Held: Respondents were not entitled to a jury trial. By
filing claims against the bankruptcy estate, respondents triggered
the process of "allowance and disallowance of claims," thereby
subjecting themselves to the Bankruptcy Court's equitable power.
Grandfinanciera, 492 U.S. at
492 U. S. 58-
59, and n. 14. Thus, the trustee's preference action became an
integral part of the claims-allowance process, which is triable
only in equity. As such, there is no Seventh Amendment right to a
jury trial. In contrast, a party who does not submit a claim
against the estate is entitled to a jury trial as a preference
defendant, since the trustee could recover the transfers only by
filing what amounts to a legal action.
Ibid. Accordingly,
"a creditor's right to a jury trial on a bankruptcy trustee's
preference claim depends upon whether the creditor has submitted a
claim against the estate,"
id. at
492 U. S. 58, a
distinction overlooked by the Court of Appeals.
Certiorari granted; 897 F.2d 1041, reversed and remanded.
PER CURIAM.
This case presents the question whether creditors who submit a
claim against a bankruptcy estate and are then sued by
Page 498 U. S. 43
the trustee in bankruptcy to recover allegedly preferential
monetary transfers are entitled to jury trial under the Seventh
Amendment. This action was brought by petitioner Langenkamp,
successor trustee to Republic Trust & Savings Company and
Republic Financial Corporation (collectively debtors). Debtors were
uninsured, nonbank financial institutions doing business in
Oklahoma. Debtors filed Chapter 11 bankruptcy petitions on
September 24, 1984. At the time of the bankruptcy filings,
respondents held thrift and passbook savings certificates issued by
the debtors, which represented the debtors' promise to repay moneys
the respondents had invested.
Within the 90-day period immediately preceding debtors' Chapter
11 filing, respondents redeemed some, but not all, of the debtors'
certificates which they held. Thus, upon the bankruptcy filing,
respondents became creditors of the now-bankrupt corporations.
Respondents timely filed proofs of claim against the bankruptcy
estates. Approximately one year after the bankruptcy filing, the
trustee instituted adversary proceedings under 11 U.S.C. § 547(b)
to recover, as avoidable preferences, the payments which
respondents had received immediately prior to the September 24
filing. A bench trial was held, and the Bankruptcy Court found that
the money received by respondents did in fact constitute avoidable
preferences. Republic Trust & Savings Co., CCH Bkrptcy.L.Rep. �
73281 (1990). The United States District Court for the Northern
District of Oklahoma affirmed. On appeal, the United States Court
of Appeals for the Tenth Circuit upheld the District Court's
judgment on three grounds, but reversed on the issue of the
holders' entitlement to a jury trial on the
Page 498 U. S. 44
trustee's preference claims.
Langenkamp v. Hackler, 897
F.2d 1041 (1990). Relying on our decisions in
Granfinanciera,
S.A. v. Nordberg, 492 U. S. 33
(1989), and
Katchen v. Landy, 382 U.
S. 323 (1966), the Tenth Circuit correctly held that
"those appellants that did not have or file claims against the
debtors' estates undoubtedly [were] entitled to a jury trial on the
issue whether the payments they received from the debtors within
ninety days of the latter's bankruptcy constitute[d] avoidable
preferences."
Langenkamp, supra, at 1046. The Court of Appeals went
further, however, concluding:
"[A]lthough some of the appellants did file claims against the
estates because they continued to have monies invested in the
debtors at the time of bankruptcy, . . . we believe they likewise
are entitled to a jury trial under the rationale of
Granfinanciera and
Katchen. Despite these
appellants' claims, the trustee's actions to avoid the transfers,
consolidated by the bankruptcy court, were plenary rather than a
part of the bankruptcy' court's summary proceedings involving the
'process of allowance and disallowance of claims.'"
897 F.2d at 1046-1047.
Petitioner contends that the Tenth Circuit erred in holding that
those creditors of the debtors who had filed claims against the
estate were entitled to a jury trial. We agree.
In
Granfinanciera, we recognized that, by filing a
claim against a bankruptcy estate, the creditor triggers the
process of "allowance and disallowance of claims," thereby
subjecting himself to the bankruptcy court's equitable power. 492
U.S. at
492 U. S. 58-59,
and n. 14 (citing
Katchen, supra, 382 U.S. at
382 U. S.
336). If the creditor is met, in turn, with a preference
action from the trustee, that action becomes part of the
claims-alIowance process which is triable only in equity.
Ibid. In other words, the creditor's claim and the ensuing
preference action by the trustee become integral to the
restructuring of the debtor-creditor relationship through the
bankruptcy court's equity jurisdiction.
Granfinanciera,
supra, 492 U.S. at
492 U. S. 57-58.
As
Page 498 U. S. 45
such, there is no Seventh Amendment right to a jury trial. If a
party does not submit a claim against the bankruptcy estate,
however, the trustee can recover allegedly preferential transfers
only by filing what amounts to a legal action to recover a monetary
transfer. In those circumstances, the preference defendant is
entitled to a jury trial. 492 U.S. at
492 U. S.
58-59.
Accordingly, "a creditor's right to a jury trial on a bankruptcy
trustee's preference claim depends upon whether the creditor has
submitted a claim against the estate."
Id. at
492 U. S. 58.
Respondents filed claims against the bankruptcy estate, thereby
bringing themselves within the equitable jurisdiction of the
bankruptcy court. Consequently, they were not entitled to a jury
trial on the trustee's preference action. The decision by the Court
of Appeals overlooked the clear distinction which our cases have
drawn and in so doing created a conflict among the circuits on this
issue. For this reason we grant the petition for certiorari,
reverse the judgment of the Court of Appeals for the Tenth Circuit,
and remand for further proceedings consistent with this
opinion.
It is so ordered.
Justice KENNEDY took no part in the consideration or decision of
this case.
