Certiorari Denied March 19, 1984. See 104 S.Ct. 1602.
SPROUSE, Circuit Judge:
Twin Parks Limited Partnership appeals from the district court's judgment affirming the bankruptcy judge's decision in favor of N.S.C. Contractors, Inc. Twin Parks contends that the bankruptcy judge lacked jurisdiction to decide N.S.C.'s state law claim of breach of contract. Twin Parks also challenges the award of post-bankruptcy petition interest to N.S.C., and assigns numerous other errors. Finding merit in the appellant's challenge to the award of interest but none in its other assignments of error, we affirm the district court's decision except that part awarding post-petition interest. We reverse that part of the decision and reduce the money judgment accordingly.
Twin Parks filed a Chapter XII petition on June 14, 1979, seeking a real property arrangement under the Bankruptcy Code.
N.S.C. subsequently filed a complaint with the bankruptcy court seeking to lift the stay order or, alternatively, asking the court to allow its claim against the debtor. Twin Parks answered, filed a counterclaim and specifically requested the court to take jurisdiction over the dispute. It demanded a jury trial on all issues pertaining to the state law breach of contract claim. This demand was denied and the bankruptcy judge heard and decided the case without a jury. The trial began on July 29, 1980, was delayed several times due to the illness of Twin Parks' major shareholder and was finally concluded in favor of N.S.C. on May 9, 1981. Twin Parks appealed the adverse judgment to the district court which reviewed the record and affirmed the bankruptcy judge's order on April 20, 1982.
Twin Parks' principal argument for reversal is jurisdictional. It argues that the bankruptcy judge, who was clearly not an Article III judge,
The jurisdictional argument Twin Parks now raises for the first time would have merit if made by a litigant not voluntarily before the court and whose action was not underway on the effective dates of the Northern Pipeline and Reminc decisions. Northern Pipeline and Reminc obviously provide support for its argument that pre-Reform Act bankruptcy judges, acting under the supervision of Article III District Courts, cannot decide claims arising entirely under state law without the consent of the parties. Northern Pipeline, at 87, 102 S.Ct. at 2880, 73 L.Ed.2d at 625; Reminc, 704 F.2d at 1318. The Reminc Court's discussion was particularly supportive, stressing the point that pre-Reform Act judges are not sufficiently adjunct to the district court to justify their exercise of federal judicial power
The Supreme Court in Northern Pipeline stated:
458 U.S. at 88, 102 S.Ct. at 2880, 73 L.Ed.2d at 626. (emphasis added) In Reminc, we agreed with the appellant that the bankruptcy judge lacked jurisdiction, but emphasized that the decision must be applied prospectively as to all other litigants.
Twin Parks contends nevertheless that only cases which have exhausted appeals are foreclosed by a "prospective" change in the law. It argues further that an appellate court is bound to apply the law in effect at the time it renders a decision — in this case the jurisdictional rule established by Northern Pipeline.
This argument oversimplifies the controlling rule. It is generally true that "a change in the law will be given effect while a case is on direct review," Linkletter v. Walker, 381 U.S. 618, 627, 85 S.Ct. 1731, 1736, 14 L.Ed.2d 601, 607 (1965). Tribunals announcing new principles of law, however, qualify their retroactivity in differing ways, and the new principles' effect on cases then existing in various stages of litigation differ accordingly. See United States v. Johnson, 457 U.S. 537, 102 S.Ct. 2579, 73 L.Ed.2d 202 (1982); Linkletter, 381 U.S. at 628, 85 S.Ct. at 1737; Great Northern Railway Co. v. Sunburst Oil & Refining Co., 287 U.S. 358, 53 S.Ct. 145, 77 L.Ed. 360 (1932); Lester v. McFaddon, 415 F.2d 1101 (4th Cir.1969).
We agree with Twin Parks' argument, however, concerning the award of interest and hold that the bankruptcy court and the district court committed error in allowing N.S.C. Contractors prejudgment interest beyond the time when the Chapter XII petition was filed. The rule concerning the award of interest against a debtor in bankruptcy was summarized by the Supreme Court in Vanston Bondholders Protective Committee v. Green, 329 U.S. 156, 67 S.Ct. 237, 91 L.Ed. 162 (1946):
Id. at 163, 67 S.Ct. at 240 (quoting Thomas v. Western Car Co., 149 U.S. 95, 116-17, 13 S.Ct. 824, 833, 37 L.Ed. 663 (1893)). The Vanston court made it clear that while the award of pre-petition interest normally is governed by state law, "[w]hen and under what circumstances federal courts will allow interest on claims against debtors' estates being administered by them has long been decided by federal law." Id.
Vanston's vitality has not diminished.
Neither the district court nor N.S.C. on appeal attempted to justify the award of post-petition interest under any of these exceptions. The award of interest past June 14, 1979, the filing date of Twin Parks' Chapter XII petition, was thus inappropriate.
The district court's award of interest past June 14, 1979, is reversed and the money judgment reduced accordingly. That portion of the interest award attributable to the pre-petition period is governed by state law and remains undisturbed. Finding no error in the other district court actions, all other portions of its judgment are affirmed.
The case before us calls into question the practices followed under the law existing previous to the Bankruptcy Reform Act. Reminc, like the present case, involved a challenge to pre-Reform Act practices and procedures. For this reason, this court's recent decision in Reminc has more specific application to the instant case than Northern Pipeline. In Reminc, we ruled that Rule 810 of the Rules of Bankruptcy Procedure "unconstitutionally vested the non-Article III bankruptcy [judge] with too great a measure of the judiciary power of the United States." 704 F.2d at 1318.