Matter of Commercial Heat Treating of Dayton, Inc.
| Decision Date | 09 December 1987 |
| Docket Number | Adv. No. 3-85-0184.,Bankruptcy No. 3-83-02561 |
| Citation | 80 BR 880 |
| Parties | In the Matter of COMMERCIAL HEAT TREATING OF DAYTON, INC., Debtor. COMMERCIAL HEAT TREATING OF DAYTON, INC., Plaintiff, v. ATLAS INDUSTRIES, INC., Defendant. |
| Court | U.S. Bankruptcy Court — Southern District of Ohio |
Thomas B. Talbot, Jr., Dayton, Ohio, for plaintiff.
Louis J. Hattner, Toledo, Ohio, for defendant.
DECISION ON ORDER DENYING DEFENDANT'S MOTION TO DISMISS
This adversary proceeding involving the collection of a prepetition account receivable presents significant issues of statutory interpretation concerning the amendments to Title 28 enacted in connection with the Bankruptcy Amendments and Federal Judgeship Act of 1984, Public Law 98-353, (BAFJA). Specifically, this proceeding raises issues concerning jurisdiction in bankruptcy cases and proceedings, this District's Standing Order referring bankruptcy cases and proceedings to the Bankruptcy Court and the procedures to be followed by Bankruptcy Courts in determining referred cases and proceedings.
The statutes granting jurisdiction (28 U.S.C. § 1334) and governing jurisdictional procedure (28 U.S.C. § 157) in bankruptcy cases and proceedings are set forth in Title 28—Judiciary and Judicial Procedure, not Title 11—Bankruptcy. While it would appear unnecessary to make such an obvious point, adversary proceedings are often commenced in this court without compliance with the pleading requirements of Bankruptcy Rule 7008 concerning jurisdiction. Further, there are indications that this initial lack of compliance is being compounded by a failure to comply with the specific pleading requirements concerning core or non-core proceedings recently adopted in Rules 7008(a) and 7012(b)1. These concerns prompt the court to begin with such an explicit reference to Title 28—Judiciary And Judicial Procedure.
In order to understand the complexity of what may appear to be a simple issue—an attempt by the debtor in possession to collect a prepetition account receivable—a limited review of the United States Supreme Court's decision in Northern Pipeline Const. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982) and Congress' legislative response, BAFJA, is necessary.2
In Northern Pipeline, the United States Supreme Court, in a plurality opinion, held unconstitutional the congressional grant of jurisdiction which provided Id. at 54 n. 3, 102 S.Ct. at 2862 n. 3. The plurality opinion reasoned that the separation of power's doctrine was violated because the legislation attempted to confer the complete judicial power of the United States contained in Article III of the Constitution upon judges who did not possess the complete protections of life tenure and irreducible salary contained in that same Article.
While it is clear that Northern Pipeline discussed a number of other issues, including congressionally created exceptions to Article III, public/private rights adjudications and the status of issues related entirely to state law (Id. at 64-91, 102 S.Ct. at 2867-82), it is also clear from subsequent Supreme Court decisions that in Northern Pipeline the Court was "Unable to agree on the precise scope and nature of Article III's limitations." Thomas v. Union Carbide Agr. Products Co., 473 U.S. 568, 584, 105 S.Ct. 3325, 3334-35, 87 L.Ed.2d 409 (1985):
The Court\'s holding in that case 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. (Citation omitted) Id.
The most recent Supreme Court decision on this subject, Commodity Futures Trading Com'n. v. Schor, 478 U.S. 833, 106 S.Ct. 3245, 92 L.Ed.2d 675 (1986), reaffirms the above statement as the holding in Northern Pipeline.
Northern Pipeline also concluded that the grant of jurisdiction to the bankruptcy court could not be severed from the remainder of the then existing bankruptcy legislation. Although the Supreme Court stayed the mandate of its decision in Northern Pipeline so that Congress could have time to enact revised bankruptcy legislation, the final extension of the stay expired before Congress acted.
The Judicial Conference of the United States, prepared for the possibility that Congress might not act before the stay expired, had recommended a proposed emergency rule (the Interim Rule), which, with minor modifications, had been adopted in all the circuits. This Interim Rule became, to a very great extent, the model for Congress' revised bankruptcy legislation, BAFJA. As a result of the significant identity between the Interim Rule and BAFJA, decisions expressed by circuit courts concerning the Interim Rule have precedential value in decisions concerning BAFJA. (A copy of the Interim Rule as it was adopted in this circuit may be found in the Appendix to White Motor Corp. v. Citibank, N.A., 704 F.2d 254, 265 (6th Cir. 1983).)
The congressional response to the constitutional infirmity announced in Northern Pipeline is found in two sections of Title 28: § 1334—Bankruptcy cases and proceedings and § 157—Procedures (see Appendix).
As finally enacted by Congress, BAFJA provides that the district courts shall have original and exclusive jurisdiction of all cases under title 11 (§ 1334(a)) and original, but not exclusive jurisdiction of all civil proceedings arising under, arising in or related to cases under title 11 (§ 1334(b)).
The district court may abstain from hearing a particular proceeding (§ 1334(c)(1)) and, in certain circumstances, shall abstain from hearing a particular proceeding (§ 1334(c)(2)).
The district court may, but is not required to, refer any or all bankruptcy cases and any and all proceedings under title 11 to the bankruptcy judge(s) for the district (§ 157(a)). Such an order of reference has been entered in this district.3 In certain circumstances, the district court is required to withdraw a particular proceeding in a bankruptcy case; and, the district court retains the authority to withdraw any case or proceeding previously referred to the bankruptcy judge (§ 157(d)).
After the case has been referred to the bankruptcy judge, upon motion of a party, or upon the court's own motion (§ 157(b)(3)), a determination is made that a particular proceeding is either a core proceeding or a non-core proceeding (§ 157(b)(2)). This determination establishes the manner in which the bankruptcy judge's decision will be expressed. In core matters, the bankruptcy judge's decision is expressed in a final determination subject only to ordinary appellate review (§ 157(b)(1)). In non-core matters, the bankruptcy judge's decision is expressed in proposed findings of fact and conclusions of law which are submitted to the district court for final entry after review of any appropriate objection (§ 157(c)(1)); however, in a non-core proceeding, if the parties consent to the bankruptcy judge entering a final order, the final order is then subject only to ordinary appellate review (§ 157(c)(2)).
Although constitutional issues continue to be implicated in the present jurisdictional scheme, and BAFJA has not been specifically examined by the United States Supreme Court, it is significant to recognize that, while circuit courts continue to acknowledge these constitutional concerns, there is no circuit court decision holding unconstitutional the present congressional enactments governing jurisdiction and jurisdictional procedures in bankruptcy cases and proceedings.
The pleadings demonstrate a simple set of facts in this adversary proceeding.
The plaintiff, a Chapter 11 debtor in possession, is presently liquidating all remaining assets, including an account receivable claim. Plaintiff's complaint (Doc. 1) alleges jurisdiction pursuant to 28 U.S.C. § 1334 and refers to 28 U.S.C. § 157, in each instance, without additional specification. Plaintiff alleges a contract with the defendant pursuant to which heat treating services and materials in the amount of $7,725.20 were provided to the defendant. The debt remains unpaid.
The defendant's answer (Doc. 5): denies the allegation pursuant to 28 U.S.C. 1334 and the reference to 28 U.S.C. § 157; admits a contract existed with the plaintiff for heat treating services and materials; denies the remainder of plaintiff's allegations; and asserts that the plaintiff fails to state a claim upon which relief can be granted.
The defendant filed a separate motion to dismiss and memorandum (Doc. 9), to which the plaintiff filed an opposing memorandum (Doc. 16). Neither party has filed any further pleadings or memoranda.
The plaintiff argues (Doc. 16) that a number of bankruptcy courts have held that the collection of prepetition accounts receivable (or similar contract claims) are within the jurisdiction of the bankruptcy court as core proceedings citing various combinations of § 157(b)(2)(A), (E) and (O): Baldwin-United Corp. v. Thompson, 48 B.R. 49 (Bankr. S.D.Ohio 1985), In re Perry, Adams, & Lewis Securities, 30 B.R. 845 (Bankr.W.D. Mo.1983) and Cotton v. Shirah, 49 B.R. 926 (Bankr.N.D.Ga.1985). The plaintiff further argues that this court is the proper venue for this proceeding, which is in the nature of a turnover proceeding, and the presence of state law contract issues does not determine whether this is a core or non-core proceeding.
The defendant argues (Doc. 9) that this proceeding is not a turnover proceeding, but rather a breach of contract action, and as such, it is a non-core proceeding for which no...
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