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In re Nat'l Hydro-Vac Indus. Servs., L.L.C.

United States Bankruptcy Court for the Eastern District of Arkansas, Pine Bluff Division

May 24, 2001, Decided ; May 24, 2001, Filed, Entered on Docket

CASE NO. 01-50466M, CHAPTER 11



The issue before the Court is whether to grant relief from the automatic stay to Simmons First National Bank ("Bank") to terminate its Bank Card Merchant Agreement ("Agreement") with National Hydro-Vac Industrial Services, L.L.C. ("Debtor"). After the Bank filed its motion for relief from stay on April 12, 2001, a hearing was conducted on the matter on April 24. The Court ruled from the bench that the Agreement is an executory contract and that the Bank's postpetition termination of the Agreement was a technical violation of the stay subject to annulment. The Court took under advisement the issue of whether to grant prospective relief from stay to the Bank.

The Court has jurisdiction pursuant to 11 U.S.C. § 1334 and § 157. This is a core proceeding in accordance with 28 U.S.C. § 157(G)(1994), and the Court may enter a final determination in this case.

 [*783] FACTS

The Debtor is an industrial cleaning contractor performing services such as vacuuming,  [**3]  hydro-blasting, and chemical cleaning at industrial sites throughout the United States. In April of 1999, prior to the Debtor's bankruptcy, the Debtor and the Bank entered into the Agreement at issue. Pursuant to the Agreement, the Debtor's customers can charge to their bank charge cards, such as Visa or MasterCard, amounts owed to the Debtor for services rendered to the customer.

Under the terms of the Agreement, the Debtor processes the customer's credit card number though a terminal supplied by the Bank, and when the charge is approved, the transaction is transmitted to the Bank. The Bank then processes the transaction through to the card- issuer bank, which in turn debits the customer-cardholder's account. Within 24 to 48 hours, the Bank credits the Debtor's account at the Bank with the amount charged and paid through a credit card by the Debtor's customer. The Bank later collects the same amount from the card-issuer bank. The Bank is paid a fee of 15 cents and 3% of each transaction for providing this service to the Debtor.

The Agreement provides that either party may terminate the Agreement "at any time, without cause and for any reason whatsoever, effective immediately upon [**4]  notice of termination given to the other party hereto." (Simmons Ex. 4.) The terms of the Agreement also state that it is not transferrable or assignable.

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262 B.R. 781 *; 2001 Bankr. LEXIS 578 **; 37 Bankr. Ct. Dec. 262


Disposition:  [**1]  Bank's postpetition termination of the Agreement violated the automatic stay void. Bank's motion for relief from stay and for abandonment in order to terminate the Agreement denied.


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Bankruptcy Law, Administrative Powers, Automatic Stay, Duration of Stay, Executory Contracts & Unexpired Leases, General Overview, Termination Clauses, Relief From Stay, Business & Corporate Compliance, Assignments, Assignment of Obligations, Consent Requirements, Contracts Law, Standards of Performance, Contracts Law, Types of Contracts, Personal Service Agreements, Powers to Assume & Reject, Executory Contracts, Nonassignability Clauses, Third Parties, Delegation of Performance, Unassumable Contracts, Contract Conditions & Provisions, Case Administration, Examiners, Officers & Trustees, Appointment, Estate Property Lease, Sale & Use, Discharge & Termination, Creditors & Debtors