Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-02792/USCOURTS-casd-3_11-cv-02792-0/pdf.json

Nature of Suit Code: 423
Nature of Suit: Bankruptcy Withdrawal 28 USC 157
Cause of Action: 28:0157 Motion for Withdrawal of Reference

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

In re: Eleazar Salazar,

Debtor,

__________________________________

ELEAZAR SALAZAR,

Plaintiff,

v.

U.S. BANK NATIONAL

ASSOCIATION, as Trustee for the CBASS Mortgage Loan Asset-Backed

Certificates, Series 2006-CB2, its

successor and/or successors; LITTON

LOAN SERVICING, LP; QUALITY

LOAN SERVICE CORPORATION;

ACCREDITED HOME LOANS, INC.,

Defendants.

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Civil No. 11cv2792 L(BLM)

Bankruptcy Case No.: 10-17456-MM13

Adversary No.: 11-90441-MM

ORDER GRANTING MOTION TO

WITHDRAW THE REFERENCE

[doc. #1] 

Plaintiff/debtor Eleazar Salazar’s Chapter 13 bankruptcy action was filed on September

30, 2010. In September 2011, plaintiff filed an adversary complaint asserting state law claims

challenging the foreclosure of real property against defendants U.S. Bank National Association,

as Trustee for the C-BASS Mortgage Loan Asset-Backed Certificates, Series 2006-CB2; Litton

Loan Servicing, L.P. Defendants filed an answer to the adversary complaint on November 14,

2011. They now move to withdraw the reference from the Bankruptcy Court to the District

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Court. The motion has been fully briefed. For the reasons set forth below, the motion will be

granted.

Discussion

District courts have discretion to refer “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” to the

bankruptcy judges for that district. 28 U.S.C. § 157(a). “[B]ankruptcy courts may hear and enter

final judgments in ‘core proceedings' in a bankruptcy case.” Stern v. Marshall, 131 S. Ct. 2594,

2601–02 (2011). In “non-core proceedings, the bankruptcy courts instead submit proposed

findings of fact and conclusions of law to the district court, for that court's review and issuance

of final judgment.” Id.

This court “may withdraw in whole or in part, any case proceeding referred, on its own

motion or on timely motion of any party, for cause shown.” 28 U.S.C. § 157(d). In the present

case, defendants move to withdraw the reference of the adversary complaint because the claims

debtor asserts are not core bankruptcy matters but instead are based on alleged violations of

California law. “Core proceedings are actions by or against the debtor that arise under the

Bankruptcy Code in the strong sense that the Code itself is the source of the claimant's right or

remedy, rather than just the procedural vehicle for the assertion of a right covered by some other

body of law, normally state law.” Matter of U.S. Brass Corp., 110 F.3d 1261, 1268, 30 Bankr.

Ct. Dec. (CRR) 778 (7th Cir. 1997). The party seeking withdrawal of the reference bears the

burden of showing that the reference should be withdrawn. Carmel v. Galam (In re Larry's

Apartment, LLC), 210 B.R. 469, 472 (Bankr. D. Ariz. 1997).

Defendants argue that debtor’s claims challenge the nonjudicial foreclosure procedures of

a mortgage loan and do not draw from or rely on bankruptcy law and therefore, are non-core

proceedings that should be heard in this Court. In other words, like the Stern case, the state law

claims at issue in this action are “in no way derived from or dependent upon bankruptcy law.”

131 S. Ct. at 2618.

Debtor contends, however, that plaintiff’s adversary complaint is a core proceeding

because the claims concern the administration of the estate; would determine, avoid or recover

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fraudulent conveyances; or affect the liquidation of the assets of the estate or the adjustment of

the debtor-creditor relationship. Opp. at 2 (citing 11 U.S.C. §157(b)(2)(A), (H), and (O)). The

Court disagrees. Debtor adversary complaint is a state law wrongful foreclosure action which

clearly could have been filed in state court and would not be “resolved in the process of ruling

on a creditor's proof of claim.” Stern, at 2621. As a result, the bankruptcy court cannot enter a

final judgment on debtor’s adversary action. Nevertheless, the Court must determine whether it

is required to withdraw the reference, or, if not required, it should exercise its discretion to do so.

The bankruptcy code specifically provides that a bankruptcy court may hear and “submit

proposed findings of fact and conclusions of law to the district court,” subject to de novo review,

in a proceeding “that is not a core proceeding.” 28 U.S.C. § 157(c)(1). Thus, the Court may

decline to withdraw the reference and require the bankruptcy court to provide proposed findings

of fact and conclusions of law.

The Ninth Circuit has set forth factors to consider in determining whether to exercise its

discretion and withdraw the reference: (1) efficient use of judicial resources; (2) delay and costs

to the parties; (3) uniformity of bankruptcy administration; (4) the prevention of forum shopping;

and (5) other related factors. Sec. Farms v. Int'l. Bhd. of Teamsters (In re Security Farms), 124

F.3d 999, 1008 (9th Cir. 1997). 

Here, the most efficient use of judicial resources supports withdrawal of the reference.

The Court is able to consider the factual and legal basis for the adversary action, which is based

on determination of state law claims, without unreasonable delay or costs. Because this type of

action has been considered frequently in the district court, the results of the adversary litigation

would likely be consistent with similar cases. This is not a case where there are complex issues

of law that require consideration of the interplay between bankruptcy and state law claims.

As noted above, because debtor’s claims are non-core, the bankruptcy court may not enter

final judgment. For the reasons set forth above, withdrawal of the reference is reasonable. 

Debtor finally argues that the motion for withdrawal of the reference is untimely: such a

motion is “timely if it was made as promptly as possible in light of the developments in the

bankruptcy proceeding.” Sec. Farms, 124 F.3d at 1007 n.3.

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The Court finds no basis to suggest that the motion for withdrawal of the reference was

not promptly made.

Based on the foregoing, IT IS ORDERED: 

1. Defendants’ motion for withdrawal of the reference is GRANTED;

2. Defendants shall answer or otherwise respond to plaintiff’s complaint on or before

February 17, 2012.

IT IS SO ORDERED. 

DATED: January 30, 2012

M. James Lorenz

United States District Court Judge

COPY TO: 

HON. BERNARD G. SKOMAL

UNITED STATES MAGISTRATE JUDGE

ALL PARTIES/COUNSEL

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