585 B.R. 630
Bankr. N.D. Ga.2018Background
- Debtor Linda P. Manton and her husband allegedly transferred three parcels and $15,478.04 to Manton Family Partnership and its general partner TLM for no consideration while indebted to First Bank of Dalton.
- First Bank sued in Georgia superior court (fraudulent conveyance and related claims); superior court entered default judgment against non-debtor defendants on well‑pleaded allegations; damages to be determined.
- Debtor filed Chapter 7 on March 13, 2017 and received discharge July 19, 2017; on August 3, 2017 Debtor removed the state action to bankruptcy court under 28 U.S.C. §§ 1334, 1452 and FRBP 9027.
- Chapter 7 Trustee moved to intervene and be substituted as plaintiff (real party in interest); Defendants joined that motion and sought substitution and other relief; First Bank moved to remand and/or abstain.
- The bankruptcy court granted Trustee intervention, substituted Trustee as the real party in interest (exclusive authority under §§ 544/548 to prosecute fraudulent-transfer claims), and denied Plaintiff’s motion to remand, concluding removal was timely and the matter is a core proceeding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing to remove | Debtor lacked authority to remove because only Trustee may prosecute fraudulent-transfer claims | Debtor as a party may remove under § 1452; Trustee later seeks intervention | Debtor had standing to remove; §1452 permits any party to remove and Trustee may intervene |
| Timeliness of removal (FRBP 9027) | Removal untimely because 90-day period expired and claims vs. non‑debtors were not stayed | Removal timely under 9027(a)(2)(B) because the state action was stayed by § 362 and 30‑day clock had not run | Removal was timely—automatic stay applied to all defendants and/ or 30‑day period had not begun to run |
| Scope of stay (§ 362) | Claims against non‑debtors not stayed; precedents re: guarantors/co‑defendants control | Fraudulent‑transfer relief seeks estate property; §541/§550 makes transferred property estate property so stay applies | §362 stayed the fraudulent‑conveyance action as to all defendants because recovery targets estate property |
| Abstention / Remand (§ 1334(c) / § 1452(b)) | Court should (or must) abstain and remand because action is state law, non‑core, predominance of state issues, comity | Action is core (fraudulent conveyance is listed in §157(b)(2) and invokes trustee’s §544 right); equitable and permissive abstention weigh against remand | Court held action is core, arises under Title 11, abstention and equitable remand denied; Motion to Remand denied |
Key Cases Cited
- Highland Capital Mgmt. LP v. Chesapeake Energy Corp., 522 F.3d 575 (5th Cir.) (fraudulent‑transfer recoveries are estate property)
- Am. Nat'l Bank of Austin v. MortgageAmerica Corp., 714 F.2d 1266 (5th Cir.) (trustee’s authority to prosecute avoidance actions)
- Deutsche Bank Trust Co. Ams. v. Large Private Beneficial Owners (In re Tribune Co. Fraudulent Conveyance Litig.), 818 F.3d 98 (2d Cir.) (collecting authority that trustee has exclusive power to avoid transfers)
- City of Farmers Branch v. Pointer (In re Pointer), 952 F.2d 82 (5th Cir.) (trustee’s avoidance powers and related principles)
- Wood v. Wood (In re Wood), 825 F.2d 90 (5th Cir.) (two‑step test for core proceedings)
- Stern v. Marshall, 564 U.S. 462 (U.S.) (limits on bankruptcy court authority over certain state‑law claims)
- Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (U.S.) (constitutional limits on non‑Article III adjudication)
- Continental Nat'l Bank v. Sanchez (In re Toledo), 170 F.3d 1340 (11th Cir.) (bankruptcy jurisdiction/core analysis)