Fairfield Communities, Inc. v. Daleske (In Re Fairfield Communities, Inc.) , 142 F.3d 1093 ( 1998 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 97-2250
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In re: Fairfield Communities, Inc., *
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Debtor. *
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Fairfield Communities, Inc., *
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Debtor-Appellant, *
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v. *
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Phyllis G. Daleske; Marie L. * Appeal from the United States
Eschenbach; Robert E. Fiedler; * District Court for the
Shirley M. Fiedler; Charles B. West; * Eastern District of Arkansas.
Doris J. West; D. White, and Company *
Incorporated; Joan L. White, doing *
business as D.A. White Enterprises; *
William M. Storm; Bernice Storm; *
James Skrien; Liesel Skrien; Charles *
Decker; Mildred Decker; Dean Hall; *
Carolina Hall; Donald C. Rickard; *
Louis Teutsch; Geri Teutsch; Russell *
Lee; Charlotte Lee; Barbara Foster; *
George Forsythe; Dorothy Forsythe; *
Jose D. Gallegos; Patricia M. Gallegos; *
William A. Lucas; Nick Quaglietta; *
Charles B. West, *
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Claimants-Appellees, *
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In Re: Fairfield Communities, Inc., *
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Debtor. *
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William M. Storm; Bernice Storm; *
James Skrien; Liesel Skrien; Charles *
Decker; Mildred Decker; Dean Hall; *
Carolina Hall; Donald C. Rickard; *
Elaine G. Rickard; Louis Teutsch; Geri *
Teutsch; Russell Lee; Charlotte Lee; *
Barbara Foster; George Forsythe; *
Dorothy Forsythe; Jose D. Gallegos; *
Patricia M. Gallegos; William A. Lucas; *
Nick Quaglietta, *
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Claimants-Appellees, *
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v. *
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Fairfield Communities, Inc., *
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Debtor-Appellant, *
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Phyllis G. Daleske; Arthur E. *
Eschenbach; Marie L. Eschenbach; *
Robert E. Fiedler; Shirley M. Fiedler; *
Charles B. West; Doris J. Weset; D.A. *
White & Company, Inc.; Joan L. White, *
doing business as D.A. White *
Enterprises, *
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Debtors. *
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In re: Fairfield Communities, Inc., *
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Debtor. *
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Fairfield Communities, Inc., *
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Debtor-Appellant, *
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v. *
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John E. Lobdell; Glinda S. Lobdell; *
Robert E. Fiedler; Shirley Fiedler, *
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Claimants-Appellees. *
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Submitted: January 16, 1998
Filed: April 27, 1998
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Before BOWMAN, WOLLMAN, and HANSEN, Circuit Judges.
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BOWMAN, Circuit Judge.
In 1993 and 1994, owners of property in a development in the Colorado
mountains sued the developer, Fairfield Communities, Inc., in Colorado state court,
alleging that Fairfield had imposed on them a fee that is invalid under Colorado law.
Fairfield, which had emerged from Chapter 11 bankruptcy in 1992, then sued the
property owners in the Bankruptcy Court for the Eastern District of Arkansas, the court
that had presided over Fairfield's Chapter 11 case, alleging that the property owners'
claims had been discharged when the Bankruptcy Court confirmed Fairfield's plan of
reorganization. In the Bankruptcy Court, the property owners filed motions to dismiss
Fairfield's suits for lack of subject matter jurisdiction. The Bankruptcy Court held that
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it has jurisdiction over some but not all of Fairfield's claims. The District Court,1 to
which the Bankruptcy Court's decision was first appealed, held that the Bankruptcy
Court does not have subject matter jurisdiction over any of Fairfield's claims. Fairfield
now appeals to us. There are no issues of fact, and we review de novo the legal
question of whether the Bankruptcy Court has jurisdiction.
Generally, once a bankruptcy debtor's reorganization plan has been confirmed,
as Fairfield's plan was before Fairfield initiated this case, "the estate of the debtor, and
thus the bankruptcy court's jurisdiction, ceases to exist." Norwest Equip. Fin., Inc. v.
Nath (In re D & P Partnership), 91 F.3d 1072, 1074 (8th Cir. 1996). Nevertheless, even
after the confirmation of a debtor's plan, "a bankruptcy court may explicitly retain
jurisdiction [by stating so in the order confirming the plan] over aspects of a plan related
to its administration and interpretation." Id. In this case, the Bankruptcy Court did state
in the order confirming Fairfield's plan that it retained jurisdiction over cases involving
the enforcement of the plan. The critical question is thus: does this case involve the
enforcement of Fairfield's plan?
Fairfield argues that it does, because, according to Fairfield, the property owners'
claims were discharged by the confirmation of the plan, and Fairfield is seeking to bar
those claims on that basis. The confirmation order, however, discharges only claims
against Fairfield that arose before the entry of that order. The plan has nothing
whatsoever to do with claims arising after the confirmation date. Accordingly, this case
could involve the plan only if the property owners' claims arose before the plan's
confirmation. If, on the other hand, the property owners' claims arose postconfirmation,
then this case lies outside the scope of the plan, and there is no basis for bankruptcy
court jurisdiction. See In re Morgan & Morgan, Inc., 24 B.R. 518, 520-21 (S.D.N.Y.
1
The Honorable Henry Woods, United States District Judge for the Eastern
District of Arkansas.
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1982), in which the bankruptcy court dismissed for lack of jurisdiction the debtor's suit
to enjoin a postconfirmation action against it, and stated that:
The debtor is not entitled to a permanent umbrella shielding it from all law
suits . . . The order of confirmation marked the commencement of the
period when a debtor was weaned from dependence on the bankruptcy
court's injunctive powers so as to stand on its own feet with respect to
post-confirmation matters . . . [There is no reason] to protect the debtor
from post-confirmation suits bottomed on claims arising after the entry of
the order confirming the plan of arrangement.
See also Pettibone Corp. v. Easley, 935 F.2d 120, 122 (7th Cir. 1991) (ordering
dismissal for want of jurisdiction of debtor's postconfirmation suit to enjoin claims
against it, and stating that: "Once the bankruptcy court confirms a plan of
reorganization, the debtor may go about its business without further supervision or
approval. The firm also is without the protection of the bankruptcy court. It may not
come running to the bankruptcy judge every time something unpleasant happens.").
In determining when the property owners' claims against Fairfield arose, we begin
by noting that, as the property owners point out, their claims are based solely on
Fairfield's conduct after the confirmation date. The property owners seek a declaratory
judgment that the fee Fairfield has imposed on them is invalid and an injunction
prohibiting Fairfield from continuing to collect the fee. These claims are, obviously,
purely prospective; they do not in any way depend on Fairfield's past conduct, much less
its conduct prior to confirmation. The property owners also seek the refund of certain
fees that Fairfield already has collected, and certain other compensatory and punitive
damages. The property owners have limited their complaints, however, so as to seek
monetary recovery solely on the basis of Fairfield's postconfirmation conduct. Thus all
of the property owners' claims are based on Fairfield's conduct subsequent to
confirmation.
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Fairfield contends that the property owners' claims nevertheless arose before
confirmation because they relate back to the dates of the original land sale contracts that
established the fee that the property owners now allege is unlawful. In support of this
argument, Fairfield cites United States acting through the Agricultural Stabilization and
Conservation Service v. Gerth, 991 F.2d 1428, 1433-35 (8th Cir. 1993), in which we
held that a claim created by a contract arises at the formation of the contract, even if its
validity is contingent on some later event. In Gerth we stated that "Gerth's claim--his
right to payment--came into existence at the time the contract was signed and ASCS
promised to pay him" even though Gerth's right to payment was contingent on
subsequent Congressional appropriation of the funds with which ASCS would pay
Gerth. Id. at 1434.
This case differs from Gerth in one critical respect. In Gerth, the contract in
question directly created the claim: the contract provided that Gerth had a claim for
payment from the ASCS. In this case, the land sale contracts did not create the property
owners' claims against Fairfield. The contracts did not provide that the property owners
had a claim to payment from Fairfield; quite to the contrary, the contracts provided that
Fairfield had a claim to payment from the property owners--the right to collect the
contested fee. The property owners' claims are based on the alleged illegality of the
contracts insofar as they create this right. More precisely, the property owners' claims
are based on Fairfield's attempts to enforce the contested fee provision--and not all of
Fairfield's attempts, but only those occurring after the confirmation of Fairfield's
reorganization plan. We conclude that the property owners' claims arose not when the
land sale contracts were formed but rather when Fairfield engaged in the conduct that
forms the basis of the claims, after confirmation.
In summary, the property owners are asserting only postconfirmation claims
against Fairfield. As such, these claims were not discharged in Fairfield's bankruptcy.
Accordingly, the Bankruptcy Court lacks jurisdiction over Fairfield's suits to enjoin the
property owners' claims.
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We affirm the judgment of the District Court.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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