Opinion
Case No. 94-13600-AM, Adversary Proceeding No. 96-1015
September 18, 1996
George Leroy Moran, Kellogg, Krebs Moran, Fairfax, VA, of Counsel for the plaintiff
Maria M. Kear, Kear Gilbert, Fairfax, VA, of Counsel for the defendants
MEMORANDUM OPINION
This is an adversary proceeding in which the debtor seeks to revoke the order confirming its own chapter 11 plan. Incident to that relief, it seeks an accounting from the investors whose infusion of cash was central to confirmation of the plan, as well as the turnover of property that it claims the investors are withholding from the reorganized debtor. The defendant investors have counterclaimed for the appointment of a receiver or chapter 11 trustee, an accounting, and a judicial winding-up. At a pretrial conference held on July 9, 1996, the court raised sua sponte the question of whether it had jurisdiction over the causes of action pleaded in the complaint and the counterclaim. The court then took under advisement the issue of jurisdiction as well as an outstanding motion by the debtor to dismiss the counterclaim for failure to state a claim for relief.
Facts and Procedural History
P W Surplus Office Movers, Inc. ("P W" or "the debtor"), a Virginia corporation incorporated in May, 1993, operates a moving and storage business in the Washington, D.C. metropolitan area. It filed a voluntary chapter 11 petition in this court on September 20, 1994. All the stock in the corporation was owned at that time by Kerry Poindexter and Anthony Wright. On July 17, 1995, the court confirmed the debtor's second amended plan of reorganization. Under the terms of the plan, a group of investors consisting primarily of Thomas J. Riley, Charles D. Riley and H. Frank Burby ("the Riley group" or "the investors") were to infuse an agreed amount of cash into the debtor, which would be used to fund the debtor's plan, in exchange for 49% of the debtor's common stock. The terms of this agreement were set forth in a stock purchase agreement dated January 26, 1995 ("the Stock Purchase Agreement"). The order of confirmation, which was entered on the docket on July 17, 1995, approved the Stock Purchase Agreement on the condition that it be amended to comply with the confirmation order and the Second Amended Plan.
Article I of the amended Stock Purchase Agreement reads as follows:
At the Closing of such purchase and sale (the "Closing"), Buyer will pay or cause to be paid to John T. Donelan, Esquire, P.C., as custodian, an amount sufficient to the sum defined in Article III, Section 3.2 of the Plan (hereinafter, the "Class III Payment"). Payment of the Class II Creditors, as defined in the Plan, shall be paid by Buyer and Corporation collectively, in equal monthly payments within six (6) years of the assessment date with interest at the rate of nine percent (9%) per annum (the "Class II Payment"). The contribution of Buyer to the Class II Payment and the Class III Payment are hereinafter collectively referred to as the "Purchase Price." At the Closing, the Class III Payment portion of the Purchase Price shall be paid by wire transfer of immediately available United States dollar federal funds to a bank specified by John T. Donelan, Esquire, P.C. The Class II Payment portion of the Purchase Price shall be paid post-Closing by Buyer on an as needed basis.
The buyers were Thomas J. Riley, Charles D. Riley, Thomas J Riley, Trustee for Thomas James Riley, Charles D. Riley, Trustee for Jennifer A. Riley, and H. Frank Burby.
P W Surplus Office Movers, Inc.
The Class II creditors were the Internal Revenue Service and the Virginia Department of Taxation, both of whom were being paid their tax claims over a period of six years from the date the taxes were assessed. The Class III creditors were the unsecured creditors, who under the plan were to receive payment in cash of 20 cents on the dollar.
The present complaint was filed by the reorganized debtor on January 16, 1996. It alleges in substance that the cash the investors paid into the debtor was actually the debtor's own money that the investors had diverted, apparently by depositing checks payable to the debtor into a secret bank account the investors had set up in the debtor's name. The complaint seeks revocation of the order of confirmation and rescission of the Stock Purchase Agreement as having been procured through fraud and also seeks an accounting by the investors and the return of certain property they claim the investors are withholding. The investors filed a "general denial," which in substance was a request for an extension of the time to file responsive pleadings until the court had ruled on the debtor's motion to employ special counsel to prosecute the complaint. The debtor agreed to the extension, which was embodied in a consent order entered by this court. After the employment of special counsel was approved, the investors then filed an answer to the complaint and a counterclaim. In the counterclaim, they allege that the majority shareholders, Poindexter and Wright, have refused to provide them with access to the corporation's financial records, have caused the corporate offices to be moved to a secret location, and are using their "complete and absolute" control of the debtor's assets and financial information "to misapply and waste" the debtor's assets. The investors seek the appointment of a "receiver, Chapter 11 Trustee, and/or custodianship," an accounting, and access to corporate records.
The pleading is styled a "bill of complaint," apparently by analogy to the practice in the Virginia state courts, in which suits in equity are commenced by the filing of a bill of complaint. Rule 2:2, Rules of the Sup.Ct. of Va. Under the Federal practice applicable in bankruptcy courts, however, the procedural distinctions between "cases at law and in equity" have been abolished, and adversary proceedings in bankruptcy cases, regardless of the nature of the relief sought, are commenced by the filing of a complaint. Fed.R.Civ.P. 1 and 2; F.R.Bankr.P. 7003.
To say that the complaint is confusing and poorly-drafted would be an understatement. Only by reading the various exhibits attached to the complaint in tandem with the complaint itself, and to some extent by reading between the lines, is the court able to piece together the plaintiffs theory of recovery.
There is no requirement in either the Bankruptcy Code or the Federal Rules of Bankruptcy Procedure that a reorganized debtor — as opposed to a trustee or debtor in possession — obtain bankruptcy court approval to employ counsel. Thus, the lack of prior court approval for the employment of the debtor's current counsel had then, and still has, no effect on the validity of counsel's action in filing the present complaint on behalf of the reorganized debtor.
The reorganized debtor has moved under F.R.Bankr.P. 7012 to dismiss the counterclaim for failure to state a claim for relief. No order has ever been entered closing the chapter 11 case, and the case remains open on the court's docket.
F.R.Bankr.P. 3022 provides for entry of a final decree closing a chapter 11 case after the estate "is fully administered." On March 28, 1996, the United States Trustee filed a motion for a rule to show cause against the reorganized debtor as to why a final decree closing this case should not be entered, or, in the alternative, why the case should not be dismissed or converted to chapter 7. An order to show cause was entered on April 2, 1996, and the matter was set on the court's April 23, 1996 docket. The debtor filed a response stating that the filing of a final report and motion for final decree is impossible until there has been a disposition of the present adversary proceeding. Since the complaint, in part, seeks revocation of the order confirming the debtor's plan, it is obvious that the chapter 11 case will not be ripe for the entry of a final decree until that issue is resolved.
Discussion I.
The extent to which a bankruptcy court may or should exercise jurisdiction to hear and determine disputes after confirmation of a plan in a chapter 11 case is not always clear. On the one hand, the confirmation of a plan revests the property of the bankruptcy estate in the debtor and terminates the automatic stay. § 1141(b), Bankruptcy Code, 11 U.S.C. § 1141(b); United States v. Carolina Parachute Corp., 907 F.2d 1469 (4th Cir. 1990). Although confirmation of a plan operates as a discharge of preconfirmation debts, § 1141(d), Bankruptcy Code, a creditor provided for under the plan receives "a new claim under terms specified in the plan." 3 David G. Epstein, Steve H. Nickles, and James J. White, Bankruptcy, § 10-29, p. 87 (1992). In effect, a confirmed plan is in the nature of a novation, and the creditor, after confirmation, generally remains free to enforce its claim, to the extent recognized and provided for in the plan, in any otherwise appropriate forum without seeking relief from the bankruptcy court. Carolina Parachute, supra; In re Ernst, 45 B.R. 700 (Bankr. D. Minn. 1985). On the other hand, however, it is equally clear that confirmation of a chapter 11 plan does not terminate all jurisdiction of the bankruptcy court over the affairs of the reorganized debtor. See, e.g., § 1142(b), Bankruptcy Code. As one treatise explains,
In the more common case it is probably better to think of the reorganized corporation as a baby being weaned from its mother's milk. Like the mother of a growing child, the court continues to supervise the debtor and has limited, though continuously decreasing, power to adjust, modify, or give orders with respect to the plan and the debtor's behavior. As time passes, both the court's interest in doing so and its right to interfere gradually diminish.
Epstein, et al., supra, at p. 61-62. In particular, after confirmation a bankruptcy court "retains jurisdiction to order the parties to comply with the plan, to carry out their responsibilities, and to set it up and put it in motion," and, of equal importance, has jurisdiction "to interpret the plan and so to determine the rights of the parties." Id. at p. 62. Nevertheless, post-confirmation jurisdiction is not unlimited and does not extend to disputes not involving rights created by the Bankruptcy Code and not otherwise "related to" a bankruptcy case. Poplar Run Five L.P. v. Virginia Electric Power Co. (In re Poplar Run L.P.), 192 B.R. 848 (Bankr. E.D. Va. 1995) (dismissing post-confirmation adversary proceeding in closed case seeking return of security deposit).
II.
Before the court can resolve the larger question of jurisdiction, however, a more immediate issue must be addressed, namely the timeliness and adequacy of PW's complaint to the extent it seeks revocation of the order of confirmation. Revocation of an order of confirmation in a chapter 11 case is governed by § 1144, Bankruptcy Code, which provides as follows:
On request of a party in interest at any time before 180 days after the date of the entry of the order of confirmation, and after notice and a hearing, the court may revoke such order if and only if such order was procured by fraud. An order under this section revoking an order of confirmation shall —
(1) contain such provisions as are necessary to protect any entity acquiring rights in good faith reliance on the order of confirmation; and
(2) revoke the discharge of the debtor.
(emphasis added). The statute of limitations set forth in § 1144 is absolute. "Congress has determined that a 180-day limitations period strikes the appropriate balance between the strong need for finality in reorganization plans and the interest in affording parties in interest a reasonable opportunity to discover and assert fraud. In recognition of the strength of the interest in finality of reorganizations plans, courts have held uniformly that strict compliance with section 1144 is a prerequisite to relief." Dale C. Eckert Corp. v. Orange Tree Assoc., Ltd. (In re Orange Tree Assoc., Ltd.), 961 F.2d 1445 (9th Cir. 1992).
The order confirming P W's plan was entered on the docket on July 17, 1995. P W filed its complaint 183 days later on Tuesday, January 16, 1996. At first blush, therefore, the complaint would appear to be untimely filed. Here, however, the provisions of F.R.Bankr.P. 7006(a) come into play. The 179th day was Friday, January 12, 1996 — a day that the clerk's office of this court was closed due to a major snowstorm. The court was also closed on the 180th and 181st days — a Saturday and a Sunday. Furthermore, the court was closed on the 182nd day — Monday, January 15 — for a federal holiday, Martin Luther King Day. Consequently, the next day that the court was open and a complaint could be filed was Tuesday, January 16, 1996. Since the complaint was filed on that date, the court finds that it was timely under § 1144, Bankruptcy Code.
"In computing any period of time prescribed . . . by any applicable statute, the day of the . . . event . . . from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included, unless it is a Saturday, a Sunday, or a legal holiday, or, when the act to be done is the filing of a paper in court, a day on which weather or other conditions have made the clerk's office inaccessible" (emphasis added).
Because the statute expressly requires that the "request" — which under F.R.Bankr.P. 7001 must be brought by an adversary proceeding — to revoke the order of confirmation must be made "before" 180 days after the date the confirmation order was entered, it is certainly arguable — as indeed the investors urge in their brief — that a complaint filed on the 180th day would be out of time. The court's own research has not found any reported case in which a complaint was filed on the 180th day after confirmation and was held to be either timely or untimely. The issue need not detain us, however, since in this case both the 179th day and the 180th day were days the clerk's office was closed.
The timeliness of the filing, however, does not end the initial inquiry. An order of confirmation may be revoked "if and only if the order of confirmation was procured by fraud." § 1144, Bankruptcy Code. When it enacted § 1144, Congress provided no definition of fraud. Consequently, courts have looked to state law. In order to sustain a claim for fraud under Virginia law, a plaintiff must establish the following essential elements:
1. a false representation of a material fact;
2. made intentionally and knowingly;
3. with intent to mislead;
4. reliance by the party misled; and
5. resulting damage to the party misled.
Advanced Resources International, Inc. v. Tri-Star Petroleum, 4 F.3d 327, 335 (4th Cir. 1993), citing Nationwide Mutual Insurance Co. v. Hargraves, 242 Va. 88, 91 (1991).
Additionally, the plain language of § 1144 permits an order of confirmation to be revoked only where that order was procured by fraud. Accordingly, courts have concluded that "[i]t is . . . fraud directed at the bankruptcy court that will provide the foundation for vacating an order of confirmation." First Union National Bank of Florida v. Perdido Motel Group, Inc., 142 B.R. 460, 464 (N.D. Ala. 1992) (emphasis added). Consistent with the statutory language, courts have vacated an order of confirmation only where "(1) the [party in interest] made a false representation of (2) an existing material fact (3) which he knew was false when made (4) that was reasonably relied upon by the bankruptcy court (5) in issuing its confirmation order." Id. (Court vacated order of confirmation where it was later learned that the debtor achieved confirmation by reaching side agreements with two creditors, such that the debtor promised them more favorable treatment than other similarly situated unsecured creditors, and then procured approval of judge by falsely representing that the favored creditors were being treated similarly to other unsecured creditors). Further, "[a] failure to disclose material information that is known by an entity that is obligated to make such a disclosure, can be a basis for revocation of an order of confirmation." Ogden v. Ogden Modulars, Inc. (In re Ogden Modulars, Inc.), 180 B.R. 544, 547 (Bankr. E.D. Mo. 1995) (failure of debtor's officers to disclose that debtor's president was collecting $5,000 per month from estate assets as consulting fee in addition to regular salary, that president was using debtor's employees and property for personal gain, and that rental income was diverted from debtor to debtor's president warranted revocation of confirmation due to fraud on court). See also, First Union Nat'l Bank of Florida v. Tenn-Fla Partners (In re Tenn-Fla Partners), 170 B.R. 946 (Bankr. W.D. Tenn. 1994) (chapter 11 debtor in possession's knowing concealment of potential purchaser's interest in estate's sole asset prior to confirmation of plan, telling bidders to wait until after confirmation and preventing bondholders from knowing property's true market value prior to their voting to accept less than full value of their claims was fraud on court warranting revocation of confirmation).
P W's complaint is pleaded in four counts. Count I alleges a breach of the Stock Purchase Agreement and seeks, apparently, a return of the share certificates issued to the investors for their 49% equity interest. Count II seeks revocation of "that portion" of the confirmed plan approving the Stock Purchase Agreement. Count III seeks an accounting for the funds allegedly deposited by the investors in the secret bank account. Finally, Count IV seeks the turnover of $7,000 in cash and 250 moving blankets belonging to the reorganized debtor.
With respect specifically to Count II, the complaint repeats and incorporates by reference some 31 numbered allegations focusing almost entirely on the defendants' failure to comply with the Stock Purchase Agreement and the order of confirmation — in other words, post-confirmation defaults. Indeed, Count II contains only a single reference to a pre-confirmation act by the defendants:
37. The Defendants' have willfully misrepresented to this Court and to the Debtor that they would personally place the monies into the Debtors [sic] account, when in fact, the Purchasers have taken funds already due to the Debtor and then used these monies to fund the Plan of reorganization.
This is apparently a reference to testimony by Thomas J. Riley at the confirmation hearing that he and the other investors had the money "in the bank right now" to fund the reorganization plan. Complaint, Exhibit 5, p. 5. Accordingly, the complaint, while not a model of clarity or precision, and while setting forth much that is extraneous, may fairly be read as alleging that the order of confirmation was procured by the fraudulent representation of the investors that they were investing their own money in the reorganized debtor when actually the money they were planning to "invest" already belonged to, and had been stolen from, the debtor. Whether this is what really happened is, of course, another matter; but at this stage of the proceedings, the court is required to treat the well-pleaded allegations of the complaint as true. See, Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief).
Obviously, to the extent that Count II also pleads and relies upon post-confirmation "failure of the Defendants to abide by the requirement [sic] of the Confirmed Plan of Reorganization" as "hinder[ing] the Debtors ability to abide by and to implement the Confirmed Plan of Reorganization," ¶¶ 39, 40, such allegations provide no basis for revocation of confirmation.
III.
Having concluded that Count II at least minimally sets forth a claim for revocation of confirmation and is not time-barred, the court will briefly address the three remaining counts in the debtor's complaint and the single count in the investors' counterclaim.
A.
In its complaint, P W asserts that its causes of action "arise in" its chapter 11 case, and that this court has subject matter jurisdiction under 28 U.S.C. § 157, 11 U.S.C. § 1144, 28 U.S.C. § 1471, 11 U.S.C. § 542 and F.R.Bankr.P. 7001. The debtor also asserts that this adversary proceeding is a core proceeding under 28 U.S. § 157(b)(2)(A), (E), (L), and (O). Except for the reference to 28 U.S.C. § 1471, the investors admit in their answer the jurisdictional allegations of the complaint, although in a subsequent reply memorandum they now assert that jurisdiction over Count II is lacking because (1) the complaint was filed outside the 180-day period of § 1144 and (2) the complaint was signed by counsel who were not "counsel of record." Both of these issues are discussed above and need not be further addressed.
28 U.S.C. § 1471 was implicitly repealed by Pub.L. No. 98-353 (1984) and was replaced by 28 U.S.C. § 1334. Accordingly, the court will consider the plaintiffs assertion of jurisdiction pursuant to § 1471 to be a scrivener's error and will treat jurisdiction as having been asserted pursuant to § 1334.
What is meant is that the complaint was not signed by the attorney who had been employed as counsel to the debtor in possession in the debtor's chapter 11 case. Confirmation of the chapter 11 plan, however, terminated the debtor's status as a debtor in possession. The reorganized debtor was, as previously noted, free to hire counsel without obtaining the prior approval of this court. When counsel signed and filed the complaint commencing this adversary proceeding, he thereby entered his appearance for the reorganized debtor and became its counsel of record in this adversary proceeding.
Chief Judge Bostetter of this court recently examined the nature and extent of bankruptcy jurisdiction in the context of a controversy arising post-confirmation. In re Poplar Run, supra. As Judge Bostetter observed,
Like other federal courts, bankruptcy courts are courts of limited jurisdiction, and as such, they "must be alert to overstepping their limited grants of jurisdiction." At any stage of a litigation . . . subject-matter jurisdiction may be questioned. By failing to do so, the parties cannot confer jurisdiction by consent. If the court perceives the defect, it is obligated to raise the issue sua sponte. "It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction."
Only the Constitution and federal statutes can confer subject-matter jurisdiction on the federal courts. The statute conferring bankruptcy jurisdiction is codified at 28 U.S.C. § 1334, and it provides inter alia that "the district courts shall have original and exclusive jurisdiction of all cases under title 11." The words "cases under title 11" refer merely to the bankruptcy petitions themselves. . . . In addition . . . the district courts may refer to the bankruptcy courts (1) proceedings that "arise under" the Bankruptcy Code, (2) proceedings that "arise in" a case under the Bankruptcy Code, and (3) proceedings that "relate to" a case under the Bankruptcy Code. . . .
To determine whether a proceeding "arises under" title 11, we apply the same test for deciding whether a civil action presents a federal question under 28 U.S.C. § 1331. This means that "arising under" jurisdiction in bankruptcy extends to "only those cases in which a well-pleaded complaint establishes either that federal [bankruptcy] law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal [bankruptcy] law."
192 B.R. at 854-5 (internal citations omitted). Proceedings "arising in" a case under title 11, as the Fourth Circuit recently explained, are those proceedings that "are not based on any right expressly created by Title 11, but nevertheless would have no existence outside of the bankruptcy." Bergstrom v. Dalkon Shield Claimants Trust (In re A.H. Robins Company Inc.), 86 F.3d 364, 372 (4th Cir. 1996), quoting Matter of Wood, 825 F.2d 90, 97 (5th Cir. 1987). Finally, the "related to" category of cases is "quite broad and includes proceedings in which the outcome could have an effect upon the estate being administered." Id. Nevertheless, the "related to" category is not so broad as to encompass litigation of state law claims that will not have an effect on the bankruptcy estate, simply because one of the litigants filed a petition in bankruptcy. Lux v. Spotswood Construction Loans, 176 B.R. 416 (E.D. Va. 1994) (after chapter 7 case was closed, there was no "related to" jurisdiction over adversary proceeding brought by debtor challenging a foreclosure).
B.
Count I of the debtor's complaint essentially seeks cancellation of the share certificates — representing a 49% equity interest in the reorganized debtor — based either on a failure of consideration or fraud in the inducement. The issuance of this stock was expressly provided for in the plan confirmed by the court. Under the plan, the existing shares of stock were canceled, and new stock was issued. The consideration for the 49% being issued to the investors was their investment of sufficient cash at confirmation to pay the unsecured claims at 20 cents on the dollar, their agreement to become "collectively" liable with the debtor for the taxes due to the Internal Revenue Service and the Virginia Department of Taxation, and their forgiveness of certain pre-confirmation loans. The question of whether they in fact invested anything at all at confirmation or were — as the reorganized debtor now asserts — simply engaged in a shell game in which they paid for the stock with the debtor's own money, goes to the heart of the reorganization plan confirmed by this court. It is of course true that the claim for rescission is one that could as easily be asserted and tried in state court, and that there are no technical issues of bankruptcy law that would have to be resolved in order to determine whether there was, as alleged, fraud in the inducement or a failure of consideration. Nevertheless, given the nature of the controversy, and the fact that the chapter 11 case is not yet closed, the court concludes that the claim "arises in" the debtor's chapter 11 case and is a core proceeding.
While U.S. District Courts and bankruptcy courts have exclusive jurisdiction over bankruptcy "cases," jurisdiction over proceedings "arising in" a bankruptcy case, "arising under" the Bankruptcy Code, or "related to" a bankruptcy case is non-exclusive. 28 U.S.C. § 1334. Accordingly state courts in most instances can hear and determine causes of action over which they would otherwise have jurisdiction even where the cause of action has its genesis in a bankruptcy case or involves the application of bankruptcy law. There are, however, specific exceptions: for example, under § 523(c), Bankruptcy Code, only a bankruptcy court may determine the dischargeability of a debt alleged to be excepted from discharge under § 523(a)(2), (a)(4), (a)(6), or (a)(15), Bankruptcy Code.
C.
Count III seeks the equitable remedy of an accounting for the funds the investors allegedly deposited in the secret bank account. The complaint is far from clear as to when these funds became the debtor's property. If the debtor became entitled to them prior to confirmation, they were property of the estate, and became property of the reorganized debtor when the plan was confirmed. If the debtor became entitled to them after confirmation, they were never property of the estate. It seems reasonable, however, to read the complaint as alleging at least in part the former — that is, that the bulk of the funds for which an accounting is sought are the funds that are alleged to have been diverted to the secret bank account and paid to the debtor at confirmation. Once again, the cause of action is one that arises under state law and involves no application of bankruptcy law. The state courts are at least as competent to hear and determine the controversy as this court. Nevertheless, because the issues in Count III are intimately bound up with the claim that the investors obtained their stock under the confirmation order by fraud, and because the bankruptcy case remains open, the court concludes that Count III — to the extent it concerns funds that were property of the estate — "arises in" the debtor's case and is a core proceeding. The court cautions, however, that to the extent that the debtor is seeking an accounting for funds the debtor became entitled to post-confirmation, such a controversy, in the court's opinion, is not even "related to" the debtor's case, and this court is without jurisdiction to hear the controversy or order relief.
Among the specific funds for which an accounting is sought are apparently two checks payable to P W in the aggregate amount of $7,000 that one of the investors received on December 30, 1995, more than five months after confirmation. Complaint, Exhibit 7.
D.
Count IV seeks the "turnover" of $7,000 in cash and 250 moving blankets from the investors. The complaint does not state when and how the investors came into possession of the property. The complaint asserts that the cause of action arises under § 542, Bankruptcy Code, which provides as follows:
(a) . . . an entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, . . . shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.
As noted previously, PW's plan was confirmed on July 17, 1995. The effect of confirmation is to revest the property of the bankruptcy estate in the debtor. § 1141(b), Bankruptcy Code. Hence the fundamental problem: a prerequisite for obtaining relief pursuant to § 542 is that there be an estate in existence. As noted recently by Chief Judge Bostetter of this court in a somewhat similar context,
[T]he bankruptcy provisions addressing turnover require that the property be delivered to either the trustee or the debtor-in-possession — in other words, the party administering the estate. In this instance, the estate ceased to exist upon plan confirmation, and all estate property not otherwise transferred under the plan reverted to the debtor. There is no estate that can receive the "estate" property allegedly held by Virginia Power, and accordingly, §§ 542 and 543 are causes of action unavailable to Poplar."
Poplar Run Five L.P., supra, at 856 (emphasis added; internal citations omitted); accord, Finkelstein v. Transamerican Natural Gas Corp. (In re Transamerican Natural Gas), 127 B.R. 800, 803-804 (S.D Texas 1991) (since "the bankruptcy 'estate' ceased to exist at confirmation, post-confirmation controversy over state law contract claim was not within bankruptcy court's core jurisdiction as concerning the "administration of the estate" even if outcome would affect pool of funds from which creditor claims could be paid). Accordingly, Count IV of P W's complaint will only be viable as a bankruptcy cause of action if the court grants the relief requested in Count II by revoking the order of confirmation. Otherwise, to the extent that the investors are withholding from the reorganized debtor property belonging to the corporation, such a claim, arising as it does solely under state law, would not appear to be even "related to" the debtor's chapter 11 case. Since it cannot be determined at the present time whether the order of confirmation will be revoked, the court will not dismiss Count IV at this time. If the order of confirmation is revoked, there will then be an "estate," and the court, based on the evidence, will determine whether the property should be turned over to the debtor in possession or other representative of the bankruptcy estate. Otherwise, if the order of confirmation is not revoked, the court will dismiss Count IV for lack of jurisdiction.
E.
There is left finally for consideration the investors' counterclaim alleging oppressive conduct by the majority shareholders, and seeking appointment of "a receiver, Chapter 11 Trustee, and/or custodianship." First, this court is absolutely prohibited from appointing a receiver. § 105(b), Bankruptcy Code (". . . a court may not appoint a receiver in a case under this title"). The court may, of course, order the appointment of a trustee in a chapter 11 case "for cause, including fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor by current management. . . ." § 1104(a)(1), Bankruptcy Code. However, the authority to appoint a trustee exists only "after the commencement of the case but before confirmation of a plan." § 1104(a), Bankruptcy Code. Accordingly, unless and until the order of confirmation is revoked, this court has no authority to order the appointment of a trustee. The remainder of the relief requested by the investors — inspection of the corporation's records and a judicial winding up — are state law remedies for wrongs arising under state law. Since the specific acts that are the subject of the counterclaim all occurred post-petition, this court, unless the order of confirmation is revoked, would have no jurisdiction to grant the relief the investors are seeking, and if relief is to be had at all, it would have to be obtained from the state courts. If the order of confirmation is revoked, remedies will be available under bankruptcy law that are analogous to the state law remedies the investors are seeking. For example, the investors may seek appointment of a chapter 11 trustee under § 1104(a), Bankruptcy Code, an examination of the debtor and its shareholders under Federal Rule of Bankruptcy Procedure 2004, appointment of an examiner under § 1104(b), Bankruptcy Code, conversion of the case to chapter 7 under § 1112(b), Bankruptcy Code, or some combination of those remedies. As the counterclaim now stands, however, it sets forth a cause of action that — except for the request to appoint a chapter 11 trustee — is simply outside this court's jurisdiction. The request for appointment of a chapter 11 trustee, moreover, would ordinarily be brought by motion — with appropriate notice to creditors and other parties in interest — rather than as an adversary proceeding. Since the question of whether, if confirmation is revoked, a chapter 11 trustee should be appointed is one that implicates the interests of all creditors, and not merely the investors, it seems appropriate to dismiss the counterclaim without prejudice. If confirmation is not revoked, the investors may seek appropriate relief in state court. If confirmation is revoked, they may seek analogous relief by motion in this court, after proper notice to creditors and parties in interest.
F.
In summary, the court has jurisdiction to hear and determine Count II, seeking revocation of the order of confirmation, and Count I, seeking cancellation of the stock issued to the investors. If the order of confirmation is revoked, the court will have jurisdiction over Count III and Count IV. Accordingly, those counts will not be dismissed at this time but will be dismissed if the court ultimately determines that the order of confirmation should not be revoked. Finally, the investors' counterclaim will be dismissed without prejudice, but the investors will be free, should the order of confirmation be revoked, to seek appropriate equivalent relief under the Bankruptcy Code and Federal Rules of Bankruptcy Procedure.
A separate order will be entered consistent with this opinion.