In re Windsor Communications Group, Bankruptcy No. 82-03714K.
| Decision Date | 04 December 1986 |
| Docket Number | Bankruptcy No. 82-03714K. |
| Citation | 67 BR 692 |
| Parties | In re WINDSOR COMMUNICATIONS GROUP, INC., t/a Norcross-Rust Craft Greeting Card Publishers, Debtor. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
Edward C. Toole, Jr., Mary F. Walrath, Douglas J. Smillie, Andrew A. Giaccia, Philadelphia, Pa., for debtor/Windsor Communications.
William Schaps, Philadelphia, Pa., Trustee — Pinto Trucking.
Stephen Raslavich, Philadelphia, Pa., for Pinto Trucking.
On September 2, 1986, the second day on the bench, we were presented with seven (7) adversarial proceedings in which the Debtor in the above-entitled case was seeking to collect various accounts receivable. We were later advised that these cases were the tail-end of a series of more than seventeen hundred (1,700) such adversarial proceedings instituted by this Debtor alone since the bankruptcy filing in this case as an involuntary Chapter 7 case on August 5, 1982, and its conversion to Chapter 11 on August 25, 1982.
The following day, September 3, 1986, among the matters before us were twenty (20) accounts receivable adversarial proceedings filed by the Counsel for the Trustee in the case of Pinto Trucking Service, Inc., Bankruptcy No. 85-04573K.
The number of accounts receivable proceedings before us has continued to flow since these beginnings. In the majority of these cases, the Defendants failed to respond, and the Debtor-Plaintiffs have sought default judgments. Nevertheless, we were unable to decide exactly how to handle these matters, because we were aware that the pertinent provisions of the Bankruptcy Amendments and Federal Judgeship Act of 1984, P.L. 98-353 (BAFJA), codified at 28 U.S.C. § 157, were variously interpreted by not only this Court, but by courts across the country, in classifying these apparently garden-variety accounts receivable proceedings as either "core" or "noncore" proceedings. The Code dictates that a determination as to whether any proceedings before it are core or noncore is to be made by a bankruptcy court "on the judge's own motion or on timely motion of a party," 28 U.S.C. § 157(b)(3), presumably at an early stage in the proceedings. Thus, we are constrained to reach a conclusion on the issue forthwith.
The significance of this determination does not affect the issue of whether we, as a bankruptcy court, can hear the case. Rather, at issue is whether we can "hear and determine" the matter, per 11 U.S.C. § 157(b)(1), or are required to hear it and then "submit proposed findings of fact and conclusions of law to the district court," which has exclusive power to enter a final order in a noncore matter. 28 U.S.C. § 157(c)(1). The core-noncore determination was, then, critical in arriving at the procedure to be utilized in deciding these matters.
We must confess, moreover, that our view as to the proper procedure was colored by our observation that a large percentage of these cases result in defaults, and that not only the labor of producing findings of fact and conclusions of law, but the seemingly empty formality of submitting an uncontested matter to the district court for a final order struck us as the height of wastefulness of the time of both our Court and the District Court. Thus, our initial reaction was to reach a determination that these matters were core proceedings if such a result could possibly be squared with BAFJA.
In order to assist our determination, we asked Counsel for the Debtor in this case and Counsel for the Trustee in Pinto Trucking to submit Briefs on this issue. Somewhat to our surprise and chagrin, Counsel for the Trustee for Pinto Trucking ultimately declined our invitation, stating that he believed that such proceedings were noncore. Windsor's Counsel submitted a Brief concluding that, while Counsel believed that actions brought exclusively to recover tangible property and proceedings in which actions to recover tangible property were mixed with proceedings to collect accounts receivable were core proceedings, garden-variety accounts receivable proceedings were noncore.
These views of creditors' attorneys have caused us to rethink our initial reaction. Nevertheless, for perhaps more sophisticated reasons than our initial, purely pragmatic considerations, or, perhaps more accurately stated, because none of the more sophisticated arguments outweigh the accurate common sense of our initial reactions, we continue to believe that such garden-variety accounts receivable actions can and should be determined to be core proceedings. We shall therefore so treat all such matters before us which have not yet proceeded to final judgment as core proceedings, and shall proceed to so "determine" such cases, per 28 U.S.C. § 157(b)(3), in the future.
The underlying reason for the divergence of results in this area is the loose draftsmanship of 28 U.S.C. § 157(b)(2), which, in defining what is and is not a core proceeding, states as follows:
The difficulty with this list is that it is illustrative rather than exclusive, and several of the categories, particularly §§ 157(b)(2)(A) and (O), are extremely broadly stated.
Varying results on the determination of account receivable actions as core or noncore were reached by different judges of this Court in the space of a few brief months in 1985. In several of the Windsor proceedings, e.g., Windsor Communications Group, Inc. v. Wal-Mart Stores, Adversary No. 82-2465, Slip Op. at 2 (Bankr. E.D.Pa. Opinion and Report filed April 18, 1985); Windsor Communications Group, Inc. v. Five Towns Stationery, Inc., 53 B.R. 293, 296 (Bankr.E.D.Pa.1985); and Windsor Communications Group, Inc. v. Grant, Adversary No. 84-0782, Slip Op. at 14 (Bankr.E.D.Pa. Report to District Judge Pollak, filed March 1, 1985), the Honorable William A. King, Jr. consistently held that such proceedings were noncore.
Apparently supporting this conclusion is an Opinion by Chief Judge John P. Fullam of our District Court in an appeal in a case of the Honorable Thomas M. Twardowski of this Court in In re George Woloch, Inc., 49 B.R. 68 (E.D.Pa.1985). That case arrived in the district court in an unusual case procedural posture, i.e., in an appeal from a denial of a Motion to Dismiss, the purpose and intent of which Chief Judge Fullam indicated was unascertainable. Id. at 70 n. 1. Nevertheless, presuming that the appellants desired a jury trial, which they demanded and which the Chief Judge believed could not be provided by the bankruptcy court, Chief Judge Fullam withdrew the reference of the matter to the bankruptcy court and stated: "The debtor seeks to characterize this dispute as a `core' proceeding, but I conclude that it is plainly a `related' proceeding." 49 B.R. at 70.
However, several weeks later, Emil F. Goldhaber, Chief Judge of this Court, admittedly unaware of the Woloch decision, rendered a directly contrary Opinion in In re Franklin Computer Corp., 50 B.R. 620 (Bankr.E.D.Pa.1985). In contrast to Judge Fullam's brief treatment of the issue, Judge Goldhaber's Opinion is among the most lengthy and reflective on the subject, and Judge Goldhaber himself adhered to this decision in subsequent decisions. E.g., In re Alloy Metal Wire Works, 52 B.R. 39, 40 (Bankr.E.D.Pa.1985). In his ruling, Judge Goldhaber opined that an accounts receivable proceeding could be classified as core under either 28 U.S.C. §§ 157(b)(2)(A), (E), or (O).
In our determination, we shall attempt to answer four (4) different questions which have arisen in our study of this issue, as follows:
1. May an accounts receivable proceeding be reasonably said to fall within any of the categories of 28 U.S.C. § 157(b)(2)?
2. Does the decision of the Supreme Court in Northern Pipeline Construction Co. v. Marathon Pipeline Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), require, from a constitutional vantage point, that such proceedings be determined to be noncore?
3. Irrespective of this Court's independent analysis of this issue, is it bound to follow the Woloch decision, since it was rendered by the district court?
4. What are the practical consequences of the decision?
There appears to be no doubt that, at least in one sense, an accounts receivable proceeding concerns the administration of the collecting debtor's estate, and effects the liquidation of the assets of the debtor's estate, per 28 U.S.C. § 157(b...
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