In re Arctic Enterprises, Inc.
| Decision Date | 03 March 1986 |
| Docket Number | BKY 3-81-280,Civ. 4-85-1370. |
| Parties | In re ARCTIC ENTERPRISES, INC., Debtor. MINSTAR, INC., f/k/a Arctic Enterprises, Inc., Plaintiff/Respondent, v. PLASTECH RESEARCH, INC., Defendant/Appellant. |
| Court | U.S. District Court — District of Minnesota |
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John C. Thomas and Robert Gust, Oppenheimer, Wolff, Foster, Shepard & Donnelly, Minneapolis, Minn., for plaintiff/respondent.
Maclay R. Hyde and Regina M. Chu, Bassford, Hecke, Lockhart & Mullin, Minneapolis, Minn., for defendant/appellant.
This matter is before the Court on appellant Plastech Corporation's appeal from an order of the bankruptcy court. The order of the bankruptcy court will be affirmed.
Appellant is a Minnesota corporation and the successor in interest to Arctic Enterprises, Inc., a manufacturer of snowmobiles headquartered in Thief River Falls, Minnesota. Defendant Plastech Corporation, formerly known as Plastech Research, Inc., is a Rush City, Minnesota corporation engaged in the manufacture of plastic tools and molding.
On February 17, 1981, Arctic Enterprises, Inc. filed a chapter 11 petition in bankruptcy. Prior to that date Plastech and Arctic had engaged in a continuing business relationship, whereby Plastech manufactured molded plastic parts and equipment upon the order and specifications of Arctic. Pursuant to this relationship, molds, tooling, dies, and equipment owned by Arctic were in Plastech's possession.
On the date of Arctic's bankruptcy filing, Plastech was a creditor of Arctic in the amount of $105,905. Arctic's chapter 11 petition listed Plastech as an unsecured creditor in that amount. Plastech was not included in the listing of secured creditors.
On September 4, 1981 Arctic filed a plan of reorganization with the bankruptcy court. The plan was approved by the bankruptcy court in an order dated December 4, 1981. Significantly, at no time prior to entry of the confirmation order did Plastech object to the reorganization plan or to its treatment under the plan as an unsecured creditor. Neither the order confirming the plan nor the plan itself provides for or makes reference to a lien or secured interest in Arctic property in favor of Plastech.
Following confirmation of the plan of reorganization Plastech retained the Arctic tools and equipment in its possession. In June, 1982, pursuant to the plan of reorganization Arctic sold the molds, tooling, dies, and equipment to Certified Parts Corporation. Plastech, however, refused to relinquish possession of the tools and equipment. Plastech claimed that it had a secured interest in the tools and equipment and demanded payment of the value of its interest in the tools and equipment as a condition of their release. On August 10, 1982 Arctic, under protest, paid to Plastech the claimed amount of the security lien, $58,290.79, thereafter obtaining release of the goods from Plastech.
Some two years later Arctic's successor in interest, Minstar, Inc., brought this action seeking to recover the $58,290.79 paid to Plastech to obtain release of the tools and equipment, on the theory that Plastech's interest in the tools and equipment was unsecured and that, therefore, its withholding of them was wrongful. By order dated March 29, 1985, the bankruptcy court denied Plastech's motion to dismiss for lack of subject matter jurisdiction. By order dated August 30, 1985 the bankruptcy court granted Minstar's motion for summary judgment as to some but not all issues in the case. Plastech then sought leave of the Court for interlocutory appeal of the bankruptcy court's August 30 order. By order dated November 22, 1985 the Court granted Plastech's motion for leave to appeal.
Before the Court are three issues of law1 appealed from the August 30, 1985 order of the bankruptcy court:
As a preliminary matter, it should be pointed out that the August 30 order of the bankruptcy court here appealed from does not in any way make reference to the jurisdictional and abstention issues raised by Plastech. Plastech's jurisdictional objections were dealt with by the bankruptcy court's March 29, 1985 order. Plastech's motion for leave to appeal the March 29 order was untimely.2 Accordingly, the jurisdictional issues were not before the bankruptcy court at the time the August 30 order was issued. Nevertheless, the Court may properly consider Plastech's jurisdictional objections in this appeal. It is well established that an issue of the subject matter jurisdiction of the Court may be raised at any time by a federal court sua sponte, and that it is the duty of every federal court to raise this issue as a "threshold inquiry" in all federal proceedings. In re Dr. C. Huff Co., Inc., 44 B.R. 129, 133-34 (Bankr.W.D.Ky.1984) citing In re Maine Marine Corp., 20 B.R. 426 (Bankr.D.Me.1982); In re Curtina International, 15 B.R. 993 (Bankr.S.D.N.Y. 1981); Matter of Kutner, 656 F.2d 1107 (5th Cir.1981); Save the Bay, Inc. v. United States, 639 F.2d 1100 (5th Cir.1981); American Fire and Casualty Co. v. Finn, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702 (1951). See also In re Dreske Greenway Trust, 14 B.R. 618 (Bankr.D.Wis.1981) ().
Plastech raises two arguments in support of its objections to jurisdiction.
First, Plastech contends that the December 4, 1981 order of the bankruptcy court divested the Court of further jurisdiction of the case. Specifically, Plastech points to paragraph 10 of the December 4, 1981 order, which provides that:
This Court shall retain jurisdiction of Debtors subsequent to the date of this Order for the purpose of allowing claims and hearing objections, if any, thereto, for conducting and completing adversary proceedings filed prior to the date of this Order for the purpose of determining or resolving any defaults, disputes, or similar matters under the Plan or the Agreement between Debtors and Lenders of July 14, 1981 . . . and for the purpose . . . of determining that obligations and liabilities of the debtors if any arising out of the claims of the Internal Revenue Service for income, exise sic and employment taxes for the taxable periods ending March 31, 1976, March 31, 1977, March 31, 1978, March 31, 1979, and March 31, 1980 in accordance with the Repayment Agreement between the United States of America and the Debtors dated October 22, 1981 and for the purpose of approving administrative expenses after confirmation of the plan, if any, and such related matters. In all other respects, the Court, from the date of this Order, hereby specifically relinquishes jurisdiction over the Debtors and their business operations.
The Court finds that the bankruptcy court did not divest itself of jurisdiction. The bankruptcy court in the confirmation order specifically retained jurisdiction over debtors "for the purpose of allowing claims and hearing objections, if any to the confirmed plan of reorganization." This matter may be construed as a "claim" by Minstar pursuant to the plan of reorganization.
Second, Plastech contends that this proceeding is unrelated to Arctic's chapter 11 bankruptcy case, and as such does not "arise under" chapter 11.
The Bankruptcy Amendments3 and Federal Judgeship Act of 1984 vests in the federal courts jurisdiction over (a) cases under Title 11 and (b) civil proceedings arising under, arising in, or related to Title 11 cases. 1 Collier on Bankruptcy ¶ 3.01 at 3-20 (15th ed. 1985). The courts' jurisdiction over bankruptcy "cases" is original and exclusive, while jurisdiction over bankruptcy civil proceedings is original but not exclusive. Id. Thus, whether the Court has jurisdiction over this adversarial proceeding turns on whether the matter fits within one of the four categories of cases and proceedings cognizable under Title 11:
See In re S.E. Hornsby & Sons Sand & Gravel Co., Inc., 45 B.R. 988, 994 (Bankr. M.D.La.1985).
The parties have not contended that the matter before the Court is a "case" under Title 11.4 Rather, Minstar contends, and the bankruptcy court found, that this matter is a core civil proceeding arising in a case under Title 11. See Minstar v. Plastech, BKY 3-81-280, slip op. at 5 (Bankr.D. Minn. Mar. 29, 1985). Under the provisions of section 157(b)(1) of the bankruptcy code the bankruptcy courts have authority to hear and decide core proceedings which arise from a case under the bankruptcy code. Huff, 44 B.R. at 134. Core proceedings have been defined to include "most matters which are integral to the adjudication of bankruptcy or were traditionally before the bankruptcy court." Gaslight Club, Inc. v. Official Creditors Committee, 46 B.R. 209, 211 (N.D.Ill.1985). The Collier treatise identifies four species of core proceedings: (a) matters of administration, (b) avoiding actions, (c) matters concerning property of the estate, and (d) others. Collier, ¶ 3.01 at 3-28.
Section 157(b)(2) contains fifteen illustrations of core proceedings. Specifically included in the list of core proceedings are: "determinations of...
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