IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE WESTERN DISTRICT OF PENNSYLVANIA 

In re:

TRUSTEES OF CONNEAUT 

LAKE PARK, INC.,

Debtor. 

TRUSTEES OF CONNEAUT 

LAKE PARK, INC., 

Plaintiff, 

v.

PARK RESTORATION, LLC, 

Defendant. 

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Bankruptcy Case No. 14-11277-JAD

Chapter 11

Adv. Proc. No. 16-01029 JAD 

Document No.

MEMORANDUM OPINION REGARDING PLAINTIFF’S MOTION FOR 

PRELIMINARY INJUNCTION 

I. Summary 

The Trustees of Conneaut Lake Park, Inc., Inc., debtor and debtor-inpossession, commenced an Adversary Proceeding on June 13, 2016, against 

Park Restoration, LLC, alleging breach of contract claims: Failure to Vacate the 

Beach Club without Damage;1 Failure to Secure Beach Club in Commercially 

1 Count I of the Complaint, Adv. Case 16-01029-JAD, Adv. Dkt. No. 1 (the “Complaint”).

Related to Doc. No. 7

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Reasonable Manner;2 and Contractual Indemnity.3 In each of the three Counts, 

the Plaintiff alleges “damages as a result of the Defendant’s breach of 

Management Agreement in an amount not less than the full value of the Beach 

Club.” This is the second adversary proceeding between these Parties (among 

others) filed in this Bankruptcy Case. In the first Adversary Proceeding, the 

Defendant herein sought title to certain insurance proceeds resulting from the 

destruction of the Beach Club, while the Debtor and certain Taxing Authorities 

asserted rights in the insurance proceeds. The insurance proceeds,

$611,000.00, (“Insurance Proceeds”), which are the subject of the first

Adversary Proceeding, were deposited into this Court’s Registry.

Contemporaneous with the filing of the Complaint, the Debtor filed a 

Motion for Preliminary Injunction, which Motion is the subject of this 

Memorandum Opinion. The Defendant filed its response to the Motion, and after 

briefing and argument, this matter is now ripe for determination. 

For the reasons set forth below, the Court shall enter an order denying the 

preliminary injunction. 

II. Background

The background of the disputes between these parties is briefly 

summarized as follows. 4 The Plaintiff presently holds, in trust for the use of the 

2 Count II of the Complaint.

3 Count III of the Complaint. 

4 Additional background can be found in this Court’s Memorandum Opinion filed at Adv. No. 

15-1010-JAD, Dkt. No. 82. 

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general public, 208.213 acres of land and the improvements thereon (the “Real 

Property”) located in Crawford County, Pennsylvania. Prior to 2014, a building, 

commonly referred to as the “Beach Club,” was located on part of the Real 

Property. The Plaintiff and the Defendant were parties to the Beach Club 

Management Agreement dated on or about November 24, 2008 (the 

“Management Agreement”), pursuant to which the Defendant agreed to provide 

operational and management services for the Beach Club.5 According to the 

Management Agreement, the Defendant agreed that its management services:

(a) “include all services and functions necessary to insure that the Beach Club 

is a fully operational and full service club offering services commensurate with

other commercially similar clubs,” and (b) “include, but [are] not limited to, 

physical control and security, all maintenance at the facility, food and beverage, 

insuring that the property is fully secured and maintained in a commercially 

reasonable fashion.” From at least November 2008 through and including 

August 1, 2013, Defendant was in possession of, used, and occupied the Beach 

Club. On August 1, 2013, the Beach Club was destroyed by fire. By letter dated 

March 20, 2015, the Plaintiff, among other things, advised Defendant that all of 

its right, title, and interest in the Management Agreement terminated when the 

fire occurred. 

The gist of the Complaint is that because the Beach Club was on the Real 

Property owned by the Plaintiff, the failure of the Defendant to “return” the Beach 

5 A copy of the Management Agreement is attached as Exhibit A to the Complaint. 

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Club in good condition to the Plaintiff at the termination of the Management 

Agreement, was a breach of the Management Agreement, for which the Plaintiff 

is entitled to damages. 

Failing to obtain an interest in the Insurance Proceeds in the first 

Adversary Proceeding,6 the Debtor now seeks a preliminary injunction “enjoining 

disbursement of the Insurance Proceeds pending resolution of this Adversary 

Action and granting such further relief as this Court deems just and proper.”7

III. Analysis

The first question this Court must answer is, whether, in an action for 

money damages, this Court has the power to issue a preliminary injunction 

preventing the Defendant from use of assets in which the Plaintiff has no lien or 

equitable interest. The United States Supreme Court has found that no such 

power exists under the law. Grupo Mexicano de Desarrollo S.A. v. Alliance Bond 

Fund, Inc., 527 U.S. 308 (1999). 

A. Grupo Mexicano de Desarrollo S.A. v. Alliance Bond Fund, Inc.

6 In the Memorandum Opinion issued by this Court, I found that the Taxing Authorities were 

entitled to be paid first from the Insurance Proceeds, the balance to the Defendant herein. In 

reversing, the District Court found that all of the Insurance Proceeds were payable to the 

Defendant herein (Park Restoration, LLC v. Summit Township, et al., (In re Trustees of 

Conneaut Lake Park, Inc.), Civil Action No. 1:16-cv-00006-BJR (W.D. Pa. May 4, 2016). 

Neither Court found in favor of the Debtor nor is the Debtor a party to the pending appeal 

before the Court of Appeals. 

7 Motion for Preliminary Injunction, Adv. No. 16-01029, Adv. Dkt. No. 7. 

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The disposition of the Motion for Preliminary Injunction is controlled by 

the decision of the United States Supreme Court in Grupo Mexicano de 

Desarrollo S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 119 S. Ct. 1961, 144 

L. Ed. 2d 319 (1999). Below is a summary of the pertinent facts and application 

of the law as recited in Grupo: 

Grupo Mexicano de Desarrollo, S. A. (GMD), was a Mexican 

holding company. In 1994, GMD issued $250 million of 8.25% 

unsecured, guaranteed notes due in 2001 (Notes), which ranked 

pari passu in priority of payment with all of GMD’s other unsecured 

and unsubordinated debt. Interest payments were due in February 

and August of every year. Between 1990 and 1994, GMD was 

involved in a toll road construction program sponsored by the 

Government of Mexico. Problems in the Mexican economy resulted 

in severe losses for the concessionaries, who were therefore unable 

to pay contractors like GMD. In response to these problems, in 

1997, the Mexican Government announced the Toll Road Rescue 

Program, under which it would issue guaranteed notes (Toll Road 

Notes) to the concessionaries, in exchange for their ceding to the 

Government ownership of the toll roads. The Toll Road Notes were 

to be used to pay the bank debt of the concessionaries, and also to 

pay outstanding receivables held by GMD and other contractors for 

services rendered to the concessionaries (Toll Road Receivables). In 

the fall of 1997, GMD announced that it expected to receive 

approximately $309 million of Toll Road Notes under the program.

By mid-1997 GMD was in serious financial trouble. In 

addition to the Notes, GMD owed other debts of about $450 million. 

As a result of these financial problems, neither GMD nor its 

subsidiaries (who had guaranteed payment) made the August 1997

interest payment on the Notes. Between August and December 

1997, GMD attempted to negotiate a restructuring of its debt with 

its creditors. On October 28, GMD publicly announced that it would 

place in trust its right to receive $17 million of Toll Road Notes, to 

cover employee compensation payments, and that it had transferred 

its right to receive $100 million of Toll Road Notes to the Mexican 

Government (apparently to pay back taxes). GMD also negotiated 

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with the holders of the Notes to restructure that debt, but by 

December these negotiations had failed.

On December 11, certain noteholders (hereafter the 

‘respondents’) accelerated the principal amount of their Notes, and, 

on December 12, filed suit for the amount due in the United States 

District Court for the Southern District of New York (petitioners had 

consented to personal jurisdiction in that forum). The complaint 

alleged that ‘GMD is at risk of insolvency, if not insolvent already;’

that GMD was dissipating its most significant asset, the Toll Road 

Notes, and was preferring its Mexican creditors by its planned 

allocation of Toll Road Notes to the payment of their claims, and by 

its transfer to them of Toll Road Receivables; and that these actions 

would ‘frustrate any judgment’ respondents could obtain. 

Respondents sought breach-of-contract damages of $80.9 million, 

and requested a preliminary injunction restraining petitioners from 

transferring the Toll Road Notes or Receivables. On that same day, 

the District Court entered a temporary restraining order preventing 

petitioners from transferring their right to receive the Toll Road 

Notes.

On December 23, the District Court entered an order in which 

it found that ‘GMD is at risk of insolvency if not already insolvent;’

that the Toll Road Notes were GMD’s ‘only substantial asset;’ that 

GMD planned to use the Toll Road Notes ‘to satisfy its Mexican 

creditors to the exclusion of [respondents] and other holders of the 

Notes’; that ‘[i]n light of [petitioners'] financial condition and 

dissipation of assets, any judgment [respondents] obtain in this 

action will be frustrated’; that respondents had demonstrated 

irreparable injury; and that it was ‘almost certain’ that respondents 

would succeed on the merits of their claim. . . . It preliminarily 

enjoined petitioners ‘from dissipating, disbursing, transferring, 

conveying, encumbering or otherwise distributing or affecting any 

[petitioner’s] right to, interest in, title to or right to receive or retain, 

any of the [Toll Road Notes].’ . . . The court ordered respondents to 

post a $50,000 bond. The Second Circuit affirmed. 143 F.3d 688 

(1998). We granted certiorari, 525 U.S. 1015 (1998).

Grupo Mexicano de Desarrollo, S. A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 

311-313, 119 S. Ct. 1961, 1965, 144 L. Ed. 2d 319, 327 (1999).

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Justice Scalia framed the issue: “This case presents the question whether, 

in an action for money damages, a United States District Court has the power to 

issue a preliminary injunction preventing the defendant from transferring assets 

in which no lien or equitable interest is claimed.”8

In Grupo, the preliminary injunction had become permanent before the 

Supreme Court considered the appeal, and the respondents considered the 

appeal therefore moot. In its analysis, the Supreme Court compared the “usual 

preliminary injunction” – to enjoin action that was sought to be declared 

“unlawful,” with the request by the noteholders – to enjoin an action that was 

valid and lawful pending the outcome of litigation: 

In the case of the usual preliminary injunction, the plaintiff 

seeks to enjoin, pending the outcome of the litigation, action that he 

claims is unlawful. If his lawsuit turns out to be meritorious--if he 

is found to be entitled to the permanent injunction that he seeks--

even if the preliminary injunction was wrongly issued (because at 

that stage of the litigation the plaintiff's prospects of winning were 

not sufficiently clear, or the plaintiff was not suffering irreparable 

injury) its issuance would in any event be harmless error. The final 

injunction establishes that the defendant should not have been 

engaging in the conduct that was enjoined. Hence, it is reasonable 

to regard the preliminary injunction as merging into the final one: 

If the latter is valid, the former is, if not procedurally correct, at least 

harmless. A quite different situation obtains in the present case, 

where (according to petitioners’ claim) the substantive validity of the 

final injunction does not establish the substantive validity of the 

preliminary one. For the latter was issued not to enjoin unlawful 

conduct, but rather to render unlawful conduct that would 

otherwise be permissible, in order to protect the anticipated 

judgment of the court; and it is the essence of petitioners' claim that 

8 Grupo Mexicano de Desarrollo, S. A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 310, 119 S. 

Ct. 1961, 1964, 144 L. Ed. 2d 319, 326 (1999)(emphasis added). 

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such an injunction can be issued only after the judgment is 

rendered. If petitioners are correct, they have been harmed by 

issuance of the unauthorized preliminary injunction--and hence 

should be able to recover on the bond--even if the final injunction is 

proper. It would make no sense, when this is the claim, to say that 

the preliminary injunction merges into the final one.9

Having determined that the failure of the petitioners to appeal the 

permanent injunction does not forfeit their claim that the preliminary injunction 

was wrongful, the Supreme Court then considered the question that is the issue 

squarely before this Court: Whether the Court has the authority to issue the 

preliminary injunction pursuant to F.R.Civ.P. 65.

The Judiciary Act of 1789 conferred on the federal courts 

jurisdiction over ‘all suits . . . in equity.’ §11, 1 Stat. 78. We have 

long held that ‘[t]he ‘jurisdiction’ thus conferred . . . is an authority 

to administer in equity suits the principles of the system of judicial 

remedies which had been devised and was being administered by 

the English Court of Chancery at the time of the separation of the 

two countries.’ Atlas Life Ins. Co. v. W. I. Southern, Inc., 306 U.S. 

563, 568 (1939). See also, e.g., Stainback v. Mo Hock Ke Lok Po, 

336 U.S. 368, 382, n. 26 (1949); Guaranty Trust Co. v. York, 326 

U.S. 99, 105 (1945); Gordon v. Washington, 295 U.S. 30, 36 (1935). 

‘Substantially, then, the equity jurisdiction of the federal courts is 

the jurisdiction in equity exercised by the High Court of Chancery 

in England at the time of the adoption of the Constitution and the 

enactment of the original Judiciary Act, 1789 (1 Stat. 73).’ A. Dobie, 

Handbook of Federal Jurisdiction and Procedure 660 (1928). ‘[T]he 

substantive prerequisites for obtaining an equitable remedy as well 

as the general availability of injunctive relief are not altered by [Rule 

65] and depend on traditional principles of equity jurisdiction.’ 11A 

C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure

§2941, p. 31 (2d ed. 1995). We must ask, therefore, whether the 

relief respondents requested here was traditionally accorded by 

courts of equity.

9 Id., at 527 U.S. 308, 315.

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Respondents do not even argue this point. The United States as 

amicus curiae, however, contends that the preliminary injunction 

issued in this case is analogous to the relief obtained in the equitable 

action known as a ‘creditor's bill.’ This remedy was used (among 

other purposes) to permit a judgment creditor to discover the 

debtor’s assets, to reach equitable interests not subject to execution 

at law, and to set aside fraudulent conveyances. [internal citations 

omitted] It was well established, however, that, as a general rule, a 

creditor's bill could be brought only by a creditor who had already 

obtained a judgment establishing the debt. [internal citations 

omitted] The rule requiring a judgment was a product, not just of 

the procedural requirement that remedies at law had to be 

exhausted before equitable remedies could be pursued, but also of 

the substantive rule that a general creditor (one without a judgment) 

had no cognizable interest, either at law or in equity, in the property 

of his debtor, and therefore could not interfere with the debtor's use 

of that property. As stated by Chancellor Kent: ‘The reason of the 

rule seems to be, that until the creditor has established his title, he 

has no right to interfere, and it would lead to an unnecessary, and, 

perhaps, a fruitless and oppressive interruption of the exercise of 

the debtor's rights.’ [internal citations omitted]. 

Grupo Mexicano de Desarrollo, S. A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 

320, 119 S. Ct. 1961, 1969, 144 L. Ed. 2d 319, 332 (1999).

The Supreme Court reviewed it’s decision in De Beers Consol. Mines, Ltd. 

v. United States, 325 U.S. 212 (1945), where United States sought a preliminary 

injunction restraining the defendants from removing their assets from this 

country pending adjudication of the merits of its complaint which sought 

equitable relief against alleged antitrust violations. In concluding that the

injunction was beyond the power of the District Court, the Supreme Court 

stated:

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‘[a] preliminary injunction is always appropriate to grant 

intermediate relief of the same character as that which may be 

granted finally,’ but that the injunction in that case dealt ‘with a 

matter lying wholly outside the issues in the suit.’ Id., at 220. We 

pointed out that ‘Federal and State courts appear consistently to 

have refused relief of the nature here sought,’ and we concluded:

To sustain the challenged order would create a precedent of 

sweeping effect. This suit, as we have said, is not to be 

distinguished from any other suit in equity. What applies to 

it applies to all such. Every suitor who resorts to chancery for 

any sort of relief by injunction may, on a mere statement of 

belief that the defendant can easily make away with or 

transport his money or goods, impose an injunction on him, 

indefinite in duration, disabling him to use so much of his 

funds or property as the court deems necessary for security 

or compliance with its possible decree. And, if so, it is difficult 

to see why a plaintiff in any action for a personal judgment in 

tort or contract may not, also, apply to the chancellor for a socalled injunction sequestrating his opponent's assets pending 

recovery and satisfaction of a judgment in such a law action. 

No relief of this character has been thought justified in the 

long history of equity jurisprudence. Id., at 222-223.

The statements in the last two sentences, though dictum, confirms 

that the relief sought by respondents does not have a basis in the 

traditional powers of equity courts.

Grupo Mexicano de Desarrollo, S. A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 

327, 119 S. Ct. 1961, 1972, 144 L. Ed. 2d 319, 336 (1999).

The requirement that the creditor obtain a prior judgment is 

a fundamental protection in debtor-creditor law--rendered all the 

more important in our federal system by the debtor's right to a jury 

trial on the legal claim. There are other factors which likewise give 

us pause: The remedy sought here could render Federal Rule of 

Civil Procedure 64, which authorizes use of state prejudgment 

remedies, a virtual irrelevance. Why go through the trouble of 

complying with local attachment and garnishment statutes when 

this all-purpose prejudgment injunction is available? More 

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importantly, by adding, through judicial fiat, a new and powerful 

weapon to the creditor’s arsenal, the new rule could radically alter 

the balance between debtor’s and creditor’s rights which has been 

developed over centuries through many laws--including those 

relating to bankruptcy, fraudulent conveyances, and preferences. 

Because any rational creditor would want to protect his investment, 

such a remedy might induce creditors to engage in a ‘race to the 

courthouse’ in cases involving insolvent or near-insolvent debtors,

which might prove financially fatal to the struggling debtor.

Grupo Mexicano de Desarrollo, S. A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 

331, 119 S. Ct. 1961, 1974, 144 L. Ed. 2d 319, 338 (1999).

After reviewing the legal history of pre-judgment attachment under early 

English law, the Supreme Court decided that “such a remedy was historically 

unavailable from a court of equity,” and would create a “new rule [that] could 

radically alter the balance between debtor’s and creditor’s rights.” Therefore, the 

Supreme Court held the District Court had no authority to issue a preliminary 

injunction preventing petitioners from disposing of their assets pending 

adjudication of respondents’ contract claim for money damages.” Id.

‘A federal court has no authority generally to freeze a 

defendant's funds to help ensure satisfaction of a judgment should 

the plaintiff prevail on an underlying legal claim.’ F.T. Int’l, Ltd. v. 

Mason, No. 00–5004, 2000 U.S. Dist. LEXIS 14601, at *3 (E.D.Pa. 

Oct. 5, 2000) (citing Grupo Mexicano De Desarrollo v. Alliance Bond 

Fund, 527 U.S. 308, 119 S.Ct. 1961, 144 L.Ed.2d 319 (1999)). ‘A 

court also has no authority in any event to freeze assets in an 

amount which exceeds that recoverable in the underlying action.’ 

F.T. Int’l, Ltd., 2000 U.S. Dist. LEXIS 14601 at *3 (citing Hoxworth 

v. Blinder, Robinson & Co., Inc., 903 F.2d 186, 198–99 (3d 

Cir.1990)). ‘Aside from the traditional showing necessary to obtain 

preliminary injunctive relief, a plaintiff may obtain a prejudgment 

freeze on a defendant's assets only if he has asserted a cognizable 

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equitable claim, has demonstrated a sufficient nexus between that 

claim and specific assets of the defendant which are the target of the 

injunctive relief, and has shown that the requested interim relief is 

a reasonable measure to preserve the status quo in aid of the 

ultimate equitable relief claimed.’ F.T. Int'l, Ltd., 2000 U.S. Dist. 

LEXIS 14601 at *3–4.

Akers v. Akers, No. 5:15-CV-2512, 2015 WL 4601155, at *2 (E.D. Pa. July 31, 

2015).

B. Strouse Greenberg Properties VI Limited Partnership et al. v. 

CW Capital Asset Management LLC et al. 

In support of its position that this Court has the authority to issue a 

preliminary injunction with respect to the Insurance Proceeds, the Plaintiff 

primarily relies on Strouse Greenberg Properties VI Limited Partnership et al. v. 

CW Capital Asset Management LLC et al., 442 F.Supp.2d 313 (E.D. La. 2006). 

The background of Strouse is as follows: Strouse Greenberg Properties VI 

Limited Partnership (Strouse Greenberg) and Oak Island II Limited Partnership 

(Oak Island Partnership) filed a complaint for declaratory judgment against 

CWCapital Asset Management LLC (CW Capital), successor in interest to CRIIMI 

MAE Services Limited Partnership, and LaSalle Bank National Association 

(LaSalle Bank). Strouse Greenberg was the owner of a 426-unit apartment 

complex located in New Orleans, Louisiana (Oak Island I). Oak Island 

Partnership was the owner of the Oak Island II Apartments (Oak Island II). CW 

Capital was the special servicer for LaSalle Bank, as trustee for the Registered 

Holders of Mortgage Capital Funding, Inc., Commercial / Multifamily Mortgage 

Pass-Through Certificates, Series 1997-MCI (the “Trust”). The Trust was the 

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owner and holder of two Multifamily Notes and Addendum to Multifamily Notes 

(the Strouse Note and the Oak Island Partnership Note), dated November 13, 

1996, in the principal amounts of $3,361,000 (the Oak Island I loan), and 

$3,840,000 (Oak Island II loan) made payable to The Patrician Financial 

Company. In addition to a mortgage on the property, the contracts assigned 

to the Trust all proceeds of the hazard and title insurance as additional 

collateral and provided the Trust with the exclusive option to hold all 

proceeds of the insurance policies. The mortgages each contain crosscollateralization and cross-default provisions such that security for one loan is 

security for the other and a default on one loan is a default on the other. 

Hurricane Katrina destroyed Oak Island I and II. 

Oak Island I was covered by a $5,000,000 FEMA Standard Flood 

Insurance Policy. Without the knowledge of the Trust, in November 

2005, Strouse Greenberg received 40 checks totaling $5,000,000 in 

compensation for damage to Oak Island I. All but one of the policies 

listed the Trust, as mortgagee/loss-payee. Thirty-eight of the checks 

($4,750,000) were two-party checks payable to Strouse Greenberg and 

the Trust’s agent; two checks in the amount of $250,000 were payable 

to only Strouse Greenberg. Without the Trust's authorization, Strouse 

Greenberg negotiated 39 of the 40 checks: 38 two-party checks and 

one check payable only to Strouse Greenberg. One additional check 

is missing. 

On February 1, 2006, Strouse Greenberg informed the Trust 

that it had received the checks. When Strouse Greenberg refused to 

turn over the proceeds to the Trust, the Trust declared both the Oak 

Island I and Oak Island II mortgage loans to be in default on February 

6, 2006, and accelerated both loans on February 27, 2006. The 

outstanding balance for the two loans is approximately $6.8 million. 

Strouse Greenberg and Oak Island Partnership filed a complaint for 

declaratory judgment, seeking a declaration that the defendants 1) are 

not entitled to accelerate the loans, 2) are not entitled to the insurance 

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proceeds, 3) are not entitled to a prepayment premium, and 4) are 

entitled to no more than payment of the balance of the Oak Island I 

loan less any monies held in escrow. CWCapital filed an answer on its 

own behalf and on behalf of the Trustee and the Trust (collectively the 

Trust), a counterclaim against Strouse Greenberg and Oak Island 

Partnership, and a third-party complaint against Samuel M. 

Switzenbaum as guarantor. The counterclaim and third-party 

complaint allege claims of breach of contract and civil conversion. The 

court denied the Trust’s motion for a temporary restraining order and 

held a hearing on the motion for a preliminary injunction.

Id., at 315.

The Trust argued that it was entitled to a preliminary injunction against 

Strouse Greenberg to preclude the borrower from spending the insurance 

proceeds or exposing the proceeds to other creditors without the knowledge or 

consent of the Trust. Strouse Greenberg contended that relevant loan document 

between it and the Trust, did not require that the insurance proceeds from the 

FEMA policies be delivered to the Trust because “Covenant 5 refers only to the 

Lexington Insurance Company policy and does not include the FEMA flood 

insurance policy, which Strouse Greenberg voluntarily purchased in addition to 

the coverage required by the contract.” Strouse Greenberg Props. VI LP v. CW 

Capital Asset Mgmt. LLC, 442 F. Supp. 2d 313, 316 (E.D. La. 2006). 

Alternatively, Strouse Greenberg argued that, “even if the loan documents 

authorize the Trust to hold the insurance proceeds, the Trust is required to apply 

the proceeds to the restoration of the damaged property because, as long as 

Strouse Greenberg continues to make payments on the notes and restoration of 

the damage is economically feasible, there is no ‘default’ which would trigger the 

cross-collateralization and cross-default provisions of the contract.” Id.

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The Trust argued that it would suffer irreparable harm if injunctive relief 

were not granted, and that it was entitled to the injunctive relief as “a widely 

recognized exception to the rule against issuing an injunction to preserve money 

damages is when the property restrained is the subject of the lawsuit.” 

‘A preliminary injunction is always appropriate to grant 

intermediate relief of the same character as that which may be granted 

finally.’ In re Fredeman Litigation, 843 F.2d 821, 825 (5th Cir. 1988)

(quoting DeBeers Consolidated Mines v. United States, 65 S.Ct. 1130, 

1134 (1987)). ‘[A]n injunction may issue to protect assets that are the 

subject of the dispute or to enjoin conduct that might be enjoined 

under a final order.’ Id. at 827. In each of the cases in which courts 

have restrained or enjoined the disbursement of funds, ‘the assets 

frozen were in some way the subject of the litigation.’ Id.

Strouse Greenberg Props. VI LP v. CW Capital Asset Mgmt. LLC, 442 F. Supp. 

2d 313, 320 (E.D. La. 2006).

After reviewing the evidence, the court found the loan documents required 

that Strouse Greenberg purchase the insurance, and the Lender, as attorney in 

fact for the Borrower, would collect and receive the insurance proceeds and apply 

the insurance proceeds, at Lender’s option, to the reconstruction of the property 

or to the loan balance. In addition to a mortgage on the property, the contracts 

assigned to the Trust all proceeds of hazard and title insurance as additional 

collateral and provided the Trust with the exclusive option to hold all proceeds 

of the insurance policies. Further finding the insurance proceeds were the 

subject to the dispute, the court granted the injunction as an appropriate 

remedy.

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C. Whether the Court has the Authority to Issue the Preliminary 

Injunction pursuant to F.R.Civ.P. 65?

As in Grupo Mexicano, this Motion for Preliminary Injunction presents the 

question whether, in an action for money damages, this Court has the power to 

issue a preliminary injunction preventing the defendant from transferring assets 

in which no lien exists and which alleged equitable interest is not the subject of 

the dispute.10

The Plaintiff declares that the “Insurance Proceeds in this case are related 

to the dispute, and an injunction against their dissipation is permissible. The 

very agreement giving rise to the Defendant’s pecuniary interests and capacity

to procure the Policy and receive the Insurance Proceeds is the Agreement that 

is the subject of this litigation. Even more fundamentally, the Insurance 

Proceeds represent the replacement value for the loss of the building structure 

that the Defendant warranted to the Plaintiff it would vacate without damage.”11

In Strouse Greenberg, the case relied on by the Plaintiff in support of its 

position, the lawsuit was brought by the Strouse Greenberg to determine the 

rights in the insurance proceeds. The court concluded, with ample evidence, the 

loan agreements provided the lender with a lien on the proceeds, expressly 

required the borrower to purchase the insurance, and granted to the lender sole 

10 Grupo Mexicano de Desarrollo, S. A. v. Alliance Bond Fund, Inc., 527 U.S. 308, 310, 119 S. 

Ct. 1961, 1964, 144 L. Ed. 2d 319, 326 (1999). 11 Plaintiff’s Memorandum in Support of Motion for Preliminary Injunction, Adv. Dkt. No. 8, pp. 

4-5. 

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control over the proceeds, to either rebuild or repay the loan, at its option. This 

express language is what the court relied on in finding that it had the power to 

adjudicate the preliminary injunction. 

Here, the Complaint seeks monetary damages for breach of the 

Management Agreement. No evidence was offered whereby the Plaintiff expressly 

required the Defendant to procure the insurance, or of any lien held by the 

Plaintiff in the Insurance Proceeds, or of Defendant’s express agreement to 

purchase the insurance for the benefit of the Plaintiff. Nor are the Insurance 

Proceeds the subject of the Complaint. Therefore, Strouse Greenberg does not 

support the granting of a preliminary injunction. 

IV. Conclusion

For the reasons set forth in Grupo Mexicano, I find this Court lacks the 

authority to issue a preliminary injunction preventing the Defendant from 

disposing of the Insurance Proceeds – if and when they are disbursed to the 

Defendant from the Court’s Registry - pending adjudication of the Plaintiff’s 

contract claim for money damages.

Because I find this Court lacks the power to issue the preliminary 

injunction as requested by the Plaintiff, I need not consider whether the Plaintiff 

as met the elements for the granting of a preliminary injunction as set forth in 

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Fed.R.Civ.P. 65 (which is incorporated into bankruptcy proceedings by operation 

of Fed.R.Bankr.P. 7065). 

For the reasons set forth above, the Court shall enter an Order denying 

Plaintiff’s Motion for Preliminary Injunction.

Date: August 1, 2016 __________________________________________

Jeffery A. Deller

Chief U.S. Bankruptcy Judge

Cm: Debtor, Counsel for the Debtor, Office of the United States Trustee, Counsel 

for the Defendant Park Restoration, LLC.

18

FILED

CLERK

U.S. BANKRUPTCY

COURT - WDPA 8/1/16 12:27 pm

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