Alarid v. Pacheco (In re Pacheco)

• Decision Date: 13 February 2020
• Docket Number: No. 19-10733-j7,Adversary No. 19-1066-j,19-10733-j7
• Citation: 616 B.R. 126
• Parties: IN RE: Robert PACHECO and Maria Pacheco, Debtors. Michael Alarid, Jr., Cross-Plaintiff, v. Robert Pacheco, Cross-Defendant.
• Court: U.S. Bankruptcy Court — District of New Mexico

616 B.R. 126

IN RE: Robert PACHECO and Maria Pacheco, Debtors.Michael Alarid, Jr., Cross-Plaintiff,

v.Robert Pacheco, Cross-Defendant.

No. 19-10733-j7

Adversary No. 19-1066-j

United States Bankruptcy Court, D. New Mexico.

Signed February 13, 2020

Camille Cordova, Attorney for Cross-Plaintiff, The Alarid Law Firm, P.C., 300 Central SW, Suite 2200 East, Albuquerque, NM 87102, Michael Edward Lash, Christopher L. Trammell, Attorneys for Cross-Defendant, Christopher L. Trammell, P.A., 3900 Juan Tabo, NE, Albuquerque, NM 87111

Edward Alexander Mazel, Attorney for Cross-Plaintiff, Mazel Law, LLC, 122 Central Ave. SW, Suite 4, Albuquerque, NM 87102

MEMORANDUM OPINION

ROBERT H. JACOBVITZ, United States Bankruptcy Judge

THIS MATTER is before the Court on Plaintiff, Michael Alarid, Jr.'s Objection to Notice of Removal and Motion to Remand ("Motion to Remand"). The Court heard oral argument on the Motion to Remand and took the matter under advisement. The removed cross-claim asserts a state law claim to establish the debt Mr. Alarid seeks to except from the discharge in a separate pending nondischargeability proceeding.¹ Prepetition, the State Court entered summary judgment against Mr. Pacheco on Mr. Alarid's cross-claim, and Mr. Pacheco filed a motion to reconsider the summary judgment, which remains pending. Mr. Pacheco has been granted a bankruptcy discharge. At issue is whether this Court should remand the removed cross-claim so the State Court can rule on the pending motion to reconsider the summary judgment and otherwise adjudicate the claim on the debt at issue in the nondischargeability action.

The Court will remand this adversary proceeding and modify the discharge injunction for the limited purpose of allowing the State Court to rule on the pending motion to reconsider its prior summary judgment. This Court otherwise will adjudicate the claim on the debt in the nondischargeability action, if and to the extent the State Court's ruling does not have preclusive effect.

BACKGROUND AND PROCEDURAL HISTORY²

Defendant Robert Pacheco filed a voluntary petition under chapter 7 of the Bankruptcy Code on March 29, 2019. The chapter 7 trustee conducted a meeting of creditors under 11 U.S.C. § 341(a) on April 26, 2019. See Bankruptcy Case No. 18-12192-j7 – Docket Nos. 1 and 7. On May 3, 2019, the Chapter 7 Trustee reported that she held and concluded the meeting of creditors. Id. – Docket No. 14. The Court entered an Order of Discharge granting Mr. Pacheco a chapter 7 discharge on August 14, 2019. See Case No. 19-10733-j7 – Docket No. 29. The chapter 7 bankruptcy case was closed on the same date.

Before Mr. Pacheco filed for bankruptcy protection, he and Michael Alarid, Jr. had been involved in two different state court lawsuits: 1) Michael Alarid Jr. v. Robert Pacheco , Case No. D-412-CV-2013-00127; and 2) Ditech Financial, LLC v. Dianne M. Pacheco et al, Case No. D-412-CV-2015-0029 (the "State Court Foreclosure Action"). Both actions concerned Mr. Pacheco's sale of certain real property to Mr. Alarid under a real estate contract. Mr. Alarid asserted a cross claim against Mr. Pacheco in the State Court Foreclosure Action (the "Cross-Claim"). The record before this Court does not show that any discovery has been taken with respect to the Cross-Claim.

In the State Court Foreclosure Action, the State Court entered summary judgment on the Cross-Claim (the "Summary Judgment") after Mr. Pacheco failed to file a response to Mr. Alarid's summary judgment motion. On December 17, 2018, Mr. Pacheco filed a motion to reconsider asking the State Court to vacate the Summary Judgment on the ground that the summary judgment motion was not properly supported by admissible evidence as required. See Motion by Defendant Robert Pacheco to Reconsider and Vacate Judgment on Cross Plaintiff's Motion for Summary Judgment on Cross Claim ("Motion to Reconsider") – Docket No. 3-7. The Motion to Reconsider has been fully briefed in the State Court Foreclosure Action. See Docket Nos. 3-8, 3-10, and 3-12.

On June 24, 2019, Mr. Alarid filed a Complaint for Determination Excepting Debt Evidenced by State Court Judgment from Discharge against Robert Pacheco, initiating adversary proceeding No. 19-1054 (the "Nondischargeability Action"). Mr. Alarid seeks to except from the discharge the debt established by the Summary Judgment pursuant to 11 U.S.C. §§ 523(a)(2)(A) and (a)(6). In the Nondischargeability Action he alleges many of the same factual allegations underlying the Cross-Claim.

On September 3, 2019, Mr. Pacheco removed the Cross-Claim asserted in the State Court Foreclosure Action to this Court, initiating this adversary proceeding. See Docket No. 1. The Motion to Reconsider remained pending at the time of removal. Mr. Alarid filed the Motion to Remand on October 23, 2019. See Docket No. 15.

DISCUSSION

A. Removal of the Cross-Claim in the State Court Foreclosure Action³

Mr. Pacheco's removal of the Cross-Claim was proper. A litigant may remove one, but not all, claims asserted in a state court action. See 28 U.S.C. § 1452(a) ("A party may remove any claim or cause of action ..."); Fed. R. Bankr. P. 9027(a)(1) (procedure for removal of a "claim or cause of action") (emphasis added); S. Elizabeth Gibson, Removal of Claims Related to Bankruptcy Cases: What Is A "Claim or Cause of Action"? , 34 UCLA L.Rev. 1, 29 (1986) ("Thus the very language of the bankruptcy removal provision reveals an unmistakable congressional intent to enact a removal right that might extend to less than an entire lawsuit.").

Alarid asserts that removal of the was cross claim was untimely. Removal of a claim asserted in a state court action commenced before the filing of a bankruptcy case is timely if it is filed

within the longest of (A) 90 days after the order for relief in the case under the Code, (B) 30 days after entry of an order terminating a stay, if the claim or cause of action in a civil action has been stayed under § 362 of the Code, or (C) 30 days after a trustee qualifies in a chapter 11 reorganization case but not later than 180 days after the order for relief.

Fed. R. Bankr. P. 9027(a)(2).

Removal of the Cross-Claim filed in the State Court Foreclosure Action was timely under Fed. R. Bankr. P. 9027(a)(2)(B). The automatic stay applied to the State Court Foreclosure Action upon the commencement of Mr. Pacheco's chapter 7 case on March 29, 2019 and remained in effect until the automatic stay terminated upon the entry of the discharge on August 14, 2019. See 11 U.S.C. § 362(a) (the filing of a petition operates as a stay of "the ... continuation ... of a judicial ... proceeding against the debtor that was ... commenced before the commencement of the case under this title ...."); 11 U.S.C. § 362(c) (the stay of an action against the debtor terminates when the case is closed, dismissed, or the chapter 7 discharge is granted). The notice of removal, filed September 3, 2019, was timely filed within 30 days after the termination of the automatic stay upon entry of the order of discharge.

B. The Timeliness of the Motion to Remand

Mr. Pacheco asserts that the Motion to Remand was untimely because it seeks abstention. Abstention is governed by 28 U.S.C. § 1334(c).⁴ Under NM LBR 5011-2, a party requesting mandatory or permissive abstention must file a motion to abstain "within 30 days after the conclusion of the meeting of creditors." NM LBR 5011-2. The Motion to Remand was filed in October of 2019, well after the 30-day deadline for seeking abstention under the local rule. It is, therefore, untimely under the local rule applicable to abstention.

However, although the Motion to Remand asserts that permissive abstention factors weigh in favor of abstention and asks the Court to permissively abstain, the title, opening paragraph, and prayer for relief of the Motion to Remand all request remand. Because Mr. Alarid has filed a motion to remand and seeks remand, the Court will not apply the time limit for a motion to abstain under the local rule, even though the considerations for equitable remand and permissive abstention are virtually identical.

The bankruptcy remand statute does not fix a time limit for filing a motion seeking equitable remand. See 28 U.S.C. § 1452(b). See Topfer v. Topfer (In re Topfer) , 587 B.R. 622, 628 (Bankr. M.D. Pa. 2018) ("[N]o specific deadline for filing a motion to remand is included in 28 U.S.C. § 1452(a) ...."). Nor does Bankruptcy Rule 9027 applicable to removal impose a time limit for seeking remand. Id. The general non-bankruptcy federal remand statute, 28 U.S.C. § 1447(c), imposes a 30-day time limit after the filing of a notice of removal under 28 U.S.C. § 1446(a) to file a motion to remand "on the basis of any defect other than lack of subject matter jurisdiction." 28 U.S.C. § 1447(c). However, the 30-day time limit in 28 U.S.C. § 1447(c) does not apply to motions seeking equitable remand under 28 U.S.C. § 1452(b).⁵ Even so, the court may consider the timing of such a motion to remand as a factor when determining whether to remand under 28 U.S.C. § 1452(a). See Topfer , 587 B.R. at 628 ("[T]he timing of the motion to remand can be counted as an equitable factor in considering remand.") (citation omitted).

Mr. Alarid filed the Motion for Remand within 50 days of the notice of removal. At oral argument, Mr. Alarid no longer asserted that procedural defects in the removal of the Cross-Claim required remand and instead premised his entire argument on equitable remand. Under these circumstances, the Court finds and concludes that the Motion for Remand was timely filed.

C. Remand under 28 U.S.C. § 1452(b)

Remand of matters related to bankruptcy cases is governed by 28 U.S.C. § 1452(b), which provides, in relevant part:

The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground.

28 U.S.C. § 1452(b).

The Motion to Reconsider, which has been fully briefed to the State Court, asks the State Court to...