Memorandum of Decision Re: Enforcement of Settlement

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Decisions
IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA
In re EDWARD NOTARIUS and PATRICIA                                                 No. 93-11650 SCHWEIZER,        Debtors. ___________________________/ EDWARD NOTARIUS and PATRICIA SCHWEIZER,        Plaintiffs,     v.                                                                                                                    A.P. No. 94-1368 DAVID and MARIANNE NEUFELD,        Defendants. ______________________________/
Memorandum of Decision
     The parties to this adversary proceeding were the parties to a prior adversary proceeding in this court. After a full day of trial, they announced a settlement on the record. The agreement called for Chapter 12 debtors Notarius and Schweizer to abandon their home and vineyard to the Neufelds in return for the Neufelds' promises to make payments to them within a short time thereafter.      Notarius and Schweizer commenced this second adversary proceeding when, after they had left their home as promised, the Neufelds refused to make their payments. By this adversary proceeding, Notarius and Schweizer seek to enforce the Notarius' obligations under the settlement agreement which resolved the prior adversary proceeding.      When this matter came on for trial, the Neufelds made an oral motion to dismiss this adversary proceeding based on the just-published decision of the Court of Appeals in In re Hunter, -- F.3d -- (9th Cir.1995). The court noted from the bench that the decision did not discuss the jurisdictional basis for this action, 28 U.S.C. section 1334(b), which gives the district court (and through reference the bankruptcy court) jurisdiction over all civil proceedings arising in or related to a bankruptcy case. However, the facts seemed similar enough that it seemed to make sense to dismiss the action without prejudice so that the parties would not risk litigating the issues twice. The debtors' motion for reconsideration is now before the court.      Unfortunately, the court did not have time to reflect on the motion to dismiss made at the trial. It remembered only later that this case had been very extensively litigated before it came to trial. Not only had the court summarily found that the Neufelds had failed to make immediate payments as they had agreed, but the court had even entered a judgment on that claim pursuant to FRCP 54(b). In addition, there was an interlocutory appeal to the district court which was fully prepared and argued and a decision rendered.      Thus, by dismissing the case the court would not be saving the parties time and money but rather rendering useless a very substantial amount of litigation. While these factors have nothing to do with whether or not there is jurisdiction, they do compel the court to make sure that there is no jurisdiction before dismissing the case at this point. Upon reflection, the court finds jurisdiction even in light of Hunter.      Hunter is distinguishable on at least three grounds. First, the original adversary proceeding in that case was a dischargeability action brought by the creditor and did not involve the debtor's estate, whereas in this case the original action was brought by the debtors, alleging fraud against the Neufelds, and raised issues central to their reorganization. Moreover, at the time the debtors commenced this second action they needed the settlement money to perform under their plan. The fact that the partial judgment the court entered has resulted in enough of a recovery to allow the debtors to perform under their plan does not destroy jurisdiction to hear the rest of the case; jurisdiction is determined as of the time the action was commenced. In re Fietz, 852 F.2d 455, 457n2 (9th Cir.1988).      Second, the settlement agreement in the first adversary agreement was in essence an agreement by the debtors to sell the principal asset of their estate to the Neufelds. Not only does this court have jurisdiction to hear actions brought to enforce such agreements, but it may hear them as core matters. In re Harris Pine Mills, 44 F.3d 1431, 1437-38 (9th Cir.1995). Hunter did not involve a sale or transfer of estate assets.      Third, there is no indication in Hunter that the base case was still open, so that there was no pending bankruptcy case to which the second adversary proceeding could be related. In this case, the Chapter 12 proceedings are still open. Moreover, the confirmed plan specifically provides for the court to exercise jurisdiction over actions brought by the debtors to enforce their plan.      The Supreme Court has recently held that while the jurisdiction conferred by 28 U.S.C. section 1334(b) is not limitless, it is nonetheless expansive and may include any action whose outcome could conceivably have an effect on the bankruptcy estate, especially in reorganization cases. Celotex Corp. v Edwards, -- U.S. --, 115 S.Ct. 1493, 131 L.Ed.2d 403 (1995). When this adversary proceeding was commenced, its outcome was crucial to the performance of the debtors' plan. Even now that the plan has been substantially performed, thanks to partial relief the court has already granted, this adversary proceeding is sufficiently related to the Chapter 12 case to establish jurisdiction. Accordingly, the court will grant the debtors' motion and vacate its decision to dismiss. Counsel for the debtors shall submit an appropriate form of order, which shall provide that a status conference will be held on November 27, 1995, at 2:00 P.M.
Dated: October 8, 1995                                                                                                  _______________________                                                                                                                                                    Alan Jaroslovsky                                                                                                                                                    U.S. Bankruptcy