Santos v. Pomenya et al

UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
(Greenbelt Division)
In re: 	*
ROSEMARY VILLAGE 	* 	Case No. 03-17540-NVA
COOPERATIVE, INC., 	(Chapter 11)
*
Debtor.
*
* 	* 	* 	* 	* 	* 	*
ENRIQUE SANTOS, 	*
Plaintiff, 	*
v. 	* 	Adv. No. 04-1372-NVA
POMENYA, et al., 	*
Defendants. 	*
* 	* 	* 	* 	* 	* 	*
ROSEMARY VILLAGE 	*
COOPERATIVE, INC.,
*
Plaintiff,
*
v. 	Adv. No. 04-1395-NVA
*
SANTOS, et al.,
*
Defendants.
*
* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	* 	*
Signed: September 30, 2005
SO ORDERED
Entered: October 03, 2005 Case 04-01372 Doc 37 Filed 10/03/05 Page 1 of 10

1 Because of the multiple requests for relief contained in this pleading, the Clerk’s office docketed it twice, as [6]
Conditional Motion to Compel and as [12] Motion to Enlarge Time to Respond to Notice of Removal.
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MEMORANDUM OF DECISION REGARDING ORDER
(1) GRANTING MOTION OF ENRIQUE SANTOS FOR REMAND [7] IN
ADV. NO. 04-1372-NVA; (2) REMANDING CASE TO CIRCUIT COURT
OF MARYLAND FOR MONTGOMERY COUNTY, AND (3) GRANTING
DEBTOR’S COMPLAINT FOR INTERPLEADER [1] IN ADV. NO. 04-1395-NVA
The Court has before it several interrelated motions and requests in two adversary
proceedings, Adv. No. 04-1395 (the “Interpleader Action”) and Adv. No. 04-1372 (the
“Removed Action”), which are more fully identified and discussed below. On August 15, 2005,
the Court held a hearing in the Removed Action, on the Motion of Enrique Santos (“Mr.
Santos”) for Remand (the “Remand Motion”) [7] of an action that had been removed to this
Court from the Circuit Court of Maryland for Montgomery County (the “Montgomery County
Circuit Court”) pursuant to 28 U.S.C. § 1452(a). Also on August 15, 2005, the Court held a
hearing in the Interpleader Action, on the request by the Debtor to interplead funds. For the
reasons that follow, the case will be remanded to the Montgomery County Circuit Court and the
Court will grant the request by the Debtor to interplead funds, but will direct the funds to be
placed in the hands of the Montgomery County Circuit Court.
A list of the pleadings called by the Court on August 15, 2005 and those considered in
determining to remand the matter follows:
a. 	Pleadings in the Removed Action (Adv. No. 04-1372-NVA):
[1] Notice of Removal, filed by Margaret [Pomenya], Eddie Powell, Alem Moges,
Audrey Schlesinger, et al., on March 22, 2004;
[6] Conditional Motion to Compel and to Enlarge Time to Respond to Notice of
Removal, filed by Mr. Santos on April 6, 2004; 1
[7] Motion for Partial Remand, filed by Mr. Santos on April 5, 2004;
Case 04-01372 Doc 37 Filed 10/03/05 Page 2 of 10

2 Because of the multiple requests for relief contained in this pleading, the Clerk’s office docketed it twice, as [10]
Objection to Motion to Compel and [13] Motion and Order to Have Funds of Defendants’ Equity Interest Dispersed.
3 Because of the multiple requests for relief contained in this pleading, the Clerk’s office docketed it four times, as
[16] Motion to Amend Pleadings, [17] Opposition to Motion to Strike (which motion was filed by Mr. Santos on
April 30, 2004 [11]), [18] Counterclaim, and [19] Jury Demand.
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[10] Opposition to Defendant’s Partial Remand, Motion to Compel and Expansion of
Time to Respond, and Plaintiffs’ Motion and Order to Have the Funds of Plaintiffs’
Equity Interest Dispersed, filed by certain named and unnamed plaintiffs
(collectively, the “Removal Parties,” who will be identified further below);2
[16] Motion to Amend, Motion in Opposition and Response to Defendant’s Motion to
Strike and Plaintiff’s Counterclaim, filed by the Removal Parties on May 12, 2004; 3
[20] Motion to Dismiss Counterclaim, Motion for More Definite Statement and
Objection to Jury Demand, filed by Mr. Santos on June 3, 2004;
[24] Response and Opposition to Motion for Remand, et al., filed by the
Removal Parties on June 25, 2004; and
[28] Document entitled Defendants ReUrge their Response and Opposition to Plaintiff’s
June 28, 2004 and July 7 & 8 Motions, filed by the Removal Parties on July 15,
2004.
b. 	Pleadings in the Interpleader Action (Adv. No. 04-1395-NVA):
[1] Complaint for Interpleader and Declaratory Relief filed by Rosemary Village
Cooperative, Inc. (“Rosemary Village” or the “Debtor”) on April 12, 2004;
[12] Motion to Dismiss, filed by Mr. Santos on May 13, 2005;
[23] Report Pursuant to Court Order and Supplemental Motions to Establish Consistency
Therewith filed by Mr. Santos on June 28, 2004; and
[25] Supplemental Response, filed by Mr. Santos on July 7, 2004.
The Court has also reviewed the numerous other pleadings filed in both Adversary
Proceedings, as well as the Chapter 11 Final Report and Motion for Final Decree to Close the
Case Administratively [351] (the “Final Report”), filed by the Debtor in the main case on June
17, 2005. This Memorandum of Decision and the accompanying Order are intended to dispose
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of all pending motions in both Adversary Proceedings that deal with Mr. Santos’ request for
remand and/or dismissal on jurisdictional grounds. To the extent any of the other pleadings
remain outstanding in the title 11 case after entry of this Memorandum of Decision and the
Order, the Court will dispose of them separately.
BACKGROUND
A short summary of who the parties are and how they came before this Court is
warranted. The Removal Parties (as identified hereinafter), along with other individuals not
before this Court, are or were members of Rosemary Village, which was a nonprofit housing
cooperative. On July 23, 2003, Rosemary Village filed a voluntary petition under Chapter 11 of
the Bankruptcy Code. Rosemary Village owned a multi-family residential development in Silver
Spring, Maryland (the “Property”). The Removal Parties owned shares in the cooperative and
lived in the housing development.
By the time this case began to take shape, the housing development had been cited by
Montgomery County for approximately 6,000 housing code violations, the laundry rooms and
boiler rooms had been condemned by the county fire marshal, and about 10 percent of the units
were vacant. In 2002, a majority of the members of the cooperative voted to approve a proposed
sale of the Property, which sale was later challenged by some dissenting members in the
Montgomery County Circuit Court. The consequent delay in closing on the sale and a fear that
the County would condemn the Property as a whole led to the filing of the bankruptcy petition
on July 23, 2003. The Property was eventually sold with approval of the Bankruptcy Court by
Order [90] entered in the main chapter 11 case on October 3, 2003.
Mr. Santos had been retained by the dissenting members to fight the sale. They lost that
fight for several reasons, which are not required to be set out here. Fifteen of the dissenters then
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allegedly failed or refused to pay Mr. Santos for his services. On March 9, 2004, Mr. Santos
filed a First Amended Complaint (the “Complaint”) against them in the Montgomery County
Circuit Court in a case captioned Santos v. Pomenya, et al., Case No. 250156-V, and at the same
time was pursuing his pending Motion for Preliminary Injunction (collectively, the “State Court
Action”). The Complaint contains seven counts: (I) Breach of Contract; (II) Quasi-Contract;
(III) Fraud; (IV) Wrongful Interference with Contractual Relations; (V) Defamation; (VI) Civil
Conspiracy; and (VII) Aiding and Abetting. In the Complaint Mr. Santos seeks compensatory
damages in the amount of $250,000 and punitive damages in the amount of $500,000, as well as
interest, fees and costs.
The Complaint was served on the following individuals, all of whom resided at that time
in Silver Spring, Maryland: Margaret Pomenya, Alem Moges, Kadijatu Jalloh, Francois Jules,
Grace Campbell, Richard Gaskins, Yvette Hawkins, Alganesh Mebrahtu, Eddie Powell, Cheick
A. Tounkara, Hasiba Succer, Audrey Schlesinger, Marjorie Walton and Enona Williams. These
parties, with the exception of Ms. Pomenya, have been identified as the Removal Parties. On
August 15, 2005, Ms. Pomenya stated to this Court that she is not represented by counsel and
that she does not wish to continue as a party in this matter. That request will be granted.
On March 22, 2004, the Removal Parties filed the Notice of Removal [1]. Attached to it
as exhibits were the following documents:
a. 	Defendants’ Answers and Responses in Opposition to Plaintiff’s Motion for
Preliminary Injunction (attached to this document are several other documents,
including Mr. Santos’ First Amended Complaint);
b. 	Motion for Order to Shorten Time to Answer and Set Hearing on Motion for
Preliminary Injunction;
c. 	Legal Services Agreement dated November 27, 2002;
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d. 	Notices from Law Office of Enrique Santos dated April 21, 2003, and signed
acknowledgments;
e. 	Affidavit of Emiliana Victoria Lobos, successor Trustee of the Friends of
Rosemary Village Cooperative Trust dated March 9, 2004;
f. 	Invoice in the amount of $ 184,693.00 dated August 20, 2003 and time sheets
from the Law Office of Enrique Santos; and
g. 	Invoice in the amount of $164,322.77 dated July 20, 2003 and time sheets from
the Law Office of Enrique Santos.
On March 15, 2004, a week before the Removed Action was commenced, the Court
confirmed the Debtor’s Amended Plan of Reorganization (the “Plan”) [263]. Pursuant to the
Plan, distributions (in the form of proceeds from the sale of the Property) were to be made to the
members, identified in the Plan as equity interest holders, within thirty days of entry of the Order
confirming the Plan. Mr. Santos asserts that some portion of these distributions should be paid
over to him, either because the members assigned their claims to him (and some members have
done so as reflected by the assignments on the docket in the main case), or because he is entitled
to the proceeds as damages in the State Court Action. For this reason, the Debtor commenced
the Interpleader Action on April 2, 2004. In the Interpleader Action, the Debtor requests that the
funds be deposited with the Court until the dispute over the proceeds is resolved.
CONCLUSIONS
Technical Requirements for Removal
The Removal Parties filed their Notice of Removal pursuant to 28 U.S.C. § 1452(a).
That section provides:
“A party may remove any claim or cause of action in a civil action
other than a proceeding before the United States Tax Court or a civil action
by a governmental unit to enforce such governmental units’ police or regulatory
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power, to the district court for the district where such civil action is pending, if
such district court has jurisdiction of such claim or cause of action under
section 1334 of this title.”
28 U.S.C. § 1452(a).
Mr. Santos alleged in the Remand Motion [7], that the Notice of Removal was defective
because it did not comply with the requirements for removal set forth in Rule 9027(a) of the
Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”). Bankruptcy Rule 9027(a)
provides:
“A notice of removal shall be filed with the clerk for the district
and division within which is located the state or federal court where the
civil action is pending. The notice shall be signed pursuant to Rule 9011
and contain a short and plain statement of the facts which entitle the party
filing the notice to remove, contain a statement that upon removal of the
claim or cause of action the proceeding is core or non-core and , if non-
core, that the party filing the notice does or does not consent to entry of
final orders or judgment by the bankruptcy judge, and be accompanied by
a copy of all process and pleadings.”
Fed. R. Bankr. Proc. 9027(a)(1).
The Court finds that the Notice of Removal [1] complies with the requirements of
Bankruptcy Rule 9027(a), except that it fails to state whether the matter is core or non-core and
whether the Removal Parties consent to the Bankruptcy Court entering final orders and/or
judgments. However, the Court also finds that this defect was cured by the Removal Parties in
the Motion to Amend Pleadings [16]. At paragraph 10, the Removal Parties stated: “In their
amendment, Plaintiffs’ motion to amend it[s] notice for removal is non-core and [do] not consent
to the final order.” In addition, at the hearing on August 15, 2005, in response to the direct
question of this Court, Thomas P. Johnson, Esq., counsel for the Removal Parties, stated that the
matter is non-core and that the Removal Parties do not consent to entry of final orders of this
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Court should remand be denied. For the foregoing reasons, the request for relief by Mr. Santos
based on technical violations of the statute and Bankruptcy Rules will be denied.
Mandatory Abstention
Notwithstanding technical compliance with Bankruptcy Rule 9027(a), however, the
Court finds that it is required by 28 U.S.C. § 1334(c)(2) to abstain from hearing the dispute.
That section provides:
“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.”
28 U.S.C. § 1334(c)(2).
It is clear from the counts recited in the Complaint pending in the State Court Action that
the entire action is based on state law. It is also clear that but for the bankruptcy case, none of
these parties could have commenced the action in the federal district court (or, by reference, to
this Court). Jurisdiction of bankruptcy cases and proceedings is governed by 28 U.S.C. § 1334:
“(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 court, 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.”
28 U.S.C. §§ 1334(a) and (b).
The bankruptcy court 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
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orders subject to review under 28 U.S.C. §158 (dealing with appeals). 28 U.S.C. § 157(b)(1).
A bankruptcy court may also hear a non-core proceeding that is otherwise related to a case under
title 11, but may not enter final orders or judgments unless the parties consent and the district
court refers the proceeding under section 157(a). 28 U.S.C. § 157(c).
Whether or not a proceeding is sufficiently related to a case under title 11 is not
specifically governed by statute. However, several jurisdictions have developed a test
articulated by the Third Circuit in Pacor v. Higgins (In re Pacor, Inc.), 743 F. 2d 984 (3d Cir.
1984), adopted by the Fourth Circuit in A.H. Robins, Inc. v. Piccinin, 788 F. 2d 994 (4th Cir.
1986). Under the Pacor test, an action is “related to” the bankruptcy case if: (a) the outcome of
that action could alter the debtor’s rights, liabilities, options or freedom of action; and (b) the
outcome could conceivably have an impact on the handling and administration of the estate.
Pacor, 743 F. 2d at 994. Certain or likely alteration of the debtor’s rights, or likely impact on
the estate is not required; just the possibility of such alteration or impact is sufficient. Celotex
Corp. v. Owens-Illinois, Inc., 124 F. 3d 619, 626 (4th Cir. 1997).
The Removal Parties have stated that the matter is non-core. This Court agrees. The
Removal Parties assert that the case is related to the bankruptcy case because the funds at issue
are proceeds from the sale of the Property, a sale that was approved by the Court, and because
the Debtor is holding them pending further order of the Court. The Court disagrees. In this case,
all of the litigants are non-debtors. All of the claims are grounded in state law. The Debtor has
filed the Interpleader Action requesting, simply, that the funds be deposited with the Court until
the matter is resolved. The Debtor has also filed its Final Report. The Debtor has no stake in the
outcome of the dispute and there will be no impact on the administration of the estate because
the funds will be turned over to the party entitled to them. Whether the party entitled to the
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funds is Mr. Santos or the Removal Parties is of no consequence from the perspective of
administration of the Debtor’s estate. Abstention is appropriate in this case because it is not a
proceeding sufficiently related to the bankruptcy case to warrant jurisdiction by any court other
than the Montgomery County Circuit Court, and the matter can be timely adjudicated there.
For the foregoing reasons, the Motion of Enrique Santos for Remand will be granted, and
the Debtor’s request for Interpleader will be granted. An appropriate Order will be entered
contemporaneously with this Memorandum of Decision.
cc:
Debtor
Debtor’s Counsel
Defendant
Counsel for Removal Parties
END OF MEMORANDUM OF DECISION
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