In re McCray, Bankruptcy No. 94-12335
| Decision Date | 10 April 1997 |
| Docket Number | Bankruptcy No. 94-12335,Adversary No. 96-1252. |
| Parties | In re Louis McCRAY, Debtor. AMW CABLE COMPANY, INC., Plaintiff, v. Louis McCRAY and Jeffrey Levingston, Chapter 7 Panel Trustee, Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Mississippi |
Charles Victor McTeer, McTeer and Associates, Greenville, MS, for Louis McCray.
William M. Bass, Denver, CO, Paul Mathis, Lake Tindall, L.L.P., Greenville, MS, for AMW Cable Co., Inc.
Jeffrey Levingston, Cleveland, MS, Chapter 7 Trustee.
On consideration before the court is a motion for summary judgment filed by the plaintiff, AMW Cable Company, Inc., (AMW); as well as, a motion for abstention filed by the defendants, Louis McCray (debtor or McCray) and Jeffrey Levingston, Chapter 7 panel trustee; appropriate responses having been filed to both motions; and the court having heard and considered same hereby finds as follows, to-wit:
I.
The court has jurisdiction of the subject matter of and the parties to this proceeding pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(a). This is a related or noncore proceeding as contemplated by 28 U.S.C. § 157(b)(3).
II.
AMW was incorporated under the laws of the State of Mississippi in September, 1987. It subsequently was qualified to do business in the State of Colorado. In December, 1989, AMW borrowed the sum of $1,000,000.00 from First Interstate National Bank, Denver, Colorado. This loan, which was secured by all of AMW's assets, was personally guaranteed by two of its shareholders, Robert D. Gross and his wife, Judith Ann Carroll. On December 8, 1992, First Interstate National Bank advised AMW that the loan was in default and demanded payment. Shortly thereafter, or December 31, 1992, AMW filed a voluntary Chapter 11 petition for reorganization in the Bankruptcy Court for the District of Colorado.
Pursuant to an order of the Colorado bankruptcy court, Gross, Carroll, and a related company, Winslow Communications, Inc., purchased the First Interstate National Bank promissory note and related security instruments for the sum of $525,000.00. This transaction was financed primarily from a loan obtained from Colorado National Bank in the sum of $350,000.00, as well as, two refinanced promissory notes executed in favor of First Interstate National Bank. The security interests which were originally conveyed to First Interstate National Bank were pledged to Colorado National Bank as collateral for the new loan.
AMW's confirmed plan of reorganization apparently contained a provision to the effect that the assets of AMW could be conveyed to Gross, Carroll, or Winslow Communications since they had purchased the original loan obtained from First Interstate National Bank. AMW ultimately defaulted on its obligations to Colorado National Bank and/or First Interstate National Bank, and on June 28, 1994, Gross had the assets of AMW transferred to Winslow Communications, ostensibly relying upon the confirmed plan.
In October, 1996, Gross negotiated the sale of an AMW cable franchise for the Town of Metcalf, Mississippi, through Winslow Communications to Telecable Associates, Inc., for the purchase price of $209,000.00. The proceeds were purportedly to be paid over to either Colorado National Bank or First Interstate National Bank. However, before this transaction could be consummated, McCray and several other AMW shareholders filed a lawsuit in the Chancery Court of Washington County, Mississippi, seeking to enjoin Gross from using the sales proceeds to pay the two banks. McCray and the other shareholders asserted that they were entitled to their pro rata share of the proceeds. AMW, through its present attorney of record, entered an appearance and consented to the chancery court's jurisdiction. Coincidentally, an injunction was issued by the chancery court, pursuant to an agreement reached by all of the parties, to the effect that the sale of the cable franchise would be approved, and the proceeds were to be "escrowed" pending a hearing on the merits of the complaint in the chancery court. Extensive discovery was completed, and the matter was thereafter litigated. A decision, however, has not yet been rendered by the chancellor. The claims and the respective positions of the parties are identical to the ones that are asserted in this court. In addition to the fact that the issues have been tried in a state court of competent jurisdiction, this court would make the following observations:
III.
This court's jurisdictional authority is essentially derived from 28 U.S.C. § 1334. For reference purposes, § 1334(a) and (b) are set forth as follows:
28 U.S.C. § 1334(a), (b).
An examination of the § 1334(b) exception to the district courts' original and exclusive jurisdiction reveals that it is, in fact, a three part exception. It provides that the district courts shall have original, but not exclusive jurisdiction, of the following types of "civil proceedings": (1) those arising under Title 11, (2) those arising in a case under Title 11, and (3) those related to a case under Title 11. The Fifth Circuit in Wood v. Wood (In re Wood), 825 F.2d 90 (5th Cir.1987), stated that distinguishing the separate provisions of § 1334(b) is not necessary when determining the scope of bankruptcy jurisdiction, but that "it is necessary only to determine whether a matter is at least `related to' the bankruptcy." This court, however, is of the opinion that the facts of this proceeding warrant an examination of each of the three components of § 1334(b).
IV.
The legislative history of the Bankruptcy Code provides that the term "arising under" is well defined:
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. For example, a claim of exemptions under 11 U.S.C. § 522 would be cognizable by the bankruptcy court, as would a claim of discrimination in violation of 11 U.S.C. § 525. Any action by the trustee under an avoiding power would be a proceeding arising under title 11, because the trustee would be claiming based on a right given by one of the sections in subchapter III of chapter 5 of title 11.
1 Collier on Bankruptcy ¶ 3.014ci (15th ed. rev.1996).
Essentially, when a cause of action is created by the Bankruptcy Code, then that proceeding is one which "arises under" Title 11. Collier on Bankruptcy, Id. The meaning of "arising under" was further explained in the Senate debate preceding enactment of the 1984 amendments to the Bankruptcy Code;
How and when a case arises "under the . . . laws of the United States" has been much considered in the books. Some tests are well established. To bring a case within the limits of federal question jurisdiction, a right or immunity created by the . . . laws of the United States must be an element, and an essential one, of the plaintiff\'s cause of action. . . . The right or immunity must be such that it will be supported if the . . . laws of the United States are given one construction or effect, and defeated if they receive another. . . . A genuine and present controversy, not merely a possible or conjectural, must exist with a reference thereto. . . . (Gully v. First National Bank, 299 U.S. 109, 113 133, 57 S.Ct. 96, 97-98, 81 L.Ed. 70 (1936)).
1 Collier on Bankruptcy ¶ 3.01 4ci (15th ed. rev.1996). (citing 130 Cong. Rec. § 6089 (Daily Ed. May 21, 1984)).
In the matter presently before this court, the plaintiff, AMW, seeks a declaratory judgment adjudicating that it is entitled to the proceeds realized from the sale of the cable franchise for the Town of Metcalf. AMW is a former debtor in a Colorado bankruptcy case. The debtor herein, Louis McCray, is one of...
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