Moody v. Security Pacific Business Credit, Inc.
| Decision Date | 29 March 1988 |
| Docket Number | 86-2697,87-2384,87-0268,87-1753,and 87-2386.,86-2239,87-2385,Bankruptcy No. 82-3265,Motion No. 87-531M.,87-0269,Civ. A. No. 83-2383 |
| Citation | 85 BR 319 |
| Parties | James MOODY, Trustee of the Estate of Jeannette Corporation, et al., Plaintiffs, v. SECURITY PACIFIC BUSINESS CREDIT, INC., et al., Defendants, v. Calvin McCRACKEN, et al., Additional Defendants. In re JEANNETTE CORPORATION, t/a Jeannette Glass, Debtor. John POLOJAC and American Flint Glass Workers Union of North America, Local No. 535, Movants, v. JEANNETTE CORPORATION, t/a Jeannette Glass, Respondent. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
George E. McGrann, Dickie, McCamey & Chilcote, Pittsburgh, Pa., for Coca-Cola Bottling Co. of N.Y. and New York Development.
Grace S. Harris, Pittsburgh, Pa., for Calvin McCracken.
Philip Beard, Stonecipher, Cunningham, Beard & Schmitt, Pittsburgh, Pa., for Unsecured Active and Retired Employees.
Robert J. Cindrich, Mansmann, Cindrich & Titus, Pittsburgh, Pa., for Unsecured Creditors Committee.
Christopher J. Keith, Bell, Boyd & Lloyd, Chicago, Ill., Robert O. Lampl, Pittsburgh, Pa., for Robert M. Janowaik and Interdyne Inc.
H. Woodruff Turner, Kirkpatrick & Lockhart, Pittsburgh, Pa., for debtor's Board of Directors (Brogan Group) (Jeannette Corp.)
Robert L. Potter, Strassburger McKenna Gutnick & Potter, Pittsburgh, Pa., for Frank Storey.
David J. Humphreys, Humphreys & Nubani, Pittsburgh, Pa., for Unsecured Trade Creditors.
Angie Arnett, Pension Benefit Guar. Corp., Washington, D.C.
Douglas Campbell, Stanley Levine, Campbell & Levine, Pittsburgh, Pa., for trustee, James Moody.
Sanford M. Lampl, Lampl, Sable, Makoroff and Libenson, Pittsburgh, Pa., Michael Pappone, Thomas Fuchs, Goldstein & Manello, Boston, Mass., for debtor, Jeannette Corporation.
George L. Cass, Buchanan & Ingersoll, P.C., Pittsburgh, Pa., William F. Lloyd, Michael J. Sweeney, Sidley & Austin, Chicago, Ill., for Security Pacific Business Credit, Inc.
The issue addressed in the within findings of fact, conclusions of law, opinion and order is whether this United States District Court should grant the motion requesting that the underlying Bankruptcy Code Chapter 11, Reorganization Proceeding filed in the United States Bankruptcy Court for the Western District of Pennsylvania, at Bankruptcy No. 82-3265, should be converted into a Bankruptcy Code Chapter 7, Liquidation Proceeding under the facts and law applicable to this case.
The procedural history of this above-captioned case, the companion bankruptcy case and the related cases in this Court is indeed both complicated and voluminous involving many thousand of pages and millions of dollars. In total, there are more than two thousand docket entries involved in this matter all of which have been litigated in the District Court and the Bankruptcy Court for over a period of five years.
A recitation of the relevant factual history in this case will demonstrate that the lawyers for the various litigants have worked themselves wittingly and/or unwittingly into a procedural box.
Without the affirmative intervention of this Court, it is believed that this case will never be tried with finality. In fact, on the present state of this record it is the belief of this Court that it is absolutely impossible to successfully try this case at this time.
All of the documents and papers relating to the above-captioned cases, including all pleadings, hearing transcripts, docket entries and court opinions, court memorandum of law, and court orders filed both at the Bankruptcy No. 82-3265, in the United States Bankruptcy Court for the Western District of Pennsylvania and in the United States District Court for the Western District of Pennsylvania, at the above-captioned Civil Action numbers, 83-2383, 86-2239, 86-2697, 87-0268, 87-0269, 87-1753, 87-2384, 87-2385 and 87-2386, and particularly volumes one and two of the Appendix submitted herewith and prepared by this Court for use in this within proceeding are incorporated into and are made a part of these Findings of Fact in this matter by this reference thereto.
This case was originally docketed as Bankruptcy Case No. 82-3265, and has unfolded over the last five years as follows:
On October 4, 1982, an involuntary petition in bankruptcy was filed against Jeannette Corporation trading as Jeannette Glass. (See Bankruptcy Docket Entry No. 1, Appendix Document No. 34), wherein Douglas Campbell claimed to be the attorney for the petitioning creditors even though he purported to represent the only and sole petitioning creditor, George Hill Co. with approximately a $9,000.00 claim. (Three creditors are required to petition for involuntary bankruptcy provided that the debtor has more than twelve creditors with non-contingent claims.)
In due course, Attorney George Cheever, of Kirkpatrick and Lockhart, appeared for the debtor, Jeannette Corporation, (See Bankruptcy Docket No. 6, Appendix Document No. 34) and on October 7, 1982, Attorneys Hine and Flory, also appeared for the debtor and filed an answer and counterclaim to the "Involuntary Petition". (See Bankruptcy Docket Entry No. 7, Appendix Document No. 34)
On December 10, 1982, the debtor's attorneys moved the Bankruptcy Court to convert the Bankruptcy case from Chapter 7 to Chapter 11, of the Bankruptcy Code. (See Bankruptcy Docket Entry No. 33, Appendix Document No. 34)
After a hearing on the same day the motion to convert was filed, the Bankruptcy Judge ordered that the action was "hereby converted to Chapter 11" on December 10, 1982. (See Bankruptcy Docket Entry No. 23, Appendix Document No. 34) On the same day, December 10, 1982, an order was entered approving the appointment of nine unsecured creditors as a Committee of Unsecured Creditors (See Bankruptcy Docket Entry No. 24, Appendix Document No. 34) and Douglas A. Campbell and Campbell and Levine were approved as the attorneys for the Committee of Unsecured Creditors, it being represented that Campbell and Levine would hold no interest adverse to the Committee because Campbell and Levine would resign as attorneys for the petitioning creditors. (See Bankruptcy Docket Entry No. 25, Appendix Document No. 34)
On the same day, December 10, 1982, when the debtor, Jeannette Corporation petitioned the Bankruptcy Court to convert the proceeding from Chapter 7 to Chapter 11, it was upon the representation of the petitioner-debtor that the debtor was able to file a plan of reorganization. (See Bankruptcy Docket Entry No. 33, Appendix Document No. 34) Also, on the same day, December 10, 1982, the debtor purportedly listed the ten largest unsecured creditors. (See Bankruptcy Docket Entry No. 34, Appendix Document No. 34)
On December 15, 1982, the Bankruptcy Judge, for the second time reappointed the same business trade creditors to the Committee of Unsecured Creditors. (See Bankruptcy Docket Entry No. 40, Appendix Document No. 34)
On December 14, 1982, the debtor in possession, Jeannette Corporation, was authorized to employ Thompson, Hine and Flory, and Lampl, Sable & Makoroff as its counsel in the Chapter 11 case. (See Bankruptcy Docket Entry No. 41, Appendix Document No. 34)
On February 9, 1983, the Committee of Unsecured Creditors applied for standing to sue on behalf of the debtor in possession, Jeannette Corporation to recover certain alleged "fraudulent transfers". (See Bankruptcy Docket Entry No. 62, Appendix Document No. 34) These allegations of fraudulent activity formed the basis of the above-captioned Civil Action No. 83-2383, (hereinafter referred to as "fraudulent conveyance litigation") which was filed September 22, 1983, in this District Court and which is now one of the main concerns of this within Opinion. (See the complaint filed in this above-captioned case at Civil Action No. 83-2383, Appendix Document No. 35, in the United States District Court for the Western District of Pennsylvania)
On February 15, 1983, the debtor, Jeannette Corporation filed its first Plan of Reorganization under Chapter 11 of the Bankruptcy Code. (See Bankruptcy Docket Entry No. 69, Appendix Document No. 34) The plan was to be implemented by the debtor selling its glassware manufacturing division to a Pennsylvania Corporation known as Jeannette Industries, Inc., a Pennsylvania Corporation, including all of its land, buildings, and all personal property of every kind located in Westmoreland County, Pennsylvania.
Prior to this time, namely, December 27, 1982, the Bankruptcy Court approved what is referred to as "THE OLD AGREEMENT", dated December 6, 1982, wherein all of the assets owned by the debtor, Jeannette Corporation, in its glassware manufacturing division located in Jeannette, Pennsylvania, were to be sold for $4,000,000. in cash, and two notes, one for $2,500,000., and a second note for $4,049,000.
This District Court cannot find the docket entry in the Bankruptcy case record reflecting this alleged Bankruptcy Court approval of "THE OLD AGREEMENT", however, on page 11, of the Disclosure Statement for the first submitted Reorganization Plan, the "OLD AGREEMENT" is referenced. (See Bankruptcy Docket Entry No. 70, Appendix Document No. 34)
In essence, the first Plan of Reorganization was to sell the entire glassware manufacturing business of the debtor as a going concern rather than involving the debtor in a piece-meal liquidation process, wherein the various assets of the company would be disposed of separately. The potential money damage recovery to the debtor, Jeannette Corporation, from the "fraudulent conveyance" litigation which was ultimately filed against the defendants in this above-captioned civil case at Civil Action No. 83-2383, was completely discounted in the first proposed Plan of Reorganization. (See Bankruptcy Docket Entry No. 69, Appendix Document ...
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