Opinion ID: 3012927
Heading Depth: 2
Heading Rank: 2

Heading: The Proceedings in the Bankruptcy Court

Text: (Krystal I). On September 8, 1994, (approximately three weeks before the Vehicle Board rendered its decision), Krystal filed for Chapter 11 protection. Thereafter, on June 15, 1995, Krystal filed a Plan of Reorganization in which it provided for the sale of its GM franchise in order to raise funds to pay creditors. GM objected to the plan arguing that it had properly terminated the franchise agreement with Krystal pursuant to the terms of that agreement. The appropriate state agency had upheld the termination, and the Commonwealth Court had affirmed the agency’s determination that the termination was proper. Thus, according to GM, the franchise was not an asset of the estate available for sale in the bankruptcy proceedings. On October 24, 1995, Krystal filed an Amended Reorganization Plan and an Amended Disclosure Statement. Article V of the Disclosure Statement stated: Debtor also holds an Automobile Franchise Agreement with General Motors Corporation. However, the status of this franchise is now in litigation. General Motors terminated the franchise prior to the commencement of the case and the matter was in litigation at the time the Chapter 11 petition was filed. General Motors nevertheless proceeded with termination and the matter is now on appeal in the Commonwealth Court. Debtor takes the position, which is vigorously contested by General Motors, that this franchise agreement remains an asset of the case. GM responded by filing a separate objection to the plan and disclosure statement based upon its continuing contention that Krystal’s franchise was not an asset of the estate and could not be sold by Krystal or the Trustee to satisfy Krystal’s creditors. The Bankruptcy Court affirmed GM’s objections and ruled that the franchise had been validly terminated by GM. Accordingly, the court held that the franchise could 5 not be sold as part of the bankrupt’s estate. The District Court subsequently affirmed that ruling, and Krystal then appealed to us. We reversed. We held that inasmuch as Krystal had filed for bankruptcy before GM terminated the franchise agreement, GM’s termination of that agreement was a violation of the automatic stay imposed under § 362 of the Code. See, In Re Krystal Cadillac Oldsmobile GMC Truck, Inc., 142 F.3d 631 (3d Cir. 1998) (“Krystal I”).5