Sun City Clinic of Chiropractic, Ltd. v. Helvig (In re Helvig)

74 B.R. 204, 1987 Bankr. LEXIS 911, 16 Bankr. Ct. Dec. (CRR) 131
CourtUnited States Bankruptcy Court, D. Arizona
DecidedApril 9, 1987
DocketBankruptcy No. B-86-1559-PHX-SSC; Adv. No. “A”
StatusPublished

This text of 74 B.R. 204 (Sun City Clinic of Chiropractic, Ltd. v. Helvig (In re Helvig)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sun City Clinic of Chiropractic, Ltd. v. Helvig (In re Helvig), 74 B.R. 204, 1987 Bankr. LEXIS 911, 16 Bankr. Ct. Dec. (CRR) 131 (Ark. 1987).

Opinion

OPINION AND ORDER

SARAH SHARER CURLEY, Bankruptcy Judge.

This matter comes before the Court on a Motion for an Order to Show Cause Why Armón Helvig, hereinafter referred to as “Debtor,” should not be held in contempt for willfully violating this Court’s July 2, 1986, order modifying the automatic stay, filed by Sun City Clinic of Chiropractic, Ltd., hereinafter referred to as “Sun City.” This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and 28 U.S.C. § 157. This Court has authority to grant the relief requested pursuant to 11 U.S.C. § 105(a). Better Homes of Virginia, Inc. v. Budget Service Company, 52 B.R. 426 (E.D.Va.1985); In the Matter of Brock, 58 B.R. 797 (Bankr.S.D.Ohio 1986); In re Taylor, 59 B.R. 197 (Bankr.M.D.La.1986); In re L.H. & A. Realty, Inc., 62 B.R. 910 (Bankr.D.Vt.1986); In re Shafer, 63 B.R. 194 (Bankr.D.Kan.1986); In re Taco Ed’s, Inc., 63 B.R. 913 (Bankr.N.D.Ohio 1986).

On April 12, 1986, the Debtor filed for relief under Title 11, United States Code, Chapter 7. In his Schedule A-2, the Debt- or acknowledged a $70,000 secured debt due and owing Gary Ledoux, the principal of Sun City. In his Schedule B-2, the Debtor listed the value of Sun City’s tangible collateral at $20,000. On Schedule B-2(i), the Debtor made an additional notation that the collateral was “secured beyond value,” a reference to the fact that the collateral was overencumbered.

On June 24,1986, Sun City filed a motion for relief from the automatic stay, alleging lack of adequate protection. The subject property of the motion is a going concern, chiropractic practice, including patient records, furniture, fixtures and a leasehold interest in real property. On July 2, 1986, the Debtor, Sun City and the Trustee filed a stipulation for relief from the stay. By order dated July 2, 1986, this Court approved the stipulation.

Concerning this instant matter, the operative portion of the stipulation, paragraph 6, provides that, “The parties further stipulate and agree that Movant (Sun City) shall be entitled to have the immediate ability to operate the Chiropractic Practice as he (Sun City/Gary Ledoux) deems necessary.” All parties allegedly agreed at that time that this provision, hereinafter referred to as “paragraph 6,” entitled Sun City to retake the chiropractic practice, including repossession of the patient records, furniture, fixtures and real property leasehold interest.

[206]*206On November 6, 1986, Sun City filed a Motion for Order to Show Cause In re Contempt, alleging that the Debtor willfully violated this Court’s July 2, 1986, order modifying the automatic stay, by refusing to allow Sun City to retake the subject property. On November 12, 1986, this Court entered an order to show cause why the Debtor should not be held in contempt for violating the July 2, 1986, order. The Court convened a hearing on this matter on November 19, 1986. At that hearing the parties concluded that an evidentiary hearing would be required to resolve the matter. Pursuant thereto, this Court conducted an evidentiary hearing on January 6, 1987.

Sun City, as seller, and the Debtor, as purchaser, entered into the sale of an ongoing chiropractic practice on or about March 1, 1984. The agreement of sale was introduced into evidence at the time of the hearing before this Court. The agreement provides for the sale of what may almost be termed a “turnkey” operation. “Goodwill and going concern,” leasehold improvements, other real property interests, personalty, patients’ records, files, even the trade name were transferred from Sun City to the Debtor. Sun City was to use its best efforts to ensure that the patients remained with the practice. Pursuant to the agreement of sale, the parties contemplated that Sun City would send out a letter to its patients, introducing the patients to the Debtor. Sun City would also introduce the Debtor to the patients when the latter parties arrived for treatment. In return for this “turnkey” operation, the Debtor agreed to pay the sum of $115,000 and assume the obligations incurred under the lease agreement concerning the premises where the practice was located. The parties ascribed in the agreement of sale certain values to the property being sold. The agreement provides that “Equipment, leasehold improvements, furniture, supplies, records and lease interests” shall have an allocated value of $80,000; goodwill an allocated value of $35,000; and a covenant not to compete, an allocated value of $20,000.

The evidence presented to this Court reflected that the Debtor did not return the “turnkey” operation that was transferred to him. Although Sun City turned over a well-established practice to the Debtor, the Debtor thwarted the efforts of Sun City to receive back an ongoing operation after the stay was vacated. When the Debtor took the stand, he was visibly uncomfortable. He admitted that at the time the stay was vacated, it was contemplated by the parties that the practice would be returned to Sun City. Although the evidence introduced at the time of trial indicated that the Debtor had turned over some records to Sun City, this Court concludes that compliance with the intentions of the parties was minimal and sporadic. Pursuant to the vacatur of stay stipulation and order, and specifically paragraph 6 of the stipulation, Sun City was to have the immediate ability to operate the practice. Without the treatment records, patient files, appointment book, and an orderly transition incorporating a letter to the patients and other procedures, Sun City did not have the immediate ability to operate the practice. Moreover, Sun City’s Exhibits No. 3, 4 and 5 were particularly disposi-tive, in conjunction with the testimony of Sun City’s principal and the Debtor, indicating that the Debtor utilized beyond the agreed time period the practice’s telephone number, and attempted to retain patients belonging to the practice. Furthermore, the Debtor continued to utilize, after the stay had been vacated, letterhead that misled the patients of the practice. The Debt- or admitted at the hearing that the letterhead utilized the same name of the practice except that “Ltd.” was no longer incorporated in the name. The contents of the letter forwarded to patients of the practice after the vacatur of the stay also misled the practice’s patients into believing that the Debtor had emerged victorious from litigation with relatively few changes and that he was available to treat patients of the practice on an ongoing basis.

However, the evidence adduced at the time of trial did not support Sun City’s contention that the Debtor had obstructed or refused to cooperate in the turning over [207]*207to Sun City of the leasehold interest at the premises where the practice was located. The lease agreement had expired by its terms at the approximate time that the stay was vacated. Moreover, the landlord at the time had required that a three-year lease agreement be entered into between Sun City and the landlord. During the period of these negotiations, Sun City leased the premises from the landlord on a month-to-month basis. However, the evidence presented reflected that the landlord acted on his own, and not in concert with the Debtor, to prohibit Sun City from obtaining its old location.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

In Re Taylor
59 B.R. 197 (M.D. Louisiana, 1986)
In Re L.H. & A. Realty, Inc.
62 B.R. 910 (D. Vermont, 1986)
In Re Shafer
63 B.R. 194 (D. Kansas, 1986)
Brock v. Barlow (In Re Brock)
58 B.R. 797 (S.D. Ohio, 1986)

Cite This Page — Counsel Stack

Bluebook (online)
74 B.R. 204, 1987 Bankr. LEXIS 911, 16 Bankr. Ct. Dec. (CRR) 131, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sun-city-clinic-of-chiropractic-ltd-v-helvig-in-re-helvig-arb-1987.