Citizens & Northern Bank v. Pembrook Pines Mass Media, N.A., Corp. et al
Filing
38
DECISION AND ORDER denying 23 Motion ; denying 23 Motion for Reconsideration re 23 MOTION Motion by Defendant Pembrook Pines Mass Media, N.A., Corp. for Order Confirming its Authority to File a Chapter 11 Petition, or in the Alternative, Recons idering a Limited Portion of the Receiver Order re 21 Order on Motion to Appoint Receive MOTION for Reconsideration re 21 Order on Motion to Appoint Receiver MOTION Motion by Defendant Pembrook Pines Mass Media, N.A., Corp. for Order Confirming i ts Authority to File a Chapter 11 Petition, or in the Alternative, Reconsidering a Limited Portion of the Receiver Order re 21 Order on Motion to Appoint Receive MOTION for Reconsideration re 21 Order on Motion to Appoint Receiver filed by Pembrook Pines Mass Media, N.A., Corp.. Signed by Hon. Charles J. Siragusa on 4/3/12. (KAP)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
CITIZENS & NORTHERN BANK,
Plaintiff,
DECISION & ORDER
-vs-
09-CV-6385-CJS
PEMBROOK PINES MASS MEDIA, N.A.,
CORP. and ROBERT J. PFUNTNER,
Defendants.
APPEARANCES
For Plaintiff:
Angela Z. Miller, Esq.
Keith M. Brandofino, Esq.
W illiam H. Baaki, Esq.
Phillips Lytle LLP
3400 HSBC Center
Buffalo, NY 14203
(716) 847-7060
For Defendant Pembrook Pines Mass
Media, N.A., Corp.:
Stephen A. Donato, Esq.
Bond, Schoeneck & King
One Lincoln Center
Syracuse, NY 13202
(315) 218-8336
INTRODUCTION
Siragusa, J. This case is before the Court on Pembrook Pines Mass Media, N.A.,
Corp.’s (“Pembrook”) motion, Mar. 16, 2012, ECF No. 23-2, seeking,
an Order confirming Pembrook’s authority to file a chapter 11 bankruptcy
petition with the United States Bankruptcy Court for the Western District of
New York, or in the alternative, pursuant to Rule 59(e) of the Federal Rules
of Civil Procedure and Local Rule 7(d)(3), for reconsideration of portions of
the Court’s Receiver Order entered on March 1, 2012…
Id. at 1–2. For the reasons stated below, Pembrook’s application is denied.
BACKGROUND
Citizen’s and Northern Bank (“the Bank”) filed its complaint against Pembrook and
Robert J. Pfuntner (collectively “Borrowers”) on July 30, 2009. In the complaint, the Bank
alleged facts supporting diversity jurisdiction and claimed that Pembrook and Pfuntner had
defaulted on loans the Bank made to them. On March 15, 2010, the Clerk entered a default
against the Borrowers. Subsequently, the Bank moved for a default judgment, July 29,
2010, ECF No. 5. In its moving papers, the Bank stated that it served the complaint and
summonses on the Borrowers on October 6, 2009, and that neither appeared or answered
within the time permitted under Federal Rule of Civil Procedure 12(a)(1)(A). The Court
ordered the Clerk to enter judgment for the Bank against both defendants in the amount of
$233,479.35, plus interest from March 12, 2010, through the date the judgment was
entered, at a rate of $25.38 per day, Decision and Order, Sept. 7, 2010, ECF No. 6. The
Clerk entered judgment on September 17, 2010, ECF No. 7. On July 20, 2011, the Bank
and the Borrowers signed a Forbearance Agreement which, by its terms, terminated on
January 31, 2012 or upon breach or default by the Borrowers, whichever occurred earlier.
In early January 2012, the Bank, in accordance with Federal Rule of Civil Procedure
69(a), sought the appointment of a Receiver pursuant to section 5228 of the New York Civil
Procedure Law and Rules, Motion to Appoint Receiver, Jan. 4, 2011, ECF No. 9. In an
affidavit filed in support of the Bank’s motion, W illiam H. Baaki, Esq., stated that the
Borrowers owned and operated radio stations and held licenses from the Federal
Communications Commission (“FCC”), and that Pembrook was still generating revenue
from its operation of the radio stations. Baaki Aff. ¶¶ 5–6. Further, Mr. Baaki stated that
since the radio station licenses were unique properties, the execution of the judgment
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against the assets would not achieve as high a value as a private sale conducted by a
Receiver, who was knowledgeable about the sale of FCC broadcast licenses and could
ensure compliance with FCC rules pertaining to the sale of those licenses. Id. ¶ 11. In
regard to the Bank’s application for a Receiver, the Court issued an Order to Show Cause,
which was personally served on Pembrook and on Pfuntner on February 11, 2011. At the
Show Cause hearing on February 18, 2011, Mr. Baaki appeared for the Bank and no one
appeared for either of the defendants. Consequently, on March 1, 2012, ECF No. 21, the
Court appointed Richard A. Foreman as Receiver over Pembrook (“Receiver Order”). The
appointing order also restrained anyone but Mr. Foreman from filing a bankruptcy petition
on behalf of Pembrook (“the Bankruptcy Injunction”).
On March 8, 2012, Pembrook filed a Chapter 11 voluntary petition in the Bankruptcy
Court, W estern District of New York. In re Pembrook Pines Mass Media, N.A., Corp., No.
2-12-20379-PRW (Bk. W .D.N.Y. Mar. 8, 2012). The Bank moved to dismiss the petition
based upon the terms of the Court’s Order containing the Bankruptcy Injunction. On March
16, 2012, the Honorable Michael J. Kaplan suspended the proceedings in the Bankruptcy
case, pursuant to Section 305(a) of the Bankruptcy Code, and relieved the Bank of the
automatic stay, “in recognition of the Order Appointing Receiver…” entered in this case.
Order Granting in Part Motion of Citizens & Northern Bank for an Order (A) Dismissing the
Chapter 11 Case, or, in the Alternative, (B) Providing Relief from the Automatic Stay, or, in
the Alternative, (C) Providing Adequate Protection and Continuing the Receivership, In re
Pembrook Pines Mass Media, N.A., Corp., No. 12-20379 (Bk. W .D.N.Y. Mar. 16, 2012).
In its pending application before this Court, Pembrook argues that the Receiver
Order cannot abrogate its fundamental right to commence a Bankruptcy proceeding, and,
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therefore, asks the Court to reconsider the Bankruptcy Injunction contained in the Order.
Following oral argument on March 22, 2012, the parties, at the Court’s invitation, filed
additional papers in support of, and opposition to, Pembrook’s motion.
STANDARD OF LAW
As the Fifth Circuit has recognized, “[t]here is no motion for ‘reconsideration’ in the
Federal Rules of Civil Procedure. See Hamilton Plaintiffs v. W illiams Plaintiffs, 147 F.3d
367, 371 n. 10 (5th Cir.1998). However, a motion for reconsideration filed within ten days
of the district court’s judgment is construed as a Rule 59(e) motion that suspends the time
for filing a notice of appeal. See id.” Bass v. U.S. Dept. of Agriculture, 211 F.3d 959, 962
(5th Cir. 2000). Since the Federal Rules of Civil Procedure do not expressly provide for
motions for reconsideration, such a motion may be construed as a motion to alter or amend
judgment under Rule 59(e) or Rule 60(b). See Osterneck v. Ernst & Whinney, 489 U.S. 169,
174 (1989).“The standard for granting such a motion is strict, and reconsideration will
generally be denied unless the moving party can point to controlling decisions or data that
the court overlooked—matters, in other words, that might reasonably be expected to alter
the conclusion reached by the court.” Shrader v. CSX Transp., Inc., 70 F.3d 255, 257 (2d
Cir. 1995).
ANALYSIS
In support of its opposition to the Bankruptcy Injunction, Pembrook argues that
since Congress bestowed the fundamental right to file a petition in Bankruptcy, only
Congress may limit that right. Pembrook’s Suppl. Mem. of Law at 2. Further, Pembrook
maintains that a Federal court may only limit access to Bankruptcy, “when construing
federal laws such as the federal securities and racketeering laws.” Id. On this point,
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Pembrook contends that, since the Receivership was created by New York State law, the
Court is without authority to limit Pembrook’s access to Bankruptcy: “A District Court … may
enjoin an entity or individual from filing a bankruptcy petition only when a federal agency
receivership is in place and only under certain limited circumstances involving established
fraud and/or the debtor’s express written consent to receivership.” Id. at 3. Additionally,
Pembrook disputes that it consented to the receivership by failing to participate in the action
until after the Receiver Order.
The Bank responds that Pembrook and Pfuntner1 did consent to the entry of a
Receiver Order, since each signed a Forbearance Agreement with the Bank on July 20,
2011, a copy of which the Bank has provided. Angela Z. Miller, Esq., letter to the Court
(March 23, 2012), ECF No. 35. The Forbearance Agreement states in pertinent part as
follows:
(C) Effect of Forbearance Termination. On termination of the Forbearance
Period (“Termination”), the Indebtedness is payable in full and the Lender
may exercise and enforce the Lender’s respective rights and remedies under
the Loan Documents, this Forbearance Agreement, the Actions,2 the
Judgments and applicable law, without the requirement of any further notice
or other action by the Lender. The Borrowers agree not to contest any such
lawful exercise by the Lender of such rights and remedies. All of the Lender’s
rights and remedies hereunder or under the Loan Documents and Judgments are cumulative. Upon Termination, the Borrowers shall not oppose
and each shall cooperate fully with the Lender in realizing upon and
maximizing the value of the Lender’s collateral and consents to the Lender’s
sale or disposition of its collateral by public or private sale or any other
means allowed by applicable law. Such cooperation shall include, but not be
1
Robert J. Pfuntner has not participated in this action to date. Pembrook’s counsel informed
the Court during oral argument that Pfuntner was seeking a lawyer to represent himself. The Court
agreed to delay signing a new Order appointing a Receiver for Pfuntner’s property for a reasonable
time.
2
Presumably a reference to this lawsuit, as well as a State court lawsuit, since both are
described in more detail in the Forbearance Agreement.
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limited to, surrender in place of the collateral for sale or disposition thereon
(at the Lender’s option) and the daily turnover of all cash collateral to the
Lender and accounting therefor. All of the foregoing obligations may be
enforced by injunctive relief without bond to which the Borrowers hereby
consent notwithstanding the existence of and in addition to remedies at law.
Id.
Pembrook relies in great part on In re Yaryan Naval Store Co., 214 F. 563 (6th Cir.
1914) and In re Prudence Co., Inc., 79 F.2d 77, 80 (2d Cir. 1935), to support its position that
appointment of a Receiver does not deprive Pembrook’s directors of the power to file a
petition in bankruptcy. In Yaryan, the Sixth Circuit determined that the terms of the
injunction issued by a Federal district court in Georgia did not prohibit the company from
filing for bankruptcy. However, in SEC v. Byers, 609 F.3d 87, 92 (2d Cir. 2010), the Second
Circuit stated, “as Royal Business makes clear, this Circuit rejected Yaryan.” In Royal
Business, the Second Circuit determined that, “the consensual receivership and subsequent
provision of fresh capital by the SBA limit Royal’s right to file a Chapter 11 petition without
the district court’s consent.” Royal Business Funds Corp., 724 F.2d 12, 15 (2d Cir. 1983).
It is true that In Prudence Co., the Second Circuit wrote that, “[i]t is well settled that the
appointment of receivers for a corporation does not deprive its directors of the power to file
a petition in bankruptcy.” In re Prudence Co., 79 F.2d at 80. However, as the Bank points
out in its memorandum, the rationale behind the decisions in many of the older cases relied
on the Bankruptcy Code’s conferral of the right to file on all persons and corporations and
that, “[r]ights and privileges so positively bestowed, cannot be destroyed, denied, or
abridged by any power save that which created and brought them into being.” In re Yaryan
Naval Stores, 214 F. at 565. Here, the Bankruptcy Injunction does not prevent Pembrook
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from voluntarily filing a petition in Bankruptcy Court. Instead, it gives the authority to make
that decision to the Receiver.
The Court determines that by its failure to appear and defend against the lawsuit, its
failure to appear and defend against the motion to appoint a Receiver, and its voluntary
agreement “not to contest any such lawful exercise by the Lender of such rights and
remedies,” Forbearance Agreement ¶ C. Pembrook has forfeited its ability to file for
bankruptcy without this Court’s consent. Accordingly, the Court denies Pembrook’s motion
to reconsider its prior decision with regard to the Bankruptcy Injunction and denies
Pembrook’s application to permit the Bankruptcy petition to go forward.
CONCLUSION
Pembrook Pines Mass Media, N.A., Corp.’s motion, ECF No. 23, for an Order
confirming its authority to file a Chapter 11 Bankruptcy Petition, is denied, as is its
application for alternative relief to reconsider the Court’s Order Appointing a Receiver.
IT IS SO ORDERED.
Dated: April 3, 2012
Rochester, New York
ENTER:
/s/ Charles J. Siragusa
CHARLES J. SIRAGUSA
United States District Judge
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