UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

ASHLAND DIVISION

IN RE:

RED STAR COAL COMPANY

DEBTOR Case No. 92-70452

RED STAR COAL COMPANY PLAINTIFF

VS. ADV. NO. 93-1003

BILLY ISON, d/b/a SANDY

VALLEY ENTERPRISE, INC. DEFENDANT

MEMORANDUM OPINION

This matter is before the Court on the Motion of the defendant herein for an order remanding this case to the Boyd Circuit Court. The defendant contends that the removal was not timely in accordance with Rule of Bankruptcy Procedure 9027(a)(2)(C) and asserts as further grounds that the within proceeding is not a core proceeding as alleged by the plaintiff/debtor.

Prior to the filing of the present Chapter 11 proceeding by the plaintiff, there was pending in state court an action brought by the plaintiff against the defendant seeking the recovery of the sum of $8,023.26 plus interest alleged due on an account. The defendant filed his answer denying liability and asserting a counterclaim seeking the recovery of $13,644.00 for an alleged breach of contract. Subsequently, plaintiff filed its Chapter 11 proceeding on this Court on September 17, 1992. On April 13, 1993 the plaintiff filed its Notice of Removal reciting that it was filed pursuant to Bankruptcy Rule 9027(a)(2)(B). No termination of the automatic stay was sought by the defendant prior to removal.

The defendant then filed this motion and, first, asserts that the removal was improper pursuant to Bankruptcy Rule 9027(a)(2)(C) as being more than 180 days after the order for relief. The plaintiff/debtor has responded that the action was removed pursuant to Bankruptcy Rule 9027(a)(2)(B) which provides that removal may be had up to 30 days after the stay is terminated. Clearly 9027(a)(2) gives the opportunity to remove within the longest of the three conditions.

No trustee has been appointed in this Chapter 11 case so subsection (C) clearly does not apply as asserted by the defendant.

The question remains as to the stay in this proceeding. The stay is not applicable to actions brought by the debtor. Maritime Electric Company, Inc. v.United Jersey Bank, 959 F.2d 1194 (3rd Cir. 1991). However, in this case there was a counterclaim by the defendant which would clearly come within the provisions of the stay. As the Maritime case points out, all proceedings in the same case are not necessarily lumped together for purposes of automatic stay analysis. At page 1204. While the plaintiff/debtor was not constrained by the automatic stay in the state court as regards the continued prosecution of its claim against the defendant, it appears clear from the language of '362 that the stay applied to the defendant in the prosecution of his counterclaim. The rule does not address removal where the stay is partially applicable as regards the state court proceeding but under present circumstances it appears reasonable to conclude that the removal remains available to the plaintiff/debtor where the stay was still in effect with regard to the defendant's counterclaim.

With respect to the second prong of defendant's argument, whether a matter is core or non-core does not affect removal so long as the matter is related to the bankruptcy proceeding. 28 U.S.C. '157(b) and (c). Clearly final action on non-core matters must be taken by the District Court but this does not prevent bankruptcy court action up to that point. The questions presented in this litigation involve the collection of a receivable by the debtor and a counterclaim asserted by the defendant. One involves collection of the assets of the debtor and another the determination of the liability of the debtor on the claim. Both are at least "related to" the bankruptcy proceeding. The determination of the core/non-core question can await further proceedings herein.

For the reasons set out above, the defendant's motion to remand will be overruled by separate order entered herein.

Dated this _______ day of June, 1993.

By the Court,

________________________

Copies to:

Susan J. Hoffmann, Esq.

W. Jeffrey Scott, Esq.