In re Statewide Pools, Inc.

Decision Date30 January 1991
Docket NumberAdv. No. 2-89-0324.,Bankruptcy No. 2-86-04302
Citation126 BR 877
CourtU.S. Bankruptcy Court — Southern District of Ohio
PartiesIn re STATEWIDE POOLS, INC., Debtor. Larry E. STAATS, Trustee, Plaintiff, v. ADOLFSON & PETERSON, INC. et al., Defendants.

Larry E. Staats, Columbus, Ohio, trustee.

James H. Tilberry, Cleveland, Ohio, for plaintiff.

David M. Whittaker, Luper, Wolinetz, Sheriff & Neidenthal, Columbus, Ohio, for defendant Schaferoth Const. Co.

Charles M. Caldwell, Office of the U.S. Trustee, Columbus, Ohio.

ORDER AMENDING AND RESTATING "OPINION AND ORDER DETERMINING NON-CORE STATUS; REPORT AND RECOMMENDATION ON REQUEST OF DEFENDANT SCHAFEROTH CONSTRUCTION COMPANY FOR ABSTENTION; DENIAL OF DISMISSAL AND/OR SUMMARY JUDGMENT"

BARBARA J. SELLERS, Bankruptcy Judge.

In light of the provisions of Section 309 of The Federal Courts Study Committee Implementation Act of 1990, Public Law 101-650, signed by the President on December 1, 1990 and effective as of that date, the "Opinion and Order Determining Non-Core Status; Report and Recommendation on Request of Defendant Schaferoth Construction Company for Abstention; Denial of Dismissal and/or Summary Judgment" entered by the Court on January 3, 1991 is hereby amended and restated as follows:

I. PRELIMINARY CONSIDERATIONS AND JURISDICTIONAL STATEMENT

This matter is before the Court upon the pre-answer motion (the "Motion") of defendant Schaferoth Construction Company ("Schaferoth") requesting that this Court abstain from hearing this adversary proceeding or, alternatively, requesting the Court to dismiss the adversary proceeding or grant summary judgment against plaintiff, Larry E. Staats, Trustee (the "Trustee"). The Trustee opposes the Motion.

The Court has jurisdiction in this matter under 28 U.S.C. § 1334(b) and the General Order of Reference entered in this district. In Part IV(A) of this opinion and order, the Court determines that this is a non-core proceeding which is related to the debtor's Chapter 7 case. In Part IV(B) of this opinion and order, the Court denies Schaferoth's request that this Court abstain from exercising the jurisdiction it possesses in this proceeding. In Part IV(C), the Court denies Schaferoth's alternative requests for dismissal of the adversary proceeding or summary judgment against the Trustee.

II. FACTS

The facts relevant to the resolution of the issues raised by the Motion are as follows.

On October 28, 1986, an order for relief was entered under Chapter 7 of the Bankruptcy Code in the case of Statewide Pools, Inc. On September 11, 1989, Larry E. Staats, the duly-appointed trustee in the Chapter 7 case, through special counsel, instituted this adversary proceeding seeking recovery of monies allegedly owed the debtor by the various defendants for materials and services provided prepetition. As to Schaferoth, the complaint prays for judgment in the amount of $25,974.72. Schaferoth has not yet filed an answer, but has filed a proof of claim in the amount of $21,000, plus interest and costs.

In its Motion, Schaferoth alleges that the adversary proceeding is non-core. Schaferoth further alleges that this proceeding is a simple state law contract action, the resolution of which, as it pertains to Schaferoth, is governed by Colorado substantive law.

The Trustee, on the other hand, argues that the action is a core proceeding. Further, the Trustee argues that Ohio substantive law governs resolution of the proceeding.

The parties dispute the governing law for one simple reason: if, as Schaferoth contends, Colorado law applies, the Trustee's action is apparently time barred by the running of the applicable three-year statute of limitations for contract actions. Colo. Rev.Stat. § 13-80-101(1)(a). If, as the Trustee contends, Ohio's fifteen-year statute of limitations for contract actions applies, the action was timely filed. See, Ohio Revised Code § 2305.06.

III. ISSUES

The issues to be addressed by the Court are three-fold:

1. Is this action a core or non-core proceeding?
2. Should the Court abstain from hearing the action under 28 U.S.C. § 1334(c)(1)?
3. Should the Court dismiss this adversary proceeding or grant summary judgment in favor of Schaferoth and against the Trustee?

IV. LEGAL DISCUSSION

A. Core/Non-Core Determination

Neither Schaferoth nor the Trustee has explicitly moved the Court to determine whether this proceeding is core or non-core within the meaning of 28 U.S.C. § 157. However, the parties have devoted significant portions of their pleadings to the issue. Since classification of the proceeding is pertinent to Schaferoth's request for abstention, the Court will first make this determination. 28 U.S.C. § 157(b)(3).

Numerous courts and commentators have fully reviewed the historical background, as well as the legal importance, of the core/non-core dichotomy in the wake of the Supreme Court's ruling in Northern Pipeline Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) and the subsequent enactment by Congress of the Bankruptcy Amendments and Federal Judgeship Act of 1984 ("BAFJA"). See, e.g., United Sec. & Communications, Inc. v. Rite Aid Corp. (In re United Sec. & Communications, Inc.), 93 B.R. 945 (Bankr.S.D.Ohio 1988); Commercial Heat Treating of Dayton, Inc. v. Atlas Indus. (Matter of Commercial Heat Treating of Dayton, Inc.), 80 B.R. 880 (Bankr.S. D.Ohio 1987); Countryman, The Bankruptcy Judges: Jurisdiction by Neglect, 92 Com.L.J. 1 1987; King, Jurisdiction and Procedure Under the Bankruptcy Amendments of 1984, 38 Vand.L.Rev. 675 (1985); Taggart, The New Bankruptcy Court System, 59 Am.Bankr.L.J. 231 (1985).

In Sonnyco Coal, Inc. v. Bartley (In re Sonnyco Coal, Inc.), 89 B.R. 658 (Bankr.S. D.Ohio 1988), rev'd in part, No. C2-88-417 (S.D. Ohio June 28, 1990), this Court undertook to explain the nature and consequences of the dichotomy as follows:

The Bankruptcy Amendments and Federal Judgeship Act of 1984 restructured the grant of bankruptcy jurisdiction and made the bankruptcy court a unit of the district court. 28 U.S.C. § 151. Under the current statute, absent consent of the parties, only district judges, after review of proposed findings of fact and conclusions of law recommended by bankruptcy judges, may enter final orders in proceedings merely related to cases under title 11 ("non-core proceedings"). 28 U.S.C. § 157(c). Bankruptcy judges, however, retain power to hear and determine all cases under Title 11 and to enter final orders in proceedings arising in a case under Title 11 or arising under Title 11 ("core proceedings"). Those procedures are codified at 28 U.S.C. §§ 151-158.
The initial determination whether a proceeding is core or non-core clearly by statute is the responsibility of the bankruptcy judge. 28 U.S.C. § 157(b)(3). Because a finding that a proceeding is noncore is not appealable immediately as a final order, this Court finds that the resolution of that issue is constitutionally within its power as a judicial officer of a unit of the district court.
The determination whether a proceeding is core or non-core, however, involves more than a choice between two options. If a proceeding is determined to be core, that conclusion ends the analysis and the bankruptcy judge not only may hear the matter, but also may enter whatever final orders are required. If it is determined that a proceeding is not a core proceeding, however, further determination must be made as to whether the proceeding is sufficiently related to the bankruptcy case to come within the bankruptcy subject matter jurisdiction of the district court. If the proceeding is not so related, although the district court might have an independent basis for jurisdiction, the bankruptcy court would have no subject matter jurisdiction over the proceeding as its jurisdiction by reference extends at its most remote nexus only to proceedings which are related to a bankruptcy case. 28 U.S.C. § 157(a). If the proceeding is not core, but is related to a bankruptcy case and, therefore is properly a non-core proceeding, the bankruptcy court has subject matter jurisdiction by reference and may hear the action, but absent consent of the parties, must submit proposed findings of fact and conclusions of law to a district judge for entry after de novo review of those matters objected to by the parties. 28 U.S.C. § 157(c)(1).

89 B.R. at 663.

In lieu of defining "core" proceeding, Congress chose to provide only a non-exclusive list of proceedings which are core. See, 28 U.S.C. § 157(b)(2). Because of such limited congressional guidance, and perhaps due to the constitutional considerations inherent in these determinations, the courts have found the core/non-core dichotomy to be a slippery concept.

In contending that his action to collect a prepetition account receivable is core, the Trustee relies on Baldwin-United Corp. v. Thompson (Matter of Baldwin-United Corp.), 48 B.R. 49 (Bankr.S.D.Ohio 1985). In Baldwin-United, Judge Newsome held that such an action falls within the meaning of 28 U.S.C. § 157(b)(2)(E) (orders to turn over property of the estate) and 28 U.S.C. § 157(b)(2)(O) (other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims). Upon its own review, the Court has found additional cases which hold that actions to collect accounts receivable or similar actions are "core."1 These cases, in various combinations, find support for their decisions in the language of the catchall provisions of 28 U.S.C. § 157(b)(2)(A) (matters concerning administration of the estate) and 28 U.S.C. § 157(b)(2)(O) and/or the provisions of 28 U.S.C. § 157(b)(2)(E) regarding turnover proceedings.

In contrast to the above cases, a majority of courts have more recently held that accounts receivable or similar actions are not core proceedings, but merely proceedings...

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