Commercial Banking Co. v. Jones (In Re Maxair Aircraft Corp.)

148 B.R. 353, 1992 U.S. Dist. LEXIS 18833, 1992 WL 368000
CourtDistrict Court, M.D. Georgia
DecidedDecember 7, 1992
DocketCiv. A. No. 92-24-VAL, Bankruptcy No. 91-70507-VAL
StatusPublished
Cited by10 cases

This text of 148 B.R. 353 (Commercial Banking Co. v. Jones (In Re Maxair Aircraft Corp.)) is published on Counsel Stack Legal Research, covering District Court, M.D. Georgia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Commercial Banking Co. v. Jones (In Re Maxair Aircraft Corp.), 148 B.R. 353, 1992 U.S. Dist. LEXIS 18833, 1992 WL 368000 (M.D. Ga. 1992).

Opinion

ORDER

OWENS, Chief District Judge.

Pursuant to Rule 9020 of the Bankruptcy Rules, respondents Donald E. Jones and Maxair Aircraft Corp. of Georgia, Inc., have filed objections to an order of the Bankruptcy Court of the Middle District of Georgia in which the court found respondents in contempt of court. Under Rules 9020 and 9033, this court is to make a de novo review upon the record of the Bankruptcy Court’s findings of fact and conclusions of law in this matter and accept, reject, or modify these findings or recommit the matter to the bankruptcy court with instructions. The following findings of fact and conclusions of law are based upon this court’s de novo review of the record in this case.

FACTS

On August 21, 1991, Maxair Aircraft Corp. of Georgia, Inc. (“MaxAir”), filed a voluntary bankruptcy petition under Chapter 11 in the United States Bankruptcy Court for the Middle District of Georgia. MaxAir, a manufacturer of ultra light aircraft and parts, was originally formed by respondent Donald E. Jones and James Allred, who has since left the company. Jones has been MaxAir’s chief operating officer since MaxAir filed under Chapter 11.

Commercial Banking Co. (“CBC”) is a secured creditor of MaxAir with a first priority security interest in MaxAir’s inventory, accounts receivable, and certain machinery and equipment. This security interest specifically includes equipment and inventory at the MaxAir premises in Val-dosta, Georgia.

*355 On September 17, 1991, MaxAir and CBC entered into a consent order concerning MaxAir’s use of cash collateral. Under this order, MaxAir was permitted to use CBC’s cash collateral on equipment inventory and accounts receivable so long as MaxAir complied with certain conditions. First, MaxAir was to furnish weekly ac-countings to CBC, and these weekly ac-countings were to show proof of any replacement of inventory. In addition, CBC and its agents were granted “the right to inspect and audit all records and inventory” of MaxAir at any time during normal business hours. Order on Debtor’s Use of Proceeds, II10.

On November 12, 1991, the bankruptcy court entered an order prohibiting MaxAir from any further use of collateral. CBC then filed a motion for relief from the automatic stay, and this motion was scheduled for a hearing on November 27, 1991. Two days prior to the scheduled hearing, on November 25, 1991, a CBC officer contacted MaxAir to request an inspection of the collateral as permitted in the consent order. Jones emphatically refused to allow any inspection.

On November 27, 1991, the bankruptcy court lifted the automatic stay, and CBC obtained an order for writ of possession of the collateral from the State Court of Lowndes County that same day. Officers of CBC immediately attempted to enforce this order at MaxAir, but discovered that substantially all of the machinery and equipment constituting the collateral had been removed from the premises.

On December 5,1991, CBC filed a motion requesting that MaxAir and Jones be held in contempt of court and sanctioned such that they could purge themselves of the contempt upon the return of the subject collateral. The bankruptcy court scheduled a hearing for this motion on December 12, 1991. CBC’s counsel sent notice of this hearing to Jones’ counsel on December 5.

Due to an illness, Jones’ counsel could not attend the hearing on December 12, 1991, and local counsel was obtained to represent Jones at the last minute. The bankruptcy court heard some testimony; however, due to the illness of Jones’ counsel, the court continued the hearing. In addition, the court entered an order on December 12, 1991, requiring MaxAir and Jones to provide an accounting to the court of the whereabouts of all collateral and to make no further transfers of any property of MaxAir’s estate.

On December 18, 1991, Jones filed a response to the bankruptcy court’s order of December 12, in which he claimed that at no time had he ever had possession of any of the assets formerly located at the Max-Air premises in Valdosta. He also alleged that these assets were the property of MaxAir Aircraft Corp. of Florida, Inc. (“MaxAir of Florida”) 1 and were currently en route to the Bahamas.

On December 20, 1991, the bankruptcy court entered an order rescheduling the contempt hearing for January 9, 1992. In this order, the court noted that Jones’ response of December 18 did not appear to comply with the court’s order of December 12. The court then directed Jones and MaxAir to appear on January 9, 1992, and to show cause as to why they should not be held in contempt.

On January 9, 1992, the bankruptcy court held the contempt hearing. Jones failed to appear, claiming that he was unable to do so as a result of a subpoena issued by the Middle District of Florida. Jones’ counsel consented to proceed with the hearing.

After examining the evidence and hearing all testimony, the bankruptcy court made the following findings of fact:

*356 1. That approximately seven to eight days prior to the hearing of November 27, 1991 on CBC’s motion to lift the automatic stay, the two largest pieces of collateral were removed from the Max-Air premises in Valdosta.
2. That during the two days preceding the automatic stay hearing, Jones refused to allow CBC access to the Max-Air premises to inspect the collateral and
. that Jones’ refusal amounted to a veiled threat.
3. That beginning on the day before the automatic stay hearing, most equipment and inventory was removed from the MaxAir premises.
4. That Jones’ wife, mother, and son, and various MaxAir employees participated in the removal of the equipment and inventory and that Jones was directly responsible for this removal.
5. That Jones failed to account for the collateral in violation of the court’s order of December 12, 1991.
6. That Jones had no legal excuse for failing to appear at the January 9, 1992 hearing and therefore violated the court’s order of December 20, 1991.

Based upon these factual findings, the bankruptcy court found MaxAir and Jones to be in willful contempt of court of the cash collateral order of September 17,1991, the collateral accounting order of December 12, 1991, and the show cause order of December 20. The court then issued a written order on January 10, 1992, stating the sanctions imposed. First, MaxAir and Jones are liable for attorney fees and costs, to be assessed at a future hearing. Second, Jones is to be incarcerated until he purges himself of the contempt in one of the following ways:

1.By returning all equipment and inventory pledged to CBC as collateral to the MaxAir premises in Valdosta, Georgia, by making an accounting of all accounts receivable and all collateral proceeds, and by specifically returning two plastic injection molding machines to the MaxAir premises;
2. By otherwise purging himself of the contempt as determined by court order; or
3. By payment in full of all principal and interest due to CBC.

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148 B.R. 353, 1992 U.S. Dist. LEXIS 18833, 1992 WL 368000, Counsel Stack Legal Research, https://law.counselstack.com/opinion/commercial-banking-co-v-jones-in-re-maxair-aircraft-corp-gamd-1992.