Bankruptcy No. 11-14926 Adversary No. 11-00744
The opinion of the court was delivered by: DuBOIS, J.
This is a bankruptcy appeal. Debtors James Albert D'Angelo, Senior, and Carolyn Marie D'Angelo (collectively, "Debtors") appeal from a decision of the United States Bankruptcy Court for the Eastern District of Pennsylvania awarding attorneys' fees and costs to J.P. Morgan Chase Bank, N.A. ("JPM"). The award of fees and costs arose from JPM's successful motion to remand to state court a foreclosure proceeding that Debtors had removed to the Bankruptcy Court. Also before the Court are JPM's Motion to Dismiss Appeal, JPM's Motion for Sanctions, and Debtors' Countermotion to Appellees' Motion for Sanctions. For the following reasons, the Court affirms the ruling of the Bankruptcy Court and denies all of the pending motions.
The facts of the case are set forth at length in the Bankruptcy Court's opinions, see In re
D'Angelo, Bankr. No. 11-14926-MDC, Adv. No. 11-00744-MDC, 2012 WL 27541 (Bankr. E.D. Pa. Jan. 5, 2012) (granting motion for fees and costs); In re D'Angelo, Bankr. No. 11-14926-MDC, Adv. No. 12-00301-MDC, __ B.R. __, 2012 WL 2951381 (Bankr. E.D. Pa. July 19, 2012) (denying motion for preliminary injunction), and are repeated here only as necessary to resolve the pending matters.
A. Proceedings Leading to Appeal
This bankruptcy proceeding arises from a dispute regarding property owned by Debtors in Doylestown, Pennsylvania, on which JPM sought to foreclose in state court. Debtors James D'Angelo, Senior ("Mr. D'Angelo") and Carolyn D'Angelo ("Mrs. D'Angelo") own real estate located at 102 Pickwick Drive in Doylestown, Pennsylvania ("Doylestown property"). In re D'Angelo, 2012 WL 27541, at *1. A mortgage on the Doylestown property, dated August 11, 2005, secured a note of $1,462,500. Id. Through a series of assignments, JPM became the mortgage holder and, on July 3, 2006, filed a foreclosure action in the Court of Common Pleas of Bucks County ("Court of Common Pleas" or the "state court"), J.P. Morgan Chase Bank National Association v. D'Angelo et al., Civil Action No. 2006-6047 ("Foreclosure action"). Id.
Debtors opposed the foreclosure proceedings, asserting that the mortgage and note were invalid because they were forged. Id. Specifically, according to Debtors, James D'Angelo, Junior-Mr. D'Angelo's son, hereinafter "D'Angelo Junior"-obtained a mortgage for $1.5 million with the help of an unscrupulous mortgage lending agent who was later indicted for mortgage fraud. (Debtors' Br. 6; see also United States v. Harry Anthony, Cr. No. 11-12 (W.D. Pa.).) D'Angelo Junior allegedly forged Mr. D'Angelo's name and arranged for a friend to forge Mrs. D'Angelo's name. (Id.) D'Angelo Junior, according to Debtors, then "traded" the $1.5 million mortgage for a second mortgage of $1.88 million. (Id.) JPM sought to foreclose on the second mortgage. (Id.) Debtors sought a declaratory judgment in the Court of Common Pleas, asking that court to hold that the mortgage was "invalid, void, or otherwise unenforceable" due to D'Angelo Junior's forgery. In re D'Angelo, 2012 WL 27541, at *1. The declaratory judgment case, D'Angelo et al. v. JP Morgan Chase Bank, N.A., et al., Civ. Action No. 2007-- 00041--26--1, was consolidated with the Foreclosure action in Civil Action Number 2006-6047.
On April 11, 2011, the Court of Common Pleas granted partial summary judgment to JPM and imposed an equitable lien of $1,339,387.30 against the Doylestown property ("Equitable Lien").*fn1 The Court of Common Pleas ordered Debtors to "confirm" the Equitable Lien within ten days "by executing an amended and restated note and mortgage effective [August 11, 2005] on the same terms and conditions as the August 11, 2005 Note and Mortgage assigned to" JPM. Docket Entries, J.P. Morgan Chase Bank Nat'l Ass'n v. D'Angelo et al., Civ. No. 2006-6047 (Bucks Cnty. Ct. Com. Pl.) (hereinafter "CCP Docket Entries"). Debtors failed to do so, (Debtors' Br. 7), and, on June 22, 2011, JPM filed a motion in the Court of Common Pleas seeking to hold Debtors in contempt for their noncompliance. (CCP Docket Entries.)
That same day, Debtors filed a Chapter 13 bankruptcy petition in the United States Bankruptcy Court for the Eastern District of Pennsylvania. In re D'Angelo, 2012 WL 27541, at *1. That proceeding was later converted to Chapter 11. Id. at *1 n.1. The filing of the bankruptcy petition automatically stayed enforcement of the Equitable Lien. See 11 U.S.C. § 362(a). According to the Bankruptcy Court, Debtors' counsel "has freely admitted that the Debtors filed for bankruptcy in order to avoid the adjudication of their claims against J.P. Morgan by the Bucks County Court." In re D'Angelo, 2012 WL 2951351, at *13.
JPM responded by filing a Motion for Relief from Stay in the Bankruptcy Court on July 7, 2011, seeking permission to enforce the Equitable Lien. In re D'Angelo, 2012 WL 27541, at *1. The Bankruptcy Court held an evidentiary hearing on the Motion for Relief from Stay on August 4, 2011, and, at the conclusion of the hearing, granted JPM relief from the automatic stay to seek enforcement of the Equitable Lien in the Court of Common Pleas. Id. On September 1, 2011-before JPM took any action in state court and before a hearing scheduled for September 7, 2011, in state court-Debtors removed the consolidated Court of Common Pleas Case, Civil Action No. 2006-6047, to the Bankruptcy Court pursuant to 28 U.S.C. § 1452.*fn2 (Notice of Removal, Appellee's Br. Ex. 1.) Debtors filed an Amended Notice of Removal on September 7, 2011, asserting that "[t]here is no justification for forcing Debtors to continue incomplete and expensive state law litigation, which they cannot afford," and that "Debtors' removal is . . . the only practical method whereby Debtors' claims can be resolved and the estate effectively administered." (Amended Notice of Removal, Appellee's Br. Ex. 2, at 6.)
JPM filed a Motion to Remand on September 15, 2011, contending that the "improper removal of the [state court case] is nothing more than a further attempt to derail JP Morgan's exercise of its rights and a continued attempt to forum shop." (Mot. Remand, Appellee's Br. Ex. 3, at 1.) Therefore, JPM argued, remand was appropriate under 28 U.S.C. §§ 1447(c)(2) and 1452(b). (Mem. L. Supp. Mot. Remand, Appellee's Br. Ex. 4, at 4--5.)
The Bankruptcy Court held a hearing on the Motion to Remand on September 29, 2011. At the end of the hearing, the court granted the Motion to Remand. In re D'Angelo, 2012 WL 27541, at *2. It "specifically found that the Debtors' attempt to remove the [state court case] was a patent attempt to relitigate the matters decided by [the Bankruptcy Court] at the Lift--Stay Hearing and that denying remand would have the effect of rendering [the Bankruptcy Court's] Lift--Stay Order a nullity." Id. Noting that "Debtors did not attempt removal concurrent with the filing of their petition," the Bankruptcy Court concluded that "Debtors did not legitimately believe the Actions presented issues that should be addressed" in a bankruptcy proceeding. Id. at *3.
At the conclusion of the September 29, 2011, hearing, JPM's counsel asked the Bankruptcy Court to order Debtors to reimburse the fees JPM incurred in litigating the Motion to Remand pursuant to 28 U.S.C. § 1447(c). Id. The Bankruptcy Court ordered the parties to brief the issue of fee reimbursement. After receipt of the parties' submissions, the Bankruptcy Court issued a Memorandum and Order on January 4, 2012, granting JPM's request for $4,715.00 in attorney's fees. Id. The Bankruptcy Court concluded that Debtors "failed to assert any colorable basis for the removal" and that removal was "an improper attempt to negate the effect" of the Bankruptcy Court's lifting of the automatic stay so that JPM could seek to enforce the Equitable Lien. Id. at *4 (citing, inter alia, Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005)). Debtors then appealed the Bankruptcy Court's January 4, 2012, Order. The appeal was docketed in this Court on February 1, 2012.
Although not directly relevant to the issues presently before this Court, the proceedings that continued in the state court and the Bankruptcy Court after the appeal was entered provide additional background. After the Bankruptcy Court lifted the automatic stay, the Court of Common Pleas held a hearing on October 31, 2011, at which Debtors were ordered to execute an amended mortgage and note to comply with that court's April 11, 2011, order. In re D'Angelo, 2012 WL 2951381, at *7. At a hearing on January 12, 2012, the Court of Common Pleas "determined that the Debtors had not complied with its Lien Order and found the Debtors to be in willful contempt of that order." Id. That court "awarded J.P. Morgan $4,000.00 in fees and costs plus a $100 penalty for each day after January 12, 2012, that the Debtors failed to comply with the Lien Order." Id. A sheriff's sale of the Doylestown property was scheduled for June 8, 2012. Id.
On February 12, 2012, Debtors filed a Complaint in the Bankruptcy Court in Adversary Case Number 12-211 in which they sought to have the Bankruptcy Court "review the legitimacy of J.P. Morgan's equitable lien." Id. at *5. In response, JPM filed a motion to dismiss and a motion for sanctions. Id. The Bankruptcy Court held a hearing on April 3, 2012, at which it granted the motion to dismiss on the ground that the Complaint was filed by an attorney "whose employment had not been ...