Cain Partnership, Ltd. v. Pioneer Investment Services Co. (In re Pioneer Investment Services Co.)

946 F.2d 445, 1991 WL 180625
CourtCourt of Appeals for the Sixth Circuit
DecidedSeptember 18, 1991
DocketNos. 90-5766, 90-6578
StatusPublished
Cited by5 cases

This text of 946 F.2d 445 (Cain Partnership, Ltd. v. Pioneer Investment Services Co. (In re Pioneer Investment Services Co.)) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cain Partnership, Ltd. v. Pioneer Investment Services Co. (In re Pioneer Investment Services Co.), 946 F.2d 445, 1991 WL 180625 (6th Cir. 1991).

Opinion

KENNEDY, Circuit Judge.

Appellant appeals from the District Court’s affirmance of the Bankruptcy Court’s order denying appellant’s motion for relief from an automatic stay and granting debtor’s motion for approval of assumption of an unexpired lease. Two issues are presented to this Court: 1) whether the Bankruptcy Court and District Court had subject matter jurisdiction to adjudicate these motions; and 2) whether the Bankruptcy Court and District Court properly applied Tennessee law to the leasehold issues raised by appellant. For the following reasons, we AFFIRM.

I.

A.

On April 12, 1989, Pioneer Investment Services Company (“debtor” or “Pioneer”) filed a voluntary petition in bankruptcy and became a debtor-in-possession. Included in its amended schedule of assets filed with the Bankruptcy Court was an unexpired lease of approximately 95.5 acres of nonresidential real property (“Colonial Lease”) to which Cain Partnership, Ltd. (“Partnership” or “appellant”) was a party. On May 18, 1989, Pioneer filed a motion in bankruptcy court to assume the Colonial Lease.

On May 25, 1989, the Partnership filed a motion to lift the automatic stay imposed pursuant to 11 U.S.C. § 362 so that the Partnership could repossess the real property subject to the Colonial Lease. The Partnership claimed that Pioneer had breached the lease prior to filing for bankruptcy resulting in the automatic termination of the lease and forfeiture of any right to use or any interest in the property. Fleet National Bank and First National Bank intervened in this proceeding.

On June 15, 1989, the Bankruptcy Court held proceedings on these motions. The Bankruptcy Court initially notified all parties that these were core proceedings. Each party claimed that they had a right to use the property subject to the Colonial Lease, and that such right was superior to the other party’s right. The Bankruptcy Court issued an order on September 15, [447]*4471989, denying the Partnership’s motion to lift the stay and granting debtor’s motion to assume the Colonial Lease.

The Partnership appealed from this order to the District Court. On March 8, 1990, the District Court affirmed the Bankruptcy Court’s decision. The District Court subsequently denied the Partnership’s motion for a rehearing.

On June 1, 1990, the Partnership appealed to this Court (90-5766). Its brief on that appeal raised no jurisdictional issue. The issue was first raised when the Partnership filed a motion entitled “Appellant’s Motion To Hold Appeal In Abeyance And Remand For Disposition Of Motion to Vacate As Void The Order Appealed.” This motion was filed pursuant to Federal Rules of Civil Procedure 60(b)(4) and raised for the first time the issue of whether the Bankruptcy Court and District Court had jurisdiction to adjudicate the issues raised by the parties.1 This Court ordered the appeal held in abeyance awaiting disposition of the motion filed by the Partnership in the District Court.

The Partnership filed a motion in the District Court requesting that it vacate its order because it lacked subject matter jurisdiction to adjudicate the issues previously decided. The District Court denied this motion. This Court then docketed the Partnership’s appeal.

B.

The facts relevant to this appeal are not in dispute. The debtor became obligated under the Colonial Lease as a result of a series of assignments. The Colonial Lease, as executed between the original parties, provides: “This lease may be assigned or the leased premises may be sublet in whole or in part for any lawful purpose at the will of the Lessee. However, the Lessee shall remain liable to the Lessor for lease payment and payment of taxes.” The lease agreement does not address default, forfeiture or remedies for breach, except for provision of attorney’s fees if the Partnership were required to resort to legal action to enforce its rights under the lease agreement.

Rent and property taxes owed by Pioneer were paid from an escrow account pursuant to an agreement collateral to the lease. The agreement, executed by several parties including Valley Fidelity Bank and Trust Company (“Valley”), obligated Valley to pay from the escrow account riionthly installments of rent and all real property taxes for the property subject to the Colonial Lease. At all times relevant to this action, Pioneer maintained sufficient funds in the escrow account to satisfy these obligations. Valley, however, failed to pay real property tax obligations which arose prior to debtor’s bankruptcy filing. On May 2,1989, almost one month after debtor filed its bankruptcy petition, the Partnership paid the overdue tax obligations. Pri- or to these payments, the Partnership never gave notice to Pioneer that Valley had not paid the real estate taxes; nor did the Partnership ever request that Pioneer make these payments. At no time did the Partnership notify Pioneer or take any actions to indicate that the Colonial Lease was terminated.

II.

The Partnership first contends that the Bankruptcy Court lacked subject matter jurisdiction to hear and determine the issue raised in the parties’ motions — whether debtor’s prepetition breach automatically terminated the Colonial Lease — because it was a matter to be resolved solely by the application of state law. Appellant argues that the statutory grant of jurisdiction to bankruptcy courts over core proceedings is unconstitutional. Resolution of this issue requires a brief overview of the statutory development of the bankruptcy court’s jurisdiction.

[448]*448Under the Bankruptcy Act of 1898, proceedings in bankruptcy were summary, as opposed to plenary, in nature. Cline v. Kaplan, 323 U.S. 97, 65 S.Ct. 155, 89 L.Ed. 97 (1944). Bankruptcy courts “ha[d] the power to adjudicate summarily rights and claims to property which [was] in the actual or constructive possession of the court.” Cline, 323 U.S. at 98, 65 S.Ct. at 156. Without such possession, and lacking consent of the adverse party to the jurisdiction of the bankruptcy court, the court did not have jurisdiction over a claim.

The enactment of the Bankruptcy Reform Act of 1978 (the “Code”) eliminated the concept of actual or constructive possession of property as the primary basis for bankruptcy court jurisdiction. The Code granted the bankruptcy court all of the district court’s bankruptcy jurisdiction. Thus, the bankruptcy court could hear and determine any issue arising in a bankruptcy case. This broad jurisdictional grant was subsequently declared unconstitutional by the Supreme Court. See Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982). Congress sought to remedy this constitutional defect by passage of the Bankruptcy Amendments and Federal Judgeship Act of 1984 (“BAFJA”). The instant case is governed by the jurisdictional provisions of BAFJA.

Under the Code as amended by BAFJA, the district courts have original and exclusive jurisdiction over all title 11 cases. 28 U.S.C.A. § 1334(a) (West Supp.1991).

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Randall Waldman v. Ronald Stone
698 F.3d 910 (Sixth Circuit, 2012)
Matter of Sabec
137 B.R. 659 (W.D. Michigan, 1992)
In Re Pioneer Investment Services Company
946 F.2d 445 (First Circuit, 1991)

Cite This Page — Counsel Stack

Bluebook (online)
946 F.2d 445, 1991 WL 180625, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cain-partnership-ltd-v-pioneer-investment-services-co-in-re-pioneer-ca6-1991.