MEMORANDUM OF DECISION ON DEFENDANT’S MOTION TO DETERMINE WHETHER A PROCEEDING IS A CORE PROCEEDING
ROBERT L. KRECHEVSKY, Chief Judge.
I.
ISSUE
Carl D. Sherman, the defendant in this adversary proceeding, has moved the bankruptcy court, pursuant to 28 U.S.C. § 157(b)(3),
for a determination whether the proceeding is a core proceeding under § 157(b)
or is a proceeding otherwise re
lated to a case under title 11 (i.e., noncore). The defendant seeks this ruling in connection with two motions he filed in the district court requesting that court (1) to abstain from hearing the proceeding pursuant to 28 U.S.C. § 1334(c)(2)
and (2) to withdraw the proceeding from the bankruptcy court to the district court pursuant to 28 U.S.C. § 157(d).
For reasons that follow, it is determined that the proceeding is not a core proceeding.
II.
BACKGROUND
John J. O’Neil, Jr., the trustee, commenced the present action in the bankruptcy court on March 22, 1990 against the defendant, a former officer and shareholder of the debtor, TVR of America, Inc. The debtor had operated an automobile distributorship from December 8, 1983 until March 28, 1988, when an involuntary bankruptcy petition was filed against it. The court entered an order for relief on April 28, 1988, and O’Neil is the duly-appointed trustee of the debtor’s chapter 7 estate.
The trustee’s amended complaint contains four counts asserting the defendant’s liability to the debtor’s estate. Count One alleges that when the defendant was an officer and stockholder of the debtor from January 9, 1984 to September 12, 1985, he breached his fiduciary duties by causing the debtor to be undercapitalized resulting in the debtor suffering losses in excess of $200,000.00. Count Two asserts that the defendant, following the formation of the debtor, failed to make a promised $50,-000.00 contribution to the debtor’s equity capital and that the defendant continues to
be liable for such payment. Count Three asserts that the defendant is liable for having wrongfully negotiated checks for his own benefit totaling $57,732.67 drawn between April 2, 1984 and July 2, 1985 on the debtor’s bank accounts. Count Four alleges that the defendant is liable for wrongfully negotiating checks totaling $27,381.59 on or about September 12, 1985, drawn on the debtor’s bank accounts and payable to companies with which the defendant was affiliated.
The complaint asserts the jurisdiction of the bankruptcy court over the adversary proceeding on alternative grounds. Paragraph 2 of each count states the proceeding is a core proceeding under § 157(b)(2)(H),
or, alternatively, bases jurisdiction on 28 U.S.C. § 1334(b).
The trustee demands damages from the defendant of at least $200,000.00 under Count One, $50,000.00 for Count Two, $57,732.67 for Count Three, and $27,381.59 for Count Four.
The defendant filed an answer admitting his past relationship with the debtor, but denying any liability to the debtor’s estate, denying the trustee’s jurisdictional allegations and stating that the defendant “does not consent to the entry of final orders of judgment by the bankruptcy judge.” The defendant filed a demand for jury trial.
The defendant subsequently filed the noted motions for abstention and to withdraw the proceeding, and the district court is withholding its rulings thereon pending the bankruptcy court’s determination of whether the proceeding constitutes a core or noncore proceeding.
III.
DISCUSSION
A.
Bankruptcy law, as restructured in 1984 by Congress to confront the Article III concerns outlined by the Supreme Court in
Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.,
458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), modified the jurisdictional grant to the Article I bankruptcy courts by dividing matters before that court into core and noncore categories. Simply put, in noncore matters, the bankruptcy court acts as an adjunct to the district court; it may not enter final orders without the consent of the parties; and its findings of fact and conclusions of law are subject to
de novo
review by the district court. In core matters, the bankruptcy court may enter final judgments, and the standards for appeal of such judgments are the same as in civil matters appealed from the district court to the court of appeals.
See Century Brass Products, Inc. v. Millard Metals Service Center, Inc. (In re Century Brass),
58 B.R. 838 (Bankr.D.Conn.1986).
Century Brass
held that state-law prepetition account receivable claims asserted by a debtor’s estate against parties who have not filed proofs of claim are noncore matters. For reasons set out at length in the opinion,
Century Brass
determined that to comport with the principles enunciated in
Marathon,
the term “core proceedings” must be interpreted narrowly, and bankruptcy courts may not enter final judgments in traditional state-law contract actions absent consent from the parties. Although a contrary position remains,
see
cases cited in
In re Marshall,
118 B.R. 954, 959 n. 2 (W.D.Mich.1990), causes of action that existed prior to the filing of the bankruptcy case that would continue independently of the provisions of Title 11, that are not specifically treated as core proceedings ,under § 157(b)(2)(B) and where the parties’ rights and obligations are not meaningfully affected as a result of the filing of the bankruptcy case, are generally treated as noncore proceedings.
In re Commercial Heat Treating of Dayton, Inc.,
80 B.R. 880, 886 (Bankr.S.D.Ohio 1987).
See In re Cinematronics, Inc.,
916
F.2d 1444, 1450 (9th Cir.1990);
Beard v. Braunstein,
914 F.2d 434, 443-45 (3rd Cir.1990);
In re Ben Cooper, Inc.,
896 F.2d 1394, 1400 (2nd Cir.1990)
vacated
— U.S. -, 111 S.Ct. 425, 112 L.Ed.2d 408 (1990);
In re Castlerock Properties,
781 F.2d 159, 161-62 (9th Cir.1986).
B.
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MEMORANDUM OF DECISION ON DEFENDANT’S MOTION TO DETERMINE WHETHER A PROCEEDING IS A CORE PROCEEDING
ROBERT L. KRECHEVSKY, Chief Judge.
I.
ISSUE
Carl D. Sherman, the defendant in this adversary proceeding, has moved the bankruptcy court, pursuant to 28 U.S.C. § 157(b)(3),
for a determination whether the proceeding is a core proceeding under § 157(b)
or is a proceeding otherwise re
lated to a case under title 11 (i.e., noncore). The defendant seeks this ruling in connection with two motions he filed in the district court requesting that court (1) to abstain from hearing the proceeding pursuant to 28 U.S.C. § 1334(c)(2)
and (2) to withdraw the proceeding from the bankruptcy court to the district court pursuant to 28 U.S.C. § 157(d).
For reasons that follow, it is determined that the proceeding is not a core proceeding.
II.
BACKGROUND
John J. O’Neil, Jr., the trustee, commenced the present action in the bankruptcy court on March 22, 1990 against the defendant, a former officer and shareholder of the debtor, TVR of America, Inc. The debtor had operated an automobile distributorship from December 8, 1983 until March 28, 1988, when an involuntary bankruptcy petition was filed against it. The court entered an order for relief on April 28, 1988, and O’Neil is the duly-appointed trustee of the debtor’s chapter 7 estate.
The trustee’s amended complaint contains four counts asserting the defendant’s liability to the debtor’s estate. Count One alleges that when the defendant was an officer and stockholder of the debtor from January 9, 1984 to September 12, 1985, he breached his fiduciary duties by causing the debtor to be undercapitalized resulting in the debtor suffering losses in excess of $200,000.00. Count Two asserts that the defendant, following the formation of the debtor, failed to make a promised $50,-000.00 contribution to the debtor’s equity capital and that the defendant continues to
be liable for such payment. Count Three asserts that the defendant is liable for having wrongfully negotiated checks for his own benefit totaling $57,732.67 drawn between April 2, 1984 and July 2, 1985 on the debtor’s bank accounts. Count Four alleges that the defendant is liable for wrongfully negotiating checks totaling $27,381.59 on or about September 12, 1985, drawn on the debtor’s bank accounts and payable to companies with which the defendant was affiliated.
The complaint asserts the jurisdiction of the bankruptcy court over the adversary proceeding on alternative grounds. Paragraph 2 of each count states the proceeding is a core proceeding under § 157(b)(2)(H),
or, alternatively, bases jurisdiction on 28 U.S.C. § 1334(b).
The trustee demands damages from the defendant of at least $200,000.00 under Count One, $50,000.00 for Count Two, $57,732.67 for Count Three, and $27,381.59 for Count Four.
The defendant filed an answer admitting his past relationship with the debtor, but denying any liability to the debtor’s estate, denying the trustee’s jurisdictional allegations and stating that the defendant “does not consent to the entry of final orders of judgment by the bankruptcy judge.” The defendant filed a demand for jury trial.
The defendant subsequently filed the noted motions for abstention and to withdraw the proceeding, and the district court is withholding its rulings thereon pending the bankruptcy court’s determination of whether the proceeding constitutes a core or noncore proceeding.
III.
DISCUSSION
A.
Bankruptcy law, as restructured in 1984 by Congress to confront the Article III concerns outlined by the Supreme Court in
Northern Pipeline Constr. Co. v. Marathon Pipe Line Co.,
458 U.S. 50, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982), modified the jurisdictional grant to the Article I bankruptcy courts by dividing matters before that court into core and noncore categories. Simply put, in noncore matters, the bankruptcy court acts as an adjunct to the district court; it may not enter final orders without the consent of the parties; and its findings of fact and conclusions of law are subject to
de novo
review by the district court. In core matters, the bankruptcy court may enter final judgments, and the standards for appeal of such judgments are the same as in civil matters appealed from the district court to the court of appeals.
See Century Brass Products, Inc. v. Millard Metals Service Center, Inc. (In re Century Brass),
58 B.R. 838 (Bankr.D.Conn.1986).
Century Brass
held that state-law prepetition account receivable claims asserted by a debtor’s estate against parties who have not filed proofs of claim are noncore matters. For reasons set out at length in the opinion,
Century Brass
determined that to comport with the principles enunciated in
Marathon,
the term “core proceedings” must be interpreted narrowly, and bankruptcy courts may not enter final judgments in traditional state-law contract actions absent consent from the parties. Although a contrary position remains,
see
cases cited in
In re Marshall,
118 B.R. 954, 959 n. 2 (W.D.Mich.1990), causes of action that existed prior to the filing of the bankruptcy case that would continue independently of the provisions of Title 11, that are not specifically treated as core proceedings ,under § 157(b)(2)(B) and where the parties’ rights and obligations are not meaningfully affected as a result of the filing of the bankruptcy case, are generally treated as noncore proceedings.
In re Commercial Heat Treating of Dayton, Inc.,
80 B.R. 880, 886 (Bankr.S.D.Ohio 1987).
See In re Cinematronics, Inc.,
916
F.2d 1444, 1450 (9th Cir.1990);
Beard v. Braunstein,
914 F.2d 434, 443-45 (3rd Cir.1990);
In re Ben Cooper, Inc.,
896 F.2d 1394, 1400 (2nd Cir.1990)
vacated
— U.S. -, 111 S.Ct. 425, 112 L.Ed.2d 408 (1990);
In re Castlerock Properties,
781 F.2d 159, 161-62 (9th Cir.1986).
B.
All four counts of the trustee’s complaint clearly sound in prepetition state-law claims against the defendant based on common law tort and contract principles. None of these claims could have been filed in a federal court, absent the bankruptcy petition, and none depend on the application of bankruptcy law. The trustee’s reliance on rulings (most of which were rejected in either
Century Brass
or
Marshall)
that hold that Congress in the 1984 amendments restored the jurisdiction of the bankruptcy court to enter final judgments in essentially all proceedings as existed
pre-Marathon
is misplaced in this district.
The trustee further argues that the estate’s causes of action against the defendant should be construed to fall under the Connecticut fraudulent conveyance statute —Conn.Gen.Stat. § 52-552.
Assuming, arguendo, that Congress intended fraudulent conveyances arising under state law to be core proceedings,
see In re Mankin,
823 F.2d 1296 (9th Cir.1987),
the trustee’s characterization of his complaint as one to recover fraudulent conveyances under Conn.Gen.Stat. § 52-552 is peremptory. Only the third and fourth counts contain conceivably possible allegations of fraudulent conveyances to the defendant, the first two counts allege no conveyance at all, and in all other respects the elements of Conn. Gen.Stat. § 52-552 are nowhere alleged in the amended complaint.
In sum, the trustee’s causes of action implicate well-recognized grounds of recovery — a common law tort which a director commits when illegally transferring assets of the subject corporation,
Mills v. Tiffany’s Inc.,
123 Conn. 631, 643, 198 A. 185 (1938), the corporation’s ability to avoid self-dealing transactions under Connecticut’s corporation statutes and caselaw,
see Hadden v. Krevit,
186 Conn. 587, 442 A.2d 944 (1982), and a contract-related cause of action. The asserted resort to fraudulent conveyance law to obtain a determination of a core proceeding is artificial and a contrivance.
IV.
CONCLUSION
The trustee’s complaint in this adversary proceeding does not constitute a core proceeding, but one that is otherwise related to a case under title 11.