In re THB Corp.

• Decision Date: 22 December 1988
• Docket Number: Adv. No. 88-4064,Bankruptcy No. 88-40034-JFQ,88-4065.
• Citation: 94 BR 797
• Court: U.S. Bankruptcy Court — District of Massachusetts
• Parties: In re THB CORPORATION, Debtor. THB CORPORATION, Plaintiff, v. ESSEX BUILDERS COMPANY, INC., Defendant. THB CORPORATION, Plaintiff, v. WELCH GROUP, INC., Defendant.

94 B.R. 797 (1988)

In re THB CORPORATION, Debtor.

THB CORPORATION, Plaintiff, v. ESSEX BUILDERS COMPANY, INC., Defendant.

THB CORPORATION, Plaintiff, v. WELCH GROUP, INC., Defendant.

Bankruptcy Nos. 88-40034-JFQ, Adv. Nos. 88-4064, 88-4065.

United States Bankruptcy Court, D. Massachusetts.

December 22, 1988.

Steven Kressler, Kressler, Kressler & Pitnof, Worcester, Mass., for debtor.

Jay Theise, Widett, Slater & Goldman, Worcester, Mass., for Bank of New England/Worcester.

Leonard Krulewich, Silverman & Kudisch, Boston, Mass., for F.W. Webb.

OPINION

JAMES F. QUEENAN, Jr., Bankruptcy Judge.

These two adversary proceedings present perhaps the most difficult questions which remain in the wake of the Bankruptcy Amendments and Federal Judgeship Act of 1984, P.L. 98-353 ("BAFJA"), the Congressional solution to the jurisdictional impasse created by Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). The Debtor, a plumbing and heating contractor, brings suit to collect receivables which, if due at all, were earned prior to the filing of this Chapter 11 case. Both defendants have filed answers denying the debt, and one has counterclaimed for damages. Neither has filed a proof of claim. Having claimed trial by jury, the defendants move for dismissal of the actions on the ground that the Court is not empowered to conduct a jury trial. In the interest of efficient administration of this Chapter 11 case, we deny the motions and retain the proceedings for pretrial rulings and eventual transfer to the district court for jury trial. We hold that these are non-core proceedings related to a case under title 11 and that the defendants are entitled to trial by jury. Eliding the question of whether the Court is empowered to conduct a jury trial of such a proceeding, we conclude that the Court may at most preside over a trial resulting in a proposed verdict which is subject to review and possible retrial in the district court. The potential of a second jury trial after review makes such a procedure unfair to the parties and wasteful of judicial resources to an even greater degree than the bench trial procedure required by 28 U.S.C. § 157(c)(1).

I. NON-CORE, RELATED NATURE OF THESE ADVERSARY PROCEEDINGS

There is a conflict in the cases on whether actions to collect pre-filing accounts receivable are core proceedings or non-core proceedings related to a case under title 11, within the meaning of 28 U.S.C. § 157. In In re Windsor Communications Group, Inc., 67 B.R. 692 (Bankr.E.D.Pa.1986) the court held that a "garden variety" accounts receivable collection case was a core proceeding under any one of three subsections of the statute: § 157(b)(2)(A) ("matters concerning the administration of the estate"), § 157(2)(b)(E) ("orders to turn over property of the estate") or § 157(2)(b)(O) ("other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor . . . relationship. . . ."). Id. at 693, 695. The court believed that an action to collect a receivable earned in the ordinary course of business is different from other actions in two respects: the substantial nexus that exists between collection of receivables and the bankruptcy estate and the simplicity of state law issues generally raised. 67 B.R. at 695-96. The court was also influenced by practical considerations flowing from the volume of receivable collection proceedings in many bankruptcy cases and the desirability of expeditiously administering the estate. 67 B.R. at 693-99. It expressed particular concern for needlessly taxing the district court with proposed findings and rulings in the many proceedings which are uncontested. Id. at 699. See also In re Franklin Computer Corp, 50 B.R. 620 (Bankr.E.D.Pa.1985). Other courts have come to the same result by stressing that the phrase "turn over" used in § 157(b)(2)(E) also appears in the title to 11 U.S.C. § 542 whose subsection (b) requires payment to the estate of debts that are "matured, payable upon demand, or payable on order." See Baldwin-United Corp. v. Thompson (In re Baldwin-United Corp.), 48 B.R. 49 (Bankr.S.D. Ohio 1985). Cf. B-U Acquisition Group, Inc. v. Utica Mutual Ins. Co. (In re Baldwin-United Corp.), 52 B.R. 541 (Bankr.S.D. Ohio 1985) (insurance claim is not a core proceeding).

We are troubled by the practical difficulties which flow from labeling an ordinary accounts receivable case a non-core proceeding, difficulties which, as we shall see, are increased by a jury trial claim. Collection of accounts receivable is an integral part of many bankruptcy cases; the collection process may be analogized to a core proceeding authorizing the sale of estate property in that both have to do with liquidation of the estate for the payment of creditors. Decisions such as Mohawk Industr., Inc. v. Robinson Industr., Inc., 46 B.R. 464 (D.Mass.1985) and indeed Marathon itself are somewhat different in that they deal with claims for breach of contract or warranty rather than the collection of receivables earned in ordinary course. We are mindful that the concept of a core proceeding is to be "interpreted broadly, close to or congruent with constitutional limits." Arnold Print Works, Inc. v. Apkin (In re Arnold Print Works, Inc.), 815 F.2d 165 (1st Cir.1987) (holding suit on a receivable earned post-filing is a core proceeding). And of course § 157 makes it clear that its list of core proceedings is non-exclusive, by stating that core proceedings "include, but are not limited to" the specific proceedings set forth.

We nevertheless hold that the adversary proceedings before us are non-core proceedings which are related to a case under title 11, within the meaning of § 157(c)(1). We agree with much of the reasoning of the many decisions holding that receivable cases are not core proceedings. See, e.g., George Woloch Co., Inc. v. Longview Capital Plastic Pipe, Inc. (In re George Woloch Co., Inc.), 49 B.R. 68 (E.D. Pa.1985); Earle Industr. Inc. v. Bond Gen. Contracting, Inc. (In re Earle Industr., Inc.), 71 B.R. 919 (E.D.Pa.1987); Century Brass Products, Inc. v. Millard Metals Service Center, Inc. (In re Century Brass Products, Inc.), 58 B.R. 838 (Bankr. D.Conn.1986); 1 Collier on Bankruptcy, § 3.012b(iv) (15th ed. 1988); Greenfield, The National Conference's Position on the Court System Under the Bankruptcy Amendments and Federal Judgeship Act of 1984, and Suggestions for Rule Promulgation, 23 Harv. J. on Legis. 357, 365 (1986). Based as they are upon events occurring prior to the Chapter 11 filing, the present proceedings cannot be regarded as interwoven with a recognized administrative action. They are different, for example, from a counterclaim to a claim filed in bankruptcy, which Congress has determined is a core proceeding. See § 157(b)(2)(C). The analogy to the sale of estate property is weak. Both of the present actions are contested, and indeed one defendant has counterclaimed. They therefore involve breach of contract issues indistinguishable from those involved in Marathon. Nor are they aided by the somewhat independent course charted by the Supreme Court since Marathon. See Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 106 S.Ct. 3245 92 L.Ed.2d 675 (1986) (adjudication of state law counterclaims before Commodity Futures Trading Commission upheld by reason of control retained by district court, over dissent of Justice Brennan, the author of the plurality opinion in Marathon); Thomas v. Union Carbide Agric. Products Co., 473 U.S. 568, 105 S.Ct. 3325, 87 L.Ed. 2d 409 (1985) (binding arbitration of disputes among participants in federal pesticide registration program upheld despite limited judicial review and absence of compelling public rights). It may be that an uncontested collection case should be viewed as a core proceeding, but that is not before us. It also may be that a clear decision of Congress to make all receivable cases core proceedings because of their close nexus to liquidation of the estate would have been constitutionally permissible; one of the factors to be considered is the concerns which motivated Congress to depart from the requirements of Article III. See Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 106 S.Ct. 3245, 3258, 92 L.Ed.2d 675 (1986). We are here confronted with only general statutory language and no expression of Congressional concern regarding this type of adversary proceeding.

The Debtor's attempt to squeeze the claim against Essex Builders Company, Inc. into § 157(b)(2)(C) seeks to place a square peg into a round hole. That provision includes as a core proceeding "counterclaims by the estate against persons filing claims against the estate." Essex filed its counterclaim to the Debtor's complaint, not the reverse; Essex has filed no independent claim against the estate.

Not content with a determination that these proceedings are non-core, the defendant Welch Group, Inc. argues that its proceeding is not "related" to a case under title 11. This would mean that the district court has no jurisdiction of the proceeding under 28 U.S.C. § 1334(b) and the proceeding is therefore not included in the July 12, 1984 order of the District Court of Massachusetts referring all related proceedings to this Court. Section 1334(b), enacted in 1984 by the BAFJ, has little legislative history; its language originally appeared in 28 U.S.C. § 1471(b) which was enacted as part of the Bankruptcy Reform Act of 1978. The legislative history of § 1471(b) indicates an intent on the part of Congress to make a broad jurisdictional grant. Kelley v. Nodine Mortgage Co. (In re Salem Mortgage Co.), 783 F.2d 626, 633 (6th Cir. 1986). Collier takes the position that related proceedings include all causes of action owned by the debtor that become property of the estate. See 1 Collier on Bankruptcy, § 3.011civ. The decisions favor including among related proceedings all causes of action...