Minoco Group of Companies, Ltd., In re, No. 84-6592
| Court | United States Courts of Appeals. United States Court of Appeals (9th Circuit) |
| Writing for the Court | Before ANDERSON and NORRIS, Circuit Judges, and COPPLE; NORRIS |
| Citation | 799 F.2d 517 |
| Parties | 15 Collier Bankr.Cas.2d 1277, 14 Bankr.Ct.Dec. 1399 In re The MINOCO GROUP OF COMPANIES, LTD., a Delaware Corporation, The MINOCO GROUP OF COMPANIES, LTD., a Delaware Corporation and Minoco Southern Corporation, a Nevada Corporation, Plaintiffs/Appellees, v. FIRST STATE UNDERWRITERS AGENCY OF NEW ENGLAND REINSURANCE CORPORATION, and First State Insurance Company, Defendants/Appellants. |
| Decision Date | 09 September 1986 |
| Docket Number | No. 84-6592 |
Page 517
The MINOCO GROUP OF COMPANIES, LTD., a Delaware Corporation
and Minoco Southern Corporation, a Nevada
Corporation, Plaintiffs/Appellees,
v.
FIRST STATE UNDERWRITERS AGENCY OF NEW ENGLAND REINSURANCE
CORPORATION, and First State Insurance Company,
Defendants/Appellants.
Ninth Circuit.
Decided Sept. 9, 1986.
Thomas Walper, Stroock, Stroock & Lavan, Los Angeles, Cal., for plaintiffs/appellees.
Erwin E. Adler, Richards, Watson, Dreyfuss & Gershon, Los Angeles, Cal., for defendants/appellants.
Appeal from the United States District Court for the Central District of California.
Page 518
Before ANDERSON and NORRIS, Circuit Judges, and COPPLE, District judge *
NORRIS, Circuit Judge:
Appellants First State Underwriters Agency of New England and First State Insurance Company (collectively, "First State") are affiliated insurance companies that issued prepaid excess officers and directors liability policies to The Minoco Group of Companies ("Minoco"). The policies provided coverage only for "claims made" from November 24, 1982, through July 1, 1984, but permitted either party to cancel the policies at any time upon thirty days' notice. In November 1983, two months after Minoco filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code (the "Code"), 11 U.S.C. Secs. 1101-1174 (1982), First State gave Minoco notice of cancellation of the policies. Minoco then brought this action in bankruptcy court seeking a declaratory judgment that cancellation of the policies was automatically stayed by section 362(a) of the Code, as well as an injunction prohibiting First State from cancelling the policies.
After an evidentiary hearing, the bankruptcy court made a finding of fact that if First State were permitted to cancel the policies, Minoco would be required to indemnify present and former officers and directors for legal expenses and judgments which arise from their activities as officers and directors. 1 The bankruptcy court also found that cancellation of the policies would render reorganization of Minoco more difficult, if not impossible, for two reasons: (a) the difficulty of attracting and retaining competent personnel to serve as officers and directors, and (b) the increase in claims against the debtor's estate resulting from claims for indemnification by present and former officers and directors. On the basis of these findings, the bankruptcy court declared that cancellation of the policies was automatically stayed by section 362(a) and enjoined First State from effecting a cancellation. The district court affirmed. Exercising jurisdiction under 28 U.S.C. Sec. 158(d), we affirm on the ground that the filing of the bankruptcy petition automatically stayed cancellation of the policies under section 362(a)(3) of the Code.
Section 362(a)(3) provides that the filing of a bankruptcy petition operates as a stay of "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." "Property of the estate" is defined in section 541(a) of the Code as "all legal or equitable interests of the debtor in property as of the commencement of the case." The legislative history makes it plain that "[t]he scope of this paragraph [section 541(a) ] is broad. It includes all kinds of property, including tangible or intangible property...." S. Rep. No. 95-989, 95th Cong., 1st Sess. 82 (1978), reprinted in 1978 U.S.Code Cong. & Admin.News 5787, 5868. In In re Bialac, 712 F.2d 426 (9th Cir.1983) we said that section 541(a)'s definition of property "was intended to be broad and all-inclusive," id. at 430, and "an interest is not outside its reach because it is novel or contingent or enjoyment must be postponed." Id. at 431 (quoting Segal v....
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