Matter of Compass Development, Inc.

• Decision Date: 22 November 1985
• Docket Number: Bankruptcy No. 84-0409.
• Citation: 55 BR 260
• Parties: In the Matter of COMPASS DEVELOPMENT, INC., Debtor. CONSOLIDATED ENERGY CORP., Plaintiff, v. Nancy O'BRIEN, Edith O. O'Brien, Mae O'Brien, Doreen O'Brien, Rachel O'Brien Strickland, A.A. Strickland, Goldie O'Brien, Michael O'Brien, Melville O'Brien, Juanita O'Brien, Sharon O'Brien Stone, C.S. Stone, Patricia Douglass, D.B. Douglass, Rowland E. McNamee, Attorney In Fact for Bernice Greer, Bernice Heckler, D. Carl Heckler, Sara Nell, et al., Defendants.
• Court: U.S. Bankruptcy Court — District of New Jersey

55 B.R. 260 (1985)

In the Matter of COMPASS DEVELOPMENT, INC., Debtor CONSOLIDATED ENERGY CORP., Plaintiff, v. Nancy O'BRIEN, Edith O. O'Brien, Mae O'Brien, Doreen O'Brien, Rachel O'Brien Strickland, A.A. Strickland, Goldie O'Brien, Michael O'Brien, Melville O'Brien, Juanita O'Brien, Sharon O'Brien Stone, C.S. Stone, Patricia Douglass, D.B. Douglass, Rowland E. McNamee, Attorney In Fact for Bernice Greer, Bernice Heckler, D. Carl Heckler, Sara Nell, et al., Defendants.

Bankruptcy No. 84-0409.

United States Bankruptcy Court, D. New Jersey.

November 22, 1985.

Citrino, Balsam, DiBiasi & Katchen by Barney K. Katchen, Nutley, N.J., Jeffrey Freireich, Secaucus, N.J., for Consol. Energy.

Sills, Beck, Cummis, Zuckerman, Radin, Tischman & Epstein, P.A., by Richard D. Trenk, Newark, N.J., for defendant Edith O'Brien and defendant heirs of Nancy O'Brien.

Meth, Nagel, Rice, Woehling & Bausch by Theodore Sager Meth, Westfield, N.J., for M & J Joint Venture and Key Oil Co.

OPINION

D. JOSEPH DeVITO, Bankruptcy Judge.

This adversary proceeding was brought on by the successor-in-interest of the debtor, pursuant to Bankruptcy Rule 7001, et seq. Having previously ruled on other matters relating hereto, this Court now addresses the defendants' cross-motion for summary judgment demanding that plaintiff's complaint be dismissed with prejudice and costs.

The defendants are all heirs of the late Nancy O'Brien, former owner of certain real property located in West Virginia. On March 19, 1981, the defendants and the debtor entered into an agreement permitting the debtor to enter upon the property to explore and develop its oil and gas resources in exchange for certain rental payments. The agreement was for an initial term of "two years . . . and as long thereafter as oil or gas are produced in paying quantities." For reasons unexplained, the debtor did absolutely nothing in the way of exploration and/or development, nor did the debtor ever enter upon the property. At the expiration of the original lease term, without beneficial results, the defendants and debtor entered into an Amendment on April 9, 1983, extending the lease for an additional year. Again, the debtor took no action with respect to exploration or development.

Unknown to the defendants, on December 29, 1981, the debtor filed a voluntary petition under Chapter 11 of the Bankruptcy Code. Thereafter, on August 6, 1982, a trustee was appointed by this Court. The debtor never disclosed this information to the defendants, nor were the transactions with the defendants mentioned in the debtor's various filings in these bankruptcy proceedings.

On or about July 2, 1984, believing their agreement with the debtor to have expired by its own terms, the defendants leased the property to another unrelated entity. Thereafter, the plaintiff herein, the debtor's successor-in-interest, began this proceeding for the avowed purpose of asserting its rights under the extended lease. The plaintiff's argument is twofold. Essentially, plaintiff contends, first, that the automatic stay of § 362a acted as a toll on the expiration of the lease and, second, that the lease is executory and, thus, assumable pursuant to § 365a of the Bankruptcy Code.

The defendants' cross-motion is based on their contention that the original agreement lapsed by its own terms, and the purported amendment is without effect due to the debtor being in bankruptcy and, thus, unable to enter into such agreements without the direct participation of the trustee.

The threshold question in this matter is one of procedure. The defendants' cross-motion is for summary judgment. In adversary proceedings, Bankruptcy Rule 7056 adopts Federal Rule of Civil Procedure 56. Subsection c of that Rule empowers this Court to grant the motion for summary judgment if "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." F.R.C.P. 56c. Discerning no disputed facts herein and evaluating this controversy as purely a matter of law, the form of the defendants' cross-motion is proper, and the Court will enter an eventual ruling to that effect.

Having thus decided the procedural aspect of the defendants' cross-motion, the Court moves now to the substantive arguments. Section 362 of the Bankruptcy Code provides for an automatic stay to protect the debtor from all types of actions, be they lawsuits, foreclosures, enforcement actions, or anything akin thereto. It was intentionally written to be so broad as to reach most proceedings. 11 U.S.C. § 362a. See generally 2 Bkr.L.Ed., Code Commentary and Analysis § 15:17 (July 1983). However, employment of an automatic stay to protect the debtor from some type of litigation is to be distinguished from relying upon the stay to toll the running of an agreement. Neither the language of the statute itself nor its legislative history indicates that it was intended for any such purpose. Indeed, it would take a considerable torturing of the plain meaning of § 362a to construe it as a toll on the running of an ordinary lease.

The caselaw also cries out against such a far-flung interpretation. In Strasser, Inc. v. R.R.S., Inc. (In the Matter of R.R.S., Inc.),...