In re Spain
| Citation | 103 BR 286 |
| Decision Date | 16 December 1988 |
| Docket Number | No. CV88-PT-1337-S.,CV88-PT-1337-S. |
| Parties | In re William Harold SPAIN, Debtor. John P. WHITTINGTON, Trustee, v. GILBRALTER SAVINGS & LOAN ASSOCIATION, North Shelby County Fire District, Tax Collector of Shelby County, and Mary P. Spain, Defendants. |
| Court | U.S. District Court — Northern District of Alabama |
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J.N. Holt & W.K. Upshaw, Holt Cooper & Upshaw, Birmingham, Ala., for plaintiff.
Daniel Wainscott, Wainscott & Toffell, Birmingham, Ala., for defendant.
This is an appeal by John P. Whittington, Trustee, from an order of the Bankruptcy Court denying the Trustee's petition to sell for division the homestead property of the debtor, William H. Spain, held jointly with his wife, Mary P. Spain, also an appellee herein. The trustee's petition to sell was filed pursuant to section 363(h) of the Bankruptcy Code.1
The trustee had appealed a prior order of the Bankruptcy court denying the trustee's petition to sell the property because, under the language of the Spains' deed, the property was held as a tenancy in common for life with cross contingent (nondestructible) remainders. The district court affirmed that ruling, but the Eleventh Circuit reversed, holding that the pertinent language in the Spains' deed created a joint tenancy with destructible survivorship rights. In re Spain, 831 F.2d 236 (11th Cir.1987). The court of Appeals remanded the case to the bankruptcy court holding that "because section 363(h) is clearly applicable to joint tenancies, the bankruptcy court must next consider whether a forced sale would be appropriate in light of the four factors set forth in that provision." Id. at 239.
On remand, the bankruptcy judge entered two rather lengthy opinions. In the first, 83 B.R. 61, he made the following findings of fact and conclusions of law:
The bankruptcy judge then set the case for a further evidentiary hearing, after which he entered a second opinion, ruling that, under the reasoning of the U.S. Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipeline Company, 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), Section 363(h) is an unconstitutional grant of power to the bankruptcy courts, and, therefore, he was without jurisdiction to entertain or hear this adversary proceeding. 85 B.R. 874. Alternatively, the bankruptcy judge ruled that "the homestead was properly claimed as exempt and was therefore exempt, and title thereto never passed to the Trustee." He further found that the trustee succeeded only to the bankruptcy debtor's interest, which he calculated to be $2,500.2 Additionally, the judge further found that the administrative costs associated with a sale of the property would exceed any equity available to the creditors, and render a return to creditors of zero; therefore, under § 363(h)(3), the benefit to the estate would not outweigh the detriment to the co-owner, Mrs. Spain, of being forced out of her home.
The trustee appeals raising the following issues:
I. Did the bankruptcy court have jurisdiction to hear this adversary proceeding to sell property under section 363(h)?
II. Is the bankruptcy court's finding that the property in question never became property of the estate contrary to law?
III. Did the bankruptcy court err in its calculation of the benefit to the estate which would result from the sale of the property, and in its finding that the detriment to the co-owner outweighs the benefit of the sale?
The bankruptcy court's interpretation of applicable law is not accorded any presumptions; this court's review of legal issues is de novo Citicorp (USA), Inc. v. Davidson Lumber Co., 718 F.2d 1030 at 1032 (11th Cir.1983). However, this court shall not set aside the bankruptcy court's findings of fact unless clearly erroneous, "and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of witnesses." Bankruptcy Rule 8013.
As a plurality decision, the Supreme Court's holding in Northern Pipeline Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), "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 ordinary appellate review." Thomas v. Union Carbide Agricultural Products, 473 U.S. 568, 584, 105 S.Ct. 3325, 3334, 87 L.Ed.2d 409 (1985).
In his opinion, Justice Brennan, joined by Justices Marshall, Blackmun, and Stevens, noted the following:
Eliminating the distinction between "summary" and "plenary" jurisdiction, the Act grants the new courts jurisdiction over all "civil proceedings arising under title 11 the Bankruptcy title or arising in or related to cases under title 11." 28 U.S.C. § 1471(b) (1976 ed., Supp. IV) (emphasis added). This jurisdictional grant empowers bankruptcy courts to entertain a wide variety of cases involving claims that may affect the property of the estate once a petition has been filed under Title 11. Included within the bankruptcy courts\' jurisdiction are suits to recover accounts, controversies involving exempt property, actions to avoid transfers and payments as preferences or fraudulent conveyances, and causes of action owned by the debtor at the time of the petition for bankruptcy. The bankruptcy courts can hear claims based on state law as well as those based on federal law. See 1 W. Collier, Bankruptcy ¶ 3.01, pp. 3-47 to 3-48 (15th ed.1982).
Id. 458 U.S. at 54, 102 S.Ct. at 2862. (footnote omitted) (emphasis added).
Justice Brennan further observed:
The judges of the bankruptcy courts are vested with all of the "powers of a court of equity, law, and admiralty," except that they "may not enjoin another court or punish a criminal contempt not committed in the presence of the judge of the court or warranting a punishment of imprisonment." 28 U.S.C. § 1481 (1976 ed., Supp. IV). In addition to this broad grant of power, Congress has allowed bankruptcy judges the power to hold jury trials, § 1480; to issue declaratory judgments, § 2201; to issue writs of habeas corpus under certain circumstances, § 2256; to issue all writs necessary in aid of bankruptcy court\'s expanded jurisdiction, § 451 (1976 ed. and Supp. IV); see 28 U.S.C. § 1651; and to issue any order, process or judgment that is necessary or appropriate to carry out the provisions of Title 11, 11 U.S.C. § 105(a) (1976 ed., Supp. IV).
Justice Brennan found insufficient bases for comparison between the bankruptcy courts and three other situations3 which had been held to constitute a recognizable "circumstance in which the grant of power to the Legislative and Executive Branches was historically and constitutionally so exceptional that the congressional assertion of a power to create legislative courts was consistent with, rather than threatening to, the constitutional mandate of separation of powers." Id. at 64, 102 S.Ct. at 2868. He further rejected the arguments that bankruptcy as a "specialized area" warranted "distinctive treatment" in the interest of expediency, and that Congress's power to assign fact-finding functions to an "adjunct," is by analogy a basis for sustaining the plenary jurisdiction granted by the Bankruptcy Act.
In the wake of Northern Pipeline Construction Co. v. Marathon Pipeline Co., supra, in 1984, Congress enacted amendments to the Bankruptcy Act,4 particularly 28 U.S.C. § 157, providing in pertinent part:
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