*344 MEMORANDUM OPINION
On the 12th day of March, 1986, came on to be heard the Defendant’s Motion to Dismiss for Lack of Subject Matter Jurisdiction or, in the Alternative, to Abstain under 28 U.S.C. § 1334(c), filed in the above styled and numbered Adversary Proceeding. After having heard the arguments of counsel and having reviewed the pleadings and briefs on file, as well as the post-hearing supplemental letter briefs submitted by the parties, the Court makes the following Findings of Fact and Conclusions of Law.
FACTS
The Trustee in this Chapter 11 case has filed an Adversary Proceeding against Gulf States Drilling Co., Inc. (“Defendant”) in which the Trustee claims three grounds for relief: in Count I of the Amended Complaint he alleges breach of contract and warranty and seeks compensatory damages; in Count II Trustee asserts a counterclaim to the proof of claim in the amount of $12,773,620.83, filed by Defendant against the estate, and seeks to offset Defendant’s claim, if any, against the counterclaim; in Count III he seeks equitable subordination under 11 U.S.C. § 510 of Defendant’s claim, if any. The last of these Counts, the equitable subordination claim, has been reserved by the parties and is not in issue here. Defendant has filed a Motion to Dismiss the Complaint on the grounds that this Court lacks jurisdiction under 28 U.S.C. § 157 because this proceeding is not a core proceeding. In the alternative, Defendant in its Motion asks the Court to abstain under 28 U.S.C. § 1334(c)(1) from hearing Trustee’s Complaint.
DISCUSSION AND CONCLUSIONS OF LAW
28 U.S.C. § 1334(b) confers on the District Court original, but not exclusive jurisdiction of all civil proceedings arising under Title 11, or arising in or related to cases under Title 11, and 28 U.S.C. § 157(a) permits referral by the District Court to the Bankruptcy Court of all those proceedings listed in § 1334(b). Pursuant to the Order of Reference of Bankruptcy Cases and Proceedings Nunc Pro Tunc of the United States District Court for the Western District of Texas, entered on August 13, 1984, all such proceedings were in fact referred to this Court.
Defendant by its Motion to Dismiss has asserted only that this matter may not be finally determined by this Court, because it is not a core proceeding arising under or arising in a case under Title 11. See 28 U.S.C. § 157(b). Because the Court holds that this is a core proceeding, it is unnecessary to address the issue of whether dismissal of this action, as requested by Defendant, would be proper should the Court have found it was not a core proceeding.
Defendant’s motions require this Court to determine whether the Adversary Proceeding is a core proceeding or a related proceeding. 28 U.S.C. § 157(b)(3). If it is a core proceeding, this Court may hear and finally determine the matter. Id. § 157(b)(1). If it is not core, but only a proceeding “that is otherwise related to a case under Title 11,” the Bankruptcy Court may hear the matter, but may only submit proposed Findings of Fact and Conclusions of Law to the District Court, for review de novo in that Court. Id. § 157(c)(1).
The substantive law that would be applied in determining the Trustee’s claims as set forth in Counts I and II of the Amended Complaint is State law. Section 157(b)(3) provides, however that “[a] determination that a proceeding is not a core proceeding shall not be made solely on the basis that its resolution may be affected by State law.”
The Trustee has claimed in his Amended Complaint only that this is a core proceeding under § 157(b)(2)(D), which provides:
(b) Core proceedings include, but are not limited to — ... (0) other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security *345 holder relationship, except personal injury tort or wrongful death claims.
However, in their post-hearing letter briefs, both parties have addressed the question of whether the matter may be a core proceeding under § 157(b)(2)(C), which provides that “counterclaims by the estate against persons filing claims against the estate” are core proceedings. Both because the parties have addressed the issue themselves, and because under § 157(b)(3) this Court is required to determine the core/non-core nature of the proceedings even if not moved by the parties to do so, the Court will consider whether the matter is a core proceeding under § 157(b)(2)(C) even in the absence of a .formal pleading so alleging.
Undoubtedly, the Trustee’s claims fall within the broad literal terms of both subsections (C) and (0). This Court agrees, however, with the majority of courts which have construed § 157(b)(2)(AHO) that the list provided therein must be interpreted in light of the Supreme Court decision in
Northern Pipeline Construction Co. v. Marathon Pipe Line Company,
Marathon
involved a lawsuit brought by the Chapter 11 Debtor-in-Possession in the Bankruptcy Court, in which the Debtor asserted breach of contract and warranty, misrepresentation, coercion and duress.
Marathon,
The instant case is on point with the facts in the Marathon case, except for one crucial fact. Defendant Gulf States Drilling Co., Inc. has filed a proof of claim in the Chapter 11 case in the amount of $12,-773,620.83. After Defendant’s proof of claim was filed, the Trustee filed the instant Adversary Proceeding. The Amended Complaint alleges, among other things, that Defendant has failed and refused to perform its obligations under five contracts, which contracts form the basis for the Defendant’s proof of claim.
The facts alleged in the Amended Complaint under the heading “General Allegations” support the cause of action for breach of the contracts and breach of warranty set forth in Count I. Although not expressly labelled as such, those facts constitute in substance an objection to the proof of claim in which Defendant seeks to recover on those contracts. Bankruptcy Rule 3007 provides that “[i]f an objection to a claim is joined with a demand for relief of the kind specified in Rule 7001, it becomes an adversary proceeding.” Rule 7001(1) refers to actions, among others, for the recovery of money. The Trustee’s inclusion of Count I of the Amended Complaint, seeking compensatory damages for breach of contract and warranty, thus requires that procedurally Trustee’s objection be brought as a complaint, and not as a contested matter styled “Objection to Claim”.
Although Count II of the Amended Complaint does not recite the facts or the legal *346 grounds which support the counterclaim asserted therein, it is obvious that those facts recited in the General Allegations, and the cause of action set forth in Count I, the breach of contract and warranty count, form the basis of the counterclaim as well. Thus, between the two counts and the facts recited in the Amended Complaint, the Trustee asserts (1) an objection to the allowance of the claim of Defendant; (2) a counterclaim and the right to set off Trustee’s recovery thereunder against Defendant’s claim, if any; and (3) a claim for affirmative relief in the form of compensatory damages over and above the amount, if any, owed by the estate on Defendant’s claim.
This analysis of the Trustee’s Amended Complaint reveals that the case is distinguishable from the Marathon case and compels the Court’s finding that it is a core proceeding. By filing a proof of claim, Defendant has become a party in interest in the Chapter 11 case and is asserting a right to participate in the distribution under the Debtor’s Plan. Section 157(b)(2)(B) lists the allowance or disallowance of claims against the estate as core proceedings, and 11 U.S.C. § 502(b) requires the Court to determine the amount of a claim where the claim has been objected to.
There is no doubt that this Court can make a final determination of the allowance of a claim in the bankruptcy case.
Lessor v. A-Z Associates (In re Lion Capital Group),
The Supreme Court in
Marathon
held that where the Debtor’s claim involves “a right created by State law, a right independent of and antecedent to the reorganization petition that conferred jurisdiction upon the Bankruptcy Court,” it may not be determined by the Article I Judges of that Court.
Marathon,
Defendant argues that the procedural characterization of Trustee’s claim as a counterclaim is insufficient to confer jurisdiction in the Bankruptcy Court to finally determine the claim. This Court disagrees. “[t]he restructuring of debtor-creditor relations ... is at the core of the federal bankruptcy power.”
Marathon,
The Court holds that this is the sort of counterclaim, arising out of the same transaction as Defendant’s claim, that falls within § 157(b)(2)(C) as a core proceeding.
Lombard-Wall, Inc. v. New York City Housing Development Corp. (In re Lombard-Wall, Inc.),
As to Count I of Trustee’s Amended Complaint in which he seeks affirmative relief, the Court holds that it too is a core proceeding, whether characterized as a counterclaim seeking affirmative relief, or as a proceeding affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor relationship. The claim for breach of contract and warranty is based on the same facts and legal theories as the counterclaim. Under
Katchen v. Landy,
The Court holds that this Adversary Proceeding, insofar as Counts I and II of the Amended Complaint are concerned,
*348
constitutes a core proceeding that may be finally determined by the Bankruptcy Court. In so holding, the Court acknowledges those decisions in which a contrary result has been reached. See
Braucher v. Continental Illinois National Bank and Trust Co. of Chicago (In re Illinois-California Express, Inc.),
In conclusion, the Court holds that this matter constitutes a core proceeding and declines to abstain from hearing and finally determining the matter on its merits.