In re Curtina Intern.

• Decision Date: 22 December 1981
• Docket Number: 6192.,Debtor No. 81 B 20208,No. 81 Adv. 6190,81 Adv. 6190
• Citation: 15 BR 993
• Parties: In re CURTINA INTERNATIONAL, Debtor. Brian S. MURDOCK, Plaintiff, v. Curtis T. ALLINA and Hannelore Allina, Defendants. In re CURTINA INTERNATIONAL, INC., Debtor. WALDE TIROL Ges.m.b.H., Plaintiff, v. Curtis T. ALLINA and Hannelore Allina, Defendants.
• Court: U.S. Bankruptcy Court — Southern District of New York

15 B.R. 993 (1981)

In re CURTINA INTERNATIONAL, Debtor.

Brian S. MURDOCK, Plaintiff, v. Curtis T. ALLINA and Hannelore Allina, Defendants.

In re CURTINA INTERNATIONAL, INC., Debtor.

WALDE TIROL Ges.m.b.H., Plaintiff, v. Curtis T. ALLINA and Hannelore Allina, Defendants.

Debtor No. 81 B 20208, Nos. 81 Adv. 6190, 6192.

United States Bankruptcy Court, S.D. New York.

December 22, 1981.

Brian S. Murdock, White Plains, N.Y., trustee.

Arthur, Dry & Kalish P.C., New York City, for defendants; Thomas A. Beck and Marilyn Neiman, New York City, of counsel.

Curtis T. Ettinger, White Plains, N.Y., for plaintiff Walde Tirol Ges.M.b.H.; Reid & Priest, New York City, John M. Nonna and Deborah A. Pitts, New York City, of counsel.

DECISION ON COMPLAINTS OF BRIAN S. MURDOCK and WALDE TIROL Gas.m.b.H.

HOWARD SCHWARTZBERG, Bankruptcy Judge.

Both plaintiffs in these adversary proceedings, the trustee in bankruptcy and Walde Tirol Ges.m.b.H. ("Walde"), seek the provisional remedy of attachment of the property of the individual principals of the above debtor, pursuant to Rule 64 of the Federal Rules of Civil Procedure, as adopted by Bankruptcy Rule 764. The plaintiffs reason that these rules may be employed to make available the attachment provisions of the forum state, New York Civil Practice Law and Rules §§ 6201 and 6212(a), to reach the defendants' property in Plano, Texas, where they now reside. The plaintiffs recognize that the official authorized to perform this function under the New York CPLR, a New York sheriff, regardless of his attire, would be inappropriate to perform this task in Texas. They therefore suggest that a United States Marshal in Plano, Texas, could serve as the attaching officer.

The plaintiffs assume that this court has subject matter jurisdiction under 28 U.S.C. § 1471 as well as personal jurisdiction over the defendants by their appearance, and therefore, since attachment is sought to ensure collection of any judgment that might be obtained in the adversary proceedings rather than for jurisdictional purposes, the attachment order may be served beyond the territorial limits of the forum state because FRCP 4(f) and Bankruptcy Rule 704(f) authorize extraterritorial service. The plaintiffs contend that attachment is affordable on two of the grounds delineated under New York CPLR § 6201, namely: (1) The defendants are nondomiciliaries residing without the State of New York, as prescribed under CPLR § 6201(1); and (2) The defendants, with intent to defraud their creditors or frustrate the enforcement of a judgment that might be rendered in plaintiffs' favor, have assigned, disposed of, encumbered, or secreted property, or removed it from the state; as proscribed under CPLR § 6201(3). In support of these elements the plaintiffs assert that the defendants, husband and wife, have disposed of their real property in Westchester County, New York and have removed the proceeds to their present residence in Plano, Texas. The parties have directed their arguments to whether this court should or should not, in its discretion, issue an order of attachment pursuant to Bankruptcy Rule 764 and New York CPLR §§ 6201 and 6212. However, the parties have not cited any cases with respect to the validity of an order of attachment directed to a United States Marshal in Texas premised on the circumstances and in the manner provided by the New York CPLR. Indeed, this issue is critical, since without such authority, it is of no moment that there may exist grounds for the issuance of an order of attachment.

FACTUAL BACKGROUND

The defendants, Curtis Allina and his wife, Hannelore Allina, formed the debtor corporation, Curtina International Inc. ("Curtina"), a New York corporation, for the purpose of buying and selling confectionary food items. Defendant, Curtis Allina, was designated as president and defendant, Hannelore Allina, was designated as treasurer. The business of Curtina was operated from defendants' prior residence in Rye, New York and Harrison, New York.

An involuntary petition under § 303 of Chapter 7 of the Bankruptcy Code was filed in this court on April 3, 1981. Plaintiff Walde was one of the petitioning creditors. Plaintiff, Brian S. Murdock, was appointed interim trustee of the estate on April 28, 1981 and has continued to act as trustee in bankruptcy. Following the filing of the Chapter 7 petition against Curtina, the debtor corporation, the individual defendants departed from New York State and now reside in Plano, Texas where they purchased a home and formed a new business known as Chocolate Fantasy Inc.

The trustee in bankruptcy of Curtina commenced an adversary proceeding against the defendants, Curtis and Hannelore Allina, for various prepetition payments made by the debtor corporation for their travel and entertainment expenses and for salaries claimed to be excessive. The trustee also seeks to recover for unpaid subscription to stock of the debtor owed by the defendants. The trustee's causes of action with respect to the debtor's payments to and on behalf of the defendants are based upon the theory of fraudulent conveyances of the debtor's property to the defendants, as proscribed under Code § 548 and under Sections 273 and 274 of the New York Debtor and Creditors Law, which are made applicable under Code § 544(b).

The plaintiff, Walde, a corporation with its principal place of business located in Innsbruck, Austria, also commenced an adversary proceeding against the defendants, seeking in excess of $252,450 for goods sold and delivered to the debtor, Curtina. Walde's complaint is pitched to the theory that it is entitled to pierce the corporate veil of the debtor and maintain an action against the defendants individually because the defendants allegedly used the debtor corporation as their alter ego.

JURISDICTION

There is no question that the trustee's adversary proceeding has a sound jurisdictional predicate. Subsections (a), (b) and (c) of 28 U.S.C. § 1471 combine to confer original and exclusive jurisdiction upon a bankruptcy court for the district in which a case under title 11 is commenced and original but not exclusive jurisdiction of all civil proceedings arising under title 11 or arising in or related to cases under title 11. Therefore the trustee's action to recover property for the estate was properly commenced in this court.

However, the plaintiff Walde's action against the individual defendants, who are not debtors under title 11, stands on a different footing. Unlike the trustee, Walde does not seek to recover assets for the benefit of the estate; Walde desires to collect for itself monies allegedly owed to it by the nondebtor defendants as the alter egos of the debtor. Hence, Walde neither seeks to recover assets for the estate nor from the estate. The trustee in bankruptcy has no interest in any recovery that Walde might obtain from the nondebtor defendants. Manifestly, the private controversy between Walde and the defendants does not relate to any bankruptcy matter. Walde can derive little comfort from 28 U.S.C. § 1471(b) and (c) because its civil proceeding against the nondebtor defendants does not arise under title 11 nor is it related to a case under title 11. Although Walde bottoms its claim against the nondebtor defendants on the theory of piercing the debtor's corporate veil, it inflicts no wound upon the debtor nor will it draw any blood from this stone. Indeed, to the extent that Walde recovers any amount from the nondebtor defendants in the course of piercing the debtor's shroud it will thereby reduce the amount of any claim it might have against the debtor.

The parties did not raise the jurisdictional issue. Instead they directed their efforts to addressing the question as to whether or not there were sufficient grounds for the issuance of an order of attachment and discussed the line of cases that dealt with the problem of piercing a corporate veil. Nevertheless, this court cannot entertain Walde's adversary proceeding if there is no jurisdictional basis for the action since jurisdictional questions are paramount. This point was stated in First State Bank and Trust Company of Guthrie, Oklahoma v. Sand Springs State Bank, 528 F.2d 350, 353 (10 Cir. 1976) as follows:

" . . . jurisdictional questions are of primary consideration and can be raised at any time by courts on their own motion. Barr v. United States, 478 F.2d 1152 (10th Cir. 1973), cert. denied, 414 U.S. 910, 94 S.Ct. 233, 38 L.Ed.2d 148 (1973); Bledsoe v. Wirtz, 384 F.2d 767 (10th Cir. 1967); McGrath v. Kristensen, 340 U.S. 162, 71 S.Ct. 224, 95 L.Ed. 173 (1950.)"

Since Walde's action does not relate to, or affect the administration of this bankruptcy case and is merely a private controversy exclusively between third parties in which the trustee asserts no interest, it follows that this court does not have jurisdiction to entertain it under 28 U.S.C. § 1471(b) and (c). As stated by the court in First State Bank and Trust Company of Guthrie, Oklahoma v. Sand Springs State Bank, supra, at page 353:

"A court of bankruptcy cannot entertain jurisdiction of a private controversy which does not relate to matters pertaining to bankruptcy. Associated Electronic Supply Co. of Omaha v. C.B.S. Electronic Sales Corporation, 288 F.2d 683 (8th Cir. 1961). In the same vein, a bankruptcy court lacks jurisdiction of a controversy solely and exclusively between third parties which does not involve, directly or indirectly, the bankrupt or its property. Central States Corp. v. Luther, 215 F.2d 38 (10th Cir. 1954); O\'Dell, supra. Furthermore, a bankruptcy court ordinarily lacks jurisdiction of a controversy between parties over a matter in which the trustee asserts no interest. In re Burton Coal Co., 126 F.2d 447 (7th Cir. 1942)."

EXTRATERRITORIAL ATTACHMENT

Although the trustee's adversary proceeding against the nondebtor defendants to recover funds for the estate on grounds including alleged fraudulent conveyances...