In re Cardinal Industries, Inc.
| Decision Date | 28 September 1989 |
| Docket Number | 2-89-02779,Bankruptcy No. 2-89-02778,Adv. No. 2-89-0203. |
| Citation | 105 BR 834 |
| Parties | In re CARDINAL INDUSTRIES, INC., In Joint Administration With Cardinal Industries of Florida, Inc., Debtors. CARDINAL INDUSTRIES, INC., and Cardinal Industries of Florida, Inc., Plaintiffs, v. BUCKEYE FEDERAL SAVINGS & LOAN ASSOCIATION, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
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David G. Heiman, John W. Zeiger, Jones, Day, Reavis & Pogue, Columbus, Ohio, for plaintiffs.
Daniel R. Swetnam, Schwartz, Kelm, Warren & Rubenstein, Columbus, Ohio, for Buckeye Federal Sav. & Loan Ass'n.
Leonard A. Carlson, Smith & Schnacke, Columbus, Ohio, for AmeriFirst Bank.
Quintin F. Lindsmith, Bricker & Eckler, Columbus, Ohio, for Crossland Sav., FSB.
Stephen C. Sawicki, Hendry, Stoner, Townsend & Sawicki, Orlando, Fla., for Crown Sav. Ass'n.
Nick V. Cavalieri, Arter & Hadden, Columbus, Ohio, for Comerica Bank—Detroit.
John Dilenschneider, Squire, Sanders & Dempsey, Columbus, Ohio, for Cedargate Apartments of Lancaster I Ltd. and certain other partnerships.
Robert T. Wildman, Henderson, Daily, Withrow & DeVoe, Indianapolis, Ind., for Traub and Co., Inc.
Leon Friedberg, Benesch, Friedlander, Coplan & Aronoff, Columbus, Ohio and Stuart Hirshfield, Dewey, Ballantine, Bushby, Palmer & Wood, New York City, Attorneys for Official Unsecured Committee of Creditors for Cardinal Industries, Inc.
P. Steven Kratsch, Smith, Gambrell & Russell, Atlanta, Ga. and James M. Lawniczak, Calfee, Halter & Griswold, Cleveland, Ohio, for Official Unsecured Committee of Creditors for Cardinal Industries of Florida, Inc.
Charles M. Caldwell, Office of the U.S. Trustee, Columbus, Ohio, Asst. U.S. Trustee.
FINDINGS OF FACT AND CONCLUSIONS OF LAW ON MOTIONS FOR CLASS CERTIFICATION, PRELIMINARY AND FINAL INJUNCTIVE RELIEF, AND COMPLAINT SEEKING DECLARATORY AND INJUNCTIVE RELIEF
This matter is before the Court upon the merits of a complaint seeking declaratory and injunctive relief and motions seeking certification of a defendant class, preliminary and permanent injunctive relief. All were filed by the plaintiffs, Cardinal Industries, Inc. and Cardinal Industries of Florida, Inc. (collectively the "Debtors").
The relief requested by the Debtors' amended complaint is a declaration that the provisions of 11 U.S.C. § 362(a) apply to certain interests of these Debtors or, if § 362(a) is not applicable, that this Court should use its powers under 11 U.S.C. § 105(a) to extend the reach of § 362(a) and enjoin all members of a defendant class from proceeding against the Debtors with respect to those interests. Such relief is premised upon provisions of the Bankruptcy Code, is within the jurisdictional grant of 28 U.S.C. § 1334(b), and is, therefore, within the scope of matters referred to this Court by the General Order of Reference entered in this district pursuant to 28 U.S.C. § 157(a). Accordingly, the Court has jurisdiction in this proceeding under 28 U.S.C. § 1334(b) and the General Order of Reference entered in this district.
In determining the procedure for the entry of the final order in this matter, the Court notes that there is no subsection of 28 U.S.C. § 157(b)(2) which expressly reflects these matters. Such subsections are not an exclusive list of matters which are properly characterized as core proceedings, however. The Court perceives few issues which would have greater relevance to its core jurisdiction than those raised by this complaint concerning specific applications of particular sections of the Bankruptcy Code. And to the extent the Debtors request this Court to use its equity powers under 11 U.S.C. § 105(a), this Court may be the only forum where the appropriateness of such relief could be determined. Therefore, the Court further finds that this is a core proceeding which this Bankruptcy Judge may hear and determine. See Knopfler v. Schraiber (In re Schraiber), 97 B.R. 937 (Bankr.N.D.Ill.1989).
An extensive history of the procedural posture of this adversary has been set forth in this Court's order of August 18, 1989. Cardinal Industries, Inc. v. Buckeye Federal Savings & Loan Assoc. (In re Cardinal Industries, Inc.), 102 B.R. 991 (Bankr.S.D.Ohio 1989) (). Only the most significant events and developments subsequent to the issuance of that order are set out herein.
On May 15, 1989, Cardinal Industries, Inc. ("CII") and its wholly-owned subsidiary, Cardinal Industries of Florida, Inc. ("CIF") filed in this Court petitions for reorganization under Chapter 11 of the Bankruptcy Code. The Debtors manufacture a standardized modular housing unit which they sell to third parties or use in various real estate projects which they develop. Such projects include apartments, motels, retirement villages, single-family homes, student housing, day care centers, and office facilities. CII and its numerous wholly-owned subsidiaries ("the Cardinal Companies") are a vertically integrated business which plans, builds, manages and supplies services and product to those real estate projects from start to finish. To date, the Cardinal Companies have developed over 1,200 such real estate projects in twenty states (the "Property" or "Properties"). Substantially all of the Properties are owned by limited partnerships (the "Partnerships") formed by the Cardinal Companies. Further, in almost every Partnership, CII or a subsidiary serves as a managing general partner.
On May 23, 1989, the Debtors filed this adversary proceeding to obtain declaratory and injunctive relief against a proposed defendant class. That complaint was amended on May 31, 1989, and the proposed class was narrowed to include only those persons and entities which have or obtain a mortgage or other security interest in any of the Partnership Properties. In addition, the amended complaint added five named defendants to serve as additional representatives of the proposed defendant class. The seven named defendants are: Buckeye Federal Savings & Loan Association ("Buckeye Federal"), AmeriFirst Bank ("AmeriFirst"), CrossLand Savings, FSB ("CrossLand"), Comerica Bank of Detroit ("Comerica"), Crown Savings Association ("Crown"), Florida Federal Savings Bank ("Florida Federal"), and The Midland Mutual Life Insurance Company ("Midland").
On August 18, 1989 the Court denied approval of a settlement proposed by the Debtors, Buckeye Federal, CrossLand, Crown and Florida Federal. Cardinal Industries, Inc. v. Buckeye Federal Savings & Loan Assoc. (In re Cardinal Industries, Inc.), 102 B.R. 991 (Bankr.S.D.Ohio 1989) (the "Settlement Order").
Pursuant to the Settlement Order, a hearing was held on August 24, 1989 to consider the Debtors' motions for class certification and preliminary injunctive relief. At the commencement of that hearing the Court considered a motion by the Debtors requesting that the trial on the merits of their amended complaint be consolidated with the hearing on their application for preliminary injunctive relief, pursuant to Fed.R.Civ.P. 65(a)(2). Given numerous objections to that motion, the Court denied the request.
Following denial of the request for consolidation, the Debtors proceeded to present their case regarding class certification and preliminary injunctive relief. At the close of the Debtors' case, various named defendants and putative class members (collectively the "Defendants") filed or orally presented motions to dismiss pursuant to Bankruptcy Rule 7041 and Rule 41(b) of the Federal Rules of Civil Procedure, Bankruptcy Rule 7012 and Rule 12(b) of the Federal Rules of Civil Procedure, and Bankruptcy Rule 7056 and Rule 56(b) of the Federal Rules of Civil Procedure. Given the nature of the proceeding in which the motions were brought and the stage to which this adversary proceeding had progressed, the Court found the motions to be procedurally inappropriate and therefore denied all of the dismissal motions.
Further, pursuant to Fed.R.Civ.P. 65(a)(2), the Court determined that the trial of this action on the merits should be advanced and consolidated with the hearing on the Debtors' application for preliminary injunctive relief. On September 6, 1989, the Court reconvened to resume the consolidated hearing of this matter (the "Consolidated Hearing").
At the Consolidated Hearing, the Debtors chose not to supplement the evidentiary record established at the August 24 hearing and rested. The Defendants again moved for dismissal of the adversary proceeding pursuant to Fed.R.Civ.P. 41(b). The Court orally sustained that dismissal motion to the limited extent it related to certification of a defendant class established to effectuate injunctive relief premised solely upon § 105(a) of the Bankruptcy Code. As to § 105(a) injunctive relief dependent upon a finding that § 362 of the Bankruptcy Code applied to the Debtors' interests in the Partnerships or the Partnership Properties or arising from an extension of § 362 through powers granted under § 105, the Court denied the Defendants' motions to dismiss. The rationale of the Court is detailed below.
Following the Court's ruling on the motions to dismiss, various named defendants and putative class members proceeded to introduce testimony from the Settlement Hearing into the evidentiary record. Certain of the Defendants also moved for the admission of supplemental loan documents, affidavits of client representatives and stipulations of fact. At the conclusion of the hearing, following closing arguments by the Debtors, named defendants and certain participating putative class members, the Court took this matter under advisement.
At the time of the hearing on the settlement the Court permitted intervention, as parties but not as putative class members, by the...
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