I. Introduction
Thе motions presently before the Court arise out of a series of transactions involving a note and mortgage on residential property, the funds for which were converted by a mortgage banker now in Chapter 11. The substantive dispute centers upon the parties’ respective rights in the note and mortgage relating to the property. Title and interest in the note and mortgage, however, are not at issue in the present motions, and the mortgage banker is not a party to this dispute.
Plaintiff law firm, Saul, Ewing, Remick & Saul (“Saul, Ewing”) sued defendant bank, Provident Savings Bank (“Provident”) in Delaware Chancery Court, alleging various state law causes of action. The defendant, citing 28 U.S.C. § 1334 as the basis for federal jurisdiction, removed the action to federal court, with an eye towards transferring the case to the District of New Jersey, where defendant has pending an Adversary Proceeding against thе mortgage banker in the New Jersey Bankruptcy Court. Plaintiff has filed a motion to remand the action back to the Delaware Chancery Court, arguing, inter alia, that this Court lacks subject matter jurisdiction over the dispute and that the defendant’s removal was untimely. Defendant has opposed this motion and has alternatively filed a motion pursuant to Bankruptcy Rule 9006(b) to extend the time in which to file the removal petition. The motions beforе the Court present the following issues: (1) whether the Court has jurisdiction under 28 U.S.C. § 1334; (2) whether defendant’s petition to remove was timely filed; (3) the propriety of discretionary remand and/or abstention; and (4) whether defendant’s failure to timely petition for removal constitutes excusable neglect.
II. Facts
Before describing the facts which lead up to the present dispute, it is necessary to identify the parties involved in and related to this action. Pinnacle Mortgage Investment Company (“Pinnacle”) is a Pennsylvania corporation, engaged in the business of mortgage banking. Docket Item (“D.I.”) 6 at A-
Under the Loan Agreement, Provident financed Pinnacle’s mortgage loans for the interval of time between Pinnacle’s closing of mortgage loans with the residential borrower and the sale of the closed mortgage loans to investors in the secondary mortgage market, such as FHLMC (“Freddie Mac”). Id. at A-4, A-101. Provident financed the loans by crediting Pinnacle’s account at Provident with the amount of mortgage proceeds by a check made payable to Pinnacle, and Pinnacle, in turn, would draw a check on its account payable to the mortgagor and the closing agent. Id. Provident would be repaid the monies advanced and loaned to Pinnacle plus interest when permanent buyers or investors of each Pinnacle loan purchased the loan and forwarded the funds to Provident. Id. at A-4. The transaction between Pinnacle and Provident was structured in such a way that the note and mortgage, payаble to Pinnacle, were to be endorsed in blank. The note and mortgage were then forwarded to Provident and held as security until such time as the note and mortgage were sold to investors. Id. at A-101.
Ward agreed to act as agent for Provident in connection with the closing for the Bennett Mortgage, which occurred on October 31, 1994. Id. The agency arrangement was created by an Agency Agreement, executed by Ward and Provident, which provided, among other things, that “Provident Savings Bank has been granted a security interest in, among other things, the Note and Mortgage to be executed at the time of settlement.” Id. at A-102. The transaction between Provident and Saul, Ewing turned sour when, unbeknownst to Saul, Ewing, who was relying on Pinnacle’s check, Pinnacle converted the funds for its own use, leaving insufficient funds in its account at Provident to cover the check. Ward completed the closing of the Bennett property and issued checks to third parties. Id. at A-103. Ward made disbursements to the parties by withdrawal from the Saul, Ewing escrow account. 1 Id. The executed note, endorsed in blank, and an assignment of the mortgage were then forwarded to Provident. Id. When Saul, Ewing, after disbursing $150,057.44 of its own escrow funds as Provident’s agent, presented Pinnacle’s cheek drawn on Pinnacle’s account at Provident, Provident refused to honor the check, due to insufficient funds. Id. at A-104. On or about November 2, 1994, after the Bennett closing, Provident filled in its name on the blank endorsement on the note and mortgage, thereby consummating an assignment in its favor. The assignment was then duly recorded with the Chester County Recorder’s Office on November 15, 1994. 2 Id.
On February 2, 1995, at 4:17 p.m., Provident and two other Pinnaсle creditors filed an involuntary petition against Pinnacle in the New Jersey Bankruptcy Court. See In re Pinnacle Mortgage Investment Corp., Case No. 95-10608 (Bankr.D.N.J.). On that same day, at 4:29 p.m., Saul, Ewing filed its complaint against Provident and Pinnacle in Delaware Chancery Court, seeking (1) a preliminary and permanent injunction against Provident from transferring or encumbering the note and mortgage; (2) a declaratory judgment that Saul, Ewing is the rightful holder of the note and mortgage and/or that the note and mortgage are invalid; (3) a declaratory judgment that Provident holds the note and mortgage in constructive trust for the benefit of Saul, Ewing; and (4) damages. See Saul, Ewing, Remick & Saul v. Provident Sav. Bank, C.A. No. 14013 (Del. Ch. Feb. 16, 1995). A copy of the complaint was sent to Provident on or about February 20, 1995, attached as an exhibit to Saul, Ewing’s motion to dismiss the Pennsylvania action. D.I. 5 at 9. Provident formally accepted service of the complaint on March 13, 1995. Id.
Provident then filed an Adversary Proceеding in the New Jersey Bankruptcy Court on March 22,1995, see Provident Sav. Bank. v. Pinnacle Mortgage Investment Corp., Adv. Pro. No. 95-1091 (Bankr.D.N.J.), seeking, inter alia, a declaratory judgment that the note and mortgage are valid. Id. at 9. On April 24, 1995, Ward moved to dismiss the Adversary Proceeding as it pertained to him for lack of subject matter jurisdiction. Id. On June 5, 1995, a hearing was held on Ward’s motion. The court denied the motion, finding that it had subject matter jurisdiction under 28 U.S.C. § 1334.
Meanwhile, Provident failed to respond to the Saul, Ewing complaint in the Delaware action, and Saul, Ewing moved for an entry of default judgment on April 3, 1995. Id. A hearing on the motion was held on April 25, 1995 before the Honorable Myron T. Steele of the Delaware Chancery Court. Id. at 9-10. At oral argument, Vice Chancellor Steele entered an order requiring Provident to file an affidavit explaining why it had failed to respond to the complaint and to file an answer and supporting brief. D.I. 6 at A-153-54. On April 27,1995, Provident filed its petition to remove this action. D.I. 1. Saul, Ewing has moved to remand the action back to the Chancery Court, one of the motions presently before the Court. D.I. 4.
III. Analysis
A. Motion to Remand
Before addressing the issue of whether the Court should grant Saul, Ewing’s motion to remand, the Court must first determine whether it has bankruptcy jurisdiction over the matter in the first instance. The jurisdictional grant to federal district courts over bankruptcy matters is found at 28 U.S.C. § 1334, which provides, in pertinent part:
(a) Except as provided in subsection (b) of this section, the district court shall have original and exclusive jurisdiction of all cases under title 11.
(b) Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or related to cases under title 11.
A bankruptcy court may, by reference from a district court, hear cases arising under title 11 or arising in a case under title 11, including those deemed “core” proceedings as defined at 28 U.S.C. § 157(b). The more frequently litigated issue under § 1334(b), however, and that which is in dispute in the present case, is whether an action is “related to” a case under title 11. The Third Circuit Court of Appeals has formulated a test to determine whether an action is “related tо” a bankruptcy proceeding for the purposes of establishing jurisdiction under 28 U.S.C. § 1334:
The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of that proceeding could conceivably have any effect on the estate being administered in bankruptcy.... An action is related to bankruptcy if the outcome could alter the debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.
Pacor, Inc. v. Higgins,
However, if the civil action pertains to the property of the bankruptcy estate, courts have found “related to” jurisdiction. It is this form of “related to” jurisdiction that Provident seeks to establish. With certain exceptions not relevant here, the only property interests of a debtor that become part of the estate are those that exist at the time of the commencement of the case.
See
11 U.S.C. § 541 revision notes and legislative reports (“The commencement of a bankruptcy case creates an estate.”);
see also In re Bobroff,
This Court is informed by decisions of the Third Circuit Court of Appeals which have addressed the issue
sub judice,
i.e. whether the property before the Court should be deemed part of the Pinnacle bankruptcy estate so as to invoke this Court’s “related to” jurisdiction. Because the bankruptcy estate is created at the moment the petition is filed, the Court must examine when the debtоr first gained or lost its interest in the property in dispute. The Third Circuit Court of Appeals has held that actions pertaining to property acquired
after
the bankruptcy estate has been created does not invoke the “related to” jurisdiction of a district court. In
Bobroff,
The Third Circuit Court of Appeals has also hеld that property which is liquidated before or after the creation of the bankruptcy estate no longer belongs to the estate, and a dispute arising out of such property cannot invoke the “related to” jurisdiction of a district court. In
In re Hall’s Motor Transit Co.,
Central Transit obtained the property from Hall’s in a sale permitted by the bankruptcy trustee and affirmed by the bankruptcy court after the rezoning had occurred. Consequently, the property - passed from Hall’s estate to Cеntral Transit and, moreover, out of the bankruptcy court’s jurisdiction. The bankruptcy court’s jurisdiction does not follow the property, but rather, it lapses when the property leaves the debtor’s estate.
Id.
Similarly, in
Selig,
The Property in issue therefore clearly does not appear to be, to have ever been, or to have any possibility of becoming, property of the Debtors’ estate. Therefore ... the Property is outside of the scope of bankruptcy court jurisdiction. Litigation concerning the Proрerty is, therefore, ... not “related to” the Debtors’ bankruptcy case.
Id. at 245.
As the discussion above indicates, a court has “related to” jurisdiction over property only when the property is part of the bankruptcy estate. Without deciding the parties’ respective interests in the instruments in the case sub judice, it is clear that Provident’s security interest in the blank endorsed note and mortgage ripened into legal title by virtue of the endorsement in its favor and subsequent recordation of the assignment. As of November 15,1994, whatever interest Pinnacle had in the note and mortgage was legally extinguished. The property at stake was therefore not part of the bankruptcy estate at the time the bankruptcy action was commenced, on February 2, 1995. Since the property in dispute was not part of the bankruptcy estate on that date, “related to” jurisdiсtion is lacking.
Provident argues in the alternative that jurisdiction can be found at 28 U.S.C. § 157. Provident argues that § 157(b)(2)(K), determination of the validity, extent and priority of competing liens; § 157(b)(2)(E), proceedings to turn instruments over to court; and § 157(b)(2)(H), transfer of instrument by fraudulent conveyance, are all invoked in this case, and therefore provide the court with jurisdiction as “core” proceedings.
Id.
This argument is without merit. 28 U.S.C. § 157 is not a jurisdictional grant to the district courts, but rаther, an “itemization” of the types of proceedings which constitute “core” proceedings appropriate for resolution by the bankruptcy court. Provident cites no authority for the proposition that the district court’s jurisdiction is established by this list of “core” proceedings. In fact, Bankruptcy Judge Wizmur had previously rejected the
Subdivision (b)(2) of section 157 then contains a non-exclusive, descriptive listing of “core” proceedings. It is this Court’s firm conviction that, although drafted in declaratory form, this subdivision is only descriptive of the types of matters which generally will arise under or arise in a case under title 11.
In re Nanodata Computer Corp.,
In reaching this conclusion, the Court is mindful of the ruling of Judge Wizmur in the Adversary Proceeding in the Bankruptcy Court for the United States District Court for the District of New Jersey. See Provident Sav. Bank. v. Pinnacle Mortgage Investment Corp., Adv.Pro. No. 95-1091 (Bankr.D.N.J.). Judge Wizmur, ruling from the bench on Ward’s Motion to Dismiss the Adversary Proceeding as it pertains to him, found that jurisdiction was proper under 28 U.S.C. § 1334.
Let me agree from the standpoint that I think the resolution of claims, as well as the threshold contention that as a threshold matter the mortgage and note that we’re dealing with here constitutes an interest of the debtor under [11 U.S.C. § ] 541, does offer this court the jurisdictional reach, certainly under Celotex, which adopted the Pacor criteria to adjudicate the matter, from the standpoint of a discretionаry abstention.
Transcript of Proceedings. This Court has reached the opposite conclusion, having had the luxury of time in which to research the issue. As a result, the Court respectfully disagrees with Judge Wizmur. At any rate, this Court, of course, is not bound by a decision of another federal court other than the United States Supreme Court and the Third Circuit Court of Appeals.
B. Motion to Extend Time
The second motion before the Court is Provident’s motion, pursuant to Bankruptcy Rule 9006(b)(1) to extend time to remove the action nunc pro tunc to April 27, 1995. D.I. 9. Because the Court is without bankruptcy jurisdiction, this motion will be dismissed as moot.
IV. Conclusion
Because this action does not relate to the property of a bankruptcy estate, this Court has no jurisdiction under 28 U.S.C. § 1334. Therefore, the case will be remanded to Chancery Court. Provident’s motion to extend time will be dismissed as moot. An order setting forth these conclusions will issue.
Notes
. Counsel for Sаul, Ewing explained at oral argument that the law firm has, in connection with its real estate practice, an escrow account whereby the proceeds for some twenty to twenty-five residential or commercial loans are disbursed to the mortgagors. Funds deposited in this escrow account are not traceable to any particular loan. Thus, the Bennett check was forwarded to Saul, Ewing, deposited in the communal escrow account, and commingled with its contents. When the Bennett check bounced, the money from the Saul, Ewing escrow account had already been paid to third parties, which had the effect of taking money from the account which was designated for some other loan. Saul, Ewing covered the shortfall.
. Saul, Ewing’s complaint in Chancery Court alleges that the assignment was duly recorded
. Judge Wizmur, United States Bankruptcy Judge for the District of New Jersey, heard oral argument on William Ward’s motion to dismiss on June 5, 1995. In re Pinnacle Mortgage Investment Corp., Bankruptcy No. 95-10608 (June 5, 1995). With resрect to Provident's assertion that § 157 confers jurisdiction upon the district court, Judge Wizmur remarked, "Forgetting about [§] 157, which I agree with you doesn't grant jurisdiction, it's merely a procedural recitation of how the bankruptcy court should resolve matters over which it has jurisdiction. We're, of course, guided by 28 U.S.C. § 1334.” Transcript of Proceedings.
. Saul, Ewing also urges this Court to remand pursuant to 28 U.S.C. § 1452(b) and/or abstain from accepting jurisdiction over this dispute pursuant to 28 U.S.C. § 1334(c)(1) and Bankruptcy Rule 5011(b). D.I. 5 at 18. Since the Court finds that jurisdiction is lacking under 28 U.S.C. § 1334 and will remand, it will not reach the abstention or discretionary remand arguments.