In re Otero Mills, Inc., Bankruptcy No. 82-00217 M L

Decision Date14 July 1982
Docket NumberAdv. No. 82-0373.,Bankruptcy No. 82-00217 M L
Citation21 BR 645
PartiesIn re OTERO MILLS, INC., Employer ID No. 85-0194848, Debtor. OTERO MILLS, INC., Plaintiff, v. SECURITY BANK & TRUST, Defendant.
CourtU.S. Bankruptcy Court — District of New Mexico

Jennie Deden Behles, Albuquerque, N.M., for plaintiff.

Norman S. Thayer, Albuquerque, N.M., for defendant.


MARK B. McFEELEY, Bankruptcy Judge.

This matter came before the Court on the motion of Security Bank & Trust (the Bank) for amendment of this Court's order entered July 1, 1982. In that order the Court made permanent a temporary injunction which prohibited the Bank from moving to foreclose on any transcript of judgment obtained as a result of a default judgment awarded to the Bank against Charles J. Dugan (Dugan) in Otero County District Court.


Dugan is the president, founder, and a major shareholder of the debtor, Otero Mills, Inc. The Bank's claim against Dugan arises from two notes which were delivered to the Bank as a result of two loans by the Bank to Otero Mills in 1979. The loans totalled $650,000.00 and Dugan executed personal guaranties to the Bank on both notes. Otero Mills failed to make the scheduled payments on these notes in March and April 1982, and the Bank filed suit against Dugan on April 23, 1982, in Otero County (New Mexico) District Court to enforce the guaranties and collect on the notes. On May 27, 1982, the Bank served notice of its intent to apply for a default judgment in Otero County District Court and on May 28, 1982, Otero Mills moved to obtain a temporary restraining order to prohibit the Bank from applying for the default judgment. The hearing for the temporary restraining order was before United States Bankruptcy Judge Stewart Rose on May 28, 1982. Judge Rose denied the motion, but preserved all issues for the preliminary injunction hearing, which had been set for June 2, 1982. On June 1, 1982, the Bank obtained a default judgment against Dugan. After a hearing on June 2, 1982, the Bank was temporarily enjoined from proceeding on any writ of execution obtained as a result of the judgment of the Otero County District Court. This temporary injunction was entered on June 4, 1982, and specifically allowed for transcripting the Otero County District Court judgment against property owed by Dugan. It prohibited only actual foreclosure against Dugan's property. On July 1, 1982, pursuant to a memorandum opinion and order, this temporary injunction was made permanent. The Bank now moves for rehearing and amendment, alleging as grounds the opinion of the United States Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., ___ U.S. ___, 102 S.Ct. 2858, 73 L.Ed.2d 598, 1982. The Bank asserts that the United States Bankruptcy Court has no jurisdiction over this matter as of June 28, 1982.


There is no question that on June 27, 1982, this Court had the jurisdiction and authority to issue the injunction of which the Bank now complains. 28 U.S.C. § 1471 puts the exercise of jurisdiction given to the district courts for all cases under title 11 of the United States Code into the hands of the bankruptcy judge. Section 105 of the Bankruptcy Code itself gives the bankruptcy court the power to issue "any order, process or judgment that is necessary or appropriate to carry out the provisions of this title." 11 U.S.C. § 105(a). We will not repeat here the reasoning contained in the memorandum opinion entered on July 1, 1982, in this case as it addresses the Court's power to enjoin actions against third parties. We will add, however, that the legislative history of the Bankruptcy Reform Act of 1978 supports that conclusion. Indeed, the opinion in Northern Pipeline itself leaves no doubt that Congress intended the jurisdiction of the bankruptcy court to permit such injunctions. In the United States Senate hearings, the Act was represented to give the bankruptcy court:

". . . pervasive jurisdiction over all proceedings arising in or relating to bankruptcy cases. . . . This represents a major improvement over present law where the distinction between summary and plenary jurisdiction often results in wasteful litigation . . . 28 United States Code 1481 rounds out the power of a bankruptcy court by making clear that the court has all the powers of a court of equity, law, or admiralty.

124 Cong.Rec. S17424 (daily ed. Oct. 6, 1978) (statement of Sen. DeConcini).

This broad jurisdiction was also envisioned by the House of Representatives. Rep. Railsback, in the debate concerning bankruptcy judges as Article III judges, stated that without Article III judges in the bankruptcy court,

The existing district courts would continue in their role as courts of bankruptcy with bankruptcy judges attached thereto as adjuncts. Jurisdiction in district courts sitting in bankruptcy would be extended to plenary proceedings where detriment to the bankrupt\'s estate can be shown. The plenary jurisdiction will be exercised by the bankruptcy judges to the extent authorized by rule or order of the District Court.

123 Cong.Rec. H11771 (daily ed. Oct. 28, 1977) (statement of Rep. Railsback).

In defining the scope of jurisdiction which it had to consider in Northern Pipeline, the United States Supreme Court found the grant of jurisdiction to the bankruptcy court to be so broad as to cover "claims that may effect the property of the estate once a petition has been filed. . . ." Northern Pipeline Construction Co. v. Marathon Pipe Line Co., supra, at p. ___, 102 S.Ct. at 2862 (emphasis added). Indeed ...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT