In re Groggel

Decision Date10 November 2005
Docket NumberAdversary No. 03-3240-MBM.,Bankruptcy No. 02-34080-MBM.
Citation333 B.R. 261
PartiesIn re Mark Donald GROGGEL, Debtor. Carlota M. Bohm, Trustee of the Bankruptcy Estate of Mark Donald Groggel, Plaintiff, v. The Horsley Company, a Utah corporation, Defendant.
CourtU.S. Bankruptcy Court — Western District of Pennsylvania

David B. Fawcett, Buchanan Ingersoll PC, Pittsburgh, PA, for the trustee.

John Newborg, Pittsburgh, PA, for the Horsley Company.


M. BRUCE McCULLOUGH, Bankruptcy Judge.

Carlota Bohm, the Chapter 7 Trustee for the above-captioned debtor (hereafter "the Trustee"), brings the instant adversary action to pursue three separate causes of action, namely (i) one for breach of contract (Count 1), (ii) one for quantum meruit (Count 2), and (iii) one predicated upon the failure by the Horsley Company, the named defendant in the instant adversary proceeding (hereafter "Horsley"), to file a payment bond (Count 3). The Court, in a Memorandum and Order of Court dated February 13, 2004, granted Horsley's motion to dismiss, but only with respect to the Trustee's Count 3, see In re Groggel, 305 B.R. 234, 236 (Bankr.W.D.Pa.2004); the first two of the Trustee's counts thus remain for disposition by the Court.

The Trustee's contract breach and quantum meruit causes of action against Horsley are actually causes of action that were owned by Mark Groggel, the instant debtor (hereafter "the Debtor"), prior to the commencement of his bankruptcy case, which causes of action the Trustee, by virtue of 11 U.S.C. § 541(a)(1), now owns for the benefit of the Debtor's bankruptcy estate. The Trustee seeks as damages in the instant adversary proceeding either $336,000 or, alternatively, $258,635.94, plus pre-judgment interest from February 15, 2000the Trustee appears to ask for the same amount of damages regardless of which of her two causes of action she is proceeding under. For the reasons set forth below, the Court grants judgment (a) in Horsley's favor with respect to, that is denies any recovery on, the quantum meruit cause of action, and (b) in favor of the Trustee on the contract breach cause of action, but only to the extent of $32,973 in damages.


As the Court has previously held, "it undoubtedly possesses subject matter jurisdiction [via 28 U.S.C. § 1334(b)] over each of the three counts pled in the Trustee's complaint, albeit subject matter jurisdiction of the noncore `related to' variety." Groggel, 305 B.R. at 237. The Court observes that the Trustee contends that the entirety of the instant adversary proceeding is a core matter by virtue of 28 U.S.C. § 157(b)(2)(E). Because § 157(b)(2)(E) provides nothing other than that an action for the turnover of property of the estate constitutes a core proceeding, see 28 U.S.C.A. § 157(b)(2)(E) (West 1993), the Trustee must necessarily argue that her causes of action constitute claims against Horsley for the turnover of property of the Debtor's bankruptcy estate. The Court disagrees with such position by the Trustee, however, because (a) the Trustee's claims against Horsley constitute nothing more than garden variety contract claims, that is claims wherein the right to property — i.e., money — is in dispute, and (b) "actions seeking a turnover of assets whose title is in dispute can only constitute, at the most, noncore rather than core proceedings given that such actions are not true turnover actions within the meaning of [11 U.S.C.] § 542(a) and 28 U.S.C. § 157(b)(2)(E)," In re Allegheny Health, Education and Research Foundation, 233 B.R. 671, 677-78 (Bankr.W.D.Pa.1999). Therefore, the Court holds once again that each of the Trustee's claims against Horsley constitute noncore matters, which means, in turn, that the Court may enter final orders and judgments regarding such claims only if the parties consent thereto, see 28 U.S.C.A. § 157(c) (West 1993).

Have both parties consented to the entry of final orders and judgments with respect to the Trustee's claims in the event that such claims constitute, as has now been determined, noncore matters? The Trustee, in ¶ 15 of her complaint, not only asserts that her claims constitute core matters but also expressly consents to the entry of final orders and judgments in the instant adversary proceeding even if such claims constitute noncore matters. Horsley responds in ¶ 15 of its answer by asserting that the Trustee's "[p]aragraph 15 is a conclusion of law and no response is required thereto." Unfortunately for Horsley, the Trustee's averment that the instant adversary proceeding is a core matter "is not the kind of allegation [by the Trustee] to which no responsive pleading is required. In fact, such a responsive pleading is explicitly required under Bankruptcy Rule 7012(b). See Fed.R.Bankr.P. 7012(b)." In re Aero-Fastener, Inc., 177 B.R. 120, 132 (Bankr.D.Mass.1994). Consequently, and by virtue of Fed.R.Civ.P. 8(d) and Fed.R.Bankr.P. 7008(a), Horsley, by failing to admit or deny the Trustee's "core" averment, is deemed to have admitted that the instant adversary proceeding is core in nature. See Id. "Moreover, case authority exists for the proposition that a defendant's admission that a matter is core `may be deemed an expression of consent to allowing ... [a bankruptcy] court to determine ... [a] matter, even if it is non-core.'" In re Stipetich, 294 B.R. 635, 650 (Bankr.W.D.Pa.2003) (emphasis added) (quoting In re Grigsby, 119 B.R. 479, 484 (Bankr.E.D.Pa.1990), vacated on other grounds, 127 B.R. 759 (E.D.Pa.1991)) (also noting that substantial case authority exists to the effect that, notwithstanding Bankruptcy Rule 7012(b)'s requirement of express consent by both parties, a party can impliedly consent to the entry of final orders and judgments by a bankruptcy court in noncore matters); see also In re Seatco, Inc., 259 B.R. 279, 283 (Bankr.N.D.Tex.2001) (same, citing Hiser v. Neumann Medical Center, Inc. (In re St. Mary Hospital), 117 B.R. 125, 131 (Bankr.E.D.Pa.1990), and Gravel and Shea v. Vermont Nat'l Bank, 162 B.R. 961, 966 (D.Vt.1993)). Therefore, the Court rules that Horsley has expressly consented to the entry of final orders and judgments with respect to the Trustee's instant claims. Because both parties have expressly consented to the entry by this Court of such final orders and judgments, the Court's ruling (as well as factual findings and legal conclusions) set forth herein, as well as that which was contained within the Court's February 13, 2004 decision, constitute final rather than proposed judgments/orders.


The genesis of the Trustee's contract breach and quantum meruit claims against Horsley is a contract between the Debtor, operating under the name of National Storage Systems (hereafter "NSS"), and Horsley that was finalized at some point during early July 1999 (hereafter "the Contract"). Although the Trustee and Horsley hotly dispute the terms of the Contract, which dispute is facilitated by the fact that the Contract was never reduced to one particular written document, let alone a signed, written agreement, the Trustee and Horsley agree on the following matters vis-a-vis the Contract that are relevant to a resolution of the Trustee's claims:

1. That the Debtor and Horsley entered into the Contract in early July 1999;

2. That pursuant to the Contract, the Debtor, as a subcontractor to Horsley, was to install a shelving system (i.e., shelving, mezzanine, and flooring) as part of a warehouse construction project in Tracy, California (hereafter "the Shelving"), for which construction project Horsley had contracted with the federal government (hereafter "the Tracy Job");

3. That, pursuant to the Contract, Horsley was to pay the Debtor a total of $336,000 in return for the Debtor's performance on the Contract — a July 9, 1999 purchase order drafted by Horsley and mailed to the Debtor (hereafter "the Purchase Order") indicates that the amount to be paid was $338,000, but the Debtor and Horsley agreed at trial that $336,000 was the actual contract price;

4. That, pursuant to the Contract, the Debtor was to provide things relevant to such installation like necessary transportation, labor and supervision, tools, and equipment; and

5. That, pursuant to the Contract, the same would be fully completed within three months from when the Debtor commenced performance, or roughly October 15, 1999.

The Debtor submitted to Horsley on July 2, 1999, his bid of $336,000 on the Tracy Job subcontract, which bid ultimately culminated in the Contract (hereafter "the Bid"). The Debtor personally visited the Tracy Job construction site (hereafter "the Construction Site") on July 7 — 8, 1999 (hereafter "the Site Visit"), or nearly one week after he submitted the Bid to Horsley. The Debtor thus necessarily concedes that he did not visit the Construction Site before making the Bid. The Debtor also testified that, prior to submitting the Bid, he failed to actually speak to Horsley. As well, the Debtor testified that Horsley failed to offer, and that he thus failed to attend, any sort of pre-bid meeting, which type of meeting, the Debtor conceded at trial, would typically have been held for a construction project of the size of the Tracy Job.

The Debtor testified that he based the Bid on drawings and a materials list that he obtained prior to the submission of the Bid from Borroughs Corporation, another of Horsley's subcontractors (hereafter "Borroughs"). At trial, the Debtor conceded that such drawings were not detailed and were difficult to scale. The Debtor also testified at trial that when he made the Bid he neither knew how he was to install the Shelving, nor, for that matter, who would actually be the manufacturer for the mezzanine and flooring that were part of the Shelving (Borroughs was still taking bids regarding the...

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