In re Drewes v. Zip Feed Mills, Inc.

D. North Dakota

In re Drewes v. Zip Feed Mills, Inc.

119 B.R. 197, 1990 Bankr. LEXIS 2099

CourtUnited States Bankruptcy Court, D. North Dakota

DecidedAugust 1, 1990

DocketBankruptcy No. 89-05299; Adv. No. 90-7040

StatusPublished

This text of 119 B.R. 197 (In re Drewes v. Zip Feed Mills, Inc.) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. North Dakota primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

In re Drewes v. Zip Feed Mills, Inc., 119 B.R. 197, 1990 Bankr. LEXIS 2099 (N.D. 1990).

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Opinion

ORDER

WILLIAM A. HILL, Bankruptcy Judge.

This is a consolidated adversary proceeding commenced by the trustee on June 26, 1990, against thirteen defendants seeking recovery of alleged preferences and fraudulent conveyances. Ten of the answering defendants have filed demands for jury trial.¹ Three defendants have not interposed any answer.²

In Granfinanciera v. Nordberg, — U.S. -, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989), the Supreme Court, relying heavily on its decisions in Katcken v. Landy, 382 U.S. [198]*198323, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966), and Schoenthal v. Irving Trust Co., 287 U.S. 92, 53 S.Ct. 50, 77 L.Ed. 185 (1932) held that the Seventh Amendment right to a jury trial is preserved in actions seeking to recover fraudulent transfers notwithstanding the fact that the claim arises in the context of a bankruptcy case. Although Granfinanciera was a fraudulent conveyance action under section 548, nothing in Granfinanciera or in the historical underpinnings of section 547 suggests that a preference action to recover a money judgment should be treated any differently than a fraudulent conveyance action. A jury trial is preserved in either situation. In Granfinanciera, however, the court clearly indicated also that the Seventh Amendment right to a jury trial is preempted upon the filing of a proof of claim. Granfinanciera, 109 S.Ct. at 2798-99. On this issue the court stated, “We read Schoenthal and Katchen as holding that, under the Seventh Amendment, a creditor’s right to a jury trial on a bankruptcy trustee’s preference claim depends upon whether the creditor has submitted a claim against the estate.” Id. 109 S.Ct. at 2799. Further elaborating on this point the court went on: “As Katchen makes clear ... by submitting a claim against the bankruptcy estate, creditors subject themselves to the court’s equitable power to disallow their claims, even though the debtor’s opposing counterclaims are legal in nature.... ” Id. 109 S.Ct. at 2799.

Dale and Leon Roesler, Kent Roes-ler, Merle Schatzke and Orval Beadles have filed proofs of claim and for that reason have no right to have the adversary proceeding against them tried by a jury.³ The six remaining defendants who have requested jury trials (Eldon Saunders, Alvin Leedahl, Steve Brakke, Paul Brakke, Don Brakke and Dallas Glasow) have not filed proofs of claim against the estate and are entitled to a jury trial with respect to the trustee’s claim against them.

In this circuit it has been determined that bankruptcy judges lack either express or implicit authority to conduct jury trials in legal proceedings brought by a debtor or trustee against third party creditors. In re United Missouri Bank of Kansas City, N.A., 901 F.2d 1449 (8th Cir. 1990). Thus, while these five defendants are entitled to a jury trial, that trial cannot be conducted by the Bankruptcy Court. It is appropriate procedurally that the trustee’s Complaint be severed with this court retaining jurisdiction over the trial of the section 547/548 actions against Zip Feed Mills, Dale and Leon Roesler, Kent Roes-ler, Merle Schatzke, Runck Chateau Ranch, Gordon Halvorson and Orval Beadles. The trustee’s Complaint against Eldon Saunders, Alvin Leedahl, Steve Brakke, Paul Brakke, Don Brakke and Dallas Glasow is transferred to the United States District Court for the District of North Dakota for trial before a jury as prayed for in their respective Answers.⁴

The Bankruptcy Court will continue to administer the instant adversary proceeding as to those actions retained. As to the actions transferred, all further pleadings and correspondence should be directed to the United States District Court.

SO ORDERED.

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ORDER

WILLIAM A. HILL, Bankruptcy Judge.

This is a consolidated adversary proceeding commenced by the trustee on June 26, 1990, against thirteen defendants seeking recovery of alleged preferences and fraudulent conveyances. Ten of the answering defendants have filed demands for jury trial.¹ Three defendants have not interposed any answer.²

In Granfinanciera v. Nordberg, — U.S. -, 109 S.Ct. 2782, 106 L.Ed.2d 26 (1989), the Supreme Court, relying heavily on its decisions in Katcken v. Landy, 382 U.S. [198]*198323, 86 S.Ct. 467, 15 L.Ed.2d 391 (1966), and Schoenthal v. Irving Trust Co., 287 U.S. 92, 53 S.Ct. 50, 77 L.Ed. 185 (1932) held that the Seventh Amendment right to a jury trial is preserved in actions seeking to recover fraudulent transfers notwithstanding the fact that the claim arises in the context of a bankruptcy case. Although Granfinanciera was a fraudulent conveyance action under section 548, nothing in Granfinanciera or in the historical underpinnings of section 547 suggests that a preference action to recover a money judgment should be treated any differently than a fraudulent conveyance action. A jury trial is preserved in either situation. In Granfinanciera, however, the court clearly indicated also that the Seventh Amendment right to a jury trial is preempted upon the filing of a proof of claim. Granfinanciera, 109 S.Ct. at 2798-99. On this issue the court stated, “We read Schoenthal and Katchen as holding that, under the Seventh Amendment, a creditor’s right to a jury trial on a bankruptcy trustee’s preference claim depends upon whether the creditor has submitted a claim against the estate.” Id. 109 S.Ct. at 2799. Further elaborating on this point the court went on: “As Katchen makes clear ... by submitting a claim against the bankruptcy estate, creditors subject themselves to the court’s equitable power to disallow their claims, even though the debtor’s opposing counterclaims are legal in nature.... ” Id. 109 S.Ct. at 2799.

Dale and Leon Roesler, Kent Roes-ler, Merle Schatzke and Orval Beadles have filed proofs of claim and for that reason have no right to have the adversary proceeding against them tried by a jury.³ The six remaining defendants who have requested jury trials (Eldon Saunders, Alvin Leedahl, Steve Brakke, Paul Brakke, Don Brakke and Dallas Glasow) have not filed proofs of claim against the estate and are entitled to a jury trial with respect to the trustee’s claim against them.

In this circuit it has been determined that bankruptcy judges lack either express or implicit authority to conduct jury trials in legal proceedings brought by a debtor or trustee against third party creditors. In re United Missouri Bank of Kansas City, N.A., 901 F.2d 1449 (8th Cir. 1990). Thus, while these five defendants are entitled to a jury trial, that trial cannot be conducted by the Bankruptcy Court. It is appropriate procedurally that the trustee’s Complaint be severed with this court retaining jurisdiction over the trial of the section 547/548 actions against Zip Feed Mills, Dale and Leon Roesler, Kent Roes-ler, Merle Schatzke, Runck Chateau Ranch, Gordon Halvorson and Orval Beadles. The trustee’s Complaint against Eldon Saunders, Alvin Leedahl, Steve Brakke, Paul Brakke, Don Brakke and Dallas Glasow is transferred to the United States District Court for the District of North Dakota for trial before a jury as prayed for in their respective Answers.⁴

The Bankruptcy Court will continue to administer the instant adversary proceeding as to those actions retained. As to the actions transferred, all further pleadings and correspondence should be directed to the United States District Court.

SO ORDERED.

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