In re S & M Constructors, Inc.
| Decision Date | 08 September 1992 |
| Docket Number | Bankruptcy No. 92-11872 (N.D. Ohio),Adv. No. 92-4196 (W.D.MO.),No. 92-0327-CV-W-8 (W.D.MO.).,92-0327-CV-W-8 (W.D.MO.). |
| Citation | 144 BR 855 |
| Court | U.S. Bankruptcy Court — Western District of Missouri |
| Parties | In re S & M CONSTRUCTORS, INC., Debtor. The FOLEY COMPANY, Plaintiff, v. AETNA CASUALTY & SURETY COMPANY, Defendant. |
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Kevin E. Glynn (argued) William J. DeBauche, Niewald, Waldeck & Brown, Kansas City, Mo., for plaintiff.
Edward Brown (argued), Arter & Hadden, Cleveland, Ohio, Mark Moedritzer, Shook, Hardy & Bacon, Kansas City, Mo., for defendant.
The matters before the Court are a motion filed by The Foley Company ("Foley") seeking remand of this proceeding to the United States District Court for the Western District of Missouri, and a motion to have this proceeding transferred to the United States Bankruptcy Court for the Northern District of Ohio filed by Aetna Casualty and Surety Company ("Aetna"). For the reasons set forth below, Aetna's motion for transfer is DENIED, and Foley's motion for remand is SUSTAINED.
The following constitute this Court's findings of fact and conclusions of law under Fed.R.Civ.P. 52, which is made applicable to this adversary action pursuant to Fed.R.Bankr.P. 7052.
On February 27, 1989, Foley, as general contractor, entered into a subcontract, with the debtor S & M as subcontractor, for a project for the United States Army Corps of Engineers known as the Power Reliability Enhancement Program, Fort Ritchie, Maryland. In accordance with the subcontract, S & M executed and delivered to Foley performance and payment bonds, with S & M as principal and Aetna as surety, for the benefit of Foley as obligee.
According to Foley, S & M failed to perform properly its obligations under the subcontract. Foley was forced to complete the work called for under the contract, including work allegedly performed improperly by S & M. Foley contends that, as a result of S & M's failure to perform its obligations under the subcontract, it has been damaged in the amount of $2,309,336.37.
The subcontract between Foley and S & M provided that disputes arising thereunder were to be resolved by arbitration proceedings to be held in Kansas City, Missouri. (Exhibit B to Exhibit 1, Foley Motion for Remand filed July 10, 1992, paragraph 2). S & M filed a demand for arbitration with the American Arbitration Association on October 24, 1990. Counsel for S & M and Foley attended a preliminary hearing with the arbitrators on November 1, 1991, at which time the arbitration hearing was scheduled to begin on February 3, 1992 in Kansas City. On January 23, 1992, S & M filed a petition for temporary restraining order and preliminary injunction in the Circuit Court of Jackson County, Missouri, seeking a stay of the arbitration proceeding. On February 10, 1992, the Circuit Court of Jackson County, Missouri dissolved the temporary restraining order and denied S & M's request for a preliminary injunction. The arbitration was rescheduled for a temporary restraining order in the United States District Court for the Western District of Missouri (Sachs, J.), again seeking a stay of the arbitration proceeding. S & M's request was denied on February 21, 1992.
On February 24, 1992, one day before the arbitration was to begin, S & M filed several pleadings in the United States Court of Appeals for the Eighth Circuit, including a notice of appeal, a motion for stay pending appeal, and a motion for temporary stay of the arbitration. On March 16, 1992, the Eighth Circuit denied S & M's requests. The arbitration was then rescheduled for March 23, 1992. On March 18, 1992, S & M filed a motion to stay enforcement of the Eighth Circuit's decision pending application to the United States Supreme Court for a Writ of Certiorari. On March 27, 1992, the Eighth Circuit issued its decision denying S & M's motion to stay pending application to the Supreme Court. The arbitration was again rescheduled, this time for March 31, 1992. On March 30, 1992, S & M filed for relief under Chapter 11 of the United States Bankruptcy Code in the Northern District of Ohio. According to counsel at oral argument, it is anticipated that any plan proposed by S & M will be a plan of liquidation, since S & M is not currently performing any other work.
On April 6, 1992, Foley filed a complaint against Aetna in the United States District Court for the Western District of Missouri. Foley alleges that it has made demand upon Aetna to complete the work that S & M failed to complete as required under its subcontract. Aetna has declined to pay Foley for any work it has subcontract. Aetna has declined to pay Foley for any work it has performed as a result of S & M's improper performance, and refused to perform any of the work necessary to complete S & M's subcontract. Foley contends that Aetna has also failed to perform its obligations to Foley under the performance and payment bonds. Foley's complaint filed with the District Court against Aetna seeks to enforce Aetna's independent liability to Foley under the performance and payment bonds. Foley demanded a trial by jury in the complaint.
On May 8, 1992, Aetna filed, pursuant to 28 U.S.C. § 1452 and Fed.R.Bankr.P. 9027, a Notice of Removal of Foley's action from the District Court to this Court, and on May 15, 1992 filed its Answer to Foley's Complaint. As required by 28 U.S.C. § 1452, removal was made to this bankruptcy court, even though the bankruptcy proceeding which allegedly forms the basis for removal is pending in Ohio. On May 19, 1992, Aetna filed a motion to have this adversary action transferred to the United States Bankruptcy Court for the Northern District of Ohio. On July 10, 1992, Foley filed its motion to have this case remanded to the District Court, and its suggestions in opposition to Aetna's motion for transfer.1
In re Cassidy Land and Cattle Co., Inc., 836 F.2d 1130, 1132 (8th Cir.1988), cert. denied, McCarty Ranch Trust v. Craig, 486 U.S. 1033, 108 S.Ct. 2016, 100 L.Ed.2d 603 (1988).
Unless a case or proceeding falls within one of the four specified categories of cases and proceedings over which the district court is granted jurisdiction pursuant to section 1334(a) or (b), and which are listed in section 157(a), it cannot be heard by the bankruptcy court. The first such category of cases are those which are those "upon which all of the proceedings which follow the filing of the petition are predicated." 1 Lawrence P. King et al., Collier on Bankruptcy ¶ 3.011ci, at 3-21 (15th ed. 1992). In other words, a is the bankruptcy case itself commenced by the filing of the petition. See In re Wood, 825 F.2d 90, 92 (5th Cir.1987).
Likewise, the bankruptcy court may hear and determine "core proceedings arising under title 11, or arising in a case under title 11" that have been referred under section 157(a). 28 U.S.C. § 157(b)(1). "Core proceedings arising under title 11" include those causes of action which are expressly created by title 11, such as causes of action to recover fraudulent conveyances and preferential transfers,3 section 544 avoidance actions,4 contested dischargeability proceedings, and similar rights that would not exist had there been no bankruptcy. See In re Peterson, 104 B.R. 94, 96 (Bankr.E.D.Wis.1989). "Core proceedings arising in a case under title 11" usually involve claims that, although not expressly created under title 11, would have no existence absent the bankruptcy, such as administrative matters. See 1 Lawrence P. King et al., Collier on Bankruptcy ¶ 3.011cv, at 3-33 (15th ed. 1992). A nonexhaustive list of "core proceedings" is found in 28 U.S.C. § 157(b)(2).
Finally, the bankruptcy court may hear non-core proceedings that are "related to" a case under title 11, but, unless the parties consent to entry of a final order by the bankruptcy court, may make only recommended findings of fact and conclusions of law to be submitted to the district court. 28 U.S.C. § 157(c)(1) and (2). According to Collier, the two categories of "`related proceedings' are those which (1) involve causes of action owned by the debtor that became property of the estate under section 541, and (2) concern suits between third parties which in one way or another affect the administration of the title 11 case." 1 Lawrence P. King et al., Collier on Bankruptcy ¶ 3.011civ, at 3-29 (15th ed. 1992).
Foley's action against Aetna for recovery under the payment and performance bonds certainly is not a Nor is it a "core proceeding arising under...
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