Creasy v. Coleman Furniture Corp.

763 F.2d 656, 13 Bankr. Ct. Dec. (CRR) 418, 12 Collier Bankr. Cas. 2d 1238, 1985 U.S. App. LEXIS 19743
CourtCourt of Appeals for the Fourth Circuit
DecidedJune 6, 1985
DocketNos. 84-2033(L), 84-2034
StatusPublished
Cited by63 cases

This text of 763 F.2d 656 (Creasy v. Coleman Furniture Corp.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Creasy v. Coleman Furniture Corp., 763 F.2d 656, 13 Bankr. Ct. Dec. (CRR) 418, 12 Collier Bankr. Cas. 2d 1238, 1985 U.S. App. LEXIS 19743 (4th Cir. 1985).

Opinion

SNEEDEN, Circuit Judge:

Coleman Furniture Company filed for reorganization under Chapter 11 of the Bankruptcy Act on November 3, 1982. In July of 1983, the Coleman Furniture bankruptcy action was converted to a Chapter 7 liquidation action. The Chapter 7 trustee, Roy Creasy, filed an adversary proceeding in bankruptcy court in which he sought to determine the rights to funds of the Coleman Furniture Company employee pension fund and to recover any excess funds as assets of the bankrupt’s estate. Coleman Furniture, prior to the bankruptcy filing, had a pension plan to provide retirement benefits to eligible employees of the company and their beneficiaries. Under the terms of the plan, the eligible employees were to be paid first and any extra funds were to revert to Coleman Furniture.

One of the employees, Diane Turman, filed a declaratory judgment action in state court in which she sought a determination of her rights in the pension fund. A trustee of the pension fund, who was a defendant in the state court action, filed a remov[658]*658al petition under 28 U.S.C. § 1478(a),1 and the state court action was removed to federal bankruptcy court. Turman argued that the removal petition was untimely and that the federal court had no jurisdiction to resolve the pension fund dispute. Shumate, the majority stockholder and an executive officer of Coleman Furniture, intervened; and, he also argued that the bankruptcy court lacked the power to adjudicate the pension fund dispute. The district court held that the removal petition was timely filed, that the court had jurisdiction to hear the dispute over the pension fund, and that any surplus assets of the pension fund would be property in the debtor’s estate. We affirm.

The bankruptcy court obtained jurisdiction over the initial bankruptcy proceeding filed by the trustee via a referral from the district court under the Emergency Rule for the Continued Operation of the Bankruptcy Courts. The United States District Court for the Western District of Virginia had adopted the Emergency Rule in an order dated December 24, 1982. Under the Emergency Rule, which was adopted in response to the Supreme Court’s decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), bankruptcy actions were deemed to have been filed first in the district court and then referred to the bankruptcy court under a general reference order.2

After the bankruptcy proceeding was filed, Diane Turman, who had been an employee of Coleman Furniture and who was represented by the same attorney who represented Shumate in the bankruptcy proceeding, filed a state court action on October 12, 1983, in which she sought a declaratory judgment as to her vested rights and the rights of the other employees in the pension plan. Shumate and Roland Gunn, the plan’s committee members, and Bank of Virginia Trust Company and Wachovia Bank and Trust Company, the plan’s trustees, were named as defendants.

The trustee in the original bankruptcy action had sought to terminate the pension fund and liquidate its assets. He argued that any excess remaining in the trust fund after the distribution of benefits to the Coleman Furniture’s former employees would be property in the estate of the bankrupt corporation — Coleman Furniture. Depending upon how the terms of the pension fund are interpreted, Shumate, the owner of Coleman, and also an employee, stands to gain a substantial portion of the pension fund. The trustee, however, wants the fund liquidated in accordance with the federal Employees’ Retirement Income Security Act procedures so that all the former employees are treated equally and in accordance with the terms of the plan. [659]*659The trustee accurately points out that under the terms of the pension fund any assets remaining after payment of benefits are to be returned to the company. Thus, the trustee would have the right to control these assets of the corporate debtor. The only possible chance Shumate has of getting his hands on a substantial portion of the pension fund money is to keep the question of pension fund distribution out of the bankruptcy court and hope for a favorable ruling in state court on the question of which employees, including himself, are entitled to be paid first.

Shumate intervened in the bankruptcy action and argued that the trustee had no right to control the pension fund assets. Bank of Virginia Trust Company and Wachovia Bank and Trust Company, the pension fund trustees, also intervened in the adversary bankruptcy proceeding, because they were receiving conflicting investment instructions from Creasy, the bankruptcy trustee, and Shumate, who was a member of the pension plan committee.

Bank of Virginia Trust filed an application to have the Turman state court action removed to the U.S. Bankruptcy Court in Virginia on November 21, 1983. The removal motion was granted, despite Turman’s contention that it was untimely. Turman then filed a motion to remand her suit to state court. Additionally, Bank of Virginia Trust filed a declaratory judgment action requesting the court to determine whether the trustee or the pension fund committee had the right to invest the trust funds and oversee payments.

Bank of Virginia Trust Company then filed a motion in district court to revoke the reference to the bankruptcy court. On January 24, 1984, the reference to the bankruptcy court was revoked, and the adversary proceeding and all related matters, including the Turman action which had been removed from state court, were consolidated and brought before the district court. Subsequently, this order was vacated and modified to reflect the withdrawal of the reference to bankruptcy court of only the adversary proceedings. On April 24, 1984, the district court denied Turman’s motion for a remand of the pension fund case back to state court.

Shumate moved the district court to dismiss the adversary proceeding, arguing that under Marathon, the court lacked jurisdiction to adjudicate the contractual rights to the pension plan funds. The matter was referred to a United States Magistrate, who was designated as a special master pursuant to Fed.R.Civ.P. 53, to determine if the district court had jurisdiction over the dispute. Magistrate Glen E. Conrad concluded that the district court had jurisdiction over the Turman action and the Coleman adversary proceeding; and, upon de novo review of the special master’s report, the district court, The Honorable Glen Williams presiding, held that it had jurisdiction over the disputes.

Turman and Shumate filed a joint brief in this Court. Turman argues that the court erred in holding that the removal petition was timely filed and in finding that it could exercise jurisdiction over the removed state court action. Shumate argues that the district court erred in finding that it had jurisdiction to adjudicate any issues involving the pension fund raised by the Coleman Furniture bankruptcy trustee and in the Turman action. Shumate also argues that the trust fund assets are not property in the debtor’s estate within the meaning of 11 U.S.C. § 541

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Bluebook (online)
763 F.2d 656, 13 Bankr. Ct. Dec. (CRR) 418, 12 Collier Bankr. Cas. 2d 1238, 1985 U.S. App. LEXIS 19743, Counsel Stack Legal Research, https://law.counselstack.com/opinion/creasy-v-coleman-furniture-corp-ca4-1985.