Opinion
Case No. 8:06-CIV-114-T-17-MSS.
June 19, 2006
ORDER
This cause is before this Court on the bankruptcy appeal filed by The Whiting-Turner Contracting Company and United States Fidelity and Guaranty Company (Docket No. 12) and response thereto (Docket No. 29).
STATEMENT OF FACTS AND PROCEDURAL HISTORY
Electric Machinery Enterprises (EME) performed work for the Whiting-Turner Contracting Company (Whiting-Turner) as an electrical subcontractor on the Universal City Development Partners (UCDP) "Seuss Landing" project in Orlando, Florida. During completion of the project, both Whiting-Turner and EME suffered schedule delays and increased costs for which Whiting-Turner pursued claims against UCDP, in 1999, for itself and on behalf of its subcontractors, including a "pass-through" claim submitted by EME in the amount of $5,001,644.00. EME and Whiting-Turner entered into a Tolling Agreement that included, inter alia, a clause providing for binding arbitration between the parties. Both before and after the Tolling Agreement, Whiting-Turner made several advance payments to EME which totaled $1,845,451.00. In 2004, Whiting-Turner settled with UCDP for $9,600,000.00 and informed EME that Whiting-Turner considered the subcontract to be paid in full and concluded.
EME initiated this adversary proceeding, in bankruptcy court, claiming it did not receive its pro-rata share of the settlement between Whiting-Turner and UCDP and is therefore owed $5,081,286.00 in principal, plus $2,328,423.00 by Whiting-Turner. EME moved for summary judgment, alleging that this is an action for turnover of property of the estate. Whiting-Turner moved to compel arbitration pursuant to the clause in the Tolling Agreement. The Bankruptcy Court denied in part the Motion for Summary Judgment, ruling that the case was not a turnover proceeding because the claim was not liquidated. The Bankruptcy Court also denied the Motion to Compel Arbitration, concluding that the funds in dispute were subject to a constructive trust, that the determination of the res of such a constructive trust is a core proceeding, and that arbitration in those circumstances would be inappropriate. Whiting-Turner has taken this interlocutory appeal from the Bankruptcy Court's denial of their Motion to Compel Arbitration.
JURISDICTION
The arbitration agreement in this dispute is governed by the Federal Arbitration Act (FAA), 9 U.S.C. § 1, et seq. Appellants have a right to appeal the Bankruptcy Court's denial of their Motion to Compel Arbitration under the FAA's Appeal Statute which provides that, "An appeal may be taken from . . . an order denying an application . . . to compel arbitration." 9 U.S.C. § 16(a). This District Court has jurisdiction to hear this appeal under 28 U.S.C. § 158(a).
STANDARD OF REVIEW
This Court reviews the Bankruptcy Court's undisputed findings of fact under the clearly erroneous standard of review and conclusions of law under the de novo standard of review. As stated by this Court, "A finding of fact is clearly erroneous when, although there is evidence to support it, the reviewing court on review of the entire evidence is left with the definite and firm conviction that a mistake has been committed." Lightner v. Lohn, 274 B.R. 545, 548.
DISCUSSION
I. The Bankruptcy Court's finding of a constructive trust was not clearly erroneous.
Appellants argue that, contrary to the Bankruptcy Court's order, there is no constructive trust in favor of EME. "To impose a constructive trust, there must be (1) a promise, express or implied, (2) transfer of the property and reliance thereon, (3) a confidential relationship and (4) unjust enrichment." Provence v. Palm Beach Taverns, Inc., 676 So.2d 1022, 1025 (Fla. Dist. Ct. App. 1996). The Bankruptcy Court found that Whiting-Turner was collecting money for itself and its subs, that Whiting-Turner was going to distribute the money, that if Whiting-Turner did not distribute the money it would be unjustly enriched, and that these facts would be grounds for imposing a constructive trust. After due consideration, it is the conclusion of this Court that sufficient facts exist to support the Bankruptcy Court's determinations. The Bankruptcy Court committed no reversible error in finding a constructive trust.
II. The Bankruptcy Court's conclusion that it had jurisdiction over the determination of the res of a constructive trust was correct.
The Bankruptcy Court was correct in finding that the determination of the trust res was a core proceeding. It is clear that 28 U.S.C. § 157(b)(2) provides a non-exhaustive list of core proceedings, which, as the Bankruptcy Court properly notes, "is meant to get, in its essence, at the major decisions that a [b]ankruptcy [c]ourt makes in administering property of a bankrupt estate." R. Doc. 7-39, pg. 63. This district has held that "[t]he finding of a constructive trust by the bankruptcy court and a determination of the proper distribution of that trust are intimately tied to the traditional bankruptcy functions and estate, and therefore, are core matters within the clear jurisdiction of the bankruptcy court." Maurer v. Maurer (In re Maurer), 271 B.R. 207, 210 (Bnkr. Ct. M.D. Fla. 2002), quoting Canal Corp. v. Finnman (In re Johnson), 960 F.2d 396, 400 (4th Cir. 1992). It is, therefore, apparent to this Court that proceedings related to a constructive trust are core.
Section 1334(e), 28 U.S.C. § 1334(e), provides district courts and bankruptcy courts with jurisdiction "of all the property, wherever located, of the debtor . . . and of the property of the estate." The Bankruptcy Court based its jurisdictional determination in this case on a recent United States Supreme Court decision which interpreted § 1334(e), Tennessee Student Assistance Corp. v. Hood, 541 U.S. 440, 124 S.Ct. 1905 (2004). The Hood case held that "A bankruptcy court's in rem jurisdiction permits it to `determin[e] all claims that anyone, whether named in the action or not, has to the property or thing in question. The proceeding is `one against the world.'" Id. at 448, 1911. The Hood decision was applied in the Eleventh Circuit in In re Lake Worth Generation, LLC, 318 B.R. 894 (Bnkr. S.D. Fla. 2004). The Lake Worth court stated that "[t]he bankruptcy court's in rem jurisdiction is nearly plenary. . . ." Id. at 902. The Hood and Lake Worth decisions make clear that the Bankruptcy Court's jurisdiction is expansive and certainly includes the determination of the res of a constructive trust where the res would be the property of a bankrupt estate. This Court thus concludes that the Bankruptcy Court properly found that the determination of the trust res was a core proceeding within its jurisdiction.
III. The Bankruptcy Court's determination that arbitration would not be appropriate in this case was not an abuse of discretion.
The Bankruptcy Court, through its jurisdiction over this matter, had discretion to determine whether arbitration would inherently conflict with the purposes of the bankruptcy code. After considering the applicable case law, the Bankruptcy Court exercised this discretion in finding that enforcing the Tolling Agreement's arbitration clause would not be appropriate in this case. It is the conclusion of this Court that there is no basis for finding an abuse of discretion in the Bankruptcy Court's determination that arbitration would be inappropriate. Accordingly, it is
ORDERED that the bankruptcy appeal be denied, and the Clerk of Court is directed to close this case and remand to the bankruptcy court.
DONE and ORDERED.