North County Jeep & Renault, Inc. v. General Electric Capital Corp. (In re Palomar Truck Corp.)
Opinion
lead Opinion
Palomar Truck Corporation, which operated a motor vehicle dealership, filed a voluntary Chapter 11 petition. A trustee was appointed. The Trustee met with a representative of North County Jeep and Renault, Inc. (“North County”), and agreed to sell the dealership to North County for $150,000. The trustee and North County agreed the dealership must remain open to preserve the new car franchises pending court approval of the sale. Palomar lacked the money to continue operating the business. North County agreed to operate the dealership while the Trustee obtained court approval of the sale. In return, the Trustee promised that the sale would not be subject to overbid.
The bankruptcy court decided to entertain overbids despite the trustee’s agreement to the contrary. The successful bidder, Sunroad Capital Corp., bid $495,000, and assumed operating responsibility for the dealership.
It is not disputed that if North County had not intervened the business would have closed, the franchise agreements would have been terminated and “presumably the value of the business would have been significantly reduced.” In re Palomar Truck Corp., 116 B.R. 169, 171 (Bankr. 9th Cir.1990).