Petition — Puerto Rico v. Commonwealth Oil Refining Co.
Supreme Court brief1980
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NOV % 1979
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IN THE SPE eee oer Kk 19 Mire |
Supreme Court of the United State
October Term, 1979
79-730
No. é
COMMONWEALTH OF PUERTO RICO AND
PUERTO RICO WATER RESOURCES AUTHORITY,
Petitioners
V.
COMMONWEALTH OIL REFINING COMPANY,
INC., ET AL,
Respondents
Petition For A Writ Of Certiorari To The
United States Court Of Appeals
For The Fifth Circuit
KENNETH R. WYNNE
2900 South Tower Pennzoil Place
Houston, Texas 77002
BENJAMIN RODRIGUEZ RAMON
Housing Investment Building
Suite 840
P. O. Box “SS”
Hato Rey, Puerto Rico 00919
Counsel for Petitioners
November 6, 1979
a8
Alpha Law Brief Co., One Main Plaza, No. 1 Main St., Houston, Texas 77002
TABLE OF CONTENTS
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1. by Predicating Venue Exclusively on the Location of
the Debtor’s Executive Offices, the Decision Below
Undermines the Basic Aim of Chapter XI to Reconcile
ee eee
2. This is One of the Largest, Most Visible Bankruptcies
in History and the Decision Below Both Affects a
Myriad of Interests in These Proceedings and Distorts
the Balance of Authorities as to Bankruptcy Venue in
eee
3. The Fifth Circuit Court of Appeals has Fundamentally
Misconstrued the Venue Provisions of the Bankruptcy
Act and Rules in Conflict With Its Own Prior De-
cisions and Those of Other Circuits ...............
INDEX OF AUTHORITIES
Anniston Soil Pipe Co. v. Central Foundry Co., 216 F.Supp.
473 (N.D. Ala.), aff'd per curiam, 329 F.2d 313 (Sth
Tee cei csncecececss
Bank of Elberton v. Swift, 268 F. 305 (Sth Cir. 1920)....
Boggs v. Blue Diamond Coal Co., 432 F.Supp. 19 (E.D.
SE EE
Burdick v. Dillon, 144 F. 737 (Ast Cir. 1906) ...........
Burlingham v. Crouse, 228 U.S. 459 (1913) .............
Continental Coal Corp. v. Roszelle Bros., 242 F. 243 (6th
ee eee ok ke pbb bese cce acc cee.
Dryden v. Ranger Refining & Pipe Line Co., 280 F. 257
10
12
19
A-1
Page
(5th Cir. 1922), cert. denied, 260 U.S. 726 (1922). .14, 15,17, 18
Guarantee Acceptance Corp. v. Fidelity Mortgage Investors,
re
14, 16
II
Page
In re Flexton Corp., 208 F.2d 869 (2d Cir. 1953)........ 14
In re Guanacevi Tunnel Co., 201 F. 316 (2d Cir. 1912)... 15
In re Hudik-Ross Co., 198 F.Supp. 695 (D.C.N.Y.), aff'd
sub nom. In re S.0.S. Sheet Metal Co. v. Hudik-Ross Co..,
roo e ge get Bs S|, Pers pert re re rr rr 14
In re Kerr’s Inc., 253 F.Supp. 742 (D.C.N.Y.), aff'd, 360
Fie. POO Gee Se PD obs Mix cen see CoO Vae ieee 14
In re Marine Aircraft Corp., 118 F.Supp. 844 (S.D.N.Y.
i: EES ee PE Ee rape te ene or ey aaa 16
In re L. F. Popeli Co., 221 F.Supp. 534 (D.C.N.Y.), aff'd
sub nom. L. F. Popell Co. v. Delta Air Lines, Inc., 323
a ee Ge SE on sh ee ee eee ee a ee 14
In re Portex Oil Co., 30 F.Supp. 138 (D.Ore. 1939), aff'd
sub nom. Clark Bros. Co. v. Portex Oil Co., 113 F.2d 45
CR Sess eae Rea OA ce chia ene wre bak 15
In re Pusey & Jones Co., 286 F. 88 (2d Cir. 1922), cert.
Ce ee es ee CEE ce ecb cee a eee cena 15
In re Transvision, Inc., 217 F.2d 243 (2d Cir. 1954), cert.
Ca, Se Wis Ne CE 3 cco chee AA eas 7
Kokoszka v. Belford, 417 U.S. 642 (1974) .............. 7
Lawrence v. Atlantic Paper & Pulp Corp., 298 F. 246 (5th
Cir. 1924), cert. denied, 266 U.S. 606 (1924) ......... 14
Riggs v. Island Creek Coal Co., 542 F.2d 339 (6th Cir.
| NE ee A ea), So ves te yt al 18
Shearin v. Cortez Oil Co., 92 F.2d 855 (5th Cir. 1937)... 15
sivaten ©. New, 263 US. S1B (IGRI) 2... cies ences: 7
Williams v. United States Fidelity & Guaranty Co., 236 US.
Bee SEE eet eo eee tate ae ee een Or ee 7
UNITED STATES STATUTES
Bankruptcy Act, § 2(a)(1) [11 U.S.C. $ 11(a)(1)] 2, 6, 12, 13, 16, 17
Bankruptcy Act, § 32(b)-(c) [11 U.S.C. § 55(b)-(c)] .... 3
pameritey Te P16. ois sk oe sien 2, 3,6, 10, 12, 13, 15, 16, 17
ER et FS Rei UN Mehra Went il icine. rel AA RA 2
eae Ee ro eA oa re eee 2
Oe Ayes OD 8a htc coe PhO eae ee 17,18
Oe Cr on ete ee eed ec ee 13
MISCELLANEOUS
Remington, A Treatise on the Bankruptcy Law of the United
SN ee CE ee ec Ce codak oc ieee oie 7
Report of the Judicial Conference of the United States, Com-
mittee on Jurisdiction and Venue (1951), 2 U.S. Code
Cree. Ot BP PU CUD oo breicc cha dcbuivees 18
S. Rep. No. 1830, 85th Cong., 2d Sess., 2 U.S. Code Cong.
ee i Bre eerie rr se: 18
Supreme Court of the Hnited States
October Term, 1979
| ae See eee er a
COMMONWEALTH OF PUERTO RICO AND
PUERTO RICO WATER RESOURCES AUTHORITY,
Petitioners
Vv.
COMMONWEALTH OIL REFINING COMPANY,
INC., ET AL,
Respondents
Petition For A Writ Of Certiorari To The
United States Court Of Appeals
For The Fifth Circuit
Petitioners, the Commonwealth of Puerto Rico and the
Puerto Rico Water Resources Authority, respectfully pray
that a writ of certiorari issue to review the judgment and
opinion of the United States Court of Appeals for the
Fifth Circuit entered in this proceeding on June 13, 1979.
OPINION BELOW
The opinion of the Fifth Circuit Court of Appeals is
reported at 596 F.2d 1239 (June 13, 1979) and under
2
No. 78-3019, slip op. at 5460 (Sth Cir. June 13, 1979).
The opinion of the District Court for the Western District
of Texas, San Antonio Division, is not reported. The
opinion of the Bankruptcy Court, District Court for the
Western District of Texas, San Antonio Division, is re-
ported at 4 Bankr. Ct. Dec. 589 (May 26, 1978). Copies
of all of these opinions appear in the Appendix attached
hereto.
JURISDICTION
The judgment of the Court of Appeals for the Fifth
Circuit was entered on June 13, 1979, a timely Petition
for Rehearing En Banc was denied on August 9, 1979,
and this Petition for Certiorari was filed within 90 days
of that date. This Court’s jurisdiction is invoked under
11 U.S.C. $47(c) and 28 U.S.C. § 1254(1).
QUESTIONS PRESENTED
1. What is a corporation’s “principal place of busi-
ness” for purposes of venue under Bankruptcy Rule
116(a)(2)?
2. To what extent are the interests of creditors and
non-debtor parties to be considered in establishing
venue in a Chapter XI brankruptcy proceeding?
STATUTORY PROVISIONS INVOLVED
l. AY pile: Act, § 2(a)(1) [11 U.S.C. § 11(a)
(1)]:
a. The Courts of the United States herein before
defined as courts of bankruptcy are hereby created
courts of bankruptcy and are hereby invested, with-
in their respective territorial limits as now estab-
3
lished or as they may be hereafter changed, with
such jurisdiction at law and in equity as will enable
them to exercise original jurisdiction in proceedings
under this Act, in vacation, in chambers, and dur-
ing their respective terms, as they are now or may
be hereafter held, to —
(1) Adjudge persons bankrupt who have had
their principal place of business, resided, or had
their domicile within their respective territorial
jurisdictions for the preceding six months, or for
a longer portion of the preceding six months than in
any other jurisdiction, or who do not have their
principal place of business, reside, or have their
domicile within the United States, but have property
within their jurisdiction, or in any cases transferred
to them pursuant to this Act;
. Bankruptcy Act, § 32(b)-(c) [11 U.S.C. § 55(b)-
(c)]:
b. Where venue in any case filed under this Act
is laid in the wrong court of bankruptcy, the judge
may, in the interest of justice, upon timely and
sufficient objection to venue being made, transfer
the case to any other court of bankruptcy in which
it could have been brought.
c. The judge may transfer any case under this Act
to a court of bankruptcy in any other district, re-
gardless of the location of the principal assets of
the bankrupt, or his principal place of business, or
his residence, if the interests of the parties will be
best served by such transfer.
. Bankruptcy Rule 116(a)(2), (b):
(a) Proper Venue.
(2) Corporation or Partnership. A petition by
or against a corporation or partnership may be filed
in the district (A) where the bankrupt has had its
4
principal place of business or its principal assets
for the preceding 6 months or for a longer portion
thereof than in any other district; or, (B) if there
is no such district, in any district where the bank-
rupt has property.
(b) Transfer of Cases; Dismissal or Retention
When Venue Improper.
(1) When Venue Proper. Although a petition is
filed in accordance with subdivision (a) of this
rule, the court may, after hearing on notice to the
petitioner or petitioners and such other persons as
it may direct, in the interest of justice and for the
convenience of the parties, transfer the case to any
other district. The transfer may be ordered at or
before the first meeting of creditors either on the
court’s Own initiative or on motion of a party in
interest but thereafter only on a timely motion.
(2) When Venue Improper. If a petition is filed
in a wrong district, the court may, after hearing
on notice to the petitioner or petitioners and such
other persons as it may direct, dismiss the case or,
in the interest of justice and for the convenience of
the parties, retain the case or transfer it to any
other district. Such an order may be made at or
before the first meeting of creditors either on the
court’s own initiative or on motion of a party in
interest but thereafter only on a timely motion.
Notwithstanding the foregoing, the court may with-
out a hearing retain a case filed in a wrong district
if no objection is raised.
STATEMENT OF THE CASE
This is a venue dispute in one of the largest bankruptcy
actions ever filed in the United States—the Chapter XI
arrangement proceedings of Commonwealth Oil Refining
Company and various of its subsidiaries (““(Corco”). Corco
5
is a massive refining and petrochemical company located
in the Commonwealth of Puerto Rico and is that island’s
largest private enterprise. In controversy is whether Cor-
co’s Chapter XI arrangement proceedings should be con-
ducted in San Antonio, Texas or in Puerto Rico.
Corco was incorporated in 1953 under the laws of the
Commonwealth of Puerto Rico and has developed and
maintained all of its physical operations in Puerto Rico
ever since that date. It is the cornerstone of “Operation
Bootstrap,” the industrialization program of Puerto Rico
fostered by the governments of both Puerto Rico and the
United States. All of Corco’s production, all of its phys-
ical assets (with an estimated replacement value of over
$1,000,000,000.00), over 95% of its employees and ‘the
vast majority of its sales are in Puerto Rico. In 1976,
after Tesoro Petroleum Corporation had successfully ten-
dered for a controlling interest in Corco, Tesoro moved
Corco’s executive offices to San Antonio where Tesoro
was headquartered, to facilitate a planned merger between
the two companies. The merger plan was soon dropped,
but Corco’s executive offices and some 70 Corco em-
ployees have anachronistically remained in San Antonio.
Corco conducts no business in San Antonio.
Corco commenced these proceedings in San Antonio
on March 2 and 3, 1978. On March 6, 1978, the Com-
monwealth of Puerto Rico (“the Commonwealth”) and
the Puerto Rico Water Resources Authority (“PRWRA”),
Puerto Rico’s only utility, which is dependent upon Corco
for fuel oil, objected to venue of these proceedings in
San Antonio and moved to transfer them to the United
States District Court for the District of Puerto Rico.
Following a four day evidentiary hearing in May, 1978,
6
the Bankruptcy Court for the Western District of Texas,
sitting in San Antonio, filed a Memorandum Opinion
holding that venue was proper in San Antonio and should
be retained there. The Commonwealth and PRWRA
promptly appealed. On August 25, 1978, the District
Court found that venue was not proper in San Antonio
but nevertheless affirmed the Bankruptcy Court’s decision
retaining venue in San Antonio. The Court of Appeals
for the Fifth Circuit reversed the District Court’s finding
that venue was improper in San Antonio and affirmed
retention of venue in San Antonio.
REASONS FOR GRANTING THE WRIT
1. BY PREDICATING VENUE EXCLUSIVELY
ON THE LOCATION OF THE DEBTOR’S EXE-
CUTIVE OFFICES, THE DECISION BELOW
UNDERMINES THE BASIC AIM OF CHAPTER
XI TO RECONCILE DEBTOR AND CREDITOR
INTERESTS.
The Fifth Circuit found venue to be proper in San
Antonio primarily because it decided that San Antonio
was Corco’s “principal place of business” pursuant to
Bankruptcy Rule 16(a)(2).’ The Fifth Circuit justified
its ruling by pointing to the presence of Corco’s executive
offices in San Antonio and assuming therefrom that it
would be “less disruptive” to Corco’s financial rehabil-
itation to maintain venue in San Antonio. In so doing,
the Court contorted the concept of “principal place of
business,” locating it in a city where Corco’s senior fi-
1. Rule 116(a)(2) implements Bankruptcy Act, § 2(a)(1) [11
U.S.C. § 11(a)(1)].
7
nancial officer testified the debtor does no business at all.*
Linking its approval of venue in San Antonio to its unique
notion of “principal place of business,” the Fifth Circuit
virtually ignored the great majority of Corco’s creditors
and parties in interest, in particular the Commonwealth
and the Official Creditors Committee, who requested a
transfer and whose interests would be served by a transfer
of this case to Puerto Rico.
The hallmark of bankruptcy jurisdiction has always
been the protection of the rights and interests of creditors,
as well as the rehabilitation of a debtor. Williams v.
United States Fidelity & Guaranty Co., 236 U.S. 549
(1915); Burlingham vy. Crouse, 228 U.S. 459 (1913).
See also Kokoszka v. Belford, 417 U.S. 642 (1974);
Straton v. New, 283 U.S. 318 (1931); Remington, A
Treatise on the Bankruptcy Law of the United States § 17
at 34-38 (1950). Protecting and serving the entire com-
munity of interests swept into a bankruptcy proceeding,
without undue coddling of the debtor, are essential prem-
ises of the Bankruptcy Act. Bank of Elberton v. Swift,
268 F. 305, 308 (Sth Cir. 1920); Remington, supra, § 17
at 37. A Chapter XI proceeding is not to rehabilitate a
debtor by “unduly prejudicing the rights of any interested
parties.” In re Transvision, Inc., 217 F.2d 243, 246 (2d
Cir. 1954), cert. denied, 348 U.S. 952 (1955). Bank-
ruptcy Rule 116(b)(1) relates venue to the “interest of
justice and the convenience of the parties,’ not of the
debtor alone.
Departing dramatically from these fundamental pre-
cepts the Fifth Circuit has derogated the rights and in-
2. “Q: Mr. Wetzel, is Corco engaged in business in San Antonio?
A: No, not to my knowledge. . . . Commonwealth Oi! Refin-
ing Company does not do business in San Antonio.” (Tr. 321)
8
terests of the creditors and other non-debtor parties for
the sake of a presumed convenience to the debtor, Corco.*
Entirely overlooked in the Court’s preoccupation with the
benefits it presumed will inure to Corco through venue in
San Antonio are the parties who have urged that venue
be transferred: the Government of Puerto Rico, the Se-
curities and Exchange Commission of the United States,
the Department of Energy of the United States, the Gov-
ernment Development Bank for Puerto Rico, all of Corco’s
bank creditors in Puerto Rico, PPG Industries (the cred-
itor with the largest claim in these proceedings), Trans-
ocean Gulf Oil Company (Corco’s largest trade creditor),
Corco’s employees’ union and, most significantly, the
Official Creditors Committee (charged with the fiduciary
obligation to represent all Corco’s unsecured creditors).
These parties represent a myriad of critical interests and,
as each has consistently maintained, those interests would
3. The Court’s presumption, from the presence of Corco’s execu-
tive offices in San Antonio, that venue there would promote Corco’s
financial rehabilitation is, itself, suspect. The record produced before
the Bankruptcy Court clearly indicates that Corco is geared to work,
to litigate and generally to promote its financial wellbeing in Puerto
Rico. As the Fifth Circuit observed:
[A]ll of its assets are there; all of its production takes place
there; 95% of its employees live there; 70% of its refined
products sales and 88% of its petrochemical sales are made in
Puerto Rico to entities phys ©a!!y located on the island (some of
the entities are headquartered elsewhere and the contracts for
the sales may be negotiated off-island); invoices are prepared
and distributed from Puerto Rico; all original records are kept
in Puerto Rico by virtue of Puerto Rican law; the debtor’s data
processing center is located in Puerto Rico; its audits are con-
ducted in Puerto Rico; stockholders’ and directors’ meetings are
held on the island; most of CORCO’s current litigation, which is
extensive with regard to both the number of suits and the dollar
amounts involved, is going on in Puerto Rican courts (the next
most utilized forum is New York); the majority of its creditors
are in Puerto Rico; and Puerto Rico is its place of incorporation.
596 F.2d at 1246.
9
be better protected if these proceedings were moved to
Puerto Rico.
The Commonwealth of Puerto Rico is a vivid example
of a creditor and vitally interested party whom the Fifth
Circuit’s perception of debtor convenience could adversely
affect. Corco has sued the Commonwealth of Puerto Rico
and its top officials in San Antonio as a part of these
proceedings.* That suit involves hundreds of millions of
tax dollars and affects the entire petrochemical industry
of Puerto Rico. If Corco rehabilitates itself by winning
that suit in a location where the defendants are ill-equipped
to defend themselves, it is no exaggeration to say the
Government of Puerto Rico could be bankrupted. In its
desire not to inconvenience Corco’s executives, the Fifth
Circuit has failed to evaluate the potential effects of its
venue determination, such as the litigation against the
Government of Puerto Rico, on the many parties other
than Corco involved in these Chapter XI bankruptcy
proceedings.
Corco is as well equipped to consumate a plan of
arrangement in 2uerto Rico as it is in San Antonio.* The
4. Commonwealth Oil Refining Company, Inc., et al v. Common-
wealth of Puerto Rico, et al, pending in the United States District
Court for the Western District of Texas, San Antonio Division, Bank-
ruptcy No. SA-78-BK-147, Adversary Proceeding No. 120. The law-
suit challenges the constitutionality of the Commonwealth’s oil excise
tax pursuant to Act No. 6 of March 27, 1975 (codified in pertinent
part at 13 L.P.R.A. §§ 4013, 4045A and 4060) and attacks the legality
of a set-off by the Commonwealth of sums allegedly owing by PR-
WRA to Corco. Although tentatively resolved by agreement, the out-
come is still subject to creditor objections and Court approval.
5. Not only do all of the tangible circumstances reflect Corco’s
ability to function effectively in court proceedings in Puerto Rico
(see footnote 3, supra), Corco’s Comptroller and Treasurer, the ex-
ecutive specifically charged with development of a plan of arrange-
ment, testified that Corco’s financial “thinking, planning and dealing”’
could continue just as well if these Chapter XI proceedings were
transferred to Puerto Rico. (Tr. 446)
10
benefits the Fifth Circuit divined to support its interpre-
tation of “principal place of business” are illusory. Simply
stated, the overall interests which the Bankruptcy Act and
Rules purport to serve are best served by having Corco
deal in bankruptcy where it has chosen to deal in business.
The notion of “principal place of business” under
Bankruptcy Rule 116, in light of the policy objectives of
Chapter XI, should embody a more even-handed con-
sideration of the interests of the creditors and other non-
debtor parties than is reflected in the decision below.
2. THIS IS ONE OF THE LARGEST, MOST VIS-
IBLE BANKRUPTCIES IN HISTORY AND
THE DECISION BELOW BOTH AFFECTS A
MYRIAD OF INTERESTS IN THESE PRO-
CEEDINGS AND DISTORTS THE BALANCE
OF AUTHORITIES AS TO BANKRUPTCY
VENUE IN SUBSEQUENT PROCEEDINGS.
The very size of this bankruptcy, the number of parties
involved in it, and the dimensions of the interests they are
seeking to protect, cloak the ultimate determination of
its venue with special import. Further, the concept of
“principal place of business” on which the decision below
is predicated is perpetuated in the Bankruptcy Act of
1978.° In view of the vast new powers which the new
Act vests in every Bankruptcy Court on the basis of
where a debtor has its “principal place of business,” the
decision below assumes enormous proportions.
Within the considerable ambit of interests affected by
the decision below, there should not be lost those of the
Commonwealth of Puerto Rico and its 3.3 million in-
habitants. The historical role of the Commonwealth in
6. 28 U.S.C. § 1472.
1]
the development of Corco’s oil refining and petrochemical
operations and the vital position Corco occupies in the
development of the economy of Puerto Rico cannot be
overemphasized.‘ Corco is a fundamental aspect of Puerto
Rican life. It is the source of much of Puerto Rico’s
energy and most of its fuel and petrochemicals. Corco’s
largest single customer is PRWRA, which provides elec-
trical power to an estimated 900,000 commercial, indus-
trial and residential customers, and in turn generates
revenues to Corco that range from $132,000,000.00 to
$182,000,000.00 per year.* Corco also provides most of
the other refined petroleum products and petrochemical
needs of Puerto Rican consumers.” Therefore, the people
of Puerto Rico literally depend upon Corco for their light,
heat, power, safety and transportation. The overwhelming
majority of Corco’s employees, customers, and creditors,
and a major portion of its sales and revenues are in
Puerto Rico.'’® In short, the continued economic viability
7. The Affidavit in Support of Objection to Venue and Motion to
Transfer submitted by Carlos Romero Barcelo, Governor of the Com-
monwealth of Puerto Rico, outlines in depth the symbiotic relation-
ship between the Commonwealth and Corco. The Governor stated:
The construction of Corco’s refinery was the first major industrial
project promoted by Puerto Rico pursuant to ‘Operation Boot-
strap,” a joint effort by the United States and Puerto Rico Gov-
ernments to promote the development of the Puerto Rico econ-
omy. Because the establishment of a petroleum refining industry
in Puerto Rico would provide a stable source of supply of res-
idual fuel oils for the generation of Puerto Rico’s electricity
needs by the Puerto Rico Water Resources Authority, as well
as the fuel and raw materials for other industries, refining was
to be the cornerstone of this program of the Commonwealth
Government for the development of the Puerto Rico economy.
8. Bankruptcy Opinion at 490. (All Bankruptcy Opinion refer-
ences are to Transcript pages. Those page numbers appear in brackets
in the Appendix.)
9. Id.
10. Bankruptcy Opinion at 486-90; Affidavit in Support of Ob-
jection to Venue and Motion to Transfer at 20-23.
12
of Corco is a prerequisite to a healthy and stable economy
in Puerto 1.ico.
The Commonwealth of Puerto Rico and numerous
other parties have substantial vested interests in this bank-
ruptcy. Their ability to protect those interests will be
significantly diminished if venue of these proceedings is
not moved to Puerto Rico. Furthermore, by virtue of the
size and visibility of this bankruptcy and the profound
precedential effect its venue determination will have under
the new Bankruptcy Act, the error of the decision below
rises to a level deserving of this Court’s attention and
correction.
3. THE FIFTH CIRCUIT COURT OF APPEALS
HAS FUNDAMENTALLY MISCONSTRUED
THE VENUE PROVISIONS OF THE BANK-
RUPTCY ACT AND RULES IN CONFLICT
WITH ITS OWN PRIOR DECISIONS AND
THOSE OF OTHER CIRCUITS.
a. The role and meaning of “principal place
of business” in the context of bankruptcy
venue.
The Bankruptcy Act, § 2(a)(1) [11 U.S.C. § 11(a)
(1)], governs venue in a Chapter XI proceeding.’ Prior
11. Section 2(a)(1) is phrased in terms of jurisdiction. However,
it has been settled for some time that this section relates primarily
to venue. Bass v. Hutchins, 417 F.2d 692, 694-95 (5th Cir. 1969);
In re Eatherton, 271 F.2d 199, 201-03 (8th Cir. 1959); Advisory
Committee Note on Bankruptcy Rule 116 (1976). Prior to the adopt-
ion of Bankruptcy Rule 116 (a)(2), the courts had difficulty de-
termining the “residence” or “domicile” of a corporation as a “‘per-
son” under § 2(a)(1), and often concluded that residence and domi-
cile must be identical in the instance of corporations for purposes of
that section. Rule 116(a)(2) set to rest any ambiguity by stating
that venue could only be filed where a corporation had its “principal
13
to 1973, Section 2(a)(1) was interpreted to limit the
venue of a corporate debtor to its principal place of busi-
ness.'* However, in 1973 Bankruptcy Rule 116(a)(2) ex-
plicitly included the location of a corporation’s principal
assets as an alternative basis for venue."*
In the case sub judice, the Bankruptcy Court found
Corco’s principal place of business to be in San Antonio.
The District Court reversed this finding and held that
Puerto Rico was the principal place of business. The
District Court finding was reversed by the Fifth Circuit,
which affirmed the original finding of the Bankruptcy
Court. The decision of the Fifth Circuit is erroneous and
conflicts with the meaning attributed to “principal place
of business” in numerous other decisions of the federal
courts of appeals.
place of business” or “principal assets.” See 1 Collier on Bankruptcy
§ 3.02(a) (vii) (15th ed. 1979). Section 1472 of the new Bank-
ruptcy Code, which relates to venue in Chapter XI filings, is modeled
after Section 2(a)(1) and perpetuates “principal place of business”
and place of “principal assets” as alternate sites for venue.
12. See authorities cited infra at 14-15.
13. Bankruptcy Rule 116 was adopted pursuant to the authority
granted to this Court in 28 U.S.C. § 2075. That section states:
The Supreme Court shall have the power to prescribe by gen-
eral rules, the forms of process, writs, pleadings, and motions,
in the practice and procedure in cases under Title 11.
Such rules shall not abridge, enlarge, or modify any substantive
right.
Such rules shall not take effect until they have been reported to
Congress by the Chief Justice at or after the beginning of a
regular session thereof but not later than the first day of May
and until the expiration of ninety days after they have been
thus reported.
Bankruptcy Rule 116 is made applicable to filings under Chapter XT
by virtue of Rule 11-13.
As to the impact of the Bankruptcy Rules on the Bankruptcy Act,
see Advisory Committee’s Introductory Note to the Preliminary Draft,
reprinted in 1976 Collier Pamphlet Edition, Bankruptcy Act and
Rules, Part II at 751-63.
14
The record adduced before the Bankruptcy Court is
uncontroverted that Puerto Rico is the location of Corco’s
physical plant, its producing activities and operations, and
its major property assets.’* In addition, the record shows
that Corco was incorporated in Puerto Rico, has always
transacted business there, deals there with its largest
single customer, PRWRA, and there effects the majority
of its sales and has most of its creditors.** On the other
hand, San Antonio is the location of Corco’s executive
offices.*®
Predicated as it is on these facts, the decision below
conflicts with the majority of circuit court opinions which
have analyzed “principal place of business” under the
Bankruptcy Act. The general rule is that a corporation
has its principal place of business where its physical
Operations are conducted and where its principal assets
are concentrated, in short, where is does its business.
Guarantee Acceptance Corp. v. Fidelity Mortgage In-
vestors, 544 F.2d 449 (10th Cir. 1976): In re Kerr’s Inc.,
253 F.Supp. 742 (D.C. N.Y.), aff'd, 360 F.2d 163 (2d
Cir. 1966); In re L. F. Popell Co., 221 F.Supp. 534
(D.C. N.Y.), affd sub nom., L. F. Popell Co. v. Delta
Air lines, Inc., 323 F.2d 50 (2d Cir. 1963); In re Hudik-
Ross Co., 198 F.Supp. 695 (D.C. N.Y.), aff'd sub nom.,
In re S.0.S. Sheet Metal Co. v, Hudik-Ross Co., 297 F.2d
32 (2d Cir. 1961); In re Flexton Corp., 208 F.2d 869
(2d Cir. 1953); Lawrence v. Atlantic Paper & Pulp
Corp., 298 F. 246 (Sth Cir. 1924), cert. denied, 266
U.S. 606 (1924); Dryden v. Ranger Refining and Pipe
Line Co., 280 F. 257 (Sth Cir. 1922), cert. denied, 260
14. Bankruptcy Opinion at 477, 489.
15. Bankruptcy Opinion at 477, 487-90.
16. Bankruptcy Opinion at 477-78.
15
U.S. 726 (1922); In re Pusey & Jones Co., 286 F. 88
(2d Cir. 1922), cert. denied, 261 U.S. 623 (1922); Con-
tinental Coal Corp. v. Roszelle Bros., 242 F. 243 (6th
Cir. 1917). A minority of decisions have, when a com-
pany’s plant operations or property are separated from
its management, looked to the place from which
the “supreme direction and command” of the company
emanates. Jn re Portex Oil Co., 30 F.Supp. 138 (D. Ore.
1939), aff'd sub nom., Clark Bros. Co. v. Portex Oil Co.,
113 F.2d 45 (9th Cir. 1940); Shearin v. Cortez Oil Co.,
92 F.2d 855 (Sth Cir. 1937): In re Guanacevi Tunnel
Co., 201 F. 316 (2d Cir. 1912); Burdick v. Dillon, 144
F. 737, 738 (1st Cir. 1906).
The decision below aptly notes this difference of ap-
proach, 596 F.2d at 1295, including within the Fifth Cir-
cuit. Compare Shearin v. Cortez Oil Co., supra, with Dry-
den v. Ranger Refining & Pipeline Co., supra. Neverthe-
less, the decision below vitiates the holding in Dryden and
directly conflicts with the majority of cases in the other
circuits in tying principal place of business inextricably
and exclusively to the location of executive offices.
The decision below, however, casually dismisses the
relevance of prior case law in its own circuit and in the
circuits of other federal courts of appeals by pointing to
the adoption of Bankruptcy Rule 116. The decision states
that Rule 116(a)(2)’s inclusion of the location of a cor-
poration’s principal assets as an alternate site for venue
obviates the necessity “to choose between the places of
production and management.” 596 F.2d at 1245. Yet,
Rule 116(a)(2) does not offer a choice for venue be-
tween the place of production and the place of.manage-
ment; the choice is between where the debtor corporation
“has had its principal place of business or its principal
16
assets.” In many instances, as here, a corporation will
have its principal place of business and its principal assets
in the same place. Also as here, a temporary relocation
of its management, to serve corporate purposes unrelated
to the conduct of its business, such as to facilitate a merger
with another company, should not alter the court’s per-
ception of the place where the corporation principally
does its business.
Adoption of Bankruptcy Rule 116(a)(2) did not
change the meaning of “principal place of business” from
that applied under Section 2(a)(1) of the Bankruptcy
Act.'' The decision below holds that whenever the loca-
tion of a corporation’s principal assets is separate from
that of its executive offices, no matter how remote from
the company’s operations those offices are, the location
of that corporation’s executive offices presumptively is its
principal place of business. Such a construction of Rule
116(a)(2) is unwarranted, departs from earlier interpre-
tations of “principal place of business” and detracts from
the fundamental objectives of the bankruptcy laws.
Specifically, the Fifth Circuit’s construction of Rule
116(a)(2) is inconsistent with the Tenth Circuit’s recent
holding in Guarantee Acceptance Corp. v. Fidelity Mort-
gage Investors, supra, which involved the alternative
choice of venue in a Chapter X proceeding, pursuant
to Rule 10-114(a)(1), between principal place of busi-
ness and location of principal assets. See also In re Marine
Aircraft Corp., 118 F.Supp. 844 (S.D.N.Y. 1954). The
Court in Guarantee Acceptance Corp., supra, citing the
17. Indeed, a major reason for the adoption of Rule 116(a)(2)
was to resolve ambiguity that had existed under Section 2(a)(1)
of the Bankruptcy Act as to the significance of “domicile” and “res-
idence” in the case of a corporation or partnership. See footnote 11,
supra.
17
opinion of the Fifth Circuit in Dryden v. Ranger Refining
& Pipeline Co., supra, stated:
[I]t may be said that the corporate headquarters and
offices are not necessarily the principal place of busi-
ness of the corporation. [Citations omitted.] The
determination to be made is one of fact as to where
in the main, the corporation does its business. 544
F.2d at 452.
In the decision below the Fifth. Circuit nexer made suck .
a determination. The assumption was that Rule 116(a)
(2) embraces a different standard for the determination
of “principal place of business” than the section to which
that rule applies, Section 2(a)(1) of the Bankruptcy Act.
The interpretation given to the term “principal place of
business” in the decision below is based upon a fund-
amentally erroneous view of the effect of the adoption of
Rule 116 and is inconsistent with the meaning attributed
to that phrase in the great majority of bankruptcy cases
which have considered it.
b) The role of diversity jurisdiction decisions in
defining “principal place of business.”
The decision below concludes that “principal place of
business” may have a different meaning for diversity juris-
diction purposes'[28 U.S.C. § 1332(c)] than it has under
the Bankruptcy Act. Accordingly, the Fifth Circuit de-
cided that precedents as to the meaning of “principal
place of business” under the federal diversity statute
(which were contrary to the Court’s interpretation of that
term ‘in the decision below) were irrelevant. 596 F.2d
at 1247 n.17. Yet. the key authority relied upon in the
18
interpretation of “principal place of business” in Anniston
Soil Pipe Co. v. Central Foundry Co., 216 F.Supp. 473
(N.D. Ala.), aff'd per curiam, 329 F.2d 313 (5th Cir.
1964), a diversity jurisdiction case, was the Fifth Cir-
cuit’s decision in Dryden v. Ranger Refining & Pipeline
Co., supra, heretofore that circuit’s foremost bankruptcy
venue decision. In addition, the Sixth Circuit has held
that there is no essential difference between the statutory
standard for the meaning of “principal place of business”
in 28 U.S.C. § 1332(c) and under the Bankruptcy Act.
Riggs v. Island Creek Coal Co., 542 F.2d 339, 341 (6th
Cir. 1976); see also Boggs v. Blue Diamond Coal Co.,
432 F.Supp. 19 (E.D. Tenn. 1977).
The Fifth Circuit’s new position that diversity juris-
diction precedent is irrelevant for purposes of determining
“principal place of business” under the venue provisions
of the Bankruptcy Act is repudiated by the legislative
history of 28 U.S.C. § 1332(c). That statute utilizes
“principal place of business” because of that concept’s
familiarity through the case law under the Bankruptcy
Act. See Report of the Judicial Conference of the United
States, Committee on Jurisdiction and Venue (1951),
reported at 2 U.S. Code Cong. & Ad. News 3114, 3132-
34 (1958); S.Rep. No. 1830, 85th Cong., 2d Sess., re-
printed in 2 U.S. Code Cong. & Ad. News 3099, 3101-
02 (1958).
19
CONCLUSION
For these reasons, a writ of certiorari should issue to
review the judgment and opinion of the Fifth Circuit.
Respectfully
; NE
2900 South Tower aah Place
Houston, Texas 77002
(713) 223-2900
BENJAMIN RODRIGUEZ RAMON
Housing Investment Building
Suite 840
P. O. Box “SS”
Hato Rey, Puerto Rico 00919
Counsel for Petitioners
November 6, 1979
CERTIFICATE OF SERVICE
I hereby certify that three copies of the above and fore-
going have been served on each of the following parties
by placing the same, postage prepaid, certified mail, return
receipt requested, in the United States Mail, on this the
sixth day of November, 1979.
Sheinfeld, Maley & Kay
2130 Two Shell Plaza
Houston, Texas 77002
Rochelle, King & Balzersen
1435 Republic National Bank Building
Dallas, Texas 75201
ee
20
George J. Wade
Shearman & Sterling
One Citicorp Center
153 E. 53rd Street
New York, New York 10022
James G. Ulmer, Esq.
Baker & Botts
3000 One Shell Plaza
Houston, Texas 77002
Burleson Smith, Esq.
Cox & Smith, Incorporated
600 National Bank of Commerce Building
San Antonio, Texas 78205
Howard C. Buschman, III, Esq.
Wilkie, Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10027
Patrick H. Swearingen, Jr., Esq.
Matthews, Nowlin, McFarlane & Barrett
1500 Alamo National Bank Building
San Antonio, Texas 78205
John Tower White, Esq.
Wender, Murase & White
400 Park Avenue
New York, New York 10022
Bond Davis, Esq.
Gresham, Davis, Gregory, Worthy & Moore
1800 Frost Bank Tower
San Antonio, Texas 78205
L. E. Dubon, Esq.
Dubon, Gonzalez & Berrios
Banco de Ponce Building, 15th Floor
GPO Box 6123
San Juan, Puerto Rico 00936
21
Vincente Zayas Puig, Esq.
Baragano, Arzucga & Zayas
P. O. Box 4191-S
San Juan, Puerto Rico 00905
Francis & Doval
GPO Box CH
San Juan, Puerto Rico 00936
Escribano, Carreras, Aceuedo,
Perez & Varela
212 Mayaguez Street, Suite 3-B
Hato Rey, Puerto Rico 00917
E. Delgado Roque
GPO Box 5028
San Juan, Puerto Rico 00136
Anthony V. Ponzio, Esq.
United States Securities and Exchange
Commission
219 S. Dearborn Street
Chicago, Illinois 60604
James T. Eichstaedt, Esq.
Chief Counsel
Div. of Corporate Regulations
Securities and Exchange Commission
500 N. Capitol St.
Washington, D.C. 20549
Michael Paige, Esq.
Assistant General Counsel
U.S. Department of Energy
Washington, D.C. 20461
Barbara Allen Babcock
Assistant Attorney General
Civil Division
Department of Justice
Washington, D.C. 20530
22
Robert Baker
c/o Commonwealth Oil Refining Company,
Inc.
8626 Tesoro Drive
San Antonio. Texas 78217
Jack Hebdon, Esq.
Groce, Locke & Hebdon
2000 Frost Tower
San Antonio, Texas 78205
Joe Warren Jones, Esq.
615 National Bank of Commerce Bldg.
San Antonio, Texas 78205
Solicitor General
Department of Justice
Washington, D.C. 20530
A-1
APPENDIX A
UNITED STATES COURT OF APPEALS
Fifth Circuit
Office of the Clerk
Edward W. Wadsworth Tel. 504-589-6514
Clerk 600 Camp Street
New Orleans, La. 70130
August 9, 1979
TO ALL PARTIES LISTED BELOW:
NO. 78-3019—In the Matter of: Commonwealth Oil Re-
fining Co., Inc.
Commonwealth, etc. v. Commonwealth,
et al
Dear Counsel:
This is to advise that an order has this day been en-
tered denying the petition( ) for rehearing, and no
member of the panel nor Judge in regular active service
on the Court having requested that the Court be polled
on rehearing en banc (Rule 35, Federal Rules of Ap-
pellate Procedure; Local Fifth Circuit Rule 16) the pe-
tition( ) for rehearing en banc has also been denied.
See Rule 41, Federal Rules of Appellate Procedure for
issuance and stay of the mandate.
Very truly yours,
Edward W. Wadsworth, Clerk
By: /s/ SALLY HAYWARD
Deputy Clerk
i a a,
A-2
cc: Mr. Benjamin R. Ramon
Messrs. Kenneth R. Wynne
John T. Arnold
Mr. Robert C. Maley, Jr.
Mr. James C. Ulmer
Mr. George J. Wade
Messrs. J. Burleson Smith
R. Laurence Macon
David C. Spoor
Mr. Will M. Kahn
B-1
APPENDIX B
UNITED STATES COURT OF APPEALS
For The Fifth Circuit
No. 78-3019
D. C. Docket No. CA SA 78 CA 223
In the Matter of: COMMONWEALTH OIL
REFINING CO., INC., Bankrupt.
COMMONWEALTH OF PUERTO RICO and
PUERTO RICO WATER RESOURCES AUTHORITY,
Appellants, Cross-Appellees,
versus
COMMONWEALTH OIL
REFINING CO., INC., ET AL.,
Appellees, Cross-Appellants.
Appeal from the United States District Court for the
Western District of Texas
Before COLEMAN, GODBOLD and INGRAHAM,
Circuit Judges.
JUDGMENT
This cause came on to be heard on the transcript of
the record from the United States District Court for the
Western District of Texas, and was argued by counsel;
ON CONSIDERATION WHEREOF, It is now here
ordered and adjudged by this Court that the judgment of
the said District Court in this cause be, and the same is
hereby, affirmed;
B-2
It is further ordered that the appellants pay to the ap-
pellees the costs on appeal, to be taxed by the Clerk of
this Court.
June 13, 1979
ISSUED AS MANDATE:
C-1
APPENDIX C
In the Matter of: COMMONWEALTH OIL
REFINING CO., INC., Bankrupt
COMMONWEALTH OF PUERTO RICO
and Puerto Rico Water Resources Authority,
Appellants Cross-Appellees,
V.
COMMONWEALTH OIL REFINING
COMPANY, INC., et al., Appellees Cross-Appellants.
No. 78-3019
United States Court of Appeals,
Fifth Circuit.
June 13, 1979.
Rehearing and Rehearing En Banc
Denied August 9, 1979.
Debtor, a company engaged in the business of opera-
ting petroleum refinery and petrochemical facilities, filed
a Chapter XI petition for reorganization in the San Anto-
nio Division of the Western District of Texas. The Gov-
ernment of Puerto Rico and the Puerto Rico Water Re-
sources Authority objected to venue and moved to trans-
fer the proceedings to the United States District for the
District of Puerto Rico. The United States District Court
for the Western District of Texas, at San Antonio, Adrian
A. Spears, Chief Judge, affirmed the bankruptcy court’s
denial of the transfer motions, and movants appealed.
The Court of Appeals, Godbold, Circuit Judge, held
that: (1) bankruptcy court was not clearly erroneous in
locating the debtor’s principal place of business in San
C-2
Antonio, where, inter alia, the debtor’s corporate struc-
ture demonstrated that it managed most of its affairs
from San Antonio, even though production is centered
in Puerto Rico, and (2) bankruptcy court, after con-
cluding that venue was proper in San Antonio, did not
abuse its discretion in refusing to transfer the case to
Puerto Rico, as the convenience of the parties and the
interest of justice militated against a transfer to Puerto
Rico.
Affirmed.
Benjamin R. Ramon, Hato Rey, P. R., Bracewell &
Patterson, Kenneth R. Wynne, John T. Arnold, Houston,
Tex., Cadwalader, Wickersham & Taft, New York City,
for appellants cross-appellees.
Sheinfeld, Maley & Kay, Robert C. Maley, Jr., Hous-
ton, Tex., Rochelle, King & Balzersen, Dallas, Tex., for
Commonwealth Oil Refining.
James G. Ulmer, Houston, Tex., George J. Wade, New
York City, J. Burleson Smith, R. Laurence Macon, David
C. Spoor, San Antonio, Tex., Will M. Kahn, New York
City, for Tesoro.
Appeals from the United States District Court for the
Western District of Texas.
Before COLEMAN, GODBOLD and INGRAHAM,
Circuit Judges.
GODBOLD, Circuit Judge:
Commonwealth Oil Refining Company (CORCO),
filed a Chapter XI petition for reorganization in the San
C-3
Antonio Division of the Western District of Texas on
March 2, 1978." On March 6 the Government of Puerto
Rico and the Puerto Rico Water Resources Authority
(PRWRA) objected to venue and moved to transfer the
proceedings to the United States District Court for the
District of Puerto Rico. Both the bankruptcy court and
the district court denied the motions to transfer.
I. Proceedings below
[1-3] Venue for a Chapter XI case is proper in either
the district where the debtor has “had its principal place
of business or its principal assets for the preceding [six]
months or for a longer portion thereof than in any other
district.” Fed.R.Bankr.P. 116(a)(2). All parties agree
that Puerto Rico is where CORCO’s principal assets are
located. There is no agreement on the location of COR-
CO’s principal place of business. CORCO contends that
its principal place of business is San Antonio. Puerto
Rico and PRWRA argue that it is Puerto Rico. The
bankruptcy court concluded that San Antonio is COR-
CO’s principal place of business and that venue is prop-
erly laid there. It refused to transfer the case. The dis-
trict court reversed the findings that the principal place
of business is San Antonio and that venue is proper in
San Antonio, but nevertheless it retained jurisdiction
pursuant to Bankruptcy Rule 116(b), which allows the
court to retain a case “in the interest of justice and for
the convenience of the parties” even though venue was
improperly laid. Fed.R.Bankr.P. 116(b)(2). The dis-
cretion to retain such a case, however, must be used with
caution and in few cases. In re S.0.S. Sheet Metal Co.,
1. Eleven subsidiaries of CORCO filed reorganization petitions
in the same court at the same time.
C-4
297 F.2d 32 (CA2, 1961). The bankruptcy court, on the
other hand, having concluded that venue was proper in
San Antonio, considered the motion to transfer under
Bankruptcy Rule 116(b)(2), which allows the court to
transfer a case to another district if “the interest of jus-
tice and . . . the convenience of the parties” would be
better served by administering the case in the other dis-
trict. Again, the court should exercise its power to trans-
fer cautiously, Jn re Bankers Trust, 403 F.2d 16, 23 n.
10 (CA7, 1968), and the party moving for the transfer
must show by a preponderance of the evidence that the
case should be transferred, Jn re Fairfield Puerto Rico,
Inc., 333 F.Supp. 1187, 1189 (D.Del. 1971).
We reverse the district court’s finding that CORCO’s
principal place of business is Puerto Rico and agree with
the bankruptcy court that its principal place of business
is San Antonio. We also conclude that the bankruptcy
court did not misuse its discretion in refusing to transfer
the case to Puerto Rico. We reach the same conclusion
as the district court, that the case should remain in San
Antonio, but we follow the reasoning of the bankruptcy
court.
The location «£ a debtor’s principal place of business
is a question of fact. It is therefore necessary to set out
in some detail the corporate structure of CORCO and its
operations. We will then determine the legal definition
of principal place of business. Finally, we consider
whether the case should have been transferred under Rule
116(b)(1).
IT. CORCO
CORCO, incorporated under the laws of Puerto Rico,
is in the business of operating a petroleum refinery and
C-5
petrochemical facilities.* Its physical plant is located in
Puerto Rico.* Prior to 1971 CORCO’s executive offices
were also located there. From 1971 to 1975 the offices
were in New York City. In 1975, Tesoro Petroleum Cor-
poration, headquartered in San Antonio, successfully
tendered for a controlling share of CORCO’s common
stock.* In contemplation of a merger of the two com-
panies, Tesoro had CORCO’s executive offices moved to
San Antonio in 1976. The merger plans have since been
shelved, but CORCO’s executive offices have remained in
San Antonio.°
Although all of CORCO’s production facilities are lo-
cated in Puerto Rico, almost all of its executive officers
live and office in San Antonio. The management of COR-
CO is divided into six departments: Planning and Eco-
nomics, Operations, Marine Transportation, Refined Prod-
ucts Marketing, Petrochemicals Marketing, and Environ-
mental Affairs. Each department is headed by a vice
president. The vice presidents report to the executive vice
president who in turn is responsible to the president and
chief executive officer. Both the president and executive
2. Most of CORCO’s petrochemical facilities are operated as
joint ventures. For purposes of this opinion, it is not necessary to
explain the legal relationships between the joint ventures and CORCO.
3. The refinery and petrochemical facilities are valued at $545,-
000,000. The replacement cost of the facilities is estimated at one
billion dollars.
4. Tesoro owns 36.7% of CORCO’s common stock.
5. Rule 116(a)(2) is concerned with the location of the debtor's
principal place of business only for the six months preceding the
bankruptcy filing. The prior locations of CORCO’s executive head-
quarters, therefore, is of no relevance to the issue in this case. Nor
is it of any significance that CORCO moved its offices to San Antonio
at the request of Tesoro. CORCO’s offices are in San Antonio and
have been there for the relevant period under Rule 116(a) (2).
C-6
vice president work out of San Antonio. Of the six de-
partment heads, four live in San Antonio; one, vice
president of Refined Products Marketing, lives in Mc-
Lean, Virginia; and one, senior vice president of Opera-
tions, lives in Puerto Rico. There are two other vice
presidents, the general counsel and secretary and the
comptroller and treasurer; both live in San Antonio.
Directly below the vice president level of management is
a group of general managers and directors. Both the
director of Personnel and director of Public Affairs live
in San Antonio. There are three general managers—
Joint Ventures, Operations and Supplies, and Refined
Products Liason. All three live in San Antonio.
An analysis of the jobs performed by CORCO’s man-
agement reveals that the company’s physical operations
are controlled from San Antonio. This is best seen by an
explanation of the process through which CORCO pur-
chases feedstocks for its facilities and ultimately sells its
products to customers.
A starting point in describing the process is the COR-
CO Operating Team. The function of the team is to
prepare what is called the Operating Plan. The plan out-
lines how the refining and petrochemical facilities should
operate for the upcoming 60 or 90 day period, the
amount of each product that should be produced, and the
facility that should produce it. Because of constant
changes in the market the plan must continually be up-
dated. This is accomplished at the weekly or semi-weekly
meetings of the team. The team consists of the heads of
all the departments or their designated representatives.
Input into the plan necessarily comes from all de-
partments. The general manager for Supplies and Re-
C-7
fined Products Liaison reports on the availability of raw
materials and their prices. Marine Transportation must
find available means for transporting the raw materials
to Puerto Rico and some of the finished product to off-
island customers. Both the Petrochemical and Refined
Products Marketing departments estimate the quantities
of products that can be sold. The Operations department
estimates the quantities of the different products that can
be produced. The Planning and Economics department
is charged with assimilating all of these factors, supplies
transportation, production and sales, and coming up with
a plan that will result in the most profitable mix of
products and quantities.
The bankruptcy court found that the Operating Plan
is not a statement of general policy but rather a detailed
production schedule. We agree. The people in charge of
operations at the refinery are not authorized to sub-
stantially deviate from the production schedule in the
plan. Because of the upstream and downstream effect of
any substantial deviation on the rest of CORCO’s opera-
tion, changes must be cleared through San Antonio and
the appropriate changes made in the transportation needs
and marketing aspects of CORCO’s business. There is,
of course, some delegated authority to make adjustments
in production. The refinery is given latitude to cope with
emergencies, and in some instances the plan delegates
options for the Puerto Rico personnel to choose from.°
6. Appellants make much of the fact that the actual production
of various products has often failed to meet the schedule laid out in
the plan. They infer from the deviations that the refinery personnel
have substantial authority to change the operating plan. The evidence
is to the contrary. CORCO’s general manager of operations explained
that a significant portion of the deviations resulted from San Antonio
decisions to shut down certain producing units for necessary main-
tenance.
C-8
This limited delegation of authority, however, does not
alter the basic fact that the purchase of feedstocks, the
refining process, and the transportation of both is di-
rected from San Antonio.‘
The financial heart of CORCO is located in San An-
tonio.© The comptroller and treasurer works out of San
Antonio. He is charged with the normal responsibilities
of a comptroller and treasurer: managing bank accounts,
payment of taxes and preparation of financial reports.
In addition, all of CORCO’s expenses, except for those
directly related to the refinery in Puerto Rico, are paid
out of the San Antonio office. The weekly $20,000,000
bill for feedstocks is paid from San Antonio. The pay-
roll for the refinery workers is prepared in Puerto Rico.
CORCO’s financing is run by people who work in San
Antonio. Although many of CORCO’s loan agreements
are negotiated and executed in New York, the people re-
sponsible for the negotiations work out of San Antonio.
The only significant task relating to the financial manage-
ment of CORCO that is performed in Puerto Rico is the
maintenance of the corporate books, the corporate audit,
and the billing of customers. CORCO maintains its
original books in Puerto Rico as required by Puerto
Rican law.° CORCO’s tax returns, however, are pre-
pared in San Antonio.
7. The evidence indicates that it is not unusual in the petroleum
industry to control the refining process from offices geographically
distant from the physical plant.
8. Since the filing of the Chapter XI petition the bank group
providing post-petition financing has exerted substantial control over
the financial workings of CORCO. Money received by CORCO
from its sales is paid into a special account controlled by the lending
banks.
9. From a computer terminal in San Antonio, CORCO’s officers
have immediate access to its records.
C-9
In addition to the location of CORCO’s physical plant
in Puerto Rico, most of its products are sold to customers
located in Puerto Rico. CORCO’s sales team is divided
into two departments, refined products and petrochem-
icals. CORCO’s largest refined product customer is PR-
WRA, which purchased over 9,000,000 barrels of oil in
1977 for an approximate price of $132,700,000.*° An
employee stationed in Puerto Rico, the general manager
of marketing,’* services CORCO’s account with PRWRA.
This general manager, however, does not have the author-
ity to commit CORCO to delivery of residual fuel oil to
PRWRA. After PRWRA has informed CORCO’s general
manager that it wants to purchase fuel, the vice-president
for Refined Products Marketing is informed, who then
checks with the operating team to determine the avail-
ability of the product. Based on the information the vice-
president receives, he either approves or disapproves of
the sale. Only this vice-president is authorized to bind
CORCO in a sales agreement.
CORCO sold $198,000,000 worth of gasoline to other
customers in Puerto Rico during 1977. The contracts for
these sales are negotiated in the home offices of com-
panies that sell gasoline in Puerto Rico. Of the five gaso-
line contracts, four were negotiated and executed in the
mainland and only one in Puerto Rico. CORCO’s Vir-
ginia office is responsible for negotiating the contracts
and servicing the accounts.
10. The bankruptcy court opinion lists the value of the sales at
$182,000,000. The court was referring to the estimated sales pro-
jections for 1978.
11. The use of the title general manager for corporate officers
of CORCO is confusing. The general managers stationed in San
Antonio are heads of departments. The general manager who services
the PRWRA account is not a department head.
C-10
The sale of refined products to mainland customers re-
sulted in revenues of $190,000,000 in 1977. Most of
these sales were made to customers on the Northeast
coast of the United States. People working out of COR-
CO’s Virginia office are responsible for these sales. No
sales are actually consummated, however, until the Vir-
ginia office has checked with San Antonio on the avail-
ability of the products.
The petrochemical marketing department is stationed
in San Antonio. Over 80% of the petrochemicals pro-
duced by CORCO are either sold to CORCO’s joint
venturers located in Puerto Rico or to CORCO’s refin-
ery for refining into gasoline.” Most of the remaining
production is sold to mainland customers. For sales of
$110,000,000 in 1977, all but $9,000,000 were sold
off-island. The contracts for the petrochemical sales were
negotiated either at the home office of the purchasers or
in San Antonio.
This overview of CORCO’s operation reveals that pro-
duction is centered in Puerto Rico and that management
is centered in San Antonio. CORCO’s supplies come
from off-island sources, but a majority of CORCO’s pro-
duction is sold to customers located in Puerto Rico.’®
With this factual basis we consider the location of COR-
CO’s principal place of business.
12. The record is silent on who or where decisions are made con-
cerning sales of petrochemicals to joint venturers or to CORCO’s
refinery.
13. For example approximately 52% of the gasoline produced
by CORCO is sold for use in Puerto Rico; 90% of its aviation fuel:
44% of its middle distillate; 70% of its residual fuel; and 38%
of its aromatics.
C-11
III. Venue in Chapter XI proceedings
A history of the Chapter XI venue provision is es-
sential to an understanding of the meaning of principal
place of business. Prior to the adoption of the current
Chapter XI venue provision in 1973, Section 2(a)(1)
of the Bankruptcy Act, 11 U.S.C. § 11(a)(1), limited
venue for Chapter XI cases to the corporation’s principal
place of business.** Chapter X of the Bankruptcy Act, on
the other hand allowed for venue in both the district
where the corporation maintains its principal place of
business or its principal assets.’” Rule 116(a)(2) chang-
ed the Chapter XI venue provision to conform to Chap-
ter X’s standards.'® The change is significant for at least
14. Section 2(a)(1) provides in relevant part:
The courts of the United States hereinbefore defined as courts
of bankruptcy are . . . hereby invested . . . with such jurisdic-
tion at law or in equity as will enable them to...
(1) Adjudge persons bankrupt who have had their principal
place of business, resided, or had their domicile within their
respective territorial jurisdictions for the preceding six
months, or for a longer portion of the preceding six months
than in any other jurisdiction. .. .
Although the statute is couched in terms of jurisdiction, prior to
passage of Rule 116 it was interpreted as a venue provision. See Bass
v. Hutchins, 417 F.2d 692, 694-95 (CA5, 1969). It was, therefore,
within the power of the Supreme Court to promulgate a Bankruptcy
Rule altering § 2(a)(1)’s venue provision. See 28 U.S.C. § 2075;
Note, 52 N.Y.U. L. Rev. 362, 367 n.34 (1977).
15. 11 U.S.C. § 528. The statute provides that
If no bankrupcty proceeding is pending, an original petition
may be filed with the court in whose territorial jurisdiction the
corporation has had its principal place of business or its prin-
cipal assets for the preceding six months or for a longer portion
of the preceding six months than in any other jurisdiction.
Id.
16. See Advisory Committee’s Note to Rule 116(a). Rule 116
is made applicable to Chapter XI through Rule 11-13(a)(1). The
venue provision for Chapter X is contained in Rule 10-114. It con-
tinues to allow venue at either the debtor’s principai place of business
or where its principal assets are located.
C-12
two reasons. First, it sheds some doubt on the validity
of old case law construing Chapter XI’s prior venue
statute. Second, the change indicates an intent to ex-
pand the districts where a Chapter XI debtor may file by
appreciating the fact that a debtor’s principal place of
business is not necessarily at the same location as its
principal assets.
Prior to the adoption of Rule 116, the courts were
divided on the question whether a debtor’s principal place
of business is located in the district where the debtor
maintains its general offices or in the district where the
debtor operates its production facilities. Compare Dryden
v. Ranger Refining & Pipe Line Co., 280 F. 257 (CAS),
cert. denied, 260 U.S. 726, 43 S.Ct. 89, 67 L.Ed. 483
(1922), and Continental Coal Corp. v. Rozelle Bros.,
242 F. 243 (CA6, 1917), with Shearin v. Cortez Oil
Co., 92 F.2d 855 (CAS, 1937), and Burdick v. Dillon,
144 F. 737 (CAI, 1906). Although all courts agreed
that the location of a debtor’s principal place of busi-
ness is a question of fact, either production or manage-
ment facts were emphasized, depending on the circuit’s
preference.
This circuit has to some extent been inconsistent in its
treatment of this issue. In Dryden, the debtor maintained
its general office in Kansas City, Missouri. The debtor
was in the business of producing, refining, and selling
oil and gas. Most of its refineries and producing wells
were located in the Northern District of Texas. Most of
the debtor’s contracts were made and filled in the
Northern District. Money owed the debtor on these con-
tracts was also collected in the Northern District. On
these facts the court concluded that the debtor’s princi-
C-13
pal place of business was located in the Northern District.
In the later case, Shearin, this court expressed a prefer-
ence for locating a debtor’s principal place of business
in the district where the debtor manages its affairs. In
Shearin, the debtor’s oil wells and the place where it
delivered its product was in the Southern District of
Texas. The place from where the debtor managed its
business, however, was in the Northern District of Texas.
The court chose the Northern District as the principal
place of business.
Dryden and Shearin are inconsistent in the language
they use in reaching their conclusion on the location of
the debtor’s principal place of business, but they are
reconcilable on their individual facts. Dryden ruled out
the situs of production as a litmus test for locating a cor-
poration’s principal place of business. The court recog-
nized that in an appropriate case the place “from which
general supervision of [the debtor’s] business is exer-
cised, may be properly held to be the principal place of
business.” 280 F. at 263. Shearin was an appropriate
case. All of the debtor’s business was managed from its
offices in the Northern District. The emphasis in Shearin
was on the place where the debtor deals with the public.
Since the adoption of Rule 116 it is no longer neces-
sary to choose between the places of production and
management. The emphasis of earlier decisions on the
location of the debtor’s production facilities is no longer
appropriate because the location of the debtor’s principal
assets is now an independent basis of venue. Although
relevant to an inquiry into a debtor’s principal place of
business, the change in Rule 116 has greatly diminished
its significance. The case law developed under Chapter
C-14
X’s venue provision, which has always contained Rule
116’s alternative basis for venue, is now relevant to
venue under Chapter XI. We agree with the court’s con-
clusion in In re Portex Oil Co., 30 F.Supp. 138 (D.Or.
1939), aff'd sub nom. Clark Bros. Co. v. Portex Oil Co.,
113 F.2d 45 (CA9, 1946), that
A distinction must have been intended between
the two points where jurisdiction could be founded,
although often the principal assets will be at the
principal place of business. The intent must have
been to permit a corporation which habitually trans-
acted its corporate business at some point to bring
proceedings there.
* * *
[T]he distinction noted in the statute permits ad-
ministration if the petition is filed in the district
where the principal place of business is located, for
the very purpose of allowing the internet adminis-
tration of a company to be settled at the point where
those interested in it chose primarily to conduct its
business.
Id. at 140.
[4] Allowing venue in the district where a debtor
manages its business is particularly appropriate in both
Chapter X and XI cases. A corporate arrangement or
reorganization is primarily a financial proceeding. The
debtor is maintained as a going enterprise and its finances
are put back in order. See Note, 52 N.Y.U. L. Rev. 362,
362 n.5 (1977). Where the corporation transacts its
corporate business is a logical place for venue in such
proceedings.
[5] Our review of CORCO’s corporate structure dem-
onstrates that it manages most of its affairs from San
C-15
Antonio. The feedstocks for its facilities are purchased by
people working out of the San Antonio office. The trans-
portation of the raw product to Puerto Rico is arranged
from San Antonio. The operation of the refineries is di-
rected from San Antonio. The sale of its refined products
is managed from Virginia, and the sale of petrochemicals
is managed from San Antonio. The people who deal with
the Department of Energy and other federal agencies are
stationed in San Antonio. On these facts, we conclude
that the bankruptcy court was not clearly erroneous in
locating CORCO’s principal place of business in San
Antonio.
The district court relied exclusively on this court’s
opinion in Dryden for reversing the bankruptcy court’s
conclusion that CORCO’s principal place of business is
in San Antonio. The court stated “that the facts compel
the conclusion that application of the tests set forth in
Dryden . . . fix the debtor’s principal place of business
in Puerto Rico.” In a footnote the court listed the follow-
ing facts in support of its conclusion:
all of its assets are there; all of its production takes
place there; 95% of its employees live there; 70%
of its refined products sales and 88% of its petro-
chemical sales are made in Puerto Rico to entities
physically located on the island (some of the entities
are headquartered elsewhere and the contracts for
the sales may be negotiated off-island); invoices are
prepared and distributed from Puerto Rico; all origi-
nal records are kept in Puerto Rico by virtue of
Puerto Rican law; the debtor’s data processing center
is located in Puerto Rico; its audits are conducted
in Puerto Rico; stockholders’ and directors’ meetings
are held on the island; most of CORCO’s current
litigation, which is extensive with regard to both
C-16
the number of suits and the dollar amounts involved,
is going on in Puerto Rican courts (the next most
utilized forum is New York); the majority in number
of its creditors are in Puerto Rico; and Puerto Rico
is its place of incorporation.
As already indicated, the location of a debtor’s assets
is not particularly significant since the adoption of Rule
116. The location of employees is, of course, tied to the
location of assets. Many more workers are needed to
run a refinery than to manage one. The district court
mentions the physical location of CORCO’s customers
but does not give sufficient consideration to where the
sales are negotiated and who in the corporate structure
is charged with sales responsibility. Where the invoices
are prepared is significant, but where CORCO pays its
bills is of equal importance. The office of the comptroller
and treasurer is located in San Antonio. The other factors
mentioned by the district court, location of records,
where audits are performed, directors’ and stockholders’
meetings are held, and the location of CORCO’s current
litigation are all relevant factors, but the inquiry should
not have stopped there. Although the district court’s cita-
tion to Dryden is somewhat cryptic, the lower court must
have proceeded on the understanding that the location
of a debtor’s principal assets is its principal place of
business. Dicta in Dryden might support such an assump-
tion, but adoption of Rule 116 has vitiated whatever
validity that dicta once had. Moreover, the Dryden court
eschewed any attempt to set a firm rule and recognized
that general supervision of a corporation’s business can
constitute a corporation’s principal place of business. The
district court should have considered that management
of all aspects of CORCO’s business emanates from San
Antonio.
C-17
[6, 7] For the district court to reverse the bankruptcy
court’s conclusion that San Antonio is CORCO’s principal
place of business it had to conclude that the bankruptcy
court’s finding was clearly erroneous. Guarantee Ac-
ceptance Corp. v. Fidelity Mortgage Investors, 544 F.2d
449, 459 (CA10, 1976); Clark Bros. Co. v. Portex Oil
Co., 113 F.2d 45, 47 (CA9, 1940). Our review of the
facts and the relevant legal principles convinces us that
the bankruptcy court’s finding was not clearly erroneous.*’
IV. Transfer of venue
[8] Even though venue in San Antonio was proper,
it was still within the bankruptcy court’s discretion to
17. The government of Puerto Rico relies heavily on Anniston
Soil Pipe Co. v. Central Foundry Co., 216 F.Supp. 473 (N.D. Ala.
1963). There, the district court concluded that for purposes of
diversity jurisdiction, 28 U.S.C. § 1332(c), a corporation’s principal
place of business is the place where a corporation has its physical
assets, not its executive offices. We intimate no vier on the correct-
ness of the Anniston decision. Rather, we conclude that it is ir-
relevant. The diversity statute was amended in 1958 to give corpora-
tions dual citizenship; in addition to the traditional citizenship in
the state of incorporation, a corporation would also be considered
a citizen of the state where it has its principal place of business.
The purpose of the amendment was to reduce the availability of
diversity jurisdiction. S.Rep. No. 1830, 85th Cong., 2d Sess. (1958),
reprinted in U.S. Code Cong. & Admin. News, 1958, pp. 3099, 3100.
The adoption of Rule 116, on the other hand, was intended to expand
venue choices for bankruptcy proceedings. Moreover, one of the pur-
poses of diversity jurisdiction is to protect nonresidents from any
possible prejudice they might encounter in local courts. Bank of the
United States v. Deveaux, 9 U.S. (5 Cranch) 61, 87, 3 L.Ed. 38, 45
(1809). See generally Friendly, The Historic Basis of the Diversity
Jurisdiction, 41 Harv. L. Rev. 453 (1928). A court fixing of a cor-
poration’s principal place of business would naturally try to imple-
ment this policy. No similar concern informs locating a corporation's
principal place of business for bankruptcy proceedings. The policy
concerns guiding each choice have little or nothing in common. 1
J. Moore, Federal Practice { 0.77 [3.-4.], (2d ed. 1978). The Anniston
decision is not persuasive in this context.
C-18
transfer the case to Puerto Rico. Fed. R. Bankr. P. 116
(b)(1). The court declined to do so, and we conclude
that there was no abuse of discretion. Jn re Tonkawa
Refining Co., 502 F.2d 1341, 1343 (CA10, 1974).**
The two general considerations the rule instructs the
court to take into account are the convenience of the
parties and the interest of justice.
[9] Under the heading of convenience of the parties
the bankruptcy court listed six factors:
(1) The proximity of creditors of every kind to the
Court;
(2) The proximity of the bankrupt (debtor) to the
Court;
(3) The proximity of the witnesses necessary to the
administration of the estate;
(4) The location of the assets;
(5) The economic administration of the estate;
(6) The necessity for ancillary administration if bank-
ruptcy should result.
None of the parties has questioned the propriety of these
considerations, nor have they suggested any additional
ones.
The bankruptcy court correctly concluded that the most
important consideration is whether the requested transfer
would promote the economic and efficient administration
18. There is no need to consider whether the district court
abused its discretion in retaining the case after it concluded that
venue in San Antonio was improper, because of our conclusion that
venue was proper in San Antonio.
C-19
of the estate. On the efficiency side, San Antonio is clear-
ly the favored district. The heart of a Chapter XI pro-
ceeding is working up a financial plan of arrangement
acceptable to all relevant parties. The people charged
with this responsibility in CORCO’s managament are all
located in San Antonio. The bankruptcy court also found
that the debtor’s estate could be administered more eco-
nomically in San Antonio. We cannot conclude that the
bankruptcy court’s finding was clearly erroneous.
[10] The next group of considerations concern the
proximity to the court of the creditors (and stockholders),
the debtor, and necessary witnesses. By far the largest
group of creditors numerically is located in Puerto Rico.
On the other hand, the creditors with the largest claims
have either urged retention of the proceeding in San
Antonio or are located in San Antonio. The bankruptcy
court decided to give more importance to the location and
desires of the creditors holding the largest claims. We
think this was inappropriate. To confirm a plan of ar-
rangement under Chapter XI, it must be accepted by
both a majority of creditors and by creditors holding a
majority in amount claimed against the debtor. 11 U.S.C.
§ 762. Both number and size are of equal significance
in gaining acceptance of a plan and should be of equal
significance in considering the convenience of the credi-
tors. Tesoro Petroleum, located in San Antonio, owns
37.6% of CORCO’s common stock. This makes San
Antonio the area with the largest number of stockholders.
Only 1.62% of CORCO’s shareholders are residents of
Puerto Rico. On balance, the proximity of creditors and
stockholders favors San Antonio.
The proximity of the debtor is evident. The concern
is with the corporation’s employees who must appear in
C-20
court, not with the employees who are on the production
line. CORCO’s management is in San Antonio. This also
answers the concern with the availability of witnesses.
Most of the witnesses who must appear in court are
stationed in San Antonio.
The next set of factors is the location of books, records
and assets. Although most of CORCO’s original books
and records are in Puerto Rico, instant access through
CORCO’s computer system is available in San Antonio.
The fact that the original set is maintained in Puerto Rico,
therefore, is of little significance in weighing the relative
convenience of the two forums. CORCO’s assets are in
Puerto Rico. This is of little importance in a Chapter XI
proceeding where the goal is financial rehabilitation, not
liquidation. See In re Banker's Trust, 403 F.2d 16, 23-
24 (CA7, 1968).”°
Finally, the bankruptcy court considered the need for
ancillary administration in the event that liquidation oc-
curs. As the court stated in Jn re Fairfield Puerto Rico,
Inc., supra at 1191, “[a]nticipation of the failure of the
Chapter XI proceeding is an illogical basis upon which
to predicate a transfer.”*°
In addition to considering the convenience of the par-
ties, Rule 116(b)(1) also instructs the court to account
19. The location of the debtor’s assets would be an extremely
significant consideration in a liquidation proceeding.
20. The government of Puerto Rico argues that the case should
be transferred because of the extensive litigation between CORCO
and other entities in Puerto Rico where Spanish civil law applies.
Much of that litigation will not be in the bankruptcy court and
will proceed in the appropriate court in Puerto Rico. The litigation
involving Spanish civil law in the bankruptcy court could probably
be handled more conveniently in Puerto Rico. By itself, however,
that is insufficient reason to transfer the case.
C-21
for the interest of justice. The main concern that this
implicates is the importance of CORCO to the welfare
and economic stability of Puerto Rico and its people.
Because CORCO is a major supplier of..petroleum pro-
ducts to Puerto Rico, both the economy and the people
of Puerto Rico are vitally concerned with the outcome
of the Chapter XI proceeding. The government contends
that the overwhelming concern of Puerto Rico with the
continued operations of CORCO require a transfer of this
case to Puerto Rico. We disagree. Without belittling in
the least the extent of Puerto Rico’s interest in CORCO,
that interest is served by maintaining CORCO as a func-
tioning reiinery. This can best be accomplished in San
Antonio. The troubles of CORCO are financiat The
people who can solve those problems for COR€O are in
San Antonio. The bankruptcy court found, and we cannot
say it is clearly erroneous, that it will be less disruptive
to the continued operation of CORCO if this case is
retained in San Antonio.
V. Conclusion
We conclude that CORCO’s principal place of busi-
ness is San Antonio. The bankruptcy court could have
nevertheless transferred the case in its discretion to
Puerto Rico. It was not an abuse of discretion to refuse
to do so.
Thus we conclude that the bankruptcy court must be
affirmed. Our ultimate conclusion is the same as that
reached by the district court, though arrived at by a
different route.
The judgment of the district court is AFFIRMED.
D-1
APPENDIX D
[1698]
IN THE
DISTRICT COURT OF THE UNITED STATES
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
BANKRUPTCY NO. SA-78-BK-147
(CHAPTER XI)
(JOINTLY ADMINISTERED)
IN RE:
COMMONWEALTH OIL REFINING COMPANY,
INC., et al
DEBTORS
APPEAL FROM BANKRUPTCY COURT
ORDER
Came on for consideration the appeal of the Common-
wealth of Puerto Rico and the Puerto Rican Water Re-
sources Authority, hereinafter referred to as “appeallants”,
from the bankruptcy court’s Memorandum Opinion of
May 25, 1978, and Order of June 20, 1978, denying
appeilants’ objection to venue and motion to transfer.
The Commonwealth Oil Refining Company, Inc., the
debtor-in-possession in the Chapter XI proceeding below;
Citibank, N.A.; The Chase Manhattan Bank, N.A.;
Chemical Bank; First National Bank of Boston; Irving
D-2
Trust Company and Bank of America have appeared as
appellees in this proceeding. No oral argument having
been requested by either party, and it appearing to the
Court upon examination of the record that none was
necessary, the Court has considered the record designated
by the parties and the briefs of counsel in weighing the
merits of this appeal.
In their first point, the appellants contend that the
court below applied an incorrect legal standard in mak-
ing its determination that the Commonwealth Oil Re-
fining Company, Inc., hereinafter “CORCO”, has its
principal place of business in San Antonio, Texas. The
legal standard applied by the court appears at page 16
of its Memorandum Opinion:
CORCO’s principal place of business under Bank-
ruptcy Rule 116(a) is a question of fact to be de-
termined on a case by case basis and lies totally
within the sound discretion of this Court. (Mem.
Op. 16)
[1699]
The appellants challenge that part of the above state-
ment which characterizes a decision concerning a debtor’s
principal place of business as one that lies “totally
within the sound discretion of this Court.” Upon review
of the cases cited by the court below in support of this
proposition, this Court has been unable to find any
support for it. It is the opinion of this Court that the
above-quoted statement should be, and the same is hereby,
modified to read as follows:
D-2
CORCO’s principal place of business under Bank-
ruptcy Rule 116(a) is a question of fact to be de-
termined on a case by case basis.
The appellants next contend that the court below er-
roneously found that the debtor’s principal place of busi-
ness is located in San Antonio, Texas, from which the
court concluded that the Western District of Texas is a
proper situs for the Debtor’s Chapter XI proceedings.
Despite the unfortunate choice of words used by the court
below to express the legal standard applied to such deter-
minations, this Court, upon a review of the Memorandum
Opinion, is convinced that the bankruptcy judge made a
factual determination concerning the principal place of
business of CORCO. As such, the bankruptcy court’s
finding is to be evaluated by this Court under the stand-
ard set forth in Bankruptcy Rule 810:
. . . The Court shall accept the referee’s findings
of fact unless they are clearly erroneous .. .
The meaning of the phrase “clearly erroneous” as it ap-
plies to a finding of fact has been defined by the Supreme
Court of the United States as follows:
. when although there is evidence to support it,
the reviewing court on the entire evidence is left
with the definite and firm conviction that a mistake
has been committed. United States v. United States
Gypsum Co., 333 U.S. 364, 395 (1947).
This Court, upon a review of the transcript of the hearing
on the venue issue held before the bankruptcy court, the
record designated by the parties, and the briefs of coun-
D-4
sel, is of the opinion that a mistake was committed here-
in by the court below in finding that CORCO’s
[1700]
principal place of business lies in San Antonio, Texas.
This Court believes that the facts compel the conclusion
that application of the tests set forth in Dryden v. Ranger
Refining and Pipeline Co., 280 F. 257 (Sth Cir. 1922),
fix the debtor’s principal place of business in Puerto
Rico.’ Accordingly, that portion of the Memorandum
Opinion which finds the debtor’s principal place of busi-
ness to be San Antonio, Texas, is hereby REVERSED.
The Court next considered the issue of ultimate im-
portance in this appeal. The appellants contend that the
court below erred in denying their motion to transfer
CORCO’s Chapter XI proceedings from the Western
District of Texas to the District of Puerto Rico. The
decision of the court below concerning the transfer issue
is subject to reversal only upon a showing that an abuse
1. The facts in the record which point to a conclusion that the
debtor’s principal place of business is located in Puerto Rico are:
all of its assets are there; all of its production takes place there;
95% of its employees live there; 709% of its refined products sales
and 88% of its petrochemical sales are made in Puerto Rico to
entities physically located on the island (some of the entities are
headquartered elsewhere and the contracts for the sales may be
negotiated off-island); invoices are prepared and distributed from
Puerto Rico; all original records are kept in Puerto Rico by virtue
of Puerto Rican law; the debtor’s data processing center is located
in Puerto Rico; its audits are conducted in Puerto Rico;. stock-
holders’ and directors’ meetings are held on the island; most of
CORCO’s current litigation, which is extensive with regard to both
the number of suits and the dollar amounts involved, is going on
in Puerto Rican courts (the next most utilized forum is New York);
the majority in number of its creditors are in Puerto Rico; and
Puerto Rico is its place of incorporation.
D-5
of discretion was committed. Clark Bros. Co. v. Portex
Oil Co., 113 F.2d 45, 48 (9th Cir. 1940). While the
bankruptcy court, in accordance with its finding that
San Antonio, Texas, is the debtor’s principal place of
business, assigned the burden of proof on the issue of
transfer to the appellants, the shift in that burden to
the appellees necessitated by this Court’s finding that
Puerto Rico is the debtor’s principal place of business
is not necessarily fatal to the validity of the lower court’s
findings that the interest of justice and convenience of
the parties will best be served by
[1701]
retention of the proceedings in the Western District of
Texas. While it is true that discretion to retain jurisdiction
in the interest of justice and for convenience of the parties
where venue is improperly laid should be exercised with
great caution and in few cases, In re S.O.S. Sheet Metal
Co., Inc., 297 F.2d 32 (2nd Cir. 1961), this Court is
of the opinion that the exercise of discretion to retain
jurisdiction is proper in this case under Bankruptcy Rule
116(b)(2). The court below addressed all of the con-
siderations which have been held to control the deter-
mination of whether a transfer of the proceedings would
better serve the interests of justice and the convenience
of the parties. (Mem. Op. 20-24). The majority of its
findings on these issues originated in evidence introduced
by the debtors. In addition to the factors cited by the
bankruptcy judge, certain considerations apparent in this
particular proceeding deserve mention. The debtor’s ar-
rangement proceedings have been underway in the West-
ern District of Texas for approximately six months at
D-6
this writing. The bankruptcy court in this district is
intimately familiar with the progress and present status
of the arrangement proceedings and the problems present
in them. While the debtor’s principal place of business
is located in Puerto Rico, the great majority of the people
charged with its management are in the Western District
of Texas. Their importance to the ongoing operations of
the debtor is well documented by the court below (Mem.
Op. 3-9A). While their presence here and the functions
they perform do not make the Western District of Texas
the Debtor’s principal place of business, it is the manage-
ment personnel who will be looked to by the court during
the arrangement proceedings to ensure a successful out-
come. Their immediate access to the Court is imperative
if there is to be any chance of a successful arrangement.
To require the debtor’s management to travel to Puerto
Rico to attend court proceedings there as often as their
presence will most certainly be required would disrupt
their daily managerial duties to an extent that would
render the potential
[1702]
success of these arrangement proceedings doubtful from
the outset. In addition, the burden of transportation ex-
penses necessary to give management constant access to
a Puerto Rican court would be a considerable drain on
an already overextended estate, and it is apparent that
the institutional lenders prefer that venue be retained in
San Antonio.
The creditors, of course, are also entitled to full access
to the court. They are represented by a creditors’ com-
mittee in arrangement proceedings, however, and would
D-7
suffer little, if any, less hardship were this proceeding
to be transferred.
Finally, the interest in this arrangement proceeding
held by the Puerto Rican people must be addressed. The
central role played by CORCO in the social and economic
well-being of the Commonwealth cannot be denied. Were
this a liquidation proceeding, it should certainly take
place in Puerto Rico. Should it become apparent that a
liquidation proceeding is imminent, a transfer of the
case will certainly be proper, as the court below has
acknowledged (Mem. Op. 25). But to proceed on the
assumption now that CORCO’s efforts to revitalize itself
and rearrange its debt structure are doomed to failure,
and that liquidation will result, is not a proper basis for
transfer. The bankruptcy court in San Antonio is fully
cognizant of the interrelationship of CORCO’s fate with
that of Puerto Rico, (Mem. Op. 13-14, 24-25), and there
is no basis upon which to conclude that the court will
not proceed with the interests of the Puerto Rican people
in mind. Accordingly, the bankruptcy court’s order
denying the appellants’ motion to transfer is hereby
AFFIRMED.
It is SO ORDERED.
Entered at San Antonio, Texas, this 25th day of
August, 1978.
/s/ ADRIAN A. SPEARS
Adrian A. Spears
United States District Judge
E-1
APPENDIX E
* *« *
[476]
IN THE
DISTRICT COURT OF THE UNITED STATES
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
BANKRUPTCY NO. SA-78-BK-147
(CHAPTER XI)
(JOINTLY ADMINISTERED)
IN RE:
COMMONWEALTH OIL REFINING COMPANY,
INC., et al
DEBTORS
MEMORANDUM OPINION
At San Antonio, Texas, on the 15th day of May, 1978,
came on for hearing the Objection to Venue and Motion
to Transfer (the “Motion”) filed by The Commonwealth
of Puerto Rico (The “Commonwealth”) and the Puerto
Rico Water Resources Authority (the “Authority”) or
(“PRWRA”) to transfer these proceedings from this
district to the United States District Court for the Dis-
trict of Puerto Rico, in San Juan, Puerto. The Common-
wealth and the Authority were joined in the Motion
by Transocean Gulf Oil Company, Banco de Ponce,
E-2
Banco Popular de Puerto Rico, Banco Credito y Ahorro
Ponceno, Union Independiente de al Industria de Petro-
quimicas de Puerto Rico, State Insurance Fund of The
Commonwealth of Puerto Rico and the Securities and
Exchange Commission of the United States. The United
States Department of Energy filed Amicus Curiae.
The Debtors, (“CORCO”) filed their response to the
Motion, opposing the transfer of this case from this dis-
trict. The Debtors were joined in their opposition to a
change of venue by Citibank, N.A., the Chase Man-
hattan Bank, N.A., Chemical Bank, First National Bank
of Boston, Irving Trust Company and Bank of America,
and Tesoro Petroleum Corporation.
The following memorandum opinion constitutes this
Court’s findings of fact and conclusions of law.
[477]
I.
HISTORIC BACKGROUND AND DEVELOPMENT
Commonwealth Oil Refining Company, Inc., (“COR-
CO”) was incorporated in 1953 under the laws of the
Commonwealth of Puerto Rico. CORCO began operat-
ing in 1956 as a petroleum refinery and eventually ex-
panded its operations to include several petrochemical
facilities. In essence, CORCO is in the business of pro-
ducing and selling refined petroleum products and a
variety of petrochemicals. The refinery and petrochemi-
cal facilities represent an investment of $545,000,000.00
and have a replacement cost of $1,000,000,000.00.
E-3
It should be noted that CORCO’s corporate structure
is multi-faceted and complex in that there are a total
of twenty-two affiliates, subsidiaries and joint venture
companies integrally tied to the parent company’s opera-
tions. Eleven of these subsidiaries are involved in these
Chapter XI proceedings. For a variety of business rea-
sons, the parent, CORCO, is licensed to do business in
Puerto Rico, New York and Texas, while the subsidiary
companies are qualified or licensed in those states and
countries which best serve their particular business pur-
pose such as: Liberia, Puerto Rico, the Bahamas, Dela-
ware and Virginia.
From the inception of the company until approximately
1971, all of CORCO’s operations and management were
situated in Puerto Rico. In 1971, the executive offices
were moved to New York City, New York. In 1975,
Tesoro Petroleum Corporation (“Tesoro”) headquartered
in San Antonio, Texas, acquired a 36.7% ownership
interest in CORCO’s common stock. Thereafter, in May,
1976, the executive offices and most management and
executive personnel were moved from New York City
to San Antonio where the CORCO offices are now
located.
[478]
II.
CORCO’S INTERNAL STRUCTURE
CORCO’S organizational structure is divided into two
distinct aspects which may be generally classified as man-
agement and production. The distinction is particularly
magnified by the geographic fact that management of
E-4
the company emanates from the CORCO offices on the
mainland of the United States in San Antonio, Texas,
whereas the actual plant facilities and production are
centered on the island of Puerto Rico.
At its physical plant facility in Puerto Rico, CORCO
directly employs over 1,400 people. There are between
15 and 20 employees at the CORCO office in McLean,
Virginia, 2 employees in New York City and some 70
employees in San Antonio consisting of middle level
management, top management and other executive per-
sonnel.
It is essential to examine in detail the various func-
tions performed by management: The departmental re-
lationship to one another; and management’s relationship
to its Puerto Rico facility and its customers.
Basically, CORCO management is divided into six
(6) separate departments: Planning and Economics,
Operations, Marine Transportation, Refined Products
Marketing, Petrochemicals Marketing, and Environmental
Affairs. Each of these departments are supervised by a
Vice-President who in turn reports directly to the Execu-
tive Vice-President.
In addition to these six (6) major areas of responsi-
bility, there are other departments which oversee COR-
CO’s joint ventures, personnel, public affairs and an
office which acts as liaison for suppliers and refined
products. These departments are supervised by General
Managers who also report to the Executive Vice-Presi-
dent. At the apex of the structural pyramid is the Presi-
dent and Chief Executive Officer. To assist the President
in generally coordinating the company is the Executive
Vice-President, the
E-5
[479]
Vice-President and General Counsel, and the Vice-Presi-
dent, Comptroller and Treasurer. All of the officers of
the company reside in San Antonio, Texas with the excep-
tion of the Senior Vice-President of Operations and the
Vice-President of Refined Products Marketing who reside
in Puerto Rico and McLean, Virginia respectively.
Crucial to the overall operation of CORCO is the
General Manager of Raw Materials Supply Department
and Refined Products Liaison. The department is essen-
tially responsible for locating and purchasing all “feed-
stocks” for the operation of the refinery. The feedstocks
purchased are primarily crude oil and naphtha. As there
are no feedstock supplies in Puerto Rico, all negotiations
and contracts for such purchases are conducted at or
from the San Antonio office or elsewhere in the various
oil centers of the United States such as Houston, New
York and San Francisco. While the majority of crude oil
feedstocks is purchased from United States producers,
it is not uncommon for CORCO to acquire feedstocks
from international sources such as Lybia and Venezuela.
Since prices in the oil industry fluctuate daily and pur-
chases of feedstocks are made on a daily basis in accord-
ance with customer demands, the Supply Department
must maintain a day-to-day and even an hour-by-hour
vigilence of the market to ascertain the best available
supply of feedstocks for the best available supply of feed-
stocks for the best possible price. Parenthetically, it
should be noted that CORCO is one of the largest
naphtha purchasers in the world, and like crude oil pur-
chases, the market for naphtha is world wide and subject
E-6
to similar variances of market fluctuation which requires
constant scrutiny by the Supply Department.
The Marine Transportation Department, whose per-
sonnel are located in the CORCO San Antonio office, is
charged with the daily shipping of feedstocks to the re-
finery as well as other petrochemical facilities in Puerto
Rico. It is this Departmment’s function to insure that
delivery of feedstocks is
[480]
timely and that the requisite ships are chartered, and that
the charter hires are financially complete in every respect
so that the transportation of the raw material to the
refinery and from the refinery to the market place is
economically and efficiently accomplished. The decisions
of the Marine Transportation Department must be made
on a daily basis and represent an integral part of
CORCO’S operations.
The Petrochemical Marketing Department of CORCO
is responsible for the sale and marketing of petrochemi-
cals sold to the customers other than CORCO’S joint
venturers. Negotiations for the sales of these products
are conducted at or from the San Antonio office and/or
the headquarter office of each customer. No such negotia-
tions are conducted in Puerto Rico. While a great major-
ity of CORCO’S petrochemical production is sold and
under long term contracts, about 25% of sales are on a
“spot purchase” basis to various customers in the United
States, Europe, South America and Asia. Of the approxi-
mate $110,000,000.00 in petrochemical sales, 7.5 million
dollars represented sales to Union Carbide for use in
E-7
Puerto Rico. Negotiations for the Union Carbide sales
were conducted both in New York and San Antonio and
not on the island of Puerto Rico. 1.5 million dollars
represented sales to petrochemical customers in Puerto
Rico.
The Refined Product Marketing Department and its
Vice-President are located in McLean, Virginia. This
department is responsible for the direct and daily control
of CORCO’S sales activity for all refined fuel products
marketed on the island of Puerto Rico. The Virginia
office also operates as the CORCO Affiliate Petroleum
Marketing Corporation which is charged with the super-
vision of all cargo, rack, and barge sales of petroleum
products on the East Coast of the United States.
CORCO’S major customer for its refined products is the
Puerto Rican Water Resources Authority (“PRWRA”)
which furnishes the island its total supply of electrical
power. The General Manager of
[481]
Marketing lives in Puerto Rico and has the primary
task of servicing the PRWRA account as regards collec-
tions, delivery dates, disputes involving demurrages, un-
paid invoices, and reconciliation of figures and receipts
of data concerning PRWRA fuel oil inventory. He has no
authority to make commitments for the sale of fuel oil
to PRWRA on behalf of CORCO. Rather, the General
Manager of Marketing acts as a liaison between the cus-
tomer, PRWRA, and the Vice President of Refined
Product Marketing as concerns any supply or fuel oil
inventory requirements. Any requests for a deviation in
the refined product sold to PRWRA is transmitted from
E-8
the customer via the General Manager to his departmental
Vice-President. The Vice-President, must, in turn, report
any major deviation or need for additional fuel oil by
PRWRA to the San Antonio office where the ultimate
decision is made and re-transmitted back through the
same channels to the customer.
As concerns the sale of refined products other than fuel
oil—such as liquified petroleum gas, Jet A-1 aviation
fuel, and gasoline, the sales responsibility is also vested in
the Refined Products Marketing Department in Virginia.
Contracts, sales agreements and negotiations for these
products are all the responsibility of this department upon
the ultimate approval of the San Antonio office. Such
contracts and agreements concerning the sale of these
refined products require the constant attention of the
Vice-President who must be in regular communication
with his corporate superior for ratification of new agree-
ments or deviations from existing contracts.
The Operations Department is charged with the daily
implementation of corporate policy as well as the control
and direction of the daily operation of CORCO’S refin-
ing facilities in Puerto Rico. This department and its
General Manager are located in San Antonio. Operations
and its Manager are directly responsible for any and all
variations in the refinery function which may result from
changes in market, supply, price or oper-
[482]
ating mode. These variables must be dealt with on a day-
to-day basis as problems arise and coordinated with the
pertinent department heads to determine the appropriate
E-9
course of action. In essence, the Operations Department
Manager is chairman of the Operating Team which will
be discussed hereafter and responsible for coordinating,
and implementing the Operating Plan.
The Planning and Economics Department is situated
in San Antonio and one of its primary functions is the
formulation of the basis of the Operating Plan. This de-
partment receives its input from all other departments
and from the refinery and petrochemical facilities. The
information gathered from all of these sources concerns
among other things the availability of feedstock supplies;
fuel price variations; the demands of the refinery and its
customers; any equipment maintenance scheduling and
transportation requirements. All of these and other
pertinent factors are fed into a computer which is pro-
grammed to analyze the data and to produce a composite
of information in mathematical terms of the overall status
of the company, and a forecast of its various needs over
a certain time frame. Obviously, the task is a complex
and intricate one, and serves as a necessary guide in the
formulation of the overall Operating Plan. As problems
are encountered or changes made in the refinery pro-
duction, contracts, supply or transportation, the com-
puter run must be amended accordingly and the informa-
tion re-evaluated. This function of the department is a
daily one and comprises an essential element in the man-
agement of the company. Other responsibilities of the
Planning and Economics Depariment are the development
of short and long term plans for the operation of the
company with particular emphasis on the conduct of op-
erations at the refinery and petrochemical complexes;
providing advice to management on the economic con-
sequences of various business opportunities and options
E-10
as they arise; administering compliance with Department
of Energy Regulations:
[483]
and dealing with the Department of Energy as concerns
the entitlements program.
Within the corporate structure of CORCO, it is also
important to note the position of the Comptroller and
Treasurer. While this office performs the usual fiscal
functions generally associated with its title (i.e. main-
tenance of bank accounts, payment of taxes, prepara-
tion of financial reports) it is also charged with the pay-
ment of virtually every expenditure of the company ex-
cept those related to actual local operations in Puerto
Rico. These payments include among others the pur-
chase of feedstocks and total expenditures amounting to
approximately $20,000,000.00 per week. The depart-
ment also supervises the investment of surplus funds on
a short term basis which has earned about $100,000.00
to $150,000.00 per month. Cash disbursements, expedi-
tures and investments of this magnitude require the daily
attention of the Treasurer and his entire staff. Ad-
ditionally, this department has been required to work
closely with the various bank creditors, the fiscal agent
and be accessible to the Court during these Chapter XI
proceedings.
The Executive Vice-President of CORCO is directly
involved in the day-to-day supervision of the supply
and purchase of raw materials; the transportation of
refined products; and the manufacturing and sale of
refined and petrochemical products. He is not simply a
E-11
formulator of general company policy, but is rather an
integral and essential supervisor of all department func-
tions and, other than the President, is responsible for
the ultimate decisions in the daily operational structure
of CORCO.
There is one CORCO Vice-President who is responsible
for the refinery operation in Ponce, Puerto Rico. Like
other department heads, he is under the supervision of
the Executive Vice-President in San Antonio, Texas.
The refinery Vice-President essentially serves as a Plant
Manager to supervise personnel, make incidental pur-
chases, and insure that the refinery is run according to
the Operating Plan which is formulated and directed from
San Antonio. He has no authority to negotiate purchases
[484]
of feedstocks; to negotiate sales of refined products; to
stop or start refinery production except in emergencies;
or to decide the volume of production.
Finally and most important is a description of the
CORCO Operating Team. The Team is composed of
the various department heads or their designated repre-
sentatives. It is incumbent on the Team to evaluate all
of the relevant information from as many department
sources as possible to devise what has previously been
termed as the Operating Plan. The Team meets once
or twice a week and is chaired by the General Manager
of Operations. Specifically, members of the team in-
clude personnel from Planning and Economics, Marine
Transportation, Raw Materials and Supply, Refined
Products Marketing and Operations as well as other de-
E-12
partments whenever their specific expertise and advice
is desired. The Team reviews in detail the computer
analysis and forecast prepared by Planning and Eco-
nomics. Projections are made in light of the computer
analysis and on the basis of information supplied by
each department as to an overall Plan of Operation for
the succeeding sixty-ninety days. Customer demand,
availability of supply, transportation requirements, pricing
and cost are among the factors taken into account in
formulating the plan. As has been stated previously,
many factors are presented almost daily which demand
some degree of amendment to the Operating Plan. For
that reason, the Plan is re-evaluated and re-structured
on a weekly basis as often as necessary. This constant
short term revision of the Operating Plan also affects
the long range projections which must also be amended
accordingly. The Plan is disseminated to all departments
and plant facilities so that at every level of operation the
company’s goals, both immediate and in the future, are
known by those charged with the task of its implementa-
tion. The Plan is far and above a mere statement of
general policy or company guidelines. Rather, it repre-
sents the overall production schedule in detail and affects
each and every aspect of the company’s daily, weekly
and monthly operations. There is no substantial deviation
from the Plan by any department
[485]
without clearance from the Operating Team in San
Antonio. In essence, it is the Operating Team and the
Plan which they devised that guides, governs, and affects
every phase of CORCO’s operations.
E-13
[486]
t III.
% CORCO SUPPLIERS AND CUSTOMERS
While CORCO’S physical plant facilities are situated
in Puerto Rico, it must be noted that the island produces
no raw materials or feedstocks which may be locally
purchased. As a result, the company is required to buy
its crude oil and raw petrochemicals not only from the
United States mainland but from worldwide markets.
As concerns crude oil purchases, CORCO’S major sup-
plier is Coastal States Trading Company based in Hous-
ton, Texas. Libyan and Venezuelan crude oil is also
purchased in significant quantities. Negotiations for feed-
stock purchases are generally conducted either by tele-
phone contact with the supplier from the CORCO
General Manager of Raw Materials and Supply in San
Antonio or by personal contact with suppliers or their
representatives in New York, Houston and San Francisco.
Purchases of raw materials for use in the petrochemical
plants are primarily negotiated and consummated with
suppliers in the Southeast area of the United States.
The sale of CORCO petrochemical products is con-
ducted by the Department of Marketing in San Antonio.
Sales to customers, other than CORCO joint venture
affiliates, in 1977 totalled some $110,000,000.00. Of
that amount, approximately $9,000,000.00 represents
sales in Puerto Rico. CORCO’S major petrochemical
customers are located principally throughout the United
States, Delaware, Missouri, Louisiana, New Jersey, West
Virginia, as well as Germany, South America and Asia.
E-14
Negotiations for these sales are conducted either at the
purchasers home office or from San Antonio.
Sales of refined products produced by CORCO and
sold on\the island of Puerto Rico was the responsibility
of the Refined Product Marketing Department in Mc-
Lean, Virginia. CORCO customers on the island include
the major oil companies that
[487]
purchase gasoline and aviation fuel (Texaco, Esso, Shell,
Arco and Gasolinas de Puerto Rico), liquified petroleum
gas customers, bunker sale customers, PRWRA and mis-
cellaneous spot sales customers. PRWRA is undoubtedly
the largest single customer of CORCO. In 1977, for
example, sales to PRWRA generated approximately
$182,000,000.00. Other gasoline sales on the island,
during the same period account for some $198,000,000.00
or 9.9 Million barrels. Contracts for these sales are
negotiated in the various home offices of these customers.
PRWRA sales are conducted between the Authority exec-
utives and the CORCO liaison officer on the island with
the approval of the Marketing Vice-President in McLean,
Virginia and the Operating Team in San Antonio. Texaco
contracts are negotiated in White Plains, New York. Shell
sales are conducted in Puerto Rico. Arco contracts are
consummated from Los Angeles, California. Gasolinas de
Puerto Rico has its parent company in California where
the contract was originally negotiated. Esso sales are con-
ducted in Coral Gables, Florida.
Off-island spot sales of gasoline are made to customers
principally in the Northeast United States and Eastern
hice ~
E-15
seaboard from Norfolk, Virginia to Boston, Massachu-
setts. Those sales are made from the McLean, Virginia
office upon the approval of the CORCO Operating per-
sonnel in San Antonio. In 1977 some 12.7 million barrels
were sold at a dollar value of $190,000,000.00. The spot
market includes sales of gasoline, kerosene and tool oil.
IV.
CORCO REVENUES AND DEBT STRUCTURE
The present financial picture of CORCO with parti-
cular attention to its existing debt structure is an essential
aspect in the determination of proper venue. Initially and
as was previously noted in this opinion, CORCO’S invest-
ment in its physical Puerto Rican plant facilities is in the
neighborhood of
[488]
$545,000,000.00 with a replacement cost of approxi-
mately $1,000,000,000.00. Tesoro Petroleum Company’s
purchase of 36.7% of CORCO common stock (5.5
million shares) represents an investment in CORCO of
$80,000,000.00. As of the date of filing of these pro-
ceedings the additional indebtedness to Tesoro was in
the $70,000,000.00 range. Primary lenders to CORCO
comprise several of the largest banking houses in New
York, California and Puerto Rico and are referred to
as the Citibank Group. The debt owed to the bank group
is presently in the neighborhood of $150,000,000.00.
The total shares of CORCO common stock outstand-
ing is 14,999,831. Of that total, 243,441 shares (1.62% )
are held by Puerto Rican residents numering 1,099
E-16
shareholders out of a total of 23,241 shareholders. Ad-
ditionally, CORCO has issued $17,856,000.00 of 442%
convertible subordinated debentures due in 1992. These
debentures are held by 783 accounts and Puerto resi-
dents hold 2.6% of the total outstanding debentures.
According to the schedules filed by CORCO in this
case, there is a total indebtedness to all creditors in the
amount of $322,.881,857.88. From that total indebted-
ness there are landlord debts of about $606,000.00 of
which 55% is owed to United States mainland creditors
and 45% to Puerto Rican creditors. The debt scheduled
as owing to taxing authorities is some $1,768,000.00
of which 11% is owed to United States mainland tax-
ing authorities and 89% to Puerto Rico authorities.
Priority wage claims total $400.69, 100% of which is
owed to Puerto Rican employees. The secured debt totals
$263,366,705.48 of which 91% is owed to United States
mainland creditors and 9% to Puerto Rican creditors.
The unsecured debt amounts to $57,140,364.98, of
which 93% is scheduled as owing to United States main-
land creditors and 7% to Puerto Rican creditors. In
summary, the total indebtedness from all categories in-
dicates that 90% of all debts are owed to United States
mainland creditors and 10% to Puerto Rican creditors.
[489]
Aside from the value of its physical plant facilities,
and revenues generated therefrom, CORCO relies heavily
upon the entitlements and exceptions programs ad-
ministered by the Department cf Energy of the United
States. At the risk of oversimplification, the entitlements
program is a monetary contribution by the Department of
E-17
Energy to certain companies in order to equalize com-
petitive factors where it has been determined that in-
equities exist in the market place. The inaccessibility
of the CORCO refinery to a material source of feedstock,
the lack of a pipeline facility from the supplier to the
refiner, the expense of shipping refined products to the
mainland are some of the factors weighed in awarding
CORCO the entitlements it receives. The company has
been awarded entitlements amounting to $90,000,000.00-
$100,000,000.00 a year from the Department of Energy.
Obviously, these entitlements are a significant factor in
the financial operation of the company.
7.
THE COMMONWEALTH OF PUERTO RICO
Having thus far set out the historic background and
corporate and financial structure of CORCO as it exists
internally and with respect to its customers, suppliers
and creditors, it is also incumbent to consider the im-
pact this proceeding has on The Commonwealth and
people of Puerto Rico, and the factual basis for its posi-
tion urging the transfer of the case to the Bankruptcy
Court in San Juan.
In a strictly factual context, it must first be noted
that all of CORCO’s physical plant facilities—both re-
fining and petrochemical—are located on the island of
Puerto Rico. As has been noted, CORCO directly em-
ploys approximately 1,200 Puerto Rican _ residents.
Through its own plant operations as well as its partici-
pation in the various joint venture projects in Puerto
Rico, CORCO ultimately effects 12,000 Puerto Rican
citizens. CORCO’S Puerto Rican payroll is $750,000.00.
E-18
[490}
CORCO’S largest single customer is the Puerto Rican
Water Resources Authority which consists of four power
generating installations and provides all of the electrical
power on the island. Electrical service customers number
approximately 900,000 including commercial, industrial
and residential. Forty percent of the total power gene-
rated by PRWRA emanates from its South Coast
Plant which is dependent exclusively on CORCO for its
fuel oil supply. Revenues from PRWRA to CORCO
range from $132,000,000.00 to $182.000,000.00 per
year.
In addition to furnishing PRWRA much of its fuel oil
supply, CORCO provides other refined petroleum prod-
ucts and petrochemicals to island consumers. For ex-
ample, CORCO supplies Puerto Rico with 98% of its
liquified petroleum gas requirements, 62% of its motor
gasoline, 90% of its aviation fuel, 58% of its middle
distillates, and 73% of its aromatics.
CORCO is a fact of life for many of the people and
businesses of Puerto Rico who depend on the company
for jobs, transportation, fuels and electrical power. In
turn, CORCO’S revenues are in large meature attribut-
able to its sale of refined products and petrochemicals
on the island. The immense public interest of the citizenry
of Puerto Rico and their government are well founded
and fully appreciated by this Court.
VI.
POST CHAPTER XI PROCEEDINGS
On March 2, 1978. CORCO filed for Chapter XI in
E-19
the San Antonio Division of the Western District of
Texas. Since the date of filing, this Court has appointed
a Fiscal Agent to oversee the company’s operation gen-
erally and assist all parties in the formulation of a
Plan of Arrangement. The Court has also approved the
retention of various attorneys and law firms both in the
United States and Puerto Rico to handle the myriad of
legal problems facing the company during the pendency
of the case.
[491]
Prior to the First Meeting of Creditors, the Court was
required to hear various emergency matters concerning
the rejection of certain executury contracts, temporary
restraining orders, designation of bank depositories and
the like. Since the filing of the instant Motion for Trans-
fer of this matter to Puerto Rico, the Court has refrained
from ruling on substantive issues pending in the case
until the venue question was heard and resolved.
On May 15, 1978, the First Meeting of Creditors
was held for the limited purpose of receiving the report
of the Fiscal Agent. Thereafter, the meeting was ad-
journed and the Motion now before the Court was there-
after presented in its entirety.
[492]
Vil.
LAW APPLIED TO THE FACTS
Jurisdiction is conceded to be in the Western District
of Texas. Proper venue for these Chapter XI proceedings
E-20
is determined by Bankruptcy Rule of Procedure 116
(a)(2) which provides:
(2) CORPORATION OR PARTNERSHIP. A pe-
tition by or against a corporation or partnership may
be filed in the district (A) where the bankrupt has
had its principal place of business or its principal
assets for the preceding 6 months or for a longer
portion thereof than in any other district; or, (B)
if there is no such district, in any district where the
bankrupt has property.
The Motions to Transfer Venue are brought under
Bankruptcy Rule 116(b)(1) and (2) which provide:
(1) WHEN VENUE PROPER. Although a peti-
tion is filed in accordance with subdivision (a) of
this rule, the court may, after hearing on notice to
the petitioner or petitioners and such other persons
as it may direct, in the interest of justice and for
the convenience of the parties, transfer the case to
any other district. The transfer may be ordered at
or before the first meeting of creditors either on the
court’s own initiative or on motion of a party in
interest but thereafter only on a timely motion.
(2) WHEN VENUE IMPROPER. If a petition
is filed in a wrong district, the court may, after
hearing on notice to the petitioner or petitioners and
such other persons as it may direct, dismiss the case
or, in the interest of justice and for the convenience
of the parties, retain the case or transfer it to any
other district. Such an order may be made at or
before the first meeting of creditors either on the
court’s own initiative or on motion of a party in
interest but thereafter only on a timely motion. Not-
withstanding the foregoing, the court may without
a hearing retain a case filed in a wrong district if
no objection is raised.
E-21
CORCO’s principal place of business under Bankruptcy
Rule 116(a) is a question of fact to be determined on
a case by case basis and lies totally within the sound
discretion of this Court. Continental Coal Corp. v.
Rozelle Brothers, 242 F. 243 (6th Cir. 1917); Chicago
Bank of Commerce v. Carter, 61 F.2d 968 (8th Cir.
1932); In re R. H. Pennington & Co., 228 F. 388 (W.D.
Kentucky 1915); Clark Brothers Co. v. Portex Oil Co..,
113 F.2d 45 (9th Cir. 1940); In re Hudik-Ross Co., Inc.,
198 F. Supp. 695 (S.D.N.Y.) aff'd sub. nom.; In re S.O.S.
Sheet Metal Co., Inc., 297 F.2d 32 (2d Cir. 1961);
In re Bankers Trust, 403 F.2d 16 (7th Cir. 1968);
Dryden v. Ranger Refining & Pipeline Co., 280 F. 157
(Sth Cir.); cert. denied 260 U.S. 726 (1922).
[493]
This Court, after thoroughly reviewing the evidence
adduced concerning where the debtors’ principal place of
business is located concludes that their principal place
of business is San Antonio, Texas, and therefore the
Western District is a proper venue situs for the debtors’
Chapter XI proceeding as provided for under Bankruptcy
Rule 116(a)(2). Movants rely on and cite Dryden v.
Ranger Refining & Pipe Line Co., 280 F. 257 (Sth Cir.
1922) and Anniston Soil Pipe Co. v. Central Foundry
Co., 216 F.Supp. (N.D. Alabama, 1963); Affd per
curiam, 329 F.2d 313 (5th Cir. 1964), as authority
for their position that the debtors’ principal place of
business is situated in Puerto Rico. In the Dryden case,
the Court concluded from the evidence that the bank-
rupt’s principal place of business was in Ranger, Texas
where its refinery was located. The Dryden case is easily
E-22
distinguished from the case at bar for the following
reasons:
(1) In the Dryden case substantially all of the
bankrupt’s feedstocks were supplied from oil and gas
wells owned by it in Texas which were situated in
the general area of its refinery. In the case at bar,
no feedstocks exist in Puerto Rico, but have to be
imported by the debtor from the United States main-
land and from certain foreign countries.
(2) In Dryden substantially all contracts for the
sale of the bankrupt’s refinery products were initiated
and closed in Ranger, Texas, where its refinery was
located. In the instant case substantially all of the
debtors’ contracts for purchase and sale of its feed-
stocks and refined products are controlled, negoti-
ated, contracted for and closed from either their
offices in San Antonio, Texas, McLean, Virginia,
or from the customer’s and purchaser’s offices in the
United States.
(3) In Dryden contracts for and agreements with
various transportation companies for the inflow and
[494]
outflow of its feedstocks and refined products were
handled at the refinery office of the bankrupt in
Ranger, Texas. In the case at bar, all contracts for
and arrangements with Marine Transportation Com-
panies are handled and controlled from the debtors’
San Antonio office and not in Puerto Rico.
(4) In Dryden the great majority of the bankrupt’s
dealings with the public were carried on and closed
E-23
at its refinery office in Ranger, Texas. In the instant
case, the great majority of the debtors’ dealings
with the public are directed, controlled, carried on
and closed from either their San Antonio offices or
from the offices of the various members of the
public located in the United States.
Finally, the Court of Appeals in Dryden at pages 263
and 264, concedes that the place where a corporation’s
sales are negotiated, contracted, concluded and from
which general supervision of all of its business is exer-
cised, may be properly held to be the principal place
of business of such corporation—as opposed to the place
where the working operations of ihe corporation are
located.
The Anniston Soil Pipe Co., case is also distinguish-
able for the following reasons:
(1) No bankruptcy proceeding or venue issue was
present in the Anniston case.
(2) In the Anniston case, the sole issue to be
determined was whether the District Court had
jurisdiction of the case based upon diversity of
citizenship of the parties. In the case at bar, the
jurisdiction of this Court over these Chapter XI
proceedings is not an issue in the case.
(3) Movants have not shown that the factors and
rationale used in Anniston or any other diversity
case,
[495]
bearing on a jurisdictional question, are applicable
E-24
to a determination of venue in a bankruptcy pro-
ceeding where jurisdiction itself is not an issue.
(4) In Anniston, the jurisdiction of the District
Court failed because the principal place of business
of the Appellant was found to be located in the
same State as its Operating Plant, and as a result,
no diversity of citizenship existed to support juris-
diction. In the instant case, the venue of this Court
will not necessarily fail if the evidence had shown
that the principal place of business of the debtors
was in Puerto Rico, because Bankruptcy Rule
116(b)(2) expressly allows this Court to retain
venue of the case—if the interest of justice and the
convenience of the parties so requires.
The Court, having concluded and determined that
proper venue for CORCO’S Chapter XI proceedings lie
in the Western District under Rule 116(a)(2), must now
determine whether venue for these Chapter XI proceed-
ing should be transferred to the District of Puerto Rico
under the discretionary provisions of Rule 116(b)(1).
In determining such transfer issue, this Court should not
freely abandon to another district, or lightly shift to
another Court, its duty to determine a matter clearly
within its jurisdiction and same should be exercised with
caution. In re United Button Co., 137 F. 668, 672 (D.
Del. 1904), In re Bankers Trust, 403 F.2d 1623 (C.A. 7
1968). In re Miller, 172 F.Supp. 208, 209-210 (D.
Kan. 1959). Also the burden of proof is upon the mov-
ing party requesting and seeking the transfer—with the
quantum of the burden being a “fair preponderance of
the evidence”. In re Triton Chemical Corp., 46 F.Supp.
326, 328 (D. Del. 1942); In re Fairfield Puerto Rico,
Inc., 333 F.Supp. 1187 (D. Del. 1971); In re S.O.S.
E-25
Sheetmetal Co., Inc., 297 F.2d 32 (2nd Cir. 1961);
In re Fada Radio & Electric Co., 132 F.Supp. 89 (S.D.
N.Y. (1955).
[496]
While Rule 116(b)(1) uses the term “convenience of
the parties” in connetion with a discretionary transfer of
venue in a bankruptcy proceeding, it does not attempt to
define who are the parties at interest. It has been held
however, that the term includes creditors, whether secured
or unsecured, the debtor, shareholders, debenture holders,
and all persons whose pecuniary interests are directly
affected by the bankruptcy proceeding. Clark Bros. Co.
v. Portex Oil Co., 113 F.24 45, 48; Re United Button Co.
137 F. 672; Re Statewide Treatres Corp., 4 F.Supp. 87;
Haas v. Gerstel, 134 F.2d 803, (C.A. 5 Fla. 1943); In
re Fairfield Puerto Rico, Inc., Supra, In re Okmulge Pro-
ducing & Refining Co., 265 F. 736 (D. Del. 1920). Ac-
cordingly it is held that CORCO, its affiliated companies,
its creditors, both secured and unsecured, its debenture
holders and shareholders are among those who are parties
in interest.
The tests for transfer under Rule 116(b)(1) is whether
it is “in the interest of justice and for the convenience of
the parties” to transfer the case to another district.
Neither the Bankruptcy Act nor the Bankruptcy Rules of
Procedure attempt to define the phrase “in the interest
of justice” or “convenience of the parties”. However, it
has been held and recognized by the Courts that some of
the factors to be considered in determining whether a
transfer of venue will be “in the interest of justice” and
“for the convenience of the parties” are:
E-26
(1) The proximity of creditors of every kind to the
Court;
(2) The proximity of the bankrupt (debtor) to the
Court;
(3) The proximity of the witnesses necessary to the
administration of the estate;
(4) The location of the assets;
(5) The economic administration of the estate;
(6) The necessity for ancillary administration if
bankruptcy should result.
See In The Matter Of Fairfield Puerto Rico, Inc.,
debtor 33 F.Supp. 1187 (D. Del. 1971); In re United
Button Co., 137 F.
[497]
668, (D. Del. 1904); Haas v. Gersiel, 134 F.2d 803,
(C.A. 5 Fla. 1943); In re Triton Chemical Corp., 46
F.Supp. 326, (D. Del. 1942); In re Bankers Trust, 403
F.2d 16, (C.A. 7 1968); In re Miller, 172 F.Supp. 208,
(D.C. Kan. 1959).
The foregoing factors are applied as follows in the
instant case:
The Economic And Efficient
Administration Of The Estate Of
The Debtor-In-Possession
If one factor could be singled out as having the most
logical importance, it would be whether a transfer would
promote the efficient and economic administration of an
E-27
estate. In re United Button Co., 137 F. 668; In re Triton
Chem. Corp., 46 F.Supp. 326, 329. The evidence clearly
shows that the estates of the Debtors-In-Possession are
being jointly administered in the Western District in an
economic and efficient manner. Refererice is here made
to the voluminous findings set forth by the Court in Parts
I & II of this Opinion which bear upon and relate to this
important factor. Such findings clearly show that the
debtors’ management operations are substantially based
and geared to their San Antonio, Texas office from which
the economic and efficient operations of the estates of
these Debtors-In-Possession are currently being accom-
plished and will continue to be accomplished in the future.
Additionally, no evidence was adduced to show that the
Debtors-In-Possession have any other office in Puerto
Rico or elsewhere which can readily duplicate the man-
agement functions of the San Antonio office. Also,
Movants, in support of their Motion to Transfer Venue,
adduced no meaningful evidence to show how or under
what circumstances the estates of the Debtors-In-Posses-
sion could be administered as economical and efficiently,
or more economical and efficiently in Puerto Rico than
is currently being accomplished in San Antonio. Rather,
the evidence tended to show that in all probability, the
expenses of administering the debtors’ Chapter XI pro-
ceedings would increase if venue is transferred to
[498]
Puerto Rico, and the remoteness of the proceedings in
Puerto Rico from the debtors’ total management opera-
tions in San Antonio, and the United States mainland,
would reduce the efficient administration of these Chapter
XI proceedings.
E-28
Proximity Of The Creditors To The Court
In considering the interest of the creditors in deter-
mining whether venue should be transferred in this case,
it is the total dollar amount of the claims held by
creditors, and not their number, which is more important.
Clark Bros. Co. v. Portex Oil Co., 113 F.2d 45, 48.
In the instant case, the evidence established 90% of the
debtors’ total indebtedness is owed to United States main-
land creditors and only 10% to Puerto Rican creditors.
Additionally, only 1.62% of the debtors’ shareholders
are residents of Puerto Rico, and only 2.6% of its
debenture holders are Puerto Rican residents. By com-
parison, 36.7% of the debtors’ common stock is owned
by a San Antonio based shareholder having an invest-
ment of approximately $80,000,000.00 in same. Also,
the same San Antonio based shareholder has advanced
loans to CORCO totaling approximately $70,000,000.00.
It has been held that the creditors with the largest
claims have the greatest interest and their interests should
be weighed accordingly. Re Republic Gas Corp., 6 F.
Supp. 70, 71; Re United Button Co., 137 F. 673; Clark
Bros. Co. v. Portex Oil Co., 113 F.2d 45. In the case at
bar, a substantial number of the creditors having the
largest claims have requested the Court to retain venue
in the Western District. Among these large creditors
desiring venue to be retained in San Antonio are a major-
ity of the debtors’ lender-banks who are currently pro-
viding post-Chapter XI financing for the debtors’ con-
tinued operations. Finally, Tesoro Petroleum Company,
the owner of 36.7% of the debtors’ common stock, and
the owner and holder of a $70,000,000.00 indebtedness,
has also expressed a preference for venue in the Western
District.
E-29
[499]
Proximity To The Court And Choice Of
Forum Of The Debtors-In-Possession
Due to the extensive operations of the Debtors-In-Pos-
session, numerous hearings have been held and will con-
tinue to be held during the course of these Chapter XI
proceedings, which require the attendance in Court as
witnesses, of a substantial number of the debtors’ middle
level and top level management—based in San Antonio.
Most of these hearings are substantive in nature, in-
volving large sums of money, and involve subject matter
which is vital to the continued business operations of the
debtors and their goal of rehabilitation. These hearings
must be conducted in a timely and expeditious manner
if the interests of the debtor and other parties at interest
are to be fully protected. No counterparts of debtors’
middle and top level management personnel are situated
in Puerto Rico. Additionally, all of such witnesses and
their interpolated work data, are located in San Antonio.
Further, the Attorneys-In-Chief, who represent the debtors
in these Chapter XI proceedings, have their offices in
Houston, Texas and Dallas, Texas, which are in close
proximity to the Court. Finally, the debtors’ chief supplier
of crude oil, with whom CORCO must negotiate and
confer on an almost daily basis, and whose sales to
CORCO amount to $2,500,000.00 to $3,000,000,00 a
day, is situated in Houston, Texas and is in close prox-
imity to the Court.
Location Of Books, Records And Assets
Substantially all of the books and records of debtors
are maintained in Puerto Rico. By computer systems sit-
E-30
uated both in San Antonio and Peurto Rico, the man-
agement of CORCO at San Antonio has instant access
to such books and records, and can actually “override”
the computer systems in Puerto Rico in order to make
changes in such books and records or in order to “update”
[500]
same. Additionally, the principal assets of the debtor,
which consist of its plant facilities, are located in Ponce,
Puerto Rico—with management and operations of such
plant facilities being principally situated and conducted
from San Antonio. As previously stated, the tests for
transfer under Rule 116(b)(1) is whether “the interest
of justice” and “the convenience of the parties” will best
be served by such transfer. However, it is clear from Rule
116(b)(1) that the location of the principal assets does
not necessarily control whether transfer should be or-
dered. Determinative factors will vary with each case.
In re Fairfield Puerto Rico, Inc., 333 F.Supp. 1187 (D.
Del. 1971).
The Necessity For Ancillary Administration
If Bankruptcy Results
This Court is not unmindful of the necessity for ancil-
lary administration in the event a subsequent adjudica-
tion of the debtors as bankrupts occur in this proceed-
ing. However, anticipation of the failure of these Chap-
ter XI proceedings is not a valid or logical basis upon
which to base or predicate a transfer of venue in this
case. Again, determinative factors vary with each case.
In re Fairfield Puerto Rico, Inc., 333 F.Supp. 1187, (D.
Del. 1971).
E-31
The Necessity For Ancillary Administration
If Bankruptcy Results
This Court is not unmindful of the necessity for ancil-
lary administration in the event a subsequent adjudica-
tion of the debtors as bankrupt occur in this proceeding.
However, anticipation of the failure of these Chapter XI
proceedings is not a valid or logical basis upon which to
base or predicate a transfer of venue in this case. Again,
determinative factors vary with each case. In re Fairfield
Puerto Rico, Inc., 333 F.Supp. 1187, 1190 (D. Del.
1971).
Vil
CONCLUSION
There are several matters which have not received
specific treatment in this opinion but which were raised
either in briefs or during the hearing which require
comment by the Court.
Substantial testimony was elicited by the Common-
wealth of Puerto Rico and PRWRA regarding CORCO’S
inability to provide sufficient supplies of fuel oil reserves
to meet emergency situations that may arise especially
during the hurricane season. The evidence showed that
all of PRWRA’S fuel oil consumption requirements have
been met on a regular basis, and that a reserve in-
ventories fell into short supply only when the refinery
refused to furnish fuel because of a dispute over payment.
In any event, witnesses for CORCO reiterated their
[501]
assurances that PRWRA’s requirements would be met in
all respects now and in the future.
E-32
Additionally, testimony was adduced at the hearing
from witnesses on behalf of the Puerto Rican Govern-
ment concerning the devastating effect a refinery shut
down would have on the island generally. This Court is
completely aware of the absolute necessity of CORCO’s
continued operation at full capacity, and during the pen-
dency of this case will keep a constant vigil to prevent
any cessation of operation in order to preserve and pro-
tect the national and economic interests of the people of
Puerto Rico.
Considering and weighing all of the above set forth
factors and being aware that the formulation of a Plan
of Arrangement depends primarily on efforts and activi-
ties of a financial nature which are, for the most part,
conducted from San Antonio or from other parts of the
United States mainland, the Court concludes that the
Movants have failed to carry their burden of proof by
a fair preponderance of the evidence in support of trans-
ferring venue to Puerto Rico. The Motions, therefore,
will be denied but with leave granted to The Common-
wealth of Puerto Rico and Puerto Rico Water Resources
Authority to renew their Motion in the event there is
an adjudication under the Bankruptcy Act.
Entered this 26th day of May 1978 at San Antonio,
Texas.
JOSEPH C. ELLIOTT
Joseph C. Elliott
Bankruptcy Judge
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.