Wood and Locker, Inc., Matter of, 88-1532

• Decision Date: 09 March 1989
• Docket Number: No. 88-1532,88-1532
• Citation: 868 F.2d 139
• Parties: , 20 Collier Bankr.Cas.2d 920, 19 Bankr.Ct.Dec. 395, Bankr. L. Rep. P 72,819 In the Matter of WOOD AND LOCKER, INC., Debtor. The SECTION 1120(A)(1) COMMITTEE OF UNSECURED CREDITORS, Appellants, v. INTERFIRST BANK DALLAS, N.A., Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 139

868 F.2d 139

57 USLW 2554, 20 Collier Bankr.Cas.2d 920,

19 Bankr.Ct.Dec. 395,

Bankr. L. Rep. P 72,819

In the Matter of WOOD AND LOCKER, INC., Debtor The SECTION 1120(A)(1) COMMITTEE OF UNSECURED CREDITORS, Appellants, v. INTERFIRST BANK DALLAS, N.A., Appellee.

No. 88-1532.

United States Court of Appeals Fifth Circuit.

March 9, 1989.

John W. Harris, Claiborne B. Gregory, Jr., San Antonio, Tex., for appellants.

Barbara K. Hoffman-Hill, Dallas, Tex., for appellee.

Appeal from the United States District Court for the Western District of Texas.

Before RUBIN, KING and GARWOOD, Circuit Judges.

KING, Circuit Judge:

The Section 1102(a)(1) Committee of Unsecured Creditors of Wood & Locker, Inc. appeals the district court's decision to affirm the bankruptcy court's grant of summary judgment to intervenor, Interfirst Bank-Dallas, N.A. Finding that we lack jurisdiction under 28 U.S.C. Sec. 158(d) to consider this appeal, we dismiss the appeal.

I. BACKGROUND

On January 7, 1987, Wood & Locker, Inc. (the "Debtor") ¹ and the Section 1102(a)(1) Committee of Unsecured Creditors (the "Committee") of the Debtor filed a Complaint to Avoid Preference (the "Complaint") against Williams-Patterson, Inc. ("W-P"). The Complaint is an adversary proceeding, filed under Bankruptcy Rule 7001. Citing sections 547, ² 550 ³ and 1107 ⁴ of the Bankruptcy Code of 1978 (the "Code"), the Complaint sought to recover from W-P preferences in the aggregate amount of approximately $129,000, allegedly received from the Debtor in April and May of 1983--within 90 days prior to the date on which the Debtor had filed for relief under Chapter 11 of the Code.

Citing section 502(d) ⁵ of the Code, the Complaint also sought to disallow a prepetition claim (the "Claim") filed by W-P against the Debtor in October of 1983 in the amount of approximately $1,090,000. Some two years before the Complaint was filed, Interfirst Bank-Dallas, N.A. ("Interfirst") had acquired substantially all of W-P's assets, including the Claim against the Debtor. In October of 1984, the bankruptcy court had approved the transfer of the Claim and, pursuant to Bankruptcy Rule 3001(e)(2), had ordered that Interfirst be substituted for W-P as the claimant in the bankruptcy action. Although the Complaint sought to disallow the Claim, Interfirst had not been joined as a party in the adversary proceeding. In order to protect its claim, Interfirst sought permission to intervene in the adversary proceeding. On April 24, 1987, the bankruptcy court granted Interfirst permission to intervene.

Interfirst then sought a declaratory judgment by the bankruptcy court that Interfirst was not liable to the Debtor or the Committee under sections 547 and 550 of the Code for the alleged preferential transfers. Interfirst argued first that the transfers were not avoidable under section 547 because they were not made to or for the benefit of Interfirst and were not for or on account of an antecedent debt owed by the Debtor to Interfirst before the transfers were made and second, that property could not be recovered from Interfirst under section 550. Finally, and building on its first two arguments, Interfirst argued that section 502(d) of the Code did not preclude Interfirst from receiving distributions on the Claim as provided in the confirmed plan.

On October 29, 1987, Interfirst filed a Motion for Summary Judgment, asserting that it was entitled as a matter of law to the declaratory relief outlined above. On December 1, 1987, the bankruptcy court granted Interfirst's motion, holding that: (1) Interfirst is not liable to the Debtor under section 547(b); (2) Interfirst is not liable to the Debtor under section 550 because no transfers could be recovered from Interfirst; (3) section 502(d) does not apply to the Claim; and (4) Interfirst is entitled to distribution on the Claim under the plan of reorganization in effect for the Debtor.

Only the Committee appealed the decision of the bankruptcy court. The notice of appeal filed by the Committee states that it is an appeal "from the final order[ ], or in the alternative, the interlocutory order[ ], of the bankruptcy court entered in this adversary proceeding on the 1st day of December, 1987, granting Intervenor's Motion for Summary Judgment." In addition to the notice of appeal, the Committee filed in the bankruptcy court, under Bankruptcy Rule 8003, a Motion For Leave To Appeal to the district court. ⁶ In that motion, the Committee asserts that the order of the bankruptcy court is final, rather than interlocutory, but also seeks leave to appeal in the event that the order is subsequently held to be interlocutory. The Committee notes that the Complaint against W-P for recovery of a voidable preference under section 547 of the Code is still pending final resolution. Although the Motion For Leave To Appeal is included in the record on appeal to this court, there is no indication that the district court ever entered a formal order ruling on the Motion for Leave to Appeal. The Memorandum Opinion and Order entered by the district court states, however, that the appeal of the Committee is "before this court," and that the district court has jurisdiction of the appeal under 28 U.S.C. Sec. 158(a) ⁷ and (c). ⁸ The opinion indicates that the district court was aware that the preference action was still pending before the bankruptcy court. We therefore construe the district court's Memorandum Opinion and Order as having granted the Committee's Motion for Leave to Appeal. As to the merits, the district court affirmed the bankruptcy court's grant of summary judgment, holding that Interfirst is not "the kind of creditor" from whom the Debtor can recover property under section 550 of the Code, or the kind of creditor who may be held liable under section 547 of the Code. For those reasons, the district court agreed with the bankruptcy court that the section 502(d) disallowance provision is not triggered.

The Committee then appealed to this court from the district court's judgment affirming the bankruptcy court's grant of summary judgment.

II. DISCUSSION

We have an independent obligation to examine the basis of our own jurisdiction. In re Lift & Equip. Service, Inc., 816 F.2d 1013, 1015 (5th Cir.), revised on other grounds, 819 F.2d 546 (5th Cir.1987). We were advised at oral argument that the suit to recover the preference from W-P is still pending in the bankruptcy court. In view of that fact, we asked for further briefing on the question whether the bankruptcy court's order granting summary judgment to Interfirst on its Complaint for Declaratory Judgment was, within the meaning of 28 U.S.C. Sec. 158(a), a final judgment, order or decree or an interlocutory order or decree. Our inquiry stems from the fact that under 28 U.S.C. Sec. 158(d), ⁹ we have jurisdiction only over "final decisions, judgments, orders, and decrees entered under subsection[ ] (a)" of section 158.

While the district court may, under 28 U.S.C. Sec. 158(a), review interlocutory orders of the bankruptcy court, our recent decision in In re Phillips, 844 F.2d 230, 234 (5th Cir.1988), has made clear that a district court's decision on appeal from a bankruptcy court's interlocutory order is not a final order for purposes of further appellate review unless the district court order in some sense "cures" the nonfinality of the bankruptcy court order. ¹⁰ In order to determine whether we have jurisdiction under section 158(d) we must therefore determine first whether the bankruptcy court's grant of summary judgment to Interfirst was an interlocutory or final order.

We begin our analysis by noting that because the Debtor and the Committee sought to recover a preference from W-P, they were compelled by Bankruptcy Rule 7001 to file an adversary proceeding to which Part VII of the Bankruptcy Rules applies. Adversary proceedings have been correctly described as "full blown federal lawsuits within the larger bankruptcy case," and are thereby distinguishable from other disputes in bankruptcy cases which are denominated "contested matters" and are generally subject to the less elaborate procedures specified in Bankruptcy Rule 9014. E. Warren & J.L. Westbrook, The Law of Debtors and Creditors 175 (1986). Part VII of the Bankruptcy Rules virtually incorporates the Federal Rules of Civil Procedure. Id.; see also D-1 Enterprises v. Commercial State Bank, 864 F.2d 36, 39 (5th Cir.1989) (rules regarding compulsory counterclaims apply only in adversary proceedings). Most important for the case before us, Bankruptcy Rule 7054 specifically incorporates Federal Rule 54(b), which provides as follows:

When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.

The applicability of Rule 54(b) to adversary proceedings necessarily affects our determination of the finality of the bankruptcy court's order. If the bankruptcy court has not certified as final an order that is a partial judgment within the meaning of Rule 54(b), the order will, by operation of the rule, remain interlocutory. In re King City Transit Mix, Inc., 738 F.2d 1065, 1066 (9th Cir.1984) (appellate jurisdiction lacking because bankruptcy...