The opinion of the court was delivered by: Marvin Aspen, Chief Judge, District
MEMORANDUM OPINION AND ORDER
Presently before us is the motion of Defendants Tad Ballantyne ("Ballantyne") and Jeff Renzoni ("Renzoni") to stay Plaintiff Congress Financial Corporation's ("Congress Financial") complaint pending the outcome of a concurrent action in the Bankruptcy Court for the Northern District of Texas. For the reasons set forth below, we deny Defendants' motion. [ Page 2]
Congress Financial first loaned money to Defendants Ballantyne and Renzoni when they owned and operated Racine Steel ("Racine"). On or about August 9, 2001, Congress Financial and Texas Steel Partners, Inc. ("TSPI") entered into a Loan Security agreement which provided TSPI with a $1,000,000 Term Loan and access to a $7,000,000 Revolving Operating Loan. These two loans were secured by liens on TSPI assets. to connection with the Loan Agreement, Ballantyne and Renzoni, as owners of TSPI, each guaranteed payments of up to $500,000 of their obligation to Congress Financial (the "Guaranteed Payments" or the "Guarantees").*fn1 The Guarantees entered into by Ballantyne, Renzoni and Congress Financial provided that "the liability of the Guarantor for the entire Guaranteed Obligations shall mature and become immediately due and payable, even if the liability of the Borrower or any other obligor does not, upon the occurrence of any act, condition or event which constitutes an Event of Default as such term is defined in the Loan Agreement" Plain. Ex. A ¶ (2)(c)(4). According to the Loan Agreement, an "Event of Default" occurs when, inter alia, "a case or proceeding under the bankruptcy laws of the United States of American . . . is filed by Borrower or any Obligor." Plain. Ex. C, § 10.1(h).
Racine began to experience financial difficulties, prompting Congress Financial to fear that it would suffer approximately $2.3 million in losses from the Racine debt. To offset this loss, Congress Financial insisted that the loan obligation be shifted from Racine to TSPI. Thus, on [ Page 3]
September 17, 2002, TSPI and Congress Financial amended the August 2001 Loan Agreement to reflect that TSPI owed Congress Financial an additional $2,300,545.90. This amount was backdated to September 1, 2002. After assuming the Racine debt, TSPI experienced greater financial difficulties. On December 2, 2002, TSPI filed a Chapter 11 petition in the Bankruptcy Court for the Northern District of Texas (In re Texas Steel Partners, 02-49573-BJH) (the "Bankruptcy Proceeding"). The Bankruptcy Proceeding has since been converted to a Chapter 7 liquidation.
On March 6, 2003, Congress Financial sent demand letters to each Defendant, seeking payment of the two $500,000 Guaranteed Payments. To date, Defendants have not made any payments. On March 27, 2003, Congress Financial filed suit before this Court seeking to enforce Defendant's payment of the two guaranteed payments. Currently before us is Defendants' motion to stay this proceeding pending the conclusion of the bankruptcy proceeding. For the reasons set forth below, we deny Defendants' motion.
Defendants set forth three reasons for their motion to stay: equitable estoppel, a stay under the Bankruptcy Code, and judicial economy. We are not persuaded by any of these arguments and therefore deny Defendants' motion to stay.
Defendants' first argument is that "notions of [equitable] estoppel . . . favor a stay pending complete resolution of the [B]ankruptcy [P]roceeding." In support of this argument, Defendants contend that Congress Financial, "through a host of actions, misrepresentations and omissions orchestrated and insisted that Texas Steel Partners file for Chapter 11 bankruptcy protection." Def. Mot To Stay. Defendants claim that Congress Financial encouraged TSPI to file for bankruptcy so that the Defendants' personal guarantees would be triggered. Defendants further [ Page 4]
allege that the transfer of the Racine debt to TSPI was fraudulent because it was meant to ensure and induce TSPI into filing for bankruptcy. See Def. Reply in Support of Mot. To Stay.
Defendants' argument and allegations do not support a finding that Congress Financial should be equitably estopped from pursuing the instant action. The doctrine of "equitable estoppel allows delay in suing when defendant has taken steps to prevent plaintiff from suing in time." Flight Attendants Against UAL Offset v. C.I.R., 165 F.3d 572, 575 (7th Cir. 1999). The elements of equitable estoppel are "(1) misrepresentation by the party against whom estoppel is asserted; (2) reasonable reliance on that misrepresentation by the party asserting estoppel; and (3) detriment to the party asserting estoppel." LaBonte v. United States, 223 F.3d 1049, 1054 (7th Cir. 2000) (citing Kennedy v. United States, 965 F.2d 413, 417 (7th Cir. 1992)). Defendants have not established the elements necessary for equitable estoppel. Defendants' general and vague statements that Congress Financial made "misrepresentations" and "insisted" that TSPI file for bankruptcy are entirely lacking in specificity and evidentiary support Defendants' allegation that "[i]mplied within Congress's representations [that through Chapter 11 bankruptcy TSPI would be able to obtain work-out financing, attract additional equity investment and quickly come out of bankruptcy] was that it would not use the occasion of bankruptcy as a basis to collect on personal guarantees made by Renzoni and Ballantyne," is entirely without merit. There is no evidence that Congress Financial directly or indirectly implied that it would not use the event of default to collect the personal guarantees. We therefore deny defendants' motion for a stay based on equitable estoppel.
In its next argument, Defendants essentially contend that this action should be stayed because of the pending bankruptcy proceeding. Defendants put forth two reasons in support of this argument First, Defendants contend that "the pending bankruptcy clearly implicates the rights of the same [ Page 5]
parties that are in this proceeding." Second, Defendants maintain that the bankruptcy proceedings will provide Congress Financial with an adequate remedy, making the instant action superfluous. Defendants' arguments simply do not comport with the provisions of the Bankruptcy Code. Under 11 U.S.C. § 362, a petition for bankruptcy stays, inter alia, "any act to obtain possession of property of the estate or of property from the estate or to control property of the estate." Under the Bankruptcy Code, "property of the estate" includes "all legal or equitable interests of the debtor." Bankr. Code, 11 U.S.C. § 541(a)(1). When a bankruptcy petition is filed, virtually all property of the debtor at that time becomes property of the bankruptcy estate. See Matter of Yonikus, 996 F.2d 866, 869 (7th Cir. 1993), Even under ...