IN RE MARSTON, (Bankr.E.D.Va. 1999)

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In re: GLENN ALAN MARSTON JOANNE M. MARSTON, Chapter 7, Debtors MANUFACTURED HOME COMMUNITIES, INC., Plaintiff vs. GLENN MARSTON, Defendant, (Removed from Fairfax County General District Court, Civil 98-33268)

Case No. 97-17400-SSM, Adversary Proceeding No. 98-1471United States Bankruptcy Court, E.D. Virginia
January 8, 1999

Glenn A. Marston, Esquire, Chantilly, VA, for Defendant

Robert Rae Gordon, Esquire, Gordon Pesner, LC, McLean, VA, of Counsel for the plaintiff

MEMORANDUM OPINION
STEPHEN MITCHELL, Bankruptcy Judge

A hearing was held in open court on January 8, 1998, to determine whether this action should be remanded to the General District Court of Fairfax County, Virginia, from which it was removed by the defendant. The plaintiff was present by counsel. The defendant was present and represented himself. The court ruled from the bench that the action would be remanded. The purpose of this memorandum opinion is to set forth in greater detail the basis for the court’s ruling.

Background
This is an unlawful detainer action which was commenced by Manufactured Home Communities, Inc. (“MHC”), in the General District Court of Fairfax County, Virginia, on

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December 1, 1998, to recover possession of a mobile home lot located at 14506 Lake Central Drive, Chantilly, Virginia, together with $470.00 rent for the month of November, 1998, late fees of $20, and reasonable attorneys fees, based on breach of a written lease agreement. On December 17, 1998 — the day prior to the return date — the defendant, Glenn Marston (“the debtor”), filed in this court a notice of removal. Upon review of the removal papers, this court — concerned over the apparent lack of subject-matter jurisdiction — set a hearing on its own motion to consider whether the action should be remanded to the state court.

The debtor and his wife, Joanne Margaret Marston, filed a voluntary petition under chapter 7 of the Bankruptcy Code in this court on October 6, 1997. The chapter 7 trustee filed a report of no distribution on November 7, 1997, and the debtors received a discharge of their dischargeable debts on January 16, 1998. The case has not yet been closed, however, because of an unrelated adversary proceeding to determine the dischargeabilty of student loan debts.

On their schedules, debtors listed an unexpired lease with MHC but did not include MHC on the list of creditors to receive notice. According to Mr. Marston, the landlord was not listed because it was not his “specific intent” at that time to discharge the lease. Mr. Marston has continued to occupy the property since his bankruptcy filing and, until November 1998, to pay rent in the amount stipulated in the lease. It was represented at oral argument that the lease was signed in 1996 and was for an initial term of one year, with automatic renewal for additional one-year terms unless 60 days notice was given of an intent not to renew. An exhibit to the notice of removal reflects that the current lease term expired on December 31, 1998, and that MHC had given Mr. Marston the required notice of its intent not

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to renew. Another exhibit reflects that “Meadows of Chantilly,”[1] as lessor, mailed or delivered to Mr. Marston a five-day notice to quit or pay rent on November 9, 1998.

Discussion A.
As an initial matter, it is far from clear what statutory authority the debtor relies on for removal. The notice of removal cites to 28 U.S.C. § 1446 and 1334. Section 1334 is the general bankruptcy jurisdiction statute and does not address removal. Section 1446 specifies th procedure to be followed for removal of cases from state to federal court under 28 U.S.C. § 1441, 1442, 1442a, 1443, and 1444, but does not itself create a right of removal. Of the specific statutes just cited, only 28 U.S.C. § 1441 — the general federal removal statute — would appear to be applicable.[2] However, removal under Section 1441 requires that federal question jurisdiction be apparent on the face of a properly-pleaded complaint; it is not sufficient that a removing defendant intends to rely on a federally-created right to defeat that claim. Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 118 S.Ct. 921, 139 L.Ed.2d 912 (1998) (prior bankruptcy court orders authorizing sale of property free and clear of liens did

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not permit the purchaser, who was subsequently made a defendant in a mortgage foreclosure action, to remove it to federal court under Section 1441). The unlawful detainer warrant does not on its face state a claim with respect to which a Federal district court would have original jurisdiction, nor does it state a claim arising under the Constitution, laws, or treaties of the United States. While the notice of removal does state that the debtor intends to rely on various provisions of the Bankruptcy Code as a defense to the action, Rivet is clear that the existence of such a defense is not sufficient to allow removal under 28 U.S.C. § 1441.

B.
Although not cited by the debtor, 28 U.S.C. § 1452 permits an action to which a bankruptcy debtor is a party to be removed from state to Federal court if the Federal court would have subject matter jurisdiction of the claim under 28 U.S.C. § 1334. Section 1334 in turn confers on the Federal courts jurisdiction over bankruptcy “cases,” civil proceedings “arising under” the Bankruptcy Code, civil proceedings “arising in” a bankruptcy case, and civil proceedings “related to” a bankruptcy case. Although the jurisdictional grant of Section 1334 is comprehensive, it is not unlimited. As Chief Judge Bostetter of this court has cautioned,

Like other federal courts, bankruptcy courts are courts of limited jurisdiction, and as such, they “must be alert to avoid overstepping their limited grants of jurisdiction.”

Poplar Run Five L.P. v. Virginia Electric Power Co. (In re Poplar Run Five L.P., 192 B.R. 848, 854-55 (Bankr. E.D. Va. 1995) (internal citations omitted)).

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The debtor concedes in his notice of removal that the unlawful detainer action, being “non-core,” neither “arises under” the Bankruptcy Code nor “arises in” a bankruptcy case.[3] He does assert, however, that it is “related to” his bankruptcy case because of his intent to rely on a bankruptcy-derived defense to MHC’s claim for possession, rent, and attorney’s fees. The Fourth Circuit has explained that the “related to” category of proceedings is “quite broad and includes proceedings in which the outcome could have an effect upon the estate being administered[.]”Bergstrom v. Dalkon Shield Claimants Trust (In re A. H. Robins Co., Inc.), 86 F.3d 364, 372 (4th Cir. 1996), cert. denied 117
S.Ct. 483, 136 L.Ed.2d 377 (1996), citing Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984) (“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.”)[4] Nevertheless, the “related to” category is not so broad as to encompass litigation of state law claims that will not have an effect on the bankruptcy estate, simply because one of the litigants has filed a petition in bankruptcy. Lux v. Spotswood Construction Loans, 176 B.R. 416 (E.D. Va. 1994), aff’d, 43 F.3d 1467 (table), 1994 WL 621820 (4th Cir. 1994) (after the chapter 7 case was closed, there was no

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“related to” jurisdiction over adversary proceeding brought by debtor challenging a foreclosure).

C.
As noted above, this is an unlawful detainer action to recover rent and possession of a lot in a mobile home park based on the alleged failure by the debtor to pay rent as required by a written lease. The civil warrant and supporting affidavit allege unpaid rent for November 1998. Mr. Marston’s chapter 7 petition was filed on October 6, 1997 — some 13 months prior to the alleged default — and he received a discharge on January 16, 1998, more than 8 months prior to the default.

In the context of the present case, the court need not determine whether the rule articulated in Rivet would also apply to removal under Section 1452. Suffice it to note that a case removed under Section 1452 may be remanded to the state court “on any equitable ground.” 28 U.S.C. § 1452(b). Whatever the merits of the debtor’s argument that the bankruptcy filing terminated the lease[5] and that the discharge eliminated his personal liability,

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nothing in the Bankruptcy Code created any right on the part of the debtor to occupy property rent-free following bankruptcy.[6] At the very most, the argument raised by the debtor might — an issue the court specifically does not reach — provide a defense to MHC’s claim for attorney’s fees or for contract rent, since such claims necessarily arise from contract,[7] but it would provide no defense to a claim for possession or for quantum meruit rent based on the debtor’s post-bankruptcy occupancy of the premises. Landlord-tenant actions are quintessentially state-law actions. There is no suggestion, moreover, that this action cannot be speedily and inexpensively adjudicated in the state court.[8] To the extent that the debtor has defenses to the claimed attorney’s fees and to contract rent based on his bankruptcy discharge,

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he is free to raise those defenses in the state court, and the state court has ample jurisdiction to consider them.

D.
Based on all the circumstances, the court concludes that the balance of the equities (including, but not limited to, this court’s probable lack of subject-matter jurisdiction) weigh heavily in favor of remand. Accordingly, a separate order will be entered remanding this action to the General District Court of Fairfax County.

[1] The court assumes that “Meadows of Chantilly” is a trade name for MHC.
[2] 28 U.S.C. § 1441 provides in relevant part as follows:

(a) [A]ny civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable without regard to the citizenship or residence of the parties. * * *

[3] 28 U.S.C. § 157(b) distinguishes between “core” proceedings in which bankruptcy judges may enter final orders or judgments, and “non-core” related matters in which bankruptcy judges may conduct trials, but in which final orders or judgments must, unless the parties consent to the bankruptcy judge acting, be signed by a United States District Judge after review of the bankruptcy judge’s proposed findings of fact and conclusions of law.
[4] The Pacor formulation was cited with approval by the Supreme Court in Celotex Corp v. Edwards, 514 U.S. 300, 308, 115 S.Ct. 1493, 1499, 131 L.Ed.2d 403 (1995).
[5] The argument would be that under 11 U.S.C. § 365(d)(1), the lease was “deemed rejected” when the chapter 7 trustee did not assume it within 60 days of the filing of the petition. Rejection of an unexpired lease constitutes a breach, retroactive to the date the bankruptcy petition was filed. 11 U.S.C. § 365(g). The effect of Section 365(g) is to make postpetition rents due under the lease a prepetition claim subject to discharge. It does not, however, preclude a claim in the bankruptcy case for administrative rent for any post-petition period the debtor continues to occupy the property, nor does it preclude a claim for quantum meruit rent if the debtor continues to occupy the property post-bankruptcy. The analysis in the present case is complicated by the fact that the landlord was not given notice of the bankruptcy filing. Nevertheless, an unlisted claim is excepted from discharge in a bankruptcy only if the creditor was deprived of the right to file a timely proof of claim, or, if the debt is one grounded on fraud, theft, embezzlement, fiduciary defalcation, or willful injury to person or property, the creditor was deprived of the right to file a timely complaint to determine nondischargeability. 11 U.S.C. § 523(a)(3) In re Woolard, 190 B.R. 70, 74 (Bankr. E.D. Va. 1995). Since the debtor’s case was noticed to creditors as a “no asset” case, no bar date was ever set for claims, and the landlord was accordingly not deprived of the right to file a timely proof of claim. Nor would the claim for money damages arising from the breach of the lease appear to be potentially nondischargeable on one of the specific grounds set forth in 11 U.S.C. § 523(a)(3).
[6] At oral argument, Mr. Marston suggested that the effect of the deemed rejection, together with his continued occupancy, was to transform his status from a tenant under a lease to that of a month-to-month tenant, and therefore that the unlawful detainer summons is defective because it pleads breach of a written lease agreement. This is an argument properly addressed to the state court on remand.
[7] Landlord’s counsel suggested at oral argument that Va. Code Ann. § 55-248.31 would allow an award of attorney’s fees independent of contract. This, too, is an argument properly addressed to the state court on remand.
[8] See 28 U.S.C. § 1334(c)(2), which provides in relevant part as follows:

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.