Garner v. Bankplus, Civil Action No. 3:11CV515TSL–MTP.

470 B.R. 402

Albert R. GARNER, Sigrid Garner, Thomas I. Garner, R & S Developers, LLC, RTC Properties, LLC, MGR Construction, LLC, Pavilion Properties, LLC, Storage Zone of Jackson, LLC, and Storage Zone of Florence, LLC, Plaintiff,

v.BANKPLUS, Defendant.

Civil Action No. 3:11CV515TSL–MTP.

United States District Court,

S.D. Mississippi,

Jackson Division.

Feb. 29, 2012.

David W. Baria, Marcie Fyke Baria, Baria Law Firm, PLLC, Bay St. Louis, MS, Richard A. Montague, Jr., Wells, Moore, Simmons, Edwards & Wilbanks, PLLC, Robert C. Williamson, Jr., Baria–Williamson, PLLC, Jackson, MS, for Plaintiff(s) or Petitioner(s).

Sarah Elizabeth Wilson, Christopher H. Meredith, Daniel Elwood Ruhl, William H. Leech, Copeland, Cook, Taylor & Bush, Ridgeland, MS, for Defendant(s) or Respondent(s).

MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

This cause is before the court on the motion of plaintiffs Albert R. Garner, Sigrid Garner, Thomas I. Garner, R & S Developers, LLC, RTC Properties, LLC, MGR Construction, LLC, Pavilion Properties, LLC, Storage Zone of Jackson, LLC, and Storage Zone of Jackson to abstain and remand.¹ Defendant BankPlus has responded in opposition to the motion and the court, having considered the memoranda of authorities, together with attachments, submitted by the parties, concludes that plaintiffs' motion to abstain and remand should be granted.

Plaintiffs commenced the present action in the Circuit Court of Hinds County, Mississippi on July 26, 2011, asserting state law claims against BankPlus for breach of contract, misrepresentation, estoppel and injunctive relief, all centered on their allegation that BankPlus reneged on a loan restructuring agreement entered into with plaintiffs. More specifically, plaintiffs alleged that in July 2010, BankPlus represented and committed to plaintiffs to renew, extend, re-amortize and reduce the interest rate on some seventeen outstanding loans to the various Garner businesses and the Garner family, yet the Bank did not restructure the loans as represented and instead filed suit in state court seeking to recover on the loans and initiated foreclosure of certain real property that was collateral for the loans. Plaintiffs herein seek to estop the Bank from enforcing the loans “other than in accordance with the Bank's representations, promises and commitments”; to enjoin the Bank from foreclosing on the collateral since, plaintiffs allege, they are not in default under the terms of their agreements, as modified; a declaratory judgment as to the parties' rights and responsibilities under the loan documents, as restructured; and damages allegedly incurred as a result of the Bank's breach of contract or due to their reliance on its misrepresentations.

On August 8, 2011, two weeks after this suit was filed, one of the plaintiffs, RTC Properties, filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Southern District of Mississippi, Case No. 11–02754–ee. BankPlus promptly removed the case to this court on the basis of bankruptcy jurisdiction pursuant to 28 U.S.C. § 1334, following which plaintiffs filed their present motion requesting that the court abstain from hearing the case and remand it to state court. Subsequent to completion of briefing on the motion, the court has been informed that four additional plaintiffs—Pavilion Properties and the three individual plaintiffs—have filed for bankruptcy protection in the Mississippi Southern District Bankruptcy Court, in Case Nos. 11–03994–ee, 12–00171–ee and 12–00170–ee, respectively. ²

In their motion, plaintiffs acknowledge that pursuant to 28 U.S.C. § 1334, the case was properly removed and that this court has jurisdiction as the case is “related to” the referenced bankruptcy cases.³See28 U.S.C. § 1334(providing “the district court shall have original and exclusive jurisdiction of all cases under title 11,” and “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”); Feld v. Zale Corp., 62 F.3d 746, 752 (5th Cir.1995) (“[A]n 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 ... in any way impacts upon the administration of the bankrupt estate.”) (citations omitted). However, they argue that this court must abstain pursuant to § 1334(c)(2), which states:

Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction.

They request alternatively discretionary abstention and/or equitable remand pursuant to 28 U.S.C. § 1334(c)(1) or 28 U.S.C. § 1452(b), respectively. ⁴

For mandatory abstention to apply under § 1334(c)(2), the following conditions must exist: (1) a motion has been timely filed requesting abstention; (2) the cause of action is essentially one that is premised on state law; (3) the proceeding is non-core or related to the bankruptcy case; (4) the proceeding could not otherwise have been commenced in federal court absent the existence of the bankruptcy case; and (5) the proceeding has already been commenced and can be timely adjudicated in a state court forum. Williamson v. Central Mississippi Med. Ctr., Civ. Action No. 3:06CV201LS, 2006 WL 2043029, *1–2 (S.D.Miss. July 20, 2006). Plaintiffs submit that each of these conditions is present, and that the court must therefore abstain and remand. For its part, BankPlus does not dispute that plaintiffs timely moved for abstention, that their causes of action are premised on state law, and that this case could not have been commenced in this court absent the existence of plaintiffs' bankruptcy cases. However, it maintains that mandatory abstention does not apply both because plaintiffs' claims against it constitute core proceedings, and because plaintiffs have not established that the action can be timely adjudicated in state court. The court rejects that latter contention, as it has no reason to believe that upon remand, the cause will not be handled in a timely manner. Moreover, the court concludes that plaintiffs' claims do not constitute core proceedings.

Pursuant to 28 U.S.C. § 157(b)(1), “[b]ankruptcy judges may hear and determine all cases under title 11 and all core proceedings arising under title 11, or arising in a case under title 11 ... and may enter appropriate orders and judgments.” Although the statute does not define “core proceedings,” the Fifth Circuit has interpreted the statute as equating core proceedings with the categories of “arising under” and “arising in” proceedings. Matter of Wood, 825 F.2d 90, 97 (5th Cir.1987). It has in turn read the phrase “arising under title 11” to describe those proceedings that “invoke[ ] a substantive right provided by title 11,” and the phrase “arising in” as describing matters “that could arise only in bankruptcy.” Id. Thus, “a proceeding is core under section 157 if it invokes a substantive right provided by title 11 or if it is a proceeding that, by its nature, could arise only in the context of a bankruptcy case.” Id. “If the proceeding does not invoke a substantive right created by the federal bankruptcy law and is one that could exist outside of bankruptcy it is not a core proceeding; it may be related to the bankruptcy because of its potential effect, but ... it is [a] non-core proceeding.” Id.

Subsection (b)(2) provides a list of sixteen categories of “arising under” and “arising in” proceedings, some specific and others more general. See Stern v. Marshall, ––– U.S. ––––, 131 S.Ct. 2594, 2605, 180 L.Ed.2d 475 (2011) (holding that “core proceedings are those that arise in a bankruptcy case or under Title 11[,]” and explaining that “[t]he detailed list of core proceedings in § 157(b)(2) provides courts with ready examples of such matters.”). BankPlus submits that two of the general categories apply here, namely, § 157(b)(2)(A), which includes “matters concerning the administration of the estate,” and 157(b)(2)(O), which includes “other proceedings affecting ... the adjustment of the debtor-creditor relationship.” ⁵ BankPlus reasons that this case concerns the administration of the debtors' bankruptcy estates, first, because the debtors' causes of action herein are property of their bankruptcy estates, and second, because plaintiffs' complaint seeks enforcement of an alleged modification of loans as to which BankPlus is a creditor in the bankruptcy proceedings, or put another way, because the plaintiffs are suing in this case to modify obligations that are involved in the pending bankruptcies. BankPlus further submits that since plaintiffs seek herein a restructuring of their loan obligations, then their claims fit within subsection (O) as they seek to affect “the adjustment of the debtor-creditor relationship.”

The Fifth Circuit has cautioned against a broad reading of these “catch-all” provisions; “otherwise, the entire range of proceedings under bankruptcy jurisdiction”—including claims that qualify as merely “related to” the bankruptcy case—“would fall within the scope of core proceedings,” a result contrary to the purpose of the 1984 Bankruptcy Act. Wood, 825 F.2d at 95.⁶See also In re Doctors Hosp.1997, L.P., 351 B.R. 813, 844 (Bkrtcy.S.D.Tex.2006) (stating that Fifth Circuit “warns against a broad interpretation of § 157(b)(2)(O) and prefers to deem a proceeding as core under the more specific examples rather than fitting a particular proceeding into the catch-all language of subsections (b)(2)(A) and (b)(2)(O)”...