Rafoth v. National Union Fire Insurance (In Re Baker & Getty Financial Services, Inc.)Rafoth v. National Union Fire Insurance (In Re Baker & Getty Financial Services, Inc.)
MEMORANDUM OPINION
This matter comes before the Court on the Motion filed by National Union Fire Insurance Company (“NUFIC”) seeking a determination that the instant adversary action is a non-core proceeding. The Motion also asks the Court to refer the case to the District Court so that a jury trial may be conducted. 1
Baker & Getty Securities, Inc. (“BGS”) applied for an NASD Group Fidelity Bond on August 31, 1986. NUFIC subsequently issued a securities dealer blanket bond for the one-month period between October 1 and November 1, 1986. On January 22, 1987, involuntary petitions were filed against BGS, Baker & Getty Diversified, Inc. (“BGD”), and Baker & Getty Financial Services, Inc. (“BGFS”). An Order of Relief was entered on February 17, 1987. On May 14, 1987, NUFIC issued another securities dealer blanket bond to BGFS for the period from November 1,- 1986, through November 1, 1987. On June 24, 1987, BGS notified NUFIC that a claim would be made on the bond. On September 29, 1987, it submitted a proof of loss to NUFIC claiming a loss of Two Million, Four Hundred Seventeen Thousand, Sixty-Six & 76/100 Dollars ($2,417,066.76). On December 8, 1987, the Trustee filed this Complaint seeking a declaratory judgment finding the Plaintiffs loss to be covered by the bond, and an Order compelling the Defendant to pay the Plaintiff the aggregate liability amount of One Million & 00/100 Dollars ($1,000,000.00), plus interest, court costs, and attorney fees. NUFIC filed an Answer on February 12, 1988, in which the Defendant denied both coverage and this Court’s jurisdiction. On February 16,1988, the present Motion was filed with the Plaintiff’s response filed on February 24, 1988.
In 1982, the Supreme Court invalidated portions of the jurisdictional structure of bankruptcy courts as provided under the Bankruptcy Reform Act of 1978 (Pub.L. No. 95-598; 92 Stat. 2549; 11 U.S.C. § 101,
et seq.)
in
Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.,
We begin with the premise that “core proceedings” are to be given the broadest, constitutionally permissable defi
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nition.
In re Arnold Print Works, Inc.,
[A] proceeding filed in the bankruptcy court alleging a cause of action that:
(1) is not specifically identified as a core proceeding under Sec. 157(b)(2)(B)-(N), [and]
(2) existed prior to the filing of the bankruptcy case, [and]
(3) would continue to exist independent of the provisions of Title 11, [and]
(4) in which the parties’ rights, obligations, or both, are not significantly affected as a result of the filing of the bankruptcy case.
(emphasis in the original).
Commercial Heat Treating v. Atlas Indus., Inc.,
As applied to the present case, there is no specific identification of the instant cause of action in the non-exclusive listing of core actions in Sec. 157(b)(2).
3
Furthermore, the cause of action would continue to exist independent of the Bankruptcy Code and the bankruptcy filing does not significantly affect the parties’ rights. However, the cause of action did not exist prior to the filing of the bankruptcy case. Courts have held that litigation over post-Petition claims ought to be classified as core proceedings.
In re Arnold Print Works,
The Arnold case considered the constitutionality of classifying the collection of a post-Petition account receivable as a core proceeding. The court wrote:
The Constitution permits a non-Article III bankruptcy court to adjudicate post-Petition claims related to administration or liquidation of a debtor’s estate because the claims are both historically and functionally distinguishable from those at issue in Marathon.
The Supreme Court has repeatedly turned to history and tradition to help define the type of adjudicatory proceeding that the Constitution reserves exclusively for Article III courts....
If one examines the jurisdictional history of post-Petition claims of the sort in issue here, one finds that they are not ‘traditional contract actions’; nor are they matters that ‘historically’ have been decided only in the equivalent of Article III courts. To the contrary, bankruptcy courts have adjudicated claims like this *140 one at least since the enactment of the Bankruptcy Act-of 1898_ Given potential court supervision of estate administration, the legal fiction that the debtor-in-possession is a court official and that the contract is with the court itself is a fiction that borders on the truth. It helps to distinguish the claim at issue here, even on the view of Marathon’s plurality: [the debtor] makes the kind of claim that, historically speaking, might be characterized as raising matters of ‘public rights,’ defined as those arising between the government and others, [citation omitted] Marathon found no constitutional objection to a bankruptcy court deciding this sort of claim. Quite apart from the force of the fiction, the history of bankruptcy court jurisdiction means that a post-Petition contract made with the debtor-in-possession cannot be called a ‘traditional’ state contract action.
In re Arnold, Printworks, Inc.,
This Court is the appropriate forum to decide whether there is a right to a trial by jury.
4
In re Energy Resources Co.,
The Trustee seeks a declaratory judgment that the loss occasioned by the Debtors is covered by the bond issued by NUFIC and, thus, that the Company is liable to cover the loss, not exceeding One Million & 00/100 Dollars ($1,000,000.00). It is true that a cause of action seeking a judgment for money damages is normally viewed as one at law.
In re Portage Assoc., Inc.,
Where monetary relief must necessarily be a part of the equitable remedy, the case remains equitable in nature, [citations omitted]. Even though [the plaintiff’s] ... complaint seeks monetary relief, the action is, nonetheless, equitable in nature because, ‘where a plaintiff seeks to recover monies alleged to be wrongfully withheld, the basis for such an action is wholly equitable.’ [citation omitted]. For example, ‘where a cause of action seeking monetary relief is integral to the equitable relief sought ..., the action lies in equity with no right of jury trial.’
American Universal Ins. Co. v. Pugh,
The Court is unable to discern why a jury trial is needed in this action. NUFIC claims that a jury trial is needed because “[m]ajor issues of credibility are likely to be determinative of the ultimate issues in
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this case.” However, NUFIC fails to specify which of its defenses is dependent upon issues of credibility or why this Court would be unable to effectively evaluate the credibility of the parties involved. Furthermore, an examination of the Defendant’s Answer containing NUFIC’s defenses persuades the Court that issues of credibility will play a subordinate role in the disposition of this controversy. The primary, and perhaps only, question to be considered concerns the proper construction of the contract. As a question of law, the jury would be unable to resolve this question. The construction of a contract is solely a question of law, decisions about which are committed to a court, not a jury.
Broad v. Rockwell Int’l Corp.,
Accordingly, NUFIC’s Motions will be overruled. This Memorandum Opinion shall constitute the Court’s findings of fact and conclusions of law pursuant to Bankruptcy Rule 7052.
An appropriate Order will be entered.
Notes
. At least one court has held that once a case has been referred to the bankruptcy court, only the District Court may transfer a case back to its jurisdiction.
See In re Wonder Corp. of America,
. The First Circuit made this finding based on both congressional statements reflecting legislative intent and the non-exclusive listings in Sec. 157(b)(2).
. Because of our holding, it is unnecessary for the Court to consider whether the present action may be termed a core proceeding by virtue of Sec. 157(b)(2)(A), (E) or (O).
. At least one court has concluded that no right to a jury trial exists in core proceedings since such proceedings “are inherently proceedings in equity.”
Bokum Resources Corp. v. Long Island Lighting Co.,
. This dichotomy is intended to reveal whether a right to trial by jury in this action is guaranteed by the Seventh Amendment to the U.S. Constitution. Historically, if the issue would have been tried in courts of equity, there is no right to a jury. There is only a right to a jury when the issue would have been tried in a court of law.
Hauytin v. Grynberg,