Walnut Associates v. Saidel
| Decision Date | 23 February 1994 |
| Docket Number | Civ. A. No. 93-CV-2795. |
| Citation | 164 BR 487 |
| Parties | WALNUT ASSOCIATES v. Daniel H. SAIDEL, et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
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Mitchell A. Kramer, Joseph P. Walsh, Mitchell A. Kramer & Associates, Jenkintown, PA, for plaintiff.
Carl W. Hittinger, Alan J. Davis, Ballard, Spahr, Andrews and Ingersoll, Stanley Weinberg, Saidel, Sand and Saidel, Philadelphia, PA, for defendants.
Presently before the court are defendants Daniel H. Saidel, Jonathan A. Saidel, Richard M. Sand, individually and t/a Saidel, Sand, & Saidel, and James J. Smith's motion to dismiss the complaint, pursuant to Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction or 12(b)(6) for failure to state a claim, or in the alternative, for abstention, plaintiff Walnut Associates' responses, and defendants' replies thereto. For the following the reasons, the court will grant defendants' motion to dismiss.
The plaintiff in this case is Walnut Associates (hereinafter "plaintiff"), a reorganized bankrupt limited partnership whose single largest asset was, at all relevant times, its ownership interest in the MetroBank building located at 1528 Walnut Street, Philadelphia, Pennsylvania. Plaintiff filed its complaint alleging eight state law claims against defendants Daniel H. Saidel, Jonathan A. Saidel, Richard M. Sand, individually and t/a Saidel, Sand, & Saidel, a Law Partnership, and James J. Smith (hereinafter "defendants").1 Plaintiff's complaint has asserted no federal claims against defendants nor is there any diversity jurisdiction.
Plaintiff, a limited partnership, immediately preceding its bankruptcy, owned and operated the MetroBank building. During its ownership of the building, plaintiff experienced cash flow problems and encountered difficulties in paying the expenses which arose in connection with the maintenance and operation of the building. Consequently, plaintiff was unable to supply its tenants with heat and provide building maintenance. Thereafter, many of the tenants vacated the MetroBank building or withheld rental payments and plaintiff soon became enmeshed in legal disputes concerning the building. See In re Walnut Assocs., 145 B.R. 489, 492 (Bankr.E.D.Pa.1992).
Plaintiff filed its voluntary petition in bankruptcy under chapter 11 on September 31, 1991. The United States Bankruptcy Court for the Eastern District of Pennsylvania, by Order dated February 19, 1992, confirmed plaintiff's amended plan of reorganization. The amended plan envisioned primarily the sale of the MetroBank building, the debtor's single largest asset. See Defendants' Memorandum Of Law In Support Of Their Motion To Dismiss, Exhibit A, ¶ 5.1.2. In addition, the amended plan provided for continued jurisdiction of the estate only until the plan's full consummation.2 Shortly after the confirmation, in March 1992, a General Electric Capital Corporation entity, 1528 Newco Associates, purchased the MetroBank building from Walnut Associates. In re Walnut Associates, 145 B.R. 489, 493 (1992).
In addition to the above, the bankruptcy court, by Order dated June 10, 1992, authorized the debtor Walnut Associates, the plaintiff in the above captioned action, to employ Mitchell Kramer, Esquire, "as special counsel to represent the debtor with claims and matters and causes of action related to its ownership" of the MetroBank building. See Defendants' Memorandum Of Law In Support Of Their Motion To Dismiss, Exhibit C. Mitchell Kramer, allegedly acting in his role as special counsel to the debtor, is plaintiff's counsel and filed the instant suit on plaintiff/debtor's behalf.
The bankruptcy court entered its final decree in debtor's bankruptcy case pursuant to Bankruptcy Rule 3022 on April 15, 1993, after providing due notice and after all parties in interest were in attendance at the bankruptcy court's hearing on April 14, 1993.3 Plaintiff filed its complaint in the instant matter on May 26, 1993, nearly a month and a half after the bankruptcy case was closed. At no point before entry of the final decree on April 15, 1993, did plaintiff or plaintiff's counsel seek to have either the bankruptcy court or the district court retain jurisdiction with respect to the claims in plaintiff's complaint.
A district court can grant a dismissal pursuant to Fed.R.Civ.P. 12(b)(1) based on the legal insufficiency of a claim. Dismissal is proper only when the claim clearly appears to be immaterial and solely for the purpose of obtaining jurisdiction, or is wholly insubstantial and frivolous. Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1408-09 (3d Cir.), cert. denied, ___ U.S. ___, 111 S.Ct. 2839, 115 L.Ed.2d 1007 (1991). See also Lunderstadt v. Colafella, 885 F.2d 66, 70 (3d Cir.1989) () (citations omitted).
A federal court, in deciding a motion to dismiss for lack of subject matter jurisdiction, presumptively lacks jurisdiction over a proceeding unless plaintiff affirmatively demonstrates that jurisdiction exists. Lucas v. Gulf & W. Indus., Inc., 666 F.2d 800, 805 (3d Cir.1981). Thus, when subject matter jurisdiction is challenged under Rule 12(b)(1), the plaintiff bears the burden of persuasion. Id. See also Kehr Packages, 926 F.2d at 1409 (citing Mortensen v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir.1977)). In a complaint filed in bankruptcy court, the fact that the debtor is a party to the proceeding does not automatically confer subject matter jurisdiction. See In re M. Paolella & Sons, Inc., 85 B.R. 965, 970 (Bankr.E.D.Pa.1988). Finally, when considering a motion to dismiss pursuant to Fed. R.Civ.P. 12(b)(1), the district court is not restricted to the face of the pleadings, but may review any evidence, such as affidavits, documents or testimony, to resolve factual disputes concerning the existence of jurisdiction. McCarthy v. United States, 850 F.2d 558, 560 (9th Cir.1988) (citations omitted), cert. denied, 489 U.S. 1052, 109 S.Ct. 1312, 103 L.Ed.2d 581 (1989); 2A J. MOORE, FEDERAL PRACTICE, ¶ 12.072.-1, at 12-47 to 12-49.
Defendants argue in their motion to dismiss that because the bankruptcy estate has been fully administered, and because the bankruptcy case has been officially closed, the court lacks subject matter jurisdiction to hear plaintiff's adversary complaint. In its response, plaintiff argues that the bankruptcy court's authorization of the debtor to employ special counsel to bring these type of "non-core" claims is sufficient to confer federal jurisdiction. The court finds that where a bankruptcy case is closed and the estate no longer exists, and where plaintiff does not seek to have the bankruptcy case opened for cause pursuant to 11 U.S.C. § 350(b) and Bankruptcy Rule 5010, the court is without jurisdiction to entertain any proceedings, irrespective of whether those proceedings are defined as "core" or related "non-core" proceedings.
In this case, the court must determine whether it can entertain subject matter jurisdiction over the instant adversary proceeding, alleging only state law claims. The bankruptcy courts are granted jurisdiction pursuant to 28 U.S.C. § 1334. In relevant part, this section reads as follows:
28 U.S.C. § 1334.
The Third Circuit in In re Marcus Hook Dev. Park, Inc., 943 F.2d 261 (3d Cir.1991), analyzing the jurisdiction under section 1334(b), stated:
It is well settled that the bankruptcy court potentially has jurisdiction over four types of title 11 matters, pending referral from the district court: (1) cases under title 11, (2) proceedings arising under title 11, (3) proceedings arising in a case under title 11, and (4) proceedings related to a case under title 11. . . . The first of these categories, cases under Title 11, "refers merely to the bankruptcy petition itself."
Id. at 264 (citations omitted). The Third Circuit determined that the action it had before itself in Marcus Hook did not involve the bankruptcy petition itself, and therefore, the court analyzed whether the action fell within one of the latter three categories of section 1334(b). In regard to this, the Marcus Hook court stated:
Id. (citations omitted). Bankruptcy jurisdiction pursuant to section 1334(b) thus extends to proceedings that "could conceivably have any effect on the estate being administered in bankruptcy." Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir.1984). The court's jurisdiction pursuant to section 1334(b), however, changes after the bankruptcy court confirms the plan for reorganization.
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