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MILLER BLOCK COMPANY MILLER BLOCK COMPANY v. UNITED STATES NATIONAL BANK JOHNSTOWN (12/11/89)

filed: December 11, 1989.

MILLER BLOCK COMPANY; MILLER BLOCK COMPANY, INC.; JAMES R. WALSH, ESQUIRE, TRUSTEE OF THE BANKRUPT ESTATE OF MILLER BLOCK COMPANY, OTHERWISE MILLER BLOCK COMPANY INC.; DEAN W. MILLER; AND THE ESTATE OF FREDERICK C. MILLER, DECEASED,
v.
UNITED STATES NATIONAL BANK IN JOHNSTOWN, A NATIONAL BANKING ASSOCIATION; UNITED STATES NATIONAL BANK IN JOHNSTOWN, A CORPORATION, AND USBANCORP, INC., APPELLANTS



Appeal from the Order of the Court of Common Pleas, Civil Division, of Cambria County, No. 1987-1633.

COUNSEL

Dennis S. Mulvihill, Pittsburgh, for U.S. Nat. Bank, appellants.

Norman A. Krumenacker, Jr., Johnstown, for appellees.

Cavanaugh, Brosky and Rowley, JJ.

Author: Rowley

[ 389 Pa. Super. Page 463]

This is an appeal by United States National Bank in Johnstown (Bank) from an order denying its motion to strike or open a default judgment entered in an action commenced by Miller Block Co. seeking damages for wrongful repossession by the Bank of some chattels. After thoroughly reviewing the record and the arguments of the parties, we reverse.

On August 3, 1987, the complaint was filed in the instant case. Thereafter, there were four letters exchanged by counsel regarding an extension of time within which to file a responsive pleading, the last of which was from counsel for appellees and advised counsel for the Bank that he should file the responsive pleading by October 6, 1987. On October 2, 1987, the Bank filed a removal petition in U.S. District Court to have the case transferred to federal court. On October 7, 1987, default judgment was entered in state court, but no notice of the default judgment was given to the Bank until March, 1988. On March 4, 1988, the federal court denied the Bank's removal petition and remanded the case to the Pennsylvania courts. On March 18, 1988, the instant petition to strike/open the default judgment was filed and was subsequently denied. The instant appeal followed.

On appeal, the Bank raises numerous arguments in support of its assertion that the default judgment should have been stricken or opened. First, it claims that the Pennsylvania court was without jurisdiction to entertain the default judgment on October 7, 1987, because the federal removal

[ 389 Pa. Super. Page 464]

    petition had been filed on October 2, 1987, and under the federal removal statute, 28 U.S.C.A. § 1446(e), the filing of a removal petition bars state court jurisdiction until the case is remanded to the state court. The Bank also argues that there was no written agreement between the parties for an extension of time to file a responsive pleading and consequently, the default judgment entered without prior notice, as required by Pa.R.C.P. 237.1, should be stricken. Alternatively, the Bank argues that the judgment should be opened because its petition to open was timely filed, it presented a legitimate reason for not having filed a responsive pleading, and it has sixteen meritorious defenses. The Bank also claims that the judgment should be stricken/opened because Miller Block, which had filed a Chapter 11 bankruptcy petition, failed to obtain from the bankruptcy court the requisite permission to file the instant case. In addition, the Bank argues that the judgment should be stricken/opened because Miller Block's complaint failed to state a cause of action against the defendants. Finally, the Bank asserts that the judgment must be set aside because service was deficient.

I. JURISDICTION

The federal removal statute provides that the filing of a petition for removal and the filing of the requisite bond, with notice to the parties and the filing of a copy of the petition in the state court, "shall effect the removal and the State court shall proceed no further unless and until the case is remanded." 28 U.S.C. § 1446(d). In the present case it is undisputed that the removal petition and bond were filed on October 2, 1987, that notice was provided to the parties, and that a copy of the removal petition was timely filed in the state court. It is also undisputed that the removal petition was denied in March, 1988. Thus, the issue before us is whether or not the removal petition operated to divest the state court of jurisdiction between the time the petition was filed and the time it was denied.

[ 389 Pa. Super. Page 465]

Where a case is remanded to the state court upon denial of a removal petition, it is for the state court to determine the effect of the attempted removal on state court jurisdiction. See Wenrick v. Schloemann-Siemag Aktiengesellschaft, 361 Pa. Super. 137, 522 A.2d 52 (1987). The Pennsylvania Supreme Court has held that the federal removal statute

"is subject to strict construction and its provisions must be strictly complied with before the jurisdiction of a state court can be ousted: [citations omitted.] When a removal has been effected in strict compliance with the statutory requirements, then the state court's jurisdiction ceases and any further proceeding in the state court is a nullity so long as the action is pending in the federal court."

Crown Const. Co. v. Newfoundland American Ins. Co., 429 Pa. 119, 124, 239 A.2d 452, 455 (1968) (emphasis in original). However, where there has not been strict compliance with the removal statute, or where the removal is subsequently determined to be invalid for lack of subject matter jurisdiction, proceedings in the state court between the filing of the removal petition and its denial are valid. See Metropolitan Casualty Ins. Co. v. Stevens, 312 U.S. 563, 61 S.Ct. 715, 85 L.Ed. 1044 (1941); Yankaus v. Feltenstein, 244 U.S. 127, 37 S.Ct. 567, 61 L.Ed. 1036 (1917); Wenrick, supra. This is the logical corollary of the rule that if the removal is valid, any interim proceedings in the state court are void. Metropolitan Casualty Ins. Co., supra.

Applying these rules to the facts in the present case, we conclude that the state trial court was not divested of jurisdiction upon the filing of the removal petition because there was not strict compliance with the requirements of the removal statute, and because the federal court ...


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