In re Brothers Coal Co., Inc.

• Decision Date: 09 October 1980
• Docket Number: Adv. No. 7-80-0151-B.,Bankruptcy No. 7-80-00441-B
• Citation: 6 BR 567
• Parties: In re BROTHERS COAL COMPANY, INC., Debtor. WESTINGHOUSE CREDIT CORPORATION, Plaintiff, v. Claude S. YEARY, Sr., Defendant.
• Court: U.S. Bankruptcy Court — Western District of Virginia

6 B.R. 567 (1980)

In re BROTHERS COAL COMPANY, INC., Debtor WESTINGHOUSE CREDIT CORPORATION, Plaintiff, v. Claude S. YEARY, Sr., Defendant.

Bankruptcy No. 7-80-00441-B, Adv. No. 7-80-0151-B.

United States Bankruptcy Court, W.D. Virginia.

October 9, 1980.

Don R. Pippin, Pippin & Pippin, Norton, Va., T. Munford Boyd, Paxson, Smith, Boyd, Gilliam & Gouldman, Charlottesville, Va., for plaintiff.

Lance Paul Cohen, Yeary & Tate, P.C., Abingdon, Va., James E. Nunley, Bristol, Va., for defendant.

MEMORANDUM OPINION AND ORDER

H. CLYDE PEARSON, Bankruptcy Judge.

The issue before the Court is whether or not the Plaintiff's motion to remand should be granted in this case which was removed to this Court from the Circuit Court of Wise County, Virginia.

On April 24, 1980 Brothers Coal Company, Inc. (Debtor) filed petition in this Court seeking relief under Chapter 11 (11 U.S.C. § 1101, et seq.) and an order for relief was accordingly thereupon entered.

The Debtor is engaged in a coal mining operation in Southwest Virginia and had incurred substantial indebtedness with the Plaintiff, Westinghouse Credit Corporation (Plaintiff) giving security interests in numerous items of mining equipment as collateral for the loan. Additionally, Plaintiff obtained from Claude F. Yeary, Sr. (Defendant) a guarantee of the indebtedness. The Defendant is a principal officer and shareholder of the Debtor corporation.

On June 3, 1980 Plaintiff instituted in the Circuit Court of Wise County, Virginia, a motion for judgment against the Defendant seeking judgment in the sum of $637,086.58 with interest and attorney's fees provided for in the guarantee agreement. On July 18, 1980, the Defendant filed application in this Court pursuant to 28 U.S.C. § 1478¹ and Interim Bankruptcy Rule 7004 removing the State Court action to this Court alleging that the Defendant, being a principal of Brothers Coal Company, Inc., was being sued upon the said guarantee, the validity of which was being questioned, as well as whether or not the alleged guarantee was absolute or conditional; that the issues between the Plaintiff and Defendant herein are the same issues which will require resolution in this Court involving the Plaintiff and equipment dealers, Carter Machinery and Caterpillar, Inc.; that reclamation of the equipment or portions thereof would require a determination of credit upon the indebtedness resulting in possible unresolved deficiency against the Debtor and Yeary, and will likely require resolution by this Court of Plaintiff's compliance or noncompliance with the Uniform Commercial Code of Virginia.

It further appears that in another adversary proceeding in this Court styled Westinghouse Credit Corporation v. Brothers Coal Company, Inc., No. 7-80-0098-B, relief from the stay was granted permitting the Plaintiff herein to repossess and liquidate numerous items of equipment pursuant to the provisions of the Uniform Commercial Code of Virginia, the proceeds therefrom to be credited upon the indebtedness, which the Debtor and Yeary will ultimately be called upon to pay. Consequently, either this Court, or the Circuit Court of Wise County, if the case is remanded, will be required to hear and determine. If remanded to State Court, the Debtor herein may well be a necessary party in any determination of any remaining deficiency of the Plaintiff's debt.

The motion to remand raises a question of jurisdiction of this Court under 11 U.S.C. § 524(e).² This section deals with the discharge of debts of debtor in this Court and that the discharge of a Debtor does not effect the liability of any other entity for such debt such as defendant's guaranty herein. For the reasons given hereafter, the fact that a discharge of debtor's obligations does not discharge the obligations of a co-debtor is a matter entirely separate and apart from the question of jurisdiction of this Court to hear and determine questions affecting mutual debts of the debtor and a debtor's co-debtors. At the outset, it is essential that we review the new Code provisions relating to this Court's jurisdiction.

Title 11 U.S.C. § 105 designated "power of Court" states that the Bankruptcy Court may issue any order of process or judgment that is necessary or appropriate to carry out the provisions of this title. This is a provision of the Bankruptcy Code Title 11. It is also necessary that we review the provisions of a new Chapter 90 added to Title 28 relating to the Judiciary and Judicial Procedure.

Title 28 U.S.C. § 1471³ provides for the jurisdiction of the Bankruptcy Court under the Bankruptcy Reform Act of 1978, which is applicable hereto. This section vests in this Court jurisdiction of all civil proceedings arising under Title 11 or arising in or related to cases under Title 11. This section structures the Bankruptcy Court and is modeled as closely as possible on Chapter 5 of Title 28, which establishes and governs the United States District Courts and is designed and intended to mirror the District Court system as nearly as possible. See 9 Bkr.L.Ed. § 82:22, page 459. At page 472, the above authority sets forth the following commentary upon the jurisdictional portion herein recited as follows:

"Subsection (b) is a significant change from current law. It grants the bankruptcy court original (trial), but not exclusive, jurisdiction of all civil proceedings arising under title 11 or arising under or related to cases under title 11. This is the broadest grant of jurisdiction to dispose of proceedings that arise in bankruptcy cases or under the bankruptcy code. Actions that formerly had to be tried in State court or in Federal district court, at great cost and delay to the estate, may now be tried in the bankruptcy courts. The idea of possession or consent as the sole basis for jurisdiction is eliminated. The bankruptcy court is given in personam jurisdiction as well as in rem jurisdiction to handle everything that arises in a bankruptcy case.

The jurisdiction granted is of all proceedings arising under title 11 or arising under or related to a case under title 11. The bill uses the term "proceeding" instead of the current "matters and proceedings" found in the Bankruptcy Act and Rules. The change is intended to conform the terminology of title 28, under which anything that occurs within a case is a proceeding. Thus, proceeding here is used in its broadest sense, and would encompass what are now called contested matters, adversary proceedings, and plenary actions under the current bankruptcy law. It also includes any disputes related to administrative matters in a bankruptcy case.

... The phrase "arising under" has a well defined and broad meaning in the jurisdictional context. By a grant of jurisdiction over all proceedings arising under title 11, the bankruptcy courts will be able to hear any matter under which a claim is made under a provision of title 11 ... Indeed, because title 11, the bankruptcy code, only applies once a bankruptcy case is commenced, any proceeding arising under title 11 will be in some way "related to" a case under title 11. In sum, the combination of the three bases for jurisdiction, "arising under title 11," "arising under a case under title 11," and "related to a case under title 11," will leave no doubt as to the scope of the bankruptcy court\'s jurisdiction over disputes."

To implement the very broad jurisdiction granted the court in § 1471, the Congress further provided the ancillary sections delineating rights of parties litigant as to venue under §§ 1472, 1473, 1474; change of venue under § 1475 and with further provision for curing defects as provided by § 1477. Further, it set forth provisional remedies and rights of litigants such as jury trials under § 1480, appeal rights under § 1482, as well as remedial rights under § 1479 relating to removal. To put to rest any question as to jurisdiction of this Court pursuant to the powers herein mentioned, the Congress further enacted 28 U.S.C. § 1481 which states:

"a Bankruptcy Court shall have the powers of a court of equity, law, and admiralty, ..."

Section 1481 vests in the Bankruptcy Court essentially all powers relating to civil remedies without exception.

To insure the expeditious and orderly processing of cases pending in this Court, as well as cases pending elsewhere coming within this Court's jurisdiction, Congress further provided in 28 U.S.C. § 1478 procedure for removal of civil actions pending in other courts. It is well to note that § 1478 is broad and encompassing, excluding only proceedings in the United States Tax Court or civil action by a Government unit to enforce police or regulatory powers. To further implement the Congressional intent to extend the broad jurisdictional authority of the Bankruptcy Court, the Congress further provided in § 1478(b) that an order granting remand or declining to grant remand is not reviewable by appeal or otherwise. This would seem to demonstrate a clear congressional intent, to implement the broad range of jurisdiction and powers needed in this Court to effectively resolve such disputes.

The commentary set forth in 9 Bk.L.Ed. 82:22, Supra, as to this Court's jurisdiction in matters "arising under Title 11", "arising under a case under Title 11" and "related to a case under Title 11" leaves little doubt as to the scope of the intended jurisdiction vested in this Court in this recent enactment. Further, in order that no question can be raised as to the Court's jurisdiction to hear such matters, the Congress vested in this Court under § 1481 full civil jurisdiction of equity, law and even admiralty.

It would seem to be inappropriate and a duplication of judicial effort to litigate such issues in the State Court while the...