1996 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

1-4-1996

IN RE: The Guild and Gallery Plus, Inc. v. Maggio

Precedential or Non-Precedential:

Docket 95-5295

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Recommended Citation

"IN RE: The Guild and Gallery Plus, Inc. v. Maggio" (1996). 1996 Decisions. Paper 241.

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1 

UNITED STATES COURT OF APPEALS 

FOR THE THIRD CIRCUIT 

 

No. 95-5295 

 

IN RE: 

THE GUILD AND GALLERY PLUS, INC. 

 Debtor 

JOHN B. TORKELSEN 

 Appellant 

v. 

CARMEN J. MAGGIO 

 

On Appeal from the United States District Court 

for the District of New Jersey 

(D.C. No. 94-cv-05619) 

 

Argued November 28, 1995 

BEFORE: MANSMANN, COWEN and SEITZ 

Circuit Judges

(Filed January 4, 1996) 

William J. Brennan, III (argued) 

Grayson Barber 

Smith, Stratton, Wise, Heher & Brennan 

600 College Road East 

Suite 4200 

Princeton, New Jersey 08540 

 COUNSEL FOR APPELLANT 

 JOHN B. TORKELSEN 

Allan M. Harris (argued) 

Ravin, Greenberg & Marks 

101 Eisenhower Parkway 

Roseland, New Jersey 07068 

 COUNSEL FOR APPELLEE 

 CARMEN J. MAGGIO 
2 

 

OPINION

 

COWEN, Circuit Judge. 

 The question presented in this case is whether various 

state-law claims against a bankruptcy trustee in his individual 

capacity can be either a "core" bankruptcy proceeding under 28 

U.S.C. § 157(b)(2)(A) ("matters concerning the administration of 

the estate") or a noncore, related proceeding under 28 U.S.C. 

§158(c)(2). The plaintiff alleged that the trustee negligently 

lost or intentionally stole property that at one time was in the 

estate's possession, but was never "property of the [bankrupt] 

estate," as defined in 11 U.S.C. § 541. Both the bankruptcy 

court and the district court below held that such a case was a 

"core proceeding," which the bankruptcy court had the power to 

decide, subject to ordinary appellate review. 

 As it is uncontroverted that the property alleged to 

have been lost or stolen by the trustee (a painting held by the 

debtor in its capacity as a bailee) was never "property of the 

estate," as defined by § 541(a)(1) of the Bankruptcy Code, and as 

it is equally undisputed that the outcome of appellant's suit 

against the trustee would have no effect on the bankrupt estate, 

we conclude that this case is neither a core proceeding nor a 

noncore, related proceeding under controlling precedent. Because 

the courts below lacked subject matter jurisdiction to consider 

appellant's actions against the trustee, we will reverse the 

order of the district court entered March 31, 1995, and remand 
3 

this matter to the district court with instructions that it 

remand the matter back to the bankruptcy court with a direction 

that the bankruptcy court dismiss the complaint for lack of 

subject matter jurisdiction. 

I.

 The Guild and Gallery Plus, Inc., ("the Gallery") filed 

a petition under Chapter 11 of the Bankruptcy Code while the 

Gallery was in possession of seventeen paintings owned by 

appellant John B. Torkelsen. Torkelsen had sent these paintings 

to the Gallery for storage while renovations were being done on 

his home. One of the paintings was entitled "Summertime--

Collecting Wild Flowers--1902" by Peter Mark Monstadt ("the 

Summertime painting"). 

 On December 7, 1991, after the Chapter 11 petition had 

been filed, Torkelsen sent his fiancee, Pamela Rogers, his 

attorney, Penny Bennett, his brother, his son and an unidentified 

third man ("the Torkelsen party") to the Gallery in order to 

remove all seventeen paintings and bring them back to him. When 

the Torkelsen party arrived at the Gallery, Anton Borics, who 

supervised the Gallery on behalf of the trustee, Carmen J. 

Maggio, opposed the removal of the paintings. Alarmed, Borics 

contacted Maggio by phone. Maggio also objected to the removal 

of the paintings. Nonetheless, when it became clear that the 

Torkelsen party was determined to remove all of the paintings 

immediately, Maggio agreed, albeit under duress, that the 
4 

paintings could be removed.1 Maggio insisted, however, that the 

Torkelsen party provide him with a written list of everything 

that had been removed from the Gallery. 

 Pursuant to Maggio's request, attorney Penny Bennett 

prepared a receipt for the paintings that had been removed from 

the Gallery on December 7. Attorney Bennett, Pamela Rogers and 

Julie Lapitino, a Gallery employee, signed the receipt. It 

provided that "The undersigned hereby acknowledge that seventeen 

(17) pieces of art owned by John Torkelsen were removed from the 

Guild Gallery on this day. The undersigned have confirmed that 

the attached inventory dated June 12, 1991, entitled Guild 

Gallery, accurately lists and identifies the seventeen pieces of 

art concerned." App. at 480. 

 Shortly thereafter, Torkelsen conducted an unsuccessful 

search for the Summertime painting. Torkelsen assumed that the 

painting had been left behind at the Gallery. In a letter dated 

December 9, 1991, Torkelsen's attorney requested that Maggio 

return the Summertime painting. Maggio responded by advising 

counsel to file the appropriate motion. On December 20, 1991, 

Torkelsen filed a motion for reclamation of property seeking to 

recover the Summertime painting. 

 On December 27, 1991, Maggio instructed Gallery 

employee Diane Lane to search for the Summertime painting in the 

 

1Removal of the paintings at this time violated the automatic 

stay provisions of the Bankruptcy Code. See 11 U.S.C. § 362(a). 

Pursuant to a Consent Order entered April 10, 1992, Torkelsen 

agreed to pay $8,000.00 in attorneys' fees to the trustee and 

$1,000.00 in punitive damages to the General Estate Fund for 

having violated the automatic stay. 
5 

Gallery's storage areas. On the same day, Lane claimed to have 

located the Summertime painting at the Gallery. On January 7, 

1992, based upon Lane's representation, Borics wrote Maggio a 

letter advising him that the Gallery was still in possession of 

one of Torkelsen's paintings. Maggio then agreed, by consent 

order dated March 16, 1992 ("Consent Order"), to return the 

Summertime painting. The Consent Order provided that the trustee 

would "abandon, turn over and arrange for movant to retrieve 

`Summertime--Collecting Flowers--1902' by Peter Mark Monstadt, 

within 10 days from the date hereof. . . . " App. at 450. 

 After the bankruptcy court had approved the Consent 

Order, the Summertime painting could not be located. Unable to 

retrieve his property, Torkelsen filed an adversary complaint 

against Maggio in the Bankruptcy Court for the District of New 

Jersey "seeking damages for the loss of the `Summertime' painting 

based on theories of wrongful possession, negligence, res ipsa 

loquitur, bailment, conversion and breach of warranty." In re 

Guild & Gallery, No. 94-5619, slip op. at 3 (D.N.J. Mar. 31, 

1995). Maggio filed a counterclaim seeking to: (1) vacate the 

Consent Order due to mistake of fact; (2) require Torkelsen to 

defray any loss by collecting insurance proceeds covering the 

Summertime painting; and (3) recover damages against Torkelsen 

resulting from the trespass that occurred on December 7, 1991. 

 On August 16-17, 1994, this case was tried. On the day 

before the trial commenced, a conference call was held in which 

the court and counsel for both parties participated. During this 

conversation, the court informed the parties that since all of 
6 

Torkelsen's claims against the trustee hinged upon the factual 

contention that the Summertime painting remained in the Gallery 

after December 7, 1991, the court would hear the parties' 

evidence on this specific issue and make a finding of fact before 

other matters would be considered. Counsel for both parties 

consented to this arrangement. 

 On August 17, 1994, the bankruptcy court found that 

Torkelsen had not proved by a preponderance of the evidence that 

the Summertime painting remained at the Gallery after December 7, 

1991. In reaching this decision, the court "placed significance, 

among other things, . . . on the credibility of the witnesses 

that [it] had the opportunity to observe. . . . " App. at 441-

42. The bankruptcy court did not find Diane Lane's testimony to 

be convincing. On the issue of whether Lane had identified the 

Summertime painting in the Gallery on December 27, the court 

noted Lane's "subsequent doubt and contradictory testimony" and 

her inability "to confirm that the painting that she saw on 

December 27th was, in fact, Summertime." Id. at 437. Thus, the 

court concluded that any statements by Maggio, Borics or the 

trustee's attorney that the Summertime painting had been located 

in the Gallery after December 7 were based solely upon their 

erroneous belief about the accuracy of Lane's report. 

 As for the receipt which certified that seventeen 

paintings had been removed, the bankruptcy court noted that the 

three women who signed the receipt on December 7, 1991, had 

testified to their belief in its accuracy on that date. Moreover, 

the court observed that at least two of the women had compared 
7 

the list, double-checked it, and concluded that all of 

Torkelsen's paintings had been accounted for, including the 

Summertime painting. 

 On August 17, 1994, the bankruptcy court granted the 

first count of Maggio's counterclaim seeking to vacate the 

Consent Order on the ground that it was based upon a mistake of 

fact. All of Torkelsen's claims against Maggio were dismissed 

with prejudice. Maggio's remaining counterclaims also were 

dismissed with prejudice. 

 On September 6, 1994, Torkelsen filed a motion with the 

bankruptcy court seeking to have the bankruptcy judge recuse 

himself from the case before a final order was entered. On 

September 26, a hearing was held on the recusal motion. The 

motion was denied the following day. The bankruptcy court's 

final order dismissing all of Torkelsen's claims was entered on 

October 11, 1994.2

 Torkelsen appealed to the United States District Court 

for the District of New Jersey. By order dated March 31, 1995, 

the district court affirmed all aspects of the bankruptcy court's 

decision. This appeal followed. 

II.

 Jurisdiction over Title 11 matters "lies with the 

district court. However, the district court routinely refers 

most bankruptcy cases to the bankruptcy court." In re Marcus 

 

2Since this case is to be dismissed on jurisdictional grounds, we 

express no view on the question whether the bankruptcy court's 

factual finding that the Summertime painting was removed from the 

Gallery on December 7, 1991, was clearly erroneous. 
8 

Hook Dev. Park, Inc., 943 F.2d 261, 264 n.3 (3d Cir. 1991) 

(citation omitted). See 28 U.S.C. § 157(a). "It is well-settled 

that the bankruptcy court potentially has jurisdiction over four 

types of title 11 matters, pending referral from the district 

court: (1) cases under title 11, (2) proceedings arising under 

title 11, (3) proceedings arising in a case under title 11, and 

(4) proceedings related to a case under title 11." Marcus Hook, 

943 F.2d at 264. See 28 U.S.C. § 1334. We have jurisdiction to 

review the final order of the district court pursuant to 28 

U.S.C. § 158(d) and 28 U.S.C. § 1291. 

 Although neither party has challenged the bankruptcy 

and district courts' jurisdiction to adjudicate Torkelsen's 

claims, "we are obligated to do so on our own motion if a 

question thereto exists." Liberty Mut. Ins. Co. v. Wetzel, 424 

U.S. 737, 740, 96 S. Ct. 1202, 1204 (1976). "An appellate court 

must satisfy itself not only of its own jurisdiction, but also of 

the jurisdiction of the courts under review." Pomper v. 

Thompson, 836 F.2d 131, 132 (3d Cir. 1987) (per curiam) (citing 

Mitchell v. Maurer, 293 U.S. 237, 55 S. Ct. 162 (1934)). "[W]e 

cannot ignore matters that bring into question the existence of 

federal jurisdiction." Thermice Corp. v. Vistron Corp., 832 F.2d 

248, 251 (3d Cir. 1987) (citations omitted). 

III. 

A. 

1.

 28 U.S.C. § 157(b)(1) provides that "Bankruptcy judges 

may hear and determine all cases under title 11 and all core 
9 

proceedings arising under title 11, or arising in a case under 

title 11. . . . " Section 157(b)(2) sets forth a nonexhaustive 

listing of core proceedings. In the instant case, we must decide 

whether Torkelsen's claims against the trustee fall within the 

scope of § 157(b)(2)(A); that is, "matters concerning the 

administration of the estate." In order to develop an 

understanding of the genesis and purpose of the distinction 

between core and noncore proceedings under the Bankruptcy 

Amendments and Federal Judgeship Act of 1984 ("1984 Act"), Pub. 

L. No. 98-353, Title I, § 101(a), 98 Stat. 333 (1984), it is 

instructive to look to the Acts of Congress that preceded the 

promulgation of the 1984 Act as well as current Supreme Court 

doctrine on the power of Article I bankruptcy courts to hear and 

decide cases. 

 For eighty years, bankruptcy court jurisdiction was 

governed by the Bankruptcy Act of 1898, ch. 541, 30 Stat. 544 

(1898). One commentator has described the jurisdictional scheme 

of the 1898 Act in the following terms: 

 The Bankruptcy Act of 1898 vested original 

jurisdiction over all bankruptcy matters in the United 

States District Courts. In turn, the district judges 

referred certain matters to bankruptcy referees. There 

were two main types of bankruptcy matters under the Act 

of 1898: "proceedings" and "controversies." 

"Proceedings" generally involved the administration of 

the bankrupt's estate and were solely within the 

province of the bankruptcy court. "Controversies" were 

collateral disputes arising out of bankruptcy 

proceedings. These matters involved the trustee and 

third parties and could be heard by either the 

bankruptcy court or by a non-bankruptcy court that had 

jurisdiction. While proceedings fell within the 

"summary jurisdiction" of the bankruptcy court, 

controversies sometimes required the court to exercise 
10 

"plenary jurisdiction." The two types of jurisdiction 

differed in the following manner. Matters within the 

summary jurisdiction of the bankruptcy court could be 

adjudicated through the use of more expeditious modes 

of procedure, with the court sitting in equity. The 

district court qua bankruptcy court could hear these 

matters; however, a bankruptcy referee usually 

rendered final judgment on such matters, subject only 

to "review" by the district court. In contrast, 

plenary jurisdiction was exercised only by the district 

court or state courts, following their general rules of 

procedure. According to some estimates, as much as 

fifty percent of all litigation under the Act of 1898 

concerned whether the matter was within the bankruptcy 

court's summary jurisdiction. 

Thomas S. Marion, Core Proceedings and "New" Bankruptcy 

Jurisdiction, 35 DePaul L. Rev. 675, 676-77 (1986) (hereinafter 

New Bankruptcy Jurisdiction). Under appropriate circumstances, 

we may look to cases decided under the 1898 Act for guidance in 

determining whether a matter is a core proceeding. See Beard v. 

Braunstein, 914 F.2d 434, 444 (3d Cir. 1990). 

 In 1978, Congress sought to establish a more efficient 

bankruptcy scheme that would avoid the confusion inherent in the 

summary/plenary distinction. Through the enactment of the 

Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549 

(1978), Congress made an attempt to 

centralize bankruptcy jurisdiction and expedite the 

administration of bankruptcy cases . . . . The Reform 

Act conferred on district courts original and exclusive 

jurisdiction over all "cases" under title 11. It also 

gave district courts original and concurrent 

jurisdiction of all civil proceedings arising from or 

related to cases under title 11. In turn, the Reform 

Act gave the bankruptcy courts "all of the jurisdiction 

conferred by [the Reform Act] on the district courts." 

This comprised jurisdiction over any action involving 

the debtor, including many actions that would have 

required a plenary suit under the Act of 1898. Eighty 

years of litigation over the summary-plenary 
11 

distinction were abandoned in favor of a simplified 

bankruptcy court system. 

Marion, New Bankruptcy Jurisdiction, supra, at 678. See Hays & 

Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 

1149, 1159 (3d Cir. 1989) ("[T]he dichotomy between plenary and 

summary jurisdiction" was "the evil the Reform Act was designed 

to address."). The Supreme Court, however, in Northern Pipeline 

Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S. 

Ct. 2858 (1982) (plurality opinion), struck down the more 

efficient jurisdictional scheme of the 1978 Act. The Marathon

Court held that the power the 1978 Act purported to delegate to 

Article I bankruptcy judges violated Article III, § 1 of the 

Constitution. 

 The facts underlying the Marathon case are as follows. 

In January 1980, Northern Pipeline filed a Chapter 11 

reorganization petition in the Bankruptcy Court for the District 

of Minnesota. Two months later Northern Pipeline filed suit 

against Marathon seeking damages for alleged breaches of contract 

and warranty, as well as for alleged misrepresentation, coercion, 

and duress. The parties involved were not diverse, nor did the 

case present a substantial federal question. The only nexus 

between Northern Pipeline's claims and the bankruptcy was the 

fact that Northern Pipeline was a debtor in a Chapter 11 business 

reorganization. 

 The Marathon Court held that an Article I bankruptcy 

court could not exercise "The judicial Power" over Northern 

Pipeline's contract and fraud claims. The plurality observed 
12 

that "the restructuring of debtor-creditor relations, which is at 

the core of the federal bankruptcy power, must be distinguished 

from the adjudication of state-created private rights, such as 

the right to recover damages that is at issue in this case." Id.

at 71, 102 S. Ct. at 2871. The plurality was unimpressed with 

the conduit notion of the Bankruptcy Reform Act of 1978, pursuant 

to which jurisdiction was first granted to the district court and 

then transferred to the bankruptcy courts. Justice Brennan 

concluded that the 1978 Act was unconstitutional because it 

impermissibly vested "all `essential attributes' of the judicial 

power of the United States in the `adjunct' bankruptcy court." 

Id. at 84-85, 102 S. Ct. 2878. 

 The Supreme Court's decision in Marathon had 

potentially far-reaching implications. In reaction to Marathon, 

Congress enacted the 1984 Act, which made important changes in 

the structure of the bankruptcy court system. As in 

the Reform Act, the district courts are vested with 

original and exclusive jurisdiction over all cases 

under title 11, and original and concurrent 

jurisdiction over all proceedings arising under or 

related to title 11. The critical difference between 

the Reform Act and the Act of 1984 is that under the 

latter, bankruptcy courts do not exercise all 

jurisdiction vested in district courts. Instead, the 

bankruptcy court is established as a unit of the 

district court to which the district court may refer 

any or all cases and proceedings. The district court 

may revoke this reference on its own motion or on 

timely motion of any party, for cause shown. Thus, the 

district court, in form, has complete control over what 

actions the bankruptcy court hears. Under the Reform 

Act, the district court had no such power. 

 The Act of 1984 contains additional limitations on 

the bankruptcy court's jurisdiction. Proceedings are 

divided into "core proceedings" and "proceedings that 

are not core proceedings" ("non-core proceedings"). 
13 

Bankruptcy judges may hear and finally determine all 

cases under title 11 and all core proceedings, subject 

to appeal to the district court. The bankruptcy judge 

may also hear non-core proceedings. However, if the 

parties do not consent to final judgment in a non-core 

proceeding in bankruptcy court, the bankruptcy judge 

merely submits proposed findings of fact and 

conclusions of law to the district judge. If a party 

objects to a particular matter, the district judge must 

conduct a de novo review of that matter. 

Marion, New Bankruptcy Jurisdiction, supra, at 681-82. Although 

there was some question after the 1984 Act was passed as to 

whether the new bankruptcy legislation ran afoul of Marathon, 

subsequent Supreme Court decisions have interpreted the Marathon

decision narrowly. See Thomas v. Union Carbide Agricultural 

Prods., Co., 473 U.S. 568, 584, 105 S. Ct. 3325, 3334 (1985) 

(interpreting Marathon as holding "only that Congress may not 

vest in a non-Article III court the power to adjudicate, render 

final judgment, and issue binding orders in a traditional 

contract action arising under state law, without consent of the 

litigants, and subject only to ordinary appellate review"); 

Commodity Futures Trading Comm'n v. Schor, 478 U.S. 833, 106 S. 

Ct. 3245 (1986) (same). 

2.

 The bankruptcy court and the district court both 

concluded that this case was a core proceeding under 28 U.S.C. 

§157(b)(2)(A) ("matters concerning the administration of the 

estate"). Both the district court and the bankruptcy court read 

this section too broadly. 

 Our circuit precedents have "held that a proceeding is 

core under section 157 if it invokes a substantive right provided 
14 

by title 11 or if it is a proceeding that, by its nature, could 

arise only in the context of a bankruptcy case." In re Marcus 

Hook Dev. Park Inc., 943 F.2d 261, 267 (3d Cir. 1991) (citations 

and internal quotation marks omitted). In support of its ruling 

that this case was a core proceeding, the bankruptcy court 

relied, inter alia, on the decision of the Court of Appeals for 

the Fifth Circuit in In re Wood, 825 F.2d 90 (5th Cir. 1987), 

which observed that 

the phrases "arising under" and "arising in" are 

helpful indicators of the meaning of core proceedings. 

If the proceeding involves a right created by the 

federal bankruptcy law, it is a core proceeding; for 

example, an action by the trustee to avoid a 

preference. If the proceeding is one that would arise 

only in bankruptcy, it is also a core proceeding; for 

example, the filing of a proof of claim or an objection 

to the discharge of a particular debt. If the 

proceeding does not invoke a substantive right created 

by the federal bankruptcy law and is one that could 

exist outside of bankruptcy it is not a core 

proceeding; it may be related to the bankruptcy 

because of its potential effect, but under section 

157(c)(1) it is an "otherwise related" or non-core 

proceeding. 

 

Id. at 97. 

 We conclude, however, that applying this standard to 

the present matter warrants a result contrary to that reached by 

the bankruptcy court. The claims that Torkelsen raises against 

the trustee need not "arise only in bankruptcy." Torkelsen's 

state law claims are not comparable to the filing of a proof of 

claim or raising an objection to a discharge of a particular 

debt, the examples provided by Wood. Moreover, Torkelsen's 

claims certainly could exist outside of bankruptcy; they could 
15 

all be filed in a state court. The same analysis is supported by 

our own Circuit precedents. This case is not a core proceeding 

because Torkelsen's claims neither "invoke[] a substantive right 

provided by title 11," nor could this action "arise only in the 

context of a bankruptcy case." Marcus Hook, 943 F.2d at 267. See

In re Gardner, 913 F.2d 1515, 1518 (10th Cir. 1990) (per curiam) 

("Actions which do not depend on the bankruptcy laws for their 

existence and which could proceed in another court are not core 

proceedings."). 

 B.

 The language of § 157(b)(2)(A) would appear to 

encompass an extraordinarily broad number of claims. Indeed, the 

Editor-in-Chief of Collier's has commented that "[w]hile estate 

administration matters are not defined, the clause appears to 

contemplate a very broad panoply of proceedings integral to a 

case under the Code. Its overbreadth may, in fact, render the 

remaining clauses unnecessary." Lawrence P. King, Symposium on 

Bankruptcy: Jurisdiction and Procedure Under the Bankruptcy 

Amendments of 1984, 38 Vand. L. Rev. 675, 688 (1986). 

 Even if we were to interpret the language of 

§157(b)(2)(A) in the broadest possible manner consistent with the 

Constitution, this case still would not qualify as a core 

proceeding. Assuming arguendo that Maggio engaged in all of the 

conduct that Torkelsen alleges and that such conduct was 

administrative in nature, our inquiry under § 157(b)(2)(A) does 

not end there. Section 157(b)(2)(A) refers to "matters 

concerning the administration of the estate." Since it is 
16 

uncontroverted that the Summertime painting is not part of the 

bankrupt estate, the trustee's alleged misconduct does not fall 

within the plain language of this provision. 

 Section 541 of the Bankruptcy Code, which defines the 

parameters of the bankrupt estate, compels this result. Property 

of the estate includes "wherever located and by whomever held[,] 

. . . all legal or equitable interests of the debtor in property 

as of the commencement of the case." 11 U.S.C. § 541(a)(1). The 

legislative history of § 541 describes the expansive reach of 

this provision: 

Under paragraph (1) of subsection (a), the estate is 

comprised of all legal and equitable interests of the 

debtor in property, wherever located, as of the 

commencement of the case. The scope of this paragraph 

is broad. It includes all kinds of property, including 

tangible or intangible property, causes of action, . . 

. as well as property recovered by the trustee under 

section 542 . . . if the property recovered is merely 

out of the possession of the debtor, yet remained 

"property of the debtor." The debtor's interest in 

property also includes "title" to property, which is an 

interest, just as are a possessory interest, or 

leasehold interest, for example. 

S.Rep. No. 989, 95th Cong., 2d Sess. 82, reprinted in 1978 

U.S.C.C.A.N. 5787, 5868. 

 The Supreme Court affirmed the broad scope of 

§541(a)(1) in United States v. Whiting Pools, Inc., 462 U.S. 198, 

103 S. Ct. 2309 (1983). After citing the definition of "estate" 

articulated in § 541 and describing the powers of the trustee 

with regard to the estate under 11 U.S.C. § 363, the Court 

observed that "[a]lthough these statutes could be read to limit 

the estate to those `interests of the debtor in property' at the 
17 

time of the filing of the petition," the Court "view[ed] them as 

a definition of what is included in the estate, rather than a 

limitation." Id. at 203, 103 S. Ct. at 2312. The Court stated 

that "[b]oth the congressional goal of encouraging 

reorganizations and Congress' choice of methods to protect 

secured creditors suggest that Congress intended a broad range of 

property to be included in the estate." Id. at 204, 103 S. Ct. 

at 2313. 

 Justice Blackmun's opinion also provided examples of 

property interests that do not fall within the scope of § 541. 

The Court observed that the legislative history of § 541 

"indicates that Congress intended to exclude from the estate 

property of others in which the debtor had some minor interest 

such as a lien or bare legal title." Id. at 205 n.8, 103 S. Ct. 

at 2314 n.8. The Court further stated that "[w]e do not now 

decide the outer boundaries of the bankruptcy estate. We note 

only that Congress plainly excluded property of others held by 

the debtor in trust at the time of the filing of the petition." 

Id. at 205 n.10, 103 S. Ct. at 2314 n. 10. 

 The Gallery estate held Torkelsen's paintings as a 

bailee. Collier's describes the manner in which bailments should 

be analyzed under § 541: 

[I]t became well settled under the Bankruptcy Act that 

absent state statutory enactment to the contrary, if 

property was in the debtor's hands as bailee. . ., the 

trustee held it as such, and the bailor . . . could 

recover the property or its proceeds. Under the Code, 

section 362 will automatically stay the bailor . . . 

from divesting the debtor of possession, and the estate 

will include the debtor's rights under the bailment . . 

. contract. 
18 

4 COLLIER ON BANKRUPTCY, ¶ 541.08[2], at 42-43 (15th ed. 1995) 

(emphasis added). See Borman v. Raymark Indus., Inc., 946 F.2d 

1031, 1035 (3d Cir. 1991) ("[T]he automatic stay was intended to 

apply to actions that do not necessarily involve property of the 

estate."). 

 Pursuant to this analysis, the debtor's rights under 

the bailment agreement, i.e., whatever funds Torkelsen owed to 

the estate pursuant to the bailment agreement, would fall within 

the definition of "property of the estate."3 The Summertime 

painting itself, however, was not property of the estate, even 

under the expansive definition set forth in § 541 of the 

Bankruptcy Code. The estate had no security interest in the 

painting. Upon satisfaction of bailment agreement, the painting-

-which the estate never claimed as its own--had to be returned. 

This understanding was formalized in the Consent Order. Since 

the Summertime painting was not part of the bankrupt estate, then 

a fortiori this matter cannot fall within § 157(b)(2)(A), which 

can only be applied to matters concerning the administration of 

the bankrupt estate. 

 At oral argument before this court, Maggio argued that 

although the Summertime painting was not part of the bankrupt 

estate, this proceeding is nonetheless a core matter concerning 

estate administration because prior to the bankruptcy court's 

approval of the Consent Order on March 16, 1992, no formal 

 

3The specifics of the bailment agreement between Torkelsen and 

the Gallery are not part of the record. 
19 

adjudication had been made regarding the issue of who owned the 

Summertime painting. Thus, the argument goes, any alleged 

wrongdoing up until that time would still fall within the scope 

of § 157(b)(2)(A). 

 This argument must be rejected. The plain language of 

§ 157(b)(2)(A) applies only to property of the bankrupt estate. 

Torkelsen petitioned the bankruptcy court for a determination 

that the Summertime painting was his property and obtained the 

benefit of a court order confirming that fact on March 16, 1992. 

Maggio cannot now, in the face of a conclusive legal 

determination that the Summertime painting is not property of the 

estate, argue that Torkelsen's claims--which have no bearing upon 

the estate whatsoever--nonetheless fall within the provision of 

the Bankruptcy Code that by its terms applies only to the 

administration of estate property. See Howell Hydrocarbons, Inc. 

v. Adams, 897 F.2d 183, 190 (5th Cir. 1990) ("Whatever else a 

core proceeding must be, it must involve a decision that 

ultimately affects the distribution of the debtor's assets."). 

 Torkelsen seeks nothing from the Gallery estate itself. 

Torkelsen's action in no way implicates "the restructuring of 

debtor-creditor relations, which is at the core of the federal 

bankruptcy power. . . . " Marathon, 458 U.S. at 71, 102 S. Ct. 

at 2871. Moreover, as Marathon illustrates, even if the estate 

has a direct financial interest in a claim that a party proposes 

to litigate in bankruptcy court, this fact, by itself, does not 

provide an adequate jurisdictional foundation. That the estate 

has no interest, financial or otherwise, in the outcome of the 
20 

dispute between Torkelsen and the trustee renders Maggio's 

argument that this is a core proceeding untenable. We therefore 

conclude that the actions that Torkelsen brought against the 

trustee were not core proceedings under 28 U.S.C. § 157(b)(2)(A). 

 IV.

 It remains to be determined, therefore, whether this 

case is nevertheless a noncore, related proceeding. The 

applicable test to determine whether an action brought in 

bankruptcy court qualifies as a noncore, related proceeding was 

set forth in the landmark decision of Pacor, Inc. v. Higgins, 743 

F.2d 984 (3d Cir. 1984). The Pacor court held that "the test for 

determining whether a civil proceeding is related to bankruptcy 

is whether the outcome of that proceeding could conceivably have 

any effect on the estate being administered in bankruptcy." Id.

at 994. The court further observed that "the proceeding need not 

necessarily be against the debtor or against the debtor's 

property. An action is related to bankruptcy if the outcome 

could alter the debtor's rights, liabilities, options, or freedom 

of action (either positively or negatively) and which in any way 

impacts upon the handling and administration of the bankrupt 

estate." Id. Furthermore, "the mere fact that there may be 

common issues of fact between a civil proceeding and a 

controversy involving the bankruptcy estate does not bring the 

matter within the scope of section 1471(b).4 Judicial economy 

itself does not justify federal jurisdiction." Id. See In re 

 

428 U.S.C. § 1471 is the precursor of 28 U.S.C. § 1334. The same 

analysis applies. See Marcus Hook, 943 F.2d at 264 n.4. 
21 

Bobroff, 766 F.2d 797, 802 (3d Cir. 1985) (rejecting argument 

that "related to" jurisdiction "is intended to mirror the 

principle of pendent jurisdiction"); see generally Susan BlockLieb, The Case Against Supplemental Bankruptcy Jurisdiction: A 

Constitutional, Statutory, And Policy Analysis, 62 Fordham L. 

Rev. 721 (1994). 

 The test that Judge Garth articulated in Pacor has been 

enormously influential. Pacor not only governs our analysis 

here, but its cogent analytical framework has been relied upon by 

our sister circuits more than any other case in this area of the 

law. The Fourth, Fifth, Eighth, Ninth and Eleventh Circuits have 

adopted Pacor without modification. See In re Lemco Gypsum, 

Inc., 910 F.2d 784, 788 (11th Cir. 1990) ("We join the majority 

of the circuits that have adopted the Pacor formulation."); In 

re Fietz, 852 F.2d 455, 457 (9th Cir. 1988) ("We . . . adopt the 

Pacor definition. . . . We reject any limitation on this 

definition; to the extent that other circuits may limit 

jurisdiction where the Pacor decision would not, we stand by 

Pacor."); Wood, 825 F.2d at 93 ("Courts have articulated various 

definitions of `related,' but the definition of the Court of 

Appeals for the Third Circuit appears to have the most support. . 

. We adopt it as our own."); In re Dogpatch U.S.A., Inc., 810 

F.2d 782, 786 (8th Cir. 1987) (adopting the Pacor test); A.H. 

Robins Co. v. Piccinin, 788 F.2d 994, 1002 n.11 (4th Cir.) ("The 

accepted definition of the `related to' in these statutes is that 
22 

declared in Pacor. . . ."), cert. denied, 479 U.S. 876, 107 S. 

Ct. 251 (1986).5

 We elaborated upon Pacor in In re Marcus Hook. There, 

we stated that "[a] key word in [the Pacor test] is conceivable. 

Certainty, or even likelihood, is not a requirement. Bankruptcy 

jurisdiction will exist so long as it is possible that a 

proceeding may impact on the debtor's rights, liabilities, 

options, or freedom of action or the handling and administration 

of the bankrupt estate." Marcus Hook, 943 F.2d at 264 (emphasis 

added) (citations and internal quotation marks omitted). 

 Torkelsen's cause of action against the trustee does 

not satisfy the requirements for relatedness set forth in Pacor. 

As previously mentioned, the Summertime painting was not the 

property of the bankrupt estate. "If the action does not involve 

property of the estate, then not only is it a noncore proceeding, 

it is an unrelated matter completely beyond the bankruptcy 

court's subject-matter jurisdiction." In re Gallucci, 931 F.2d 

738, 742 (11th Cir. 1991). See Bobroff, 766 F.2d at 804 

(debtor's tort claims that did not accrue until after the filing 

of the bankruptcy petition were not "property of the estate;" 

therefore, "the district court did not have jurisdiction to 

 

5Even for those circuits that have not formally adopted Pacor, 

Judge Garth's opinion has provided an indispensable and 

frequently cited frame of reference, a veritable beacon on the 

uncharted and perilous waters of bankruptcy subject matter 

jurisdiction. The references to Pacor in Shepard's Citations are 

legion. When federal courts must consider whether an issue is a 

related proceeding, the starting point has universally been 

Pacor. 
23 

adjudicate them as being `related to' the debtor's bankruptcy 

proceeding"). 

 Neither party has satisfactorily demonstrated how the 

claims that Torkelsen has asserted involving the trustee's 

handling of Torkelsen's property could possibly have any bearing 

upon the estate being administered in bankruptcy. Nor would any 

judgment obtained have any "effect on the arrangement, standing, 

or priorities of [the estate's] creditors." Pacor, 743 F.2d at 

995-96. All of Torkelsen's claims are asserted only against the 

trustee in his "individual capacit[y], and there is no claim of 

vicarious liability on the part of the debtors or the estate." 

Howell Hydrocarbons, 897 F.2d at 190. The ultimate disposition 

of Torkelsen's claims would not impact upon the Gallery's 

"rights, liabilities, options, or freedom of action or the 

handling and administration of the bankrupt estate." Marcus 

Hook, 943 F.2d at 264 (citations and internal quotation marks 

omitted). 

 Torkelsen argues, however, that this case is a related, 

noncore matter because the Consent Order directing Maggio to 

return the painting to Torkelsen and the trustee's failure to do 

so affected the handling and administration of the bankrupt 

estate. Torkelsen also maintains that "Maggio's status as a 

trustee was sufficient to create bankruptcy court jurisdiction. . 

. ." Appellant's Reply Br. at 6. Both of these contentions must 

be rejected. Torkelsen's argument that the Consent Order can be 

utilized to support a finding of subject matter jurisdiction over 

claims that otherwise could not be heard in bankruptcy court is 
24 

without merit. Pacor cannot be read to countenance this sort of 

bootstrapping. At a minimum, Marathon requires that all claims 

filed in bankruptcy court must be able to stand on their own as 

either core or related proceedings. 

 Torkelsen's alternate assertion that Maggio's status as 

trustee was sufficient to create bankruptcy court jurisdiction 

must also be rejected. Surely not every suit against a trustee, 

regardless of how tenuous its connection to a bankrupt estate, 

automatically confers jurisdiction simply because the trustee is 

named as a party. See In re McKinney, 45 B.R. 790, 792 (Bankr. 

W.D. Ky. 1985) (Subject matter jurisdiction is not "created by 

the fact that the trustee holds his office by court 

appointment."). 

 Discussing the current boundaries of bankruptcy court 

jurisdiction, one commentator has observed that 

despite the expansion of bankruptcy jurisdiction, that 

jurisdiction is still sharply limited. . . [T]he limits 

of the system's jurisdiction are defined by reference 

to a res. . . The res in question is not a particular 

piece of property; it is the debtor's financial 

affairs. . . Proceedings affecting the res are within 

the court's jurisdiction; proceedings not affecting 

the res are not. 

Richard H. Gibson, Home Court, Outpost Court: Reconciling 

Bankruptcy Case Control With Venue Flexibility in Proceedings, 62 

Am. Bankr. L.J. 37, 64 (1988). Torkelsen's actions against the 

trustee, wherever they may proceed, would have no impact upon the 

financial affairs of the bankrupt estate. See Gallucci, 931 F.2d 

at 742 (noting the "general principle of bankruptcy law" that "if 

the resolution of litigation cannot affect the administration of 
25 

the estate, the bankruptcy court does not have jurisdiction to 

decide it"). 

 Since the claims asserted here fail to satisfy the 

Pacor standard, the district court lacked subject matter 

jurisdiction to hear Torkelsen's state-law claims against the 

bankruptcy trustee. We therefore will reverse the district 

court's March 31, 1995, order and remand this matter to the 

district court. The district court will be instructed to further 

remand the matter to the bankruptcy court with a direction that 

the case be dismissed for want of jurisdiction.