In re Republic Trust & Sav. Co.
| Decision Date | 20 March 1986 |
| Docket Number | Bankruptcy No. 84-01461. |
| Citation | 59 BR 606 |
| Court | U.S. Bankruptcy Court — Northern District of Oklahoma |
| Parties | In re REPUBLIC TRUST & SAVINGS COMPANY, an Oklahoma trust company, Debtor. |
Judith S. Brune, Tulsa, Okl., for movant.
Sam G. Bratton, II of Doerner, Stuart, Saunders, Daniel & Anderson, Tulsa, Okl., for trustee.
ORDER DENYING MOTION TO DISMISS
Wesley R. McKinney has filed a "Motion . . . to Dismiss Chapter 11 Proceedings of Republic Trust & Savings Company for Lack of Subject Matter Jurisdiction" and a brief and affidavit in support thereof. Jack D. Jones, Trustee of the Chapter 11 estate of Republic Trust & Savings Company, has filed an opposing "Response" and brief, which refer to a "Trustee's Report of Investigation" filed herein and to contents of a sealed transcript of examination of McKinney under Bankruptcy Rule 2004. McKinney and the Trustee have filed various replies and supplements to the above-mentioned motion, response briefs. Neither party has requested an evidentiary hearing. Upon consideration thereof, and of the record herein, the Court finds (for purposes of ruling on this motion), concludes and orders as follows:
FINDINGS OF FACT
Republic Trust & Savings Company (hereinafter "Republic Trust") is a corporation, chartered as a trust company under Article X of the Oklahoma Banking Code (6 O.S.A. § 1001 et seq.).
. . . . .
Before approximately June 1984, an entity then known as Republic Bancorporation, Inc. (hereinafter "old RBI") owned a controlling interest in three different subsidiary entities, namely Republic Bank & Trust Company (hereinafter "Republic Bank"), Republic Financial Corporation (hereinafter "Republic Financial") and Republic Trust.
Republic Bank was FDIC-insured. Neither old RBI nor Republic Financial nor Republic Trust were, or have been at any time material hereto, FDIC-insured. Republic Trust applied for FDIC membership; the application was rejected.
Republic Bank, being FDIC-insured, was subject to supervision and regulation by the Federal Reserve Board. The Federal Reserve Board attempted to scrutinize operations of the non-FDIC entities, namely old RBI, Republic Financial and Republic Trust, because of their affiliation and close operating relationship with FDIC-insured Republic Bank.
Old RBI, Republic Bank, Republic Financial and Republic Trust were all, along with various other entities, dominated and directed by one Wesley R. McKinney.
In approximately June 1984, relationships among entities controlled by McKinney were altered in a series of transactions, hereinafter referred to collectively as "divestiture".
In the course of divestiture, old RBI changed its name to Sunbelt Bancorporation, Inc. (hereinafter "SBI"), while a different entity formerly known as Sunbelt Bancorporation, Inc. changed its name to Republic Bancorporation, Inc. ("new RBI").
Neither old RBI nor new RBI held any significant ownership interest in each other. Neither old RBI nor new RBI were or are FDIC-insured.
In the course of divestiture, old RBI (now SBI) continued to own FDIC-insured Republic Bank. However, old RBI (now SBI) transferred to new RBI the ownership of Republic Financial and Republic Trust.
After divestiture, old RBI (now SBI) owned FDIC-insured Republic Bank, and with it formed an affiliate group subject to Federal Reserve regulation because one member of the group, namely Republic Bank, was FDIC-insured.
After divestiture, new RBI owned non-FDIC Republic Financial and non-FDIC Republic Trust, and with them formed an affiliate group not subject to Federal Reserve regulation because no member of the group was FDIC-insured.
As a result of the divestiture, the connection between FDIC-insured Republic Bank and non-FDIC Republic Trust, which had existed when both were owned by old RBI, was severed.
After divestiture but before September 24, 1984, neither the Federal Deposit Insurance Corporation nor any other agency or instrumentality of the United States Government attempted to regulate, liquidate, reorganize, or assert any sort of jurisdiction or supervision over, or attempt to indemnify any creditors or alleged "depositors" of, Republic Trust.
On September 24, 1984, Republic Financial and Republic Trust filed separate, simultaneous voluntary petitions for relief under 11 U.S.C. Chapter 11 in this Court.
On September 27, 1984, R.Y. Empie, Oklahoma Banking Commissioner, moved and was permitted to intervene in the Chapter 11 case of Republic Trust as a party in interest, by agreement.
On September 28, 1984, the Court appointed a Committee of Creditors holding unsecured claims in Republic Trust. The Committee later engaged attorneys. The Committee and its attorneys have expended untold amounts of time and effort in discharging their duties, and continue to do so, in the course of which said attorneys have incurred considerable administrative costs.
On October 31, 1984, Jack D. Jones (hereinafter "Trustee") was appointed Trustee of the Chapter 11 case and estate of Republic Trust. The Trustee later engaged attorneys and accountants, who with the Trustee have expended untold amounts of time and effort in discharging their duties, and continue to do so, and in the course of which they have incurred considerable administrative costs.
Since the Trustee was appointed, a concerted and intense effort has been ongoing to unravel the web of complicated facts to accomplish administration of this estate, including determination of who are the creditors, and in what amounts, and their security if any; as well as determination of the identity and value of assets of the estate; all with a goal of offering a plan of reorganization to the parties in the interest as promptly as practicable.
The Court also appointed a Committee of Unsecured Thrift Certificate Holders for Special Purpose. The members of that Committee have expended untold hours attending hearings and conferences and communicating with creditors.
On January 10, 1985, various creditors filed a petition for involuntary relief under 11 U.S.C. Chapter 7 against Wesley R. McKinney (hereinafter "McKinney"). On March 22, 1985, an order for relief in that case was entered, retroactive by operation of law to January 10, 1985.
On November 4, 1985, McKinney filed his "Motion . . . to Dismiss Chapter 11 Proceedings of Republic Trust & Savings Company for Lack of Subject Matter Jurisdiction" with supporting documents, and simultaneously a similar motion with supporting documents in the case of Republic Financial.
On December 18, 1985, the Trustee filed his consolidated Plan of Reorganization in Republic Financial and Republic Trust. With permission of the Court, on December 26, 1985, the Trustee filed a corresponding Disclosure Statement.
On January 17, 1986, the Court entered an Order denying McKinney's motion to dismiss the Republic Financial case for lack of subject matter jurisdiction.
On January 30, 1986, the Court approved the Trustee's Disclosure Statement in Republic Financial and Republic Trust; and set a hearing on confirmation of the Trustee's Plan of Reorganization in Republic Financial and Republic Trust for March 21, 1986. From and after September 24, 1984, neither the Federal Deposit Insurance Corporation, nor any other agency or instrumentality of the United States Government, has ever attempted to intervene in the Chapter 11 cases of Republic Financial or Republic Trust, for the purpose of regulating, liquidating, reorganizing, or asserting any sort of jurisdiction or supervision over said debtors; or for the purpose of indemnifying any creditors or alleged "depositors" of said debtors.
McKinney moves "pursuant to Rule 12(b)(1) of the F.R.Civ.P. ..... to dismiss the Chapter 11 proceedings herein for lack of subject matter jurisdiction under 11 U.S.C. Sections 109(b) and 109(d)," motion p. 1.
Rule 12, F.R.Civ.P. does not apply "at large" in a bankruptcy case. It is made applicable within adversary proceedings by Bankruptcy Rule 7012(b) but this is not an adversary proceeding. Pursuant to Bankruptcy Rule 1017(d), a proceeding to dismiss a case is treated as a contested matter under Bankruptcy Rule 9014, which in turn makes certain other rules automatically applicable—but Bankruptcy Rule 7012 and Rule 12, F.R.Civ.P. are not among them. By bringing this proceeding to dismiss on authority of a rule which cannot apply until after the proceeding has been otherwise commenced, McKinney seeks to lift himself by his own bootstraps into Court. Further, McKinney's motion was not served on any members of the Creditor's Committee or their attorneys of record, who are surely "parties against whom relief is sought" entitled to notice and opportunity for hearing pursuant to Bankruptcy Rules 1017(d) and 9014.
McKinney's motion and briefs call for dismissal of the case "for lack of subject-matter jurisdiction," yet are grounded on 11 U.S.C. § 109(b) and (d). This statute concerns eligibility of debtors for relief and not subject-matter jurisdiction, 2 Collier on Bankruptcy ¶ 109.092 at 109-7 (15th ed. 1985). This matter arises under 11 U.S.C. § 109 and in a case under Chapter 11 of Title 11, U.S.C., giving this Court subject-matter jurisdiction pursuant to 28 U.S.C. § 1334(a) and (b), 151 and 157, and Misc. Order No. 128, United States District Court for the Northern District of Oklahoma (July 24, 1984). Debtor's eligibility for relief under 11 U.S.C. § 109 is a question of substantive bankruptcy law; and, as will be discussed below, is a flexible matter decided on pragmatic grounds, utterly unlike the rigid limits of subject-matter jurisdiction.1
The Court will overlook or reform these irregularities of McKinney's motion, and determines that it has before it a motion to dismiss pursuant to 11 U.S.C. § 1112(b) and § 109(d) and (b), and Bankruptcy Rules 1017(d) and 9014.
McKinney proposes that Republic Trust is ineligible for bankruptcy reorganization...
To continue reading
Request your trial