Greene County Hosp., Matter of

• Decision Date: 14 January 1988
• Docket Number: Nos. 86-4504,PATH-SCIENCE,86-4507,s. 86-4504
• Citation: 835 F.2d 589
• Parties: 18 Collier Bankr.Cas.2d 1220 In the Matter of GREENE COUNTY HOSPITAL, Debtor.LABORATORIES, INC. and its successor and assigns, Sergio G. Gonzalez MD PA, Plaintiff-Appellant, v. GREENE COUNTY HOSPITAL, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 589

835 F.2d 589

18 Collier Bankr.Cas.2d 1220

In the Matter of GREENE COUNTY HOSPITAL, Debtor PATH-SCIENCE LABORATORIES, INC. and its successor and assigns, Sergio G. Gonzalez MD PA, Plaintiff-Appellant, v. GREENE COUNTY HOSPITAL, Defendant-Appellee.

Nos. 86-4504, 86-4507.

United States Court of Appeals, Fifth Circuit.

Jan. 14, 1988.

Rehearing and Rehearing En Banc Denied Feb. 19, 1988.

C. Everette Boutwell, Laurel, Miss., for plaintiff-appellant.

Robert A. Byrd, Biloxi, Miss., for defendant-appellee.

Appeals from the United States District Court for the Southern District of Mississippi.

Before GOLDBERG and JOHNSON, Circuit Judges. ^*

GOLDBERG, Circuit Judge:

To every thing there is a season.

Ecclesiastes, 3.1.

It isn't over till it's over.

In re Moody (Smith v. Revie), 817 F.2d 365 (5th Cir.1987) (quoting Yogi Berra).

A paradox of appellate jurisdiction is that the season begins only after the game has ended. In baseball, it is easy to tell when the game is over. ¹ In bankruptcy, Title 11 of the United States Code not only changes the rules of the game, it reshapes the concept of game. ² This case requires us to explore this new definition of the term "game," and then to redefine its end accordingly.

Dr. Gonzalez challenges the district court's determination that Chapter 9 of the Bankruptcy Code confers jurisdiction over the reorganization of an unincorporated municipal hospital on the bankruptcy court. We cannot reach this question because we lack subject matter jurisdiction. 28 U.S.C. Sec. 158 limits circuit court jurisdiction to "final" orders of district courts. A district court's remand, affirming a bankruptcy court's determination that it has subject matter jurisdiction, is simply not a final order, even under the more liberal definition of the word "final" used in bankruptcy appeals. To find otherwise would allow piecemeal and dilatory appeal of inconsequential decisions while the strains of the Star Spangled Banner still echo.

We therefore affirm the order of the district court.

I. Facts

A. The Lineup

Plaintiff: Sergio Gonzalez, MD PA is the assignee of Path-Science Laboratories, Inc. a laboratory which provided diagnostic services to Greene County Hospital (the "Hospital"). Plaintiff holds a past due promissory note payable by the Hospital in the principal amount of $67,316.60.

Defendant: Greene County Hospital is an unincorporated unit of Greene County Mississippi (the "County"). The Hospital is governed by a Board of Trustees (the "Trustees"), appointed by the Greene County Board of Supervisors (the "Board of Supervisors"). The County purchased the land for the Hospital in 1948 and soon thereafter built the facility at an original cost of $150,000. The Hospital was expanded in 1976, and in 1984 the Board of Supervisors authorized a construction contract to build a $1,027,000 addition to the Hospital. The Hospital, built with funds from the sale of revenue bonds, is county owned. ³

Greene County is located in southeastern Mississippi. Of the County's 9,000 residents, 23% are unemployed and 78% receive some form of public assistance. The Hospital is the second largest employer in the County, second only to the school system. Nonetheless the Hospital has not received any operating funds from the County since 1982, and has been functioning in the nature of a charity hospital for a number of years. Not surprisingly, the financial condition of the Hospital has deteriorated substantially. Hospital revenues cannot satisfy the Hospital's debt load. Faced with imminent levy and execution by creditors, the Hospital has sought reorganization under Chapter 11 of the Bankruptcy Code.

B. The Pitch

Dr. Gonzalez filed a motion to dismiss the Hospital's Bankruptcy petition, contending that the Hospital is not eligible to file for bankruptcy. The Bankruptcy Court held that the Hospital was not eligible to file under either Chapter 11 ⁴ or Chapter 7 ⁵ of the Bankruptcy Code but that it was eligible to file under Chapter 9 of the Code, ⁶ which covers adjustment of debts of municipalities. Plaintiff appealed the judgment of eligibility to the United States District Court for the Southern District of Mississippi. Judge Russell affirmed the Bankruptcy Court. Plaintiffs now appeal to the court challenging the jurisdictional determination of both the district court and the bankruptcy court.

II. Discussion

Neither plaintiff nor defendants raised the issue of this court's jurisdiction to hear this appeal, but federal courts must satisfy themselves as to their own subject matter jurisdiction. ⁷ We are convinced that a bankruptcy court's determination that it does have subject matter jurisdiction over a case is not a final order.

Jurisdiction over appeals from bankruptcy courts is governed by 28 U.S.C. Sec. 158, which provides:

(a) The district courts of the United States shall have jurisdiction to hear appeals from final judgments, orders and decrees, and, with leave of the court, from interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title.

....

(d) The courts of appeals shall have jurisdiction of appeals from all final decisions, judgments, orders, and decrees entered under subsection (a) ... of this section.

The parties may appeal all final orders of the bankruptcy judge to the district court as of right. The parties may also appeal final orders to the court of appeals as of right. ⁸ A district court may, in its discretion, take jurisdiction over interlocutory appeals from the bankruptcy court, but we have no such discretion. We have jurisdiction only over final orders. ⁹

Our task is to explain why the order of the district court was not final. This is not a trivial task. Congress has amended the statute governing appellate jurisdiction over bankruptcy appeals twice in the last nine years. ¹⁰ Under the current statutory formulation two distinct approaches to determining whether an order is final have emerged among the circuits, ¹¹ and these competing definitions of finality have not been explained with uniform conceptual clarity.

We do well to note at the outset that the difficulty of deciphering the law is not matched by the difficulty of deciding this case. This order is interlocutory under both current formulations, and would have been interlocutory under both former versions of the statute. To state our rationale, however, it is necessary to sort through the competing approaches to finality applied to orders of bankruptcy courts.

A. Appellate Jurisdiction Under The Bankruptcy Act of 1898--Laying Out the Ground Rules

When a baseball umpire makes a difficult call, the text of the applicable rule is not as important as simply knowing how to play the game. Similarly, to understand the text of the current provisions of the bankruptcy law, it is necessary to understand how the game was played prior to the Bankruptcy Reform Act of 1978. ¹²

1. Controversy and Proceeding--Games Within the Game

There is a long history of interlocutory appeal of certain kinds of disputes in a bankruptcy case. Until 1978, Sec. 24(a) of the Bankruptcy Act of (1898) (the "Bankruptcy Act") governed appellate jurisdiction over disputes in bankruptcy. The section provided that:

The United States courts of appeals ... are invested with appellate jurisdiction from the several courts of bankruptcy in their respective jurisdictions in proceedings in bankruptcy either interlocutory or final and in controversies arising in proceedings in bankruptcy, to review, affirm, revise or reverse both in matters of law and in matters of fact.

11 U.S.C. Sec. 47(a) (repealed 1978). Courts read this provision as allowing interlocutory appeals to circuit courts as of right in "proceedings in bankruptcy" ("proceedings") but allowing appeal as of right only from final orders in "controversies arising in proceedings in bankruptcy" ("controversies"). ¹³ The "distinction between 'proceedings' and 'controversies' ... long eluded concise and easily ascertainable definition." In re Durensky, 519 F.2d 1024 (5th Cir.1975). Courts commonly distinguished between questions regarding administration of the estate and questions as to whether certain property ought to be included in the estate. Id. at 1028; see United Kingdom Mutual S.S. Assur. Assoc. v. Liman, 418 F.2d 9, 10 (2d Cir.1969).

For all the intricacy of the proceeding/controversy distinction, though, Sec. 24(a) allowed the possibility of a tremendous number of interlocutory appeals. As one recent court, applying the old provision put it:

[S]ection 24(a) creates the prospect that most of the hundreds of orders that a court issues in the course of a protracted reorganization ... are appealable as a matter of right.

Matter of Chicago, Milwaukee, St. Paul & P.R. Co., 756 F.2d 508, 511 (7th Cir.1985).

The present dispute would have been characterized as a proceeding. In Durensky when faced with the determination of subject matter jurisdiction by a bankruptcy judge, ¹⁴ we said, "we believe that it is clear as anything can be in this terminological morass that the instant case constitutes a proceeding." ¹⁵

2. Interlocutory Finality--Playing Games with Trivial Proceedings

Motivated by a policy against piecemeal appeals, the courts developed a "trivial order" exception. This exception imported notions of finality into the jurisdictional requirement for appeal from orders in proceedings in bankruptcy. Orders were held to be trivial when they failed to finally resolve the rights at issue. ¹⁶ Again, as we said in Durensky:

[T]he Government's motion to dismiss ... would surely be an appealable order in view of our determination that this case is a proceeding in bankruptcy. Such a sweeping conclusion would be ill-advised however, for the courts of appeals have interpreted section 24a so as to allow appeals from interlocutory orders in proceedings only when the orders dispose of some right or duty asserted...