# Petition — Puerto Rico v. Commonwealth Oil Refining Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1207%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1980 - **Citation:** 444 U.S. 1045 ## Text a, § ere a lt bh ; NOV % 1979 SESE f 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 oak ce wk wa pa esse scees re el ao 5 ak oo vn oka s nee sees ee ee rr EE eee 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 refi [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_1207%3A1. Public record. Not legal advice.