Wells Fargo Bank N.A. v. Johnson et al

Filing 11

MEMORANDUM ORDER- granting 9 MOTION to Remand, ***Civil Case Terminated. Signed by Judge Sue L. Robinson on 4/4/2012. (lih)

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF DELAWARE

WELLS FARGO BANK N.A.,
a national association organized and
existing under the laws of The United
States of America, formerly known as
Wachovia Bank of Delaware, National
Association, a national association
organized and existing under the laws
of The United States of America,

)
)
)
)
)
)
)
)
)

Plaintiff,
v.
JUANITA D. JOHNSON and
STANLEY JOHNSON, SR,
Defendants.

)
)
) Civ. No. 11-1205-SLR
) Del. Super. Civ. No. S11L-10-087
)
)
)
)

MEMORANDUM ORDER

At Wilmington this #day of April, 2012, having considered plaintiffs motion to
remand (0.1. 9);
IT IS ORDERED that the motion is granted and the case is remanded to the
Superior Court of the State of Delaware in and for Sussex County, for the reasons that
follow:
1. Background. Defendants Juanita D. Johnson ("Juanita") and Stanley
Johnson, Sr. ("Stanley") (together "defendants") proceed pro se and have been granted
leave to proceed in forma pauperis. On October 24,2011, plaintiff Wells Fargo Bank,
N.A. (formerly known as Wachovia Bank of Delaware, National Association
("Wachovia")) ("plaintiff') filed an in rem scire facias sur mortgage action, a proceeding
used to foreclose a mortgage, against defendants in the Superior Court of the State of

Delaware ("Superior Court"), Wells Fargo Bank, N.A.

v. Johnson, Del. Super. Civ. No.

S11 L-10-087. (0.1. 10, ex. A); see Gordy v. Preform Bldg. Components, Inc., 310 A.2d
893 (Del. Super. 1973). 'The writ requires the mortgagor to "show cause why judgment
should not be given against him or her for the amount of the mortgage debt with a
special execution for the sale of the mortgaged premises. "' Id. at 894. On December 6,
2011, defendants filed a notice of removal pursuant to 28 U.S.C. §§ 157,1334,1452,
Fed. R. Bankr. P. 9027, and 11 U.S.C. §§ 362 and 365. (0.1. 1) On January 5,2012,
plaintiff filed a motion to remand. (0.1. 9) Defendants did not file a response to the
motion.
2. Removal. Civil proceedings may be removed to federal court under the
authority of 28 U.S.C. § 1452(a) when they fit within the scope of bankruptcy jurisdiction
as defined in 28 U.S.C. § 1334, the jurisdictional statute for bankruptcy cases and
proceedings. See also Fed. R. Bankr. P. 9027. Removal occurs automatically upon
the filing of a timely notice of removal with the appropriate court. Once a proceeding is
removed, § 1452(b) provides authority for it to be remanded back to state court "on any
equitable ground." Id. at § 1452(b).
3. Discussion. On October 7,2009, Juanita and Stanley executed and
delivered to Wachovia a mortgage for the real property at issue in the Superior Court
case. (0.1. 10, ex. A) Juanita and Stanley, who are married, filed separate chapter 7
bankruptcy proceedings in December 2010. Juanita's bankruptcy case, In re Juanita D.
Johnson, Bankruptcy No. 10-14010-BLS (Bankr. D. Del.), closed on April 7, 2011. (See
Johnson, Bankr. No. 10-14010-BLS, at 0.1. 43, 44) She listed the real property at issue

2

as a debt secured by property of the estate, not claimed as exempt, indicated that the
property would be surrendered, and listed the creditor as Wells Fargo/Wachovia. (Id. at

0.1. 20, 21)
4. In Stanley's bankruptcy case, In re Stanley Johnson, Sr., Bankruptcy No. 10­
14011-BLS (Bankr. D. Del.), an order of discharge was entered on April 28, 2011, and
the case closed on May 6, 2011, following entry of an order approving the Trustee's
report of no distribution, abandonment listed thereon, and closing the case. (See
Johnson, Bankr. No. 10-14011-BLS, at 0.1. 35, 37) Stanley's bankruptcy petition lists

as property of his bankruptcy estate the same real property as in Juanita's bankruptcy
petition. (Id. at 0.1. 1) As best as can be discerned, unlike Juanita, Stanley did not list
the real property as a debt secured by property of the estate, claim it as exempt,
indicate that it would be surrendered, or list plaintiff or Wachovia as a creditor of the
property. Stanley's bankruptcy case was reopened on August 31, 2011 to add creditors
who did not file claims. (Id. at 0.1. 47) On October 24,2011, after Stanley's bankruptcy
case had reopened, plaintiff filed the action in Superior Court against defendants.
Stanley's bankruptcy case closed on November 1, 2011. The notice of removal was
filed on December 6,2011 after both bankruptcy cases had closed. In the notice of
removal, defendants refer to Stanley's April 28, 2011 order of discharge and contend
that, in 'filing the Superior Court action, plaintiff violated the Bankruptcy Court's
automatic stay provisions pursuant to 11 U.S.C. §§ 362, 365, and 524(e).
5. Automatic stay. The filing of a bankruptcy petition triggers an automatic stay
pursuant to 11 U.S.C. § 362. All judicial actions against a debtor seeking recovery on a

3

claim that were or could have been brought before commencement of a bankruptcy
case are automatically stayed. Id. at § 362(a). Once triggered, the automatic stay of
an action pending against the debtor in district court "continues until the bankruptcy
case is closed, dismissed, or discharge is granted or denied, or until the bankruptcy
court grants some relief from the stay." Maritime Elec. Co., Inc. v. United Jersey Bank,
959 F.2d 1194, 1206 (3d Cir. 1991) (citing 11 U.S.C. §§ 362(a), (c)(2), (d), (e), (f»).
6. Generally, any action taken in violation of the automatic stay is void ab initio.
Maritime Elec. Co., 959 F.2d at 1206. The Third Circuit, however, has recognized an
exception to that rule and clarified that actions taken in violation of the automatic stay
are voidable, rather than void ab initio, since they are subject to validation through
annulment of the stay pursuant to § 362(d). See In re Siciliano, 13 F.3d 748, 750-51
(3d Cir. 1994). Subsection 362(d) of the Bankruptcy Code authorizes the Bankruptcy
Court to annul the automatic stay and to grant retroactive relief from the stay. See
Picco v. Global Marine Drilling Co., 900 F.2d 846, 850 (5 th Cir. 1990). A court will
generally only grant such relief when the action was taken without knowledge of the
bankruptcy filing, and cause to grant relief from the stay would have otherwise existed.
Id. The court may balance equities to recognize that an action taken in violation of the
automatic stay is voidable when a mere technical violation is involved. See Matthews v.
Rosen, 739 F.29 249 (7th Cir. 1984).
7. Courts have held that bankruptcy courts have the authority to sua sponte
annul the automatic stay. See In re Tara Hills, Inc., 234 F. App'x 432,433 (9th Cir.
2007) (not published) (Bankruptcy courts have the authority to annul retroactively the

4

automatic stay and may do so sua sponte "to prevent an abuse of process."); In re

Mataragas, 1997 WL 777254, at *2 (Bankr. N.D. III. Dec. 18, 1997) ("[T]his court will
use the powers granted under § 105(a) in conjunction with § 362(d) to sua sponte annul
the automatic stay ...."). But see In re Brown, 342 B.R. 248, 255 (Bankr. D. Md. 2006)
(This court has not been asked to grant relief from the automatic stay nunc pro tunc by
annulling the stay and sees no basis to do so sua sponte, particularly when the violation
of the stay occurred with full knowledge of the filing of the bankruptcy case.).
8. In the present case, plaintiff filed its Superior Court proceedings a mere eight
days prior to the second closing of Stanley's case and after Stanley had abandoned the
property of the bankruptcy estate. No further action was taken that could prejudice
Stanley as the debtor. In addition, it does not appear that plaintiff or Wachovia had
notice of Stanley's bankruptcy. Finally, Stanley has alleged no reason, and the court
finds none, to require plaintiff to replead and start its foreclosure anew. Accordingly,
the court exercises is discretion under § 362(d) to annul the automatic stay retroactively
and so validate the plaintiffs October 24, 2011 filing in the Superior Court.
9. Remand. The court now turns to the issues of removal and remand.
Defendants' grounds for removal are related to now closed Chapter 7 bankruptcy
proceedings filed in the United States Bankruptcy Court for the District of Delaware.

(See In re Juanita D. Johnson, Bankr. No. 10-14010-BLS, D.1. 10, ex. B; In re Sanley
Johnson, Sr., Bankr. No. 10-14011-BLS, D.1. 10, ex. C) Defendants contend that
plaintiff is violating the automatic stay. The court has validated the October 24, 2011
filing and, therefore, that issue is moot. Defendants also state that plaintiff harassed

5

them and illegally attempted to collect on the debt and seek damages for intentional
infliction of emotional distress.
10. In its motion for remand, plaintiff refers to 28 U.S.C. § 1441(a) and argues
that defendants have not met their burden for removing the case to this court. Plaintiff
notes that defendants' claims have not been formally pled as a counterclaim and
provide no grounds for removal. In addition, plaintiff argues that the removed case
rests upon Delaware law, is a matter of state law, and cannot be removed to this court.
Plaintiff does not address 28 U.S.C. § 1452, the statute that is the basis for removal of
the case. The court address the statute inasmuch as Stanley's bankruptcy case was
open at the time plaintiff filed the Superior Court proceeding.
11. As discussed, § 1452(b) provides authority for remand on any equitable
ground. Factors considered by the court in determining whether equitable grounds
exist include: (1) the court's duty to decide matters properly before it; (2) plaintiffs
choice of forum as between state and federal courts; (3) whether purely state law
matters which could be better addressed by the state court are involved; (4) prejudice to
involuntarily removed parties; (5) comity considerations; (6) economical and/or
duplicative use of judicial resources; and (7) effect a remand decision would have on
the efficient and economic administration of the estate. Gorse v. Long Neck, Ltd., 107
B.R. 479 (Bankr. D. Del. 1989); see also In re Best, 417 B.R. 259 (Bankr. E.D. Pa.
2009).
12. Mandatory abstention. The Third Circuit Court of Appeals has instructed
that issues surrounding abstention, as set forth 28 U.S.C. § 1334(c), should first be

6

considered prior to application of the more general principles of equitable remand. Stoe

v. Flaherty, 436 F.3d 209, 215 (3d Cir. 2006). Section 1334{c){2) governs whether a
district court must abstain from hearing a case. Id. Once a district court determines
that it either must abstain from hearing a removed case pursuant to 1334{c){2) or
should abstain pursuant to 1334{c)(1)'s permissive abstention provisions, it can
consider whether there is reason for the suit to proceed in state court. Id.
13. Under the mandatory abstention setforth in 28 U.S.C. § 1334{c){2),1 the
court "must abstain if the following five requirements are met: (1) the proceeding is
based on a state law claim or cause of action; (2) the claim or cause of action is 'related
to' a case under title 11, but does not 'arise under' title 11 and does not 'arise in' a case
under title 11, (3) federal courts would not have jurisdiction over the claim but for its
relation to a bankruptcy case; (4) an action 'is commenced' in a state forum of
appropriate jurisdiction; and (5) the action can be 'timely adjudicated' in a state forum of
appropriate jurisdiction." Stoe, 436 F.3d at 213.
14. A claim involving state court foreclosure proceedings of a debtor's property
is a non-core, related proceeding. In re Best, 417 B.R. at 272. Because its outcome
could augment or diminish the debtor's estate, courts have determined that foreclosure
proceedings are related to the bankruptcy case. Id. See also Bevilacqua v.

1Section 1334{c){2) provides that, "[u]pon timely motion of a party in a
proceeding based upon a State law claim or State law cause of action, related to a case
under title 11 but not arising under title 11 or arising in a case under title 11, with
respect to which an action could not have been commenced in a court of the United
States absent jurisdiction under this section, the district court shall abstain from hearing
such proceeding if an action is commenced, and can be timely adjudicated, in a State
forum of appropriate jurisdiction."

7

Bevilacqua, 208 B.R. 11, 16 (Bankr. E.D.N.Y. 1997). Here, the elements of mandatory
abstention have been established. The removed Superior Court action is based on
state law claims and is a cause of action that does not arise under title 11; it appears
that this court would not have jurisdiction over the proceeding but for its relation to the
bankruptcy case; the proceeding is related to Stanley's chapter 7 bankruptcy
proceeding; the Superior Court action was filed after abandonment of the property of
the estate; and there is no indication that the Superior Court cannot timely adjudicate
the matter. Accordingly, the court finds that mandatory abstention of the removed
Superior Court action is appropriate. See In re Best, supra; Cockrell v. Cox, 2008 WL
654272 (S.D. Miss. Feb. 19,2008) (debtor's removed state court complaint seeking,
inter alia, to enjoin mortgagee from foreclosing was subject to mandatory abstention
and remand); In re Mill-Craft Bldg. Sys., Inc., 57 B.R. 531, 535 (Bankr. E.D. WIs. 1986)
(mandatory abstention applied to removed state court foreclosure lawsuit). In addition,
remand is appropriate for equitable reasons even were abstention not mandatory.
15. Equitable grounds. Plaintiff chose the state court as the forum in which to
file its Superior Court action. The foreclosure proceedings are purely state law claims
better addressed by the state court. See In re Abruzzo, 1999 WL 1271761, at *3
(Bankr. E. D. Pa. Dec. 28, 1999) (noting state court has more experience and expertise
than bankruptcy court in foreclosure matters). This court exercised its discretion to
annul the automatic stay in Stanley's bankruptcy case stay and to validate plaintiffs
Superior Court filing. See e.g., In re Borchardt, 56 B.R. 791, 794 (Bankr. D. Minn.
1986) (When the bankruptcy court granted Farmers Bank relief from the automatic stay,

8

that court essentially determined that the state law claim should more appropriately be
brought in state court.). Comity considerations support allowing the Superior Court to
determine a civil action pending before it. Finally, there is no indication that the case
cannot be timely adjudicated in the Superior Court. See generally In re Grace Comty.,
Inc., 262 8.R. 625, 630 (8ankr. E.D. Pa. 2001) (non-core, related matters with no
federal claims must be remanded if the action has been commenced in state court, and
can be timely adjudicated there). For the above reasons, the court finds remand for
,equitable reasons is also appropriate.
16. Conclusion. For the reasons stated above, the court finds no basis for
continued jurisdiction over the foreclosure proceeding and remands the action pursuant
to 28 U.S.C. §1334 and § 1452, so that plaintiff can pursue its action in the Superior
Court. The court grants the motion to remand. (0.1. 9) Wells Fargo Bank, N.A. v.
Johnson, Del. Super. Ct. C.A. No. S11 L-1 0-087 is remanded to the Superior Court of
the State of Delaware in and for Sussex County.2

2To the extent defendants have separate causes of action against plaintiff in this
court, they must file a separate complaint establishing grounds for federal jurisdiction.

9