Raven II Holdings v. Quest Title Company et al

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UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re:
W.S.F. – World Sports Fans, LLC,
an Arizona limited liability company,
Debtor. 	No. 11-05-27795 PHX-GBN
(Jointly Administered with Case Nos.
11-05-27993 PHX-GBN and
11-05-27994 PHX-SSC)
Raven II Holdings, an Arizona LLC,
Plaintiff,
v. 	Adv. No. 06-1128 M
Quest Title Company, a New Mexico
Corporation, Duane Slade, Jennifer Slade,
Guy Williams, Lisa Williams,
Duane Slade and Guy Williams d/b/a
WFS, World Sports Fans LLC,
Defendants.
ORDER GRANTING MOTION TO REMAND
THIS MATTER is before the Court on the Notice of Removal filed by W.S..F.– World
Sports Fans LLC (“WSF”) on May 19, 2006 and on the Motion to Remand (the “Motion to
Remand”) filed on June 1, 2006 by Plaintiff Raven II Holdings, LLC, an Arizona limited liability
company (“Raven”). The Court held a hearing on the Motion to Remand on July 17, 2006 after
which the Court instructed the parties to file briefs and took the matter under advisement.
Having reviewed the pleadings, briefs, arguments of counsel and being otherwise sufficiently
informed, the Court finds:
1. WSF filed a petition for Chapter 11 bankruptcy relief in Arizona Bankruptcy Court on
November 13, 2005, which is pending under Case No. 05-27995 GBN. Defendants, Duane
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Slade (“Slade”) and Guy Williams (“Williams”) are the owners of WSF each holding a 50%
membership interest in WSF. On January 12, 2006 the Arizona Bankruptcy Court ordered
WSF’s bankruptcy case to be jointly administered with the Chapter 11 bankruptcies of Mathon
Fund, LLC (Case No. 05-27993) and Mathon Fund I, LLC (Case No. 05-27994). The jointly
administered case was assigned Case No. 05-27993 GBN.
2. This dispute arises out of the sale of real property in Cibola County, New Mexico (the
“Property”). An ownership interest in the Property is listed on WSF’s bankruptcy schedules. In
early 2006, the Property was sold. On April 25, 2006, Raven filed a proceeding in the Thirteenth
Judicial District Court in Cibola County, New Mexico to determine distribution of the proceeds
from the sale of the Property. Raven II Holdings, LLC v. Quest Title Company, Duane Slade and
Jennifer Slade, Guy Williams and Lisa Williams, Duane Slade and Guy Williams d/b/a WFS,
World Sports Fans, LLC, No. D1333 CV20060085 (the “State Court Action”). See Complaint
(Exhibit A to Notice of Removal).
3. The State Court Complaint alleges that WSF claims an interest in the sales proceeds
but that WSF “failed to complete the formation requirements under Arizona law, and therefore,
does not exist as a limited liability company.” Complaint ¶ 6. Raven did not name or serve
WSF as a defendant and did not assert claims against WSF in the State Court Action. “WSF,
World Sports Fans LLC” is referred to in the caption of the Complaint as a business name (d/b/a)
used by Slade and Williams. WSF has not intervened in the State Court Action.
3. On May 19, 2006 WSF filed in this Court a Notice of Removal of the State Court
Action arguing that this proceeding is within the Court’s core jurisdiction because it concerns
administration of its bankruptcy estate and the liquidation of an asset of the estate. See 28
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1 The record in the Arizona bankruptcy proceeding contains no order for relief from the
stay in the WSF bankruptcy proceeding. Although WSF argues that the sale was a violation of
the stay in its bankruptcy, this claim has not been asserted and is not before this Court.
2 Defendants, Slade and Williams were involved with Plaintiff Raven in a real estate
investment business. Motion to Remand p. 2. On July 31, 2006, Slade and Williams filed a
joinder to the Notice of Removal stating that the removal of the State Court Action to this Court
is proper since WSF is a legally formed entity that is in bankruptcy in Arizona and has standing
to remove this case to this Court. See Joinder in Removal, Adv. No. 06-1128 Doc. No. 16.
Raven has moved to strike the Joinder, and the Court ruled on the Motion to Strike in a separate
order.
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U.S.C. § 157(b)(2)(A) and (O) (listing types of proceedings over which the bankruptcy court has
core jurisdiction).1
4. Defendants, Duane Slade, Jennifer Slade, Guy Williams and Lisa Williams filed their
Answer to the Removed Complaint on May 30, 2006 asking the Court, inter alia, to award a
portion of the proceeds of sale to them. Adv. No. 06-1128 M, Doc. No. 2.2
5. The Motion to Remand was filed on June 1, 2006 asking the Court 1) to remand this
proceeding to the State Court, 2) to dismiss WSF’s bankruptcy petition, and 3) to award
sanctions against WSF. Adv. No. 06-1128, Doc. No. 3.
Discussion
“The Court to which such claim or cause of action is removed may remand such claim or
cause of action on any equitable ground.” 28 U.S.C. § 1452(b). In the Motion to Remand as well
as in the original Complaint, Raven asserts that WSF is not a properly formed limited liability
company because it failed to publish its Articles of Organization as required by Arizona law.
Raven asserts that consequently, this Court is precluded from exercising jurisdiction in this
adversary proceeding, and the proceeding must be remanded to the State Court.
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In its Opposition to the Motion to Remand, WSF argues that it is a properly formed
limited liability company under Arizona law and as such, it can remove this action. Exhibit B to
the Motion to Remand is a certificate from the Arizona Corporation Commission stating that
“W.S.F. – World Sports Fans LLC” filed its Articles of Organization with the Commission on
July 19, 1999. 	WSF provides an affidavit of publication by Gail Chandonnet stating that the
Tribune, a newspaper published in Mesa, AZ, published notice of WSF’s formation in August
1999.
WSF’s status as a limited liability company, however, is not dispositive with regard to
the remand of this matter because, even if WSF is a legal entity, WSF is not a party in the State
Court Action and has no standing to remove the proceeding. Only a party to a legal proceeding
may remove that proceeding to a federal bankruptcy court. 28 U.S.C. § 1452(a) (“A party may
remove any claim or cause of action in a civil action . . . to the district court for the district where
such civil action is pending, if such district court has jurisdiction of such claim or cause of action
under section 1334 of this title.”). 	The Complaint in the State Court Action was the only portion
of the State Court record attached to the Notice of Removal. The caption of the Complaint refers
to “WSF, World Sports Fans, LLC” as a business name (d/b/a) of Slade and Williams. There is
no indication in the record that WSF was named or served in the State Court Action.
Based on the record before this Court, the Court finds that WSF was not made a party in
the State Court Action, and as such, it may not remove the State Court Action to this Court.
Raven’s request for dismissal of WSF’s bankruptcy case is not properly before this
Court. A motion to dismiss a bankruptcy should be brought in the bankruptcy case.
Fed.R.Bankr.P. 7001, 9014; See In re Irby, 321 B.R. 468, 469-70 (Bankr. N.D. Ohio
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2005)(action not listed in Rule 7001 as an adversary proceeding should be treated as contested
matter in bankruptcy proceeding).
For the foregoing reasons, the Motion is hereby GRANTED in part and the State Court
Action is REMANDED to the Thirteenth Judicial District Court, Cibola County, New Mexico;
the Motion to Dismiss WSF’s bankruptcy proceeding is DENIED and the motion to award
sanctions is DENIED.
MARK B. McFEELEY
UNITED STATES BANKRUPTCY JUDGE
Copies to:
Dennis Hill
Attorney for Plaintiff
PO Box 94750
Albuquerque, NM 87199-4750
Thomas Dawe
Attorney for Defendant WFS
PO Box 1027
Albuquerque, NM 87103-1027
Ross Crown
Keith Beauchamp
Bret A. Maidman
Attorneys for Slade and Williams
40 N. Central Ave., Suite 1900
Phoenix, AZ 85004-4584
R. Kris Bailey
Joel Sannes
Attorneys for Raven II Holdings
10429 S. 51st Street, Suite 215
Phoenix, AZ 85044
Eric Burris
Attorneys for WSF
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201 Third St. NW, Suite 1500
Albuquerque, NM 87102
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