Centrust Savings Bank v. LoveCentrust Savings Bank v. Love
OPINION ON ATTEMPTED REMOVAL
1. Introduction.
While Mclver was a debtor in bankruptcy court, he was brought into this federal district court action as a third-party defendant. Mclver then tried to remove the case from this court to the bankruptcy court, by filing a notice of removal and declining further to appear. A case is never removed from a United States district сourt to the bankruptcy court.
2. History.
Chatfield Bank made loans to a group of investors on their promissory notes secured by deeds of trust on 88 condominium units. Chatfield Bank assigned these notes to various financial institutions; they are the plaintiffs.
In June 1985, the owners conveyed these condominiums to Mclver, subject to the original debts. That Nоvember, Mclver defaulted on the notes, and he filed under Chapter 11 in the bankruptcy court on November 5, 1985 (85-07238-H1-5). At that time, in this action, the various note holders sued the оriginal condominium owners, who then filed a third-party action against Mclver, alleging he violated the terms of the notes.
The note holders and the unit owners settled in November 1989, and the court entered a partial dismissal without prejudice. As a result, the only claim remaining in this action is the third-party action against Mclver. A motion for summary judgment by the third-party plaintiffs pended. In the face of a hearing notice, Mclver attempted to remove this case to the bankruptcy court by filing a nоtice of removal and failing to appear at the hearing.
3. Bankruptcy Court.
Neither bankruptcy judges nor bankruptcy courts are courts within the judicial power of the United States. U.S. Constitution, Article III;
Northern Pipeline Construction Co. v. Marathon Pipe Line Company,
4. Removal.
A case is removed to the district court, not tо the bankruptcy court, even when there is a bankruptcy action pending. The general removal statute allows a defendant in a state action to rеach the federal district court by the filing of a notice of removal, if the district court has original jurisdiction. 28 U.S.C. § 1441. “[T]he district courts shall have original and exclusive jurisdictiоn of all cases under title 11.” 28 U.S.C. § 1471(a).
The bankruptcy removal statute states: “A party may remove any claim or cause of action [related to a bankruptcy] in a civil action ... to the
district court
for the district where such civil action is pending.” 28 U.S.C. § 1452. Although the courts have not interpreted § 1452 consistently, a notice of removal is nоt the proper procedure for getting an action from the United
If a bankruptcy is pending, the defendant may file an adversary proceeding in the bankruрtcy court “to determine a claim or cause of action removed ... [under] 28 U.S.C. § 1452.” Bankruptcy Rule 7001(10).
The general removal statute and the bankruptcy removal statute allow a defendant to remove a case from state to federal district court when the federal district court has original jurisdiction, but no statute аllows removal directly from a state court to bankruptcy court. The statutes specifically mention removal from state to federal district court, but make no mention of removal to the bankruptcy court.
Helena Chemical Co. v. Manley,
5. Referral.
Because the bankruptcy courts are subordinate operations of the district courts, removal is never proper directly to the bankruptcy court. The district courts have original jurisdiction of the case and can refer them to the bankruptcy courts. Refеrral orders are used by the district court for sending cases to the bankruptcy courts. 28 U.S.C. § 157(a). The referral is not mandatory, and it can be withdrawn by the district court at any time. 28 U.S.C. § 157(d). The district courts also have jurisdiction to hear appeals from orders of bankruptcy courts. 28 U.S.C. § 158(a). The bankruptcy court cannot transfer cases in its jurisdiction to the district court.
Benchic v. Century Entertainment Corp.,
A bankruptcy court decision from this district held that referral from the district court to the bankruptcy court is аutomatic, and that the bankruptcy rules allow for direct removal from state to bankruptcy court.
Engra v. Gabel,
(a) an application for removal shall be filed with the clerk for the district and division within which is located the state ... court where the civil action is pending.
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(e) Motion for remand: unless the district court orders otherwise, a motion for remand shall be heard by the bankruptcy judge, whо shall file a report and recommendation for disposition of the motion.
(f)(1) After removal of a claim or cause of action to a district court the district court or, if the case under the Code has been referred to a bankruptcy judge of the district, the bankruptcy judge, may issue all necessary оrders and process to bring before it all proper parties whether served by process issued by the court from which the claim or cause of actiоn was removed or otherwise.
(2) The district court or, if the case under the Code has been referred to a bankruptcy judge of the district ...
These rules clearly demonstrate that the bankruptcy courts receive cases by referral, never by removal. Like othеr case management orders, the referral is left to the discretion of the district court.
Helena Chemical Co. v. Manley,
The statute talks about a removal filed in the district within which the “state or fеderal court” is located. The word federal is included to allow removal from courts of the United States other than the United States District Court, like the local courts of the District of Columbia or the territori
Section 157(a) provides: “Each district court may provide that any or all cases under title 11 ... shall be referred tо the bankruptcy judges for the district.” This is the equivalent of the standing order presently used in this district to refer cases from the district court to the bankruptcy court. By its very language, the statute is neither mandatory nor automatic. The district courts have exclusive jurisdiction of all cases under title 11. 28 U.S.C. § 1334.
Section 1452 is part of
Chapter 89: Removal of Cases from State Courts.
By its terms, it does not provide for removаl from federal district courts.
Helena Chemical Co. v. Manley,
Prudential concerns also support the conclusion that removal is never proper directly from state court to bankruptcy court. Because bankruptcy courts are units of the district court, the district court is responsible for the administration of the bankruptcy courts. The first step in the administratiоn is for the district court to determine which cases should be adjudicated by the bankruptcy judges. Removal from state court directly to bankruptcy court would give the parties, and not this court, the say on the allocation of cases to bankruptcy. Congress did not enact that result.
6. Conclusion.
Simply put, an attempt to “remove” a case from district court to bankruptcy court is an attempt to remove a case from me to me for me to refer to my adjunct for bankruptcy. No mаtter how bankruptcy lawyers think they may treat state and territorial courts, they must actually appear in federal district court cases to seek relief for their clients; sending a note will not do.