In re Murchison, Bankruptcy No. 385-30266-11

• Decision Date: 24 October 1985
• Docket Number: Bankruptcy No. 385-30266-11,385-30929-11.
• Citation: 54 BR 721
• Parties: In re Clinton W. MURCHISON, Jr., Debtor. In re TECON REALTY CORPORATION, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of Texas

54 B.R. 721 (1985)

In re Clinton W. MURCHISON, Jr., Debtor.

In re TECON REALTY CORPORATION, Debtor.

Bankruptcy Nos. 385-30266-11, 385-30929-11.

United States Bankruptcy Court, N.D. Texas, Dallas Division.

October 24, 1985.

James C. Slaughter, Jonathan B. Skidmore, Fulbright & Jaworski, Houston, Tex., Evelyn H. Biery, Fulbright & Jaworski, San Antonio, Tex., Vince Walkowiak, Fulbright & Jaworski, Dallas, Tex., Larry G. Franceski, Fulbright & Jaworski, Washington, D.C., for Riggs National Bank.

Robert L. Hoffman, Strasburger & Price, Philip I. Palmer, Jr., Richard W. Ward, Palmer, Palmer & Coffee, Dallas, Tex., for the Debtor.

Mark E. MacDonald, Mike Paslay, Johnson & Swanson, Dallas, Tex., for the Creditors' Committee.

David Snodgrass, Gardere & Wynne, Dallas, Tex., for F.D.I.C.

MEMORANDUM OPINION

HAROLD C. ABRAMSON, Bankruptcy Judge.

On 7 February 1985 an involuntary petition in bankruptcy was filed against Clinton W. Murchison Jr. (hereinafter Debtor) by Toronto-Dominion Bank, Citicorp Real Estate, and Kona-Post Corporation. On 27 February 1985 Debtor consented to entry of an order for relief. Shortly thereafter, on 19 August 1985, Tecon Realty Corporation (hereinafter Tecon), a component entity of the extensive Murchison holdings described in greater detail below, filed its own petition for relief under Chapter 11. In June of this year Texas Plaza Partners and Belgian American Investments jointly filed an Application for Approval of Sale of Property, to Determine that Consideration to be Paid is Equivalent Value and to Limit Notice for Hearing (hereinafter the application). The Application alluded to the interrelationships of Debtor, Tecon, Texas Plaza Partners, and other entities, and described the proposed sale by Texas Plaza of certain real estate to Belgian American. The application stated that "Texas Plaza Partners is the owner" of said real estate, and that "Belgian American has taken the position that it will not close the purchase of the property pursuant to the contract without the submission of such transaction for approval by this Court." The application requested that the Court approve the sale, and further requested declaratory relief finding that the proposed price constituted equivalent value.¹ Responses to the application were filed by the Unsecured Creditors' Committee, First Federal Savings of Arkansas, and Allied Bank International, none of which objected to the sale itself, although all three requested that the proceeds be held in escrow for the benefit of various entities. These parties contemplated a subsequent determination by the Court concerning priority of claims to the funds generated by the sale. Only Riggs National Bank of Washington, D.C. filed an objection. Riggs claimed that Debtor's rights were, at best, nothing more than an equitable claim to a share of the profits of Texas Plaza Partners, or to a share of the assets remaining after satisfaction of the claims of the latter entity's creditors, and that the relationship between Debtor and Texas Plaza Partners, and therefore specific assets held by the partnership, was so tenuous and remote that such assets could not be considered property of the estate. Accordingly, Riggs argued, the Court had no jurisdiction to approve a sale of this land or determine whether adequate consideration had been paid.

On 26 July 1985 a hearing was held on the application, at which time Riggs sought denial of the application or alternatively a continuance. After brief introductory remarks on the record, a conference was held in chambers. After extensive discussion, it was determined by the Court and those present that the interests of all concerned would best be served by approving the sale and holding the net proceeds in escrow pending a final determination of entitlement to the funds. Riggs agreed to withdraw its objection to the Court's jurisdiction until a new hearing could be scheduled.² An order was entered approving the sale, finding the price to be equivalent value, and freezing the net proceeds pending the outcome of the final hearing, which was scheduled for 26 August 1985.

The property was sold, and the proceeds were held in escrow pursuant to the terms of the order.³ On 26 August, prior to the scheduled hearing, Riggs filed a motion for continuance. During the thirty day interim period, another of the Murchison-related entities, TXSO, had filed a petition for relief under Chapter 11. Riggs charged that this filing was a transparent maneuver to circumvent the jurisdictional argument it had advanced and "withdrawn" at the July hearing. Riggs claimed that this unanticipated development required it to reevaluate and possibly reformulate its strategy. After a conference in chambers, it was determined that a continuance should be granted, and the matter was reset for 19 November 1985.

On 27 September 1985, Riggs filed a motion to dismiss these matters in the Murchison and Tecon cases, on the basis that TXSO, as a limited partner in the partnership holding 50% of Texas Plaza Partners, was closest to the transaction and would have a claim to the proceeds which would prime that of either Tecon or Debtor.⁴ Riggs also filed a motion to dismiss the TXSO case altogether. A hearing on these motions was held on 4 October 1985, at which time the Court expressed its misgivings as to the propriety of the order approving the sale, and asked counsel for the applicants, the Creditors' Committee, Debtor, and other interested parties to again address the jurisdictional question. After considering the pleadings in the various cases and the argument of counsel, the Court determined that the order of 26 July was void, not voidable, for lack of jurisdiction. That order was accordingly set aside, and the application was retroactively denied, for the reasons stated herein.⁵

The Murchison cases have been singular not only in the extent of their proliferation but in the degree of complexity and interaction as well. It appears from the pleadings in this and the related cases that the relationship among the various entities controlled or owned in whole or in part by Debtor or his family approaches, for want of a better term, the incestuous. It is only now, several months after the petition, that the accountants for the estates can define with any degree of confidence the extent and character of the Murchison holdings. It is just this sort of complexity which has resulted in the confusion surrounding the application to sell, and the subsequent chain of events, in question here. Upon careful evaluation of the facts presented in the application and the responsive pleadings, including the objection to jurisdiction "withdrawn" by Riggs, it is clear that the specific issue — the most significant issue — is the threshold question of whether this Court has jurisdiction over the sale of property owned by a nondebtor entity in which a debtor has a remote and fractional partnership or shareholder interest. Phrased differently, and perhaps more in keeping with the true purpose of the application, the question becomes whether this, a court of limited jurisdiction, should extend itself beyond Congressionally defined parameters for no reason other than to accomodate and placate a purchaser of property, or a title company involved in the transaction, whose misperception of the effect and consequences of bankruptcy on a proposed sale produces an uncomfortable degree of anxiety and insecurity. It should be noted by all counsel confronted with circumstances similar to those present here that this Court exists to adjudicate disputes arising in conjunction with the administration of an estate in bankruptcy between parties-in-interest and concerning property of the estate and claims against it. It is not the purpose of this Court to assuage the fears and calm the apprehensions of those who seek to sell or buy assets held by an entity which, albeit related to a debtor, is not itself in bankruptcy.

Although the order approving the sale was entered months ago, and objections to the ability of the Court to enter said order have been "withdrawn", it is clear that this Court retains the ability, indeed, the duty, to examine its jurisdiction over a matter at any time, sua sponte. Matter of Kutner, 656 F.2d 1107 (5th Cir.1981); In re Maine Marine Corporation, 20 B.R. 426 (Bkrtcy.D. Me.1982); In re Curtina, 15 B.R. 993 (Bkrtcy.S.D.N.Y.1981). That the parties have agreed to jurisdiction, whether by stipulation or "withdrawal", is immaterial. American Fire and Casualty Company v. Finn, 341 U.S. 6, 71 S.Ct. 534, 95 L.Ed. 702 (1951).

Because this case was filed in early 1985, the provisions of the Bankruptcy Amendments and Federal Judgeship Act of 1984 must govern. This statute, enacted amid the turmoil following the Supreme Court's decision in Northern Pipeline Construction Company v. Marathon Pipe Line Company, 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), attempts to curtail the wide latitude granted the bankruptcy courts under the Code. It states, in pertinent part,

(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11......

(d) The district court in which a case under title 11 is commenced or is pending shall have exclusive jurisdiction of all of the property, wherever located, of the debtor as of the commencement of such case, and of the estate.

28 U.S.C. 1334 (emphasis added). Pursuant to 28 U.S.C. 157(a), the court may then provide for automatic reference of the case and any proceedings therein to the bankruptcy court. The jurisdiction of the bankruptcy court is then defined, and matters brought before the latter forum are placed into one of three categories: core proceedings, under § 157(b)(2); noncore "related" proceedings...