Williford v. Armstrong World Industries, Inc.

• Decision Date: 12 August 1983
• Docket Number: No. 82-2083,82-2083
• Citation: 715 F.2d 124,11 BCD 642
• Parties: 10 Collier Bankr.Cas.2d 569, 11 Bankr.Ct.Dec. 642 Edward C. WILLIFORD, Appellee, v. ARMSTRONG WORLD INDUSTRIES, INC., A Pennsylvania Corporation; AC and S, Inc., A Foreign Corporation; The Celotex Corporation, A Delaware Corporation; Eagle-Picher Industries, Inc., An Ohio Corporation; Forty-Eight Insulation, Inc., An Illinois Corporation; Fibreboard Corp., Pabco Industrial Products Division, A Delaware Corporation; The Flintkote Company, A Foreign Corporation; GAF Corporation, A Delaware Corporation; Keene Corporation, A New Jersey Corporation; National Gypsum Company, A Foreign Corporation; Nicolet, Inc., A Pennsylvania Corporation; Owens-Corning Fiberglas Corp., A Delaware Corporation; Owens-Illinois, An Ohio Corporation; H.K. Porter Company, Inc., A Foreign Corporation; Pittsburgh Corning Corporation, A Foreign Corporation; Raybestos-Manhattan, Inc., A Connecticut Corporation (Now known as Raymark Industries, Inc.); Rock Wool Manufacturing Company, A Foreign Corporation, Appellants, and Crown Cork & Seal, A Foreign Corporation; Empire Ace, A Foreign Corporation; Johns-Manville Amiante Canada, Inc., A Foreign Corporation; Johns-Manville Corporation, A Delaware Corporation; Johns-Manville Sales Corporation, A Delaware Corporation; Lake Asbestow, A Delaware Corporation; Standard Insulation, A Missouri Corporation; Turner and Newall Limited, A Foreign Corporation; Unarco Industries, Inc., An Illinois Corporation, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 124

715 F.2d 124

10 Collier Bankr.Cas.2d 569, 11 Bankr.Ct.Dec. 642

Edward C. WILLIFORD, Appellee, v. ARMSTRONG WORLD INDUSTRIES, INC., A Pennsylvania Corporation; AC and S, Inc., A Foreign Corporation; The Celotex Corporation, A Delaware Corporation; Eagle-Picher Industries, Inc., An Ohio Corporation; Forty-Eight Insulation, Inc., An Illinois Corporation; Fibreboard Corp., Pabco Industrial Products Division, A Delaware Corporation; The Flintkote Company, A Foreign Corporation GAF Corporation, A Delaware Corporation; Keene Corporation A New Jersey Corporation; National Gypsum Company, A Foreign Corporation; Nicolet, Inc., A Pennsylvania Corporation; Owens-Corning Fiberglas Corp., A Delaware Corporation; Owens-Illinois, An Ohio Corporation; H.K Porter Company, Inc., A Foreign Corporation; Pittsburgh Corning Corporation, A Foreign Corporation Raybestos-Manhattan, Inc., A Connecticut Corporation (Now known as Raymark Industries, Inc.); Rock Wool Manufacturing Company, A Foreign Corporation, Appellants, and Crown Cork & Seal, A Foreign Corporation; Empire Ace, A Foreign Corporation; Johns-Manville Amiante Canada, Inc., A Foreign Corporation; Johns-Manville Corporation, A Delaware Corporation; Johns-Manville Sales Corporation, A Delaware Corporation; Lake Asbestow, A Delaware Corporation; Standard Insulation, A Missouri Corporation; Turner and Newall Limited, A Foreign Corporation; Unarco Industries, Inc., An Illinois Corporation, Defendants.

No. 82-2083.

United States Court of Appeals, Fourth Circuit.

Argued June 7, 1983.

Decided Aug. 12, 1983.

McNeill Smith, Greensboro, N.C. (Gerard H. Davidson, Jr., William L. Young, Timothy Peck, Greensboro, N.C., J. Brian Scott, Marshall A. Gallop, Jr., J. Charles Waldrup, Rocky Mount, N.C., William K. Davis, Richard V. Bennett, Winston Salem, N.C., Marvin D. Musselwhite, Jr., Raleigh, N.C., William D. Caffrey, Kenneth Kyre, Jr., Greensboro, N.C., Charles H. Mercer, Jr., Raleigh, N.C., Donald E. Britt, Jr., Wilmington, N.C., Henry L. Anderson, Jr., Fayetteville, N.C., Fitzhugh E. Wallace, Kinston, N.C., Thomas E. Harris, New Bern, N.C., Richard Tyndall, H. Lee Davis, Jr., Richmond W. Rucker, Winston Salem, N.C., Richard M. Lewis, Armistead J. Maupin, Raleigh, N.C., F. Blackwell Stith, New Bern, N.C., James G. Billings, Raleigh, N.C., Thomas N. Barefoot, Manteo, N.C., Victor S. Bryant, Jr., Durham, N.C., Perry C. Henson, J. Victor Bowman, Greensboro, N.C., Robert M. Clay, Sanford W. Thompson, IV, Raleigh, N.C., W. Harold Mitchell, Valdese, N.C., Howard E. Manning, Sr., Howard E. Manning, Jr., Raleigh, N.C., on brief), for appellants.

G. Brinson Williams, Barnwell, S.C. (Ronald L. Motley, Joseph F. Rice, Barnwell, S.C., Thomas F. Taft, Greenville, N.C., on brief), for appellees.

Before ERVIN and CHAPMAN, Circuit Judges, and KNAPP, ^* District Judge.

DENNIS R. KNAPP, District Judge.

This action comes to this Court by way of an interlocutory appeal granted by the district court to the defendants, Armstrong World Industries, Inc., and certain other co-defendants (Appellants), pursuant to 28 U.S.C. § 1292(b). The district court refused to stay the trial of this case pending the resolution of proceedings in bankruptcy filed by four of the defendants, including Johns-Manville Sales Corporation, under Chapter 11 of the Bankruptcy Act in jurisdictions outside the District of North Carolina, but did grant appellants an interlocutory appeal to this Court. In affirming the lower court, we hold that appellants, petitioners below, for reasons hereinafter assigned, were not (1) subject to the automatic stay provisions of Section 362(a) of Chapter 11 of the Bankruptcy Code, and that (2) under the facts of this case, they were not entitled to a discretionary stay under the court's general equity powers pending resolution of the bankruptcy claims of their co-defendants.

I. FACTS

Appellee, Edward E. Williford, filed this action in district court on May 10, 1982, alleging injuries due to exposure to various asbestos products manufactured or supplied by each of the 28 separate defendants. All defendants filed answers denying the allegations of the complaint. The case then moved into discovery and at the time appellants sought relief was approaching the trial stage. Thereafter, four of the 28 defendants filed petitions for reorganization under Chapter 11 of the Bankruptcy Code, and, accordingly, the action was automatically stayed as to those defendants. The remaining defendants petitioned the district court to stay the trial of the action as to all defendants, which stay was denied.

II. AUTOMATIC STAY

Section 362(a) of Chapter 11 of the Bankruptcy Code provides in pertinent part:

(a) Except as provided in subsection (b) of the section, a petition filed under p 301, 302 or 303 of 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 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.... (Emphasis added).

Appellants contend that said provision requires a stay of the trial of the case as to them until the resolution of the bankruptcy proceedings filed by their co-defendants under Chapter 11 of the Bankruptcy Act. The thrust of their argument is that the claims of the plaintiff are inextricably interwoven and present such closely related issues of law and fact that just resolution of the case cannot be accomplished without the presence at the trial of the defendants now seeking relief in the bankruptcy court. They seek to justify this construction of § 362 by attributing to it broad remedial provisions designed to stop random prosecution of claims involving interests of the debtor and place them in the bankruptcy court. They contend that the co-defendants, now the subject of bankruptcy proceedings, are essential parties to a just resolution of the case. They further argue that they are indispensable and necessary parties under Rule 19 of the Federal Rules of Civil Procedure.

We are not persuaded by these arguments. In concluding that the remaining co-defendants cannot avail themselves of the automatic stay provisions of 11 U.S.C. § 362(a), applicable to those defendants under the protection of the bankruptcy court, we need only examine the plain wording of the statute itself. It provides only for an automatic stay of any judicial proceeding "against the debtor." Section 362(a)(1). The words "applicable to all entities" denotes that the stay accorded the "debtor" is without limit or exception and that the "debtor" is protected from the pursuit of actions by any party of any character during the period of the stay. That insulation, however, belongs exclusively to the "debtor" in bankruptcy. It is to be noted also that of the remaining subsections of Section 362(a), namely 2, 5, 6, 7, and 8 (listing the kinds of proceedings stayed), specifically refer to "the debtor," and that subsections 3 and 4 refer to "the estate of the bankrupt."

In considering this very issue, the Fifth Circuit observed that a literal interpretation of § 362(a) is bolstered by language which is notably absent from its provisions. By way of comparison, Chapter 13 specifically authorizes the stay of actions against co-debtors. 11 U.S.C. § 1301(a). No such shield is provided Chapter 11 co-debtors by § 362(a). Wedgeworth, et al. v. Fibreboard Corporation, et al., 706 F.2d 541 (Fifth Circuit, 1983). ¹

The legislative history of the Act further supports the premise that the wording of the statute is clear and unambiguous and is not subject to judicial interference for any purpose. The notes of the Committee of the Judiciary recognize the debtor only as the beneficiary of the stay.

The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws. It gives the debtor a breathing spell from its creditors. It stops all collection efforts, all harassment, and all foreclosure actions. It permits the debtor to attempt a repayment or reorganization plan, or simply to be relieved of the financial pressures that drove him into bankruptcy.

See: S.Rep. No. 95-989, 95th Cong., 2d Sess. 54-55 (1978), reprinted in U.S.Code Cong. & Admin.News, 1978, pp. 5787, 5840-5841.

The automatic stay also provides creditor protection. Without it, certain creditors would be able to pursue their own remedies against the debtor's property. Those who first acted would obtain payment of the claims in preference to and to the detriment of other creditors. Bankruptcy is designed to provide an orderly liquidation procedure under which all creditors are treated equally. A race of diligence by creditors for the debtor's assets prevents that.

See: H.R.Rep. No. 95-595, 95th Cong. 2d Sess. 349 (1978), reprinted in U.S.Code Cong. & Admin.News, 1978, p. 6297.

The provisions of 11 U.S.C. § 362(a) are creatures of Congress and have the sanction thereof. Under the explicit terms of said section, the courts are powerless to grant the relief sought.

The appellants further argue that the defendants in the bankruptcy court are indispensable parties so as to mandate a stay of the proceedings under Rule 19, Federal Rules of Civil Procedure. It is clear, however, from the facts of this case t...