UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

ASHLAND DIVISION

IN RE:

W.E.C. COAL SALES, INC.

DEBTOR CASE NO. 90-00345

CHAPTER 11

W.E.C. COAL SALES, INC. PLAINTIFF

VS. ADV. NO. 91-0006

CHARLES THOMAS CONLEY and

BLACKHEART MINING, INC. DEFENDANTS

MEMORANDUM OPINION

This matter is before the Court on jury trial demands by defendants Charles Thomas Conley ("Conley") and Blackheart Mining, Inc. ("Blackheart"). The above-captioned adversary proceeding is characterized as a Complaint to Compel Turnover of Property. The plaintiff has alleged that this Court has jurisdiction of this matter pursuant to 28 U.S.C. "'1134" ('1334) and that it is a core proceeding within the meaning of 28 U.S.C. '157. Conley and Blackheart deny the core nature of the proceeding and allege that it is based on a state law claim. Conley and Blackheart have filed claims in the plaintiff's bankruptcy case.

The Complaint alleges that the defendants are indebted to the plaintiff for the purchase of coal, in the amount of $178,000.00, which sums have not been delivered to the plaintiff. The Complaint alleges that this debt is property which the plaintiff may use, sell, or lease under 11 U.S.C. '363. The Complaint further alleges that defendant Blackheart is a foreign corporation which was not registered with the Kentucky Secretary of State. Section 157 is the congressional response to the Supreme Court's decision in Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S.Ct. 2858, ___ L.Ed. ___ (1982), that traditional common law ("private right") claims were reserved for Article III courts. Courts must therefore decide if particular proceedings founded on state law claims fall within "the core of the federal bankruptcy power." Marathon, 458 U.S. at 71. In this regard, a core proceeding has been defined as an action which must have as its foundation the creation, recognition or adjudication of rights which would not exist independently of the bankruptcy environment. Holloway v. Heci Explor. Co. Emp. P. Sharing Plan, 76 B.R. 563, 568 (Bkrtcy.N.D.Tex. 1987).

The Second Circuit Court of Appeals recently held in In re Ben Cooper, Inc., 896 F.2d 1394 (2nd Cir. 1990) "that the bankruptcy court has core jurisdiction, pursuant to '157(b)(2)(A), over contract claims under state law when the contract was entered into post-petition." At 1400. The court distinguished its decision from earlier lower court cases which had held pre-petition claims

to be non-core. One of these, In re Pied Piper Casuals, Inc., 65 B.R. 327 (S.D.N.Y. 1986), is similar to the case at bar in that the trustee therein initiated an action in bankruptcy court which he identified as a "turnover proceeding". However, as the court pointed out:

A turnover proceeding is an action to compel a party to turn over property of the estate to the trustee, 11 U.S.C. '542(a), or a debt to the estate that is matured and payable on demand, 11 U.S.C. '542(b). However, a duty to pay--indeed coverage--under the instant policy is sharply contested, the contrary of a recognition of any duty to pay,..., and far from a mature obligation payable on demand.

At 781. This is exactly the situation in the instant case. While the plaintiff has characterized this action as a turnover proceeding, it has not demonstrated that the alleged debt to the estate is either "property of the estate" or a "mature obligation payable on demand". In addition, the defendants do not recognize any duty to pay.

This Court must conclude that this is not a core proceeding pursuant to 28 U.S.C. '157(b), but a related proceeding pursuant to '157(c). Therefore, assuming that this proceeding is heard in this Court, proposed findings of fact and conclusions of law shall be submitted to the district court, and any final order or judgment shall be entered by the district court after consideration of the proposed findings and conclusions.

The specific question before the Court is whether Conley and Blackheart are entitled to a jury trial. The record in this case reveals that Conley and Blackheart filed proofs of claim. Their jury trial demands are therefore disposed of by the Supreme Court's holding in Langenkamp v. Culp, 111 S.Ct. 330 (1990) that creditors who had submitted claims against the debtor's bankruptcy estate had no Seventh Amendment right to a jury trial when sued by the bankruptcy trustee to recover allegedly preferential transfers. The filing of claims brought the creditors within the equitable jurisdiction of the bankruptcy court.

In Langenkamp the Court cited its decision in Granfinanciera, S.A. v. Nordberg, 492 U.S.____, 109 S.Ct. 2782, 2798-2799, 106 L.Ed.2d 26 (1989), wherein it "recognized that by filing a claim against a bankruptcy estate the creditor triggers the process of 'allowance and disallowance of claims', thereby subjecting himself to the bankruptcy court's equitable power." Langenkamp, p. 331.

There is no doubt, therefore, that Conley and Blackheart having brought themselves within the equitable jurisdiction of the bankruptcy court by the filing of claims herein, they are not entitled to a jury trial on the plaintiff's Complaint.

Dated:

By the Court -

_____________________________

Judge

Copies to:

David M. Cantor, Esq.

Mark Robinson, Esq.

Ward D. Richards, Esq.

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