Matter of Supermercado Gamboa, Inc., Bankruptcy No. B-86-00978(A)
| Decision Date | 08 December 1986 |
| Docket Number | Adv. No. 86-0176.,Bankruptcy No. B-86-00978(A) |
| Citation | 68 BR 230 |
| Parties | In the Matter of SUPERMERCADO GAMBOA, INC. d/b/a Supermercado Truman, Debtor. SUPERMERCADO GAMBOA, INC. d/b/a Supermercado Truman, Plaintiff, v. CAMARA De COMMERCIANTES MAYORISTAS De PUERTO RICO, INC., Defendant. |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
John Garcia, Hato Rey, P.R., for debtor.
Maria Luisa Contreras, San Juan, P.R., for Camara De Commerciantes Mayoristas De Puerto Rico, Inc.
This adversary proceeding came before the court on the defendant's motion to dismiss the complaint by the debtor-plaintiff seeking an order barring the defendant from seeking relief against the nondebtor officers and shareholders of the debtor corporation on their personal guarantees of certain debts of the debtor corporation. The debtor filed its Chapter 11 petition in this court on May 29, 1986. The complaint alleges that the defendant has instituted various lawsuits in a Commonwealth court seeking to recover on the personal guarantees by virtue of the defaults in payment by the debtor corporation. The complaint relies on both § 105 and § 362 of the Bankruptcy Code.
AUTOMATIC STAY (§ 362)
The contention that the automatic stay provided by § 362 of the Code protects these nondebtor parties is not tenable. The statute in question provides in pertinent part as follows:
(a) Except as provided in subsection (b) of this section, a petition filed under. . . . this title. . . . operates as a stay, applicable to all entities of — (1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title. . . . (3) 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. . . .
It is obvious that the statutory language imposes this extraordinary ex parte injunction only upon actions directed "against the debtor". As stated by Judge Beckerleg in In re Carib-Inn of San Juan, Corp., Case No. B-81-00273(B) (Order filed April 12, 1982), it is settled law in this district that § 362 by itself does not protect nondebtor parties:
See also, Austin v. Unarco Industries, Inc., 705 F.2d 1 (1st Cir.1983) ().
The plaintiff replies with an ingenuous argument to the effect that since the nondebtor officers may claim a right to indemnification against the debtor corporation, if they are held liable under personal guarantees, the lawsuits in question do indirectly involve property of this estate. They have even gone so far as to file a Motion For Contempt seeking to hold the defendant liable for a stay violation under this interpretation of § 362 of the Code.
This argument in my judgment proves too much. In effect it "stands the statute on its head". If Congress intended to expand the scope of this extraordinary statutory provision, imposing an ex parte injunction upon the world as to actions against the debtor and its property, it would I believe have used more precise language to achieve that result. Indeed, where expanded scope of the automatic stay against codebtors was intended, as in § 1301 of the Bankruptcy Code, dealing with Chapter 13 debt adjustment proceedings, Congress did make explicit the further stay of actions against codebtors who themselves were not debtors in the bankruptcy proceeding.
INJUNCTIVE RELIEF (§ 105)
The complaint in the present case also relies on § 105 of the Bankruptcy Code dealing with the entry of discretionary injunctive relief by a bankruptcy court. It is true that this statute does grant broad authority to issue orders as "necessary and appropriate" to the reorganization effort, but this broad authority does not allow the bankruptcy court to apply a less stringent standard for granting injunctive relief for the benefit of nondebtor defendants than is traditionally required for the issuance of any injunction. Matter of Electronic Theatre Restaurants Corp., 53 B.R. 458, 13 CBC 2d 675 (N.D.Ohio 1985).
In the First Circuit, as elsewhere, the four standard factors that the debtor corporation would have to establish to obtain injunctive relief are as follows: (1) That the debtor would suffer irreparable injury if the injunction were not granted; (2) That such injury outweighs any harm which granting injunctive relief would inflict on a defendant; (3) That the debtor has exhibited a likelihood of success on the merits; (4) That the public interest will not be adversely affected by the granting of the injunction. Planned Parenthood League v. Bellotti, 641 F.2d 1006, 1009 (1st Cir.1981); Auburn News Co., Inc. v. Providence Journal Co., 659 F.2d 273, 277 (1st Cir.1981); Lancor v. Lebanon Housing Authority, 760 F.2d 361, 362 (1st Cir.1985). The same standards apply equally in the bankruptcy context. Matter of Electronic Theatre Restaurants Corp., supra; In re Gellert, 55 B.R. 970, 975 (Bankr.D.N.H. 1985).
The § 105 issue in this adversary proceeding is raised by the defendant's motion for summary judgment and dismissal of the complaint. However, the defendant has submitted no affidavits on the pertinent factual background, other than certain details as to the unpaid debts, personal guarantees, demands, and Commonwealth court litigation in question. The defendant in this proceeding apparently has taken the position that as a matter of law the bankruptcy court cannot grant injunctive relief that has the indirect effect of benefiting nondebtor parties under § 105 of the Bankruptcy Code. I do not believe that the bankruptcy court's power is so restricted. See A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994 (4th Cir.1986); In re Johns-Manville Corp. v. The Asbestos Litigation Group, 26 B.R. 420, 7 CBC 2d 1042 (Bankr. S.D.N.Y.1983).
It is true that the injunctive relief granted in the Robins and Manville cases involved a situation in which corporate insiders were distracted, if not overwhelmed, by thousands of lawsuits filed against themselves and the debtor corporation throughout the United States. The situation in the present case admittedly is not comparable to those cases. The factual situation in Robins and Manville indicated that a reasonable "breathing spell" for the corporate officers was necessary to permit them to formulate and put forward a plan of reorganization free from such distraction.
The differences between this case and those cases does not, however, support a disposition of the present case on a summary judgment basis. It simply cannot be said that there is no genuine issue as to any material fact — the requisite of course for the granting of a summary judgment motion — in the present case.
It may well be that a trial will establish that the debtor is no longer entitled to a "breathing spell" in the present case, in view of the six months that have expired since the Chapter...
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