In Re Memphis-Friday's Associates

88 B.R. 821, 18 Collier Bankr. Cas. 2d 1360, 1988 Bankr. LEXIS 888, 17 Bankr. Ct. Dec. (CRR) 1079, 1988 WL 74019
CourtUnited States Bankruptcy Court, W.D. Tennessee
DecidedJune 7, 1988
Docket19-20378
StatusPublished
Cited by13 cases

This text of 88 B.R. 821 (In Re Memphis-Friday's Associates) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, W.D. Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Re Memphis-Friday's Associates, 88 B.R. 821, 18 Collier Bankr. Cas. 2d 1360, 1988 Bankr. LEXIS 888, 17 Bankr. Ct. Dec. (CRR) 1079, 1988 WL 74019 (Tenn. 1988).

Opinion

MEMORANDUM OPINION ON MOTION TO DISMISS VOLUNTARY PETITION AND TO DISQUALIFY DEBTOR’S COUNSEL

WILLIAM H. BROWN, Bankruptcy Judge.

The issues presented in this contested matter are whether a voluntary petition filed under Chapter 11 of the Bankruptcy Code must be dismissed, on motion of a party in interest, due to the intended voluntary filing being without the consent of both general partners; whether the order for relief automatically granted upon the filing of the voluntary petition must be vacated; whether counsel for the purported debtor must be disqualified, and whether an improperly filed “voluntary” petition may be amended to become an involuntary petition. The motion giving rise to this contested matter was filed by a party in interest, rather than by a general partner, and the issue of standing of that party in interest to so bring a motion to dismiss has been raised.

This is a core proceeding under 28 U.S.C. Section 157(b)(2)(A).

CASE HISTORY

A Chapter 11 voluntary petition was filed on April 30, 1988, with the Debtor being styled “Memphis-Friday’s Associates, a Tennessee limited partnership,” and the petition was signed by Maruki Tennessee “F,” Inc. (hereinafter “Maruki”), managing general partner of the limited partnership, the named Debtor. The primary assets of the Debtor are a commercial leasehold interest and franchise right to operate a TGI Friday’s restaurant in the Overton Square area of Memphis, Shelby County, Tennessee. The voluntary petition was also signed by William M. Gotten, Esquire, attorney for the named Debtor. On May 18, 1988, Overton Square Partners (hereinafter “OSP”), as the landlord of the named Debt- or and as a creditor, moved the court to dismiss the voluntary petition, alleging that the Debtor was in fact a Tennessee general partnership rather than a limited partnership, and the general partnership agreement of Memphis-Friday’s Associates was *823 filed as an exhibit to the motion. The motion further sought to disqualify the named Debtor’s counsel, Mr. Gotten, from his representation of the Debtor and alleged that all bankruptcy actions taken on behalf of the partnership were improper, since the partnership had not in fact employed Mr. Gotten. Attached as a further exhibit to the motion to dismiss was a sworn declaration of Gerard de Cerjat, President of Kenmare, Inc., a Delaware corporation, which is the sole general partner of Kenmare Associates, a Tennessee limited partnership. Kenmare Associates is also a general partner of the named Debtor, Memphis-Friday’s Associates, with the other general partner being Maruki Tennessee “F,” Inc.

This motion to dismiss was filed the day before the court heard a motion for relief from the stay which had been filed previously by OSP. OSP in its motion for relief from the stay alleged that the named Debt- or was in default of lease obligations, both monetary and non-monetary, and that the lease had terminated by its contractual terms on April 30, 1988, the date of filing of the bankruptcy petition.

At the May 19, 1988, hearing on the motion for relief from the stay, the court, sua sponte, raised the question of whether the Debtor, Memphis-Friday’s Associates, was in fact a proper debtor due to the allegation that the Debtor was a general partnership rather than a limited partnership and due to the allegation that one of the general partners had not consented to the voluntary filing. 1 The court then reserved its ruling on the motion for relief from the stay until the motion to dismiss could be heard.

A hearing on the motion to dismiss was held on May 26, 1988, by which time the named Debtor had responded to the motion to dismiss, admitting that it was in fact a Tennessee general partnership rather than a limited partnership. However, Mr. Gotten, as Debtor’s counsel, asserts that he was unaware that the partnership was general rather than limited until the filing of the motion to dismiss. The case record, including statements at the May 19 hearing, reflects that Mr. Gotten became involved in his representation of his client shortly before the filing of the Chapter 11 petition and that Memphis-Friday’s Associates had earlier used other attorneys. The petition is in fact signed by Maruki Tennessee “F,” Inc., as general partner for a Tennessee limited partnership; however, Maruki Tennessee “F,” Inc. no longer asserts that the partnership is a limited one. The partnership agreement, which was admitted into evidence at the May 19, 1988 hearing, provides that Uokuni Tennessee “F,” Inc., (now named Maruki Tennessee “F,” Inc.) is the managing general partner of Memphis-Friday’s Associates, and that Kenmare Associates is the “investor” partner in Memphis-Friday’s Associates. The partnership agreement is dated November 1, 1985, and provides that the partnership is governed by Tennessee law.

FINDINGS OF FACT

The court finds, from the undisputed evidence, as well as from statements of counsel, that Memphis-Friday’s Associates is a general partnership, governed by Tennessee general partnership law, rather than a limited partnership.

The general partners of Memphis-Friday’s Associates are Maruki Tennessee “F,” Inc., a Tennessee corporation, and Kenmare Associates, a Tennessee limited partnership.

Kenmare Associates has not consented to the filing of the original “voluntary” petition, as evidenced by the affidavit of Mr. de Cerjat, a principal of Kenmare Associates.

The partnership agreement of Memphis-Friday’s Associates provides that the managing general partner may conduct certain business functions, but there is no specific language in the partnership agreement providing that the managing general partner may file, unilaterally, a bankruptcy petition.

Mr. William M. Gotten, counsel for the named Debtor in the original petition, has stated that he in fact was employed by and *824 is being compensated for his professional services by Maruki USA Company, Inc., a related entity to Maruki Tennessee “F,” Inc., rather than from funds of the partnership. Further, the partnership agreement does not authorize employment of legal counsel on behalf of the partnership by the managing general partner, without the consent of Kenmare Associates. Mr. William M. Gotten is in fact not the legal counsel for the partnership of Memphis-Friday’s Associates, but rather represents Maruki Tennessee “F,” Inc., one of the general partners.

DISCUSSION AND CONCLUSIONS

The issues involved in this contested matter go to the heart of whether the original filing of the bankruptcy petition is valid, and if not, whether the order for relief must be vacated. Since the parties have admitted and the court has found that the partnership of Memphis-Friday’s Associates is in fact a general rather than a limited partnership, the Bankruptcy Code and Rules require that the case be dismissed or that the court allow an amendment to the original filing. Commencement of an voluntary case under any chapter of Title 11 “constitutes an order for relief under such chapter.” 11 U.S.C. Section 301. Therefore, as to voluntary cases, the filing date and order for relief are simultaneous.

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Bluebook (online)
88 B.R. 821, 18 Collier Bankr. Cas. 2d 1360, 1988 Bankr. LEXIS 888, 17 Bankr. Ct. Dec. (CRR) 1079, 1988 WL 74019, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-memphis-fridays-associates-tnwb-1988.