AMPAM Power Plumbing, L.P. v. Capstone Building Corp. (In re AMPAM Power Plumbing, L.P.)AMPAM Power Plumbing, L.P. v. Capstone Building Corp. (In re AMPAM Power Plumbing, L.P.)
MEMORANDUM OPINION GRANTING PLAINTIFF’S AMPAM POWER PLUMBING, L.P., NOW POWER PLUMBING, INC., MOTION FOR SUMMARY JUDGMENT (ECF NO. 5)
Came on to be considered the above-numbered adversary proceeding and, in particular, Plaintiff AMPAM Power Plumbing L.P., now Power Plumbing, Inc.’s, Motion for Summary Judgment (ECF No. 5) (“Summary Judgment Motion”) filed July 25, 2014, responses, and supporting evidence. For the reasons provided herein, the Court is of the opinion that Plaintiffs Summary Judgment Motion should be GRANTED.
Jurisdiction
Although neither of the parties raised the issue of whether the Court has constitutional authority enter a final judgment, federal courts have an ongoing duty to examine their subject-matter jurisdiction, whether the issue is raised by the parties or sua sponte by the court. MCG, Inc. v. Great W. Energy Corp.,
The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334(b). This is a core proceeding under 28 U.S.C. § 157(b)(2)(I). Although Debtor received a discharge of its debts over ten years ago, bankruptcy courts in the Fifth Circuit maintain subject matter jurisdiction post-confirmation for such matters as enforcing and interpreting the scope of a debtor’s discharge order — even after the bankruptcy case is closed. Placid Oil Co. v. Jimmy Williams, Sr., et al. (In re Placid Oil Co.),
Even after Stem, bankruptcy courts have the constitutional authority to hear and finally determine dischargeability of debts in bankruptcy cases. Deitz v. Ford (In re Deitz),
Congress clearly envisioned that bankruptcy courts would hear and determine all core proceedings, 28 U.S.C. § 157(b)(1), which include, as relevant here, “determinations as to the dis-chargeability of particular debts.” 28 U.S.C. § 157(b)(2)(I). The Supreme Court has never held that bankruptcy courts are without constitutional authority to hear and finally determine whether a debt is dischargeable in bankruptcy. In fact, the Supreme Court’s decision, in Stem clearly implied that bankruptcy courts have such authority when it concluded that bankruptcy courts had the constitutional authority to decide even state law counterclaims to filed proofs of claim if the counterclaim would necessarily be decided through the claims allowance process. Stern,131 S.Ct. at 2618 .
Id. Because this case involves a determination as to the dischargeability of particular claims, this Court has both statutory and constitutional authority to enter a final judgment.
Legal Standard for Summary Judgment
Federal Rule of Bankruptcy Procedure 7056 applies Rule 56(c) of the Federal Rules of Civil Procedure to adversary proceedings. Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.CivP. 56(c); Celotex Corp. v. Catrett,
To the extent that the non-moving party asserts the existence of factual disputes, the evidence offered by the non-moving party to support those factual contentions must be of a quality sufficient so that a rational fact finder might, at trial, find in
Factual and Procedural Background
On October 13, 2003 (“Petition Date”), Plaintiff/Debtor, AMPAM Power Plumbing, L.P. (now Power Plumbing, Inc.) (“Power”), filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. Power’s Chapter 11 Plan of Reorganization was confirmed on July 30, 2004 (“Confirmation Date”). After the Petition Date but before the Confirmation Date, Power and Defendant/Claimant, Capstone Building Corporation (“Capstone”), entered into a contract for Power to perform plumbing services for a residence hall complex at Sam Houston State University (the “Project”).
The contract specified that Power’s work was to be finished by July 14, 2004. Power’s work was largely completed on the Project by July 30, 2014 — save for punch list items and a meeting to be attended by a Power representative. After the contract between Power and Capstone was entered into but before the Confirmation Date, Power apprised Capstone of its bankruptcy proceeding. On August 13, 2004, the architectural firm on the Project issued a Certificate of Substantial Completion, and Capstone remained unaware of any possible issues with regard to Power’s work until February 16, 2011.
Capstone filed a Third-Party Petition against Power in Cause No. 13-26476, Texas State University Board of Regents v. American Campus Development, et al, pending in the 12th Judicial District Court of Walker County, Texas (the “State Court Suit”). Capstone has asserted contractual indemnity and/or contribution relating to Power’s work on the Sam Houston State Project. Power reopened its Chapter 11 Case on May 6, 2014 and filed this adversary proceeding. Power now moves for summary judgment finding that all claims Capstone held in relation to Power’s work completed on the Sam Houston State Project were discharged by virtue of the Confirmation Order and therefore, Capstone must dismiss its claims against Power in the State Court Suit.
Any claims that Capstone could have had against Power at the Confirmation Date were future claims. Future claims are those claims which arise from a debt- or’s pre-bankruptcy conduct but do not manifest any injury to claimants until after confirmation of the debtor’s plan. Fairchild Aircraft Inc. v. Campbell (In re Fairchild Aircraft Corp.),
A. Classification of Capstone’s Claims as Pre-Confirmation
A claim is defined as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliqui-dated, fixed, contingent, matured, unma-tured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 101(5)(A). Congress intended the term “claim” to have the “broadest possible definition ... [including] all legal obligations of the debtor, no matter how remote or contingent.” H.R.Rep. No. 95-595, at 649 (1977), reprinted in 1978 U.S.C.C.A.N. 5787, 5963. Although not defined by the Bankruptcy Code, the Fifth Circuit defines a claim as contingent if the debt “is one which will be called upon to pay only upon the occurrence or happening of an extrinsic event that will trigger the liability of the debtor to the alleged creditor.” Beaumont v. Durkay (In Matter of Ford),
Among the circuits, several approaches have emerged on how broadly the term “claim” is to be interpreted, particularly in the context of future claims. In Lemelle v. Universal Mfg. Corp., the Fifth Circuit adopted the Piper pre-petition relationship approach.
1. Contractual Relationship Between Capstone and Power
The Fifth Circuit has previously found that a contractual relationship between the debtor and claimant is “[clearly] a pre-petition relationship sufficient to meet the Piper and Lemelle requirement.” Wheeler,
Power and Capstone both agree that the parties entered into a contract and that substantial work was completed before the confirmation of Power’s Chapter 11 Plan. The Code provides that confirmation of a plan “discharges the debtor from any debt that arose before the date of such confirmation.” 11 U.S.C. § 1141(a)(1)(A). Therefore, a “claim” under Chapter 11 of the Bankruptcy Code extends to post-petition, but pre-confirmation conduct. Wright,
2. Time of Power’s Conduct Forming the Basis for Liability
In the State Court Suit, Capstone asserts claims for common law indemnity
Although Power had contact with the Project post-confirmation, the basis for liability in the State Court Suit is the work Power completed prior to Confirmation Date — not these limited post-confirmation contacts. As a result of the parties’ pre-confirmation contractual relationship, the claim arose at the time the conduct giving rise to liability in the State Court Suit took place, even though the possible resulting injury from this conduct did not yet manifest by the Confirmation Date. See In re Hassanally,
B. Discharge of Capstone’s Claims Against Power
While the broad definition of claim serves debtors’ interests in receiving a fresh start, this definition is restrained by the constitutional protections of due process. Due process requires notice to be “reasonably calculated, under all circumstances, to inform interested parties of the pendency” of a proceeding. Placid Oil Co. v. Jimmy Williams, Sr., et al. (In the Matter of Placid Oil Co.),
Capstone does not dispute that it received actual notice, but rather argues that because Capstone was not aware of any possible defect in Power’s work at the time Capstone received notice, Capstone was unable to protect its rights. Therefore, discharge of Capstone’s claims would deprive Capstone of its due process rights. Nevertheless, the Fifth Circuit recently held that claimants are not deprived of due process even where, at the time they receive notice of the bankruptcy proceeding, they are unaware of any injury. See generally Placid Oil,
Given that the parties’ had a pre-confir-mation contractual relationship and that it is undisputed Capstone received actual notice of pendency of Power’s bankruptcy before the Confirmation Date, Capstone’s due process rights were even more protected than the claimants in Placid Oil. Therefore, despite the latency in manifestation of any injury, a finding that Capstone’s claims against Power were discharged by the Confirmation Order does not violate Capstone’s due process rights. Because Capstone received actual notice of Power’s bankruptcy comporting with the constitutional requirements of due process, all pre-confirmation claims relating to Power’s work on the Sam Houston State Project were discharged by the Confirmation Order.
Conclusion
Having gone through the facts of the case and considered the arguments made by the parties, this Court finds that (1) Capstone held pre-confirmation claims against Power and (2) those claims were discharged by Confirmation Order entered in Power’s Chapter 11 bankruptcy proceeding.
Notes
. Although not mentioned in Capstone’s Brief In Opposition (ECF No. 6), in Capstone's Answer to Power’s Original Complaint (ECF No. 3), Capstone contends that its claims are covered by insurance and such insurer’s obligations and liabilities were not discharged. While normally a debtor’s discharge of its debts does not affect its liability insurers, here, in 2008, the Court entered an Order Granting Plan Agent's Motion For An Order Enforcing Compliance With The Plan And Discharge Injunction, And Clarifying Certain Provisions Of The Plan And Confirmation Order (the "2008 Order”). Debtor sought and obtained Court authorization to acquire insurance coverage from ACE American Insurance Company ("ACE”) and later renewed the coverage after the Confirmation Date. The Chapter 11 Plan allowed claimants to
. The claimants in Lemelle v. Universal Mfg. Corp.,
. A number of courts have held or at least suggested that a breach of contract claim arises at the time the contract was entered into because a party to an ordinary contract should reasonably anticipate that the other party will breach or has made misrepresentations with respect to the contract, whether or not it was aware of any breach or misrepresentation when the petition was filed or before the claims bar date. Conseco, Inc. v. Schwartz (In re Conseco, Inc.),
. While scholars and judges have criticized the severity of including claims whose holders were not readily identifiable at the time of bankruptcy, these critiques have been limited to unknown claimants receiving only constructive notice. Placid Oil Co. v. Jimmy Williams, Sr., et al. (In Matter of Placid Oil),