IN RE: CALUMET FARM, INC. CASE NO. 91-51414

UNITED STATES BANKRUPTCY COURT 

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

 

IN RE:

CALUMET FARM, INC. CASE NO. 91-51414

DEBTOR

PHOENIX CORPORATION, formerly

known as Calumet Farm, Inc. PLAINTIFF

VS. ADVERSARY NO. 93-5088

TEXAS COMMERCE BANK NATIONAL

ASSOCIATION (HOUSTON) AS ASSIGNEE OF

THE FDIC AS RECEIVER FOR NEW FIRST

CITY, TEXAS-HOUSTON, N.A.; and FEDERAL

DEPOSIT INSURANCE CORPORATION DEFENDANTS

 

 

 

MEMORANDUM OPINION

 

 

This matter is pending on the motion of the defendant Federal Deposit Insurance Corporation, as receiver of First City Texas-Houston, N.A. ("FDIC"), to reconsider the order of January 31, 1994, overruling the motion of the FDIC to dismiss this adversary proceeding for lack of subject matter jurisdiction.

The court is of the opinion the motion to reconsider should be and hereby is overruled. See In re Parker North American Corporation, _____ F.3d _____, CCH Bankr. L. Rep. 75,889, 25 Bankr. Ct. Dec. 1083, 1994 WL 192456 (9th Cir. May 19, 1994).

In effect this adversary proceeding will determine the allowed amount of the claim of First City Texas-Houston, N.A. against the estate of the debtor. On January 31, 1992, prior to the October 30, 1992 date on which the bank was declared insolvent and the FDIC was appointed Receiver, the bank filed a claim as a secured claim in the amount of $32,392,585.46 in this chapter 11 case. The claim is accompanied by a statement of collateral indicating the claim is secured by security interests in equine collateral, equipment, fixtures, machinery, and intangibles, and by a mortgage on Calumet Farm.

The complaint in this adversary proceeding alleges that security interests in equine collateral obtained by the bank on August 23, 1990 and October 25, 1990, but not perfected until December 10, 1990, are avoidable as preferential. Under 11 U.S.C. 506(d) a claim must be disallowed unless the "entity" that is the transferee of an avoidable preference repays the amount of the preference for which it is liable. The complaint was filed within the limitation period provided by 11 U.S.C. 546(a)(1). The bankruptcy court clearly has jurisdiction to determine whether the transfers enumerated in the complaint were preferential and to disallow the claim of the bank unless preferential payments are returned. This form of declaratory or injunctive relief against a governmental entity is permissible under the decision of the Supreme Court in U.S. v. Nordic Village, Inc., 112 S.Ct. 1011 (1992). See opinion of this court in In re Larry's Marineland of Richmond, Inc., case no. 90-51914, adv. no. 93-5008 (December 20, 1993).

This adversary proceeding presents a controversy over the effect of transactions between two private parties, the debtor, Calumet Farm, Inc., and First City-Texas Houston, N.A. The fact that the debtor in possession as trustee has stepped into the shoes of Calumet and the FDIC as Receiver has stepped into the shoes of the bank does not change the nature of the action. This controversy involves the adjudication of a "private right" which ultimately must be determined by an Article III court. Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S.Ct. 2782 (1989). It would be unconstitutional for the FDIC, an administrative agency of the Government, when it is named as defendant in a civil action, to usurp the powers of the court by arrogating unto itself the determination of such a "private right", that is, whether its predecessor in interest received preferential payments. Northern Pipeline Construction Co. v. Marathon Pipe Line Company, 458 U.S. 50, 69 n.23, 102 S.Ct. 2858, 2870 n.23 (1982).

Dated:

By the court -

 

JOE LEE, CHIEF JUDGE

 

Copies to:

William T. Shier

Robert Ryan

Mark S. Finkelstein

Laura Day Delcotto

 

 

 

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF KENTUCKY

LEXINGTON

 

 

IN RE:

 

CALUMET FARM, INC. CASE NO. 91-51414

 

DEBTOR

 

 

PHOENIX CORPORATION, formerly

known as Calumet Farm, Inc. PLAINTIFF

 

VS. ADVERSARY NO. 93-5088

 

TEXAS COMMERCE BANK NATIONAL

ASSOCIATION (HOUSTON) AS ASSIGNEE OF

THE FDIC AS RECEIVER FOR NEW FIRST

CITY, TEXAS-HOUSTON, N.A.; and FEDERAL

DEPOSIT INSURANCE CORPORATION DEFENDANTS

 

 

ORDER

 

In conformity with the memorandum opinion this day entered, IT IS ORDERED that the motion of the defendant Federal Deposit Insurance Corporation, as receiver of First City Texas-Houston, N.A. ("FDIC"), to reconsider the order of January 31, 1994, overruling the motion of the FDIC to dismiss this adversary proceeding for lack of subject matter jurisdiction is OVERRULED.

Dated:

By the court -

 

JOE LEE, CHIEF JUDGE

 

Copies to:

William T. Shier

Robert Ryan

Mark S. Finkelstein

Laura Day Delcotto