HomeMy WebLinkAbout99-00373
.'
JORDAN D. CUNNINGHAM
ROBERT E. CHBRNICOFF
PAIGE MACDONALlJ.MATlllES
MARC W. WITZIG
HENRY W. VAN ECI(
CUNNINGHAM & CHERNICOFF, PoCo
AlTORNEYSAT LAW
2320 NORTH SECOND STREET'
P.O. BOX 60457
HARRISBURG, PENNSYLVANIA 17106-0457
TELEPHONE
(117) 238-6570
HBRSHEY TELEPHONB
(717) 534.2833
IRS NO. 23-2274135
PAX
(717) 238-1809
(717) 238-5371
September 20, 1999
VIA TELECOp'IER AND REGULAR MAIL (717) 737-2086
James D. Bogar, Esquire
1 West Main Street
Shiremanstown, PA 17011
Re: Carlisle Kitchen V. Hutch Construction, Inc et al.
Dear Mr. Bogar:
Please be advised that this firm represents the interests of
Mr. and Hrs. Hutchison in regard to the above referenced matter.
I was contacted by your secretary on Thursday, September 16, 1999
to schedule a time and date for arbitration of the above referenced
matter. Apparently, Wayne Shade, Esquire had filed a request with
the Court to schedule arbitration, notwithstanding the Suggestion
of Stay which was filed by this office.
On July 1, 1999, one of the named Defendant's Hutch
Construction, Inc. filed for relief under Chapter Seven of the
United States Bankruptcy Court at Docket Number 1-99-02876 in the
United States Bankruptcy Court for the Middle District of
Pennsylvania. As a result of this filing, the automatic stay
provisions, set forth in ~362 of the United States Bankruptcy Code,
are in full force and effect.
Hutch Construction, Inc. i.s one of the named Defendants in
the above referenced matter, and is inextricably interwoven in this
matter, such that this matter cannot proceed to arbitration, unless
and until Judge Woodside lifts the automatic stay. A Suggestion of
Stay was filed with the Cumberland County Prothonotary on July 24,
1999, and a copy of the same was served on Mr. Shade.
In light of the foregoing it is our position that arbitration
of this matter cannot be scheduled until Mr. Shade properly files
his Motion for Relief from Stay with the United States Bankruptcy
Court.
EXhIIHT "B"
Hutchison.
11, Denied, .It is specifically denied that Hutch
Construction, Inc. is not a party to this case and has never
been a party to chis case. By way of further reply,
Plaintiffs have averred in their Complaint that the Defendants
owe Plaintiffs the sum of $10,562,00 plus interest in the
amount of $582,03 as of January 19, 1999. (See Plaintiff's
Complaint Paragraph 7). Curiously, however, Plaint i ffs failed
to attach to their Complaint any documents evidencing the
alleged amounts due and owing, or any document which
constitutes a contractual obligation to pay interest.
Moreover, Plaintiffs have failed to attach any copies of the
alleged invoices to its Complaint, which Plaintiffs have
referenced in Paragraph 8 of their Complaint, Defendants
believe and therefore aver, that the reason Plaintiffs have
failed to attach any substantiating documentation to their
Complaint is because such documentation clearly reveals that
the alleged outstanding obligation is an obligation of Hutch
Construction, Inc., and not that of Hutch Construction and/or
James Hutchison and Cynthia A, Hutchison individually. By way
of further reply, the documents which Defendants were called
upon to produce in accordance with Plaintiffs' Request for
3
Production of Documents in April, 1999, clearly indicate that
Plaintiffs' cl.aims are claims against Hutch Construction, Inc.
and lli21, Hutch Construction or James Hutchison or Cynthia A.
Hutchison individually, By way of further reply, one of the
documents which Defendants produced in response to PlaIntiffs'
Request for Production of Documents is a letter dated May 22,
1998 which Plaintiff Howard B, Gibb himself sent to Hutch
Construction, Inc. Caples of the documentation sUPpol.ting
Defendant's contention that Plaintiffs' claims are against
Hutch Construction, Inc., and not with the named Defendants
individually, are attached hereto and marked as Exhibit "A".
As Defendants averred in their New Matter, Hutch Construction,
Inc. is clearly a party to the present case, and is the entity
responsible for the alleged outstanding obligation. By virtue
of this fact, this action must. be st.ayed due to Hutch
Construct.i on, Inc. I s Chapter 7 bankrupt.cy filing because Hut.ch
Const.ruct. ion, Inc. is an indispensable thil:ct part.y, See
Memorandum and Opinion filed on March 4, 1997 in Doe-Test
Sys,tems. Inc.. R&.B Rehabilitation, Three Rivers Rehabilitatiol1
Syst.ems. In<;:, and Joseph L. Edel.stein v, Na.tional Medical
Services of Maa,land, Civil Action 1 :CV-9S-787 citing
McCartney v, Int.eqra Ngtional Bank North, F',3d ,1997
m,53294 (3d. Cir, Feb, 11, 199'7). Copies of t.he Memorandum
4
PAY Thirteen Thousand One Hundred Sixty-'l'hree and 8/100 Dollars
DATE AMOUNT
CARLISLE KITCHEN CENTER Aug 13, 1998 *"*$13,163.0B*
TO THE 1034 HARRISBURG PIKE
ORDEA CARLISLE, PA 17013
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PAY Three Thousand Four Hundred.Sixt:Y-~l?Ci;a!1i1'lI::l1100 Dolla~s
"h-".', ',::--- -, \,""~'I:-':-:~-;_:'~:,'l'_;',':{!;i"><- .
CARlJISLE KITCHEN CENTER . " " DATE
1034 HARRISBURG PIKE May 27, 1938
CARLISLE, PA 17013
TO THE
vADER
OF:
AMOUNT
"*"$3,466,93*
.
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PAY Two Thousand
TO TilE
ORD(R
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CARLISLE KITCHEN CENTER
1034 HARRISBURG PIKE
CARLISLE, PA' 17013
DATE
Apr 29, 1998
AMOUNT
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1I'00lo5I,BII' I:Ojlo:lo~81'bl: 5. 00
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1ST CASE o( Levell priDled 10 FULL fOllllAl,
LAMAR A. MCCARTNEY, AppelluI v. INTEGRA NATIONAL BANK NORTH, Successor 10
McDOWELL N...nONAL BANK: GARY S, GAERTNER, U,S, TRUSTEE, Appellee
No, 96-30'23
UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUli
1997 U,S, App. LEXIS 2199
OclObcr 24, 1996, ArlUed
February 11. 1997. Ophllon FUed
PRIOR HISTORY: (.1] ON APPEAL FROM TIm
UNITED STATES DISTRICT COUKl' FOR TIm
WESTERN PISTRICT OP PBNNSYLVANIA. (D.c.
No. 94-cv.()()984).
DISPOSmON: Affirmed.
COUNSBL: Donald R. Ca1a1aro (ArlUed). CaWuo.
Corbett IIld Bower. 1105 Gwu Building. PlllSbur,b,
PI, U219. COWlSeI for AppeUaoI.
P. Rlymood lIu1holomew (Argued). 701 North
Hermitage RoId. Hermltage. Pa. 16148. COIlllSeI (or
AppeUee Inlegra NlIlolll1 Bank. Sucessor 10 McDoweU
Nltlolll1 Bank.
WiWIm P. PlDeo, 764 Puk Drive. P.o. Box 598,
MCldvlUe, Pi. 16335. COIlllSeI for Chapler 7 1iustee.
Por Mi:CartDey.
1UDGES: BEPORE: STAPLBTON IlId NYOAAllD,
CIRCUIT JUDGES AND MAZZONE. Dlstrlclludge.
· STAPLETON, S.. cOllCurriog.
· The HOllOnble A. Dlvid Mmone. Senior Dlslricl
Judge for the DISlrict o(MassacbuscllS silting by des,
IgDltlOD.
OPlNIONBY: NyglUd
OPlNION: NYJlll1l. Circuli Judie:
Tbe dlsmcl court Iffirmed a bankruptcy coun' s order
denying I motion for SUlIIllIIty Judgmenl 00 an obJec-
tion deblor-appellanll.amu McCll1IleY flied 10 llllegra
Natlolll1 Bank's proof of claim. McClI'lIIey uaues on
appullh.1lthe bankruptcy coun em:d by DOl dlschargiDg
the debl he owes 10 IIIlc,ra, We wllllffinn.
l.
The faclS are undlspuled. 00 Seplelllbcr 26. 1989,
IIIlegl'l loaned $ 80,000 (.2) 10 Lamar's RcstalUlllI
&. Loun,e. IDe.. which wu guar&DIeed by the Small
Business AdIl1IoIslrlltlon. AJ security for the loan,
Lamar's granled IIIlegra a flrsl mon..,e 00 Lamar's
corponle property. McCll1Iley guaraDUed the loan 10
Lamar's by graDliDg llltegra a secood mortgage UeD 00
land owned by him IDdlvldual1y.
10 May 1992, McCartIIey flied a volWllay petltlOD Wl-
der Chapter 13 of the Bankruptcy Code. He then flied
a motloD 10 seU Lamai" s corporate property. Al the
cOllClusloD of the sale hearing, McCarlDey' s AmeDded
Plan for ReorpolzatlOD W3S Idopled u an lllterlm Plan,
peDd1ng a stalUS repon. The parties IIId lbe coun
agreed al Ibe sale hearing Ibat Iotegra, actIq w11b the
SBA. would PUI Lam.u's COlpOlIIIl property lhrouah
a sheriff's sale 10 derermlDe wtw dellclcncy, If ,any,
McCartney. U guaraDIOr of Lamar's loan. owed 10
llltegra.
Pearing thai the sheritrs sale would not oo:ur until
after the bar dile in McCartney's bankruplcy plOC<<d-
iDg, Iolegra filed Proof of Claim No, 6 in the amounl
of $ 38,564.66 aguusI McClI1Dey's individual property
pledged U coUateral for Lamar's loan. The state court
subsequeDtly sold Lamar's cOlpOrale property. IDIegra
purchased Lamar's cOlpOl'Ite (.J) property allbe sale
for COSIS and wes. llltegra then resold the property and
IBRed 10 modify lIS proof of claim to show a de6c1cocy
of $ 29,638.14 plus intereslllld attomey's fees.
A1moSI leD months laler. McCll1Iley filed an objec-
tion 10 Integra's proof of claim, assertlDg thallDlegra's
claim on Lamar's underlylD, debl wu satisfied U a
1997 V,S. App, ..BXIS 2199,03
PI.e 4
mailer of law because Inlegla failed 10 tile a pelhlon
10 ti,\ Lbe fair markel value of the property within
91~ months of the sheriffs sale as requlred under the
Pennsylvania Deficiency Judgment ACI. 42 Pa,C,S,A,
f 8103, Both panles flied cross,molions for S\1lI1IlW)'
Judgmelll. which Lbe bankruplcy court denied, nl
nl On April 12, 1994, the billllcruplCY coun heard
argument on Lbe valualion of Lamar's propeny sold
at !lIe sberiffs sale, On May 3, 1994, Ihe court de.
lennined thaI the value of the Lamar's propeny was
S 20,000 and diretted Inte.r. 10 recalculale hs defi-
ciency claim based on thls value. On July 20. 1994,
the bankruptcy court converted the Debeor'. Chapter
13 case to I Chapter 7 case. Slocc then, the Chapler
7 Trustee lw sold some of McCartney's other prop-
eny and applied Lbe net proceeds 10 the debt owed to
Inlegra. As a result. It appean that the balance due
[nlegra lw been reduced 10 S 4,379.88 plus interest
and additional auorney's fees,
1041
11.
On appeal. McCartney assens that the bankruptcy
coun erred by concluding that the aueomalic stay pro-
vision of the Banlcruptcy Code, J/ U.S,C. f J62, pre-
cluded Integra from complying with the requlrements of
the DJA. More specifically. McCmney maincalns that
the automatic stay applies only to actions commeDCed
against McCartney himself, and therefore, the stay im-
posed In Ws banlcruptcy did nOI prevent Integra from
seeking a deficiency judgment against Lamar's within
the time penniued under the DJA. Since Integra failed
to file a petition In state coun eo fix the fair market value
of Lamar's corporate propeny within six months of the
sheriffs sale. McCartney argues. Integra's claim against
Lamar's is deemed released and satisfied as a matter of
law, As a conscqueDCe, McCartney contends that he,
as guarantor. is also discharged from any deficiency reo
maining on IUlegra's loan to Lamar's. Thus. McCartney
coocludes, Proof of Claim No.6 filed by Integra in his
billllcruptcy should be snicken.
m.
Under Pennsylvania law, every judgmeUl creditor who
forces real estale 10 be sold in an e~etution sale must
comply with the DJA to protcct Its claim to any unpaid
balance remaining {OS) after the sale, 42 Pa.C,S,A. f
8103, Under the DJA. the judgment credilor ha., sl~
months after the debtor's collaleral Is sold in which 10
pelition the coun 10 fb the fair IlWket value of the real
propeny, 42 Pa.C.S.A. f S.m(b). Failure to 61e a
pelition whl1inll1is lime period 'creales an irrebuuable
preswllplion th.1ILbe credicor was paid In full In Idod,'
\bUry Trusl Co, of Iblmyru Y, LapilSlcy, J./9 Pa. SuP'"
177, 488 A,24 608,611 (lb. Super. CI, 1985), ThIs
prcsuruptlon serves 10 discharge all parties elLber directly
or indJrectly liable 10 the judgment credJlor for pay,
ment of lIle debl, Including guarantors, 42 Pa.C.S,A. I
8103(d); see also Comnwllweallh Bank ClIId Trusl Co. v,
Hemsley, 395 Ib, Super. 447, 577 A.2d 627. 6.11 (pa.
Super. Cl.), alloc, denied, 58J 11.211 793 (lb. Jm).
Significantly. 10 comply wiLb Lbe requirements of the
DJA, lIle Judgment creditor mUSI either (1) name La the
petition, or (2) givc notice to, any 'debtor, obUgor, JIIU-
aneor. mongagor. and any othcr person dlRCtly or lodl-
~tly liable to Lbe Judgmcnl crcdleor for thc paymeIU of
Lbe debt.' 42 Pa.C.S,A.. f 8103(b). Default on lhIs no-
ticc rcqulrement discharges all personal liablllly CO the
judgment credJlor for partlcs neither ('6J served with
notice nor named In the petition, Id.
It is undisputed that Integra bas never filed a peddon
in Statc court to 6~ the falr markel valuc of Lamar's
propeny sold al the sheriffs sale. Under normal cir-
cumstances, falling to file a petition would dldwge
whatever remaining debt Lamar's owed 10 Inlegra.
Moreover. Integra's fallure 10 meet the SlalUlOt)' re-
quirements of Lbe DJA would also normally dlscharge
McCartney's guarantee of Lamar's debt because, IS a
maner of law. Lbere is no underlying debl owing CO
lmegra.
This case, however. docs not prcseDl a normal sltuadon
where Lbe DJA can be applied by Its literal terms. /u
Lbe banlcruptcy COlin rigMy noted, when McCartney
filed for banlcruplCY. the automatic stay provision of
JJ U. S, C. I J62(a) was lriggercd and effectively pre-
cluded Integra from stale court actlOM of any type
19a!nsl McCartney. Consequently. McCartney cannot
\lSC Integra's fal1ure to comply with the DIA to avoid
!be proof of claim Inlegra 61ed against him,
Section 362(a) of Lbe Code operates to stay
.,. (I) lhe commencemeDl or continuation, Including the
Issuance or employment of process, of ajudicial. admin-
ISlr1ltlve, or [.7) oLber action or proceeding agalJllt the
deblor thaI was or could have been commcnced before
!be commencemenl of the case under this title. or CO re-
cover a claim against the deblor tlat arose before the
commencement or Lbe c.1Se under thls tide. . . .
II V, S. C. f J62(a)( I) (1996), '!be automatic SlaY serves
several purposes, The stay gives a debtor a breaching
spell from crewlOts by stopping all collection effortS
1997 U,S. App, ~.1XIS 2199. '7
Paae 5
and all foreclosure acliolL~. Mariliou: Elec. Co" Inc,
v, Ullited Jmey BOIik, 959 F: ld 1/94, 1204 (Jd Clr,
199/) (cll-'tion omllled). In lWs respect, the Sl-'Y per.
mits we deblOr 10 I\lempt a repaymenl or reorganization
plan: or II simply relieves the deb lor of we filWlClaI
pressures thaI drove him Inlo banJcruplcy. Id, ot 1204,
nle stay also proleclS creditors by preveOllng particu-
lar CretUIOrs from aCling uoilater~lIy 10 obtain paymeOl
from a deblor 10 the delriment of other creditors, (d.
(cil.1tion omJ\led),
Although the scope of the aUlomalic Sl.1y Is broad,
we clear languag~ of section 362(a) Sl-'ys actions only
against a 'debtor.' ld. (clling A.ssocialion Of SI, Croix
Condominium Ov.!1trS v. SI. Croix Holel Corp.. 682
F. 2d 446, 448(Jd Clr, 1982)), ("8] As a conscqueoce.
'it is universally ac\cnowledged lbal an automatic Slay
of proceediogs Iccorded by f 362 may not be invoked
by entities sucb as sureties, guaranlors, cO-<lbligors. or
owers wiw a similar legal or facrual ne~u.~ to we. .
, deblor.' 959 F.2d J/94 al 1205 (quoting Lynch v.
Johns.Mallvil~ Salu Corp., 710 F.2d 1/94, J/96-97
(6th Clr, 1983)): see also Unlled Sta/u v. Dos CAbn.as
Corp" 995 F:2d 1486, 1491.93 (9th Clr. 1993) (hold.
Ing thaI stay does nOI preclude &ovemmenl from pursu.
ing deficiency judgmenl ,against noodebtor cosignors of
promlssory nOle); Croyden A.ssocialu v, Alleco, 1M.,
969 F.2d 675, 677 (81h Clr. 1992) (refusing 10 e~tend
stay to clalm.~ against solvenl codefendanlS). cen. de.
nied sub nom, Harry and Jeane"e 'i'ttinberg RJundDlion,
Inc. v. Croyden A.ssocialu, 507 U,S. 908, /22 L. Ed.
2d 650, I Jj S, CI. 1251 (I99J): Credil Alliance Ccrp.
v. Williams, 851 F.2d J/9, /2/.22 (4m Clr, 1988) (en-
forcing a default judgmenl entered against a noodebtor
guarantor of a DOte during we peodency of the corpo-
tale obligor's bankruptcy). As one coutt bas reasoned,
a prlmuy rationale for tefusing to e~teod the automatic
stay to nonbanbupt third parties Is 10 insure that CR(\i-
tors obtain ('91 'rhe protection they sougbt and received
wbeu they required a third party to guaranI)' tbe debl. '
Credil Allianct, 851 F.2d 01121: accord In re F.T.L"
IIIC" 152 Bonkr. 61, 63 (Bankr, E. D. lb. 199J).
nus prolllbliion, however, has been liberalized in a
number of cases where couns have applied the automatic
stay protection 10 nondebtor lWrd panles. I'<.elying on
A. f/, Robins Co" Inc. v. Piccinin, 788 F.2d 994, 999
(4m Cir.), cert. denied. 479 U,S. 876, 93 L, Ed. 2d 177,
107 S. Ct. 251 (/986), these couns bave e~tended the
aUlomatic stay 10 nonbankrupl codefendanlS in 'unusual
circumstances,' As the case law demollSUOIteS, couns
bave found . unusual circumstances' wbere 'mere is sucb
idenlilY belween the debtor and rhe third-party defendant
Ihalme deblor may be said 10 be the real party defendant
and thalljudg1llenl againslthe third.party defendanl will
in effecl be a judgment or findJog agalnsl we deblor,'
788 F. 2d at 999 (relying on bow we aUlOmallc Sl.1y pro'
vision and we bankruplcy coun's equll.1blo powers UD'
der 11 U.S.c. f 10510 enjoin actions againsl nondebtor
codefendams in the Dalkon SWeld produclS liablUI)' lit-
igalion because of we potenllallmpact on we estale and
the availability 1'101 of insurance proceeds 10 sadsfy
me claims); see also, III re AmerlcO/\ Film rochllologiu,
(nc" 17$ Bania. 847, 855 (Bankr. D. Del. 1994) (stay-
ing prosecution of wrnngful disclwge claims against for-
mer and preseOl dJreclors of debtor corporation because
of debtnr's Indemnification obligations and lIS possible
e~posulC to collateral esloppel prejudlce); In re RJmlIy
Heallh Serv/cu, Inc,. 105 Bankr. 937. 94243 (BanA:r.
C. D. 011. 1989) (slaying collection actions apllIIt
nondeblor member; of debtor HMO because judgments
agalnst nondebtor; would trigger claims forlndemnlfi-
cation from the debtor HMO),
Couns have also r.~lended the Slay 10 nondebtor third
parties whcre stay protection is essential to the debtor's
effons of reorganization. See. e,g., In re IAvuus
Burman A.ssociaros, 161 Bankr. 891, 899-900 (Bonkr.
E. D. N, Y. 199J) (eujolning guaranty actions against
nondeblor princlpais of debtor pannerships because
principals were rhe only persons who could effectively
formuiate, fund, an<J carry OUI debtors' plans of teOrga-
nlzallon); In re SltveTI Po Nelson, 140 BanIcr. 814. 816-
17(Bankr. M. D, Fla. 1992) (enjoining actions against
nondebtor guarantor of debtor (tll) corporation's obli-
gations where guarantor was president of debtor and
president's services, e~penise and attention wete essen-
tial 10 ilie reorganization of me debtor); see also. Paul
H. Deutch, E~pandlng The AUlomatic Stay: ProleCtlna
Nondehtors In Single Asset Bankruptcies, 2 Am. Bankr.
fnsl. L. Rev, 453 (1994).
Here, McCartney argues thalrhe automatic stay oo1y
applied 10 him in Ws individual capacity. nOlto Lamar's.
As such, be maintains that Inlegra was not stayed from
pur..-ulng a deficiency judgment in state court against
Lamar's, as required under we DIA.ln response, Integra
concedes that uoder normal circumstances rhe automatic
Sl.1y docs not preclude credllors from pursuing their
righllo paymem from nondeblor lWrd parties. Indeed.
Imegra notes that, acting in compliance with this aen-
eral rule, it pursued Lamar's 10 foreclosure and sheriff's
sale. However, lntegrn assens that II could not have pro-
ceeded any furtber against Lamar's to obtain a deficleocy
judgment because il would have betn required under Ihe
rerms of rhe DJA 10 name McCartney as a respaodeDlIn
the pelilion and thereby viola Ie rhe automatic stay pro-
leellng him. The banlauptcy coun found Integra's ("12)
1997 V,S, App, LJXIS 2199, .12
Pale 6
argumeOllO be per111L~lve l.nd reasoned lhal ~rmlulng
Integra 10 lW1le McCanl1ey in a deficiency judgmenl ac.
11011111 SLlle coun II the same lime thaI his bankruplCY
C:LIe was ~nding would defeal the purpose of f 362 10
cenlrallze all prebanlauplcy civil claims agalnsl a debtor
in the banJcruplcy coun. In re McCArt/ley, 16S Bankr.
18,21 (Bwtkr. W D. Po. 1994).
We agree. It is undJspuled thai, had IOlegra 50ugbt
a deficiency judgment a8~h~t u.mar's, It would have
been requJred under the DJA 10 name McCanney as
a respondent in lis peddon or risk discharging him as
loan guaramor. II is also undisputed thaI, bad Intelra
named McCanney as a respondenlln a deficiency action
agalllSt unw's, It would have clearly violated the au-
tomadc stay In place In his banlaup<<:y. Moreover. It Is
clear that following the sberiffs sale, Umar's, as a cor-
porale enllty. no longer bad any assets, Consequently,
McCanney, as guaranlor, would have been liable for
satisfying any deficiency judgment claim LWnod by
Imegra, Simply staled, there was no way for Inlegra
to pwsue a deficiency judgment action against Lamar's
and 10 protecl Its rigblto satisfaction of Lamar's debt
without Involving [.13) McCanney In the process.
Given McCartney's necessary participation In any de-
ficiency judgmeot action initialed by Integra against
Lamar's In Slate coun, we find that the bankrup<<:y coun
properly concluded that the automatic stay extended to
enjnin Integra frnm complying with the requirements
of the DJA. This case falls squarely under the 'un-
usual clrcwnsllllces' exception as developed In A.H.
RoblllS and Its progeny: any deficiency judgment reo
covery from Lamar's would bave necessarily Impacted
upon McCanney's estate, indeed, because McCartney,
as guaraDlor. was secondarily \lable for any deficiency
eOlered against Lamar's, and Lamar's, follOwing the
foreclosure and sheriffs sale. bad no assets, McCartDey
would have been the real party defeodantln a deficiency
judgmenl acdon by integra against Umar's. IIDy defi-
ciency judgment enu:red agaJnst Lamar's would have op-
eraled as a judgmenl or finding agalnsl him; an ou<<:ome
cleuly in tension with the purposes of the automatic
St.1y. Accordingly, (megra was stayed from pursuing a
deficlcncy judgmem action against the nondeblor third
plJty Umar's because McCamey was, In essence, thc
real pany In inleres!.
IV,
Assuming. arguendo, ('141 that the automatic stay
precluded lmegra from pursuing a deficiency judgmenl
aClion in Sl.lle court, McCartney ISSCns that integra
sbouJd have sougbt relief from the automatic stay to
allow illo n.une both Lunar's and McCanney In a defi-
ciency judgmem petition. This same argument was con.
side red and rejecled 10 In fe Wilkill.l, /50 BaMr, /27
(Bania. M. D. Po. 1992), an oplnlon we Rnd Inllluc-
tive.
In Wilkins, the creditor sougbl relief from an aulO-
malic Slay to commence . deficiency judgment acdon
under lbe DJA againsl both the deblor and nondeblOr
obligors. The court denied the credJlOr's wotion for two
primary reasollS. First, the court held thallI U.S,C, f
108(c) speciRcally extends the slx.wooth limjtation pe-
riod for deficiency judgmem actions under 42 Pa.C,S,A.
f SS22(b), n2 Id. al /28, Thus, commy 10 the cred-
Itor's argument, the WUkins coun found no wgency
that the deblor's obligation to the credllOr would be dis-
charged unIC$S the creditor received relief from stay aDd
filed a deficiency petition within the six mooth IbnItadon
period. Second, the coun noted that the deftclflllC}' b-
sues were likely 10 be settled In the banlaup<<:y coun and
consequenlly, ('ISJ there was no reason for the debtor
to defend litigation in Slate coun that could be settled
In the bankruplcy fOl1llll. /d. at 128-29. In thIs.re-
spect, the coun e~pressed Its concern thaI tbe debtOr
not be 'bwdened by lidgation and resuJting te,a! fees If
UllDecessary al this time,' /d. al/29. oJ
n2 Section 108(c) of the BanlcruPlCY Code reads,
In pertinent pan:
If applicable nonbankruplCy law. , . fixes a pe'
riod for commencing or continuing a civil action In
a coun other than a bankruptcy coun on a claim
against the debtor.. . . and sueb period bas nol
e~plred before the date of the 8Ilng of tbe petition.
then sucb ~riod does not expl.re until the tater of-
(I) the end of sucb period, Including any suspenslon
of sucb period occuning on or wr the commence-
ment of the case; or
(2) 30 days after notice of the termination or e~p1ra-
tion of the stay under section 362 . , . with respecl
10 sucb claim.
oJ Tbe coun also beld that the creditor must com-
mence a deficleocy judgmenl action against the non-
debtor obligors within the six-month limitation pe-
riod ~rmllted by stale law. Wilkins. J $0 Ban/IT.
al/28. Signlficantly, bowever, the coun e~pressly
nOled that permitting the creditor 10 proceed .gainsl
the Dondeblor obligors would have no Impact upon
the deblor's deficiency liabUlly, and that tbe assets of
the noodeblors could be collected wilbout risk of ells-
cwging the debtor purnllllt 10 the DJA. Id. Thus.
1991 V,S. App, LEX IS 2199, ol~
Palo 7
unlike the prescot case, the Wilkins coun found 110
'unusual c1rcwnslances' Lbal would warranl e~leud,
IlIg the aUlumallc sl.ty to the noudeblor obligors,
('161
We agree with lhe Wllkios COW1 tWIt debtors should
001 be burdened by Sl.1le coun litigatioll wheu deAclency
Judgmeol aCllollS Impacling upon lbe debtor's csl.tte ~
be sell led io lhe banJcruptcy forum, Indeed, to per.
mil Sl.1le coun deficiency jUflgmeol actloos involving
lhe deb lor to proc~d wben Lbey ~ be adjudicated in
the bankniplCY cowt Is to do violence to lbe pulpOlCS
of lbe automatic Sl.ty, A:l discussed earlier, by cclllnl.
!zing all prebankruptcy civil clalm.s against a debtor In
tbe bankniptcy coun, lbe debtor b grollltcd a 'brea1b.
ing spell' during wblcb be Is relieved of the llnanclal
pressures thai drove him to bankruptcy, Mar/111M, 9$9
F. 2d at 1204. The centralization of all claims In lbe
bankruptcy coun aleo permits the lSSCts of lbe debtor's
esl.tle to be marshaled for distribution 10 creditors In
an orderly and equll.tble fashion. Id, (cll.ttion omit.
led), These benefi~, of lbe automatic stay could not be
acbleved if creditors are pel1llilted relief from stay to
pursue state coun deficiency judgmeot actiotlS Impact.
iog 00 the estale of the debtor, Debtors would be Corced
to e~peod valuable time, energy and resoUftCS deCelldlng
against state coun litigation that (011] could be settled
directly lo lbe bankniptcy court. n4
n4 We note also that considerations of judicial
economy weigh against gtlIIltiog creditors relieC from
stay 10 pursue state court deficiency judgment acdotlS
thai Impact upon the estate oC the debtor and could
be scttled lo the bankniptcy coun. Indeed. lbe time,
energy and rcsoUltcs oC the coutts are no less valu-
able commodldes to preserve wben It Is possible to
litigate a claim lo one forum Ins1ud of two.
Moreover, we faU to see bow McCanney was banned
by lotegra's failure 10 seek relief from the automadc SlaY,
As lhe record clearly demollStratcs. the baolcruptcy coun
held a valuation beariog and beard argument concerning
lbe fair market value of lanw" s propeny sold at the
sberlffs sale, The court subsequently entered an order
finding the value of lamar's propelty 10 be $ 20,000
and directing Integra to recalculate Its dellciency claim
based on thai value. Thus, the bankruptcy court af,
forded McCanoey an opportUnity 10 presenl evldellce
and lesllmooy 10181 at a bearing specifically convened
10 determine tbe fair market value of lhe property sold al
the sberlffs sale. Tbls Is precisely thellllle opponunilY
10 be beard lhal McCanney would have been gtallled
In a Slale COUl! deAciellcy judll1llellt ICUOII commenced
underlhe DIA. See 42 Pa.C.S,A, 18103(c)(4), In ad.
dlclon, the bankrupt(:y coun's delermination of the fair
markel value of the Lanuu's propellY resulted In a de.
crr.a.se in the dellclency claim owing to Inlegll, fur.
ther demotlSlratlng that McCartney was nOI banned by
Imegra's failure to seek relief from the Slay, In.sofl( as
McCalloey would have us find thaI be was prejudiced
by Ills Inability l'uJly 10 escape Iiabilicy for bis guaranty.
as may have been possible under the DIA, we decline to
do so, We will not transmogrify the DIA loto a means
for guaranlors 10 escape liabWty from their guaranties.
n5 Accordingly. we conclude thatllOllC of McCartDcy..
substantive riSbts were prejudiced by lnIesra'. fa1Iutll
to seelc relief from the automadc stay.
05 See FideUty Bank, N,,~, v, Bourger. #4 lb.
Super, $2, 663 A,2d 2lJ, 214 (Ib, Super, 0,
199$), a1loc. deoled, 670 A,2(/ U2 (lb. 1996),
bolding that the purpose of lbe DefiCiency JudJlllent
ACIIs
to reUeve a deblor of further pelSOoaI liabWty to lbc
credllor, If lbe real property talcen by the creditor on
an e~ecution bas a 'fair market value'. (sic] L' of
the date of we e~ecution sale, sufficient so thatlbe
creditor may dispose of the property 10 olbers (or
even. sometimcs, use it hlmself) without a IlCtloss
to the credilor(,]
(cll.ttions and Internal quotadollS omltted) (empbasls
added) .
(0191
v.
In his lInal argument. McCartIlCy assens that the
baolauptcy court erred by boldin. that II U. S, c. t
100(c) operated 10 suspend the IImltatiOtlS period for
Initialing a dellciency judgmenl action In state court
pursuanl to lbe DIA. Because we have alteady deter-
mined tWIt Integra was sl.tyed from pur.;ulog a deficleJll:Y
judgment action in Slate coun against either Lamar's or
McCartney, we need not decide this issue. Nonetheless.
we note parenthetically thaI the Pennsylvania Superior
Court bas unequlvocally held that, under II US,C. t
108(c)(2), the sU month Umltation period for the flIlns
of a deficiency petidon pursuanl to the DJA does nol
e~pire until thirty days a!'ter notice of the termination of
the automatic stay. Cillzens NatiofUl/8an.l: of EI'tJ1IS Qry
v. Gold, 4J91b, Super. 2$4. 6jJ A,2d 124$, 1247-48
(Ib, Super. Ct. 1995) (citing Wilkins); accord III "
C,K, Smith, 192 Bankr. J97, J99-400 {BOIlkr. Iv. D.
1997 U,S. App, LEX:S 2199. '19
Pa,e I
1tJ, 1996).
VI.
In SUIl1l1lary. we arc satisfied lbac Incegra look alllbe
sleps legally possible 10 protect ils rigblS 10 a deficiency
claim agalnst McCartney as guaranlor of Lamar's debt,
IDlegra filed a proo(o(clalm in McCanney's bankruptcy
proceeding and pursued Lamar's to (oreclosure ('201
and sberiffs sale, Since any olber action 10 collccl on lbe
deficiency would have necessarily involved McCartney,
IDlegra could not proceed furtber wilbout elLber violal-
Ing lbe auwouric SLay or sacrificing lIS deficiency claim
agalnsl McCanney as guaranlor o( Lamar's debl. We
conclude thaI Inlegra was stayed !'rom Initiating a de8-
clency judgment action against Lamar's and McCartDcy
In state conn. ACl:ordingly. we will .ffirm lbe order of
lbe dlstrict court,
CONCURBY: STAPLETON
CONCUR: STAPLETON, J" concurring,
McCartney argues !hat the DJA released his guaranty
obligation to Integra when the bank faHed to institute a
deficiency proc:eeding lWlllng him as a guarantor within
sl~ months of ilS pwtbasc of the propeny al the e~ecu-
lion sale. Thls Is an untenable position. The aUlooutic
SlaY provision of the Bankruplcy Code, 1/ u.s. C. 1362.
clearly would be uodennlnt.d by the enforcement in this
siluation of that portion of the DJA releasing a guarantor
who is nOI so DallIed, 42 Pa. C.S.A. 18103(b). If the
court were willing 10 resl lIS decision on this ground,
I would join withoul comment. '!be court says. great
deal more, bowever. and I am, accordingly. unable to
join in lIS opinion. ("21)
It Is WlDeCessary for the court to address the issue
of wbether the DJA in this sltuadon bas the effecl of
releasing Lamar's Restaurant'" Lounge's obligation to
Integra. Accordingly. I would nol address that issue,
Were II necessary (or the court to address II. hOWllver, I
would find no justification for concludlng, as docs the
cnun. that the aUlollUtic Stay provision deprives a pri-
mary obligor not in bankruplCY of the benefit thaI the
DJA inlended it 10 have, There arc simply no 'unu.mt1
circumstances' warranting an e~ception from the geocral
rule thaI 1 362 applies only to a debtor in bankniprcy,
The conn's conclusion co the contrary. while il makes
no dlfference bere. is likely 10 lead to mischief in the
conle~c of other cases,
As the court persuasively demonstrales. there cu be no
quesu(,u lbat givinr:ull effect 10 the DJA would under,
CUI the objective of the .ulOllUtiC Slay of f 362, There is
lbus a conflicl bere belween state law and bankruptcy law
thai 0l1lS1 be resolved, Under the SuprellUcy ClaU.lll 10
CilS~S o( Irreconcilable coufllcl. Slale law must give ;"y.
ThIS docs nOI, however, give a court an unJlmltcd license
10 decline enforcement of stale rules of decisloo, ("22)
The court mUSI look for the accommodatloo wbJcb will
secure lbe objective of the bankruplcy law and. .llIIe
same lime, inlrude least 00 the objective or objectives
underlying lbe state law mle,
The accnOlmodallon wal lbis approacb counsels bere
requires the following conclusions:
(a) The obJecllve of f 362 cu be secured by boldin,
unenforceable that portioo of the DJA whlcb requLrea
the creditor to join the bankrupt JIIIRIlUlr in the DIA
proceeding upon pain of loslog his claim aplnsc the
bankrupt guarantor. Ie would nece.uariJy roUow that
the bankrupt 8\wanlor would DOt be bound by lIIe de-
ficiency determinatioo uoles.~ be chose, with court ap-
proval, to participate. II also follows that the baokNpt
guaranlor can be pursued in bankruprcy court dwiDa lbc
period specified in 1 108(c) of the Bankruptcy' Code;
even though the creditor ouy nol be successful if the
claim bas beeo discharged for some reason other lban
this portion of lbe DJA,
(b) There is oothinglnconsistenc belWCliO 1 362 UJd
that portion of the DJA that requires an e~ec:utlq cred-
Itor to 8le a deficiency proceeding agalust the prlmuy
debtor in order to yreselVe his claim againsc the pel-
OW)' deblor. ("23) Glviog effec:lto this portion oflbc
DJA would be consisteol with the rationale of MarldfM
Electric Co, v. U.S. leney Bank, 959 F.2d 1194 (3d
Clr. 199/), Moreover. as I have noted. I find DOthlaa in
the Code thaI would justify depriving the primary debtor
of the protectioo of the DJA,
The dlfference belWeen these coocluslons and tboec
reacbed by the conn Is DOl IIIIlCrlaI bere becauac
McCartney argues only thaI be was released WJder the
terms of the DJA. He docs not argue !hat be was released
by the effect whicb Pennsylvania law accords an losttu-
ment having the terms of his note, n6 The dlffereoce
belWClin my conclusions and those of the cOlin would
be Important. however, If It appeared that Pennsylvanla
follows the geoerally accepted rules regarding the effect
on a guarantor of releasing the primary debtor and if the
plaintiff were relying 00 thaI law,
06 The appendl~ docs Dot contain what McCartney
refers 10 as his note of guaranty, and be citeS no
Peansylvania case law on wbelber and under what
clrtwnsWICes release o( the primary nbligor releases
a guaranlor or surety. etc,
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CUI~ll HGHAI'I ~ CHERI I I COFr:
?17 2384809 P.02/03
JORDAN 0, ClJNN1NCHAM
ROIII!RT R, ODlRNlCOFP
!'AICE MACDONALo.MAT1liDS
MARC W. WTI'ZlC
HIlNRY W. VAN ECI:
CUNNINGHAM & CHERNICOFF, P.c.
Al1'ORNEYS AT LAW
2320 NORTH SECOND STREET
P,O, BOX 60457
HARRISBURG, PENNSYLVANIA 17106-0457
H~IlSHh'Y TIlLllPtlONE
(717) SJ4.18~3
IRS !IIO, 2H~7413S
TBLEPHONti
(717) 2.1".6570
FAX
(717) 2;iII-4l109
(717) 2.'Il!..~~71
September 20, 1999
VIA ~ILBCOPIIR AND REGULAR MAlL (717) 737-2086
James D. Bogar, Esquire
1 West Main Street
Shiremanstown, PA 17011
Re: Carlisle Kitchen v. Hutch Construction, Ine et al.
Dear Mr., Bogar:
Please be advised that this firm represents the interests of
Mr. and Mrs. Hutchison in regard to the above referenced matter.
I was contacted by your secretary on Thursday, September 16, 1999
to schedule a time and date for arbitration of the above referen!:led
matter. Apparently, Wayne Shade, Esquire had filed a request with
the Court to schedule arbitration, notwithstanding the Suggestion
of Stay which was filed by this office.
On July 1, 1999, one of the named Defendant'~ Hutch
Construction, Inc. filed for relief under Chapter Seven of the
United States Bankruptcy Court at Docket Number 1-99-02876 in the
Uni ted States Bankruptcy Court for the Middle District of
Pennsylvania. As a result of this filing, the automatic stay
provisions, set forth in ~362 of the United States Bankruptcy Code,
are in full for.ce and effect.
Hutch Constx'uction, Ine. is one of the named Defandants in
the above referenced matter, and is inextricably interwoven in thi,s
matter, such that this matter cannot proceed to arbitration, unless
and until Judge Woodside lifts the automatic stay. A Suggestion of
Stay was filed with the Cumberland County Prothonotary on July 24,
1999, and a copy of the same was served on Mr. Shade.
In light of the foregoing it is our position that arbitration
of this matter cannot be scheduled until Mr. Shade properly files
his Motion for Relief from Stay with the United States Bankruptcy
Court.
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Rear, Mechanicsburg, Cumberland County, Pennsylvania, By way
of further reply, Hutch Construction is no longer in business
and has not heen in business since Dacember 31, 1997,
4, Admitted in part and Denied in part, It is admitted
that on or about March 1, 1994 Defendants entered into an
agreement to guaranty the obligations of Hutch Construction to
Plaintiffs, It is denied that the guaranty applied to any
other purchaseS/obligations made by any entity other than
Hutch Construction-an entity which is now defunct,
5, Admitted in part and Denied :[n part, It is admitted
that prior to December 31, 1997 Co-Defendant Hutch
Construction purchased "various goods, wares and merchandise"
from Plaintiff, It. is denied that Defendants purchased
"various goods, wares and merchandise" from Plaintiff, It. is
further denied that Defendants purchased "various goods, wares
and merchandise from Plaintiff after December 31, 1997,
6, Denied, I t is denied that "Hutch Construct.lon
orally agreed to pay interest on any unpaid balances at 1~%
per month from thirty (30) days a fter the dat.e of each
invoice," By way of further reply, Defendants did not orally
3
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In The Court of Cornmon Pleas of
Cumberland County, ?ennsylvania
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OATH
t.e do solemnly swear (or ai fi1'1ll) that we will supoort, obey and dei end
the Conatitution of the l1nited States and the Constitution or this Common-
'"ealth and that we 'dll discharge the duties or our office '"ith fidelity,
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AWARD
W.t the undersigned arbitrators, having b~en duly appointed and sworn
(or affir=.d), make the following award:
(Note: If damages for delay are awarqed, they shall be
separately stated.)
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Date of Award: /1/r( I' c;. .;; rz,-L '.' ':=_'-'- _~_ ." ,,_
/
Non CE OF EN'I'R '!
Now, thal.'/(day of (Jell-l'l ,~Q(L, at..LJ.L. .2.,~I., the above
award was entered upon the docket and notice thereof given by mail to the
partie, or thei: attorneys.
Arbitrators' compensation
paid upon appeal:
$ ..:J9n o()
to be
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~_L:/<7u"" 0 P ~}')/)/'Y' ,~f
Del' ty
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--'
HAROLD B, GIBB, t/d/b/a
CARLISLE KITCHEN CENTER and
CARLISLE KITCHEN CENTER, INC"
Plaintiffs
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: IN THE COURT OF COMMON PLEAS
: CUMBERLAND COUNTY, PENNSYLVANIA
:
v,
NO, 99-373 CIVIL TERM
JAMES HUTCHI20N and
CYNTHIA A, HUTCHISON,
Defendants
NOTICI!: or STAY
NOTICE IS HEREBY GIVEN t.hat J'ames W, Hutchison, Jr" the above
named Defendant, has filed a pet.ition under Chapter 7 of the United
Stat.es Bankruptcy Code to Case No, 1"00-01457 and as a result
thereof, the above captioned action is st.ayed until further Order
of the United States Bankruptcy Court, The undersigned executes
this Not.ice for purposes of giving notice only and the providing of
t.his Notice is not intended t.o enter an appearance in the within
case,
CUNNINGHAM & CHERNICOFF, P,C,
Datel April 6, 2000
By:
Hen
Attorne I,D, No,
2320 North Second
P, 0, Box 60457
HarriSburg, PA 17106-0457
(7l7) 238-6570