Matter of United Tractors, Inc.

• Decision Date: 24 August 1981
• Docket Number: Bankruptcy No. 77-60285-B-SJ.
• Citation: 13 BR 239
• Parties: In the Matter of UNITED TRACTORS, INC., Bankrupt. Hugh A. MINER, Trustee in Bankruptcy, Plaintiff, v. SHARP FORD-MERCURY, INC., Defendant.
• Court: U.S. Bankruptcy Court — Western District of Missouri

13 B.R. 239 (1981)

In the Matter of UNITED TRACTORS, INC., Bankrupt.

Hugh A. MINER, Trustee in Bankruptcy, Plaintiff, v. SHARP FORD-MERCURY, INC., Defendant.

Bankruptcy No. 77-60285-B-SJ.

United States Bankruptcy Court, W.D. Missouri, St. Joseph Division.

August 6, 1981.

As Corrected August 24, 1981.

Hugh A. Miner, St. Joseph, Mo., for plaintiff.

Philip Eveloff, St. Joseph, Mo., for defendant.

FINAL JUDGMENT OF DISMISSAL OF PLAINTIFF'S COMPLAINT

DENNIS J. STEWART, Bankruptcy Judge.

I

The plaintiff trustee in bankruptcy filed his complaint in this adversary action to require the defendant to turn over to him the purchase price of a certain farm implement, to wit: a Sun Machine for analyzing motors. In the defendant's answer to the complaint, the defendant, inter alia, in requesting denial of the plaintiff's complaint, prayed to be "discharged."

The matter was expedited to a speedy trial by the court. Thereafter, before written findings of fact and conclusions of law could be filed, the United States Court of Appeals for the Eighth Circuit handed down its decision in In re Citizens Loan and Savings Co., 634 F.2d 1144 (8th Cir. Dec. 3, 1980). In that case, it appeared to this court, the court of appeals held that, in order for the bankruptcy court to exercise summary jurisdiction, the existence of the prerequisites for summary jurisdiction must be clearly and unmistakably present.¹

II

Therefore, on January 13, 1981, this court entered its order finding itself to be without summary jurisdiction and transferring this action to the civil docket of the district court pursuant to Rule 915(b) of the Rules of Bankruptcy Procedure because it appeared that there was independent federal jurisdiction of the plaintiff's complaint. In the order transferring the action to the civil docket of the district court, this court made the following pertinent findings and observations:

"After the hearing held herein, the United States Court of Appeals for the Eighth Circuit handed down its decision in In re Citizens Loan and Savings Company; Aylward v. Snooks, 634 F.2d 1144 (8th Circuit No. 80-1218 December 3, 1980), evidencing a hostility for the exercise of almost any form of summary jurisdiction. For, in that decision the court of appeals held that the court of bankruptcy might not issue a turnover order even in respect to monies which were taken from a bankrupt corporation admittedly under no claim of right when there were other monies in respect to which a claim of right could be made by the same defendant.

"When, in the wake of that holding, there is, as noted above, at least a colorable objection to the exercise of summary jurisdiction in the answer herein, it appears that this court dare not proceed further in this case. This is so even though the defendant appears to have later submitted this case to the bankruptcy court on the merits, for this only creates an ambiguity which is an unsatisfactory basis for jurisdiction in light of Aylward v. Snooks, supra.

"It appears that there is federal district court jurisdiction under § 67 of the Bankruptcy Act. Therefore, this case should be transferred to the civil docket of the district court pursuant to Rule 915(b) of the Rules of Bankruptcy Procedure.

"If the district court should elect to remand the case to the bankruptcy court, then this court can proceed with at least some minimal assurance that it has summary jurisdiction. But it is foolhardy in view of the recent decision of the court of appeals to proceed without that assurance."

III

The order thus entered finding the bankruptcy court to be without summary jurisdiction and transferring the action to the civil docket of the district court was in effect and substance a dismissal without prejudice from the bankruptcy court. As such, it was an appealable order. But no appeal was taken from the order.

This failure of either party to appeal from the order finding the bankruptcy court to be without summary jurisdiction now gives that finding res judicata effect.² For it is fundamental that the bankruptcy court has jurisdiction to determine its own jurisdiction and that, once that determination is made, it may be challenged only by direct appeal and not collaterally. "Supreme Court decisions have now made it clear that the bankruptcy court has power in the first instance to determine whether it has jurisdiction to proceed. Moreover, any determination concerning its own jurisdiction, even though erroneous, is res judicata in a subsequent collateral proceeding. These principles apply even if the question of jurisdiction was not raised; and they apply to orders of the referee as well as to those of the judge." 1 Collier on Bankruptcy ¶ 2.05, p. 150 (1978). Thus, the district court, after the time for appeal had run out, had no jurisdiction to re-determine the jurisdiction and power of the bankruptcy court. Its jurisdiction to consider jurisdiction was limited, under the foregoing principles, to determining its own jurisdiction. There being no direct attack by appeal upon the bankruptcy court finding, the district court proceedings, as to bankruptcy court jurisdiction, can be regarded only as collateral proceedings. This court's referring in its prior order to the possible future remand by the district court was predicated on the assumption that a timely appeal would be filed.

IV

Nevertheless, by means of its order of May 15, 1981, the district court remanded this action to the bankruptcy court by means of a sua sponte collateral attack on the bankruptcy court's finding itself to be without summary jurisdiction. The order of remand contained the following considerations:

"In its order of transfer, the bankruptcy court noted that defendant\'s original answer prays to be dismissed and stated that `at most\' defendant\'s prayer created some ambiguity whether jurisdiction was being objected to. This Court finds that the convention of pleading exercised by defendant raises no such ambiguity. There is no stated ground for dismissal, and there is no hint of an assertion of a lack of jurisdiction.

"Defendant also filed an `amended\' answer to the first amended complaint. Like the original answer, it includes a prayer to be discharged, but no objection to the court\'s jurisdiction. No case law support has been located for the proposition that the customary request for dismissal of defendant on grounds other than jurisdiction constitutes an objection to jurisdiction. The weight of authority certainly favors regarding an answer such as the one filed in this case as waiver or consent to summary proceedings in the bankruptcy court. See e.g., In re J.S. Mobile Homes, 434 F.2d 1294 (9th Cir. 1970); Guardian Title Co. v. Sulmeyer, 417 F.2d 1290 (9th Cir. 1969); Finkelstein v. Keith Fabrics, Inc., 278 F.2d 635 (5th Cir. 1960); Coffman v. Cobra Mfg. Co., 214 F.2d 489 (9th Cir. 1954), cert. denied, 348 U.S. 912 75 S.Ct. 291, 99 L.Ed. 715 (1955); In re Warren, 387 F.Supp. 1395 (S.D.Ohio 1975).

"In this case defendant not only did not object to jurisdiction in his answer, it also presented its case on the merits to the bankruptcy court. Moreover, defendant, who received notice that its failure to respond to this Court\'s show cause order would be construed to be consent to the jurisdiction of the bankruptcy court, has failed to respond."

V

In transferring this action to the district court which, it appears, almost certainly has idependent federal jurisdiction,³ this court had hoped that the twin goals of justice and efficiency might be served by litigation of this case on the merits in the forum where the specter of possible lack of jurisdiction of the trial court would not always lurk in the background.

But, now, having been unable to accomplish that desirable result, this court must do what it can possibly do to ensure a decision on the merits of this action.

As stated above, however, this court disagrees that it can now take jurisdiction in the absence of a finding made by the district court on direct appeal reversing the former finding of this court. In the absence of such a reversal on direct appeal, the former finding of this court now has a res judicata effect currently and cannot be changed by this court.

Even if there could now be imagined to reside in this court some power sua sponte to alter or amend its former judgment (which there is not⁴), this court could not, on the facts and law before it, with good conscience disturb its prior finding that it is without summary jurisdiction. It is too simple to note that the answer of the defendant in this action requested "discharge" rather than "dismissal" and reverse the finding on that ground. For the encyclopedic authorities give "dismissal" as one of the alternative meanings of "discharge."⁵ And "discharge," in civil practice, has long carried the meaning of the judicial action which cancels, quashes, or dismisses the court's initial process.⁶ So the word is at least ambiguous in this regard and, in context, it is construable as a request for dismissal, inter alia, for lack of jurisdiction. The authority of Gill v. Phillips, 337 F.2d 258 (1964), continues to be cited to the effect that a finding of summary jurisdiction can be made only on an unambiguous record. In re Cedar Valley Bandag, Inc., 11 B.R. 36, 38 (Bkrtcy.1981). And those authorities appear to be reinforced by the holding of the United States Court of Appeals for the Eighth Circuit in In re Citizens Loan and Savings Company, supra.

VI

Nevertheless, on the theory that the current holding of this court of absence of summary jurisdiction may be appealed⁷ this court will make written findings based upon the hearing⁸ which was conducted before this court entered its order transferring this action to the district court under Rule 915(b), supra. In this manner, if the finding of this court as to jurisdiction is reversed on a proper direct appeal, then the merits can be reviewed, thus perhaps saving another remand.

VII ...