Butz v. Society National Bank of the Miami Valley (In re Clark)

30 B.R. 182, 1983 Bankr. LEXIS 6259, 10 Bankr. Ct. Dec. (CRR) 833
CourtUnited States Bankruptcy Court, S.D. Ohio
DecidedMay 9, 1983
DocketBankruptcy Nos. 3-82-00546, 3-82-01281; Adv. Nos. 3-82-0571, 3-82-0572
StatusPublished
Cited by2 cases

This text of 30 B.R. 182 (Butz v. Society National Bank of the Miami Valley (In re Clark)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Butz v. Society National Bank of the Miami Valley (In re Clark), 30 B.R. 182, 1983 Bankr. LEXIS 6259, 10 Bankr. Ct. Dec. (CRR) 833 (Ohio 1983).

Opinion

[183]*183FINDINGS, CONCLUSIONS, PROPOSED ORDER, AND CERTIFICATION OF NEED FOR IMMEDIATE REVIEW BY THE DISTRICT JUDGE

CHARLES A. ANDERSON, Bankruptcy Judge.

PRELIMINARY DISCUSSION OF PROCEDURE

These matters, as two of numerous similarly delayed cases, are before the Court sua sponte for determination of the proper procedure for the handling of such cases under the “Emergency Model Rule” for “Operation of the Bankruptcy Court System” (hereinafter the Rule or the Model Rule). See the Rule reprinted in White Motor Corp. v. Citibank, N.A., 704 F.2d 254, 10 B.C.D. 392 (6 Cir., 1983); and also reprinted in this Court’s opinion in Winters National Bank and Trust Company of Dayton v. Schear Group (Matter of Schear Realty and Investment Co., Inc.), 25 B.R. 463, 465, 9 B.C.D. 1210, B.L.D. ¶ 68,949 (Bkrtcy.Ohio 1982), hereinafter Schear Realty. In Schear Realty, this Court expressed concern and doubt regarding the validity and prudence of the Model Rule’s contemplated exercise by this Court of “fictional” jurisdiction over causes of action derivative from the common law or state statutory law. See Schear Realty, and discussion therein which is incorporated herein for purposes of brevity. In White Motor, the Sixth Circuit explicitly disagreed with the concerns expressed in Schear Realty, and further, in effect, declared authority to the bankruptcy judges to proceed with common law and state causes of action in accordance with the provisions of the Rule in the manner elaborated within the White Motor opinion.

The implied mandate to exercise such authority, however, places this Court in an uncomfortable position of having to reconcile the Model Rule with conflicting Rules enacted by the United States Supreme Court. 28 U.S.C. § 2075 grants to the Supreme Court general rule-making powers in cases under Title 11 in the manner prescribed as follows:

The Supreme Court shall have the power to prescribe by general rules, the forms of process, writs, pleadings and motions, and the practice and procedure in cases under Title 11.
Such rules shall not abridge, enlarge or modify any substantive right.
Such rules shall not take effect until they have been reported to Congress by the Chief Justice at or after the beginning of a regular session thereof but not later than the first day of May and until the expiration of ninety days after they have been thus reported.

The present Bankruptcy Rules (hereinafter the Bankruptcy Rules or the Supreme Court Rules) became effective on 24 April 1973 pursuant to the Supreme Court’s rule-making powers granted within 28 U.S.C. § 2075, and in compliance with the reporting requirement therein. See the Supreme Court Bankruptcy Rules reprinted at 411 U.S. 991-1103. See also additional rule amendments and additions at 415 U.S. 1004-1053, and 421 U.S. 1027-1074, and 1089-1122. In addition 28 U.S.C. § 2075 further provides that, “Such rules shall not abridge, enlarge, or modify any substantive right,” thereby codifying the general rule that a court may not extend or limit jurisdiction by rule. See Rule 82 of the Federal Rules of Civil Procedure; Rule 928 of the Bankruptcy Rules of Procedure; United States v. Sherwood, 312 U.S. 584, 61 S.Ct. 767, 85 L.Ed. 1058 (1941); Abbott v. Brown, 241 U.S. 606, 36 S.Ct. 689, 60 L.Ed. 1199 (1916); Matter of Mobil Steel Co., 563 F.2d 692 (5th Cir.1977); and American Brake Shoe and Foundry Co. v. Interborough Rapid Transit Co., 1 F.Supp. 820 (D.N.Y.1932).

Supreme Court Rule 927 provides, in pertinent part, that:

Each district court by action of a majority of the judges thereof may from time to time make and amend rules governing practice and procedure under [title 11 of the United States Code] not inconsistent with these rules.... In all cases not provided for by rule, the district court may regulate its practice in any manner not inconsistent with these rules. [Emphasis added.]

[184]*184This specific prohibition that local district court rules may not be inconsistent with the Supreme Court Rules is impliedly incorporated into the Model Rule itself, which provides in paragraph (a), “The purpose of this rule is to supplement existing law and rules

Supreme Court Rules 802 and 803 contemplate that, unless appealed, all judgments and orders issued by the bankruptcy judges shall be final. The finality of a bankruptcy judge’s findings is further emphasized by Supreme Court Rules 752(a), 801 and 914, all of which provide that findings of fact by bankruptcy judges are only reversible if “clearly erroneous.” See also, Norton and Lieb, “The Aftermath of Northern Pipeline; Bankruptcy Jurisdiction under Local Court Rule,” Supplement to Norton Bankruptcy Law and Practice at 51-54 (1983). The Model Rule appears inconsistent with Supreme Court Rules "752(a), 803, 810 and 814 because the Model Rule provides that district judges shall review all bankruptcy judges’ orders and judgments if issued in a related proceeding, regardless whether an appeal was perfected, and further that the district judge “... need give no deference to the findings of the bankruptcy judge” which are “proposed” rather than formally entered into the record. Model Rule (e)(2)(B) and (3).

Furthermore, the requirement in the Model Rule that the district court automatically conduct a compulsory “review” (with the discretion to proceed de novo) apparently uproots the appellate process codified by Congress in 28 U.S.C. § 160(a), 1293(b), 1334 and 1482, as incorporated into Supreme Court Rule 801 and all Rules in Part VIII of the “Interim Rules of Bankruptcy Procedure,” effective 1 February 1980 in this District.

In essence, the procedure adopted by the Model Rule for “related proceedings” compels initial review by a district judge, whose review within his discretion may be de novo, thereby obviating the district courts’ appellate functions as contemplated within Supreme Court Rules 752(a), 810 and 914, and also thereby extinguishing the option of direct appeal to either the Circuit Courts of Appeal or one of the Bankruptcy Appellate Panels (where applicable).

The above concerns are accentuated by the fact that on 25 April 1983 the United States Supreme Court issued new Bankruptcy Rules pursuant to 28 U.S.C. § 2075

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30 B.R. 182, 1983 Bankr. LEXIS 6259, 10 Bankr. Ct. Dec. (CRR) 833, Counsel Stack Legal Research, https://law.counselstack.com/opinion/butz-v-society-national-bank-of-the-miami-valley-in-re-clark-ohsb-1983.