Renascent, Inc. v. Countrywide Home Loans, Inc. et al

Filing 5

ORDER denying 1 Motion to Withdraw Reference. Signed by Judge Dana L. Christensen on 5/31/2012. (dle) Modified on 5/31/2012 mailed to counsel Elizabeth Ries-Simpson (BAW, ).

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MONTANA
MISSOULA DIVISION
In Re:

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RENASCENT, INC.,
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Debtor.
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RENASCENT, INC.,
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Plaintiff,
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vs.
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COUNTRYWIDE HOME LOANS, INC.; )
BAC LOAN SERVICING LP f/k/a
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COUNTRYWIDE HOME LOANS
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CV 12-58-M-DLC

Bankruptcy Case No. 1062358-11
Adversary Case No. 11-00045

ORDER

SERVICING LP; THORNBURG
MORTGAGE SECURITIES TRUST
2007-3; THORNBURG MORTGAGE
SECURITIES TRUST 2006-6;
RECONTRUST COMPANY NA;
MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS INC.;
MARIE KEETON, the Ravalli, Montana
County Treasurer, and any or all persons,
known or unknown, claiming or who might
claim any right, title, estate, or interest in or
lien or encumbrance upon the real property
described in the Complaint adverse to
Plaintiffs’ ownership or any cloud upon
Plaintiffs’ title, whether the claim or
possible claim be present or contingent,

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Defendants.
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___________________________________ )
Renascent, Inc., is the Debtor in Bankruptcy Case No. 10-62358-11, filed in
the United States Bankruptcy Court for the District of Montana. Renascent, Inc.,
is also the Plaintiff in an adversary proceeding filed in the bankruptcy action under
Bankruptcy Adversary Case No. 11-00045. The adversary proceeding alleges a
state statutory quiet title action as well as state common law claims. Because such
claims constitute core proceedings under 28 U.S.C. § 157(b)(2)(B), the adversary
proceeding is referred to United States Bankruptcy Judge Ralph B. Kirscher
pursuant to Standing Order No. 12 (Revised) of the United States District Court
for the District of Montana. Within the bankruptcy case, the adversary proceeding
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has been consolidated with Debtor’s Objection to Proof of Claim No. 11, which
raises similar legal issues.
Several of the Defendants in Adversary Case No. 11-00045 have filed a
motion to withdraw the referral of that adversary proceeding, as well as the
consolidated Debtor’s Objection to Proof of Claim No. 11, under 28 U.S.C. §
157(d). No party opposes the motion. The basis for the motion is the United
States Supreme Court’s decision in Stern v. Marshall, ___ U.S. ___, 131 S.Ct.
2594, 2620 (2011), in which the Court held that while a bankruptcy court is vested
with the statutory authority to enter final judgment on a state law counterclaim
which would not necessarily need to be resolved as part of the claims allowance
process, it lacks the constitutional authority to do so, as such a function is limited
to those judges vested with the judicial power of the United States under Article
III of the United States Constitution.
The Defendants argue this Court should withdraw the reference because
under Stern the bankruptcy court is constitutionally prohibited from issuing a final
judgment, and because there is no statutory authority allowing a bankruptcy judge
to issue a report and recommendation in lieu of entering a final judgment. The
Court is not persuaded that withdrawal of the reference is appropriate at this stage.
The holding in Stern may well apply to the adversary proceeding here, but that
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determination should be made by Judge Kirscher in the first instance. Moreover,
as United States District Judge Donald W. Molloy explained in Blixseth v. Brown,
2012 WL 691598, Stern does not prohibit a bankruptcy court from issuing
proposed findings of fact and conclusions of law on a core proceeding that must
be adjudicated by an Article III judge. Id. at *7-*8. This Court does not share the
Defendants’ view that it would be a waste of the Court’s and the parties’ resources
to allow the adversary proceeding to go forward in the bankruptcy court. As
Judge Molloy noted, such a procedure is of great benefit to the Article III judge
given the specialized knowledge of the bankruptcy court and its familiarity with
the facts of the case before it. Id. at *8.
Accordingly, IT IS HEREBY ORDERED that the motion to withdraw the
reference (Doc. No. 1) is DENIED.
The Clerk of Court is directed to notify the parties and the United States
Bankruptcy Court of the entry of this Order.
DATED this 31st day of May, 2012.

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