in Waukegan were in fact among those in issue in this suit. We therefore entered an Order of August 28, 1987, denying Crystal's stay motion and reiterating the substance of our Order of August 17, 1987.

Crystal appealed our Order of August 28, 1987, to the District Court and sought a stay of our Order pending appeal from that court. On October 15, 1987, District Judge Edward N. Cahn entered an Order denying the stay order for the most part, and allowing the Debtor or Metro to prepare for shipment of the designs to the Debtor, but directing that the designs not be moved until October 22, 1987, the date of the trial, which was by then upon us.

At Crystal's request, upon the conclusion of the trial on October 22, 1987, we vacated our Orders of August 17, 1987, and August 28, 1987. We did this not as a concession that these Orders were in any sense erroneous, but because all of the other parties, including the Debtor, advised that they favored the entry of such an Order, as it would obviate considerable labors of all involved in briefing the issue of whether any order was properly entered prior to the conclusion of the full trial on the merits, and that this issue could be eliminated by our reentering a similar Order at that point, after the conclusion of the trial. We concurred with this reasoning.

We then proceeded to file an unpublished Memorandum dated October 27, 1987, substantively re-entering the same Orders as we did on August 17, and August 28, 1987, portions of which we incorporated herein. We note that Crystal has appealed that Order also, at Civil Action No. 87-7631 (E.D.Pa.), but that, per a Schedule of briefing set forth in an Order of the Honorable Joseph S. Lord, III, to whom that matter was originally assigned before its...