arca motion to set aside defualt

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MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEBTOR’S OPPOSITIION TO MOTION FOR RELIEF FROM THE AUOTMATICE STAY

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MARIN O. PEREL SBN: 4577485425 AEGEAN WAYLAS VEGAS, NV. 89149(702) 327-7323

Attorney for African Community Resource Center,A California Non-Profit Corporation

UNITED STATES BANKRUPTCY COURT

CENTRAL DISTRICT OF CALIFORNIA-LOS ANGELES

)))))))))))))

Case No.14R11836


I. PRELIMINARY STATEMENT

The Motion should be denied both because it is premature and is at odds with the

fundamental purpose of the automatic stay that gives debtors a breathing spell at the

outset of a bankruptcy case and preserves estate assets for the benefit of all

creditors. A mere six weeks into these Chapter 13 Cases, the movants seek to revive

their lawsuits against the Company and its affiliated dental centers, at a time when

the Debtors’ limited resources need to be devoted to the immediate tasks of

facilitating the proposed sale of substantially all of their assets, formulating a

Chapter 13 plan and working to achieve a comprehensive resolution of all potential

creditor’ claims, not just those of the movants, but also the claims of any other

creditors. As a result, the movants cannot establish cause sufficient to terminate

the stay at this juncture, nor have they articulated any special facts or circumstances warranting

such relief.

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Moreover, permitting the movants to go forward at present could jeopardize the

Debtors’ efforts to achieve a resolution of the litigations that helped precipitate this bankruptcy

case.

Further, should the movants be permitted to proceed with their litigation at this

juncture, such an action could undermine the Bankruptcy Code’s principle of ratable

distribution among similarly situated creditors.

In sum, the burden imposed on the Debtors in terms of time, financial resources and

attention necessary to gain relief under chapter 13. Accordingly, the Motion should be denied.II ARGUMENT

A. Lifting the Automatic Stay Would Interfere With the Debtors’ Efforts to Achieve

the Primary Purposes of These Chapter 13 Cases.

Section 362(a)(1) of the Bankruptcy Code provides that

. . . [A] petition filed under section 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 action or 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.

11 U.S.C. § 362(a)(1).

The automatic stay is among the most important protections for a debtor under the

Bankruptcy Code, if not the single most important one. See, e.g., Midatlantic Nat’l Bank v.

New Jersey Dep’t of Envt’l Protection, 474 U.S. 494, 503 (1986) (“The automatic stay

provision of the Bankruptcy Code . . . has been described as one of the fundamental debtor

protections provided by the bankruptcy laws.”) (citing H.R. Rep. No. 95-595, at 340 (1977),

reprinted in 1978 U.S.C.C.A.N. 5963, 6297) (internal quotations omitted). The automatic stay

provides the debtor with a “breathing spell” after the commencement of a Chapter 13case,

shielding it from creditor harassment at a time when the debtor’s personnel should be focusing

on restructuring efforts. In re Johns-Manville Corp., 801 F.2d 60, 64 (2d Cir. 1986); see also

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In re Laguna Assocs. Ltd. P’ship, 30 F.3d 734, 737 (6th Cir. 1994) (the purpose the automatic

stay “is to assist financially distressed business enterprises by providing them with breathing

space in which to return to a viable state.”) (quoting In re Winshall Settlor’s Trust, 758 F.2d

1136, 1137 (6th Cir.1985)).

By moving to lift the stay at the moment when the Debtors are working assiduously to

complete a reorganizing plan the and just weeks after commencing the this action, the movants

seek relief that would be incompatible with this concept. Dissolving or modifying the stay

would force the Debtors to redirect their efforts toward producing substantial numbers of

documents, responding to other written discovery, taking and defending numerous depositions,

and preparing for individual trials in cases that likely would not be trial ready for many

months, if not years. Far from providing the Debtors “breathing space in which to return to a

viable state,” id., the relief the movants seek would jeopardize the key purposes of these

Chapter 13 Cases. For this reason alone, the Motion should be denied.

B. Lifting the Automatic Stay Could Deplete Essential Estate Assets to the Detriment

of Other Patient Litigation Claimants.

In addition to shielding the debtor from unwarranted interference, the automatic stay also

protects and preserves estate assets for the benefit of all creditors. See 11 U.S.C. § 362(a)(3)

(automatically staying “any act to obtain possession of property of the estate or of property

from the estate or to exercise control over property of the estate”); A H. Robins Co., Inc. v.

Piccinin, 788 F.2d 994, 998 (4th Cir.1986) (While section 362(a)(1) stays any proceeding

“commenced or [that] could have been commenced against the debtor . . . [section 362(a)(3)]

provides similar relief against suits involving the possessions or custody of property of the

debtor, irrespective of whether the suits are against the debtor alone or others.”); see also In re

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Republic Techs. Int’l, LLC, 275 B.R. 508, 512 (N.D. Ohio 2002); Scrima v. The DeVries

Agency, Inc., 103 B.R. 132 (W.D. Mich. 1989). The automatic stay thus “protect[s] the debtor

from an uncontrollable scramble for its assets in a number of uncoordinated proceedings in

different courts, to preclude one creditor from pursuing a remedy to the disadvantage of other

creditors, and to provide the debtor and its executives with a reasonable respite from protracted

litigation, during which they may have an opportunity to formulate a plan of reorganization for

the debtor.” A.H. Robins Co., Inc., 788 F.2d at 998 (citing Matter of Holtkamp, 669 F.2d 505,

508 (7th Cir.1982)); see also In re AP Indus. I nc., 117 B.R. 789, 798 (Bankr. S.D.N.Y. 1990)

(“The automatic stay prevents creditors from reaching the assets of the debtor’s estate

piecemeal and preserves the debtor’s estate so that all creditors and their claims can be

assembled in the bankruptcy court for a single organized proceeding.”).

The movant must acknowledge that the automatic stay is “intended to prevent a

prejudicial dissipation of a debtor’s assets.” They contend, however, that because they

debtor has filed several Chapter 13 petitions that he is acting in bad faithin bring this instant

chapter 13 petition

This is not a correct application of the law since the National Union Policies and the

proceeds of those policies are assets of the estate entitled to protection under Section 362(a)

(3). Section 541(a) of the Bankruptcy Code defines “property” of a bankruptcy estate as “all

legal or equitable interests of the debtor in property as of the commencement of the case.”

11 U.S.C. § 541(a). “The scope of that definition is intended to be broad,” In re Republic

Techs. Int’l, LLC, 275 B.R. at 512 (citing United States v. Whiting Pools, Inc., 462 U.S.

198, 205 n. 9 (1983)); see also In re Graham Square, Inc., 126 F.3d 823, 831 (6th Cir.

1997)), and “an overwhelming majority of courts have concluded that liability insurance

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policies fall within § 541(a)(1)’s definition of estate property.” In re Vitek, Inc., 51 F.3d

530, 533 (5th Cir. 1995); see also, e.g., In re Minoco Group of Cos., Ltd., 799 F.2d 517, 519

(9th Cir. 1986) (debtor’s insurance policies “met the fundamental test of whether they are

‘property of the estate’ because the debtor’s estate is worth more with them than without

them”); In re St. Clare’s Hosp. & Health C tr., 934 F2d 15 (2d Cir. 1991); In re Titan Energy,

Inc., 837 F.2d 325 (8th Cir. 1988); Tringali v. Hathaway Mach. Co., Inc., 796 F.2d 553 (1st

Cir. 1986). This is particularly true here, where the Debtors’ various insurance policies are

one of the few assets potentially available to pay those unsecured creditors who have claims

arising out of the Patient Litigation. Indeed, as the Committee noted in its recently filed Rule

2004 motion seeking discovery from the Debtors, the National Union Policies “may be the

only asset available for recovery by the largest constituency of creditors represented by the

Committee.” See Docket No. 273, ¶ 5.

Because the debtor has an interest in the property at issue he conmtends that is is an

asset of a debtor any proceeding which could result in a judgment minimizing such assets

should be stayed under section 362(a)(3). As the Court of Appeals for the Fourth Circuit

reasoned:

Under the weight of authority, insurance contracts have been said to be embraced in [Section 541(a)’s] definition of “property.” . . . . [A liability insurance policy] is a valuable property of a debtor, particularly if the debtor is confronted with substantial liability claims within the coverage of the policy in which case the policy may well be . . . “the most important asset . . . of the debtor’s estate.” Any action in which the judgment may diminish this “important asset” is unquestionably subject to a stay under [11 U.S.C. § 362(a)(3)].

A.H. Robins Co., Inc., 788 F.2d at 1001 (quoting In re Johns Manville Corp., 40 B.R. 219, 229

(S.D.N.Y. 1984) and In re Johns Manville Corp., 33 B.R. 254, 261 (S.D.N.Y. 1983)); see also

ACandS, Inc. v. Travelers Cas. & Sur. Co., 435 F.3d 252, 261 (3d Cir. 2006) (Alito, J.) (“The

possession or control language of Section 362(a)(3) has consistently been interpreted to

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prevent acts that diminish future recoveries from a debtor’s insurance policies.”) (citations

omitted); In re Youngstown Osteopathic Hosp. Ass’n, 271 B.R. 544, 547-48 (Bankr. N.D. Ohio

2002) (“The prevailing view is that an all debtor’s assets is property pursuant to 11 U.S.C. §

541(a)(1) and protected by the automatic stay provision in 11 U.S.C. § 362(a)(3).”); 3 Collier

on Bankruptcy ¶ 362.07[3][a] (Alan N. Resnick & Henry J. Sommer eds., 16th ed.)

CONCLUSION

For the foregoing reasons this court should denied movants’ motion for relief from

the automatic stay.

Date: _______________ _____________________________________

Tony Maurice Davis/Debtor in pro per

arca motion to set aside defualt

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