South Central v. Oak Baptist

Case: 21-20559 Document: 00516376993 Page: 1 Date Filed: 06/30/2022
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
FILED
June 30, 2022
No. 21-20559 Lyle W. Cayce
Summary Calendar Clerk
In the Matter of: South Central Houston Action
Council, doing business as Central Care Integrated
Health Services,
Debtor,
South Central Houston Action Council, doing business
as Central Care Integrated Health Services,
Appellant,
versus
Oak Baptist Church, doing business as The Fountain of
Praise,
Appellee.
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:20-CV-2194
Before Jones, Elrod, and Higginson Circuit Judges.
Edith H. Jones, Circuit Judge:
Case: 21-20559 Document: 00516376993 Page: 2 Date Filed: 06/30/2022
No. 21-20559
Fountain of Praise, a church that owns a large commercial building,
leased space to Central Care Integrated Health Services to open a low-cost
medical clinic for residents in the area around the building. The contractual
relationship between Fountain of Praise and Central Care soured as soon as
the clinic opened. Among other things, the parties quarreled over the amount
and timing of rent payments and which party bore responsibility for fixing a
leaky roof. Eventually, Fountain of Praise terminated the lease and
successfully evicted Central Care from the premises.
In the meantime, Central Care filed for Chapter 11 reorganization.
Central Care then sued Fountain of Praise in state court, alleging breach of
contract and unjust enrichment claims. Fountain of Praise removed the case
to the bankruptcy court as an adversary proceeding related to Central Care’s
bankruptcy case. In the bankruptcy court, Fountain of Praise moved for
summary judgment on all of Central Care’s claims against it. The bankruptcy
court granted summary judgment on all accounts, concluding that Central
Care’s failure to make timely rent payments excused any breach by Fountain
of Praise and that Central Care lacked the requisite interest in the property
for an unjust enrichment claim.
Central Care appealed the order granting summary judgment to the
district court. At the parties’ request, and with their consent, the district
court reassigned the matter to a magistrate judge under 28 U.S.C. § 636(c).
The magistrate judge affirmed the bankruptcy court’s judgment. Central
Care now seeks review in this court.
This court has an obligation to consider the basis of the district court’s
jurisdiction sua sponte before addressing the merits of a dispute. Bridgmon v.
Array Systems Corp., 325 F.3d 572, 575 (5th Cir. 2003). We must vacate the
judgment because the district court improperly authorized referral of the
appeal from a bankruptcy court decision to a magistrate judge. See Minerex
2
Case: 21-20559 Document: 00516376993 Page: 3 Date Filed: 06/30/2022
No. 21-20559
Erdoel, Inc. v. Sina, Inc., 838 F.2d 781, 786 (5th Cir. 1988). In Minerex, this
court held that, notwithstanding the broad latitude for referring matters to
magistrate judges under 28 U.S.C. § 636(c), the statute governing appeals
from bankruptcy decisions, 28 U.S.C. § 158, plainly and solely allows appeals
to “be taken either to (i) the District Court or (ii) to a panel of bankruptcy
judges.” 1 Id. at 786. “[H]ad Congress meant for its appeals scheme to
include the potential for reference to a magistrate,” the court explained,
“Congress would have expressly so provided,” but it “did not do so.” Id.We therefore VACATE the magistrate judge’s judgment and REMAND
to the district court for further proceedings consistent with this opinion.
1
Importantly, subsequent cases explained that a district judge may refer
bankruptcy appeals for a report and recommendation so long as the district court “engaged
in an independent consideration of the issues . . . .” In re Foreman, 906 F.2d 123, 125-26
(5th Cir. 1990), abrogated on other grounds by Grogan v. Garner, 498 U.S. 279, 291, 111 S. Ct.
654, 661 (1991).
3