Kona Hawaiian Associates v. Federal Deposit Insurance (In Re Kona Hawaiian Associates)

ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION JON J. CHINEN, Bankruptcy Judge. Kona Hawaiian Associates, hereafter “debtor”, a Hawaii partnership and debtor in the instant Chapter 11 proceeding, lodged the instant Motion for Preliminary Injunction on December 30, 1983, along with a Complaint for Injunctive Relief and a Motion for Temporary Restraining Order, all of which seek to enjoin the defendants herein, hereafter “mortgagees”, from proceeding with actions in state court to foreclose on International Management Corporation and Pacific Holiday, Inc., the general partners of debtor, hereafter “general partners”. Mortgagees are the present holders of a first mortgage which was issued to secure a $7.5 Million loan to debtor in 1972. The promissory note evidencing the loan was signed by debtor and the general partners. Because of debtor’s default on the note, the mortgagees brought foreclosure action against debtor and the general partners in April 1983. Debtor filed bankruptcy in July 1983, which stayed the foreclosure proceedings against debtor. The mortgagees then filed a motion for summary judgment against debtor’s general partners, which action the debtor seeks to enjoin through this adversary proceeding. A hearing on the Motion for Preliminary Injunction was held before the undersigned Judge on January 9, 1984, at which time Ton Seek Pai and Gary Okuda represented debtors, Stephen Yamashiro represented the general partners, Jerrold Guben represented the mortgagees, and Susan Tius represented Bishop Estate. After argument by counsel, the Court took the matter under advisement for ruling after a pending Application for Approval of Sale of the subject property could be decided by the Court. The sale was subsequently approved rendering moot the motion for in-junctive relief. The Court has recently been informed that the sale has not closed as anticipated and that mortgagees have rescheduled *192 their motion for summary judgment in the state foreclosure action against the general partners. Mortgagees have requested that the Court enter its ruling on the pending Motion for Preliminary Injunction. The Court having reviewed the argument by counsel, the memoranda and records on file, recognizes the central question in this motion as whether the bankruptcy court can stay a proceeding against third parties/general partners of debtor. Although this Court has previously held that under certain circumstances creditors can be enjoined from pursuing the partners of debt- or, In re Airport Associates, Bk. No. 77-00339(1), (D.Hi. July 17, 1978), this ruling was reversed on appeal by the District Court for the District of Hawaii, In re Airport Associates, 462 F.Supp. 320 (D.Hi.1978). This Court is thus bound by the precedent in this District holding that the automatic stay protecting debtor cannot be extended to protect general partners of debt- or from foreclosure. Based on the foregoing, the Motion for Preliminary Injunction is hereby Denied.