Stein v. Collinson
| Decision Date | 01 July 1974 |
| Docket Number | No. 74-1408.,74-1408. |
| Citation | 499 F.2d 91 |
| Parties | Sam STEIN et al., Petitioners, v. Honorable William R. COLLINSON, United States District Judge for the Western District of Missouri, Respondent, and PARKVIEW-GEM, INC., a Delaware corporation, and Parkview-Gem of Hawaii, Inc., a Hawaii corporation, Real Parties in Interest. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Stinson, Mag, Thomson, McEvers & Fizzell, Kansas City, Mo., filed petition for writ of prohibition or mandamus.
Robert K. Ball, Kansas City, Mo., filed answer of respondents to petition for writ of prohibition or mandamus.
Before LAY, ROSS and WEBSTER, Circuit Judges.
ORDER
The issue presented is whether, in this case, we should prevent the District Court from asserting jurisdiction in a Chapter X reorganization proceeding over the affairs of a solvent subsidiary which is not a party to the proceeding. More specifically, we are asked to nullify by mandamus or prohibition a temporary restraining order of the District Court which effectively precludes petitioners from exercising foreclosure rights as lessor under a lease in which the lessee is the subsidiary.
The reorganization proceedings were instituted in the Western District of Missouri. The leased property is located in Hawaii and consists primarily of retail store space within a shopping center. It has had an interesting history.
The original lease dated February 15, 1968 was for a term ending in 2023 and provided for fixed monthly rental installments and an additional percentage of net sales. On May 31, 1968, Gem International, Inc. acquired the rights of the lessee by assignment. On May 4, 1970, a series of documents were executed, under which (1) Gem International, Inc. assigned its rights in the lease to Alexander J. Barket, Mary Kay Barket and Tudie S. Patti; (2) the assignees executed a sublease to Gem International, Inc. as sublessee; and (3) Parkview-Gem, Inc. guaranteed the performance of the obligations of Gem International, Inc. under the sublease agreement. On April 3, 1972, petitioners acquired the interests of Alexander J. Barket, Mary Kay Barket and Tudie S. Patti. On July 29, 1972, Gem International, Inc. assigned its interests as sublessee to Parkview-Gem of Hawaii, Inc., a wholly-owned subsidiary of Parkview-Gem, Inc., pursuant to a conditional right of assignment contained in the original sublease.1 Shortly thereafter, on July 31, 1972, Gem International, Inc. was merged into Parkview-Gem, Inc.
On December 18, 1973, Parkview-Gem, Inc. filed a petition for reorganization in the United States District Court for the Western District of Missouri. Thereafter, in May, 1974, petitioners notified Gem International, Inc. of their election to exercise their right of cancellation of the sublease by reason of the reorganization proceeding instituted by Parkview-Gem, Inc.2 Upon receipt of such notice, the Trustee of Parkview-Gem, Inc. sought from the District Court for the Western District of Missouri a temporary restraining order to prevent the threatened action. Following a hearing on May 31, 1974, Judge Collinson issued a temporary restraining order enjoining petitioners herein from "(1) taking or continuing any action that threatens the leasehold interest of Parkview-Gem of Hawaii, Inc., (2) interfering with or attempting to interfere with Parkview-Gem of Hawaii, Inc., (3) seizing or attempting to seize the property of Parkview-Gem of Hawaii, Inc. and (4) filing or threatening to file any proceeding at law or in equity against Parkview-Gem of Hawaii, Inc." He further ordered that the temporary restraining order be continued in full force and effect until such time as the court shall have ruled on the Trustee's pending motion for a preliminary injunction.
Petitioners contend that Judge Collinson was without jurisdiction to enter the temporary restraining order and that in view of extraordinary monetary damages which petitioners are suffering and will suffer in the future, this court should intervene by way of the issuance of an extraordinary writ.3
It is conceded that Parkview-Gem of Hawaii, Inc. is neither insolvent nor a party to the reorganization proceeding. Any jurisdiction over the affairs of the subsidiary must therefore depend upon whether the leasehold interest is "property" of the debtor, Parkview-Gem, Inc., within the meaning of § 111 of the Bankruptcy Act:
Petitioners contend that the property interests of the subsidiary are not subject to the jurisdiction of the trial court. This contention is in agreement with the general rule that courts in Chapter X proceedings are without jurisdiction to enjoin an action against a subsidiary. 6 Collier on Bankruptcy (14th ed., 1972), § 3.11, pp. 500-01. However, there is a recognized exception to this rule where the parent and subsidiary are so completely "one" that the separate legal identity of the subsidiary may be disregarded, id., and thus it has been stated that "the meaning of the term 'property' turns on the particular facts of each case * * *." In re Beck Industries, Inc., 479 F.2d 410, 417 (2d Cir. 1973), cert. denied sub nom. Trustees of Beck Industries, Inc. v. Feldman, 414 U.S. 858, 94 S.Ct. 163, 38 L.Ed.2d 108 (1973).
In this case, respondents assert that since the subsidiary corporation is not itself in default, and the right of forfeiture is found only in the reorganization proceeding of the parent, the...
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...supra, at 585, quoting from Bankers Life & Cas. Co. v. Holland, 346 U.S. 379, 382, 74 S.Ct. 145, 98 L.Ed. 106 (1953). In Stein v. Collinson, 499 F.2d 91 (8th Cir. 1974), our court refused to reach the merits of a petition for writ of mandamus on a jurisdictional question arising out of a Ch......
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