First Investors Financial Services Inc v. Farmer et al

Filing 17

ORDER OF REMAND PURSUANT TO 28 U.S.C. 1452; Case remanded to Douglas County Superior Court; denying as moot 4 MOTION for Order Waiving Plaintiffs Replevin Bond filed by First Investors Financial Services Inc; denying 2 EX PARTE MOTION for Order to Show Cause filed by First Investors Financial Services Inc. Case closed. Signed by Senior Judge Justin L. Quackenbush. (CV, Case Administrator)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF WASHINGTON

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FIRST INVESTORS FINANCIAL
SERVICES, INC.,

)
)
) No. CV-13-0353-JLQ
Plaintiff,
)
vs.
) ORDER OF REMAND PURSUANT
) TO 28 U.S.C. § 1452
)
SEAN N. FARMER and REBECCA
)
L. MALONEY f/k/a REBECCA FARMER, )
)
Defendants.
)
___________________________________ )

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BEFORE THE COURT is Plaintiff First Investors Financial Services, Inc. (“First

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Investors”) Motion for Order to Show Cause (ECF No. 2) and Motion for Order Waiving

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Replevin Bond (ECF No. 4). A telephonic hearing was held on the Motions on

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November 21, 2013. Kimberly Raphaeli appeared for Plaintiff First Investors. Charles

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Steinberg appeared for Defendant Rebecca Maloney. No one appeared on behalf of Sean

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Farmer.

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I. Introduction: Claims and Procedural History

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First Investors filed a Complaint in state court on August 19, 2013, alleging failure

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to pay a debt and seeking to repossess a 2003 GMC Yukon. Notice of Removal was

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filed on October 7, 2013, by counsel for Rebecca Maloney. The Notice represents that

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Sean Farmer consented to the removal, however Mr. Farmer has not appeared in federal

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court, has not filed anything in this case, and did not appear for the hearing. There is a

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return of service on file showing that Sean Farmer was served on September 23, 2013.

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(ECF No. 1-1, p. 36). The Notice of Removal further states that removal is proper

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pursuant to 28 U.S.C. § 1334(e) because the case “involves the administration of

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bankruptcy laws, and enforcement of lawful orders of the Bankruptcy Court.” (ECF No.

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1-1, p. 2).
Rebecca Maloney filed an Answer and Counterclaim (ECF No. 6) on October 28,

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2013.

The Counterclaim asserts that Rebecca’s debt on the GMC Yukon was

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successfully discharged under a three-year Chapter 13 bankruptcy plan and that First

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Investor’s attempts to collect on the discharged debt are illegal and have caused her

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emotional distress. First Investor counters that only Rebecca’s debt was discharged and

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that her husband, Sean Farmer, still owes on the vehicle, has not paid, and First Investor

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is entitled to possession. It is Rebecca’s position that she was awarded the vehicle in

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divorce proceedings in 2009, prior to her filing for bankruptcy in 2010, and that she is

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entitled to possession in addition to damages for wrongful collection attempts.

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II. Discussion

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A. Plaintiff First Investor’s Request for Repossession

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Rebecca argues that a bankruptcy court is allowed to modify a debt and that

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during bankruptcy the amount of First Investors’ secured claim was reduced to

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$9,375, that First Investors failed to object to this valuation, and that she paid off the

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debt and received a discharge. This argument does not address that Sean is co-debtor

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on the vehicle. First Investors argues that “the discharge provisions in bankruptcy do

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not extend or apply to any debt of a former spouse.” (ECF No. 11, p. 5). First

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Investors has filed 2013 Washington state vehicle licensing information which shows

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Sean and Rebecca as registered owners and First Investors as the legal owner. (ECF

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No. 12). First Investors concedes that it “is legally prohibited from collecting the

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debt against [Rebecca] Maloney,” but argues it is not so prohibited from collecting

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the debt from Sean Farmer. (ECF No. 11, p. 6).

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First Investors cites to three Washington state opinions in support of the

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argument that Sean remains liable for the debt. In Arneson v. Arneson, 38 Wash.2d

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99, 101 (1951), the Washington Supreme Court stated that creditors of the spouses

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are not parties to a divorce proceeding and “[i]t would appear elementary then, that

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there is no due process of law in a divorce action as to the rights of creditors of the

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spouses. The judgment can neither conclusively determine their rights, nor be made

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available on their behalf as a basis for any of the provisional remedies.”

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Similarly, in In re Marriage of Bobbitt, 135 Wash.App. 8 (2006), the court

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found that even when one party is awarded property in a dissolution decree, the other

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spouse may remain liable for the debt. The court stated, “Consistent with

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Washington law, even though the liability for the mortgage was assigned to Bobbitt,

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Esser was still subject to the mortgage owed the third-party community creditor,

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namely the mortgage holder.” Id. at 17. The court then cites a family law treatise

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which states: “distribution of community property to the spouses does not prevent a

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community creditor from pursuing the former community property in the hands of

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either spouse. From the perspective of the creditor it makes no difference that the

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decree which terminated the marriage allocated the debt to be paid by one spouse or

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the other.” Id. citing Kenneth W. Weber, Washington Practice: Family and

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Community Property Law § 14.11.

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Under the divorce decree, liability for the GMC Yukon was assigned to

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Rebecca. The community’s liability for the GMC Yukon debt was assigned to

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Rebecca, with the notation that “Sean is to have no financial obligation on this debt,

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and his name is to removed from the vehicle title AND loan upon issuance fo the

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Final Divorce Decree.” (ECF No. 29, p. 11). However, it does not appear that his

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name was removed from the vehicle title or loan. Rebecca and Sean were divorced at

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the time Rebecca filed for bankruptcy, and Sean did not receive a discharge in

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bankruptcy. Rebecca did file for bankruptcy and proposed a Chapter 13 bankruptcy

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plan in which the secured amount of First Investors’ loan was reduced to $9,375. She

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then timely made payments for three years to pay off that amount. The “fresh start”

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policy underlying the bankruptcy laws would be defeated if First Investors was able

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to repossess the vehicle from Rebecca after failing to object to the modification of the

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debt by the bankruptcy court and accepting the modified payments for three years.

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“Bankruptcy relief attempts to provide the debtor with a fresh start unhampered by

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the pressure and discouragement of preexisting debt.” In re Marriage of Myers, 54

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Wash.App. 233, 236 (1989).

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Rebecca is currently in possession of the vehicle. She received a discharge in

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bankruptcy. The court does not find, as to Rebecca, that First Investors is entitled to

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possession of the vehicle. Accordingly, First Investors’ Motion for Order to Show

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Cause (ECF No. 2) which seeks an order putting First Investors in immediate

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possession of the vehicle is DENIED. First Investors’ Motion for Order Waiving

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Replevin Bond (ECF No. 4) is DENIED AS MOOT.

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B. Remand

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This action was removed pursuant to 28 U.S.C. § 1334. Federal courts have

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original jurisdiction over cases which are related to bankruptcy proceedings. In re

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Schwartz, 2012 WL 899331 (N.D.Cal. 2012). Under this ‘related to’ test,

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“jurisdiction exists over any case where the outcome could conceivably have any

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effect on the estate being administered in bankruptcy.” Id. citing In re Pegasus Gold

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Corp., 394 F.3d 1189, 1193 (9th Cir. 2005). Additionally, Rebecca invoked Section

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1334(e) for this removal, and contends that this court has jurisdiction as the claim

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involves the property of the bankruptcy estate, namely the 2003 GMC Yukon.

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The United States Code, Title 28, Section 1452 provides in relevant part that

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claims related to bankruptcy and removed under Section 1334 may be remanded on

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equitable grounds. Specifically: “The court to which such claim or cause of action is

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removed may remand such claim or cause of action on any equitable ground.” 28

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U.S.C. § 1452(b). Case law has identified several factors as relevant in determining

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whether to remand under Section 1452: 1) the effect of the action on the

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administration of the bankruptcy estate; 2) the extent to which the issues of state law

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predominate; 3) the difficulty of applicable state law; 4) comity; 5) the relatedness or

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remoteness of the action to the bankruptcy case; 6) the existence of right to a jury

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trial; and 7) prejudice to the party involuntarily removed from state court. Parke v.

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Cardsystems Solutions, 2006 WL 2917604 (N.D. Cal. 2006). Having considered

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those factors, this court finds remand in this case is appropriate as the state courts are

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better suited to determine whether First Investors can collect any remaining

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obligation on the GMC Yukon from Sean, and can determine the effect of the state

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dissolution of marriage proceeding.

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IT IS HEREBY ORDERED:

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1. First Investors’ Motion for Order to Show Cause (ECF No. 2) which seeks

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an order putting First Investors in immediate possession of the vehicle is DENIED.

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2. First Investors’ Motion for Order Waiving Replevin Bond (ECF No. 4) is

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DENIED AS MOOT.
3. The Scheduling Conference set for December 19, 2013, is HEREBY
VACATED.
4. This action is REMANDED to the Superior Court of Douglas County for

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all further proceedings pursuant to 28 U.S.C. § 1452. The Clerk of this court is

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directed to mail a certified copy of this Order to the Clerk of the Superior Court of

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Douglas County.

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IT IS SO ORDERED. The Clerk is directed to enter this Order, furnish copies
to counsel, and close this file.
Dated December 11, 2013.
s/ Justin L. Quackenbush
JUSTIN L. QUACKENBUSH
SENIOR UNITED STATES DISTRICT JUDGE

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