Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-06002/USCOURTS-ca10-90-06002-0/pdf.json

Parties Involved:
Bobbie G. Bayless
Appellee
Theta Juan Bernhardt
Appellee
Myers D. Campbell
Appellee
Patricia M. Campbell
Appellee
Catherine Dianne Crabtree Trust
Appellee
Catherine Dianne Crabtree
Appellant
David Lynn Crabtree
Appellant
Linda Catherine Crabtree
Appellee
David Lynn Crabtree Trust
Appellee
The Orchard Company
Appellee
Jerry Tubb
Appellee

Document Text:

FILED 

Uaited States Court of Appeals 

'l"enth Ci~cuit 

APR 2 1991 

ROBERT L. HOECKER 

UNITED STATES COURT OF APPEALS Clerk 

FOR THE TENTH CIRCUIT 

BOBBIE G. BAYLESS, Trustee 

on Behalf of the Bankruptcy 

Estates of FREEMAN DALE 

CRABTREE; LINDA CATHERINE 

CRABTREE; THE ORCHARD COMPANY; 

CATHERINE DIANNE CRABTREE 

TRUST AND DAVID LYNN CRABTREE 

TRUST, 

Plaintiffs-Appellees, 

v. 

CATHERINE DIANNE CRABTREE, 

a minor, through Catherine 

Adams, guardian of her estate, 

and DAVID LYNN CRABTREE, 

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Defendants-Appellants, ) 

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MYERS D. CAMPBELL; PATRICIA M. 

CAMPBELL; JERRY TUBB and 

THETA JUAN BERNHARDT, 

Intervenors. 

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No. 90-6002 

(D.C. No. CIV-89-1337-A) 

(W.D. Okla.) 

ORDER AND JUDGMENT* 

Before MOORE, EBEL, Circuit Judges, and BROWN, District Judge** 

*This order and judgment has no precedential value and shall not 

be cited, or used by any court within the Tenth Circuit, except 

for purposes of establishing the doctrines of the law of the case, 

res judicata, or collateral estoppel. 10th Cir. R. 36.3. 

**Honorable Wesley E. Brown, United States Senior District Judge 

for the District of Kansas, sitting by designation. 

Appellate Case: 90-6002 Document: 010110031710 Date Filed: 04/02/1991 Page: 1 
Catherine and David Crabtree appeal a ruling by the United 

States Bankruptcy Court for the Western District of Oklahoma, 

affirmed by the United States District Court, ordering the 

turnover of certain property to a bankruptcy estate. On appeal, 

they assert (1) the Bankruptcy Court has no jurisdiction in this 

case; (2) they are entitled to a jury trial; (3) they were denied 

due process of law; (4) they received the disputed property as 

gifts; (5) the disputed property should not have been turned over 

to the trustee, and (6) the Bankruptcy Court should not have taken 

notice of a related state court proceeding. We affirm on all 

grounds. 

I. Background 

The underlying issue in this case is a property dispute. On 

one side are the bankruptcy trustee, Bobbie Bayless, and intervening creditors, the Campbell Group, and on the other are Catherine 

and David Crabtree. The debtors, who are not parties to this appeal, are F. Dale Crabtree, his wife Linda, their two children's 

(Catherine's and David's) trusts, and the Orchard Company, a 

partnership owned by the trusts. 

The dispute arose when the Campbell Group filed a creditors' 

action in state court to execute upon approximately one million 

dollars worth of valuable antiques, paintings and other personalty 

belonging, in their view, to The Orchard Company. Subsequently, 

the debtors filed a petition for relief under Chapter 11 of the 

United States Bankruptcy Code. In July 1988, the Chapter 11 

2 

Appellate Case: 90-6002 Document: 010110031710 Date Filed: 04/02/1991 Page: 2 
trustee initiated an adversary proceeding in bankruptcy court 

against the debtors and the Crabtree children. 

The trustee requested turnover of certain personalty located 

in Oklahoma City and Rhode Island which she claimed belonged to 

the debtors' estates. The trustee asserted the Crabtrees were 

removing and concealing this property contrary to the interest of 

the Chapter 11 estate. The Crabtree children counterclaimed 

against the trustee and crossclaimed against the Campbell Group, 

asserting ownership of the disputed property. Rejecting the 

children's request for a jury trial, the Bankruptcy Court entered 

a permanent injunction requiring turnover of the property to the 

trustee. The decision was based on findings that The Orchard 

Company owned the Rhode Island property, and F. Dale and Linda 

Crabtree owned the Oklahoma City property. 

affirmed the Bankruptcy Court's decision. 

II. Jurisdiction and Right to Jury Trial 

The District Court 

The Crabtree children have consented to the bankruptcy 

court's jurisdiction by filing counter and cross-claims. 1 In 

1Even absent the children's consent, 28 u.s.c. § 1334 grants 

federal jurisdiction in all cases "arising under title 11, or 

arising in or related to cases under title 11." The Supreme 

Court, in Northern Pipeline Construction Co. v. Marathon Pipeline 

Co., while invalidating the 1978 Bankruptcy Act's broad delegation 

of power to Article I courts, upheld federal jurisdiction of 

bankruptcy-related matters even if state law is involved. 458 

U.S. 50, 72 n. 26 (1982) (state contract law claim "may be 

adjudicated in federal court on the basis of its relationship to 

the petition for reorganization."). The Crabtree children assert 

the bankruptcy turnover issue is distinct from the state law 

property ownership issue, but the former necessarily includes the 

latter. 

Proper Article I court jurisdiction is found in 28 U.S.C. § 

(continued to next page) 

3 

Appellate Case: 90-6002 Document: 010110031710 Date Filed: 04/02/1991 Page: 3 
Katchen v. Landy, the Supreme Court stated that once a party 

presents a claim to the bankruptcy court, it submits to that 

court's jurisdiction. 382 U.S. 323, 335 (1966); see also 

Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 109 S. Ct. 2782, 

2799 n. 14 (1989). Although the Crabtree children did not file a 

proof of claim, they nonetheless injected their property claims 

into the bankruptcy proceedings by voluntarily filing counter and 

cross-claims asserting title. 2 See Matter of Baldwin-United Corp. 

v. Thompson, 48 B.R. 49, 54 (Bankr. S.D. Ohio, W.D. 1985) (filing 

counterclaim, like filing proof of claim, creates consent to 

jurisdiction). 

The filing of the counter and cross-claims also undermines 

the Crabtree children's argument for a jury trial. In Langenkamp 

v. Culp, the Supreme Court held that creditors who had submitted 

claims against the bankruptcy estate had waived any right to a 

jury trial on a subsequent preference action brought by the 

trustee. 111 S. Ct. 330, 331 (1990). The Court distinguished 

Granfinanciera, in which it held that a creditor who had not filed 

(continued from prior page) 

157(b) which grants bankruptcy courts the authority to decide and 

enter final judgment in "core" proceedings. The fact that an issue involves state law does not preclude it from being a "core" 

matter. 28 u.s.c. § 157(b)(3). Again, because the issue of 

property ownership is inextricably intertwined with the turnover 

action, one of the illustrative categories of "core" proceedings 

listed in § 157(b)(2), it is a core matter properly within the 

bankruptcy court's jurisdiction. 

2contrary to the children's assertion, the counterclaim was not 

compulsory under Fed.R.Civ.P. 13(a) because Bankruptcy Rule 7013 

creates an exception: "[A] party sued by a trustee or debtor in 

possession need not state as a counterclaim any claim that the 

party has against the debtor, the debtor's property, or the 

estate, unless the claim arose after the entry of an order for 

relief." 

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Appellate Case: 90-6002 Document: 010110031710 Date Filed: 04/02/1991 Page: 4 
a claim against the estate was entitled to a jury trial on the 

trustee's fraudulent conveyance charge. Finally, the 

Crabtree children also waived any right to a jury trial by failing 

to file a timely motion to transfer the case to the district 

court. We have recently held that bankruptcy courts do not have 

the authority to conduct jury trials, so a party seeking a jury 

trial must also seek withdrawal of the reference to the bankruptcy 

court. In re Latimer, 918 F.2d 136, 137 (10th Cir. 1990). 

III. Due Process 

Besides reasserting their jurisdictional and jury trial arguments as due process violations, the children claim they were 

denied proper notice and opportunity to be heard. The trustee 

named the Crabtree children as defendants for the first time in 

her second amended complaint, which the children were served with 

on July 29, 1988. Because the preliminary injunction hearing 

began on July 27, the Crabtree children were not represented by 

counsel on the first day of the hearing. However, counsel for the 

children did participate in the remaining six days of the hearing. 

The court also permitted the children's counsel to preserve any 

objections to exhibits offered the first day until he had had a 

chance to review them. We find no error in the district court's 

conclusion that the Crabtree children received sufficient due 

process. 3 

3

rn their reply brief, the Crabtree children assert for the first 

time that their due process rights were violated because the 

Bankruptcy Court issued a temporary restraining order (TRO) before 

the children were named in the complaint. Based on the trustee's 

(continued to next page) 

5 

Appellate Case: 90-6002 Document: 010110031710 Date Filed: 04/02/1991 Page: 5 
III. Gift and Turnover Determination 

The Crabtree children claim they own the disputed property 

because they received it as gifts from their parents, F. Dale and 

Linda Crabtree, and from The Orchard Company. The parties agree 

that under Oklahoma law, a valid gift requires: (1) donative 

intent, (2) delivery, and (3) complete relinquishment by the donor 

of control and dominion. Thomas v. Bank of Oklahoma, 684 P.2d 

553, 554 (Okla. 1984); Matter of Estate of Stinchcomb, 674 P.2d 

26, 30 (Okla. 1983). The Oklahoma Supreme Court has also stated 

that a trial court's determination about the existence of a gift 

will not be disturbed unless "clearly against the weight of the 

evidence." Stinchcomb, 674 P.2d at 30. We equate this 

formulation with the clearly erroneous standard of review for 

questions of fact. 

The Bankruptcy and District Courts found ample evidence 

that control of the disputed property had never been transferred 

to the children individually. Four documents purportedly conveyed 

property in F. Dale and Linda Crabtree's Oklahoma City house and 

all of The Orchard Company's property to the children. These 

papers were neither witnessed nor notarized, and remained in F. 

Dale Crabtree's possession. After the dates of the alleged 

transfers, The Orchard Company and its partners (F. Dale and Linda 

(continued from prior page) 

preliminary showing that the debtors were concealing their assets, 

the Bankruptcy Court, on July 23, 1988, authorized the trustee to 

inspect and take possession of the Oklahoma City property. 

Although we have no obligation to rule on this issue, we note that 

the TRO was issued ex parte, without notice to any of the 

defendants, because the Bankruptcy Court found sufficient 

indications that irreparable injury would occur if defendants knew 

the trustee wanted to secure their property. 

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Appellate Case: 90-6002 Document: 010110031710 Date Filed: 04/02/1991 Page: 6 
Crabtree and the children's trusts) claimed depreciation of the 

disputed property on their tax returns; furthermore, no gift tax 

returns were filed. The Orchard Company mortgaged property to a 

bank after the children allegedly received all its property as 

gifts. F. Dale Crabtree admitted in testimony that the Oklahoma 

City property remained in his house for family use and was under 

his dominion as head of the household. Our review of the record 

reveals no reason to doubt the conclusions of the Bankruptcy and 

District Courts. 

The Crabtree children also argue that even if no valid gifts 

existed, the turnover order was improper because the trustee must 

prove that the property belonged to the debtors' estate not just 

that the children did not receive the property as gifts. The 

trustee rightly points out, however, that in this case the two 

propositions amount to the same thing. The only candidates for 

ownership of the property were the children or the debtors' 

estate, so if the children did not own the property, it 

necessarily belonged to the estate. 

IV. State Court Proceeding 

In a state court action brought by the Campbell Group against 

the debtors, the state court rejected the debtors' argument that 

they had given the disputed property to the Crabtree children and 

ordered that the property be turned over to the creditors. In the 

present case, the Bankruptcy Court admitted portions of the 

transcript of the state court proceeding. The children contend 

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Appellate Case: 90-6002 Document: 010110031710 Date Filed: 04/02/1991 Page: 7 
this was erroneous admission of hearsay, particularly because the 

state case is now on appeal before the Supreme Court of Oklahoma. 

Although the children identify the disputed exhibits in a 

footnore, we find it difficult to evaluate their argument because 

they have not designated complete copies of these exhibits for the 

record on appeal. The Bankruptcy Court expressly stated that it 

was determining the property ownership issue de novo. The trustee 

presents a persuasive explanation that F. Dale Crabtree's prior 

testimony is admissible under Fed.R.Evid. 801 as either admissions 

of a party or prior inconsistent statements. The trustee also 

explains that the state court orders were offered not to prove 

that the gifts were invalid but to show F. Dale Crabtree's 

knowledge and disregard of the order to relinquish property to the 

creditors, and thus the need for a turnover order from the 

Bankruptcy Court. We find no abuse of discretion in the 

Bankruptcy Court's admission of this evidence. 

AFFIRMED. 

8 

Entered for the Court 

John P. Moore 

Circuit Judge 

Appellate Case: 90-6002 Document: 010110031710 Date Filed: 04/02/1991 Page: 8