Wolfe v. Greentree Mortgage Corp., 2010 U.S. Dist. LEXIS 6005 (N.D. W. Va. Jan. 26, 2010)

Wolfe v. Greentree Mortgage Corp., 2010 U.S. Dist. LEXIS 6005 (N.D. W. Va. Jan. 26, 2010)

This Emerging Issues Analysis considers a district court's decision that lays out the rules and standards for mandatory and equitable abstention. In the analyzed decision, mandatory abstention was not applicable because the action was a core proceeding and there was an adequate alternative basis for jurisdiction. And equitable abstention was not necessary given that the core proceeding would have a substantial effect on the bankruptcy estate.

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The author writes:

In Wolfe v. Greentree Mortgage Corporation, 2010 U.S. Dist. LEXIS 6005 (N.D. W.Va. Jan. 26, 2010), the district court considered whether to continue exercising jurisdiction over an action commenced in state court but removed to the bankruptcy court, and subsequently to the district court, under 28 U.S.C. § 1452. After determining that the Debtor's lawsuit was a core proceeding, the district court held that mandatory abstention was not required by 28 U.S.C. § 1334(c). The district court further held that mandatory abstention was not necessary when there was an adequate basis for asserting jurisdiction due to diversity of the parties. Finally, the district court balanced various factors and determined that equitable abstention was unwarranted where the lawsuit would have a large effect on the Debtor's bankruptcy estate.

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The district court's holding in Wolfe is noteworthy in that it addresses the process for determining whether an action should be remanded to state court. After applying the statutory requirements to the case at hand, the district court found that mandatory abstention was not applicable for two reasons: (1) the action was a core proceeding; and (2) there was an adequate alternative basis for jurisdiction. With mandatory abstention no longer an option, the district court determined that equitable abstention was not necessary given that the core proceeding would have a substantial effect on the bankruptcy estate.

The Action Is a Core Proceeding. Section 157(b)(2) of title 28 provides that core proceedings include, but are not limited to: (A) matters concerning the administration of the estate; (K) determination of the validity, extent, or priority of liens; and (O) other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims. Because the Debtor sought, in large part, to invalidate the lien of the deed of trust, the district court found that the action fell squarely within 28 U.S.C. § 157(b)(2)(K). The district court based this conclusion on In re Smith, 300 B.R. 828, 829-30 (Bankr. M.D. Ga. 2003), which held that an action to determine the validity of a lien on real property is a core proceeding:

If Plaintiff's lien against the real estate is subject to rescission, the trustee may have a valuable asset to administer. 28 U.S.C. § 157(b)(2)(A), (K) (core proceedings include matters concerning administration of the estate and determinations of the validity, extent, or priority of liens). The Court therefore must conclude that Debtor's adversary proceeding is a core proceeding in Defendant's bankruptcy case.

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