Creative Touch Interiors v. Dist. Ct. (Brown)

filed Chapter 11 bankruptcy. The district court stayed the action, finding that the 11 U.S.C. § 362 automatic bankruptcy stay applied and that the amount of the underlying obligation was uncertain because of the bankruptcy litigation. As to the automatic bankruptcy stay, the stay is generally applicable to the debtor only, not a guarantor. See In re PTI Holding Corp., 346 B.R. 820, 833-34 (Bankr. D. Nev. 2006); Edwards v. Ghandour, 123 Nev. 105, 113-14 & n.10, 159 P.3d 1086, 1091-92 & n.10 (2007) (explaining that the automatic bankruptcy stay does not apply to co- debtors and guarantors), abrogated on other grounds by Five Star Capital Corp. v. Ruby, 124 Nev. 1048, 1053-54, 194 P.3d 709, 712-13 (2008); Mfrs. & Traders Trust Co. v. Eighth Judicial Dist. Court, 94 Nev. 551, 556, 583 P.2d 444, 447 (1978) (holding that a guaranty is a contract separate from the underlying debt obligation), overruled on unrelated grounds by First Interstate Bank of Nev. v. Shields, 102 Nev. 616, 730 P.2d 429 (1986). As to the uncertainty of the underlying obligation in the bankruptcy case, the discharge or partial payment of the debt in bankruptcy by itself will not diminish the amounts owed by the guarantor, the district court has not made any findings or conclusions of law that the terms of the guaranty contract will be satisfied by payment or discharge through bankruptcy, and should the guarantor be required to satisfy the debtor's debt under the guaranty contract, the guarantor will be subrogated to the petitioner's rights in the bankruptcy. See In re Harvey Cole Co., 2 B.R. 517, 520 (Bankr. W.D. Wash. 1980) (noting that "the creditor thus has a right, unaffected by bankruptcy, to turn to the guarantor for satisfaction of a debt," and the guarantor then becomes subrogated to the rights of the creditor against the debtor).

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Accordingly, having considered the parties arguments and the appendices, we conclude that the district court improperly granted the stay, and we ORDER the petition GRANTED AND DIRECT THE CLERK OF THIS COURT TO ISSUE A WRIT OF MANDAMUS instructing the district court to vacate its order staying the litigation.

r4v-S" Dougla

(1.444•ss•••ss••s*41..

Saitta

cc: Hon. Brent T. Adams, District Judge Dubowsky Law Office, Chtd. Gunderson Law Firm Washoe District Court Clerk

SUPREME COURT OF NEVADA 3 (0) 1947A