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In re Bobroff

decided: July 5, 1985.


On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. Civ. No. 84-1814).

Gibbons, and Higginbotham, Circuit Judges, and Sarokin, District Judge.*fn*

Author: Higginbotham



This is a tort action originally filed by Charles T. Bobroff ("debtor") in the Court of Common Pleas of Philadelphia County, against Continental Bank, Frank Leis (an officer of the bank), the law firm of Blank, Rome, Comisky & McCauley, and two attorneys in that firm, Samuel H. Becker and Andrew D. Bershad ("appellants"). Upon application of the appellants, the case was removed to the United States Bankruptcy Court for the Eastern District of Pennsylvania, where the debtor's bankruptcy was pending. The Bankruptcy Court granted summary judgment for the appellants. 37 Bankr. 847. The district court, 43 Bankr. 746, reversed the decision of the Bankruptcy Court, on the ground that it lacked jurisdiction, and remanded the case to the state court. For the reasons given in the opinion that follows, we will affirm the district court's order.


The debtor formerly operated a shoe and leather goods store. In 1979, the debtor obtained a loan from Continental Bank for business use; the debt was secured by a second mortgage upon the debtor's home and by a security interest in property of the debtor's business. The debtor had contracted with Guardian Life Insurance Co. ("Guardian") for the issuance of ten policies of disability insurance. Under these policies, in the event of disability, Guardian would reimburse the debtor for business overhead, pay a monthly amount to Continental Bank as loss payee, and pay monthly amounts to the debtor personally. In June of 1980, the debtor became disabled due to a psychiatric episode, and Guardian began paying under these policies, on a somewhat irregular basis. The debtor then defaulted on the debt owed to Continental. The Bank obtained a judgment against him in February of 1981 in the Court of Common Pleas of Philadelphia County.

On April 24, 1981, the debtor filed a petition in bankruptcy under chapter 7 of the Bankruptcy Code. On July 24, 1981, the debtor filed a praecipe to convert the case to one under chapter 13. Three days later, appellant Continental Bank filed a motion to "deny debtor's request to convert the case from chapter 7 to chapter 13" on the ground that the debtor had more than $100,000 in unsecured debts and was therefore not eligible for chapter 13 relief. It appears that no action was taken on the motion at that time.

Shortly thereafter, on July 28, 1981, appellants Becker and Bershad deposed Jane Engel, a friend of the debtor's, in the presence of appellant Leis. Ms. Engel stated that the debtor was storing items previously displayed at the debtor's store (and presumably subject to Continental's security interest) at her apartment and at the garage of a Mrs. Spector, and that the debtor stated to her that he had deliberately concealed three valuable lithographs from the Bank. The debtor had previously stated under oath that no one other than he had possession of any furnishings or art work belonging to his estate. The Blank, Rome firm informed the Bankruptcy Court of the deposition testimony, and the court ordered that the debtor's residence and business and the Spector garage be padlocked pending an inventory by the trustee. Leis, Becker, and Bershad immediately brought Ms. Engel to the United States Attorney's Office, where she gave a sworn statement. Subsequently, early in 1982, the individual appellants reported these events to Guardian. Guardian then terminated payments on all of the disability policies it had issued to the debtor.

In the spring of 1982 the Bankruptcy Court conducted an evidentiary hearing on Continental's motion to deny conversion to chapter 13. On October 3, 1983 the Bankruptcy Court issued an order granting "the motion of Continental Bank to convert this chapter 13 proceeding to one under chapter 7."

On February 22, 1983, the debtor commenced this action in the Court of Common Pleas of Philadelphia County. On March 18, 1983, the appellants filed an application pursuant to former 28 U.S.C. ยง 1478(a) (1982)*fn1 for removal of the action to the Bankruptcy Court, stating that the debtor's action in the state court was a "civil proceeding related to a case under title 11"*fn2 and that therefore the Bankruptcy Court had jurisdiction over the matter. The case was then automatically removed to the Bankruptcy Court, and the debtor's motion to remand the case to the Pennsylvania Court of Common Pleas was denied.

In a "form of complaint" attached to the motion to remand, the debtor set forth three claims against the appellants: malicious prosecution, defamation, and interference with contractual relations. The parties subsequently agreed to a voluntary dismissal of the malicious prosecution cause of action. Debtor claimed that defendants had damaged his reputation in the community by stating that he was concealing assets from the bank and from the Bankruptcy Court. The debtor further claimed that defendants interfered with his contractual relations by inducing Guardian to cut off further payments to him under his policies of disability insurance. On March 5, 1984, the Bankruptcy Court granted summary judgment to appellants on both claims. On July 25, 1984 the district court, finding that this tort action was not "related to" the debtor's bankruptcy proceeding, reversed and remanded the case to state court. This appeal followed.


As a threshold matter, we must address the debtor's contention that this court lacks jurisdiction over this appeal. Debtor first argues that because the order appealed from is a denial of summary judgment and remand (to state court) for trial, it is not an appealable final judgment. This court recently rejected this position. In Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984), the district court had remanded a products liability action between a consumer (Higgins) and a distributor (Pacor) of the bankrupt's (Manville) asbestos products to state court ...

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