Court Opinion

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Opinions of the United
1998 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

4-23-1998

In Re: Krystal Cadillac
Precedential or Non-Precedential:

Docket 97-7117,97-7118

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Recommended Citation
"In Re: Krystal Cadillac" (1998). 1998 Decisions. Paper 86.
http://digitalcommons.law.villanova.edu/thirdcircuit_1998/86

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Filed April 23, 1998

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

Nos. 97-7117 and 97-7118

IN RE: KRYSTAL CADILLAC OLDSMOBILE GMC TRUCK,
INC., Debtor

KRYSTAL CADILLAC OLDSMOBILE GMC TRUCK, INC.;
LAWRENCE V. YOUNG

v.

GENERAL MOTORS CORPORATION
       Krystal Cadillac
       Oldsmobile
       GMC Truck, Inc.,
       Appellant in No. 97-7117

IN RE: KRYSTAL CADILLAC OLDSMOBILE GMC TRUCK,
INC., Debtor

KRYSTAL CADILLAC OLDSMOBILE GMC TRUCK, INC.;
LAWRENCE V. YOUNG

v.

GENERAL MOTORS CORPORATION
       Lawrence V. Young,
       Appellant in No. 97-7118

Appeal from the United States District Court
for the Middle District of Pennsylvania
(D.C. Civ. No. 96-cv-01614)
Argued
January 28, 1998

Before: MANSMANN, COWEN and ALITO, Circuit Judges.

(Opinion Filed April 23, 1998)

       William C. Cramer, Esquire
       Kathleen W. Cramer, Esquire
        (ARGUED)
       Suite 414
       Chambersburg Trust Building
       Chambersburg, PA 17201

       COUNSEL FOR APPELLANT
       KRYSTAL CADILLAC OLDSMOBILE
       GMC TRUCK, INC., in No. 97-7117

       Lawrence V. Young, Esquire
       Sara A. Austin, Esquire (ARGUED)
       Countess, Gilbert & Andrews
       29 North Duke Street
       York, PA 17401

       COUNSEL FOR APPELLANT
       LAWRENCE V. YOUNG In No.
       97-7118

       James A. Mollica, Jr., Esquire
       Mollica & Murray
       450 Trimont Plaza
       1305 Grandview Avenue
       Pittsburgh, PA 15211

                                  2
       Of Counsel:

       Carol H. Lesnek-Cooper, Esquire
       General Motors Corporation
       New Center One Building
       3031 West Grand Boulevard
       Detroit, MI 48232

       COUNSEL FOR APPELLEE
       GENERAL MOTORS CORP.

OPINION OF THE COURT

MANSMANN, Circuit Judge.

In this appeal involving bankruptcy law, we are asked to
decide whether a franchise agreement involving a vehicle
dealership had been terminated prior to the filing of the
bankruptcy petition. Because we find that the franchise
agreement was still in effect when the petition wasfiled, it
follows a fortiori that the vehicle franchise was an asset of
the bankruptcy estate. We further find that the post-
petition adjudications by the state administrative board and
the Pennsylvania Commonwealth Court, effectively ordering
the termination of the franchise agreement, were made in
violation of the automatic stay provision of 11 U.S.C.
S 362(a)(3) and, thus, were not binding on the bankruptcy
court. Accordingly, we will reverse the order of the district
court affirming the order of the bankruptcy court.

I.

The resolution of the dispute before us turns, in large
part, on certain events which occurred prior to the
commencement of the bankruptcy proceeding. We reiterate
the pertinent facts here.

Krystal Cadillac-Oldsmobile-GMC Truck, Inc. ("Krystal
Cadillac" or the "Debtor"), a licensed vehicle dealer in the
Commonwealth of Pennsylvania, owned and operated a
GMC dealership in Gettysburg, Pennsylvania.1 General
_________________________________________________________________

1. The president of Krystal Cadillac Oldsmobile GMC Trucks, Inc., Harry
Pappas, also owned and operated a Chrysler dealership at the same

                               3
Motors Corporation is a licensed vehicle manufacturer in
the Commonwealth of Pennsylvania and the appellee in this
consolidated appeal.2

Krystal Cadillac operated the GMC dealership pursuant
to the General Motors Corporation (Oldsmobile Division)
Dealer Sales and Service Agreement, which went into effect
on November 1, 1990. This franchise agreement was to
remain in effect until October 31, 1995, unless terminated
earlier and, as long as the dealer fulfilled its obligations
under the franchise agreement, it was assured the
opportunity to enter into a new dealer agreement at the
expiration date.3

In October of 1991, General Motors Acceptance
Corporation withdrew its line of credit financing.
Consequently, Krystal Cadillac found itself lacking the
necessary financing to purchase new GM vehicles. To no
avail, it made numerous attempts to obtain alternative
financing. On March 6, 1992, GM notified Krystal Cadillac
that it was in breach of the franchise agreement for failing
to maintain a line of credit and for failing to purchase new
vehicles. Based on the continued breach, GM gave notice
on May 10, 1993 that the franchise would terminate in
sixty days, that is, on July 13, 1993. At Krystal Cadillac's
_________________________________________________________________

location under the name, "Krystal Jeep-Eagle, Inc." On January 13,
1995, Krystal Jeep-Eagle filed a similar Chapter 11 bankruptcy
proceeding in the U.S. Bankruptcy Court for the Middle District of
Pennsylvania.

2. Krystal Cadillac, with Lawrence V. Young, the Chapter 11 Trustee in
Bankruptcy, filed separate appeals which we have consolidated
(collectively referred to as the "Appellants").

3. We find that the franchise agreement did not expire by its own terms
on October 31, 1995. At oral argument, counsel for the Debtor informed
us that the October 31, 1995 date was viewed as a renewal date, rather
than an expiration date, and therefore the franchise continued
indefinitely until one of the parties gave written notification of
termination. This unique arrangement was mandated because of the
extremely valuable assets involved in maintaining a viable GMC
dealership. Counsel for GM did not take issue with this assertion by the
Debtor's counsel.

                               4
request, GM extended the termination date to August 12,
1993.4

On August 11, 1993, the day before the franchise
agreement would have expired, Krystal Cadillac filed an
appeal with the Pennsylvania Board of Vehicle
Manufacturers, Dealers and Salespersons (the "Vehicle
Board"), requesting a hearing on the merits of the
termination. Approximately one year later, on August 2,
1994, the Vehicle Board conducted a hearing to review the
propriety of GM's notice of termination.5 Before the Vehicle
Board rendered its determination, Krystal Cadillac filed a
voluntary petition for relief under Chapter 11 of the
Bankruptcy Code on September 8, 1994. Thereafter, on
September 27, 1994, the Vehicle Board entered an Order
and Decision allowing GM to terminate the franchise
agreement. Subsequently, Krystal Cadillac appealed the
order of the Vehicle Board to the Pennsylvania
Commonwealth Court, which affirmed the Vehicle Board's
decision on November 6, 1995. The Pennsylvania Supreme
Court denied Krystal Cadillac's petition for allowance of
appeal. State Bd. of Vehicle Mfrs. v. Krystal Cadillac-
Oldsmobile-GMC Truck, Inc., 676 A.2d 1203 (Pa. 1996).

While this appeal was pending before the Pennsylvania
Commonwealth Court, the bankruptcy court appointed
Lawrence V. Young as the Chapter 11 Trustee. The Trustee,
in turn, filed a motion to sell the Debtor's assets, including
the GM franchise, free and clear of liens and
encumbrances. GM filed an objection to the Trustee's
motion to sell, contending that the franchise agreement had
been lawfully terminated and was not saleable or
assignable. The Debtor also objected to the Trustee's
motion to sell on the basis that it intended to file a
_________________________________________________________________

4. According to Article 13.2 of the franchise agreement, Krystal Cadillac
was entitled to ninety days notice, not sixty days as originally provided
by GM.

5. Initially, Krystal Cadillac and GM waived the 120-day requirement for
setting a hearing date and instead stipulated to a general continuance.
When notified of the August 2, 1994 hearing date, the Debtor requested
an additional continuance which was denied. Nonetheless, Krystal
Cadillac was represented by counsel at the hearing.

                               5
reorganization plan. On June 15, 1995, the bankruptcy
court conducted a hearing on the proposed sale, at which
time the court denied the Trustee's motion to sell. On that
same date, the Debtor filed a Plan of Reorganization with
the bankruptcy court, which provided for the sale of the
GM franchise as a means to pay creditors. GM filed an
objection to the Plan on July 10, 1995, arguing that since
the franchise had been validly terminated in the state
proceedings, the franchise was not an asset of the
bankruptcy estate available for sale. The Debtor filed an
amended reorganization plan on October 24, 1995, to
which GM lodged the same objection.

On December 27, 1995, the bankruptcy court entered an
order which required the Debtor to file, on or before
February 2, 1996, a motion to assume and assign the
General Motors franchise and to provide to the Trustee with
certain documentation to support such motion, including
an unredacted copy of the agreement of sale between the
Debtor and any potential purchaser, a copy of the transfer
application, evidence to support the potential purchaser's
financial abilities, and proof of the Debtor'sfinancial ability
to consummate its Plan of Reorganization.6 In its attempt to
comply with the court's December 27th order, the Debtor
filed a timely motion to assume and assign the GMC
dealership franchise, with documentation of itsfinancial
position vis-a-vis the Plan of Reorganization. On March 14,
1996, the Trustee filed a certification with the bankruptcy
court, indicating that the Debtor had failed to comply with
the terms of the court's December 27, 1995 order, and
requesting that the case be converted to a Chapter 7
proceeding.

The bankruptcy court held a hearing on April 1, 1996,
regarding the Debtor's compliance with the December 27th
order and to consider the merits of the Debtor's motion to
_________________________________________________________________

6. In the event the Debtor failed to comply with the December 27th
order, the bankruptcy court indicated it would enter an order dismissing
the case or converting it to a Chapter 7 proceeding. The Trustee's motion
to convert the case to a Chapter 7 proceeding, contingent upon the
Debtor not performing certain requirements pursuant to its
reorganization plan, was still outstanding at this time.

                               6
assume and assign the franchise. Subsequently, on April
15, 1996, the bankruptcy court entered an order denying
the Debtor's motion to assume and assign the franchise.
The court reasoned that the decisions rendered in the state
proceedings regarding the franchise termination precluded
the bankruptcy court from authorizing a sale of the
franchise. Both the Debtor and the Trustee filed motions for
reconsideration of the bankruptcy court's April 15, 1996,
order. In addition, the Trustee filed a motion to assume and
to sell the franchise agreement to a qualified buyer for the
price of Five Hundred Thousand Dollars ($500,000), which
GM opposed.

On July 26, 1996, the bankruptcy court entered an order
denying the motions for reconsideration and the Trustee's
motion to sell the franchise agreement. The court held that
the appeals to the Vehicle Board and to the Pennsylvania
Commonwealth Court clearly were filed by the Debtor and
hence constituted an action by the Debtor, not against
the Debtor. Since the automatic stay provisions of the
Bankruptcy Code applied only to actions against the
Debtor, they did not apply to the state proceedings. 7 The
court therefore concluded that the final termination of the
franchise agreement occurred by operation of law as a
result of the Vehicle Board's determination that GM had
properly effected a termination prior to the filing of the
bankruptcy petition. Based upon considerations of comity
and finality, the bankruptcy court held that the findings of
the Vehicle Board regarding the valid termination of the
franchise agreement precluded it from ruling on the
Debtor's ability to assume the franchise agreement since it
is clear under section 365 of the Bankruptcy Code, 11
U.S.C. S 365, that a debtor cannot assume a validly
terminated contract.

The Debtor and the Trustee appealed the bankruptcy
court's July 26, 1996, order to the district court on August
5, 1996. The district court affirmed the order of the
bankruptcy court on February 3, 1997, holding that the
_________________________________________________________________

7. The court further opined that in order to prevent the state proceedings
from going forward, the Debtor should have petitioned the court for an
injunction under section 105 of the Bankruptcy Code.

                               7
proceeding before the Vehicle Board did not fall within the
scope of the automatic stay provided by 11 U.S.C. S 362
and, therefore, the Vehicle Board's order allowing GM to
terminate the franchise agreement was valid and the
termination was effective. Accordingly, the district court
held the franchise agreement was not an asset of the
bankruptcy estate. The Debtor and the Trustee filed timely
but separate appeals, which we consolidated for purposes
of briefing and disposition.

The bankruptcy court exercised its jurisdiction over this
matter pursuant to 28 U.S.C. S 157(b). The district court
had jurisdiction to review the bankruptcy court's order
pursuant to 28 U.S.C. S 158(a). Our appellate jurisdiction
over the district court's order rests upon 28 U.S.C.
SS 158(d) and 1291. In undertaking our review, we stand in
the shoes of the district court, applying a clearly erroneous
standard to the bankruptcy court's findings of fact and a
plenary standard to that court's legal conclusions. In re
Siciliano, 13 F.3d 748, 750 (3d Cir. 1994) (citations
omitted); In re Brown, 951 F.2d 564, 567 (3d Cir. 1991).

II.

The outcome of this appeal hinges on whether the
franchise agreement should have been included as an asset
of the bankruptcy estate. The filing of a voluntary petition
for relief in bankruptcy pursuant to 11 U.S.C. S 301 creates
an estate in bankruptcy. 11 U.S.C. S 541(a). Generally, the
property of an estate in bankruptcy is comprised of all legal
or equitable interests of the debtor in property on the date
of commencement of the bankruptcy proceeding. 11 U.S.C.
S 541(a)(1).8 If, in fact, the franchise agreement was still in
force on the date Krystal Cadillac filed its bankruptcy
petition, the franchise agreement, by statute, became an
asset of the bankruptcy estate. In order to determine
whether the franchise agreement was still in effect on
August 11, 1993, the date Krystal Cadillac initiated this
bankruptcy proceeding, we look to the express language of
the agreement, as well as to the Pennsylvania Board of
_________________________________________________________________

8. The exceptions set forth in 11 U.S.C. SS 541(b) and (c)(2) to this
general rule are inapplicable here.

                               8
Vehicles Act, Pa. Stat. Ann., tit. 63, S 818.1 et seq. (West
1996), governing transactions between vehicle
manufacturers, dealers and salespersons. We turnfirst to
the franchise agreement.

In October 1990, the Debtor and GM executed the
Oldsmobile Division Dealer Sales and Service Agreement
("Oldsmobile Agreement"), which went into effect on
November 1, 1990. Paragraph Eleven sets forth the term of
the franchise agreement as follows:

       This Agreement shall expire on October 31, 1995, or
       ninety days after the death or incapacity of a Dealer
       Operator or Dealer Owner, whichever occurs first,
       unless earlier terminated. Dealer is assured the
       opportunity to enter into a new Dealer Agreement with
       Oldsmobile at the expiration date if Oldsmobile
       determines Dealer has fulfilled its obligations under
       this Agreement.

The Oldsmobile Agreement further provided, in Paragraph
Thirteen, for the incorporation of GM's Standard Provisions,
Dealer Sales and Service Agreement (GMMS 1013)
("Standard Provisions"), as part of the franchise agreement.
Article 13 of the Standard Provisions addresses breaches
and the remedy procedures. Where the breach has gone
uncorrected, Article 13.1.13 provides:

       If, however, Dealer's response does not demonstrate
       that the breach has been corrected, or explain the
       circumstances to [GM's] satisfaction, termination is
       warranted and [GM] may terminate this Agreement
       upon written notice to Dealer. Termination will be
       effective 60 days following Dealer's receipt of the notice.

Article 13.2, dealing with failure of performance by the
dealer,9 provides that the dealer be given no less than six
months to correct the failure. If the dealer does not correct
the failure within the time allotted, Article 13.2 provides
_________________________________________________________________

9. Failure of performance entails failure of the dealer to perform its
sales
or service responsibilities adequately, including those responsibilities
relating to customer satisfaction and training. Standard Provisions,
Article 13.2.

                               9
that GM may terminate the franchise agreement by giving
the dealer ninety days advance written notice.

Our inquiry does not end with an examination of the
terms of the franchise agreement, however, since the
agreement between the Debtor and GM is governed by the
Pennsylvania Board of Vehicles Act, Pa. Stat. Ann., tit. 63,
S 818.1 et seq. (West 1996 & 1997 Supp.). The Act provides
for the appointment of a Board of Vehicle Manufacturers,
Dealers and Salespersons, which is empowered to regulate
the licensing of vehicle salespersons, dealers and
manufacturers, and "to adopt, promulgate and enforce such
rules and regulations . . . as are deemed necessary and
proper to effectuate the provisions of [the Act] . . .", among
other things. Id. SS 818.4(1), (9). Under the Act as amended
in 1996, section 818.13 sets forth the provisions governing
termination of franchises.10 In particular, the Act states
that any manufacturer who terminates or fails to renew the
franchise of any vehicle dealer "unfairly, without due regard
to the equities of said dealer and without just cause," has
violated the Act. Id. S 818.13(a). Section 818.13(c) requires
the manufacturer to give the dealer a minimum of sixty
days advance notice of the termination or failure to renew
the franchise agreement, although subsection (c) allows a
shorter notice period in certain circumstances not present
here. Id. S 818.13(c). Of particular relevance to this case is
the subsection on appeals:

       At any time before the effective date of such
       termination or failure to renew, the dealer or
       distributor may appeal to the board for a hearing on
       the merits, and following due notice to all parties
       concerned, such hearing shall be promptly held. No
       such termination or failure to renew shall become
_________________________________________________________________

10. In 1996, the state legislature amended the Act by redesignating and
rewriting section 818.9(c) as section 818.13. (Former section 818.13
relating to the application for a license was renumbered as Pa. Stat.
Ann., tit. 63, S 818.22 in the 1996 amendment.) The substance of
section 818.9(c) has not been changed by the 1996 amendment, but
rather, reorganized into subparts with appropriate headings. For ease of
reference, we will refer to the pertinent portions of the amended section
818.13.

                               10
       effective until final determination of the issue by the
       board.

Id. S 818.13(d) (emphasis added). Finally, in the event the
dealer appeals the termination or failure to renew the
franchise, section 818.13(e) provides that the manufacturer
retains the burden of proving that just cause existed for
such termination or failure to renew. Id. S 818.13(e).

Reading the franchise agreement and the Act together, as
we must, we conclude that the franchise agreement was not
terminated, but rather, was in force on the date the Debtor
filed the petition in bankruptcy. The Act makes clear that
once a dealer has appealed the notice of termination, that
termination shall not become effective until the Vehicle
Board issues its decision. Indeed, counsel for GM conceded
at oral argument that Krystal Cadillac retained a viable
legal interest in the GM franchise at the time Krystal
Cadillac filed a notice of appeal with the Vehicle Board.
Moreover, the Vehicle Board had not rendered its decision
as of the date of the bankruptcy filing on August 11, 1993.
Accordingly, we find that termination of the franchise
agreement had not been effectuated on August 11, 1993,
and, therefore, that the franchise became an asset of the
bankruptcy estate on that date.

III.

We further conclude that the subsequent determinations
by the Vehicle Board and the Pennsylvania Commonwealth
Court, effectively ordering the termination of the franchise
agreement, were made in violation of the automatic stay
provisions of 11 U.S.C. S 362(a) and, thus, were not binding
on the bankruptcy court. Section 362(a) provides in
relevant part:

       (a) Except as provided in subsection (b) of thi s
       section, a petition filed under section 301, 302, or 303
       of this title, . . . operates as a stay, applicable to all
       entities, of--

       (1) the commencement or continuation, including
       the issuance or employment of process, of a
       judicial, administrative, or other action or

                               11
       proceeding against the debtor that was or could
       have been commenced before the commencement of
       the case under this title, or to recover a claim
       against the debtor that arose before the
       commencement of the case under this title;

       . . . .

       (3) any act to obtain possession of property of th e
       estate or of property from the estate or to exercise
       control over property of the estate;

11 U.S.C. SS 362(a)(1), (3).11 Subsection (b) of section 362
enumerates specific exceptions to the automatic stay
provisions, none of which applies here.12 11 U.S.C. S 362(b).
The legislative history to section 362 and our jurisprudence
leave no doubt that the scope of the automatic stay is
broad. In re Atlantic Bus. and Community Corp., 901 F.2d
325, 327 (3d Cir. 1990); Association of St. Croix
Condominium Owners v. St. Croix Hotel Corp., 682 F.2d
446, 448 (3d Cir. 1982). Explaining the purpose behind
section 362, Congress has stated:

       The automatic stay is one of the fundamental debtor
       protections provided by the bankruptcy laws. It gives
       the debtor a breathing spell from his creditors. It stops
       all collection efforts, all harassment, and all foreclosure
       actions. It permits the debtor to attempt a repayment or
       reorganization plan, or simply to be relieved of the
       financial pressures that drove him into bankruptcy.
_________________________________________________________________

11. We noted in Borman v. Raymark Indus., Inc. that the estate property
does not have to be in the debtor's possession for section 362(a)(3) to
apply. 946 F.2d 1031, 1035 n.2 (3d Cir. 1991). We thus concluded that
section 362(a)(3) applies to actions against third parties as well as
actions against the debtor, unlike subsection (a)(1) which ordinarily
stays
only actions against the debtor. Id. (citation omitted).

12. In its brief, GM argues that the continuation of the appeal before the
Vehicle Board constituted an enforcement of the Board's police or
regulatory power and thus fell within the exception to the automatic stay
provided under 11 U.S.C. S 362(b)(4). We do not find merit to this
argument. Clearly the proceeding before the Board was not commenced
by the Board to enforce regulatory powers. Rather, the appeal was filed
by the Debtor in response to GM's notice of termination.

                               12
       The automatic stay also provides creditor protection.
       Without it, certain creditors would be able to pursue
       their own remedies against the debtor's property. Those
       who acted first would obtain payment of the claims in
       preference to and to the detriment of other creditors.
       Bankruptcy is designed to provide an orderly
       liquidation procedure under which all creditors are
       treated equally.

H.R. Rep. No. 95-595, 95th Cong., 1st Sess. 340 (1977),
reprinted in 1978 U.S.C.C.A.N. 5963, 6296. The broad
reach of the automatic stay is further evidenced in the
term, "property of the estate," as defined in 11 U.S.C.
S 541(a).

The Debtor maintains that the termination of the
franchise is an act which resulted in GM taking possession
of an asset of the bankruptcy estate and, therefore, was
subject to the automatic stay provision in section 362(a)(3).
We agree with the Debtor that section 362(a)(3) applies to
the facts before us. GM's actions before the bankruptcy
court, i.e., objecting to the Trustee's Motion to Sell the
Debtor's Assets and the Motion to Assume and Assign as
well as to the Debtor's Plan of Reorganization, on the basis
that (1) the franchise agreement had been terminat ed and,
thus, was not the Debtor's asset and (2) the state court
determination to that effect was binding on the bankruptcy
court, constituted acts to take possession or control of
property of the bankruptcy estate.

We find support in In re Atlantic Bus. and Community
Corp., 901 F.2d 325 (3d Cir. 1990). There we considered
whether the debtor's possession of a tenancy at sufferance
in a radio station and transmitter created a property
interest as defined under section 541 and, as such, was
protected by the automatic stay provision in section
362(a)(3). Id. at 328. Informed by precedent in our sister
circuits, In re 48th St. Steakhouse, Inc., 835 F.2d 427 (2d
Cir. 1987), we concluded that a possessory interest in real
property fell within the purview of the bankruptcy estate
under section 541 and, therefore, was protected by the
automatic stay provisions of section 362. 901 F.2d at 328.
Thus we held the landlord's acts to evict the debtor and

                               13
dispossess it of its tenancy interest violated the automatic
stay provision of section 362(a)(3). Id.13

Like the landlord in Atlantic, GM undertook to dispossess
the bankruptcy estate of one of its assets. The fact that
Krystal Cadillac actually filed the notice of appeal to the
Vehicle Board does not alter this result. What is dispositive
here are the acts taken by GM after the bankruptcy petition
was filed, after having learned that the Debtor intended to
assign its interest in the GMC franchise as part of its
reorganization plan. We can come to no other conclusion
than that GM's actions before the Vehicle Board, the
Pennsylvania Commonwealth Court, and the bankruptcy
court were taken to obtain possession of the franchise
agreement, which we find to be an asset of the bankruptcy
_________________________________________________________________

13. In arriving at its decision, the bankruptcy court relied on United
States v. Inslaw, 932 F.2d 1467 (D.C. Cir. 1991). There the debtor
attempted to resolve a contract dispute with the Justice Department by
filing a complaint in the bankruptcy proceeding alleging a violation of
the
automatic stay provision. The court found that the debtor was trying to
remedy pre-petition acts of fraud, bias or harassment allegedly on the
part of the Justice Department by invoking the automatic stay
provisions. Id. at 1474. Because section 362(a) applies only to acts taken
after the petition is filed, the court held that the bankruptcy court
lacked
jurisdiction to resolve the contract dispute between Inslaw and the
Justice Department. Id. at 1475. In dicta, however, the court opined that
ensuring that the creditors do not destroy the bankruptcy estate in their
scramble for relief does not mean that every party who resists the
debtor's view of its rights violates section 362(a) if found in error by
the
bankruptcy court. Id. at 1473. The court therefore concluded that
"someone defending a suit brought by the debtor does not risk violation
of S 362(a)(3) by filing a motion to dismiss the suit, though his
resistance
may burden rights asserted by the [debtor]." Id. (citing Martin-Trigona v.
Champion Fed. Savings & Loan Ass'n, 892 F.2d 575, 577 (7th Cir.
1989)).

It is on this language that the bankruptcy court here relied in
concluding that GM did not violate the automatic stay when it
participated in the proceeding before the Vehicle Board. The bankruptcy
court failed to recognize that, in both Inslaw and Martin-Trigona, the
debtors were using the automatic stay provision to invoke the
bankruptcy court's jurisdiction over a non-core dispute. Here, the asset
itself is at the core of the dispute. Accordingly, we find that Inslaw and
Martin-Trigona are not relevant here.

                               14
estate. Accordingly, GM's acts to enforce the state court's
termination of the franchise agreement and to obtain
possession of the GMC franchise violated the automatic
stay provision of section 362(a)(3).14

IV.

In sum, we find that Krystal Cadillac's property interest
in a viable GMC franchise is an asset of the bankruptcy
estate and that the Trustee is entitled to cure any defects,
and to assume and assign the franchise for the benefit of
all of the Debtor's creditors. Accordingly, we will reverse the
judgment of the district court affirming the order of the
bankruptcy court.

A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit

_________________________________________________________________

14. Because we have concluded that the automatic stay provision of
section 362(a)(3) was violated, we need not consider the Appellants'
argument that the state proceedings were automatically stayed under
section 362(a)(1). In addition, General Motors argues that we are bound
under 28 U.S.C. S 1738 by the Pennsylvania Commonwealth Court's
decision regarding the applicability of the automatic stay provision.
However, the Pennsylvania Commonwealth Court held only that 11
U.S.C. S 362(a)(1) did not apply because the proceeding before the
Vehicle Board was commenced by, not against, the debtor. The
Pennsylvania Commonwealth Court did not decide whether 11 U.S.C.
S 362(a)(3), on which we base our decision, applies. Thus, we need not
and do not decide whether a decision of the Pennsylvania
Commonwealth Court on the applicability of 11 U.S.C. S 362(a)(3) would
bind us.

                               15