Farm Credit Bank of St. Paul v. Rub, s. 910227

• Decision Date: 20 February 1992
• Docket Number: 910229,910252 and 910299,Nos. 910227,s. 910227
• Citation: 481 N.W.2d 451
• Court: North Dakota Supreme Court
• Parties: FARM CREDIT BANK OF ST. PAUL, a Body Corporate, Plaintiff and Appellee, v. Duane E. RUB, Defendant and Appellant. Marlys M. Rub; United States of America, acting through the Farmers Home Administration, United States Department of Agriculture; Nodak Ranch & Home Supply of Lemmon, South Dakota; and Harry Swendsen, d/b/a Hettinger Auto Co., Defendants. Civ.

Page 451

481 N.W.2d 451

FARM CREDIT BANK OF ST. PAUL, a Body Corporate, Plaintiff and Appellee, v. Duane E. RUB, Defendant and Appellant Marlys M. Rub; United States of America, acting through the Farmers Home Administration, United States Department of Agriculture; Nodak Ranch & Home Supply of Lemmon, South Dakota; and Harry Swendsen, d/b/a Hettinger Auto Co., Defendants.

Civ. Nos. 910227, 910229, 910252 and 910299.

Supreme Court of North Dakota.

Feb. 20, 1992.

Sean O. Smith (argued), of Tschider & Smith, Bismarck, for plaintiff and appellee.

Duane E. Rub, pro se.

LEVINE, Justice.

Duane E. Rub appeals from a judgment foreclosing a real estate mortgage and from an order confirming a sheriff's sale of the foreclosed property. We affirm the judgment and the order.

On January 22, 1979, Duane and Marlys Rub executed a $96,000 promissory note with interest at 8 1/4% payable to the Farm Credit Bank of St. Paul [FCB] ¹ and a real estate mortgage securing the note. On January 16, 1984, following their failure to make timely payments, the Rubs reamortized the loan at 11 1/4% interest. The Rubs defaulted, and on August 24, 1986, FCB sued the Rubs ² in state district court to foreclose the mortgage. The Rubs answered, asserting that they were not in default, that they were entitled to judicial forbearance under the confiscatory-price defense, Section 28-29-04, et seq., N.D.C.C., and that FCB breached the mortgage agreement. The Rubs also counterclaimed, seeking damages and rescission for FCB's alleged breach of the mortgage agreement.

The court initially set the case for trial on November 12, 1987, but granted a continuance after the Rubs discharged their first attorney. A second trial was scheduled for June 29, 1988, but was rescheduled for August 16, 1988, so the Rubs could appeal from the denial of their proposal to restructure the loan under the Agricultural Credit Act of 1987. The August 16 trial was stayed when the Rubs filed for bankruptcy. After the bankruptcy court lifted the stay for this action, a fourth trial date, scheduled for November 1, 1989, was continued to allow the Rubs an opportunity to obtain an independent appraisal of the property.

A January 10, 1991 trial date was rescheduled for January 17, 1991, after the Rubs filed two separate demands for change of judge. The court denied both demands; however, the Rubs filed a notice of appeal from the court's order, and the January 17 trial was postponed. After this court dismissed the Rubs' interlocutory appeal a seventh trial date was set for April 18, 1991.

On April 4, 1991, Duane filed a notice of removal with the federal district court under 28 U.S.C.A. Sec. 1446 to remove the case from state court to federal court. The federal court determined that Duane's notice of removal was untimely and remanded the case to state court. The Rubs then filed a third demand for change of judge and the state court granted a continuance. The state court denied that demand for a change of judge and set an eighth trial date for May 16, 1991. On May 10, 1991, the Rubs attempted to appeal to this court from the order denying that demand for a change of judge, and on May 15, 1991, we dismissed the appeal on an expedited basis.

Prior to the trial in state court on May 16, 1991, Duane gave the court a copy of a "Notice of Removal," dated May 15, 1991, which stated that "this notice for removal is brought forth pursuant to Federal Rules of Civil Procedure under 28 USC Sec. 1446 is give [sic] notice to all state Courts and officials." That notice of removal was based on the same ground as the notice of removal filed on April 4, 1991. Duane informed FCB and the state court that the second "Notice of Removal" had been filed with the federal district court that morning. The state court concluded

"that the attempted removal under Sec. 1446 of Title 28 of the US Code is not a timely removal, that the removal has previously been attempted by Mr. Rub on at least two prior occasions, that the United States District Court for the District of North Dakota has on each of said occasions remanded this litigation back to the State District Court finding such attempted removals to be untimely. Accordingly, the Court is not going to honor the Notice of Removal, that the Court is going to proceed with the trial of this litigation on today's date."

After a bench trial, the state court issued a memorandum opinion determining that the Rubs had failed to offer any evidence in support of any of their affirmative defenses or counterclaims and that FCB was entitled to foreclose the real estate mortgage. Judgment was entered and Duane filed notices of appeal from the memorandum opinion and from the judgment.

On July 15, 1991, the federal district court denied Duane's second request for removal, stating:

"The underlying action was filed on August 11, 1986, but no notice of removal was filed until May 16, 1991. The notice of removal must be filed within 30 days of the defendant's receipt of a copy of the initial pleading setting forth the plaintiff's claim. 28 U.S.C. sec. 1446 (1989). Furthermore, all defendants must join in a notice of removal. Id. No other defendants have joined. The court's research also indicates that this action has been fully litigated in the state district court, and that defendant is merely asking this court to review the state court's decision. Finally, it appears to the court that even if the above deficiencies could be overlooked, there would be no basis for federal jurisdiction. No amount in controversy is stated, and the parties do not appear to be diverse."

On November 12, 1991, the federal district court denied Duane's motion to reconsider the removal.

Meanwhile, the clerk of the state court issued a notice of special execution sale, and the sheriff conducted a special execution sale on August 19, 1991. Duane filed notices of appeal from those proceedings, and in Farm Credit Bank of St. Paul v. Rub, 478 N.W.2d 279 (N.D.1991), we retained jurisdiction and remanded to the state court for consideration of an order confirming the sheriff's sale. The state court has entered an order confirming the sheriff's sale, and we now consider all the issues raised by Duane in the separate appeals.

Duane argues that the state court did not have jurisdiction to decide the foreclosure action because, on the day of trial, he notified FCB and the state court that he had filed a notice of removal with the federal district court. FCB responds that the state court never lost jurisdiction because the federal court subsequently concluded that Duane's notice of removal did not comply with 28 U.S.C.A. Sec. 1446.

A defendant seeking to remove a case from state court to federal court under 28 U.S.C.A. Sec. 1446, ³ must (1) file a notice of removal with the appropriate federal court, (2) promptly file a copy of the notice with the clerk of the state court, and (3) promptly give written notice of the removal to all adverse parties. 14A Wright, Miller & Cooper, Federal Practice & Procedure: Jurisdiction 2d Sec. 3730 (1985); 1A Moore's Federal Practice, p 0.168[3.-1] (1991); Michael J. Kaplan, Annotation, Effect, On Jurisdiction of State Court, Of 28 USCS Sec. 1446(e), Relating to Removal of Civil Case to Federal Court, 38 A.L.R.Fed. 824, Sec. 2[a] (1978). The federal court acquires jurisdiction when the defendant files the notice for removal with the federal court, and it has generally been held that the state and federal court both have jurisdiction until the defendant completes the remaining two requirements for removal. 14A Wright, Miller & Cooper, supra at Sec. 3737; 1A Moore's Federal Practice, supra at p 0.168[3.-8-3]; 38 A.L.R.Fed. 824, supra at Sec. 13[a].

Compliance with all three procedural requirements for removal "shall effect the removal and the state court shall proceed no further unless and until the case is remanded." 28 U.S.C.A. Sec. 1446(d). Even if the federal court determines that the case is not removable and remands to state court, it has generally been held that, under 28 U.S.C.A. Sec. 1446(d), any action by the state court while the notice of removal is pending in federal court is void. E.g., South Carolina v. Moore, 447 F.2d 1067 (4th Cir.1971); Hopson v. North American Insurance Co., 71 Idaho 461, 233 P.2d 799 (1951); People v. Martin-Trigona, 28 Ill.App.3d 605, 328 N.E.2d 362 (1975).

Under earlier removal law, ⁴ if the facts stated in a petition were insufficient for removal, the state court could ignore the petition and any action by the state court while the removal was pending in federal court was valid if the federal court subsequently remanded the case. Metropolitan Casualty Insurance Co. v. Stevens, 312 U.S. 563, 61 S.Ct. 715, 85 L.Ed. 1044 (1941). There is all but unanimity on the proposition that amendments to the removal statute in 1948 effectively changed the result in Metropolitan Casualty so that a state court adjudication, while a removal petition is pending in federal court, is void, even if the federal court subsequently determines that the case is not removable. E.g., South Carolina v. Moore, supra.

However, a few courts have concluded that, under current law, a state court decision, while a removal petition is pending in federal court, is not void if the federal court subsequently determines the case is not removable. Bell v. Burlington Northern Railroad Co., 738 P.2d 949 (Okl.Ct.App.), cert. denied, 482 U.S. 919, 107 S.Ct. 3197, 96 L.Ed.2d 684 (1986); see Wilson v. Sandstrom, 317 So.2d 732 (Fla.1975), cert. denied, 423 U.S. 1053, 96 S.Ct. 782, 46 L.Ed.2d 642 (1976); People v. Wynn, 73 Mich.App. 713, 253 N.W.2d 123 (1977); Styers v. Pico, Inc., 236 Ga. 258, 223 S.E.2d 656 (1976).

In Bell, supra, 738 P.2d at 954-55, the Oklahoma Court of Appeals said that the 1948 amendment to the removal statute indicated no congressional intent to change the approach taken in Metropolitan Casualty:

"Looking at the issue from another...