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Sioux City Foundry Co. v. Penrod (In re Dakotas' Farm Manufacturing Co.)
Citations: 31 B.R. 92; 1983 Bankr. LEXIS 5900Docket: Bankruptcy No. 482-00342; Adversary No. 482-0470
Court: United States Bankruptcy Court, D. South Dakota; June 29, 1983; Us Bankruptcy; United States Bankruptcy Court
Sioux City Foundry Company filed a complaint seeking modification of the automatic stay to proceed with a state court action against Obert Penrod, Jr., president of Dakotas’ Farm Manufacturing Company, which had filed for Chapter 11 bankruptcy. Sioux City Foundry had previously obtained a default judgment against Dakotas’ Farm but struggled to enforce it. Following this, the Foundry initiated an action to pierce the corporate veil to hold Penrod personally liable for the corporation's debts. The state court denied requests to dismiss certain defendants and to conduct depositions pending a Bankruptcy Court ruling on the automatic stay's applicability. The Bankruptcy Court found that the automatic stay under 11 U.S.C. § 362 does not prevent Sioux City Foundry from pursuing its case against Penrod, as he is not a debtor and has not filed for bankruptcy himself. Consequently, the action against him may continue without violating the stay. However, the stay does apply to the other entities involved in the state court action, thereby permitting the state court to dismiss them as defendants without infringing upon the automatic stay. Sioux City Foundry also requested access to the debtor corporation's records to support its state court claims against Penrod. The plaintiff, a creditor of the debtor corporation, acknowledges that it had the opportunity to review the debtor's books and records at the creditors' meeting under 11 U.S.C. § 341 but chose not to do so. The plaintiff also had the chance to examine Obert Penrod at the meeting but did not take that opportunity. It is noted that Mr. Penrod has previously been deposed in state court. The court clarifies that it lacks authority to compel testimony or document production in non-bankruptcy cases but has jurisdiction over the debtor corporation's property under 11 U.S.C. § 541. The automatic stay can be modified for cause if it does not interfere with the bankruptcy case, as per 11 U.S.C. § 362(d)(1). The court will modify the stay to allow the plaintiff to obtain document copies, stipulating that the plaintiff must cover all copying expenses and any clerical costs incurred by the debtor, as the unsecured creditors in the Chapter 11 case would ultimately bear such costs. The court dismisses the debtor's claim that it lacks jurisdiction to modify the stay, stating that a complaint, rather than a motion, is the proper procedure to seek such modification under the Bankruptcy Code. This Memorandum Decision serves as Findings of Fact and Conclusions of Law, and the plaintiff's counsel is instructed to submit an appropriate order within ten days.