Jeffries v. Browning (In Re Reserves Development Corp.)

64 B.R. 694
CourtDistrict Court, W.D. Missouri
DecidedAugust 22, 1986
Docket86-0508-CV-W-5
StatusPublished
Cited by12 cases

This text of 64 B.R. 694 (Jeffries v. Browning (In Re Reserves Development Corp.)) is published on Counsel Stack Legal Research, covering District Court, W.D. Missouri primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jeffries v. Browning (In Re Reserves Development Corp.), 64 B.R. 694 (W.D. Mo. 1986).

Opinion

ORDER

SCOTT 0. WRIGHT, Chief Judge.

This is an appeal from a Memorandum Opinion and Order of Bankruptcy Judge Joel Pelofsky, wherein that Court enjoined appellants from attaching property, located in West Virginia and owned by the debtor, and in which plaintiffs-appellees had acquired a pre-Bankruptcy security interest. Appellants, the West Virginia Attorney General’s office and Commissioner of Labor, allege a number of issues on appeal, some novel and some not so novel, most of which challenge the constitutionality of the Bankruptcy Court’s order. However, for the following reasons, this Court affirms the Bankruptcy Court’s order.

I. Statement of Facts

The facts in this case are generally undisputed. On April 12, 1983, two corporations, Reserve Development Corporation and R.D.C. Monongah, Inc. (“Debtors”), filed a Chapter 11 Reorganization petition under Title 11, U.S.C., in the United States Bankruptcy Court for the Western District of Missouri. After filing the petition, the debtors continued their business operations, which included the operation of a coalwashing facility in Marion County, West Virginia, as a debtor in possession. Plaintiffs-appellees, Jeffries and Ketter, held a security interest in certain coalwash-ing units located on the facility.

On October 5, 1984, the West Virginia Attorney General’s office filed suit in Ka-nawha County, West Virginia, on behalf of the West Virginia Commissioner of Labor and eleven of the debtors’ employees, seeking recovery of unpaid wages for the months of April, May, June, July and August of 1983, pursuant to the West Virginia Wage Payment and Collection Act, W.Va. Code §§ 21-5-1 et seq. On November 5, 1984, appellants obtained a prejudgment attachment of the coalwashing facility. The record is unclear as to whether appellants had any notice of the Chapter 11 proceeding at the time of the attachment.

Prior to the attachment, appellees Jef-fries and Ketter sought and obtained relief from the automatic stay in the Bankruptcy Court, and a public sale was held on October 31, 1985 in which appellees became the buyers of the coalwashing units.

On September 20, 1985, appellees Jef-fries and Ketter filed an application with the Bankruptcy Court seeking to enjoin the attachment and continued state court action, and sought the issuance of civil contempt citations against appellants for violation of the Chapter 11 automatic stay. The Bankruptcy Court entered an order on September 27, 1985, directing appellants to appear and show cause why the requested relief should not be granted. The show cause hearing was held and evidence was taken on October 21, 1985. The Bankruptcy Judge, in overruling appellants’ motion to dismiss for lack of jurisdiction, insufficient service of process and inadequate standing on the part of appellees Jeffries and Ketter, concluded that the appellant’s attachment of the coalwashing facility was in violation of the automatic stay, and thus, the attachment was void. Consequently, *697 the court enjoined appellants from attaching the property without relief from the automatic stay and, additionally, enjoined the continuation of the state court action by appellants as to the wages allegedly owed for the month of April, 1983. However, the Bankruptcy Court ruled that appellants could proceed to judgment on allegations of wage payments due for the months of May, June, July and August of 1983. The court also concluded that appellants’ violation of the automatic stay was not a willful one and, thus, denied appel-lees’ motion for contempt against appellants.

Appellants have challenged the order of the Bankruptcy Court by raising the following issues on appeal:

(1) That the Bankruptcy Court lacked both subject matter and personal jurisdiction, and, thus, the Bankruptcy judge erred in not dismissing the show cause proceeding;

(2) That appellees Jeffries and Ketter lacked standing to bring this proceeding;

(3) That since the West Virginia civil action arose after the filing of the Chapter 11 petition, the § 362 automatic stay is inapplicable;

(4) That even if the § 362 automatic stay is applicable, the West Virginia civil action is an exercise of the state’s police power and, thus, falls within the § 362(b)(4) governmental unit exemption;

(5) That service of process on the West Virginia Attorney General and the Commissioner of Labor was inadequate.

II. Discussion

A. Jurisdiction

Appellants contend that the Bankruptcy Court lacked personal jurisdiction over the West Virginia Attorney General and Commissioner of Labor, as the named defendants, because the defendants-appellants lacked the requisite minimum contacts with the State of Missouri. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). Appellants urge this Court to adopt, as a limitation on a federal court’s exercise of personal jurisdiction, the 14th Amendment limitations on personal jurisdiction as set out in International Shoe. In other words, appellants argue that since' the defendants have no connection with the State of Missouri, then the federal Bankruptcy Court’s exercise of personal jurisdiction violates the 5th Amendment Due Process Clause. While appellants concede that the federal courts have not given a definitive answer on the question of whether a defendant must have “minimum contacts” with the federal forum, they have cited to this Court federal cases which have hinted that such limitations are applicable to federal courts under the 5th Amendment Due Process Clause. See Insurance Corp. v. Compagnie Des Bauxites, 456 U.S. 694, 702-703, 102 S.Ct. 2099, 2104-05, 72 L.Ed.2d 492 (1982); Lone Star Package Can Co., Inc. v. B & O Railroad Co., 212 F.2d 147 (5th Cir.1954).

However, there is no need for this Court to decide this particular question since the Supreme Court has made clear that, for 5th Amendment Due Process purposes, a state is not a “person” under the 5th Amendment. See State of South Carolina v. Katzenbach, 383 U.S. 301, 323, 86 S.Ct. 803, 816, 15 L.Ed.2d 769 (1966). (“The word ‘person’ in the context of the Due Process Clause of the Fifth Amendment cannot, by any reasonable mode of interpretation, be expanded to encompass the States of the Union ... ”) See also State of Oklahoma, etc. v. Federal Energy Regulatory Comm., 494 F.Supp. 636 (W.D. Okl.1980). In this case, appellants have acknowledged in their brief that a suit against defendants in their official capacity is a suit against the state, and the Supreme Court has held that a state does not have standing “as parent of its citizens to invoke these constitutional provisions against the Federal Government, the ultimate parens patriae of every American citizen.” South Carolina v. Katzenbach, 383 U.S. at 324, 86 S.Ct. at 816.

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Bluebook (online)
64 B.R. 694, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jeffries-v-browning-in-re-reserves-development-corp-mowd-1986.