Pacific Gardenia files for Chapter 11 bankruptcy

After filing a Chapter 7 bankruptcy case last week, Sy’s Corporation—which does business as Pacific Gardenia Hotel—petitioned the U.S. District yesterday for relief under Chapter 11 of the Bankruptcy Code.

Represented by lawyer Joseph A. Arriola, Sy’s Corp. submitted an amended voluntary petition for bankruptcy protection under Chapter 11 of the Code. The petitioner declared 50 to 99 estimated number of creditors.

On Sept. 13, Sy’s Corp. president Ronald Sablan sought relief under Chapter 7 of the U.S. Bankruptcy Code and Chapter 11 Small Business as defined in the U.S. Code.

Sy’s Corp. said it has an estimated $10 million asset and an estimated debt of the same amount.

Earlier, the Commonwealth Development Authority asked the Superior Court to go ahead with the appointment of a receiver for the Pacific Gardenia despite the owners’ filing of bankruptcy.

CDA, through legal counsel F. Matthew Smith, said the court retains jurisdiction to proceed with CDA’s action against defendant-couple Ronald D. Sablan and Maria Ana T. Sablan, and “to appoint a receiver to preserve and protect their individual assets.”

CDA said that only the assets of defendants’ Sy’s Corporation are protected or covered by the bankruptcy automatic stay and not the non-debtor parties or their property.

Smith, citing case laws, said that both defendants cannot successfully argue that an automatic stay reaches their actions and property if they are not also debtor parties in bankruptcy proceedings.

CDA said that individual assets that are known and that should be preserved by a receiver include the Sablans’ mortgaged interests in Lot No. 008 H 37 and their individual shares in Sy’s Corp.

“There are certain to be others as well, and only a receiver can gather, preserve, and inform this court as to the exact assets available,” CDA said.

Further, CDA said that the corporate shares held by the Sablan couple are not subject to any automatic stay and are not considered property of the bankrupt debtor’s estate.

As for the mortgaged property, CDA said that it can foreclose individual interests and seek appointment of a receiver “because they are superior and independent interests that were never consolidated with any corporate loan or interest of defendant Sy’s Corp.

The authority earlier asked the court to appoint a trustee to manage and collect the profits of the corporation until the case against its owners is resolved.

CDA said that the Sablan couple owe CDA over $2.4 million, and are more than five years delinquent in their payment.