Mitchell v. Hohnbaum (In re Achugbue)

• Decision Date: 10 April 2020
• Docket Number: Adversary Proceeding No. 19-03076-dwh,Adversary Proceeding No. 19-03073-dwh,Case No. 10-31819-dwh7,Adversary Proceeding No. 19-03091-dwh,Case No. 10-33531-dwh7,Case No. 10-40926-dwh7
• Parties: In re Molly E. Achugbue, Debtor. Amy Mitchell, chapter 7 trustee for the estate of Molly E. Achugbue, Plaintiff, v. Jason Hohnbaum; Patty Hohnbaum, Sara M. Snyder, fkn Sara M. Cooley; ReconTrust Company, N.A.; and Pacific Residential, Defendants In re Robert Lee Manning, Debtor. Candace E. Amborn, as chapter 7 bankruptcy trustee, and Michael B. Batlan, as chapter 7 bankruptcy trustee, Plaintiffs, v. Alvin H. Peyton; April M. Peyton; ReconTrust Company, nka ReconTrust Company., N.A.; and Eagle Home Mortgage, LLC, Defendants. In re Eliana Rodrigues, Debtor. Amy Mitchell, chapter 7 trustee for the estate of Eliana Rodrigues, Plaintiff, v. Sayan Promwongsa, Pen Promwongsa, Dung Xuan Ngo, Dianna Ngoc Diep Ngo, HSBC Bank USA, N.A., as trustee for Wells Fargo Asset Securities Corporation, Pass-Through Certificate Series 2007-15, Bank of England, and Northwest Trustee Services, Inc., Defendants.
• Court: U.S. Bankruptcy Court — District of Oregon

In re Molly E. Achugbue, Debtor.

Amy Mitchell, chapter 7 trustee for the estate of Molly E. Achugbue, Plaintiff, v. Jason Hohnbaum; Patty Hohnbaum, Sara M. Snyder, fkn Sara M. Cooley;

ReconTrust Company, N.A.; and Pacific Residential, Defendants

In re Robert Lee Manning, Debtor.

Candace E. Amborn, as chapter 7 bankruptcy trustee,and Michael B. Batlan, as chapter 7 bankruptcy trustee, Plaintiffs, v. Alvin H. Peyton; April M. Peyton; ReconTrust Company, nka ReconTrust Company., N.A.;and Eagle Home Mortgage, LLC, Defendants.

In re Eliana Rodrigues, Debtor.

Amy Mitchell, chapter 7 trustee for the estate of Eliana Rodrigues, Plaintiff, v. Sayan Promwongsa, Pen Promwongsa, Dung Xuan Ngo, Dianna Ngoc Diep Ngo, HSBC Bank USA, N.A.,

as trustee for Wells Fargo Asset Securities Corporation, Pass-Through Certificate Series 2007-15, Bank of England,

and Northwest Trustee Services, Inc., Defendants.

Case No. 10-31819-dwh7

Adversary Proceeding No. 19-03073-dwh

Case No. 10-40926-dwh7

Adversary Proceeding No. 19-03076-dwh

Case No. 10-33531-dwh7

Adversary Proceeding No. 19-03091-dwh

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF OREGON

April 10, 2020

Below is an opinion of the court.

Chapter 7

MEMORANDUM DECISION ON EQUITABLE-REMAND MOTIONS

NOT FOR PUBLICATION

I. Introduction

This memorandum explains my decision to grant equitable-remand motions pending in three adversary proceedings. The caption of the first action appears above, and all three captions appear beginning on page 39. I have prepared this single memorandum because the motions raise similar legal issues, and I have held joint hearings in the actions. I refer to each action by the last name of the first-named defendant. Adversary Proceeding No. 19-3073 is Hohnbaum, Adversary Proceeding No. 19-3076 is Peyton, and Adversary Proceeding No. 19-3091 is Promwongsa.

For the reasons that follow—primarily the predominance in these actions of complex and important state-law issues—I will remand these actions to the Multnomah County, Oregon, Circuit Court.

II. Background

The two debtors who had owned the Peyton property, Robert Manning and Cynthia Manning, are in separate chapter 7 cases. The two trustees filed a single state-court action on behalf of both estates. Defendant ReconTrust Company, N.A., removed it twice, once for each of the two main cases. The action related to Robert's case is No. 19-3076, and the action related to Cynthia's case is No. 19-6041. Because the two actions are literally identical, I dismissed No. 19-6041—the second to be filed—with the parties' consent and without prejudice on November 8, 2019.¹ Before No. 19-6041 was dismissed, parties filed several documents in No. 19-6041 but not also in No. 19-3076: docket items 49 (ReconTrust's notice of supplemental authority), 50 (plaintiffs' response to ReconTrust's motion for judgment on the pleadings), 52 (memorandum re notice of supplemental authority), and 54 (plaintiff's response to the motion to dismiss by defendants Alvin and April Peyton). Because the two documents to which the trustees were responding in No. 19-6041 (docket items 32 and 26) are identical to two others in No. 19-3076 (docket items 29 and 25), and the trustees did not otherwise respond in No. 19-3076 to docket items 29 and 25, I will treat docket items 32 and 26 in No. 19-6041 as responsive todocket items 29 and 25 in No. 19-3076. I will also treat the two documents filed by ReconTrust (docket items 49 and 52) as having been filed in No 19-3076.

These three actions raise substantially identical issues of law. The plaintiffs are the trustees of four chapter 7 estates (Peyton involves one property jointly owned by two debtors in separate cases). Each of the cases was closed and then reopened for the filing of the complaints. The trustees filed these actions in state court, and defendants removed them here. These actions are based on state law and arise out of allegedly invalid foreclosures of the debtors' homes in 2009. The trustees seek damages for trespass and statutory damages for filing invalid claims of encumbrance.² They also seek declaratory relief that the bankruptcy estates are the true owners of the properties.³ Defendants have filed motions to dismiss or for judgment on the pleadings, which are under advisement.

The trustees filed equitable-remand motions on November 6, 2019, in Hohnbaum⁴ and Promwongsa.⁵ Defendants filed joint oppositions on December 4, 2019. ⁶ Although no remand motion has been filed in Peyton, the remand issues are nearly identical in each of the three actions, so at the December 6, 2019, hearing,⁷ I raised the question whether to equitably remand Peyton as well on my own motion. At the further hearing on January 3, 2020, the trustees' lawyer said that the absence of a remand motion in Peyton was an oversight. None of the Peytondefendants objected to my consideration whether to remand Peyton, and they had adequate opportunity to oppose remand.

Because I agree that these actions should be equitably remanded, I will take no action on defendants' motions.

III. Legal standards

These actions are within this court's removal jurisdiction under 28 U.S.C. § 1452(a), which permits removal of "any claim or cause of action in a civil action" (with irrelevant exceptions) if it is within the court's jurisdiction under 28 U.S.C. § 1334. Section 1334 in turn gives the court nonexclusive jurisdiction of "civil proceeding arising under title 11, or arising in or related to cases under title 11." As permitted by 28 U.S.C. § 157(a), the district court has referred bankruptcy cases to the district's bankruptcy judges.⁸

Section 1452(b) permits remand "on any equitable ground," meaning any ground that is "reasonable, fair, and appropriate."⁹ To decide whether to equitably remand, courts in the Ninth Circuit often consider the 14 factors listed in In re Cedar Funding, Inc.,¹⁰ a 2009 Ninth Circuit Bankruptcy Appellate Panel case. The first 12 of those factors are traceable to the 1990 Ninth Circuit case, In re Tucson Estates, Inc., applying them to permissive abstention.¹¹

IV. Analysis

A. Cedar Funding factors

1. The effect or lack thereof on the efficient administration of the estate if the court recommends remand

The trustees argue that, because these main cases were reopened only to process these actions, no other estate administration is occurring, so these actions cannot affect efficient estate administration.¹²

Defendants argue that retention, rather than remand, would serve the efficient administration of the estates, for two reasons: it's always more efficient and economical to litigate adversary proceedings in the same venue as the main bankruptcy case; and progress has been made toward resolving these actions during their "long history in federal court."¹³

I interpret this factor to ask whether estate administration would be relatively more or less efficient if these actions are remanded. Whether these actions are resolved here or in state court, the related main bankruptcy cases will remain open pending resolution of these actions, after which the trustees will administer the estates in accordance with bankruptcy law and procedure. The efficiency of that administration will not be affected by whether the resolution of these actions occurs here or in state court.

During the resolution of these actions, the bankruptcy judges presiding over the main cases will periodically monitor the main cases to determine whether the related actions have been concluded, so that the main cases can then also be concluded. I preside over the main cases related to Hohnbaum and Promwongsa and one of the two main cases (Robert Manning's) related to Peyton. Bankruptcy Judge Thomas Renn presides over the other main case related toPeyton (Cynthia Manning's). Monitoring the main cases would be slightly easier for me if these actions were to remain here, because I also preside over these actions, at least until any transfer to district court for trial or consideration of proposed final dispositions. But the difference is minor, because even if I do not continue to preside over these actions, the main-case monitoring takes an immaterial amount of judicial time. Because Judge Renn does not preside over any of these actions, his monitoring of the Cynthia Manning case would not be any easier for him if Peyton remains here.

Cases cited by defendants do not persuade me that remand of these actions would reduce the efficiency of administration of the main bankruptcy cases. The dispute in In re Mercer's Enterprises, Inc., had its roots in the debtor's prior bankruptcy case in the same bankruptcy court, in which the plaintiff bought land from the debtor and obtained an court order giving the plaintiff clear title.¹⁴ By contrast, the trustees' claims in these actions are not based on any events in the main bankruptcy cases other than the filing of the petitions and the appointments of the trustees.

In In re AmericanWest Bancorporation,¹⁵ the defendant in the removed action filed an administrative claim seeking indemnity from the debtor for any liability imposed on the defendant in the action. The indemnity claim exceeded the debtor's total assets. The factual and legal questions presented by the administrative claim overlapped with those in the action. Chapter 11 plan distributions could not begin until the both the action and the administrative claim had been fully determined, preventing distributions to other creditors. Here, by contrast, there are no estate assets other than the trustee's claims in these actions, so the pendency of theseactions is not preventing disbursement of estate assets that could be made had these actions not been brought.

In re Bavelis¹⁶ did not involve equitable remand under section 1452(b). In the context of an adversary proceeding commenced by the chapter 11 debtor (i.e. not removed), the defendants requested remand to state court of a separate action (the "Quick Capital Lawsuit") that had been removed before bankruptcy under the general...