OWENS, Chief Judge:
On October 19, 1984, James 0. Douthit filed a voluntary petition in bankruptcy under Chapter 7 of the Bankruptcy Code. Sandersville Production Credit Association (SPCA), a judgment creditor, has commenced this adversary proceeding against the debtor and the partners of the Macon law firm of Anderson, Walker & Reichert. Defendant Anderson, Walker & Reichert has moved for mandatory abstention, voluntary abstention, or withdrawal of the reference with respect to the claims raised in this adversary proceeding.
FACTUAL ALLEGATIONS
Plaintiff SPCA alleges that the debtor is indebted to plaintiff on four promissory notes. Plaintiff obtained a judgment on these notes on September 19, 1983, in the Superior Court of Bibb County, Georgia. Plaintiff’s judgment is for a principal amount of $113,223.18, $4,789.48 in prejudgment interest, $17,701.89 in attorneys fees, plus $233.00 in costs. Plaintiff alleges that it is partially secured and partially unsecured as to this debt. According to plaintiff, plaintiff holds a perfected security interest in certain farm equipment and livestock owned by the debtor. Plaintiff alleges that the debtor wrongfully disposed of certain livestock subject to plaintiff’s security interest, and that the debtor received $67,414.40 from that sale. Plaintiff alleges that this conduct by the debtor constitutes “willful and malicious injury by the debtor to ... the property of [plaintiff],” 11 U.S.C.A. § 523(a)(6) (West 1979), and that the debtor should be denied a discharge as to this indebtedness because of such conduct.
In a separate Count, plaintiff alleges that the debtor retained the defendant law firm of Anderson, Walker & Reichert to represent him in the state court action which resulted in the above-described judgment. According to plaintiff, prior to judgment
the debtor voluntarily conveyed to defendant a deed to secure debt in his personal residence as security for defendant’s legal fees. Plaintiff alleges that this conveyance was made at a time when the debtor was insolvent, that defendant knew the debtor was insolvent, and that it was made for inadequate or no consideration. Under these circumstances, plaintiff asserts that the conveyance was a fraudulent conveyance under O.C.G.A. § 18-2-22 (1982),
and that it is entitled to assert such a claim in this adversary proceeding pursuant to 11 U.S.C.A. § 544(b) (West 1979).
Plaintiff requests that the deed be declared null and void, that it be awarded $1.00 in compensatory damages, $20,000.00 in punitive damages, plus attorneys’ fees and costs.
ISSUES RAISED
Defendant Anderson, Walker & Reichert has moved this court to order mandatory abstention under 28 U.S.C.A. § 1334(c)(2) (West Sept. 1984 Supp.), voluntary abstention under 28 U.S.C.A. § 1334(c)(1) (West Sept. 1984 Supp.), or a withdrawal of the reference pursuant to 28 U.S.C.A. § 157 (West Sept. 1984 Supp.). The partnership argues that, under § 544(b), the fraudulent conveyance claim can be asserted only by the trustee, not a creditor such as the plaintiff (citing,
e.g., In the matter of Milam,
37 B.R. 865, 867 (Bankr.N.D.Ga.1984)), that the claim is therefore based solely upon state law and is only “related to” (as opposed to “arising under”) the pending bankruptcy action, and that no independent basis for federal jurisdiction exists. The plaintiff responds by arguing that it is authorized to pursue the fraudulent conveyance claim under § 544(b),
citing In re Rego Crescent Corp.,
23 B.R. 958 (E.D.N.Y.1982), and, alternatively, that the bankruptcy court should consider the fraudulent conveyance claim because it is a “core proceeding” under 28 U.S.C.A. § 157(b)(2)(H) (West Sept. 1984 Supp.).
CONCLUSIONS OF LAW
At the outset, the court notes that plaintiff’s Count II,
i.e.,
the claim under § 523(a)(6) regarding the alleged wrongful disposition of collateral, is certainly a core proceeding which should be resolved by the bankruptcy court. 28 U.S.C.A.
§ 157(b)(2)(I) (West Sept. 1984 Supp.).
The defendant law firm is not accused of any wrongdoing in this Count, and the court does not perceive the partnership’s pending motion to be addressed to that Count. Accordingly, this court hereby confirms the reference to the bankruptcy court of Count II of the instant adversary proceeding.
With respect to Count I, the fraudulent conveyance claim, the court views the issues presented by that claim somewhat differently than as east by the parties. It appears to the court that this claim essentially amounts to a priority dispute between two creditors over the same property of the estate.
The property at issue is subject to three liens. First, there is the. lien of the mortgage lender. Second is defendant’s lien taken as security for its legal fees. Finally, there is plaintiff’s judgment lien, which is last in priority based upon time of filing. If the first two liens are valid, there would be little or no equity in the property above the debtor’s lawful exemptions; the trustee is therefore likely to abandon the property pursuant to 11 U.S.C.A. § 554 (West 1979). Plaintiff naturally seeks to have defendant’s lien declared invalid, thereby preserving the property for its claim.
Obviously, a priority dispute between two creditors is a classic “core proceeding” to be resolved by the bankruptcy court. 28 U.S.C.A. § 157(b)(2)(E) (West Sept. 1984 Supp.).
The bankruptcy court certainly is authorized to decide whether § 544(b) is the appropriate vehicle for plaintiff to assert its claim, and, assuming the claim is properly presented, to inquire into the factual circumstances regarding the disputed deed to secure debt, as well as to adjudicate the issue of whether that lien was fraudulently procured or is otherwise invalid. Accordingly, because the issue if properly presented will constitute a core proceeding under § 157(b)(2)(E), defendant’s motion to abstain or withdraw the reference is DENIED, insofar as the bankruptcy court is authorized to make a factual inquiry into the conveyance at issue and to rule upon its validity and the priorities between the parties.
However, with respect to the plaintiff’s claim for damages, both compensatory and punitive, as well as its request for attorneys’ fees and costs, the court is presently unwilling to agree that the bankruptcy court is the appropriate forum to consider such claims. As a preliminary matter, this court fails to perceive any possible basis for the recovery of damages in this case. However, even if plaintiff’s claim for damages has some possible merit, plaintiff has failed to cite any authority which vests a bankruptcy court with jurisdiction to consider such claims. This is not a claim for damages
by a debtor
which arguably could constitute property of the estate under 11
U.S.C.A. § 541 (West 1979).
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OWENS, Chief Judge:
On October 19, 1984, James 0. Douthit filed a voluntary petition in bankruptcy under Chapter 7 of the Bankruptcy Code. Sandersville Production Credit Association (SPCA), a judgment creditor, has commenced this adversary proceeding against the debtor and the partners of the Macon law firm of Anderson, Walker & Reichert. Defendant Anderson, Walker & Reichert has moved for mandatory abstention, voluntary abstention, or withdrawal of the reference with respect to the claims raised in this adversary proceeding.
FACTUAL ALLEGATIONS
Plaintiff SPCA alleges that the debtor is indebted to plaintiff on four promissory notes. Plaintiff obtained a judgment on these notes on September 19, 1983, in the Superior Court of Bibb County, Georgia. Plaintiff’s judgment is for a principal amount of $113,223.18, $4,789.48 in prejudgment interest, $17,701.89 in attorneys fees, plus $233.00 in costs. Plaintiff alleges that it is partially secured and partially unsecured as to this debt. According to plaintiff, plaintiff holds a perfected security interest in certain farm equipment and livestock owned by the debtor. Plaintiff alleges that the debtor wrongfully disposed of certain livestock subject to plaintiff’s security interest, and that the debtor received $67,414.40 from that sale. Plaintiff alleges that this conduct by the debtor constitutes “willful and malicious injury by the debtor to ... the property of [plaintiff],” 11 U.S.C.A. § 523(a)(6) (West 1979), and that the debtor should be denied a discharge as to this indebtedness because of such conduct.
In a separate Count, plaintiff alleges that the debtor retained the defendant law firm of Anderson, Walker & Reichert to represent him in the state court action which resulted in the above-described judgment. According to plaintiff, prior to judgment
the debtor voluntarily conveyed to defendant a deed to secure debt in his personal residence as security for defendant’s legal fees. Plaintiff alleges that this conveyance was made at a time when the debtor was insolvent, that defendant knew the debtor was insolvent, and that it was made for inadequate or no consideration. Under these circumstances, plaintiff asserts that the conveyance was a fraudulent conveyance under O.C.G.A. § 18-2-22 (1982),
and that it is entitled to assert such a claim in this adversary proceeding pursuant to 11 U.S.C.A. § 544(b) (West 1979).
Plaintiff requests that the deed be declared null and void, that it be awarded $1.00 in compensatory damages, $20,000.00 in punitive damages, plus attorneys’ fees and costs.
ISSUES RAISED
Defendant Anderson, Walker & Reichert has moved this court to order mandatory abstention under 28 U.S.C.A. § 1334(c)(2) (West Sept. 1984 Supp.), voluntary abstention under 28 U.S.C.A. § 1334(c)(1) (West Sept. 1984 Supp.), or a withdrawal of the reference pursuant to 28 U.S.C.A. § 157 (West Sept. 1984 Supp.). The partnership argues that, under § 544(b), the fraudulent conveyance claim can be asserted only by the trustee, not a creditor such as the plaintiff (citing,
e.g., In the matter of Milam,
37 B.R. 865, 867 (Bankr.N.D.Ga.1984)), that the claim is therefore based solely upon state law and is only “related to” (as opposed to “arising under”) the pending bankruptcy action, and that no independent basis for federal jurisdiction exists. The plaintiff responds by arguing that it is authorized to pursue the fraudulent conveyance claim under § 544(b),
citing In re Rego Crescent Corp.,
23 B.R. 958 (E.D.N.Y.1982), and, alternatively, that the bankruptcy court should consider the fraudulent conveyance claim because it is a “core proceeding” under 28 U.S.C.A. § 157(b)(2)(H) (West Sept. 1984 Supp.).
CONCLUSIONS OF LAW
At the outset, the court notes that plaintiff’s Count II,
i.e.,
the claim under § 523(a)(6) regarding the alleged wrongful disposition of collateral, is certainly a core proceeding which should be resolved by the bankruptcy court. 28 U.S.C.A.
§ 157(b)(2)(I) (West Sept. 1984 Supp.).
The defendant law firm is not accused of any wrongdoing in this Count, and the court does not perceive the partnership’s pending motion to be addressed to that Count. Accordingly, this court hereby confirms the reference to the bankruptcy court of Count II of the instant adversary proceeding.
With respect to Count I, the fraudulent conveyance claim, the court views the issues presented by that claim somewhat differently than as east by the parties. It appears to the court that this claim essentially amounts to a priority dispute between two creditors over the same property of the estate.
The property at issue is subject to three liens. First, there is the. lien of the mortgage lender. Second is defendant’s lien taken as security for its legal fees. Finally, there is plaintiff’s judgment lien, which is last in priority based upon time of filing. If the first two liens are valid, there would be little or no equity in the property above the debtor’s lawful exemptions; the trustee is therefore likely to abandon the property pursuant to 11 U.S.C.A. § 554 (West 1979). Plaintiff naturally seeks to have defendant’s lien declared invalid, thereby preserving the property for its claim.
Obviously, a priority dispute between two creditors is a classic “core proceeding” to be resolved by the bankruptcy court. 28 U.S.C.A. § 157(b)(2)(E) (West Sept. 1984 Supp.).
The bankruptcy court certainly is authorized to decide whether § 544(b) is the appropriate vehicle for plaintiff to assert its claim, and, assuming the claim is properly presented, to inquire into the factual circumstances regarding the disputed deed to secure debt, as well as to adjudicate the issue of whether that lien was fraudulently procured or is otherwise invalid. Accordingly, because the issue if properly presented will constitute a core proceeding under § 157(b)(2)(E), defendant’s motion to abstain or withdraw the reference is DENIED, insofar as the bankruptcy court is authorized to make a factual inquiry into the conveyance at issue and to rule upon its validity and the priorities between the parties.
However, with respect to the plaintiff’s claim for damages, both compensatory and punitive, as well as its request for attorneys’ fees and costs, the court is presently unwilling to agree that the bankruptcy court is the appropriate forum to consider such claims. As a preliminary matter, this court fails to perceive any possible basis for the recovery of damages in this case. However, even if plaintiff’s claim for damages has some possible merit, plaintiff has failed to cite any authority which vests a bankruptcy court with jurisdiction to consider such claims. This is not a claim for damages
by a debtor
which arguably could constitute property of the estate under 11
U.S.C.A. § 541 (West 1979). Instead, plaintiff apparently relies upon a “pendent jurisdiction” theory to support its claim for nonbankruptcy law relief against another creditor of the debtor.
Where a creditor such as plaintiff has been injured by fraudulent or other willful misconduct by the debtor, the appropriate remedy under bankruptcy law as to the debtor is an exception to or a denial of a discharge. 11 U.S.C.A. §§ 523, 727 (West 1979). As to another creditor which may have willfully participated in the misconduct, the appropriate remedy under bankruptcy law is an adjudication of the relative priorities between the wrongdoer and the other, innocent creditors. While an injured creditor may have additional remedies under state law, it is not clear whether a bankruptcy court, as opposed to a state court, is the proper forum for the consideration of such remedies.
Accordingly, this court hereby orders the bankruptcy court presently to ABSTAIN from considering any claim by the plaintiff for damages, attorneys’ fees, or costs. 28 U.S.C.A. § 1334(c)(1) (West Sept. 1984 Supp.).
If and when the plaintiff obtains a ruling from the bankruptcy court invalidating the contested deed to secure debt on the ground of fraud, the court will then entertain a motion by the plaintiff as to whether, under the totality of the circumstances, the plaintiff may possess any possible claim for damages, and whether the bankruptcy court would be authorized to consider same.