Menu   5 ABR 503

In re: Case No. A97-00848-DMD) 
)Bancap No. 97-3300
Plaintiff,)Adv. No. A97-00848-002-DMD
)Chapter 13


          A hearing on defendant Grace A. Jensen's motion to change venue was held before the undersigned on August 10, 1998. Thomas Yerbich appeared on behalf of the trustee. Defendants Jack Pluid and Grace Jensen appeared on their own behalf. Having considered the motion, opposition and reply, as well as the arguments of the parties,

           IT IS ORDERED that the motion to change venue is granted. This adversary proceeding shall be transferred to the United States District Court for the District of Montana, for all further proceedings.

Procedural Background

          This action was commenced prepetition in Montana state court by two 5 ABR 504   TOP    creditors of the debtor, Frank Pluid. The state court action was entitled Susan E. Richmond and Bonnie Knudsen v. Frank Pluid, Harrell Pluid and Helen Pluid, Cause No. DV-96-158. Richmond has a judgment for $50,000 against the debtor for child support arrearages. Knudsen has a judgment against the debtor in the amount of $220,000 for wrongful sexual assault. Their complaint sought to set aside an alleged fraudulent transfer of real property located in Montana from the debtor to his parents pursuant to MCA 31-2-326.

          The debtor filed his chapter 13 petition in Anchorage, Alaska on August 29, 1997. On November 21, 1997, Richmond and Knudsen filed a timely notice of removal of action, pursuant to 28 U.S.C. 1452, in this court. Roughly one month after the notice of removal was filed, the chapter 13 trustee and the original defendants to the state court action (the debtor and his parents, Harrell and Helen Pluid) filed a stipulation to remand the case to state court. Because the parties who had removed the action (Knudsen and Richmond) had not signed the stipulation, the court scheduled a status conference on the stipulation to remand. At the status conference, the court granted the trustee a one-month period within which to determine whether he would substitute into the action in place of the plaintiffs as the real party in interest.

          On January 29, 1998, the trustee filed a motion to substitute himself in the removed action in place of the creditor plaintiffs as the real party in interest, contending that he was the proper party to prosecute the fraudulent conveyance action for the benefit of all the debtor's creditors. This motion was unopposed, and an order substituting the trustee as party plaintiff was entered on April 2, 1998.

           5 ABR 505   TOP    The trustee withdrew the stipulation to remand and filed a motion for leave to file amended complaint. That motion was also unopposed, and an order granting leave to amend the complaint was entered on May 15, 1998. While the amended complaint still seeks to set aside an alleged fraudulent transfer pursuant to MCA 31-2-326 et. seq., the defendants to the action are the debtor's siblings rather than his parents. After the debtor conveyed the Montana real property to his parents, they transferred it to the siblings on January 3, 1996. Because the transfer occurred more than one year before the debtor filed his bankruptcy petition, the trustee cannot seek to avoid the transfer under the bankruptcy fraudulent transfer provision, 11 U.S.C. 548, and must rely on the Montana fraudulent conveyance statute instead.

          Defendants Jack Pluid and Grace Jensen have each filed answers in this proceeding. They have both alleged, as an affirmative defense, that venue in this district is improper. On July 17, 1998, Jensen filed a motion to change venue. Jack Pluid has joined in that motion. The motion was brought pursuant to 28 U.S.C. 1404. The basis for Jensen's motion is that there are four critical witnesses to the action who reside in Montana. Two of the witnesses are Jensen's and the debtor's parents. Their father, Harrell Pluid, suffers serious health problems and his health would be jeopardized if he were required to travel to Alaska for trial. The other two critical witnesses include defendant Jack Pluid and a Montana attorney whom Jensen says could offer testimony relevant to the intent of the parties in making the various transfers of the subject real property. Jensen also contends that she and her brother have been unable to retain Alaska counsel to represent them in this proceeding, but they have located counsel in Montana should the case be transferred there.

           5 ABR 506   TOP    The trustee opposes the motion to transfer venue. He argues that Jensen has not made a sufficiently strong showing to justify transferring the case to Montana. He contends a transfer of venue would impose significant financial burdens on the estate, and that there are alternatives to obtaining the testimony of the out-of-state witnesses which would eliminate the need for them to travel to Alaska for trial.


          At the outset it should be noted that this proceeding is not properly venued in this district. The creditor plaintiffs removed this action from Montana state court pursuant to 28 U.S.C. 1452(a), which provides:
(a) A party may remove any claim or cause of action in a civil action other than a proceeding before the United States Tax Court or a civil action by a governmental unit to enforce such governmental unit's police or regulatory power, 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. [emphasis added]
Under 1452(a), a pending civil action may only be removed to the district court for the district where that action is pending, which may not necessarily be the same district as the one where the related bankruptcy case is pending. The proper course to follow, where a bankruptcy is pending in a district other than the one where the related state court civil action is pending, is to remove the action to the district court for the district where the action is pending, and then move for a transfer of venue to the district where the bankruptcy is pending. Furr v. Barnett Bank of Marion County (In re S & K Air Power of Florida, Inc.), 166 B.R. 193, 194-195 (Bankr. S. D. Fla. 5 ABR 507   TOP    1994). That course was not followed here. The plaintiffs to the civil action improperly removed this case directly to the District of Alaska. Under 1452(a), the fraudulent conveyance action should have been initially removed to the District Court for the District of Montana, which is where the defendants now seek to have it transferred.

          Jensen's motion is brought pursuant to 28 U.S.C. 1404, which allows a district court to transfer venue of a civil action "[f]or the convenience of parties and witnesses, in the interest of justice." The venue statute applicable to bankruptcy proceedings is 28 U.S.C. 1412, which provides that "[a] district court may transfer a case or proceeding under title 11 to a district court for another district, in the interest of justice or for the convenience of the parties." This provision is applicable to both properly venued and improperly venued cases and proceedings. 1 Collier on Bankruptcy 4.04Ώ] at 4-29 (15th ed. revised 1998).

          Motions to transfer venue are considered to be core proceedings. Id.; A.R.E. Mfg. Co., Inc. v. D & M Nameplate, Inc. (In re A.R.E. Mfg. Co., Inc.), 124 B.R. 912, 913 (Bankr. M.D. Fla. 1991); NBA Int'l Banking Corp. v. Kersting (In re Kersting), 85 B.R. 61, 63 (Bankr. S. D. Ohio 1988); In re Sundance Corp., 84 B.R. 699, 699-700 (Bankr. D. Mont. 1988). The decision to transfer venue "lies within the sound discretion of the Bankruptcy Court." In re Bent, 93 B.R. 329, 332 (Bankr. D. Vt. 1988). In determining whether to transfer an adversary proceeding, the following factors have been considered:
(1) the location of the plaintiff and defendant;

(2) the ease of access to necessary proof;

5 ABR 508   TOP   
(3) the availability of subpoena power for the unwilling witness;

(4) the expense related to obtaining willing witnesses;

(5) the enforceability of any judgment rendered;

(6) the ability to receive a fair trial;

(7) the state's interest in having local controversies decided within its borders, by those familiar with its law; and

(8) the economics of the estate administration.
A.R.E. Mfg. Co., 124 B.R. at 914. "[A] presumption has developed that civil proceedings should be tried in the 'home' court." 1 Collier on Bankruptcy, 4.04Ώ] at 4-30.

          This action to avoid a fraudulent conveyance is based on Montana state law. The real property which is the subject of the proceeding is located in Montana. One of the defendants and three of the defendants' critical witnesses reside in Montana. One of these witnesses, the debtor's father, is very ill and cannot travel to Alaska to testify at trial. Access to proof and the availability of subpoena power for unwilling witnesses will be enhanced if this action is transferred to Montana. Further, the expense of obtaining any unwilling witnesses will be reduced, and it will be easier to enforce a judgment avoiding a fraudulent conveyance, if one is rendered in this action, from the District Court in Montana. The ability to receive a fair trial would not be affected by transferring venue to Montana.

          Additionally, since the debtor's chapter 13 plan has been confirmed, the economics of estate administration should not be significantly impacted by transferring 5 ABR 509   TOP    venue to Montana. The trustee's attorney contends that it will be more costly for the estate to prosecute this proceeding if it is transferred to Montana. While it is true that other means exist for obtaining the testimony of the witnesses in Montana, which could eliminate the need for them to travel to Alaska for trial, I am not convinced that these alternative methods would result in savings for the estate. Additionally, the trustee could retain local counsel in Montana to complete discovery and prosecute this action there. Since the trustee will need to have counsel represent him at trial regardless of where the action is prosecuted, the expense of obtaining local counsel in Montana should not result in a substantial increase in expense for legal services to the estate. This is a fairly straightforward claim which does not require a familiarity with other aspects of the bankruptcy case in order to be successfully prosecuted.

          Finally, this is a local controversy, governed by Montana state law and pertaining to Montana real estate. It should be tried in the "home court," which, in this instance, would be the District Court for the District of Montana. For the foregoing reasons, defendant Jensen's motion to transfer venue will be granted, and this proceeding will be transferred to the United States District Court for the District of Montana.

DATED: September 7th, 1998.
          BY THE COURT
          United States Bankruptcy Judge