Walnut Associates v. SaidelWalnut Associates v. Saidel
MEMORANDUM and ORDER
Prеsently 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
I. Background
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 Va Saidel, Sand, & Saidel, a Law Partnership, and James J. Smith (hereinafter “defendants”). 1 Plaintiffs 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, mаny 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.,
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 plaintiffs amended plan of reorganization. The amended plan envisioned primarily the sale of the MetroBank building, the debtor’s single largest asset.
Sеe 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
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 Mitсhell 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 plaintiffs 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 Bаnkruptcy 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 plaintiffs counsel seek to have either the bankruptcy court or the district court retain jurisdiction with respect to the clаims in plaintiffs complaint.
II.
Standard For Motion To Dismiss Pursuant To
A district court can grant a dismissal pursuant to
A federal court, in deciding a motion to dismiss for lack of subject matter jurisdiction, presumptively lacks jurisdiction over a proceеding unless plaintiff affirmatively demonstrates that jurisdiction exists.
Lucas v. Gulf & W. Indus., Inc.,
III. Discussion
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 plaintiffs adversary complaint. In its response, plaintiff argues that the bankruptcy court’s authorization of the debtor to em
A.
Bankruptcy Jurisdiction Pursuant to
In this ease, 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
§ 1334 . Bankruptcy cases and proceedings
(a) Except as provided in subsection (b) of this section, the district court shall have original and exclusive jurisdiction of all cases under title 11.
(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.
The Third Circuit in
In re Marcus Hook Dev. Park, Inc.,
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
It is not necessary, though to fit the proceeding into one of these particular categories since “they operate conjunctively tо define the scope of jurisdiction.” ... Hence, we need only determine “whether a matter is at least ‘related to’ the bankruptcy.”
A proceeding is related to bankruptcy if “the outcome of that proceeding could conceivably have any effect on the estate being administered' in bankruptcy”.... Bankruptcy jurisdiction will exist so long as it is possible that a proceeding may impact on “the debtor’s rights liabilities, options, or freedom of action”, or the “handling and administration of the bankrupt estate.”
Id.
(citations omitted). Bankruptcy jurisdiction pursuant to
B. Bankruptcy Court’s Jurisdiction During Post-Confirmation Proceedings
In this case, the bankruptcy court confirmed the amended plan for reorganization of the debtor on February 19, 1992. Although the jurisdiction of the bankruptсy court continues until the Chapter 11 ease is closed,
see In re Fortner Oilfield Servs., Inc.,
Indeed, after a plan has been confirmed, subject matter jurisdiction is specifically conferred on the bankruptcy court to resolve only post-confirmation matters, including issues necessary to carry out the plan.
5
See
Bankruptcy Rule 3020(d) (“notwithstanding the entry of the order of confirmation, the court may enter all orders necessary to administer the estate.”);
The court in
In re Terracor,
To determine whether a bankruptcy ease has been “fully administered” or “substantially consummated” for the purposes of entering a final decree, a court must review the requirements established by
“substantial consummation” means—
(A) transfer of all or substantially all of the property proposed by the plan to be transferred;
(B) assumption by the debtor or by the successor to the debtor under the plan of the business or of the management of all or substantially all of the property dealt with by the plan; and
(C) commencement of distribution under the plan.
Similarly, consistent with
The Court finds the Committee Note to the new rule illuminative and essentially adopts its language. Noteworthy, however, is that all of the factors in the Committee Note need not be present before the Court will enter a final decree. Instead, the Committee Note and the factors therein merely serve as a guide in assisting the Court in its decision to close a case....
[I]n this case, the Debtor’s estate has been fully administered, and the plan has been consummated. It is time for thе Debtor to get on with its business and leave the shadows of the Court.
In re Mold Makers, Inc.,
In this case, the plan primarily envisioned the sale and transfer of the Metro-Bank building. See Defendants’ Memorandum Of Law In Support Of Their Motion To Dismiss, Exhibit A, ¶ 5.1.2. Plaintiff concedes that its single largest asset was the MetroBank building. See Plaintiffs Memorandum Of Law In Opposition To Defendants’ Motion To Dismiss, at 6. Accordingly, the building was sold pursuant to the plan in or around March 1992, with the effect of this sale being the “substantial consummation” of the plan. The bankruptcy court, therefore, properly closed the case without objection from the plaintiff-debtor.
C. Bankruptcy Court Cannot Extend Jurisdiction By Order of Court
Plaintiff in its complaint is not attempting to re-open the bankruptcy ease for cause
Plaintiff arguеs that the bankruptcy court’s June 10, 1992 order authorizing employment of special counsel by the debtor to file this type of complaint extends federal jurisdiction over this case. Plaintiff asserts that when the complaint was filed and the fact that the case was closed has no bearing on this court’s jurisdiction because debtor was authorized by the court to initiate this type of complaint.
Plaintiff, however, filed its complaint two weeks after the entry of the final deсree closing the bankruptcy case, and well after the plan had been fully consummated with the sale of the MetroBank building. Indeed, plaintiff made no objections, after due notice by the bankruptcy court,
see supra
note 3, to the entry of the final decree,
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and will not now be heard to claim federal jurisdiction predicated on a disingenuous argument that the bankruptcy’s court jurisdiction somehow is limitless. As the court instructed in
In re Rush,
The matter before the Court raises the question of whether an adversary proceeding such as the one here may have any life independent of the bankruptcy case in which it is instituted. It appears obvious that the adversary proceeding could be not brought in the bankruptcy court if there were no bankruptcy case in which it might be instituted. In other words, the matters complained of in the adversary proceeding must have some semblance of relationship to a bankruptcy case in order to make it the business of the bankruptcy court.... [T]he bankruptсy judge does not see how, in legal theory, the adversary proceeding can survive the closing of the bankruptcy case in which it was commenced, nor does it appear that the bankruptcy court can enter an order in an adversary proceeding which terminated before or at the time that the bankruptcy case was closed, unless the bankruptcy case is reopened.
Id. at 161. Indeed, in contrast to this case, the Rush court denied jurisdiction to adversary proceedings that had а greater nexus to the bankruptcy case inasmuch as the Rush proceedings had been filed before the bankruptcy case was closed. Thus, the reasoning in Rush is considerably stronger in the present case where the adversary proceedings had been filed well after the bankruptcy case was closed.
Moreover, a bankruptcy court cannot grant federal jurisdiction beyond that which is allowed by law. A reservation of jurisdiction beyond what is necessаry to effectuate the plan of reorganization is beyond
Thus, the bankruptcy court’s June 10,1992 order cannot extend jurisdiction over a cаse that no longer exists. Moreover, in the same breath, plaintiff is wrong to suggest that because these proceedings are related “non-core” proceedings, the court has jurisdiction. The determination of whether the proceedings are “core” or “non-core,” however, is irrelevant to a determination of whether this court has jurisdiction.
In re Marcus Hook Dev. Park, Inc.,
[I]t is irrelevant whether a particular proceeding is “core” or “non-core” if the inquiry is whether that proceeding falls within the scope of28 U.S.C. §§ 1334(a) and (b) .... Proceedings outside the scope of28 U.S.C. § 1334(a) and (b) cannot be referred to a bankruptcy court by a district court pursuant to28 U.S.C. § 157 .
IV. Conclusion
The court, therefore, for the forеgoing reasons will dismiss the above-captioned case on the ground that this court’s limited post-confirmation jurisdiction to oversee the implementation of the plan permits us only to clarify patent ambiguities in the confirmed plan or interpret matters concerning the plan’s operations which impact upon its effec-tuation. Indeed, where, as in this case, the bankruptcy case has been closed pursuant to Rule 3022, this court does not retain any jurisdiсtion that would permit it to hear plaintiffs adversary complaint, regardless of whether the bankruptcy court at an earlier time authorized plaintiff to employ counsel to bring these types of claims.
ORDER
AND NOW, TO WIT, this 22nd day of February, 1994, upon consideration of 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
Notes
. The eight state law claims are as follows: counts one and two — commercial disparagement; counts three and four — tortious interference with existing contractual relations; counts five and six — tortious interference with prospective business relations; count seven — legal malpractice; and count eight — civil cоnspiracy.
. Paragraph 9.5 of the amended plan reads in pertinent part as follows:
Until the Plan has been fully consummated, the Bankruptcy Court shall retain jurisdiction for all purposes including, but not limited to, the following:....
See Defendants' Memorandum Of Law In Support Of Their Motion To Dismiss, Exhibit A, ¶ 5.1.2 (emphasis supplied).
. By Order dated April 15, 1993, titled OMNIBUS ORDER DIRECTING PAYMENTS TO BE MADE UNDER AMENDED PLAN OF REORGANIZATION, AUTHORIZING WITHDRAWAL OF COUNSEL FOR THE DEBTOR, AND CLOSING THE CASE, the bankruptcy court ruled:
[F]ollowing a hearing on April 14, 1993 to consider ... whether or not this Chapter 11 case should be closed, and it appearing that all parties in interest in attendance at said hearing consented to the entry of this Order, it is ... ORDERED that the Chapter 11 case of the above-named Debtor is CLOSED.
See Defendants' Memorandum Of Law In Support Of Their Motion To Dismiss, Exhibit F.
. As one court stated:
Theoretically, one may ask first whether there is an "estate” after the confirmation of a Chapter 11 plan.... see also In re H. White Constr. Co., Inc.,92 B.R. 656 , 659 (Bankr. W.D.La.1988) (cases hold estate terminatesupon confirmation); In re Westholt Mfg., Inc., 20 B.R. 368 , 372 (Bankr.D.Kan.1982) . .. (“At confirmation, all the property of the estate is vested in the debtor, thereby terminating the estate’s existence, although the court has continued jurisdiction underSection 1142 to oversee the plan’s execution.”).
In re Mold Makers, Inc.,
. See also In re Dilbert's Quality Supermarkets, Inc.,
.
(b) The court may direct the debtor and any other necessary party to execute or deliver or to join in the execution or delivery of any instrument required to effect a transfer of property dealt with by a confirmed plan, and to perform any other act, including the satisfaction of any lien, that is necessary for the consummation of the plan.
. Bankruptcy Rule 3022 states in full:
FINAL DECREE IN CHAPTER 11 REORGANIZATION CASE
After an estate is fully administered in a chapter 11 reorganization case, the court, on its own motion or on motion of a party in interest, shall enter a final decree closing the case.
Rule 3022 works together with
. The advisory committee note to the 1991 amendments to Rule 3022 reads in full:
Entry of a final decree closing a chapter 11 case should not be delayed solely because the payments required by the plan have not been completed. Factors that the court should consider in determining whether the estate has been fully administered include (1) whether the order confirming the plan has become final, (2) whether deposits required by the plan have been distributed, (3) whether the property proposed by the plan to be transferred has been transferred, (4) whether the debtor or the successor of the debtor under the plan has assumed the business or the management of the property dealt with by the plan, (5) whether payments under the plan have commenced, and (6) whether all motions, contested matters, and adversary proceedings have been finally resolved.
The court should not keep the case open only because of the possibility that the court’s jurisdiction may be invoked in the future. A final decree closing the case after the estate is fully administered does not deprive the court of jurisdiction to qnforce or interpret its own orders and does not prevent the court from reopening the case for cause pursuant to§ 350(b) of the Code....
. Local Bankruptcy Rule 5009.1, CLOSING OF CHAPTER 11 CASES, for the United States Bankruptcy Court for the Eastern District of Pennsylvania states in full:
Within 180 days after confirmation of a Chapter 11 Plan, the court shall enter a Final Decree closing the case, unless a motion to keep the case open for cause stated is filed with the six-month period.
. Had plaintiff objected at the entry of final decree, and had the court sustained the objections, the court’s jurisdiction would have continued. As the Third Circuit in Marcus Hook instructed:
We hold that the present proceeding is related to bankruptcy. A party moving for final decree asks that the case be closed because the estate has been fully administered.11 U.S.C. § 350 (1988). Bankr.R. 3022. Should the objection to the motion for final decree be sustained, the bankruptcy court would retain its power to issue any orders necessary to administer the estate. Bankr.R. 3020(d); In re Bryant,111 B.R. 474 , 477 n. 2 (E.D.Pa.1990) (bankruptcy court still has jurisdiction even though debtor’s underlying bankruptcy had been discharged because the case was not closed).
Marcus Hook,