Young Properties Corp. v. United Equity Corp.
Decision Date | 12 April 1976 |
Docket Number | No. 75-2553,75-2553 |
Citation | 534 F.2d 847 |
Parties | In the Matter of Young Properties Corporation, a California Corporation, and its affiliates, Debtors. YOUNG PROPERTIES CORPORATION, Debtor in Possession, Plaintiff-Appellee, v. UNITED EQUITY CORPORATION and Edward Granville-Smith, Defendants-Appellants. |
Court | U.S. Court of Appeals — Ninth Circuit |
Before CARTER, WRIGHT and GOODWIN, Circuit Judges.
This is a case of first impression involving the following issue: does the United States Court of Appeals have subject matter jurisdiction to review a district court order denying a motion to transfer an adversary proceeding in bankruptcy to another district? The motion to transfer was made pursuant to Rule 782 of the 1973 Bankruptcy Rules (hereinafter "Rule 782"). We hold that we do not have jurisdiction in this case.
Appellee Young Properties Corporation (hereinafter "Young") filed a petition on October 31, 1973, with the bankruptcy court for the United States District Court for the Southern District of California, for an arrangement under Chapter XI of the Bankruptcy Act (hereinafter the "Act"). The bankruptcy court authorized Young to remain in possession of its businesses and to operate the same as a debtor in possession. As a debtor in possession Young was vested by § 342 of the Act (11 U.S.C. § 742) with the title and powers of a trustee appointed under the Act.
Roughly one year later, on October 24, 1974, Young filed a complaint against defendants-appellants United Equity Corporation (hereinafter "United") and Edward Granville-Smith, president of United, and against defendants EFM Financial Corporation and Edward F. Meyers, chairman and owner of EFM. Meyers and EFM are not parties to this appeal.
The complaint sought, in six causes of action, damages for breach of contract, for constructive and express trust, and on a common count. The complaint alleged that on September 25, 1973, United entered into a contract with a third party for the purchase by United of certain properties located in California. In paragraph 7 of this contract United agreed to pay Young a fee of $70,500 on December 31, 1973, for services rendered by Young to United as a finder in connection with the purchase of the property. United never paid the $70,500 to Young.
On December 4, 1974, appellants United and Granville-Smith timely filed a motion to transfer the adversary proceeding from the Southern District of California to the District of Maryland, pursuant to Rule 782. Rule 782 reads:
In United's motion, accompanied by an affidavit of president Granville-Smith, it was stated that United is a Delaware corporation, has its principal place of business in Maryland, and does not regularly do business in California. It was alleged that to compel United to defend this action in California would work an undue hardship.
Young opposed the motion, essentially on the grounds that it had no relation to Maryland and that prospective witnesses resided in California. Upon a hearing the bankruptcy judge denied the motion to transfer.
United and Granville-Smith petitioned to review this order in the district court. For the reasons stated by the district court, 394 F.Supp. 1243 (S.D.Cal.1975), the denial of the motion to transfer was affirmed.
The source of jurisdiction of the court of appeals in bankruptcy matters arising from the district court sitting as a bankruptcy court is § 24a of the Act (11 U.S.C. § 47a, hereinafter "s 24a"). Section 24a reads, in the part relevant to this case:
"The United States courts of appeals, in vacation, in chambers, and during their respective terms, as now or as they may be hereafter held, are invested with appellate jurisdiction from the several courts of bankruptcy in their respective jurisdictions in proceedings in bankruptcy, either interlocutory or final, and in controversies arising in proceedings in bankruptcy, to review, affirm, revise, or reverse, both in matters of law and in matters of fact. . . ." (emphasis added)
Section 24a, enacted by the 1938 Chandler Act, has uniformly been interpreted by the courts and treatises to distinguish the appealability of " proceedings" from the appealability of "controversies". With respect to interlocutory orders an appeal will lie from a "proceeding" in bankruptcy but not from a "controversy."
In accord is 9 Moore's Federal Practice, P 110.19(5) (2d Ed., rev. 1975), at 222:
Accord, Diamond Door Co. v. Lane-Stanton Lumber Co., 505 F.2d 1199, 1202-03, n.4 (9 Cir. 1974), Trieber v. England, 237 F.2d 117, 118 (9 Cir. 1956), cert. den., 352 U.S. 967, 77 S.Ct. 356, 1 L.Ed.2d 322 (1957), Petersen v. Sampsell, 170 F.2d 555, 556 (9 Cir. 1948), and Goldie v. Carr, 116 F.2d 335, 336 (9 Cir. 1940). For an exhaustive list of cases supporting this rule see 2 Collier, P 24.04(2), n.35, at 717. Also see cases cited in 11 U.S.C.A. § 47, Notes 13, 14 and 15 ( ).
Thus the law compels us to address these two questions: (1) is the order appealed from an interlocutory order, and (2) is the case a "controversy" or a "proceeding" in bankruptcy. If we conclude that the order is interlocutory and it involves a controversy, we have no jurisdiction.
Since this appeal is the first case involving a review of a denial of a Rule 782 motion, the question of whether such an order is interlocutory for the purpose of § 24a appellate jurisdiction has not yet arisen.
The principle generally utilized to distinguish a final order from an interlocutory order is given in Merle's, supra, 481 F.2d at 1018:
(citations omitted)
Applying this principle to the case at bar, we conclude that the order is interlocutory. All that has been decided is that the breach of contract trial will commence in the Southern District of California and not in the District of Maryland. The merit of the dispute whether a breach of contract occurred has not been reached.
An additional reason for our conclusion is that in other areas of the law where an order denying or permitting a transfer of a case has been appealed, such an order has been held to be interlocutory. We consider two instances: § 32 of the Bankruptcy Act (11 U.S.C. § 55) and 28 U.S.C. §§ 1404(a) and 1406(a). We cite these examples only for the purpose of defining an "interlocutory order".
Section 32 of the Bankruptcy Act (11 U.S.C. § 55, hereinafter "s 32"), as revised by Rule 116 of the 1973 Bankruptcy Rules, provides for the transfer of an entire bankruptcy proceeding to any other district, in such cases where the petition was filed in the wrong district or where the interest of justice and the convenience of the parties merit the transfer. 3
An order denying or permitting such a transfer has been held to be interlocutory. In re Flexton Corp., 208 F.2d 869, 870 (2 Cir. 1953). See 2 Collier, P 24.38(2) at 794-95, text accompanying note 39. We recognize that appellate jurisdiction in Flexton was proper even though the order appealed from was...
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