Wolfe v. First Federal Savings & Loan Ass'n of Paragould (In Re Wolfe)

68 B.R. 80, 1986 Bankr. LEXIS 6584
CourtUnited States Bankruptcy Court, N.D. Texas
DecidedMarch 5, 1986
Docket19-40572
StatusPublished
Cited by11 cases

This text of 68 B.R. 80 (Wolfe v. First Federal Savings & Loan Ass'n of Paragould (In Re Wolfe)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, N.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wolfe v. First Federal Savings & Loan Ass'n of Paragould (In Re Wolfe), 68 B.R. 80, 1986 Bankr. LEXIS 6584 (Tex. 1986).

Opinion

MEMORANDUM OPINION

ROBERT C. McGUIRE, Chief Judge.

The case at bar is an adversary proceeding brought by Debtor Richard Wolfe (“Wolfe” or “Plaintiff”) against First Federal Savings and Loan Association of Para-gould (“First Federal” or “Defendant”). During the hearing on Defendant’s jury demand, First Federal stipulated that this was a core proceeding and consented to this Court’s jurisdiction, as well as consenting to the holding of a jury trial. The Plaintiff did not consent to this Court conducting a jury trial and argued instead that Bankruptcy Courts could not conduct jury trials on this particular issue. Additionally, Debtor asserted that the jury demand was untimely and should, therefore, be denied on those grounds. This Court entered an Order, subsequent to the hearing on Defendant’s jury demand, granting the request, but retained the right to make additional findings of fact and conclusions of law. The following Memorandum Opinion supplements the previous findings and conclusions contained in that Order.

*82 A.

Statement of the Case

An involuntary Chapter 7 petition was filed against Richard Wolfe on December 27, 1984, which was subsequently converted by Wolfe to a Chapter 11 proceeding. First Federal, asserting a security interest in Wolfe’s property located at 9000 Inwood Road, Dallas, Texas, filed a Motion to lift the stay on January 11, 1985. Allegedly, First Federal took an assignment of a note from a third party without recourse for fair market consideration. Hence, it claims it is an innocent purchaser for the value of the note. Wolfe’s response to First Federal’s Motion to lift stay alleged that First Federal’s lien was void as a matter of law under 11 U.S.C. 544(b). 1

In February, 1985, Wolfe filed a Complaint to Declare Lien Void asserting that First Federal’s lien was void under Article 16(50) of the Texas Constitution. Thereafter, Wolfe moved to consolidate the Motion to Lift Stay with the adversary proceeding, which the Court granted.

First Federal’s answer in the adversary proceeding alleged various defenses including waiver, estoppel, and the unclean hands doctrine, in addition to denying Wolfe’s allegations. The Defendant asserted a counter-claim that Wolfe’s actions in regard to the alleged note violated the Texas Deceptive Trade Practices Act, V.A.T.S., Bus. & C. § 17.41 et seq. First Federal further claimed damages from Wolfe’s alleged fraudulent conduct. Wolfe filed his response and subsequent amended reply to Defendant’s counter-claim on July 2, 1985. First Federal filed its Demand for Jury Trial on July 11, 1985, asserting that all issues in dispute sounded in law, thereby requiring a jury trial. Debtor did not dispute that the case at bar would be tried by jury under state law, but countered in his brief that “... [e] very [sic] cause of action in Texas is entitled to a jury and that fact has no bearing on whether a federal court will or will not grant a jury.” Plaintiff's Brief at p. 3.

Both parties concede that the disputed issues constitute core proceedings under 28 U.S.C. § 157(b)(2), although they differ as to the specific subsection. The Plaintiff characterizes the instant dispute as a fraudulent conveyance which is covered by § 157(b)(2)(H). Wolfe then argues that, because the action is a fraudulent conveyance, it is an equitable proceeding, citing, In re Graham, 747 F.2d 1383, 1387 (11th Cir.1984), in which the Eleventh Circuit discussed the historical treatment of fraudulent conveyances and concluded they were equitable proceedings. Thus, the instant action, according to Wolfe, may be tried by this Court without a jury in compliance with Wolfe’s interpretation of the Supreme Court’s decision in Katchen v. Landy, 382 U.S. 323, 327, 86 S.Ct. 467, 471, 15 L.Ed.2d 391 (1966). Because other subsections also potentially apply to the instant action, to wit, § 157(b)(2)(A), (B), (E), (K) and (O), Wolfe’s characterization of the action is not controlling. 2

*83 Notwithstanding the parties’ largely un-analyzed assumption that the issues in dispute constitute core proceedings, the Court will make that determination on its own pursuant to 28 U.S.C. § 157(b)(3), which provides:

The bankruptcy judge shall determine, on the judge’s own motion or on timely motion of a party, whether a proceeding is a core proceeding under this subsection or is a proceeding that is otherwise related to a case under title 11. A determination that a proceeding is not a core proceeding shall not be made solely on the basis that its resolution may be affected by State law. [Emphasis added].

See also, Taggert, The New Bankruptcy Court System, 59 AM.BANKR.L.J. 234, 243 (1985).

In re Shell Materials, 50 B.R. 44, 13 B.C.D. 185 (Bankr.M.D.Fla.1985) presented issues similar to those in the case at bar. The debtor objected to the creditor’s lien based on State (Florida) law and further sought treble damages for an alleged illegal tying arrangement under federal law. Judge Paskay concluded in Shell Materials that the action seeking a determination of the lien’s validity under Florida law constituted a core proceeding. Id. at 186. The court also held that the other issues, although considered related proceedings, were sufficiently interwoven within the core issues to compel denying the motion for abstention. Judge Paskay noted that the related proceedings would have otherwise resulted in discretionary abstention by the court.

The Defendant’s Deceptive Trade Practices Act (“D.T.P.A.”) counter-claim appears sufficiently peripheral to this bankruptcy proceeding to support designation as a related proceeding. The more appropriate disposition of this issue appears to be discretionary abstention under 28 U.S.C. 1334(c)(1). The Court may therefore grant a motion to abstain under § 1334(c)(1) if filed by either party, may abstain on its own, or may consider retaining the action if the parties consent under 28 U.S.C. 157(c)(2).

Whether the remaining issues should be considered core depends on the “nature of the issue to be tried rather than the character of the overall action.” Ross v. Bernhard, 396 U.S. 531, 538, 90 S.Ct. 733, 738, 24 L.Ed.2d 729 (1970). 3 Stripped bare, the instant action is more accurately described as a declaratory judgment as to the validity of each party’s claim to the title of the property.

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Bluebook (online)
68 B.R. 80, 1986 Bankr. LEXIS 6584, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wolfe-v-first-federal-savings-loan-assn-of-paragould-in-re-wolfe-txnb-1986.