Court Opinion

ID: 1010459
Source: CourtListenerOpinion
Date Created: 2013-07-04 20:11:49.955779+00
Date Added: 2024-06-11T15:27:07.615640
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
                FOR THE FOURTH CIRCUIT

In Re: G & L DRYWALL,                   
INCORPORATED,
                             Debtor.

E. BRUCE GREER, Trustee for G & L
Drywall, Incorporated,                         No. 02-1230
                 Plaintiff-Appellant,
                 v.
HARTFORD LIFE & ACCIDENT
INSURANCE COMPANY,
               Defendant-Appellee.
                                        
          Appeal from the United States District Court
            for the District of Maryland, at Baltimore.
                Catherine C. Blake, District Judge.
       (CA-01-3088-CCB, BK-00-60627-JS, AP-01-5079-JS)

                       Argued: April 1, 2003

                      Decided: April 30, 2003

   Before NIEMEYER, MOTZ, and GREGORY, Circuit Judges.

Affirmed by unpublished per curiam opinion.

                            COUNSEL

ARGUED: Edward Lee Blanton, Jr., EDWARD L. BLANTON, JR.,
P.A., Baltimore, Maryland, for Appellant. David Stanley Klein,
2               In Re: G & L DRYWALL, INCORPORATED
DAVID STANLEY KLEIN, L.L.C., Baltimore, Maryland, for Appel-
lee.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                              OPINION

PER CURIAM:

   E. Bruce Greer, as trustee for G & L Drywall, Inc., the debtor in
this Chapter 11 bankruptcy proceeding, commenced this adversary
action against Hartford Life & Accident Insurance Company
("Hartford") to hold Hartford in contempt of court for continuing to
prosecute a state court action against Greer individually, in violation
of 11 U.S.C. § 362(a), which stays all litigation against the debtor.
The bankruptcy court entered summary judgment against Greer
because Hartford’s state suit named Greer individually as the defen-
dant, not G & L Drywall, the debtor. On appeal, the district court
affirmed, and we now too affirm.

   G & L Drywall was formed as a Maryland corporation to carry on
the construction business. In October 1996, Maryland revoked G &
L Drywall’s corporate charter for the nonpayment of taxes. Under
Maryland law, when a corporate charter is forfeited, the directors of
the corporation become the trustees of the corporation’s assets for
purposes of liquidation until a court appoints a receiver. Md. Code
Ann., Corps. & Ass’ns § 3-515(a). Greer asserts that he is such a
trustee.

   In early 1998, Greer purchased a worker’s compensation insurance
policy, effective May 1, 1998, and a general liability insurance policy,
effective July 1, 1998, on behalf of G & L Drywall from Hartford in
order to continue G & L Drywall’s construction business and to com-
plete the construction of various structures it had begun. Later in
1998, Hartford canceled the two policies for the nonpayment of pre-
                In Re: G & L DRYWALL, INCORPORATED                      3
miums. After it audited G & L Drywall’s accounts, Hartford deter-
mined that G & L Drywall owed Hartford $47,216, an amount that
is not disputed.

   In October 1999, Hartford commenced an action against Greer
individually and trading as G & L Drywall, in the Circuit Court for
Harford County, Maryland. The complaint alleged that Greer was per-
sonally liable because G & L Drywall had become a sole proprietor-
ship under Maryland law when the corporate charter was forfeited in
1996.

   Greer, acting as trustee for G & L Drywall, filed a petition under
Chapter 11 of the Bankruptcy Code on August 24, 2000, and thereaf-
ter filed a suggestion of bankruptcy in the state court proceedings,
seeking a stay pending resolution of G & L Drywall’s bankruptcy
proceedings. Greer asserted in state court that he had become trustee
for G & L Drywall as a matter of law when the corporate charter was
forfeited and that he contracted with Hartford for the insurance poli-
cies in his status as trustee, not as an individual. Accordingly, he con-
tended that the state court was obligated to stay the proceeding there
pursuant to 11 U.S.C. § 362(a).

   The state court denied Greer’s motion for a stay, explaining that the
Maryland Code provides for the transfer of corporate assets to direc-
tors as trustees for the benefit of creditors once a corporate charter has
been forfeited, but only for the purpose of winding up the affairs of
the corporation. Because Hartford’s complaint against Greer alleged
that Greer had been engaged in more than just winding up the corpo-
ration’s affairs and continued to do business, including entering into
new contracts using the G & L Drywall name, the court held that
Greer would not be relieved of personal liability if Hartford proved
its allegations. Accordingly, the state court held that the stay provided
by 11 U.S.C. § 362(a), which was applicable only to G & L Drywall,
did not prevent Hartford from prosecuting the case against Greer indi-
vidually. After the state court denied Greer’s motion for a stay, Greer,
as an individual, filed a third-party claim for indemnity against him-
self as trustee for G & L Drywall.

  Greer, as trustee for G & L Drywall, commenced this adversary
proceeding in G & L Drywall’s bankruptcy proceedings against Hart-
4               In Re: G & L DRYWALL, INCORPORATED
ford, seeking a judgment holding Hartford in contempt of court for
continuing to pursue the state court action in violation of 11 U.S.C.
§ 362(a). The bankruptcy court entered summary judgment in favor
of Hartford, stating that "[t]he defendant has not violated the auto-
matic stay because the case proceeding in the Circuit Court for Har-
ford County is not against the debtor and the underlying claim
appears to have been incurred by Greer individually while trading as
G & L Drywall, Inc." On appeal, the district court affirmed the bank-
ruptcy court’s judgment.

   Greer now contends that the district court erred in refusing to hold
Hartford in contempt for continuing to prosecute the state court action
in violation of the automatic stay provision of 11 U.S.C. § 362(a). He
argues that he purchased the insurance from Hartford as a trustee for
G & L Drywall and that, as a trustee for G & L Drywall, he is pro-
tected by § 362(a). He also argues that his third-party claim against
himself as G & L Drywall will implicate the bankruptcy estate. We
find both arguments unpersuasive.

   The stay provision of § 362(a) provides that a bankruptcy petition
"operates as a stay, applicable to all entities, of . . . the commence-
ment or continuation, including the issuance or employment of pro-
cess, of a judicial, administrative, or other action or proceeding
against the debtor." 11 U.S.C. § 362(a)(1) (emphasis added). We
have previously stated that "the plain language of § 362 . . . provides
only for the automatic stay of judicial proceedings and enforcement
of judgments against the debtor or the property of the estate." Credit
Alliance Corp. v. Williams, 851 F.2d 119, 121 (4th Cir. 1988) (quota-
tion marks omitted). Because Greer individually is the defendant in
the state court proceeding, he is not protected by the bankruptcy of
G & L Drywall, who is the debtor. Although there is an as-yet-
unresolved dispute about whether Greer purchased the insurance in
his capacity as trustee or as a sole proprietor, continuation of the state
court’s action permits Hartford to make its case that Greer is person-
ally liable without creating any risk of a judgment against G & L Dry-
wall. On the one hand, if the state court rules that Greer was acting
as trustee for G & L Drywall, then it must dismiss Hartford’s action
against Greer individually. On the other hand, if the state court rules
that Greer was not acting as trustee, any resulting judgment against
                In Re: G & L DRYWALL, INCORPORATED                   5
Greer individually is not a judgment against Greer as trustee for G &
L Drywall, the debtor.

   The same reasoning would apply to Greer’s argument that his
third-party claim implicates the bankruptcy estate. A closer analysis
reveals the fallacy of this argument because the third-party defendant,
G & L Drywall, could never be liable. If Hartford’s action against
Greer as an individual succeeded, Greer individually would be liable
and G & L Drywall would not be liable. On the other hand, if Hart-
ford failed in its action against Greer as an individual because Greer
was acting as a trustee, Greer’s third-party claim against himself as
trustee for G & L Drywall would be moot. Thus, Greer cannot dem-
onstrate how a state court judgment imposing personal liability on
him — a necessary condition of which is the finding that he was not
acting as trustee for G & L Drywall — would in effect be a judgment
against G & L Drywall.

   Although we have previously recognized that a bankruptcy court
has the power to stay actions against a non-debtor, see, e.g., A. H.
Robins Co., Inc. v. Piccinin, 788 F.2d 994 (4th Cir. 1986), such a stay
is only appropriate in the "unusual situation" where the interests of
the debtor and the non-debtor are so intertwined that a judgment
against the non-debtor is, in effect, a judgment against the debtor.
This is not such a case, however. A judgment against Greer in the
state court will relieve G & L Drywall of any liability. And a judg-
ment in favor of Greer in the state court will moot any third-party
claim against the debtor. Thus, claims against Greer and G & L Dry-
wall are mutually exclusive, not intertwined as was the case in A. H.
Robins.

  Accordingly, the judgment of the district court is

                                                         AFFIRMED.