Foster v. Holder (In re Foster)
| Decision Date | 15 October 2020 |
| Docket Number | Case No. 12-43804-ELM,Adversary No. 19-04131 |
| Parties | In re: REGINA NACHAEL HOWELL FOSTER, Debtor. REGINA NACHAEL HOWELL FOSTER, Plaintiff, v. AREYA HOLDER, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of Texas |
The following constitutes the ruling of the court and has the force and effect therein described.
(Re: Docket Nos. 10 and 12)
Before the Court in the above-captioned removed adversary proceeding are two motions for remand filed by Plaintiff Regina Nachael Howell Foster (the "Debtor"), the chapter 7 debtor in Case No. 12-43804 (the "Bankruptcy Case"): (1) a Motion to Remand: Untimely Removal [Docket No. 12] (the "Timeliness Motion"); and (2) a Motion to Remand: Lack of Subject Matter Jurisdiction [Docket No. 10] (). Pursuant to the Timeliness Motion, the Debtor asserts that the case should be remanded to Texas state court based upon the alleged failure of the removing parties - Defendants Areya Holder n/k/a Areya Holder Aurzada (the "Trustee"), Singer & Levick, P.C. ("SLPC"), Todd A. Hoodenpyle ("Hoodenpyle") and Michelle E. Shriro ("Shriro" and together with the Trustee, SLPC and Hoodenpyle, the "Removing Defendants") - to file their Notice of Removal by the deadline imposed by Bankruptcy Rule 9027(a)(3). Pursuant to the Jurisdictional Motion, the Debtor asserts that the case should be remanded to Texas state court because the Court allegedly lacks federal-question subject matter jurisdiction. Alternatively, the Debtor asserts that the Court must abstain pursuant to 28 U.S.C. § 1334(c)(2), or should abstain pursuant to 28 U.S.C. § 1334(c)(1), from exercising jurisdiction over the claims at issue in the case even if the Court has subject matter jurisdiction.
The Removing Defendants have timely responded in opposition to both Motions.1 First, in relation to the Timeliness Motion, the Removing Defendants assert that they filed their Notice of Removal within 30 days of their receipt of the Debtor's complaint as required by Bankruptcy Rule 9027(a)(3). Second, in relation to the Jurisdictional Motion, the Removing Defendants assert that the Court has subject matter jurisdiction of the case pursuant to the bankruptcy jurisdictional provisions of 28 U.S.C. §§ 1334 and 157 (), that mandatory abstention is not required, and that factors relevant to permissive abstention weigh in favor of the Court's refusal to abstain from exercising jurisdiction. The Debtor has filed a reply to each of the responses.2
At a January 15, 2020 hearing in the adversary proceeding, the Debtor, without opposition from the Removing Defendants, requested that the Motions be considered on the parties' submissions alone without an evidentiary hearing or oral argument. The Court granted the unopposed request and, hence, the parties have waived their right to have an evidentiary hearing and oral argument on the Motions.
Having now considered the Motions, the responses in opposition and the replies thereto, for the reasons set forth below the Court will deny the Timeliness Motion and grant in part, and deny in part, the Jurisdictional Motion.
This removed action presents but the latest chapter in a nearly decade-long saga of challenges lodged by the Debtor to the Trustee's administration of the Bankruptcy Case and the Debtor's bankruptcy estate. To put the current litigation and Motions in proper context, it is helpful to provide a recap of the events leading up to the current litigation.
On July 2, 2012, the Debtor filed her voluntary petition for relief under chapter 7 of the Bankruptcy Code, thereby initiating the Bankruptcy Case. The Trustee was appointed as trustee of the Debtor's chapter 7 bankruptcy estate.
Four days after filing for bankruptcy protection, the Debtor initiated a divorce proceeding (the "Divorce Action") against her husband Carlos Foster ("Foster") under Cause No. 322-518571-12 in Texas state court (the "Family Court").3 In the Divorce Action, the Debtor "claimedan interest in three parcels of real property ... recognized as important assets in her bankruptcy."4 In follow-up to that assertion, on October 12, 2012, the Debtor filed amended schedules in her Bankruptcy Case to identify her claimed community property interest in these three parcels of real property, described as: (1) commercial real property located at 4716 E. Lancaster Avenue, Fort Worth, Texas 76103 (the "Lancaster Property"); (2) commercial real property located at 421 S. Edgewood Terrace, Fort Worth, Texas 76103 (the "Edgewood Property" and together with the Lancaster Property, the "Commercial Properties"); and (3) rental real property located at 936 E. Powell Avenue, Fort Worth, Texas 76103 (the "Powell Property" and together with the Commercial Properties, the "Properties").5
At the same time that the Debtor amended her schedule of assets to reflect her asserted community property interest in the Properties, the Debtor also amended her schedule of claimed exemptions.6 Of significance, nowhere within the amended exemptions schedule did she list any of the Properties as exempt property, and at no time thereafter did she ever assert that any of the Properties constituted exempt property. Thus, because the amended schedules facially evidenced that the Properties, or at least the Debtor's asserted interest in the Properties, constituted non-exempt property of the bankruptcy estate subject to administration by the Trustee, the Trustee began to investigate the background of the Properties.
Ultimately, the Trustee learned that the Debtor's husband, Foster, was claiming the Properties as his separate property based upon the fact that they had been acquired in the name of 1st Aid Accident Injury & Pain Center, Inc. ("First Aid"), a corporation that Foster had organized as his wholly-owned business prior to his marriage to the Debtor. With respect to the Debtor'sclaimed interest in the Properties, the Trustee learned that the Debtor was basing her claim of ownership on arguments of First Aid being the mere alter ego of Foster warranting a piercing of the corporate veil of First Aid to make the Properties part of the community property estate.7
Given the complexities associated with the competing claims of ownership to the Properties, the Trustee, with Court approval, engaged SLPC as special counsel to assist the Trustee in further investigating and analyzing the competing claims of ownership and in otherwise addressing matters involving the Properties.8 Hoodenpyle and Shriro are attorneys with SLPC who worked on the engagement.
Following further investigation and analysis, the Trustee discovered, among other things, that First Aid had forfeited its corporate charter roughly eight years prior to the bankruptcy filing - in or about July 2004. Thus, concluding that the forfeiture resulted in the Debtor and Foster each owning and controlling an undivided one-half interest in the Properties because the Properties were acquired in the name of First Aid during the marriage, the Trustee concluded that she had the responsibility and authority to administer the Properties as property of the bankruptcy estate.9 Accordingly, with the assistance of counsel, she began to explore options with respect to monetizing the value of the estate's interest in the Properties.
Following the Trustee's receipt of an offer from an entity affiliated with Foster's mother to purchase the bankruptcy estate's interest in the Properties, the Trustee filed a motion to sell theProperties.10 The Debtor objected to the motion, asserting, among other things, that the disputed ownership rights to the Properties had not yet been determined, that a determination with respect to the division of the marital estate had not yet been made in the Divorce Action, and that approval of the sale to an entity affiliated with Foster's mother was unwarranted given that the proposed sales price was allegedly significantly less than the previously listed valuation of the Properties.11
Following a hearing on the motion, the Court declined to approve the sale for two reasons. First, the Court was concerned that negotiations with respect to the terms of the sale had been predicated on the assumption that the estate held no more than a 50% interest in the Properties, whereas the division of the marital estate in the Divorce Action could conceivably lead to the estate obtaining a greater than 50% interest. Second, the Court was concerned that approval of the sale could have the unintended consequence of effecting a de facto division of the marital estate without the involvement of the Family Court.12
To resolve the ownership dispute with Foster, on May 22, 2014, the Trustee initiated litigation against Foster and First Aid under Adversary Proceeding No. 14-04054 to seek the Court's entry of judgment declaring the Properties to constitute property of the bankruptcy estate and ordering turnover of the Properties to the Trustee (the "Property Ownership Lawsuit").13Foster and First Aid filed a joint answer in opposition.14 Upon the commencement of the Property Ownership Lawsuit, notice of the action and of the Trustee's complaint was provided to, among others, the Debtor by and through her then-counsel of record.15
Separately, the Trustee also filed a plea in intervention in the Divorce Action to put the Family Court on notice of the proceedings in the Bankruptcy Case and to protect what the Trustee believed to be the bankruptcy estate's interest in the...
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