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FDIC v. WISSEL & SONS CONSTR. CO.

March 13, 1995

FEDERAL DEPOSIT INSURANCE CORPORATION as RECEIVER for THE HOWARD SAVINGS BANK, Plaintiff,
v.
WISSEL & SONS CONSTRUCTION CO., INC., CONRAD WISSEL, III, RANDOLPH WISSEL, CONRAD JAMES WISSEL, BLACKSTONE CO., INC., the STATE OF NEW JERSEY, and CARMEN J. MAGGIO, in his capacity as chapter 7 trustee of the bankruptcy estates of Wissel & Sons Construction Co., Inc. and Conrad Wissel, III & Beatrice Wissel, Defendants.



The opinion of the court was delivered by: ALFRED J. LECHNER, JR.

 LECHNER, District Judge

 This is a foreclosure action brought by the Federal Deposit Insurance Corporation (the "FDIC") as receiver for The Howard Savings Bank ("Howard Savings") against defendants Wissel & Sons Construction Co., Inc. ("Wissel Contracting"), Conrad Wissel, III, Randolph Wissel, Conrad James Wissel, Blackstone Co., Inc., the State of New Jersey (collectively, the "Defendants") and Carmen J. Maggio, in his capacity as chapter 7 trustee (the "Trustee") of the bankruptcy estates of Wissel Construction and Conrad Wissel, III & Beatrice Wissel (the "Wissels"). Removal jurisdiction is alleged pursuant to 12 U.S.C. § 1819(b)(2)(B).

 Currently before the court is the motion by the Trustee to remand the instant matter pursuant to 28 U.S.C. § 1447(c). *fn1" See Notice of Motion to Remand to New Jersey Superior Court, filed 23 January 1995 (the "Notice of Remand"). For the reasons set forth below, this matter is remanded to the Superior Court of New Jersey, Chancery Division, Monmouth County.

 Facts and Procedural History

 On 22 January 1989, Howard Savings filed a complaint (the "Complaint"), in the Superior Court of New Jersey, Chancery Division, Monmouth County (the "Superior Court of New Jersey"), seeking recovery against the Defendants on a note executed by Wissel Contracting in favor of Howard Savings. Complaint, P 1. On 21 June 1989, Howard Savings obtained a final judgment in foreclosure by default against the Defendants (the "Foreclosure Judgment"). See Notice of Removal, filed 22 December 1994 (the "Notice of Removal"), attaching Exhibits A and B, P 2.

 On 29 June 1989 Wissel Contracting filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey (the "Bankruptcy Court"). Id., P 3. Soon thereafter, the Wissels sought joint voluntary Chapter 11 protection. Id.

 On 6 December 1989, Wissel Contracting and the Wissels filed separate adversary proceedings (the "Wissel Adversary Proceedings") in the Bankruptcy Court against Howard Savings. Moving Brief at 5. Howard Savings filed an adversary proceeding, on 28 March 1990 (the "Howard Savings Adversary Proceeding"), seeking a determination of the validity and priority of its secured and unsecured claims including the Foreclosure Judgment. Id.

 On 12 August 1992, the bankruptcy proceedings of Wissel Contracting and the Wissels were converted to liquidation proceedings under Chapter 7 of the United States Bankruptcy Code; the Trustee was appointed to represent both estates. Notice of Removal, P 4.

 On or about 2 October 1992, the Commissioner of Banking of the State of New Jersey declared Howard Savings insolvent and appointed the FDIC as receiver. Id., P 5. On 26 January 1993, the Trustee filed a motion for partial summary judgment against the FDIC. Opp. Brief at 4; Moving Brief at 6.

 On 5 February 1993 the FDIC filed a cross-motion to dismiss the Wissel Adversary Proceedings for lack of subject matter jurisdiction. Moving Brief at 6. The Bankruptcy Court denied the FDIC's motion on 16 September 1993. Id. In late January or February 1993 *fn2" , the FDIC moved and was substituted as plaintiff in the Howard Savings Adversary Proceeding. Id. at 6-7, 12.

 The FDIC moved for summary judgment, on 22 February 1993, contending the Wissel Adversary Proceedings were barred by the entire controversy doctrine and claim preclusion in light of the Foreclosure Judgment. Id. at 6; Opp. Brief at 4. By Order, dated 24 March 1994 (the "24 March 1994 Order"), the Bankruptcy Court granted the motion by FDIC for summary judgment and dismissed the Wissel Adversary Proceedings. Opp. Brief at 5. The Bankruptcy Court concluded the issues raised by the Wissel Adversary proceedings were relevant to, but not asserted in connection with, the Foreclosure Judgment. Id.

 On 4 April 1994, the Trustee filed an appeal of the 24 March 1994 Order in the United States District Court for the District of New Jersey. Moving Brief at 5; Opp. Brief at 7. The 24 March 1994 Order was affirmed with regard to the claims of Wissel Construction and Conrad Wissel, III, but remanded with regard to Beatrice Wissel. Moving Brief at 5 & n.2; Opp. Brief at 7.

 On 4 October 1994, the Trustee filed a motion in the Superior Court of New Jersey to set aside the Foreclosure Judgment in order to raise various defenses to the foreclosure (the "Foreclosure Action"). Moving Brief at 7; Opp. Brief at 5-6. The FDIC appeared, as receiver of Howard Savings, in opposition to the Trustee's motion. Moving Brief at 7; Opp. Brief at 6. The FDIC filed opposition papers on 27 October 1994 and was heard at oral argument on 4 November 1994. By Order of the Superior Court, dated 4 November 1994, the Foreclosure Judgment was vacated. Moving Brief at 7-8; Opp. Brief at 6.

 Thereafter, the FDIC sought formal substitution, as a plaintiff, in the Foreclosure Action. Notice of Removal, P 10. A consent order, dated and filed 9 December 1994 (the "Consent Order"), was entered by the parties. See Consent Order, attached as Exhibit B to the Notice of Removal. The Consent Order formally substituted the FDIC as plaintiff in its capacity as receiver of Howard Savings and authorized the intervention of the Trustee in the Foreclosure Action on behalf of the Chapter 7 bankruptcy proceedings of Wissel Construction and the Wissels. Id.

 After formal substitution as plaintiff, on 22 December 1994, the FDIC removed the Foreclosure Action to the United States District Court for the District of New Jersey. See Notice of Removal. The Trustee, by way of the instant motion, seeks a remand of the instant ...


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