777 F.2d 992 (5th Cir. 1985), 84-4689, Holland America Ins. Co. v. Succession of Roy

Docket Nº:84-4689.
Citation:777 F.2d 992
Party Name:HOLLAND AMERICA INSURANCE COMPANY, Plaintiff-Appellee, v. SUCCESSION OF Shepherd J. ROY, et al., Defendants, The Union Bank and Central Pecan Shelling Company, Inc., Defendants-Appellants.
Case Date:December 04, 1985
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 992

777 F.2d 992 (5th Cir. 1985)

HOLLAND AMERICA INSURANCE COMPANY, Plaintiff-Appellee,

v.

SUCCESSION OF Shepherd J. ROY, et al., Defendants,

The Union Bank and Central Pecan Shelling Company, Inc.,

Defendants-Appellants.

No. 84-4689.

United States Court of Appeals, Fifth Circuit

December 4, 1985

Page 993

Darrel D. Ryland and Craig S. Gunnell, Marksville, La., for Union bank.

Anderson & Rainach, Lawrence R. Anderson, Jr., Baton Rouge, La., for Central Pecan Shelling Co., Inc.

Boatner & Luke, R.H. Luke, Bunkie, La., for Bunkie Bank & Trust Co.

Good, Little, Simon, Weems & Bruser, John F. Simon, Alexandria, La., for Nat. Union Fire Ins. Co.

Provosty, Sadler & deLaunay, Frederick B. Alexius, Alexandria, La., Bienvenu, Foster, Ryan & O'Bannon, Ernest L. O'Bannon, John C. Tollefson, New Orleans, La., for St. Paul Fire & Marine Ins. Co. and Edgar Coco Agency, Inc.

Appeals from the United States District Court for the Western District of Louisiana; Nauman S. Scott, District Judge, Presiding.

Before CLARK, Chief Judge, POLITZ and JONES, Circuit Judges.

OPINION

EDITH HOLLAN JONES, Circuit Judge:

This appeal results from an order of the district court preliminarily enjoining state court litigation over the proceeds of a bankrupt company's fire insurance policy. We find that (1) the district court had jurisdiction and (2) the bankruptcy automatic stay did not bar litigation in the district court, but (3) it was improper to issue an injunction, and (4) the district court should consider delegating this controversy to its adjunct bankruptcy court.

I. PROCEDURAL BACKGROUND

Holland America Insurance Company issued a fire insurance policy in November 1983, to Central Pecan Shelling Company, covering its Mansura, Louisiana pecan shelling and packaging facility. Central Pecan and its principal stockholders, Shepherd J. Roy and his wife, filed for Chapter 11 reorganizations on June 1, 1984. Two days later a fire consumed the facility and Mr. Roy's body was found on the scene. Holland America alleges that Roy set the fire and that therefore claims for recovery by the Succession of Roy and by Central Pecan are barred by fraud. The property loss was $1,022,560. The policy did not name a mortgagee-loss payee.

Union Bank, appellant, allegedly without knowledge of the Central Pecan bankruptcy, filed the first lawsuit on June 19 in state court, claiming that it is the loss payee. The Edgar Coco Agency, Inc., which issued the policy, had attempted post-bankruptcy to designate Union Bank as loss payee in an endorsement. However, Union Bank's sworn proof of loss was

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rejected. Union Bank named as initial defendants Mission Insurance Company (the parent company of Holland America), Edgar Coco Agency, Inc., St. Paul Fire & Marine, and George S. Kausler, Ltd. Later, National Union Fire Insurance and Audubon Indemnity Company were joined as defendants.

On July 10, 1984, the Bankruptcy Amendments and Federal Judgeship Act of 1984, Public Law 98-353, 98 Stat. 333 (hereinafter, the "Bankruptcy Amendments Act") became effective.

On July 27, Holland America filed a Federal Rule of Civil Procedure 22 interpleader action in the district court where Central Pecan's bankruptcy is pending. Holland America denied liability on the policy and, alternatively, named all known possible claimants to its proceeds: The Succession of Roy, Central Pecan, Bunkie Bank & Trust, Cottonport Bank, Mansura State Bank, Union Bank, Douglas Guardian Warehouse, Coco, St. Paul Fire & Marine, National Union Fire and Audubon Indemnity.

The district court accepted the interpleader action and found it had diversity jurisdiction. It held that injunctive relief was proper under 28 U.S.C. Sec. 2361 and was necessary to effectuate its jurisdiction under 28 U.S.C. Sec. 2283 (the Anti-Injunction Statute). The district court concluded that the interpleader would not interfere with the automatic stay in bankruptcy, citing as its authority Dakota Livestock Co. v. Keim, 552 F.2d 1302 (8th Cir.1977). Consequently, the court enjoined certain of the defendants from engaging in litigation elsewhere to force payment of or collect the policy proceeds.

II. JURISDICTION

The district court had jurisdiction of Holland America's action either as a proceeding "arising under or related to" Central Pecan's bankruptcy or as a diversity case.

  1. Bankruptcy Jurisdiction

    The parties have not urged the applicability of the jurisdictional scheme created by the Bankruptcy Amendments Act, which became effective, as noted, in the course of the parties' forum-shopping forays. Nevertheless, that statute conferres on the district court "original but not exclusive jurisdiction of all civil proceedings ... arising in or related to cases under Title 11" and "exclusive jurisdiction of all of the property, wherever located, of the debtor as of the commencement of such case, and of the estate." 28 U.S.C. Secs. 1334(b) and (d). The transition provisions of the statute implemented the district court's jurisdiction as of July 10, 1984, for all bankruptcy cases and proceedings arising in or related to cases that were pending immediately before the date of enactment. (Act of July 10, 1984, Pub.L. No. 98-353, Sec. 115(a), 1984 U.S. Code & Ad. News (98 Stat.) 343. As this court found in Carlton v. BAWW, Inc., 751 F.2d 781, 788 (5th Cir.1985) the district court now has federal bankruptcy jurisdiction, should it elect to exercise it. The scope of the bankruptcy court's authority in this case will be discussed further below.

    The Carlton opinion makes clear that even though the parties to this action failed to identify this jurisdictional basis, the provisions of 28 U.S.C. Sec. 1653 1 permit this court to allow the amendment of their pleadings de facto without a remand for that purpose. 751 F.2d at 788-89.

  2. Diversity Jurisdiction

    Central Pecan and Union Bank have disputed the district court's jurisdiction apparently because they believe either the pending state court action or the bankruptcy court will offer more hospitable treatment of their claims. Supposing that diversity jurisdiction, pursuant to 28 U.S.C. Sec. 1332, supplied the only basis for the district court to act, they have sought realignment of the parties to Holland America's Rule 22 interpleader. Rule 22 interpleader requires diversity

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    of citizenship. State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 528, n. 3, 87 S.Ct. 1199, 1202 n. 3, 18 L.Ed.2d 270, 274 n. 3 (1967).

    Central Pecan argues that proper alignment renders...

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