Bank of Montreal v. Collins, et al.

Filing 10

ORDER denying 1 Motion to Withdraw Reference signed by Judge Lawrence K. Karlton on 4/2/13. (Kaminski, H)

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 EASTERN DISTRICT OF CALIFORNIA 8 9 IN RE: 10 11 SK FOODS, L.P., a California limited partnership, et al., 12 Debtor. 13 14 15 BANK OF MONTREAL, as Administrative Agent, Successor by Assignment to Debtors SK Foods, L.P. and RHM Industry Specialty Foods, Inc., a California Corporation, d/b/a Colusa County Canning Co., CIV. S-13-0237 LKK 16 Plaintiff, 17 v. 18 19 20 21 CARY SCOTT COLLINS, an individual doing business as Collins and Associates; FREDERICK SCOTT SALYER, an individual, SAS 1999 TRUST; CGS 1999 TRUST; CGS 2007 TRUST; STEFANIE A. SALYER, an individual CAROLINE G. SALYER, an individual, O R D E R 22 Cross-defendants. 23 / 24 I. 25 This 26 BACKGROUND bankruptcy. is an Adversary Proceeding within the SK Foods It is brought by the Bank of Montreal (“BMO”) against 1 Frederick Scott Salyer and Salyer’s accountant, Cary Scott Collins 2 (dba Collins and Associates). 3 daughters, their trust funds and Monterey Peninsula Farming, LLC, 4 as defendants. The complaint also names Salyer’s 5 The complaint seeks to recover $3.2 million in “apparently 6 improper” tax refunds, which Collins allegedly obtained by filing 7 unauthorized tax returns on behalf of the bankruptcy debtors. 8 complaint also seeks to recover ownership in non-party “Cedenco 9 Foods.” The complaint alleges that Salyer and Collins spirited the 10 $3.2 million out of the country, and “transferred ownership” of 11 Cedenco to a “secret trust located in the Cook Islands,” in the 12 South Pacific. 13 and included a demand for a jury trial. The Collins answered the complaint on July 30, 2012, 14 Collins has now moved to withdraw the automatic reference to 15 the Bankruptcy Court, citing his asserted right to a jury trial on 16 Counts One, Two, Four and Nine. 17 the avoidance of the post-petition transfer of the tax refunds, 18 under 11 U.S.C. § 549 (avoidance of post-petition transfers) and 19 Cal. Civ. Code 3439.05 (fraudulent transfer). 20 recovery of the tax refunds from Collins, the transferee, under 11 21 U.S.C. 22 Section 549. 23 Collins’ “unjust enrichment” in the amount of the tax refunds. 24 Count Nine seeks to avoid the fraudulent transfer of the ownership 25 of Cedenco, under Cal. Civ. Code § 3439.05. 26 //// § 550(a), based Count One of the complaint seeks upon the Count Two seeks the avoidance alleged under Count Four seeks a constructive trust to recover 2 1 II. STANDARDS FOR WITHDRAWAL OF THE REFERENCE 2 Except as otherwise provided by Congress, the district court 3 has original and exclusive jurisdiction over all cases arising 4 under Title 11. 5 ___, 131 S. Ct. 2594, 2603 (2011). 6 district court to refer to bankruptcy judges any cases arising 7 under that title as well as related proceedings. 8 157(a). 9 through a General Order adopted by the District Court, has referred 10 all cases under Title 11 as well as related proceedings to the 11 Bankruptcy Judges of the district. See General Order Nos. 182 (May 12 14, 1985) & 223 (October 22, 1987). 28 U.S.C. § 1334(a); Stern v. Marshall, 564 U.S. Congress has empowered the See 28 U.S.C. § Under this authority, the Eastern District of California 13 The Ninth Circuit has recently determined however, that two 14 Supreme Court decisions, Granfinanciera, S.A. v. Nordberg, 492 U.S. 15 33 (1989), and Stern v. Marshall, 564 U.S. ___, 131 S. Ct. 2594 16 (2011) make clear that bankruptcy courts do not “have the general 17 authority to enter final judgments on fraudulent conveyance claims 18 asserted against noncreditors to the bankruptcy estate.” Executive 19 Benefits Ins. Agency v. Arkison (In re Bellingham Ins. Agency, 20 Inc.), 702 F.3d 553, 565 (9th Cir. 2012). 21 claims must normally be determined by the district court. 22 are two caveats to this rule, however. Accordingly, those There 23 First, defendant can waive its right to have the matter heard 24 and finally determined by the district court, if he fails to 25 “timely” object to the Bankruptcy Court’s authority. 26 (“Because EBIA waited so long to object, and in light of its 3 Id., at 568 1 litigation tactics, we have little difficulty concluding that EBIA 2 impliedly consented to the bankruptcy court's jurisdiction”). 3 Second, even with a timely objection, the Bankruptcy Court is still 4 authorized 5 Recommendations for the district court’s de novo review. 6 566 (“bankruptcy courts have statutory authority to hear and enter 7 proposed findings of fact and conclusions of law in a fraudulent 8 conveyance proceeding asserted by a bankruptcy trustee against a 9 noncreditor, subject to de novo review by a federal district to 10 the matter, and to submit Findings and Id., at court”). 11 hear III. ANALYSIS 12 Counts One and Nine are fraudulent transfer claims under state They may 13 law, and thus are governed by the rule of Bellingham. 14 be finally decided only by the district court, absent waiver or 15 consent (including implied consent), by both parties defendant. 16 BMO argues that Collins waived his right to have this matter 17 finally determined by the district court by waiting too long – over 18 six months from his Answer – to file the withdrawal motion, after 19 the Bankruptcy Court had “already invested significant time and 20 effort on this case,” and after it had already “entered final 21 judgment” against Collins’ co-defendants. 22 at 5 (ECF at 8). Opposition (ECF No. 6) This court’s review of the Bankruptcy Court record shows that 23 24 Collins answered the adversary complaint on July 30, 2012. Bankr. 25 Dkt. Status 26 Conference Statement in which he proposed a schedule to proceed in No. 149. On August 16, 4 2013, Collins filed a 1 the Bankruptcy Court. 2 (close 3 conference), with a trial date “to be set.” 4 The Statement does not indicate any desire to proceed in the 5 district court, but rather contemplates that all proceedings will 6 take place in the Bankruptcy Court. 7 of The proposed dates range from May 24, 2013 discovery) to August 27, 2013 (final pretrial Bankr. Dkt. No. 160. The Bankruptcy Court thereupon issued a Pretrial Scheduling 8 Order with dates ranging from September 28, 2013 (initial 9 disclosures) to June 6, 2013 (final pretrial conference). The 10 close of discovery was scheduled for March 29, 2013. Collins did 11 not file any objection, nor advise the Bankruptcy Court or opposing 12 counsel that the Scheduling Order would be meaningless because he 13 intended to move the proceedings to the District Court. 14 it appears that he complied with the Scheduling Order by, for 15 example, making his expert disclosures in the Bankruptcy Court, on 16 the date specified in the Scheduling Order. 17 210. Instead, See Bankr. Dkt. No. 18 On February 7, 2013, about two months before the close of 19 discovery in the Bankruptcy Court, and a little over six months 20 after filing his Answer, Collins moved to withdraw the reference. 21 The court finds that Collins’ conduct in the Bankruptcy Court 22 waived his right to try the case in the district court, and 23 instead, impliedly consented to trial before the Bankruptcy Court. 24 IV. CONCLUSION 25 26 For the reasons stated above, defendants’ Motion To Withdraw the Reference is DENIED. 5 1 IT IS SO ORDERED. 2 DATED: April 2, 2013. 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 6