In re Matlock Trailer Corp.

Decision Date26 January 1983
Docket NumberAdv. No. 382-0755,Adv. No. 382-0289.,Bankruptcy No. 381-01797,Bankruptcy No. 382-02778,381-00758 and 381-00757
Citation27 BR 311
PartiesIn re MATLOCK TRAILER CORPORATION, Debtor, WALTER E. HELLER AND COMPANY, SOUTHEAST, INC., Plaintiff, v. MATLOCK TRAILER CORPORATION, Defendant. In re CUMBERLAND ENTERPRISES, INC., Northeast Enterprises, Inc., Northeast Enterprises of Columbus, Inc., Debtors. T. Larry EDMONDSON, Trustee, in Bankruptcy for Cumberland Enterprises, Inc., Northeast Enterprises, Inc., Northeast Enterprises of Columbus, Inc., and on behalf of himself as sole stockholder of The 1727 Corporation, Plaintiff, v. 2-STAR FOODS, INC., the Chipper Foods, Co., Inc., Gulf Coast Foods, Inc., Leon Moore, Moore & Associates, Inc., Venture Enterprises, Inc., Shoney's, Inc., David Wachtel, William Tell, Inc., Wilson C. Tate, Sr., Harold F. Morris, Mark R. Moore, Charles Cox, Jr., Tate, Cox & Moore, A Partnership, Sequel II Corporation, James C. Smith, Seafood Distributors, Defendants.
CourtU.S. Bankruptcy Court — Middle District of Tennessee

Wm. Caldwell Hancock, Daniel C. Kaufman, Waddey & Newport, Nashville, Tenn., for Matlock Trailer Corp.

John Bailey, Julie Jones, Bass, Berry & Sims, Nashville, Tenn., for Walter E. Heller and Co. Southeast, Inc.

Larry Stewart, Donelson, Stokes & Bartholomew, Nashville, Tenn., for The Chipper Foods Co., Inc. and 2-Star Foods, Inc.

Harry D. Lewis, Nashville, Tenn., for the Trustee in Cumberland Enterprises.

Before GEORGE C. PAINE, II and KEITH M. LUNDIN, Bankruptcy Judges.


These matters are before the court on motions to dismiss for lack of subject matter jurisdiction pursuant to Rule 915 of the Federal Rules of Bankruptcy Procedure and Rule 12(b)(1) of the Federal Rules of Civil Procedure made applicable to bankruptcy proceedings by Bankruptcy Rule 712(b). Because the issues presented by the motions in these cases are identical, the matters were consolidated for hearing and opinion. The movants argue that the Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., ___ U.S. ___, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) ("Northern Pipeline") removed this court's authority to adjudicate bankruptcy matters after December 24, 1982. Upon consideration of the briefs submitted, argument of counsel, and the entire record, the court is of the opinion that it retains § 241(a) jurisdiction to adjudicate all bankruptcy cases1 filed prior to December 24, 1982, including all adversary proceedings and related matters relevant to those cases, whenever filed. The motions to dismiss are therefore DENIED.

The defendant/debtor Matlock Trailer Corporation ("Matlock") manufactures, sells, leases and services commercial truck bodies and semi-trailers at a facility located in Nashville, Tennessee. Matlock employs more than 60 individuals earning an aggregate payroll in excess of $78,000 per month. On August 27, 1982, Matlock filed a voluntary petition under Chapter 11 of the Bankruptcy Code. Matlock sought to reorganize its debts because its immediate expense obligations exceeded its current revenues, although its total assets exceeded liabilities by approximately two million dollars.

The plaintiff/creditor Walter E. Heller and Company Southeast, Inc. ("Heller") is a major commercial lender from whom Matlock obtained approximately $750,000 in operating funds in December, 1981. To secure this loan, Heller took a security interest in Matlock's raw materials, work-in-progress, inventories and the real estate upon which Matlock's facility is located. The total value of the collateral is approximately $1.7 million.

As a result of the filing of the bankruptcy petition, all actions by creditors such as Heller to collect debts from Matlock or levy against its property were stayed as a matter of law. See 11 U.S.C.A. § 362(a) (West 1979). On November 8, 1982, Heller filed a complaint seeking to terminate the automatic stay and to obtain other appropriate relief, alleging in essence that its secured position was not adequately protected and that Matlock could not be successfully reorganized. See 11 U.S.C.A. § 362(d) (West 1979). Heller also filed a motion to convert the Chapter 11 case to one under Chapter 7, to appoint a trustee, or, in the alternative, to dismiss the petition because of the alleged inability of Matlock to reorganize. Matlock timely responded to Heller's complaint and motion, denying the factual assertions and legal positions contained therein.

Heller's complaint for relief from the automatic stay was heard at a preliminary hearing and pretrial conference on December 8, 1982. At that time counsel announced that the parties had tentatively agreed on a settlement and that an agreement would be entered, subject to court approval, following an opportunity for interested parties to be heard. The parties agreed that a hearing on the settlement would be set at a date future, that the preliminary hearing on relief from the automatic stay would be consolidated with the final hearing, and that the automatic stay would continue in the interim. The settlement, however, was never consummated and an agreed order was entered on December 23, 1982, formally setting the final hearing for January 6, 1983, and continuing the automatic stay "pending further order of this court." This order was not appealed by either party.

At the scheduled hearing, counsel for Heller advised the court that he had filed a motion to dismiss the Chapter 11 proceeding for lack of subject matter jurisdiction in this court as well as in the district court. He also filed a motion to dissolve the automatic stay for want of jurisdiction. In order to hear the jurisdiction motions before a possibly unnecessary final hearing on the merits and to allow the parties leave to file briefs on the issues, the stay proceeding was continued until after argument on the jurisdiction motions on January 19, 1983.

On May 12, 1980, Cumberland Enterprises, Inc. filed a voluntary Chapter 7 petition in the United States Bankruptcy Court for the Southern District of Indiana. On May 24, 1980, Northeast Enterprises, Inc. and Northeast Enterprises of Columbus, Inc. filed Chapter 7 petitions with the United States Bankruptcy Court for the Southern District of Ohio. On May 5, 1981, the United States Bankruptcy Court for the Southern District of Indiana transferred the Cumberland Enterprises, Inc. case to the United States Bankruptcy Court for the Middle District of Tennessee. On February 1, 1982, the United States Bankruptcy Court for the Southern District of Ohio transferred the Northeast Enterprises, Inc. and Northeast Enterprises of Columbus, Inc. cases to the United States Bankruptcy Court for the Middle District of Tennessee. On April 12, 1982, this court ordered the consolidation of the cases of Cumberland Enterprises, Inc., Northeast Enterprises, Inc., and Northeast Enterprises of Columbus, Inc. A trustee was subsequently appointed to administer the estate.

On May 11, 1982, the trustee filed a complaint against a number of defendants alleging conversion of assets, preferential transfers, fraudulent conveyances, and seeking the subordination of all claims held by the defendants. The trustee asserted jurisdiction pursuant to 28 U.S.C.A. §§ 1471 and 1481 (West Supp.1982), as well as 11 U.S.C.A. § 105 (West 1979). Several of the defendants, including Chipper Foods Co., Inc., moved to dismiss the complaint for lack of subject matter jurisdiction pursuant to Rule 915 of the Bankruptcy Rules and Rule 12(b) of the Federal Rules of Civil Procedure. On August 18, 1982, this court issued a memorandum and order denying defendants' motions and noting jurisdiction to act during the pendency of the Northern Pipeline stay pursuant to 28 U.S.C.A. § 1471 (West Supp.1982). Schneider v. 2-Star Foods, Inc. (In re Cumberland Enterprises), 22 B.R. 626 (Bkrtcy.M.D.Tenn.1982). The order was issued without prejudice to the defendants' right to raise the jurisdictional issue after the stay expired. Defendant Chipper Foods Co., Inc. has subsequently renewed its objection to jurisdiction. For the purpose of resolving the jurisdictional question, this motion was consolidated with the Matlock matter.

Although this court's jurisdiction under the Bankruptcy Reform Act as conferred through 28 U.S.C.A. § 1471 (West Supp. 1982) was declared unconstitutional in Northern Pipeline, the Supreme Court applied its holding prospectively and did not intend the decision to impact cases filed in reliance on the presumed validity of the Bankruptcy Code. The plurality stated that:

Having concluded that the broad grant of jurisdiction to the bankruptcy courts contained in § 241(a) is unconstitutional, we must now determine whether our holding should be applied retroactively to the effective date of the Act. Our decision in Chevron Oil Co. v. Huson, 404 U.S. 97, 92 S.Ct. 349, 30 L.Ed.2d 296 (1971), sets forth the three considerations recognized by our precedents as properly bearing upon the issue of retroactivity. They are first, whether the holding in question `decided an issue of first impression whose resolution was not clearly foreshadowed\' by earlier cases, id., at 106, 92 S.Ct. 349, 30 L.Ed.2d 296; second, `whether retrospective operation will further or retard the operation\' of the holding in question, id., at 197, 92 S.Ct. 349, 30 L.Ed.2d 296; and third, whether retroactive application `could produce substantial inequitable results\' in individual cases, ibid. In the present case, all of these considerations militate against the retroactive application of our holding today. It is plain that Congress\' broad grant of judicial power to non-Art III bankruptcy judges presents an unprecedented question of interpretation of Art III. It is equally plain that retroactive application would not further the operation of our holding, and would surely visit substantial injustice and hardship upon those litigants who relied upon the

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