In re Richardson
| Decision Date | 07 February 1983 |
| Docket Number | Bankruptcy No. 82C-00736,Civ. Proceeding No. 82PC-0746. |
| Citation | 27 BR 407 |
| Parties | In re Kent D. RICHARDSON, and F. Nadine Richardson, Debtors. Duane H. GILLMAN, Trustee of the estate of Kent D. and F. Nadine Richardson, Plaintiff, v. PRESTON FAMILY INVESTMENT COMPANY, and First Interstate Bank of Utah, Defendants. |
| Court | U.S. Bankruptcy Court — District of Utah |
Duane H. Gillman, Boulden & Gillman, Salt Lake City, Utah, for plaintiff.
Stephen T. Preston, Salt Lake City, Utah, for defendant Preston Family Inv. Co.
Roy A. Williams, Jones, Waldo, Holbrook & McDonough, Salt Lake City, Utah, for defendant First Interstate Bank of Utah.
Preston Family Investment Company, defendant in a civil proceeding brought by a trustee in bankruptcy, arising under title 11, United States Code, and commenced before June 28, 1982, requests dismissal for lack of subject matter jurisdiction. The motion is granted.
Debtors filed a joint petition for relief under Chapter 7 on March 25, 1982. On June 15, 1982, the trustee of the debtors' estates filed this action to avoid a transfer of property under 11 U.S.C. §§ 544(a)(3), 544(b), and 548(a)(2). The trustee then filed a motion for summary judgment which was granted in part and denied in part by an order entered on October 2, 1982. It was held, as a matter of law, that the trustee could not avoid the transfer under Section 544(a)(3), that a summary judgment on the trustee's cause of action under Section 544(b) was not then appropriate, and that the trustee was entitled to a partial summary judgment on his cause of action under Section 548(a)(2). Gillman v. Preston Family Investment Co. (In re Richardson), 23 B.R. 434 (Bkrtcy.D.Utah 1982). Thus, the trustee's causes of action under Sections 544(b) and 548(a)(2) were left for trial, which was set for January 14, 1983. At trial, defendant Preston Family Investment Co. moved to dismiss the trustee's complaint for lack of subject matter jurisdiction.1 In support of its motion, Preston relies on Northern Pipeline Construction Co. v. Marathon Pipe Line Co., ___ U.S. ___, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (hereinafter, Marathon).
Marathon holds that the grant of subject matter jurisdiction to the bankruptcy courts in Section 241(a) of the Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, § 241(a), 92 Stat. 2668 (codified at 28 U.S.C. §§ 1471-1482), violates Article III of the Constitution of the United States. Marathon also holds Section 241(a) invalid in its entirety. The Court refused to sever any constitutional portions of the jurisdictional grant from those portions which are not constitutional.2
The Supreme Court's judgment in Marathon did not take effect until December 24, 1982. See page 410, below. On December 24, the United States District Court for the District of Utah adopted a rule which became effective December 25. That rule applies "to all bankruptcy cases and proceedings not governed by the Bankruptcy Act of 1898 as amended, and filed on or after October 1, 1979." Section (h). The trustee's action falls within this provision. Sections (c)(1) and (h) of the rule refer this proceeding to this bankruptcy judge.
The trustee argues that either this court or the United States district court for this district has subject matter jurisdiction of this action. First, the trustee argues, this court retains jurisdiction under Section 241(a) of the Bankruptcy Reform Act. This action was filed on June 15, 1982, before the date of the Marathon decision and before the Marathon judgment became effective. In the trustee's view, because the Supreme Court ruled that its holding in Marathon would apply only prospectively, this court retains subject matter jurisdiction under Section 241(a). Alternatively, the trustee argues that this court retains jurisdiction under 11 U.S.C. § 105 and Section 404(a) of the Bankruptcy Reform Act of 1978. The trustee's final argument is that the United States district court for this district derives jurisdiction from 28 U.S.C. § 1331 and that the rule adopted in this district made a valid reference to this bankruptcy judge of the trial of this action. These arguments are analyzed below.
"Our decision today," the Court said in Marathon, "shall apply only prospectively." 102 S.Ct. at 2880. Appended to this sentence is footnote 41, which cites portions of three cases: Buckley v. Valeo, 424 U.S. at 142, 96 S.Ct. 612 at 693, 46 L.Ed.2d 659; Chicot County Drainage District v. Baxter State Bank, 308 U.S. 371, 376-377, 60 S.Ct. 317, 319-320, 84 L.Ed. 329 (1940); Insurance Corp. v. Compagnie des Bauxites, ___ U.S. ___, ___, n. 9, 102 S.Ct. 2099, 2104 n. 9, 72 L.Ed.2d 492 (1982). The Court's intention is illuminated, not only by the authorities cited in footnote 41, but by the context in which its "prospective only" holding was made.
Before reaching the issue of the possible retroactive application of its decision, the Court "concluded that the broad grant of jurisdiction to the bankruptcy courts contained in § 241(a) is unconstitutional." 102 S.Ct. at 2880. Then, the Court asked "whether its holding should be applied retroactively to the effective date of the Act," October 1, 1979. Id. The Court turned its attention to Marathon's effect on actions taken pursuant to the jurisdictional grant of Section 241(a) between October 1, 1979 and June 28, 1982, the date of the Marathon opinion.
Analysis of the retroactivity question began with a review of 102 S.Ct. at 2880 (citing Chevron Oil v. Huson, 404 U.S. 97, 106-107, 92 S.Ct. 349, 355-356, 30 L.Ed.2d 296 (1971)). Next, the Court found that Id. The Court's reference to "litigants who relied upon the Act's vesting of jurisdiction in the bankruptcy courts" leaves room for speculation. Did the Court mean parties who had secured judgments or orders by June 28, 1982? Did the Court refer to parties to matters filed by June 28 who had not yet obtained dispositive orders or judgments? Did the Court intend to include debtors and petitioning creditors who filed bankruptcy petitions before June 28 as well as parties to lawsuits, no matter when filed, which might arise within the penumbrae of pre-June 28 bankruptcy cases?3 A convincing answer to these questions has not yet been given.
After holding "that our decision today shall apply only prospectively," the Court affirmed the judgment of the lower court. Then, the Court stayed its judgment until October 4, 1982. In the Court's view, a limited stay would "afford Congress an opportunity to reconstitute the bankruptcy courts or adopt other valid means of adjudication, without impairing the interim administration of the bankruptcy laws." 102 S.Ct. at 2880.
Because the Court stayed its judgment until October 4, its holding on retroactivity is fully applicable to the period between June 28, 1982 and October 4, 1982. And because the Court later extended the stay until December 24, 1982,4 the Court's holding on retroactivity governs the period between October 4, 1982 and December 24, 1982. In other words, because of the stay until after December 24, 1982, bankruptcy cases and civil proceedings filed before June 28, 1982 stand on equal jurisdictional footing with those filed after June 28, but before the stay expired on December 24.
The Court's stay of its judgment in Marathon is a significant key to the meaning of its holding on retroactivity. Logically, the jurisdiction of the bankruptcy courts after December 24 to act in cases and proceedings filed through December 24 is the same as the jurisdiction of the bankruptcy courts would have been after June 28 to act in cases and proceedings filed through June 28 had there been no stay. Thus, the Court's view of what would have occurred after June 28 absent a stay is of prime importance.
According to the Court, absent a stay of its Marathon judgment, the interim administration of the bankruptcy laws would have been impaired. 102 S.Ct. at 2880. While it may be that the impairment the Court had in mind was limited to the absence of subject matter jurisdiction to act in bankruptcy cases filed after June 28 and in lawsuits connected with those cases, the Court did not qualify its statement. In any event, if the Court's "prospective only" holding permitted the exercise of Section 241(a) jurisdiction after June 28 in bankruptcy cases filed before June 28 and in connected lawsuits, it would have been unnecessary, at least for those bankruptcy cases and lawsuits, for the Court to stay its judgment; the Court could have entered its judgment on June 28 and in all filed bankruptcy cases and in connected lawsuits, the bankruptcy courts could have continued to exercise Section 241(a) jurisdiction. Thus, the ...
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In re Color Craft Press, Ltd.
...Section 1331 salvages this proceeding, but these questions have been answered elsewhere in the negative. See, e.g., In re Richardson, 27 B.R. 407 (Bkrtcy.D.Utah 1983). Nor has it argued that the counterclaim of defendant confers jurisdiction by consent, an argument which, in any event, woul......