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Lattea v. Vanderbilt Mortgage & Finance, Inc.

United States District Court, S.D. West Virginia, Huntington Division

January 8, 2020

VANDERBILT MORTGAGE & FINANCE, INC. and CMH HOMES, INC., d/b/a Oakwood Homes Nitro, WV, Defendants.



         Presently pending before the Court are four motions that address a variety of intertwined legal issues. The first motion, filed by Defendants Vanderbilt Mortgage & Finance, Inc. and CMH Homes, Inc., is styled a “Motion to Dismiss for Plaintiffs' Lack of Standing.” Mot. to Dismiss, ECF No. 6. The second motion is also filed by Defendants, and is styled a “Motion to Compel Arbitration and Stay Remaining Nonarbitrable Claims.” Mot. to Compel, ECF No. 8. The third motion, again filed by Defendants, is a “Motion to Refer Case to Bankruptcy Court.” Mot. to Refer, ECF No. 29. The fourth and final motion is filed by Plaintiffs Angela and Gregory Lattea, and is styled a “Motion to Withdraw (or Dispense with) Reference.” Mot. to Withdraw, ECF No. 43. For the reasons set forth below, the Court GRANTS the third motion, DENIES the fourth motion, and REFERS this action to United States Bankruptcy Court for the Southern District of West Virginia and orders it REMOVED from the docket. The remaining motions are accordingly DENIED AS MOOT.

         I. BACKGROUND

         This case originates in Plaintiffs Gregory and Angela Lattea's decision to purchase a mobile home in summer 2018. Am. Compl., ECF No. 17, at ¶¶ 2, 5. Upon visiting the Oakwood Homes lot in Nitro, West Virginia, Plaintiffs elected to purchase a used doublewide home. Id. at ¶ 6. A salesperson represented that he would sell the home to Plaintiffs and “secure a loan for the purchase of the lot upon which it would be situated for a total of $63, 000.00” Id. at ¶ 8. Plaintiffs consummated the purchase of the home and land on September 4, 2018, signing relevant financing documents with Defendant Vanderbilt Mortgage & Finance, Inc. and executing a $10, 000 down payment. Id. at ¶¶ 13-14.

         Over the course of the following months, Plaintiffs began receiving documents related to the purchase of their home that reflected differing loan amounts and sales prices. Id. at ¶ 15. On October 24, 2018, “Plaintiffs were directed to sign other loan documents and [a] deed of trust, containing a multiplicity of costs previously not disclosed to Plaintiffs.” Id. at ¶ 16. After executing these documents, the “total loan amount in the transaction was $109, 749.91, which Vanderbilt financed at a []10.560% rate, producing a monthly payment of $1, 043.46.” Id. at ¶ 22. Despite these escalating costs, Plaintiffs took possession of their home in November 2018. Id. at ¶ 23. They discovered a laundry list of safety and cosmetic defects with the home at this point, including water damage, a hole in the roof, and collapsing insulation. Id. at ¶ 24.

         On April 8, 2019, [1] Plaintiffs initiated the instant action in the Circuit Court of Putnam County and raised state law tort claims for fraud, unconscionable inducement, illegal transaction, and breach of warranty stemming from the purchase of their home.[2] See generally Id. Four days before filing the instant suit, however, Plaintiffs initiated a separate action in the United States Bankruptcy Court for the Southern District of West Virginia by filing a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. See In re Lattea, No. 3:19-bk-30130 (Bankr. S.D. W.Va.) (filed Apr. 4, 2019). Plaintiffs listed five creditors on their bankruptcy schedules, and the bankruptcy court appointed a trustee to represent the Lattea estate. Mot. to Refer, at 2. The largest asset listed as part of their estate is a claim against Defendant Vanderbilt for “unlawful lending”- the case that is currently pending before this Court-to which they have assigned an “unknown” value. See Ex. A, ECF No. 20-1, at 17. Of this unspecified value, Plaintiffs claim that $51, 329 is exempt from their estate. Id.

         This simultaneous bankruptcy proceeding accounts for some (though by no means all) of the procedural confusion surrounding this case. On May 13, 2019, Defendants timely removed this action from state court. Notice of Removal, ECF No. 1. On June 6, 2019, Defendants filed two motions: a motion to dismiss for lack of standing, and in the alternative, a motion to compel arbitration on certain claims. Mot. to Dismiss, at 1; Mot. to Compel, at 1. Before the Court reviewed the completed briefing on either motion, Defendants filed their motion to refer this case to the bankruptcy court. Mot. to Refer, at 1. Defendants argue that the instant dispute is “related to” to Plaintiffs' bankruptcy proceedings, and should be referred to the bankruptcy court pursuant to Local Rule of Civil Procedure 83.13. Plaintiffs understandably disagree, and contend that their tort claims are independent of their petition for relief under Chapter 7. On August 21, 2019, Plaintiffs filed a motion in this case and their bankruptcy case seeking to withdraw or dispense with the automatic reference “to the extent . . . necessary.” See Mot. to Withdraw, at 1. These cross-cutting issues have been fully briefed, and are ripe for resolution.


         Federal law provides that district courts “shall have original but not exclusive jurisdiction of all civil proceedings arising under Title 11, or arising in or related to cases under Title 11.”[3] 28 U.S.C. § 1334(b) (emphasis added). “An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankrupt estate.” A.H. Robins Co., Inc. v. Piccinin, 788 F.2d 994, 1002 n. 11 (4th Cir. 1986) (quoting Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3d Cir. 1984)). This relatively broad definition of matters “related to” bankruptcy is not boundless; abstract concerns about judicial economy and shared facts “do not in and of themselves suffice to make [an action] ‘related to' [a] bankruptcy.” Wise v. Travelers Indem. Co., 192 F.Supp.2d 506, 516 (N.D. W.Va. 2002). Nevertheless, the Supreme Court has observed that “Congress intended to grant comprehensive jurisdiction to the bankruptcy courts so that they might deal efficiently and expeditiously with all matters connected with the bankruptcy estate.” Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995). As such, “the ‘related to' language of § 1334(b) must be read to give district courts (and bankruptcy courts under § 157(a)) jurisdiction over more than simple proceedings.” Id. The Fourth Circuit Court of Appeals has since distilled this proposition further, holding that “a civil case is related to bankruptcy if the outcome of [the civil] proceeding could conceivably have any effect on the estate being administered in bankruptcy.” New Horizon of NY LLC v. Jacobs, 231 F.3d 143, 151 (4th Cir. 2000).

         Pursuant to these standards, this District's Local Rule of Civil Procedure 83.13 relies on 28 U.S.C. § 157(a) to provide that “all cases under Title 11, and all proceedings arising under Title 11 or arising in or related to a case under Title 11, are referred to the Bankruptcy Court for disposition.” Where a case is not automatically referred to the bankruptcy court, the district court will consider whether an action is “related to” an ongoing bankruptcy proceeding. See, e.g., U.S. Bancorp Equip. Fin., Inc. v. Edward's Transp., Inc., No. 2:05-0137, 2005 WL 6083461, at *4 (S.D. W.Va. Aug. 9, 2005). Where a case meets the “related to” threshold, district courts have the discretion to refer-or to decline to refer-that case to the bankruptcy court. Id. (reasoning that “in view of . . . finding” that case was “related to” bankruptcy proceeding, “the court is vested with discretion to refer this matter”).

         Once made, a reference to bankruptcy court may be withdrawn “for cause shown.” 28 U.S.C. § 157(a). Though neither Congress nor the Fourth Circuit Court of Appeals has yet clarified the “practical requirements for that malleable two word phrase, ” In re Johnson, No. 3:17-mc-180, 2018 WL 2033297, at *3 (S.D. W.Va. May 1, 2018), guidance is found in the six-factor test that courts in this District routinely employ in considering whether to withdraw a reference to bankruptcy court that has already been entered: “(1) whether the proceeding is core or non-core; (2) the uniform administration of bankruptcy law; (3) the promotion of judicial economy; (4) the efficient use of the parties' resources; (5) the reduction of forum shopping; and (6) the preservation of the right to a jury trial.” In re Albertson, 535 B.R. 662, 667 (S.D. W.Va. 2015) (citation omitted). With this legal framework in mind, the Court turns to a consideration of the case sub judice.


         Courts in the Southern District of West Virginia have employed different tests to determine whether to refer an action to bankruptcy court and whether to withdraw an action from bankruptcy court. As Defendants' and Plaintiffs' motions implicate both categories, the Court will undertake separate analyses to determine whether referral is warranted and, if so, whether the tests courts employ to determine if withdrawal is appropriate similarly supports referral.

         A. Motion to Refer ...

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