In re Birchminster Corp. of California

• Decision Date: 26 September 1980
• Docket Number: Bankruptcy No. 80-00221K.
• Citation: 6 BCD 976,6 BR 258
• Parties: In re BIRCHMINSTER CORPORATION OF CALIFORNIA d/b/a Central Valley Steel and Pipe Company (Jointly administered with Birchminster Industries, Inc., Bankruptcy No. 80-00185K) Debtor.
• Court: U.S. Bankruptcy Court — Eastern District of Pennsylvania

6 B.R. 258 (1980)

In re BIRCHMINSTER CORPORATION OF CALIFORNIA d/b/a Central Valley Steel and Pipe Company (Jointly administered with Birchminster Industries, Inc., Bankruptcy No. 80-00185K) Debtor.

Bankruptcy No. 80-00221K.

United States Bankruptcy Court, E.D. Pennsylvania.

September 26, 1980.

Erwin Pincus, Philadelphia, Pa., for debtor-Birchminster Corp. of California.

Thomas Holman, San Francisco, Cal., Horace A. Stern, Philadelphia, Pa., for creditors' committee.

OPINION

WILLIAM A. KING, Jr., Bankruptcy Judge.

The creditors' committee has filed the present motion seeking an order transferring venue in the case of Birchminster Corporation of California, d/b/a Central Valley Steel and Pipe Company, to the United States Bankruptcy Court for the Eastern District of California, at Fresno. Security Pacific National Bank, the major secured creditor in the case, supports and has joined in the motion.¹

On January 25, 1980, Birchminster Industries, Inc. filed a petition under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Eastern District of Pennsylvania. Subsequently, on February 1, 1980, Birchminster's wholly-owned subsidiary, Birchminster Corporation of California, trading as Central Valley Steel and Pipe, the present debtor, also filed a Chapter 11 petition with this Court. It is agreed that venue properly lay in the Eastern District of Pennsylvania under 28 U.S.C. § 1472 which states:

"A case under title 11 may be commenced in the bankruptcy court for a district—

* * * * * *

(2) in which there is pending a case under title 11 concerning such person\'s affiliate . . . "

The question presented for decision is whether, despite proper venue, the case should be transferred to the Eastern District of California. Because we find that transfer of this proceeding is in the interest of justice and for the convenience of the parties, the instant motion will be granted.

The question of the transfer of a case under Chapter 11 is governed by § 1475 of Title 28, United States Code. Section 1475 which concerns the change of venue of cases originally filed in either the proper or improper venue is not to be confused with § 1477 which only deals with transfer of cases filed originally in the wrong district, 1 Collier on Bankruptcy, para. 3.024a at 3-196 (15th ed. 1979). In circumstances, such as this, where jurisdiction exists and venue is proper, § 1475 is applicable and provides:

A bankruptcy court may transfer a case under Title 11 or a proceeding arising under or relating to such a case to a bankruptcy court for another district, in the interest of justice and for the convenience of the parties.

Thus, the test for transferring a properly filed case is twofold: the interest of justice and the convenience of the parties. This standard under § 1475 is the same as it was under Bankruptcy Rule 116(b)(1) and the cases decided thereunder remain persuasive. Id., para. 3.024d at 3-202. In re Macon Uplands Venture, 2 B.R. 444 (Bkrtcy.D.Md.1980).

In general, the factors by which courts are prone to judge whether venue should be changed include: (1) proximity of creditors and the bankrupt to court; (2) proximity of witnesses necessary to the administration of the estate; (3) location of the assets; and (4) the economic and efficient administration of the estate. In re Bankers Trust, 403 F.2d 16, 23 (7th Cir. 1968); In re Button Co., 137 F. 668, 672-3 (D.Del.1904); In re Kerr's, Inc., 253 F.Supp. 742 (S.D.N.Y.1966), aff'd 360 F.2d 163 (2nd Cir.1966); In re Macon Uplands Venture, supra, at 445.

The courts have also used the two-fold tests of "convenience of parties" and "in the interest of justice" to give consideration to the following factors in connection with the transfer of a particular proceeding:

(1) the relative ease of access to sources of proof; (2) the availability of compulsory process for attendance of unwilling, and the cost of obtaining the attendance of willing witnesses; (3) the enforceability of judgment if one is obtained; (4) relative advantages and obstacles to a fair trial; (5) a local interest in having localized controversies decided at home; and (6) a trial in the state the laws of which will govern the action. In re Macon Uplands Venture, supra, 1 Collier on Bankruptcy, para. 3.024b at 3-200, 3-201 (15th ed. 1979 and cases cited 5 herein). These criteria are relevant under § 1475 and are to be applied on a case-by-case basis. The burden of establishing that the case should be transferred is on the moving party and must be shown by a fair preponderance of the evidence. United Button, supra at 673; In re Fairfield Puerto Rico, Inc., 333 F.Supp. 1187, 1189 (D.Del.1971); In re Macon Uplands Venture, supra.

The debtor argues that a change of venue violates the principle of "economy of administration" in that the transfer of the proceedings from Pennsylvania to California would entail dual administration, at great expense. While counsel's point is well taken, this is merely one of the many considerations that must be weighed by the court.

In In re United Button Co., supra, the court stated:

What may be for the greatest convenience of parties in interest does not necessarily depend upon only one fact or circumstance entering into the situation. Proximity of the place of the bankrupt to the court entertaining the proceedings in bankruptcy, though a circumstance entitled to weight, is by no means conclusive, . . . Proximity of a majority of the creditors of the bankrupt in number or amount of their claims is a circumstance which should also be duly weighed. Id., at 672

The first factor to be considered is the proximity of creditors to the court. Counsel for the moving party, by failing to introduce into evidence either the claims docket or the relevant schedules has limited the court's inquiry into this factor. In their memorandum of law, counsel has attempted to establish the various percentages of creditors found in the judicial districts. This court may consider only the evidence presented at the trial, not other evidence which may have been in the files of the administration proceeding. In re Aughenbaugh, 125 F.2d 887 (3rd Cir. 1942); In re Stridacchio, 107 F.Supp. 486 (D.N.J.1952). See also In re Crown Sportswear, Inc., 575 F.2d 991 (1st Cir. 1978). The Aughenbaugh court stated:

To hold otherwise would be to violate the fundamental concept of procedural due process that a party to litigation is entitled to have the evidence relied on by his opponent presented at the hearing of his case so that he may have opportunity to cross-examine his opponent\'s witnesses and to offer evidence in rebuttal. As the Supreme Court said in Interstate Commerce Commission v. Louisville & Nashville R. Co., 227 U.S. 88, 93, 33 S.Ct. 185, 187, 57 L.Ed. 431, "manifestly there is no hearing when the party does not know what evidence is offered or considered, and is not given an opportunity to test, explain, or refute." And again as stated in United States v. Abilene & Southern R. Co., 265 U.S. 274, 288, 44 S.Ct. 565, 569, 68 L.Ed. 1016: "Papers in the Commissioner\'s files are not always evidence in a case. New England Divisions Case Akron, C. & Y.R. Co. v. United States, 261 U.S. 184, 198, note 19, 43 S.Ct. 270, 276 note 19, 67 L.Ed. 605. Nothing can be treated as evidence which is not introduced as such." Particularly apposite is the statement of Chief Justice Hughes in Crowell v. Benson, 285 U.S. 22, 48, 52 S.Ct. 285, 291, 76 L.Ed. 598, that "Facts conceivably known to the deputy commissioner, but not put in evidence so as to permit scrutiny and contest, will not support a compensation order." If this is the rule as to administrative bodies which are expected to apply their expert knowledge in their special field a fortiori it applies to the proceedings of a purely judicial body such as a court of bankruptcy.

Id., at 889

Thus, it appears that our review is limited to the testimony and evidence presented at trial. The testimony of the president of the debtor corporation revealed that of the total number of creditors, approximately seventy or eighty percent, are located in California with no creditors in Pennsylvania. N.T. 19. The veracity and credibility of the witness's testimony has not been questioned and is accepted as establishing that the majority of creditors are located in California.

The location of the debtor is the second factor to be considered. Testimony disclosed that the Board of Directors of the debtor, consisting of one man, meets in Pennsylvania N.T. 10 and that its policy decisions are made here. N.T. 24. The daily operating decisions for the debtor are made in Fresno, California. N.T. 15. The chief operating officer of the debtor operates out of and resides in Fresno, California. Id. Of the approximately nineteen (19) employees of the debtor corporation, fifteen (15) are located in Fresno; two (2) in Chico, California; one (1) in Windsor, California; and one (1) in Carson City, Nevada. N.T. 14. The debtor employs no persons in Pennsylvania. N.T. 14, 15. In addition, the books and records of the debtor...