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Joint Motion to Withdraw Reference in Chapter 11 Bankruptcy

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Joint Motion to Withdraw Reference in Chapter 11 Bankruptcy Powered By Docstoc
					                     I N T HE UNITED STATES BANKRUPTCY C OURT
                        F OR T HE W ESTERN DISTRICT O F T EXAS
                                   E L P ASO DIVISION

IN RE:                                 §
                                       §
JOE JESSE MONGE and                    §
ROSANA ELENA MONGE,                    §              CASE NO. 09-30881-lmc
                                       §
                  Debtors.             §
______________________________________________________________________________

                                         §
JOE JESSE MONGE and                      §             CHAPTER 11
ROSANA ELENA MONGE,                      §
                                         §
                      Plaintiffs,        §
                                         §
v.                                       §
                                         §             ADVERSARY NO. 10-3019
ALICIA ROJAS and FRANCISCO JAYME,        §
                                         §
                      Defendants.        §


THIS PLEADING REQUESTS RELIEF THAT MAY BE ADVERSE TO YOUR
INTERESTS.

IF NO TIMELY RESPONSE IS FILED WITHIN TWENTY-ONE (21) DAYS FROM
THE DATE OF SERVICE, THE RELIEF REQUESTED HEREIN MAY BE GRANTED
WITHOUT A HEARING BEING HELD.

A TIMELY FILED RESPONSE IS NECESSARY FOR A HEARING TO BE HELD.
PURSUANT TO BANKRUPTCY LOCAL RULE 5011 (C), ANY RESPONSE OR
OBJECTION TO A MOTION FOR WITHDRAWAL OF THE REFERENCE IS
REQUIRED TO BE FILED WITHIN TEN (10) DAYS OF THE DATE OF SERVICE.

                      J OINT M OTION T O W ITHDRAW R EFERENCE

TO THE HONORABLE H. CHRISTOPHER MOTT,
UNITED STATES BANKRUPTCY JUDGE:

         COME NOW, JOE JESSE MONGE and ROSANA ELENA MONGE, the Plaintiffs



Joint Motion to Withdraw Reference                                  Page 1 of 20
Monge v. Rojas - 10-03019-hcm
herein, joined by ALICIA ROJAS and FRANCISCO JAYME, the Defendants herein, and file this

their Joint Motion To Withdraw Reference, pursuant to 28 U.S.C §157, Bankruptcy Rule 5011,

and Local Bankruptcy Rule 5011, and as grounds in support thereof jointly state as follows:


                          A.        INTRODUCTORY STATEMENT.

       1.      The above-captioned Adversary Proceeding is pending in the United States

Bankruptcy Court for the Western District of Texas, El Paso Division, pursuant to the Standing

Order of Reference of the United States District Court for the Western District of Texas, El Paso

Division, Order No. 84-01, entered August 13, 1984, and published as Appendix L-l 001-f of the

Local Rules of the United States Bankruptcy Court for the Western District of Texas, El Paso

Division, thereby referring the instant Adversary Proceeding to the Bankruptcy Court pursuant to

28 USC §157.

                               B.    FACTUAL BACKGROUND.

       2.      The above-referenced Adversary Proceeding was filed on June 14, 2010, and was

originally based on Plaintiffs’ Complaint To Recover and For Turnover of Property And To

Determine Nature, Extent And Validity Of Liens And For Damages, pursuant to the provisions of

11 U.S.C.§542. The property that is the subject of said Adversary Proceeding is a single-family

residence located at 105 Thoroughbred Court, Santa Theresa, New Mexico 88008-9130.

(hereinafter referred to as the "Thoroughbred Premises").

       3.      At all relevant times herein, Plaintiffs JOE JESSE MONGE and ROSANA ELENA

MONGE have been residents of the State of Texas, and are currently residing at 51 Sierra Crest

Drive, El Paso, Texas 79902. At all relevant times herein, the Defendants, ALICIA ROJAS and




Joint Motion to Withdraw Reference                                                Page 2 of 20
Monge v. Rojas - 10-03019-hcm
FRANCISCO JAVIER JAYME, have been residents of the State of New Mexico, residing at 105

Thoroughbred Court, Santa Theresa, New Mexico 88008-9130.

         4.       Pursuant to a "Residential Lease (With Option to Purchase)" (hereinafter referred

to as the "Thoroughbred Lease") entered into on February 3, 2006, by and between JOE MONGE,

as Landlord, and ALICIA ROJAS, as Tenant, the Thoroughbred Premises were purportedly leased

to ALICIA ROJAS, with rental payments in an amount equal to the monthly mortgage payment of

approximately $7,019.19 per month. (See Plaintiffs' Complaint, paragraph 7 on page 4 of 5 of

Plaintiffs' Exhibit A attached hereto). According to the terms of the Option to Purchase, the

Purchase Price of the Thoroughbred Premises was $697,000.00. (See Plaintiffs' Complaint,

paragraph 6 on page 4 of 5 of Plaintiffs' Exhibit A attached hereto).

         5.       Plaintiffs' Complaint asserts that ALICIA ROJAS has failed to make the rental

payments as agreed to in the Thoroughbred Lease, and as a result has defaulted on said lease.

Plaintiffs' Complaint further asserts that Defendants ALICIA ROJAS and FRANCISCO JAYME,

who are married, have remained living in the premises continuously, and to the date of the instant

Motion, continue to occupy the property without making the rent payments as agreed. Plaintiffs'

Complaint requested Defendants be required to immediately turn over the property to the

Plaintiffs, and requested payment of all unpaid rental amounts to date. Plaintiffs' Complaint

claims unpaid rental payments from the Defendants in an approximate amount of $28,076.76, as of

June 14, 2010, the date of the filing of said Complaint. 1

         6.       The parties disagree as to the location of the Thoroughbred Property, as the

Plaintiffs contend that the Thoroughbred Property is located in the State of New Mexico, while

1 As of the date of the filing of the instant Motion, now sixteen (16) months after the filing of Plaintiffs' Complaint,
Plaintiffs' claim for unpaid rental payments, at the agreed rate of $7,019.19 per month, has increased by the additional
amount of $112,307.04. ($7,019.19 per month x 16 months = $112,307.04).


Joint Motion to Withdraw Reference                                                                   Page 3 of 20
Monge v. Rojas - 10-03019-hcm
Defendants contend that the Thoroughbred Property is partially located in New Mexico, and

partially located in Texas.   In any case, although the Thoroughbred Lease was executed in the

State of New Mexico, the Thoroughbred Lease provides that the laws of the State of Texas govern

the interpretation, validity, performance and enforcement of the Thoroughbred Lease, and that

exclusive venue for any litigation arising out of the interpretation, validity, performance or

enforcement of the Thoroughbred Lease shall be in El Paso County, Texas.

        7.      The Defendants filed an Answer and a Counterclaim in the Adversary Proceeding,

as amended, alleging in pertinent part that (a) Defendant ALICIA ROJAS owes monies in a

disputed amount, (b) said Thoroughbred Lease constitutes an executory contract under Texas State

law, and (c) turnover is inappropriate. (See Plaintiffs' Exhibits B and D attached hereto).

Defendants further claim that (a) the applicable Texas state law affords the Defendants an

opportunity to cure their default, if one exists, under the executory contract, (b) the Defendants

conveyed the property at issue to the Plaintiffs in a resulting trust, (c) Plaintiffs committed fraud in

the relevant transaction with Defendants, and (d) the transaction should be rescinded, and the

property re-conveyed to Defendants. (See Plaintiffs' Exhibits B and D attached hereto).

        8.      Plaintiffs' Answer to Defendants' counterclaim generally denies the allegations

contained in Defendants' counterclaim, and asserts in pertinent part the Affirmative Defenses of

breach of contract (the Thoroughbred Lease), and fraud and gross negligence on the part of the

Defendants. (See Plaintiffs' Exhibit C attached hereto).

        9.      Neither party has admitted or denied under Bankruptcy Rule 7012(b) any allegation

in their responsive pleadings as to whether subject Adversary Proceeding is core or non-core.

Neither party has expressly consented to entry of final orders or judgment by the Bankruptcy Judge

under Bankruptcy Rule 7012(b). (See Plaintiffs' Exhibits A through D attached hereto).

Joint Motion to Withdraw Reference                                                      Page 4 of 20
Monge v. Rojas - 10-03019-hcm
        10.     The parties have not completed discovery in the Adversary Proceeding, and

therefore compliance with Rule 26 of the Federal Rules of Civil Procedure is not complete.

Additional motions and/or amendment of pleadings may be appropriate as a result of the

withdrawal of reference requested herein.

        11.     The trial of this matter has not been set, and significant discovery is still

outstanding and needs to be completed. Although withdrawing this matter to the United States

District Court will likely result in a small delay in the trial of this matter, the parties are in

agreement that a brief delay in the trial will not prejudice any party to this litigation.

        12.     The parties have conferred and agreed that, except as the bankruptcy impacts the

dispute, this dispute regarding the house is based entirely upon state law. The parties believe that,

pursuant to the United State Supreme Court opinion in Stern v. Marshall, 564 U.S. ___, 131 S.Ct.

2594, 180 L.Ed.2d 475 (2011), the Bankruptcy Court herein lacks jurisdiction to hear these

state-law claims.

        13.     Therefore, the parties have agreed to file this joint motion requesting that the

United States District Court for the Western District of Texas, El Paso Division, enter an order (a)

withdrawing the reference to the United States Bankruptcy Court for the Western District of

Texas, El Paso Division, in whole, of the above-captioned Adversary Proceeding, and (b)

transferring all matters at issue in said Adversary Proceeding to the United States District Court for

the Western District of Texas, El Paso Division, to be set down for trial in the ordinary course.

        14.     The undersigned parties further agree that the United States Bankruptcy Court for

the Western District of Texas, El Paso Division, should retain jurisdiction to hear and determine all

other matters arising from or related to Bankruptcy Case No. 09-30881-lmc.




Joint Motion to Withdraw Reference                                                       Page 5 of 20
Monge v. Rojas - 10-03019-hcm
        15.     The Defendants/Counter-Plaintiffs filed no Proof of Claim in subject Chapter 11

proceedings. On July 13, 2010, the Bankruptcy Court issued an Order Confirming Debtors’

Chapter 11 Plan Small Business (Small Business Debtor Case), effectively ending the Chapter 11

proceedings. (See Plaintiffs' Exhibits E and F attached hereto).



                                        C.      ARGUMENT.

I.    T HIS J OINT M OTION T O W ITHDRAW R EFERENCE I S T IMELY UNDER 28 U.S.C. § 157(D).

        The United States District Court for the Western District of Texas, El Paso Division, has

original but not exclusive jurisdiction of all civil proceedings arising under title 11, or arising in or

related to cases under title 11. 28 USC §1334(b). Each District Court may provide that any or all

cases under title 11, and any or all proceedings arising under title 11, or arising in or related to a

case under title 11, shall be referred to the bankruptcy judges for the district. 28 USC §157.

        Accordingly, the above-captioned Adversary Proceeding was referred to the United States

Bankruptcy Court for the Western District of Texas, El Paso Division, pursuant to 28 USC §157,

and the Standing Order of Reference of the United States District Court for the Western District of

Texas, El Paso Division, Order No. 84-01, entered August 13, 1984, and published as Appendix

L-l 001-f of the Local Rules of the United States Bankruptcy Court for the Western District of

Texas, El Paso Division.

        A District Court may withdraw, in whole or in part, any case or proceeding referred to a

Bankruptcy Court, on its own motion or on timely motion of any party, for cause shown. 28

U.S.C. § 157(d). Section 157(d) does not define what constitutes a ''timely'' motion to withdraw

the reference to the Bankruptcy Court. Most courts, however, employ a "prejudice" test in

determining whether a motion to withdraw the reference is timely. See, e.g., Interconnect

Joint Motion to Withdraw Reference                                                      Page 6 of 20
Monge v. Rojas - 10-03019-hcm
Telephone Services, Inc. v. Farren, 59 B.R. 397 (S.D.N.Y. 1986); Burger King, 64 B.R. at 730.

In Interconnect, supra, the defendant moved to withdraw the reference one year after the

Adversary Proceeding had been instituted. The District Court nevertheless concluded that the

motion to withdraw was timely because the plaintiff would suffer no prejudice from the transfer

of the case to the District Court. Id at 402.

        In the case at hand, there is a scheduling order in place, but the next status hearing is

scheduled for January of 2012. Perhaps more significantly, the trial of this matter has not yet

been set, and no significant discovery has been completed. Therefore, if this joint motion is

granted, the District Court will not be restructuring or overriding any order entered by the

Bankruptcy Court. And although withdrawing this matter to the District Court will likely result in

a small delay in the trial of this matter, the parties are in agreement that a brief delay in the trial will

not prejudice either party to this litigation, or work a hardship on either party. Hence, this joint

motion of the parties should be deemed "timely" within the meaning of 28 U.S.C. § 157(d).


II.    Good Cause Exists To Withdraw Reference Under 28 U.S.C. § 157(d).

        Good "cause" exists within the meaning of 28 U.S.C. § 157(d) for withdrawal of the

reference in the instant case. Specifically, since no demand for jury trial has been asserted by

either party, and since the parties have not consented to the Bankruptcy Court issuing final orders,

the Bankruptcy Court would be the finder of fact pursuant to 28 U.S.C. § 157(c), and would be

required to submit proposed findings and conclusions to the District Court for de novo review on

those "non-core" matters to which any party has timely and specifically objected.

        Because of the requirement for de novo review by District Court in non-core matters, many

courts have held that it is a more efficient use of judicial resources, or it reduces delay and costs, if


Joint Motion to Withdraw Reference                                                         Page 7 of 20
Monge v. Rojas - 10-03019-hcm
the reference is instead withdrawn. Security Farms v. International Bhd. of Teamsters, 124 F.3d

999, 1007, note 3 (9th Cir. Cal. 1997) ("Inasmuch as a bankruptcy court's determinations on

non-core matters are subject to de novo review by the district court, unnecessary costs could be

avoided by a single proceeding in the district court."); Veys v. Riske, 2007 U.S. Dist. LEXIS 90623

*5 (W.D. Wash. Nov. 28, 2007) (where non-core issues predominate, withdrawal may promote

efficiency because a single proceeding in the district court could avoid unnecessary costs

implicated by the district court's de novo review of bankruptcy court determinations; declining to

withdraw the reference of this matter to the bankruptcy court would not promote principles of

judicial economy and would instead needlessly require the time and attention of two courts rather

than one); Coe-Truman Techs. v. United States Gov't (In re Coe-Truman Techs.), 214 B.R. 183,

187 (N.D. Ill. 1997)(as a non-core proceeding, the bankruptcy court's decision will be subject to de

novo review so it is a more efficient use of judicial resources for the district court to decide this

case in the first instance); Zahn v. Yucaipa Capital Fund (In re Almac's), 202 B.R. 648, 659 (D.R.I.

1996)(reference should be withdrawn to avoid the waste of judicial resources that would result if

the district court is forced to conduct de novo review); Met-AI, Inc. v. Hansen Storage Co., 157

B.R. 993, 1002 (E.D. Wis. 1993)(de novo review of non-core matters a factor favoring withdrawal

of the reference); Travelers Ins. Co. v. Goldberg, 135 B.R. 788, 792 (D. Md. 1992)(because of de

novo review, a referral appears to be a futile detour, requiring substantial duplication of judicial

effort).

           Therefore, in the event the District Court determines that subject Adversary Proceeding

is not a "core" proceeding, good "cause" exists, within the meaning of 28 U.S.C. § 157(d), for

withdrawal of the reference to the Bankruptcy Court, in whole, based on the interests of judicial

time and economy.

Joint Motion to Withdraw Reference                                                     Page 8 of 20
Monge v. Rojas - 10-03019-hcm
III.   Reference Should Be Withdrawn In Whole, Because The Adversary Proceeding Is
       Essentially a "Non-Core" Proceeding Involving Issues To Be Determined By
       Application Of State Law And Equity.

         Section 157(b) of Title 28 defines "core" proceedings, enumerating sixteen examples of

core proceedings. 2 28 U.S.C. § 157(b). Generally speaking, a "non-core" proceeding is a

proceeding where the causes of action are merely "related to" a bankruptcy case, while "core"

proceedings are those that "arise under" the bankruptcy code, or "arise in" a bankruptcy case. See

Wood v. Wood (In re Wood), 825 F.2d 90, 97 (5th Cir. 1987)(the phrases "arising under" and

"arising in" are helpful indicators of the meaning of core proceedings). A proceeding is "core"

under section 157 if it invokes a substantive right provided by title 11, or if it is a proceeding that,

by its nature, could arise only in the context of a bankruptcy case. Id. "If the proceeding does

not invoke a substantive right created by the federal bankruptcy law and is one that could exist

outside of bankruptcy it is not a core proceeding; it may be related to the bankruptcy because of its

potential effect, but under section 157(c)(1) it is an 'otherwise related' or non-core proceeding."

Id.

         In this case, the underlying basis of the counterclaim of the Defendants/Counter-Plaintiffs

is contractual fraud and rescission, with declaratory relief prayed for in the form of abatement of

subject Adversary Proceedings, and re-conveyance of subject property to Defendants as

Counter-Plaintiffs. (See paragraphs 12, 13 and 14 on page 4 of 6 of Plaintiffs' Exhibits B and D

attached hereto). All of the remedies sought by Defendants/Counter-Plaintiffs were created under

state law through judges (common law) and by legislatures (statutory law). All of the matters set

2 The term "core" originates from Northern Pipeline Construction Co. v, Marathon Pipe Line Co. (In re Northern
Pipeline Construction Co.), 458 U.S. 50 (1982), which held that the adjudication of state-created private rights is not
at the core of the federal bankruptcy power. Id. at 71. Section 157 of Title 28 was enacted in response to Marathon.
With the enactment of the statutory bankruptcy jurisdiction scheme, Congress did not intend to contravene
Marathon . See Orion Pictures Corp. v, Showtime Networks (In re Orion Pictures Corp.), 4 F.3d 1095, 1102 (2d Cir.
1993).

Joint Motion to Withdraw Reference                                                                  Page 9 of 20
Monge v. Rojas - 10-03019-hcm
forth in the counterclaim of the Defendants/Counter-Plaintiffs are thus essentially "non-core"

proceedings requiring a determination and application of equity and appropriate state law, and are

merely "otherwise related to" to the bankruptcy case at hand.

       Specifically, as concerns the counterclaim of the Defendants/Counter-Plaintiffs, there are

no bankruptcy causes of action alleged, and the counterclaim, if filed in state court, could exist

outside of bankruptcy. Moreover, the basis of the counterclaim does not appear in any of the

"laundry list" of core proceedings in 28 U.S.C. § 157(b)(2), and can only be viewed as a

contractual dispute. Such disputes are traditionally "non-core" proceedings. See, e.g., Northern

Pipeline Construction Co. v. Marathon Pipe Line Co. (In re Northern Pipeline Construction Co.),

458 U.S. 50, 71 (1982)("But the restructuring of debtor-creditor relations, which is at the core of

the federal bankruptcy power, must be distinguished from the adjudication of state-created private

rights, such as the right to recover contract damages that is at issue in this case."); Wood, 825 F.2d

at 97 (simply a state contract action that, had there been no bankruptcy, could have proceeded in

state court); Beitel v. OCA, Inc. (In re OCA, Inc.), 551 F.3d 359, 368 (5th Cir. 2008)(Debtor sued

third party for breach of contract; held: non-core; "As in In re Wood, the instant claim is 'not based

on any right created by the federal bankruptcy law,' but instead is 'simply a state contract action

that, had there been no bankruptcy, could have proceeded in state court. '''); Enron Power Mktg. v.

City of Santa Clara (In re Enron Power Mktg.), 2003 U.S. Dist. LEXIS 189, 30-31 (S.D.N.Y. Jan.

8, 2003)(action for post-petition breach of pre-petition contract not a core proceeding).

       Similarly, in the case of Plaintiffs/Counter-Defendants' affirmative defenses, the

underlying basis of their affirmative defenses is fraud and the tort of gross negligence. (See

paragraph 4 on page 3 of Plaintiffs' Exhibit C attached hereto). The affirmative defenses of

contractual fraud and the tort of gross negligence are, of course, actions created under state law

Joint Motion to Withdraw Reference                                                    Page 10 of 20
Monge v. Rojas - 10-03019-hcm
through judges (common law) and by legislatures (statutory law). And while Plaintiffs’

Complaint is couched as an action To Recover and For Turnover of Property And To Determine

Nature, Extent And Validity Of Liens And For Damages, pursuant to the provisions of 11 U.S.C.

§542, it is in effect an action under state law to evict tenants and recover unpaid rental payments.

         Consequently, all actions and remedies sought in subject Adversary Proceedings

(including the Plaintiffs' action To Recover and For Turnover of Property And To Determine

Nature, Extent And Validity Of Liens And For Damages, 11 U.S.C.§542 notwithstanding) are

matters that properly may be deemed "non-core" proceedings requiring a determination and

application of equity and appropriate state law. 3 Therefore, all of the actions and remedies sought

in subject Adversary Proceedings are essentially "non-core" proceedings, and are appropriate for

withdrawal, in whole, of the reference to the Bankruptcy Court pursuant to 28 U.S.C. § 157(d).


IV.    Reference In Whole Should Be Withdrawn For This Non-Core Adversary Proceeding
       In Accordance With The U.S. Supreme Court's Ruling In Stern v. Marshall.

         Under the United States Supreme Court's decision in Stern v. Marshall, 564 U.S. ___, 131

S.Ct. 2594, 180 L.Ed.2d 475 (2011), Bankruptcy Courts cannot enter final judgment on "core"

claims that are "in no way derived from or dependent upon bankruptcy law", and would not

"necessarily be resolved in the claims allowance process." Id. at 2618. In Stern v. Marshall, the

Supreme Court held that while 28 U.S.C.§ 157(b)(2)(C) granted the Bankruptcy Court the right to

enter a final judgment on a counterclaim for tortious interference, the Constitution provided

otherwise. Id. at 2618.

         The facts in Stern v. Marshall thus are much like those at hand in this case.                  Here,

3 By extension, neither fraud nor the tort of gross negligence, as alleged by Plaintiffs/Counter-Defendants, are
specifically enumerated as matters constituting "core" proceedings under 28 U.S.C. §157(b)(2). On the other hand,
under 28 U.S.C. §157(b)(2), personal injury torts are specifically excepted as matters constituting "core" proceedings.

Joint Motion to Withdraw Reference                                                                  Page 11 of 20
Monge v. Rojas - 10-03019-hcm
Plaintiffs/Counter-Defendants' affirmative defenses (fraud and tortuous gross negligence) and

Defendants/Counter-Plaintiffs' counterclaim (contractual fraud and rescission, and seeking

declaratory relief) cannot therefore be constitutionally determined by the Bankruptcy Court after

Stern v. Marshall.

       As such, under Stern v. Marshall, the Bankruptcy Court cannot enter final judgment on the

Plaintiffs' action "To Recover and For Turnover of Property And To Determine Nature, Extent

And Validity Of Liens And For Damages", which as noted above is in effect an action under state

law to evict the Defendants from tenancy, and recover unpaid rental payments. To paraphrase the

United States Supreme Court, the Plaintiffs' actions to evict the tenant Defendants and recover

unpaid rental payments are "'quintessentially suits at common law that more nearly resemble state

law contract claims.'" Id. at 2614 (quoting Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 56

(1989); see also Mirant, 337 B.R. at 119 (recognizing that fraudulent conveyance claims "have

non-core characteristics ... that would raise Marathon concerns if they were to be submitted to the

adjudicatory jurisdiction of the bankruptcy court").

       In summary, even the Plaintiffs' original claim "To Recover and For Turnover of Property

And To Determine Nature, Extent And Validity Of Liens And For Damages", although invoked

under 11 U.S.C.§542, must be adjudicated in District Court, in full accordance with the United

States Supreme Court's decision in Stern v. Marshall. Therefore, the United States District Court

for the Western District of Texas, El Paso Division, should order that subject Adversary

Proceeding be tried in whole in the United States District Court for the Western District of Texas,

El Paso Division, pursuant to 28 U.S.C. §157(d).




Joint Motion to Withdraw Reference                                                 Page 12 of 20
Monge v. Rojas - 10-03019-hcm
V.     R EFERENCE SHOULD BE W ITHDRAWN F OR T HE ADVERSARY P ROCEEDING I N W HOLE I N
       ACCORDANCE W ITH T HE F IFTH C IRCUIT ' S R ULING I N H OLLAND V. R OY.

        Assuming for arguendo that this Court finds that Plaintiffs' original claim "To Recover and

For Turnover of Property And To Determine Nature, Extent And Validity Of Liens And For

Damages", as invoked under 11 U.S.C.§542, is a core proceeding, reference of said matter should

nonetheless still be withdrawn, in accordance with the U.S. Court of Appeals for the Fifth Circuit

ruling in Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 998 (5th Cir. 1985).

        In Holland, the Fifth Circuit delineated five factors pertinent to this case that need be

considered to evaluate whether to withdraw the reference for "cause" shown: 1) whether the

underlying suit is core or non-core; 2) whether withdrawal will further uniformity in bankruptcy

administration; 3) whether forum shopping and confusion will be reduced; 4) whether withdrawal

will foster economical use of resources; and 5) whether withdrawal will expedite the bankruptcy

process.4 Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 998 (5th Cir. 1985)

(remanding to district court to determine whether to withdraw reference); Randall v. Am. Solar

King Corp. (In re Am. Solar King Corp.), 92 B.R. 207, 210 (Bankr. W.D. Tex. 1988) (citing

Holland factors and granting motion to withdraw reference); In re Johnson, 369 B.R. 322

(recommending withdrawal of reference).

        As noted previously, the underlying suit between the parties herein is very clearly a

"non-core" proceeding requiring a determination and application of equity and appropriate state

law, so the first Holland factor mandating withdrawal is herein met.

        As concerns the second factor (whether withdrawal of the reference in whole will further

uniformity in bankruptcy administration), this factor weighs in favor of withdrawal of the


4 A sixth Holland factor, whether the proceeding involves a jury demand, is not pertinent herein.

Joint Motion to Withdraw Reference                                                                  Page 13 of 20
Monge v. Rojas - 10-03019-hcm
reference in whole, because the Plaintiffs/Counter-Defendants' Chapter 11 Plan herein has already

been confirmed, and said Debtors have reorganized and are thus eligible to leave the Chapter 11

bankruptcy proceeding at any time. The court in Fitch v. Wells Fargo Bank, N.A., 423 B.R 630

(B.D.La. 2010), addressed this specific situation as follows:

               From the standpoint of judicial administration, it no longer makes any sense for the
               bankruptcy court to hear Morrison's putative nationwide BPO class action.
               Morrison's bankruptcy case has been completed * * * In short, the resolution of
               Morrison's BPO claims is not necessary to implement or execute her completed
               bankruptcy plan. Moreover, Morrison's claims do not involve the violation,
               modification or even interpretation of any bankruptcy court orders or bankruptcy
               laws. Instead, Morrison claims only that Wells Fargo's assessment and collection of
               BPOs violates RESPA and various state laws. Nor does Wells Fargo seek to
               modify any bankruptcy court filings or orders. Thus, there is no institutional
               reason for these putative class RESP A and state law claims to be heard by the
               bankruptcy court instead of this Court.


Fitch. 423 B.R. at 637-38 (emphasis added) (citations omitted).

       Like the situation in Fitch, there simply is no "uniformity in bankruptcy administration" to

further in this case. This case just no longer belongs in Bankruptcy Court, so the second Holland

factor mandating withdrawal as a whole is herein met. And given that the United States Supreme

Court's decision in Stern v. Marshall mandates that "non-core" proceeding be tried by the District

Courts instead of the Bankruptcy Courts, uniformity in bankruptcy administration can only be met

by withdrawal of the reference in whole. See, e.g., Auto. Fin. Corp., 411 B.R. at 351-352

(classification of a proceeding as "non-core" helps determine whether a Bankruptcy Court can

exercise adjudicatory jurisdiction or should have a restricted judicial administrative role.)

       As concerns the final three Holland factors, it is also clear that 3) confusion will be reduced

by withdrawal as a whole; 4) withdrawal as a whole will foster economical use of resources; and 5)

withdrawal as a whole will expedite the bankruptcy process, since the Bankruptcy Court as the


Joint Motion to Withdraw Reference                                                    Page 14 of 20
Monge v. Rojas - 10-03019-hcm
finder of fact would be required to submit proposed findings and conclusions to the District Court

for a second, albeit de novo review, on those "non-core" matters to which any party has timely and

specifically objected. In point of fact, if the District Court will have to review de novo the

Bankruptcy Court's determinations on non-core claims (and some core claims as well),

withdrawing the reference in whole will actually promote judicial economy and efficiency. See,

e.g., id. at 328; Mirant Corp. v. Southern Co., 337 B.R. 107, 122 (N.D. Tex. 2006).

       Therefore, in light of the five Holland factors, reference should be withdrawn in whole in

subject Adversary Proceeding in the interests of judicial uniformity, economy and efficiency.



                               D.      CONTENTS OF MOTION.

       All pleadings and exhibits in Adversary Proceeding Case No. 10-03019-hcm are hereby

designated for transfer to the United States District Court, particularly the following:


               a.      Complaint filed by Joe Jesse Monge and Rosana Elena Monge against
                       ALICIA ROJAS, Francisco Javier Jayme, and filed as Docket Document
                       No. 1, on 06/14/2010.

               b.      Summons Issued on ALICIA ROJAS, and filed as Docket Document No. 2,
                       on 06/14/2010.

               c.      Summons Issued on Francisco Javier Jayme, and filed as Docket Document
                       No. 3, on 06/14/2010.

               d.      Summons Served on ALICIA ROJAS, and filed as Docket Document No.
                       4, on 06/15/2010.

               e.      Summons Served on Francisco Javier Jayme, and filed as Docket
                       Document No. 5, on 06/15/2010.

               f.      Amended Complaint, and filed as Docket Document No. 6, on 06/24/2010.

               g.      Summons Issued on Francisco Javier Jayme, and filed as Docket Document
                       No. 7, on 06/24/2010.

Joint Motion to Withdraw Reference                                                   Page 15 of 20
Monge v. Rojas - 10-03019-hcm
               h.     Amended Summons Served on ALICIA ROJAS, and filed as Docket
                      Document No. 8, on 06/24/2010.

               i.     Amended Summons Served on Francisco Javier Jayme, and filed as Docket
                      Document No. 9, on 06/24/2010.

               j.     Answer to Complaint, Counterclaim against all plaintiffs filed by Francisco
                      Javier Jayme, Alicia. Rojas, and filed as Docket Document No. 10, on
                      07/13/2010.

               k.     Response Filed by Lane C. Reedman for Counter Claimants Francisco
                      Javier Jayme, ALICIA ROJAS, and filed as Docket Document No. 13, on
                      07/30/2010.

               l.     Answer to Amended Complaint, Counterclaim against Joe Jesse Monge,
                      Rosana Elena Monge filed by Francisco Javier Jayme, ALICIA ROJAS, Joe
                      Jesse Monge, and filed as Docket Document No. 19, on 08/25/2010.

               m.     Answer to Counterclaim filed by Joe Jesse Monge, Rosana Elena Monge,
                      and filed as Docket Document No. 24, on 10/18/2010.

               n.     Amended Counterclaim filed by Lane C. Reedman for Defendants
                      Francisco Javier Jayme, AliciaRojas, Counter Claimants Francisco Javier
                      Jayme, ALICIA ROJAS, and filed as Docket Document No. 39, on
                      04/05/2011.

               o.     Answer to Counterclaim filed by Joe Jesse Monge, Rosana Elena Monge,
                      and filed as Docket Document No. 41, on 05/04/2011.


       Plaintiffs and Defendants herein further jointly request that any additional filings

hereinafter submitted, including and up to the ruling on this Joint Motion to Withdraw Reference,

be designated and included in the documents to be transferred to the United States District Court

for the Western District of Texas, El Paso Division.




Joint Motion to Withdraw Reference                                                  Page 16 of 20
Monge v. Rojas - 10-03019-hcm
                                         E.     PRAYER.


          WHEREFORE, for the foregoing reasons, Plaintiffs and Defendants hereby jointly

request that this Joint Motion to Withdraw Reference be granted, and that the United States

District Court for the Western District of Texas, El Paso Division, enter an order (1) withdrawing

the reference in whole to the United States Bankruptcy Court for the Western District of Texas, El

Paso Division, of the above-numbered Adversary Proceeding, and (2) transferring all matters at

issue in said Adversary Proceeding to the United States District Court for the Western District of

Texas, El Paso Division, to be set down for trial as a civil action in the ordinary course.



          A proposed Agreed Order Granting Joint Motion To Withdraw Reference is attached

hereto.



Date: January 6, 2012                             Respectfully submitted,

                                                  THE LAW OFFICES OF MICHAEL R. NEVAREZ
                                                  A Professional Corporation
                                                  P.O. Box 12247
                                                  El Paso, Texas 79913
                                                  Telephone: (915) 603-1882
                                                  Facsimile: (915) 538-7413
                                                  Email: MNevarez@LawOfficesMRN.com


                                                  /s/ Michael R. Nevarez
                                                  By: MICHAEL R. NEVAREZ
                                                  State of Texas Bar No. 14933400

                                                  Attorney for Debtors and Plaintiffs




Joint Motion to Withdraw Reference                                                   Page 17 of 20
Monge v. Rojas - 10-03019-hcm
APPROVED:

GUEVARA, BAUMANN, COLDWELL,           DIAMOND LAW
REEDMAN & LUTHER, LLP

By:    /s/ Lane C. Reedman            By:       /s/ Sidney J. Diamond
Lane C. Reedman                       Sidney J. Diamond
Attorney for Defendants               Attorney for Debtors/Plaintiff
Texas Bar Card No. 16698400           Texas Bar Card No. 5803000
4171 North Mesa Street, Suite B-201   3800 North Mesa Street, Suite B-3
El Paso, Texas 79902                  El Paso, Texas 79902
Phone: (915) 544-6646                 Phone: (915) 532-3327
Fax: (915) 544-8305                   Fax: (915) 532-3355
Email: gbcr_law@att.net               Email: Sidney@sidneydiamond.com




Joint Motion to Withdraw Reference                                  Page 18 of 20
Monge v. Rojas - 10-03019-hcm
                             CERTIFICATE OF CONFERENCE


        I hereby certify that, prior to the filing of the foregoing Joint Motion to Withdraw
Reference, I personally conferred with the following counsel of record in the above-referenced and
-styled matter, and that they reviewed and approved said Joint Motion to Withdraw Reference:


                                Lane C. Reedman
                                Attorney for Defendants
                                Guevara, Baumann, Coldwell & Reedman, LLP
                                4171 N. Mesa St., Suite B-201
                                El Paso, TX 79902

                                Sidney J. Diamond
                                Attorney for Debtors/Plaintiff
                                Diamond Law
                                3800 North Mesa Street, Suite B-3
                                El Paso, Texas 79902



Date: January 6, 2012                            Respectfully submitted,

                                                 The Law Offices of Michael R. Nevarez
                                                 A Professional Corporation
                                                 P.O. Box 12247
                                                 El Paso, Texas 79913
                                                 Telephone: (915) 603-1882
                                                 Facsimile: (915) 538-7413
                                                 Email: MNevarez@LawOfficesMRN.com



                                                 /s/ Michael R. Nevarez
                                                 By: MICHAEL R. NEVAREZ
                                                 State of Texas Bar No. 14933400

                                                 Attorney for Debtors and Plaintiffs




Joint Motion to Withdraw Reference                                                 Page 19 of 20
Monge v. Rojas - 10-03019-hcm
                                CERTIFICATE OF SERVICE

         I hereby certify that a true and correct copy of the foregoing Joint Motion To Withdraw
Reference, together with all documents referenced therein, was served either by electronic means
as listed on the Court's CM/ECF filing and noticing system, and/or by regular first class mail,
postage prepaid, to the following parties in interest, on or before January 6, 2012:


                                     Lane C. Reedman
                                     Attorney for Defendants
                                     Guevara, Baumann, Coldwell & Reedman, LLP
                                     4171 N. Mesa St., Suite B-201
                                     El Paso, TX 79902

                                     Sidney J. Diamond
                                     Attorney for Debtors/Plaintiff
                                     3800 North Mesa Street, Suite B-3
                                     El Paso, Texas 79902


Date: January 6, 2012                           Respectfully submitted,

                                                The Law Offices of Michael R. Nevarez
                                                A Professional Corporation
                                                P.O. Box 12247
                                                El Paso, Texas 79913
                                                Telephone: (915) 603-1882
                                                Facsimile: (915) 538-7413
                                                Email: MNevarez@LawOfficesMRN.com


                                                /s/ Michael R. Nevarez
                                                By: MICHAEL R. NEVAREZ
                                                State of Texas Bar No. 14933400

                                                Attorney for Debtors and Plaintiffs




Joint Motion to Withdraw Reference                                                Page 20 of 20
Monge v. Rojas - 10-03019-hcm

				
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Description: Motion to Withdraw Reference in Chapter 11 Bankruptcy Proceeding
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