Nos. 78-B-1764 through 78-B-1773United States Bankruptcy Court, S.D. New York
May 7, 1980
Former Bankruptcy Act — Automatic Stay — Relief — Breach of Contract
GALGAY, Bankruptcy Judge
Since lifting the automatic stay under Bankruptcy Rule 11-44(d) would seriously impede the progress of the Chapter XI case and would greater “harm” to the debtor, the court refused to vacate the stay. See Rule11-44 at ¶ 20,744.
[Digest of Opinion]
The creditor in this action sought relief from the automatic stay under Bankruptcy Rule 11-44.
During 1973, the debtor, creditor, and a number of insurance companies were involved in negotiations and arrangements for the entering into of certain business relationships, including the sale of insurance at the debtor’s food market.
In 1976, one of the parties commenced an action against the creditor to recover the balance due on a promissory note, which he executed in receipt of $25,000. Subsequently, the creditor commenced an action against the debtor seeking $72 million in damages. Thereafter reducing the claim to $22 million.
When the debtor filed a petition under Chapter XI of the Bankruptcy Act, pursuant to Bankruptcy Rule 11-44, the Maryland action against the debtor was stayed. Thereafter, the creditor filed a proof of claim based on the Maryland court’s motion to sever the consolidated actions, and did not proceed against the debtor.
The creditor’s complaint in this adversary proceeding alleges that his claim is unliquidated, that it does not involve property necessary for the rehabilitation of the debtor, that the interest of judicial economy requires simultaneous trial of the actions and that the creditor’s claim against the debtor constitutes a non-dischargeable debt under Section 17 of the Bankruptcy Act.
The criteria which the Court in its discretion measured to determined whether to lift the stay were the “balance of hurt between the parties, the nature of the interest to be protected and the overall congenial statutory purpose of Chapter XI.” Thus, the court found that the balance of the equities lay with the debtor. The debtor would be subject to greater harm by the lifting of the stay than the harm the creditor would be subject to if the stay was continued. Even assuming the creditor was successful in the Maryland action, the creditor would not receive distribution until after confirmation proceedings in this case. Further, the creditor’s lengthy delay in bringing this procedure to lift the stay was a factor in the court’s determination. However, the greatest emphasis was placed on the consequences the lifting of the stay would have on the successful consummation of a Chapter XI plan of arrangement. For example, whether or not to allow a claim in the magnitude of $22 million would have tremendous significance for the prospects of the confirmation of any arrangement. Therefore, relief from the stay was denied.