Wu v. Wu

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
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In re: 	:
: 	Chapter 11
QUEEN ELIZABETH REALTY CORP. 	:
: 	Case No. 13-12335 (SMB)
Debtor. 	:
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MARGARET WU, 	:
:
Plaintiff, 	:
: 	Adv. Proc. No. 13-01495 (SMB)
PHILLIP WU, 	:
:
Defendant. 	:
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DEAN K. FONG AS RECEIVER OF THE 	:
PROPERTY OF PHILLIP WU, 	:
:
Plaintiff, 	:
: 	Adv. Proc. No. 13-01496 (SMB)
HONG KONG SUPERMARKET, INC., et al., 	:
:
Defendants. 	:
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MEMORANDUM DECISION REMANDING
ADVERSARY PROCEEDINGS
A P P E A R A N C E S:
DELBELLO DONNELLAN WEINGARTEN WISE
& WIDERKEHR, LLP
Attorneys for Queen Elizabeth Realty Corp.
One North Lexington Avenue
White Plains, New York 10601
James B. Glucksman, Esq.
Jonathan S. Pasternak, Esq.
Of Counsel
MORRISON TENENBAUM PLLC
Attorneys for Margaret Wu
87 Walker Street, Floor 2
New York, New York 10013
Lawrence Morrison, Esq.
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Of Counsel
BRYAN CAVE
Attorneys for Dean K. Fong as Receiver
of the Property of Phillip Wu
1290 Avenue of the Americas
New York, New York 10104
Thomas J. Schell, Esq.
Stephanie Wickouski, Esq.
Of Counsel
HUGH H. MO, P.C.
Attorneys for Hong Kong Supermarket, Inc.
and Hong Kong Supermarket of Hester
Street Corp. d/b/a/ Hong Kong Supermarket
225 Broadway, Suite 2702
New York, New York 10007
Franklin K. Chiu, Esq.
Of Counsel
ATHONY A. CAPETOLA
Attorneys for Phillip Wu
Two Hillside Avenue, Building C
Williston Park, New York 11596
Danielle J. Seid, Esq.
Of Counsel
STUART M. BERNSTEIN
United States Bankruptcy Judge:
The debtor removed all or part of the above-captioned adversary proceedings to this
Court. Though not a party to those actions, the debtor claims that as a party in interest, it can
remove them. The Court issued an order directing the debtor to show cause why the removed
proceedings should not be remanded. Having heard from the parties in interest, the Court now
concludes that it lacks subject matter jurisdiction over the adversary proceedings and must
remand them to state court.
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BACKGROUND
Margaret Wu (“Margaret”) commenced a divorce action against Phillip Wu (“Phillip”) in
New York State Supreme Court in 2009. Among his assets, Philip owns one-third of the shares
of Queen Elizabeth Realty Corp. (“QERC” or the “Debtor”); his brothers, Jeffrey and Lewis,
own the remaining interests. (Declaration of Jeffrey Wu Pursuant to Local Bankruptcy Rule
1007-2, dated July 23, 2013, at ¶ 5(ECF Doc. # 6.) 1 QERC owns real property at 157 Hester
Street in Manhattan (the “Property”), and had leased this property to New Enterprise Realty,
LLC (“New Enterprise”), an entity controlled by Jeffrey. (Declaration of Dean K. Fong in
Support of (i) Motion to Dismiss or Suspend the Bankruptcy Case, or in the Alternative, for
Relief under Section 543(c) and (d) of the Bankruptcy Code from Turnover of Property; and (ii)
Motion to Dismiss the Adversary Proceeding, dated Sept. 18, 2013 (“Fong Declaration”), ¶¶ 6, 9
(ECF Doc. # 34).) New Enterprise subleased the Property to Hong Kong Supermarket, Inc.
(“HKS”) (also owned by Jeffrey) and Salon de Tops, Inc. (Id. at ¶¶ 8-9.)
During the course of the matrimonial litigation, the state court entered an order (the
“Receiver Order”) appointing Dean K. Fong as the Receiver of all of the assets and property of
Phillip. (Supplement of Queen Elizabeth Realty Corp. to: (1) Opposition to Motions of Margaret
Wu and Receiver to Motion to Dismiss Chapter 11 Case; (2) Opposition to Motion of Receiver to
Dismiss Adversary Proceeding; and (3) Response to Court’s Order to Show Cause Regarding
Removal of State Court Proceedings, dated Sept. 18, 2013, Ex. 3, at pp. 58-60 of 105 (Case No.
13-01495; ECF Doc. # 7); id., Ex. 3, at p. 61 of 105.) 2 The Receiver Order is ambiguous, but can
1 	“ECF Doc.” refers to the docket in the bankruptcy case.
2 	Margaret was also appointed to act as receiver, but the Receiver Order was amended to make Fong the sole
Receiver.
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be read to authorize the Receiver to take control of the Debtor’s property even though the Debtor
was not a party to the matrimonial dispute.
Whatever the ambiguity, the Receiver took control of the Property, and the state court has
issued an order to show cause why the Receiver should not immediately sell the real estate
holdings of the Debtor. (Response of Queen Elizabeth Realty Corp. to Court’s Order to Show
Cause Regarding Removal of State Court Proceedings, dated Oct. 25, 2013, at Ex. 3 (pp. 37-39
of 91 (Adv. Proc. # 13-01495 ECF Doc. # 6).) While the Receiver exercised control of the
Property, New Enterprise and Salon de Tops, Inc. stipulated to pay rent to the Receiver, (Fong
Declaration, Ex. 7), and the Receiver thereafter caused the marshal to evict New Enterprise for
failure to pay rent. (Id., Ex. 10.) The Receiver brought a holdover action against HKS (the
“Eviction Proceeding”), (id. at ¶ 33), HKS stipulated in state court to pay $25,000 in rent to the
Receiver, (id., Ex. 13), the Receiver eventually recovered a $3,256,000.00 judgment and a
judgment of possession against HKS, (id., Ex. 15), and subsequently obtained the issuance of a
warrant of eviction on June 28, 2013. (Id., dated June 28, 2013, Ex. 15 (ECF Doc. # 34, Part
15).)
Before the warrant of eviction could be executed, the Debtor filed a voluntary chapter 11
petition on July, 17, 2013. The commencement of the case automatically stayed the Eviction
Proceeding as well as any efforts by the Receiver to interfere with property of the estate. In
addition, to the extent the Receiver Order appointed Fong as Receiver of the Debtor’s assets, the
filing of the petition also triggered his compliance with the requirements of 11 U.S.C. § 543.
Margaret and the Receiver separately moved to dismiss the bankruptcy case. (Motion by
Receiver Dean K. Fong, Esq. (i) to Dismiss or Suspend the Bankruptcy Case, or in the
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Alternative, (ii) for Relief under Section 543(c) and (d) of the Bankruptcy Code from Turnover of
Property, dated Sept. 18, 2013 (“Receiver’s MTD”) (ECF Doc. # 26); Motion to Dismiss
Bankruptcy Case, dated Aug. 8, 2013 (“Margaret’s MTD”) (ECF Doc. # 12).) The Receiver
sought alternative relief under Bankruptcy Code § 543(d) requesting that he be excused from the
requirement to turn over property of the estate to the debtor-in-possession and file an accounting.
(Receiver’s MTD, at ¶¶ 84-85.) The Debtor naturally opposed the motions, but in an unusual
twist upon the typical single asset real estate case, the Debtor’s mortgagee Shanghai Commercial
Bank Ltd. also opposed the motions, wishing instead to see the bankruptcy continue and the
receivership end. (Opposition of Shanghai Commercial Bank Ltd., New York Branch to (I)
Margaret Wu’s Motion to Dismiss the Bankruptcy Case and (II) Receiver’s Motion to Dismiss or
Suspend the Bankruptcy Case, or in the Alternative, for Relief Under Section 543(c) and (d) of
the Bankruptcy Code from Turnover of Property, dated Oct. 24, 2013 (ECF Doc. # 38).) After
hearing oral argument, the Court denied Margaret’s and the Receiver’s motions from the bench,
and directed the Receiver to comply with the requirements of 11 U.S.C. § 543. (Transcript of
hearing held on Oct. 31, 2013, filed Nov. 3, 2013 (“Tr. 10/31”), at 46:11-56:20 (ECF Doc. #
49).)
The Court subsequently entered an order consistent with the bench decision. (Order
Denying Motions of Margaret Wu and Dean K. Fong as Receiver for Entry of Order (I)
Dismissing the Case Pursuant to 11 U.S.C. § 1112(b), or (II) in the Alternative, Abstaining
Pursuant to 11 U.S.C. § 305; or (III) Excusing Receiver’s Compliance with 11 U.S.C. §543,
dated Nov. 25, 2013 (ECF Doc. # 52).) Among other things, the order directed the Receiver to
refrain from using the rental proceeds from the Property or selling the Property, prosecuting the
Eviction Proceeding or collecting the money judgment against HKS. It also enjoined Margaret
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from prosecuting the order to show cause to sell the Property. The order did not otherwise affect
the matrimonial action or the receivership of Philip’s property. 3
The Removed Proceedings
The current motion was brought on by the Debtor’s removal of the two pending state
court proceedings pursuant to 28 U.S.C. § 1452. On July 17, 2013, the Debtor removed the
entire Eviction Proceeding to the District Court. (ECF Doc. # 22, Part 3.) On August 1, 2013,
the Debtor removed those claims in the matrimonial action “under which Plaintiff seeks directly
to function on and liquidate property of QERC’s estate,” (ECF Doc. # 21, Part 3 at ¶ 6), namely:
(i) the disposition of property of the estate; (ii) determination of
claims against property of the Estate and counterclaims against
those parties; (iii) the ability of QERC to use its property; (iv)
confirmability of any Plan submitted by QERC; and (v) the ability
of QERC to timely proceed in its attempt to reorganize under
Chapter 11 of the Bankruptcy Code.
(ECF Doc. # 21, Part 3 at ¶ 12.) The District Court referred both adversary proceedings to this
Court on September 6, 2013. (ECF Doc. # 21, Part 3.) Observing that the Debtor was not a
party to either removed proceeding, the Court issued an order from the bench directing the
Debtor to show cause why the two proceedings should not be remanded to state court.
3 	Philip filed a chapter 13 petition in the Eastern District of Pennsylvania on August 5, 2013. Thus,
notwithstanding the terms of this Court’s order, his personal bankruptcy subjected the Receiver to the requirements
of 11 U.S.C. § 543 regarding Philip’s own property.
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DISCUSSION
Section 1452(a) of the Judicial Code governs the removal of bankruptcy proceedings. It
states:
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
unit’s police or regulatory 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). In addition, 28 U.S.C. § 1441(a), the general removal statute. permits a
defendant to remove a civil action.4 Although § 1452(a) limits the removal rights to a “party,”
and § 1441 further limits that right to a “defendant,” the Debtor contends that as a party in
interest in the chapter 11 case, see 11 U.S.C. § 1109(b), it had the authority to remove the
Eviction Proceeding and certain estate-related claims pending in the matrimonial action.
We begin with the well-settled rule that the starting point for the interpretation of any
statute is the plain language of the statute itself. United States v. Ron Pair Enters., Inc., 489 U.S.
235, 241 (1989). If the statute’s language is plain, the analysis ends unless its literal application
produces an absurd result. Id. at 242 (“The plain meaning of legislation should be conclusive,
except in the rare cases in which the literal application of a statute will produce a result
demonstrably at odds with the intentions of its drafters.” (quoting Griffin v. Oceanic Contractors,
4 	Section 1441(a) states:
(a) Generally.— Except as otherwise expressly provided by Act of Congress, any 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.
28 U.S.C. § 1441(a). The Debtors did not rely on § 1441(a), but § 1441(a) also applies in bankruptcy cases. Things
Remembered, Inc. v. Petrarca, 516 U.S. 124, 129 (1995) (“There is no express indication in § 1452 that Congress
intended that statute to be the exclusive provision governing removals and remands in bankruptcy.”).
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Inc., 458 U.S. 564, 571 (1982)) (internal quotation marks omitted)); accord Hartford
Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1, 6 (2000).
Only a “party” may remove a proceeding under § 1452(a). The term “party” as used in
the statute is unambiguous, and refers to someone named in the complaint, Official Unsecured
Creditors’ Comm. of Hearthside Baking Co. v. Cohen (In re Hearthside Baking Co.), 391 B.R.
807 (Bankr. N.D. Ill. 2008), and if a defendant, served with process. Hayim v. Goetz (In re SOL,
LLC), 419 B.R. 498, 503 (Bankr. S.D. Fla. 2009) (“Since the Trustee admits that the Debtor was
never served with process in the State Court Action, the Debtor never officially became a party
to that action, and thus, its attempted removal is a nullity.”); see Myles v. United States, 416 F.3d
551, 552 (7th Cir. 2005) (naming and serving a defendant is “vital” to its becoming a party).
Consequently, someone who is not a party to the state court action cannot remove it under 28
U.S.C. § 1452(a), and the removal by a non-party does not vest the federal court with subject
matter jurisdiction. Whitney Lane Holdings, LLC v. Don Realty, LLC, No. 08-cv-775
(GKS/RFT), 2010 WL 1257879, at *2 (N.D.N.Y. Mar. 26, 2010) (“The weight of authority
instructs that a district court is without subject matter jurisdiction in a case where that court’s
removal jurisdiction is invoked by a non-party.” (quoting Juliano v. Citigroup, 626 F. Supp. 2d
317, 319 (E.D.N.Y. 2009)) (internal quotation marks omitted)); Pereira v. Dunnington (In re 47-
49 Charles St., Inc.), 211 B.R. 5, 6 (S.D.N.Y. 1997) (Chin, J.) (“Fischer is not a party to any of
the landlord tenant actions and, in fact, his motions to intervene in those actions were denied.
Accordingly, he cannot remove the actions in his own name.”); see JRA Holding, Inc. v.
McCleary, No. 95-7702, 1996 WL 80692, at *1 (2d. Cir. Feb 20, 1996) (unpublished opinion)
(“[R]emoval [under 28 U.S.C. §§ 1441(a) and 1446(a)] was improvident and without jurisdiction
[because] Hidalgo was not a party to the action she sought to remove.”); Am. Home Assurance
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Co. v. RJR Nabisco Holdings Corp., 70 F. Supp. 2d 296, 298-99 (S.D.N.Y. 1999) (“[A] non-
party—even one that, like Nabisco, claims to be a real party in interest—has no authority to
notice removal under the statutes here utilized, 28 U.S.C. § 1441 and § 1446(a), which speak
only of removal ‘by the defendant or defendants.’”).
It is true that some decisions have read the term “party” in § 1452(a) more broadly to
include a non-party who is the real party in interest in the litigation. See Burns v. Grupo Mexico
S.A. de C.V., No. 07 Civ. 3496(WHP), 2007 WL 4046762 (S.D.N.Y. Nov. 16, 2007) (collecting
cases). Removal statutes, however, are narrowly construed to restrict federal court jurisdiction
and preserve the independence of state governments, and any doubts are resolved against
removability. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941); California v.
Atlantic Richfield Co. (In re Methyl Tertiary Butyl (“MTBE”) Prods. Liab. Litig.), 488 F.3d 112,
124 (2d Cir. 2007); Somlyo v. J. Lu-Rob Enterprises, Inc., 932 F.2d 1043, 1045-46 (2d Cir.
1991); Am. Home, 70 F. Supp. 2d at 299 n.4 (collecting cases). Accordingly, the Court
concludes that the term “party” as used in 28 U.S.C. § 1452(a) should be given its ordinary
meaning and preclude non-parties from removing state court proceedings.
The above-captioned adversary proceedings are, therefore, remanded. This conclusion
does not affect the restraints imposed on the Receiver and Margaret under the Court’s November
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25, 2013 order, or grant relief from the stay to interfere with or exercise control over property of
the estate.
Settle order on notice.
Dated: New York, New York
November 27, 2013
/s/ Stuart M. Bernstein
STUART M. BERNSTEIN
United States Bankruptcy Judge
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