Pennington v. Harvest Foods, Inc.

Donald PENNINGTON, et al. v. HARVEST FOODS,
INC.

95-732                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered October 14, 1996


1.   Motions -- motion to stay appeal -- granted as to separate
     appellants. -- Where the present action was "originally
     brought" by appellee rather than against it; where three of
     the original defendants counterclaimed against appellee, their
     counterclaim was dismissed, and they had appealed; and where
     separate appellants had no objection to the stay of their
     appeal, the supreme court granted appellee's motion to stay
     the appeal as to the separate appellants.

2.   Motions -- motion to stay appeal -- stay required if action
     was originally brought against debtor -- counterclaim not
     stayed when debtor counterclaims against plaintiff. -- When
     the debtor is the appellant, a stay is required if the action
     was originally brought against the debtor; when a debtor
     counterclaims against the plaintiff in initial proceedings,
     the counterclaim is not stayed by Title 11,  362, of the
     United States Bankruptcy Code because the proceeding is not
     "against" the debtor.  

3.   Motions -- motion to stay appeal -- no authority requiring
     stay of appeal of judgment in favor of appellee. -- The
     supreme court could find no authority interpreting Title 11,
      362, of the United States Bankruptcy Code in a manner
     requiring a stay of the appeal of the judgment in favor of
     appellee; although it might be said that the appeal in this
     case was "against" appellee, all of the authority of which the
     court was aware holds that the initial proceedings, and not
     the appeal, constitute the reference point for determining
     whether the action is one "originally brought" against the
     debtor.


     Motion to Stay Appeal granted in part; denied in part.
     Boswell, Tucker, Brewster & Hicks, by: Dennis J. Davis, for
appellants John Oldner; John Oldner, Inc.; and John Oldner
Consulting Services, Inc., d/b/a John Oldner & Associates.
     Dodds, Kidd, Ryan & Moore, by: Charles Gregory Alagood, for
appellants Joel Tumblson, Sr., and Soundra Tumblson.
     David H. Williams, for appellants Joel Tumblson, Jr., T.S.P.,
Inc., and Top Spread Potato, Inc.
     Wilson, Engstrom, Corum & Coulter, by:  Stephen Engstrom, Gary
D. Corum, and Nate Coulter, for appellee Harvest Foods, Inc.

     Per Curiam.
     Appellee Harvest Foods, Inc., has moved to stay the appeal of
Donald B. Pennington, et al., from a judgment in favor of Harvest
Foods, Inc.  The basis of the motion is  362 of Title 11 of the
United States Bankruptcy Code (Supp. II [1978]).  In support of an
earlier motion, Harvest Foods, Inc., supplied a copy of a United
States Bankruptcy Court order indicating that Harvest Foods, Inc.,
had filed a bankruptcy petition and was the debtor in an ongoing
proceeding before the Bankruptcy Court.
     Section 362 provides for an automatic stay of all proceedings
"against" the debtor.  In support of its motion, Harvest Foods,
Inc., cites Association of St. Croix Condominium Owners v. St.
Croix Hotel Corp., 682 F.2d 446 (3rd Cir. 1982), which contains
this language:

     In our view, section 362 should be read to stay all appeals
     and proceedings that were originally brought against the
     debtor, regardless of whether the debtor is the appellant or
     appellee.  Thus, whether a case is subject to automatic stay
     must be determined at its inception.  That determination
     should not change depending on the particular stage of the
     litigation at which the filing of this petition in bankruptcy
     occurs.

     In response to the motion for stay of the appeal, two of the
appellants, Joel Tumblson and Soundra Tumblson, contend, and we
agree, that the St. Croix case does not require a stay of an appeal
when the proceeding on appeal was "originally brought" by the
debtor.  In the St. Croix case, the action was one "originally
brought" against the debtor for eviction and damages.  The debtor
counterclaimed against the plaintiff for a monetary award and
prevailed.  Both parties appealed.  Both appeals were stayed.  The
opinion does not address the question whether the debtor's counter-
claim could be regarded as one "originally brought" by the debtor.
     In the case now before us, the situation is the reverse of
that presented in the St. Croix case.  The action was "originally
brought" by Harvest Foods, Inc., rather than against it, and three
of the original defendants, John Oldner, John Oldner, Inc., and
John Oldner Consulting Services, Inc., d/b/a John Oldner and
Associates (the Oldner appellants), counterclaimed against Harvest
Foods, Inc.  Their counterclaim was dismissed, and they have
appealed.  Unlike the Tumblsons, these appellants have no objection
to the stay of their appeal.  We grant the stay as to the appeal of
the Oldner appellants.
     When the debtor is the appellant, it is held that a stay is
required if the action was originally brought against the debtor. 
Farley v. Henson, 2 F.3d 273 (8th Cir. 1993); Cathey v. Johns-
Manville Sales Corp., 711 F.2d 60 (6th Cir. 1983).  When a debtor
counterclaims against the plaintiff in initial proceedings, the
counterclaim is not stayed by section 362, Merchants & Farmers Bank
of Dumas, Ark. v. United States of America,  122 B.R. 539 (E.D.
Ark. 1990), because the proceeding is not "against" the debtor.  
     We find no authority interpreting  362 in a manner requiring
us to stay the appeal of the judgment in favor of Harvest Foods,
Inc.  Although it might be said that the appeal in this case is
"against" Harvest Foods, Inc., all of the authority of which we are
aware holds that the initial proceedings, and not the appeal,
constitute the reference point for determining whether the action
is one "originally brought" against the debtor.
     Motion for stay granted in part and denied in part.