El Puerto de Liverpool S.A. de C.V. v. Servi Mundo Llantero, U.S.A., Inc. (In re Kmart Corp.)

285 B.R. 679, 2002 Bankr. LEXIS 1308
CourtUnited States Bankruptcy Court, N.D. Illinois
DecidedNovember 15, 2002
DocketBankruptcy No. 02 B 02474; Adversary No. 02 A 01584
StatusPublished
Cited by3 cases

This text of 285 B.R. 679 (El Puerto de Liverpool S.A. de C.V. v. Servi Mundo Llantero, U.S.A., Inc. (In re Kmart Corp.)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
El Puerto de Liverpool S.A. de C.V. v. Servi Mundo Llantero, U.S.A., Inc. (In re Kmart Corp.), 285 B.R. 679, 2002 Bankr. LEXIS 1308 (Ill. 2002).

Opinion

FINDINGS OF FACT AND CONCLUSIONS OF LAW

JACK B. SCHMETTERER, Bankruptcy Judge.

Following trial on Plaintiffs Motion for Preliminary Injunction, and hearing on the submissions filed by the Debtors and official bankruptcy committees, the Court now makes and enters the following Findings of Fact and Conclusions of Law.

INTRODUCTION

Plaintiff, El Puerto Liverpool S.A. de C.V. (“Liverpool”) is a Mexican corporation which had been a joint venturer of Chapter 11 bankruptcy Debtor Kmart, a Michigan company (“Kmart”), in formation of a Mexican entity Kmart Mexico, S.A. de C.V. (“Kmart Mexico”). Kmart and Liverpool each owned an interest in Kmart Mexico, which was incorporated in 1993. After execution of the original joint venture agreement, Kmart assigned its inter[682]*682est to one of its subsidiaries VTA, Inc., a Delaware corporation (“VTA”). Kmart and VTA are now bankruptcy debtors in Chapter 11.

Liverpool filed the instant adversary, pursuant to Sections 362 and 105 of the Code, to stay a civil lawsuit in Hildalgo County, Texas which was initially filed against Kmart, Liverpool, Kmart Mexico, and Jose Ortega, a Kmart employee. That suit was initiated by Servi Mundo Llantero USA, Inc. (“Servi Mundo USA”), on behalf of Servi Mundo Llantero S.A. de C.V. (“Servi Mundo Mexico”), a Mexican corporation and its owner Enrique Kanarek (“Defendants”). Although, Defendants severed Kmart and its related entities in bankruptcy from the Texas suit, Liverpool asserts that its interests are so intertwined with those of Kmart that suit against it constitutes a suit against Kmart even. It contended that this Court should enjoin the Texas proceeding against it because the outcome could threaten property of the estate and concomitantly Debtor’s successful reorganization. Kmart did not join or intervene in the instant Adversary proceeding, but appeared here through its pleading filed and its counsel’s argument in support of Liverpool’s motion for a preliminary injunction to prevent the Texas case from going to trial on November 12, 2002. It supported the Liverpool contention that results in the Texas case could harm the Debtor by being introduced in actions seeking joint venture liabilities and could thereby violate the automatic bankruptcy stay and impair Kmart’s property interests. Kmart’s support for injunctive relief was joined by filings by and arguments on behalf of the bankruptcy Official Committee of Unsecured Creditors, Official Committee of Equity Security Holders, and Official Financial Institutions’ Committee.

In recognition of the impending Texas trial, the motion for preliminary injunction was set for trial on November 5, 6, and 8. At the conclusion of the trial on November 8th, a ruhng was announced from the bench denying the Plaintiffs motion for injunctive relief and for entry of an injunction to protect Kmart’s rights to bankruptcy stay protection under 11 U.S.C. § 362. No orders were then entered, pending completion of these Findings and Conclusions.

The following Findings of Fact and Conclusions of Law support the ruling and determination that Liverpool is not entitled to protection under Sections 105 and 362(a) of the Bankruptcy Code, and an order denying the requested injunction will now be entered. However, results in the Texas trial could be used against Kmart with the indirect effect of violating the bankruptcy stay under 11 U.S.C. § 362 and affecting Debtor’s property interests. Kmart can be protected against such consequence and stay violation by an injunction preventing any parties to the Texas trial from using any findings or judgment reached in that case against Debtor. To avoid that result a permanent injunction is being entered under authority of 11 U.S.C. §§ 105 and 362 to bar either Texas litigant from ever using findings or judgment entered in the Texas case against the Kmart bankruptcy debtors.

Liverpool argued here that injunction to delay trial against it was necessary to protect Kmart from consequences that might indirectly deprive Debtor of its property interests and stay protection. However, the injunction against all Texas litigants prevents that consequence while allowing the Texas trial to proceed.

Plaintiff has failed to demonstrate that it and Debtor are so necessarily connected in their interests that only a delay of trial against Liverpool can protect the Debtor’s [683]*683interest, but injunction relief to protect the automatic stay rights of Kmart and other debtors will supply such protection. There is no need or justification to delay the Texas trial.

FINDINGS OF FACT

The Parties

1. Plaintiff, El Puerto Liverpool S.A. de C.V. (“Liverpool”) is a Mexican corporation.

2. Defendant, Serví Mundo Llantero U.S.A., Inc. (“SML USA”), is a Texas corporation.

3. Defendant, Serví Mundo Llantero, S.A. de C.V. (“SML MEX”), is a Mexican corporation.

4. Defendant, Enrique Kanarek (“Kanarek,” who, collectively with SML USA and SML MEX may sometimes hereinafter be referred to as the “Defendants”) is an individual who previously resided in Hidalgo County, Texas and now resides in Florida.

5. Kmart Corporation (“Kmart”) is a Michigan corporation.

6. VTA, Inc. (“VTA”) is a Delaware corporation, and a wholly owned subsidiary of Kmart.

7. Jorge Ortega (“Ortega”) is an individual who is an employee of Kmart and who resides in California.

8. Kmart, as well as many of its subsidiaries and related corporations including VTA (collectively the “Debtors”), are currently debtors-in-possession in Chapter 11 bankruptcy cases pending in the United States Bankruptcy Court for the Northern District of Illinois under jointly administered case no. 02 B 02474. The Debtors filed their voluntary petitions under Chapter 11 of title 11 U.S.C. (the “Bankruptcy Code”) on January 22, 2002 (the “Petition Date”). The automatic stay protecting Debtors under 11 U.S.C. § 362 has not been modified to permit actions against Debtors in the Texas litigation discussed below.

9. Liverpool is not a subsidiary of, affiliate of, or otherwise related to, Kmart.

10. Liverpool is not a debtor under any Chapter of the Bankruptcy Code.

11. Liverpool is a separate and distinct legal entity from Kmart with no common ownership or management.

12. Liverpool, Kmart, VTA and Ortega were co-defendants in a lawsuit pending in the 92nd District Court (the “Texas District Court”), Hidalgo County, Texas as case no. C-3263-97-A (“Case 3263-A”), which suit was commenced in 1997 (“the Texas Suit”).

13. Defendants herein are the plaintiffs in Case 3263-A.

14. On June 12, 2002, on motion of Serví Mundo the Texas District Court entered an order severing Defendants’ claims against Kmart, VTA and Ortega into a separate case bearing the no. C-3263-97A(l) (“Case 3263-A(l)”), which case has been stayed due to the Debtors’ bankruptcy cases.

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Related

In Re Trans-Service Logistics, Inc.
304 B.R. 805 (S.D. Ohio, 2004)
In Re Kmart Corp.
285 B.R. 679 (N.D. Illinois, 2002)

Cite This Page — Counsel Stack

Bluebook (online)
285 B.R. 679, 2002 Bankr. LEXIS 1308, Counsel Stack Legal Research, https://law.counselstack.com/opinion/el-puerto-de-liverpool-sa-de-cv-v-servi-mundo-llantero-usa-inc-ilnb-2002.