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In re Martin-Trigona

June 3, 1985

IN RE: ANTHONY R. MARTIN-TRIGONA, DEBTOR ANTONIO SCHLEHAN, PLAINTIFF-APPELLEE,
v.
OLYMPIC WORLDWIDE COMMUNICATIONS, INC., DEFENDANT-APPELLANT, RICHARD BELFORD, TRUSTEE



Appeal from an order of the United States District Court for the District of Connecticut (Cabranes, J.) which directed specific performance of a contract of sale over real property. Appellant Olympic Worldwide Communications Inc. contends that the district court deprived it of a fair trial be asserting jurisdiction under 28 U.S.C. § 1417 without first resolving the question of ownership of the subject property. Appellee Antonio Schlehan, the purchaser, contends that the order appealed from is not a final order under 28 U.S.C. § 1291. Appeal dismissed. Judge Pierce dissents and votes to affirm in a separate opinion.

Oakes, Cardamone and Pierce, Circuit Judges.

Author: Cardamone

CARDAMONE, Circuit Judge:

The subject of this appeal is a Fifth Avenue condominium in New York City. The question raised is whether this valuable property was an asset of a bankruptcy estate. Without deciding that point, a district court ordered that a contract between a record owner and a contract purchaser be specifically performed. The appealing owner claims that he court below incorrectly assumed that 28 U.S.C. § 1471 (1982) empowered it to order specific performance of a contract of sale without first resolving the ownership status of the condominium. Appellant further contends that the failure to decide whether or not the subject property was an asset of the debtor's estate deprived the owner of its right to a fair trial. Subsequent to the argument of this appeal, the district court ruled in February 1985 that the subject property was an asset of the debtor's estate. An appeal has been taken to this Court from that determination and is presently being scheduled for oral argument. The purchaser appellee argues that we should decline jurisdiction because the order appealed from is not a final order. Because we have determined that the order of specific performance made in this case is not a "final" order under 28 U.S.C. § 1291, we dismiss the appeal.

I

BACKGROUND

The facts of this case are as follows. On April 23, 1981 a written contract of sale was entered into between appellee Antonio Schlehan and appellant Worldwide Communications Inc. (Olympic). Olympic agreed to sell and Schlehan to purchase apartment 22P located at 641 Fifth Avenue, New York City in a building commonly known as Olympic Towers. The purchase price called for a down payment of $29,000 upon the signing of the agreement with the balance of $261,00 payable at the closing. The closing was scheduled for May 27, 1981, when Olympic was to convey title free and clear of all liens and encumbrances. On the date of the closing Schlehan was ready, willing and able to pay the $261,000 balance of the purchase price. But Olympic without giving a reason, refused to convey title to him, and instead leased the apartment.

Schlehan thereupon commenced an action in New York State Supreme Court, New York County, seeking specific performance of the contract. In its answer Olympic defended by stating that it had been advised by counsel that there was a "claim" of ownership to the apartment that prevented it from conveying good title to Schlehan. On July 15, 1981 a state-court judge ordered that the specific performance action be set for trial. Several months later the trustee in the Anthony R. Martin-Trigona bankruptcy proceeding moved to intervene as a party defendant in the state action, alleging that that the apartment subject to the contract of sale was an asset of the debtor Martin-Trigona and that a state-court judgment would adversely affect the trustee's interest in that property. After the state court granted his motion to intervene in the state action, the trustee moved to transfer the case to the United States Bankruptcy Court for the Southern District of New York. Olympic moved to have the proceeding remanded to the state court. At a hearing held January 27, 1982 Bankruptcy Judge Babbitt of the southern District denied Olympic's remand motion and granted the trustee's motion to transfer the case to the Southern District, which immediately transferred it to the United States Bankruptcy Court for the District of Connecticut where Martin-Trigona was a resident.

II

DISTRICT COURT PROCEEDINGS

The matter came before the United States District Court for the District of Connecticut (Cabranes, J.) on July 16, 1984. After hearing argument from counsel, Judge Cabranes entered a judgment ordering Olympic to convey title to and deliver possession of the apartment to Schlehan. Schlehan took possession of the apartment July 18, 1984, and Olympic subsequently delivered to him a warranty deed to the premises. On October 16, 1984 after hearing further oral argument Judge Cabranes entered an order directing the trustee in bankruptcy to make payments in order to satisfy outstanding liens on the apartment, including two mortgages and an unpaid condominum [sic] common charge, all of which totalled approximately $227,000.

In the course of an earlier hearing held before the district court on June 25, 1984, at which Schlehan, the trustee, Olympic, and Citibank as holder of the mortgage were represented by counsel, it became evident that there was some confusion as to whether the district court could properly exercise jurisdiction over the specific performance action under 28 U.S.C. § 1471. It appeared that although the apartment was owned by Olympic's President, Howard J. Kotlicky, Martin-Trigona had guaranteed a mortgage on it in an amount up to $95.000. Nonetheless, at the time of filing his bankruptcy petition the condominium was not listed as an asset of Martin-Trigona's estate.

Schlehan and the trustee urged the district court to exercise jurisdiction. They argued that the Southern district Bankruptcy Judge's refusal to remand the specific performance action to state court was sufficient grounds for that exercise. Olympic and Citibank contended that the purpose of the transfer was only to allow the federal court do decide whether the debtor had an interest in the property. From an extended colloquy on the record it appeared that although Martin-Trigona had failed to pay either the maintenance charges or the mortgage for the preceding three years, he had occupied the apartment. When this piece of information surfaced, The Connecticut district court determined that it had jurisdiction to proceed.

In its written conclusions of law, the district court stated that 28 U.S.C. § 1471 confers original jurisdiction of all civil proceedings arising in and related to cases under Title 11, and that as this was a civil proceeding related to a bankruptcy proceeding, the court had jurisdiction. In [sic] ruled that Schlehan was entitled to immediate possession of the ...


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