In re Satelco, Inc.

• Decision Date: 13 March 1986
• Docket Number: 385-8102 through 385-8112 and 385-8114 through 385-8116.,Adv. No. 385-8113,Bankruptcy No. 385-31780-A-11
• Citation: In re Satelco, Inc., 58 B.R. 781 (Bankr. N.D. Tex. 1986)
• Parties: In re SATELCO, INCORPORATED, Debtor. SATELCO, INCORPORATED v. NORTH AMERICAN PUBLISHERS, INC., Abic Epstein Realty Associates, Commercial Telephone Co., Cornerstone Investments, Inc., Fred Epperson Insurance Agency, Litecomm Supply Company, Loren H. Drum Company, Management Recruiters, Maria Theresa Moran, Metro Media Corporation, Micro Craft Corporation, Moreman Tire Company, Quorum Petroleum International, Inc., Unilock Furniture Systems, Inc., United Aerospace.
• Court: U.S. Bankruptcy Court — Northern District of Texas

58 B.R. 781 (1986)

In re SATELCO, INCORPORATED, Debtor SATELCO, INCORPORATED v. NORTH AMERICAN PUBLISHERS, INC., Abic Epstein Realty Associates, Commercial Telephone Co., Cornerstone Investments, Inc., Fred Epperson Insurance Agency, Litecomm Supply Company, Loren H. Drum Company, Management Recruiters, Maria Theresa Moran, Metro Media Corporation, Micro Craft Corporation, Moreman Tire Company, Quorum Petroleum International, Inc., Unilock Furniture Systems, Inc., United Aerospace.

Bankruptcy No. 385-31780-A-11, Adv. Nos. 385-8113, 385-8102 through 385-8112 and 385-8114 through 385-8116.

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

March 13, 1986.

Jay Vogelson, Moore & Peterson, Dallas, Tex., for debtor, Satelco, Inc.

No other counsel — default.

MEMORANDUM OPINION

HAROLD C. ABRAMSON, Bankruptcy Judge.

On 15 July 1985 Satelco, Incorporated (hereinafter "Debtor") filed its petition for relief under Chapter 11 of the Bankruptcy Code, 11 U.S.C. § 1101, et seq. Debtor was, and is, engaged in the business of supplying long distance telephone service to residential and commercial customers, most of whom are located within the State of Texas. On or about 31 December 1985 Debtor filed a series of fifteen adversary proceedings, each entitled "Complaint to Compel Turnover of Property." These proceedings differ only with respect to the individual defendant named and the amount claimed. The substance of these complaints is virtually identical, to wit, that the defendants contracted with Debtor for long distance telephone service; that the defendants used said services and incurred charges pursuant to the agreements; that despite demands by Debtor for payment of such charges, the defendants refused to pay; that such charges represent funds which are property of the estate; and that the defendants are obligated, under Bankruptcy Code § 542(a), to pay such charges, plus interest and attorneys' fees as provided by Texas law.¹

On 17 February 1986 these adversary proceedings were scheduled for pre-trial conference, at which time the Court sua sponte raised the question of its jurisdiction to hear and finally adjudicate a dispute between a debtor and a non-creditor defendant based upon state contract law, in light of the Supreme Court's ruling in Northern Pipeline Construction Company v. Marathon Pipe Line Company, 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) (hereinafter "Marathon"). After hearing the arguments of counsel, the Court took the jurisdictional question under advisement.² This opinion represents the Court's findings and conclusions.³

DISCUSSION

As the national bankruptcy bar and bench have quickly discovered, the post-Marathon era has developed into one of the most confusing periods in the history of federal jurisprudence. The explosive proliferation of lower court opinions following Marathon and the Bankruptcy Amendments and Federal Judgeship Act of 1984, P.L. 98-353 (hereinafter "1984 Amendments") attests to the degree of uncertainty and resulting inconsistency among lawyers and judges. As might be expected, this dissonance has led to a decline in the ability of counsel to accurately evaluate, and determine a proper forum for, the wide variety of actions which ordinarily arise in the course of administering a bankruptcy estate. The Court has previously undertaken a discussion of the various points of view concerning the permissible scope of a bankruptcy court's jurisdiction, and will not reiterate that discussion here.⁴ It is sufficient at this time to note that Marathon found invalid the attempt by Congress to allow the bankruptcy courts, which find their raison d'etre in Article I, to exercise powers reserved to the Article III judiciary. As Justice O'Connor recently stated, albeit in dicta in a non-bankruptcy case,

"the Court\'s most recent pronouncement on the meaning of Article III is Marathon. A divided Court was unable to agree on the precise scope and nature of Article III\'s limitations. The Court\'s holding in that case establishes only that Congress may not vest in a non-Article III court the power to adjudicate, render final judgment, and issue binding orders in a traditional contract action arising under state law, without consent of the litigants, and subject only to appellate review."

Thomas v. Union Carbide Agricultural Products Company, ___ U.S. ___, ___, 105 S.Ct. 3325, 3334-35, 87 L.Ed.2d 409 (1985) (emphasis added). The application of this dicta to the adversary proceedings at bar offers a glimpse of the basis for the Court's jurisdictional concerns. These proceedings involve "traditional contract actions arising under state law" and Debtor has attempted to invoke the jurisdiction of this Court to "adjudicate, render final judgment, and issue binding orders." Whatever else the 1984 Amendments may have purported to do, they clearly did not change this Court's status from Article I to Article III; Marathon would therefore appear to preclude Debtor's action in this Court, should Justice O'Connor's statement be considered binding authority.⁵ In a similar vein, the district court in In re WWG Industries, Inc., 44 B.R. 287, 291 (W.D.Ga. 1984) acknowledged in dicta that

"the Marathon case eliminated the theory that the bankruptcy courts could be given plenary jurisdiction under Article I. See Marathon, supra, 458 U.S. at 63-76, 102 S.Ct. at 2867-2874. In response, Congress, rather than grant the bankruptcy courts Article III status, chose to place the type of noncore, related bankruptcy proceeding involved in this case i.e., an action to collect accounts receivable owed the debtor with the district court."

This explicit recognition that the bankruptcy courts, as Article I courts, are courts of limited jurisdiction, seems quite appropriate in the aftermath of Marathon. Unfortunately, this Court concludes that while Congress clearly refused to grant the bankruptcy courts Article III status, Congress nonetheless intended bankruptcy courts to exercise certain Article III authority. More specifically, the Court surmises that Congress fully intended to allow this Court to adjudicate state law contract disputes such as the proceedings at bar.

The Court acknowledges that the 1984 Amendments are certainly less clear than desired, resulting in a maelstrom of conflicting decisions. This confusion is doubtless due to the failure of Congress to include any legislative history from which the courts could legitimately draw an inference.⁶ The Courts have generally split into two camps, those which feel the 1984 Amendments resolved the constitutional deficiencies of the 1978 Code, and now permit bankruptcy courts to adjudicate state law contract actions by the estate against non-creditor defendants; see e.g., In re All American of Ashburn, Inc., 13 B.C.D. 93, 49 B.R. 926 (Bkrtcy.N.D.Ga.1985); In re Delorean Motor Company, 13 B.C.D. 60, 49 B.R. 900 (Bkrtcy.E.D.Mich.1985); In re Lion Capital Group, 46 B.R. 850 (Bkrtcy. S.D.N.Y.1985); In re Shell Materials, Inc., 13 B.C.D. 185 (Bkrtcy.M.D.Fla.1985); In re Franklin Computer Corporation, 13 B.C.D. 209, 50 B.R. 620 (Bkrtcy.E.D.Pa. 1985); In re Harry C. Partridge, Jr. & Sons, Inc., 48 B.R. 1006 (S.D.N.Y.1985); In re Ram Construction Company, Inc., 49 B.R. 363 (W.D.Pa.1985); In re Bucyrus Grain Company, Inc., 56 B.R. 204 (Bkrtcy.D.Ks.1986); and those which feel the 1984 Amendments must be read in a manner consistent with Marathon, see, e.g. In re Pierce, 44 B.R. 601, 602 (D.Colo. 1984); In re Alexander, 13 B.C.D. 47, 48, 49 B.R. 733 (Bkrtcy.D.N.D.1985); In re Illinois-California Express, Inc., 13 B.C.D. 153, 156, 50 B.R. 232 (Bkrtcy.D.Colo.1985); In re Atlas Automation, Inc., 42 B.R. 246 (Bkrtcy.E.D.Mich.1984); In re Bokum, 49 B.R. 854 (Bkrtcy.D.Colo.1985); In re Morse Electric Company, Inc., 47 B.R. 234 (Bkrtcy.N.D.In.1985); In re Nanodata Computer Corporation, 52 B.R. 334 (Bkrtcy.W.D.N.Y.1985); In re Zweygardt, 52 B.R. 229 (Bkrtcy.D.Colo.1985); In re Yagow, 53 B.R. 737 (Bkrtcy. D.N.D.1985); In re Crabtree, 55 B.R. 130 (Bkrtcy.E.D. Tenn.1985); In re Smith-Douglass, Inc., 43 B.R. 616 (Bkrtcy.E.D.N.C.1984).⁷

The Court has previously expressed its sympathy with the latter group of cases, but has stated that the precise terms of the statute required, in that limited proceeding, that it would follow the former and hold an action to collect an account receivable to be a core proceeding.⁸ The Court is not thus constrained in the cases at bar, and will undertake an exploration of the valildity of the two bases of jurisdiction invoked by Debtor.

1. Turnover

Debtor has alleged this Court has jurisdiction to hear these actions, and therefore to enter default judgments, regarding collection of accounts receivable by virtue of Bankruptcy Code § 542, which states:

(a) Except as provided in subsection (c) or (d) of this section, an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.

(b) Except as provided in subsection (c) or (d) of this section, an entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor.

(c) Except as provided in section 362(a)(7) of this title, an entity that has neither actual notice nor actual knowledge of the commencement of the case concerning the debtor may transfer property of the estate, or pay a debt owing to the debtor, in good faith and other than in the manner specified in subsection (d) of this section, to an entity other than the trustee, with

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