In re Terracor

• Decision Date: 27 April 1988
• Docket Number: No. 88MIS-63G.,No. 81-00599 to 81-00602 and 81-00689 to 81-00696,81-00599 to 81-00602 and 81-00689 to 81-00696,88MIS-63G.
• Parties: In re TERRACOR, Terra Marketing of Nevada, Inc., Terracor Utah, the Woods Marketing, Inc., Bloomington Realty Corp., Terracor Realty Company, Terra Building Systems, Inc., Environmental Design Group, Terra Construction, Inc., Terra Engineering, Inc., and Salt Lake Mortgage Company, Debtors.
• Court: U.S. District Court — District of Utah

86 B.R. 671 (1988)

In re TERRACOR, Terra Marketing of Nevada, Inc., Terracor Utah, the Woods Marketing, Inc., Bloomington Realty Corp., Terracor Realty Company, Terra Building Systems, Inc., Environmental Design Group, Terra Construction, Inc., Terra Engineering, Inc., and Salt Lake Mortgage Company, Debtors.

Nos. 81-00599 to 81-00602 and 81-00689 to 81-00696, No. 88MIS-63G.

United States District Court, D. Utah, C.D.

April 27, 1988.

Ronald W. Goss, Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah, for Pinery Homeowners' Ass'n, Inc.

David E. Leta and Bruce Wycoff, Hansen & Anderson, Salt Lake City, Utah, for Senior Corp.

ORDER OF ABSTENTION

J. THOMAS GREENE, District Judge.

THIS MATTER came on for hearing before the undersigned United States District Judge on April 18, 1988, to consider the objections of Senior Corp. to the Report and Recommendation for Abstention Pursuant to 28 U.S.C. § 1334(c)(1) and Bankruptcy Rule 5011(b) submitted by the Honorable Judith A. Boulden, United States Bankruptcy Judge. Senior Corp. requests that the Court reject the bankruptcy judge's recommendation for abstention and withdraw the reference of this contested matter pursuant to 28 U.S.C. § 157(d). The Court has reviewed the Report and Recommendation and does not believe that withdrawal of the reference is justified in this proceeding. The Court finds that discretionary abstention is proper under 28 U.S.C. § 1334(c)(1) for the reasons set forth by Judge Boulden. Accordingly, it is hereby

ORDERED, that this Court and the bankruptcy court as a unit hereof shall abstain from hearing or determining this matter; and it is further

ORDERED, that the motion of Senior Corp. to withdraw the reference to the bankruptcy court be, and the same hereby is, DENIED.

REPORT AND RECOMMENDATION FOR ABSTENTION PURSUANT TO 28 U.S.C. § 1334(c)(1) AND BANKRUPTCY RULE 5011(b)

This court's recommendation to abstain pursuant to 28 U.S.C. § 1334(c)(1) and Bankruptcy Rule 5011(b) from a determination of matters raised by the motions filed herein, clarifies the extent to which this court should exercise jurisdiction retained by it under a five year old confirmed Chapter 11 plan of reorganization. The issue arises from The Pinery Homeowners Association, Inc.'s (PHA) Motion to Order Performance of Reorganized Debtor's Chapter 11 Plan and Senior Corp.'s (Senior) responsive Motion for Declaratory Judgment and for Affirmative Relief and related motions. This determination is necessarily fact specific and therefore requires a brief recitation of the circumstances giving rise to the pending motions.

BACKGROUND

The filing on February 24 and 26, 1981, of Terracor and various of its subsidiaries¹ (Terracor) under Chapter 11 of the Bankruptcy Code brought under the jurisdiction of this court one of the state's largest real estate developers. Terracor was involved in the development of planned residential communities in four states². Senior, a creditor claiming a security interest in virtually all of the assets of Terracor, sued Terracor and its subsidiaries in various jurisdictions in which Terracor's assets were located, thus precipitating the filing of the Chapter 11 case. Terracor's schedules listed more than 18,000 creditors. The claim filed by Senior alone exceeded $118,000,000. Protracted and complex negotiations resulted in a case file measured in yards rather than inches and a docket sheet 24 pages long, but on November 4, 1982, Terracor was successful in confirming its 123 page Second Amended Consolidated Chapter 11 Plan of Debtors (Plan).

A portion of the plan related to a planned residential community located in Douglas County, Colorado known as The Pinery. The Plan provided that upon confirmation Terracor would transfer all of The Pinery property to Senior in return for cash advances and a reduction in Senior's claim by $6,300,000. Thereafter, Terracor would have no further interest in or responsibility for The Pinery. Terracor, in fact, transferred the property to Senior as required in the Plan. It is the court's understanding that Senior continues to develop The Pinery which currently consists of approximately 3,800 acres.

The Plan acknowledged the following entities in relation to The Pinery development: 1) The Pinery Property Protection Committee³ 2) The Pinery Metropolitan District⁴ to be created by December 31, 1985, and 3) The Pinery Homeowners Association, Inc. (PHA)⁵. The Plan incorporated by exhibit a separate contract entitled The Pinery Assumption Agreement (Agreement), dated October 8, 1982, which complimented and clarified the Plan, and was executed by Terracor, The Pinery Property Protection Committee, PHA, and Senior. The Agreement dictated that a portion of The Pinery property, consisting of the common area, be transferred from Terracor to Senior to be held by Senior and eventually transferred to The Pinery Metropolitan District if formed by December 31, 1985, or in the alternative, to PHA if The Pinery Metropolitan District was not formed. In fact, the Pinery Metropolitan District never was formed. The common area property consisted, in part, of certain open space of approximately 15.4 acres to be used as an equestrian center or for other noncommercial, nonresidential community recreational purposes.⁶ The Agreement provided that any disputes were to be resolved pursuant to the laws of the State of Colorado.⁷ The Agreement also indicated that upon confirmation of the Plan, letters of credit were to be given to The Pinery Property Protection Committee and PHA to be used to pay legal and professional fees through December 31, 1985, to fund certain improvements at The Pinery and to fund creation of The Pinery Metropolitan District in compliance with the laws of the State of Colorado.⁸

CURRENT STATUS OF THE CASE

Subsequent to the confirmation of the Plan, the court's docket sheet indicates the case lay dormant from September 8, 1983, until almost 5 years after confirmation when, on September 25, 1987, PHA filed its Motion to Order Performance of Reorganized Debtor's Chapter 11 Plan. PHA's motion requested that the court order Senior to convey the common areas to PHA as set forth in the Plan and Agreement. Senior responded to PHA's Motion⁹ and also filed a Motion to Dismiss for lack of subject matter jurisdiction. Senior soon thereafter withdrew its Motion to Dismiss and brought on for hearing in lieu thereof, a Motion to Amend Response objecting to the subject matter jurisdiction of this court. Both parties requested pro hac vice admission of local Colorado counsel, which was granted.

On February 3, 1988, this court heard various procedural motions¹⁰ and, upon request, established an expedited discovery schedule. As evidenced by various discovery motions brought before this court, the parties are continuing extensive discovery both in and out of Colorado. Trial of PHA's motion and Senior's response is now set for April 26 through April 28, 1988. In oral argument on Senior's Motion to Amend Response, the parties raised this court's obligation under 28 U.S.C. § 157(b)(3) to determine whether or not this matter is a core proceeding. Senior objects to this court's hearing the matter as a core matter or entry of any order as set forth in 28 U.S.C. § 157(c)(2).¹¹ These issues were taken under advisement, resulting in this Report and Recommendation to the district court filed in accordance with Bankruptcy Rule 5011 for disposition of these issues pursuant to 28 U.S.C. § 1334(c)(1).

ANALYSIS

This court has determined that in the interest of comity with state courts and respect for state law, it should abstain from hearing these matters involving disputes that can be better litigated in Colorado. This decision is made based upon the specific facts of this case. These matters are merely related to the main bankruptcy case. The debtor's plan was confirmed 5 years ago and has been largely completed. The interpretation of the Agreement in question must be according to Colorado law. In addition, the Agreement was an attachment to the Plan and is a self contained document relating to the Colorado real property transferred from Terracor at confirmation. As an attachment, the Agreement did concern the Plan, but now the resolution of these disputes will not affect the reorganized debtor. This is only a dispute between Senior and PHA. Senior has, in fact, questioned this court's subject matter jurisdiction to hear these disputes. Accordingly, it is appropriate to first consider the court's jurisdiction in this analysis.

A. SUBJECT MATTER JURISDICTION:

As noted in In re Fortner Oilfield Services, Inc., 49 B.R. 9, 10 (Bankr.N.D. Tex.1984), the jurisdiction of the bankruptcy court continues until the Chapter 11 case is closed. "The courts which have addressed the issue uniformly note that jurisdiction extends over postconfirmation proceedings regarding rights arising under the confirmed plan." Id. (citations omitted). Subject matter jurisdiction is specifically conferred on the bankruptcy court to resolve post-confirmation matters. See 11 U.S.C. § 1142. Section 1142 provides in part:

(b) The court may direct the debtor and any other necessary party to execute or deliver or to join in the execution or delivery of any instrument required to effect a transfer of property dealt with by a confirmed plan, and to perform any other act, including the satisfaction of any lien, that is necessary for the consummation of the plan.

Senior argues that this court does not have subject matter jurisdiction because the case is consummated. This court is not persuaded that Senior's interpretation of the language of the statute is correct.¹² The clear intent of section 1142(b) is for the court to retain its jurisdiction to assure that the terms and provisions of the confirmed Chapter 11 plan are carried out until the plan is completed and a final decree is entered closing the case. See 11 U.S.C. § 350(a) and Bankruptcy Rule 3022.

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