Free Opening Brief in Support - District Court of Delaware - Delaware

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EXHIBIT B

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lhbmlaye
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2004 Wl. 2203724 (E.D.Pa)
(Cite as: 2004 WL 2203724 (”E-I).Pa.))
her debt and refinancing her mortgage with their
lV{ations,Pleadings and Filings company would be financially advantageous. As a
result, Plaintiff decided to refinance her mortgage
Only the Westlaw citation is currently available with Aarnes Pl Amend. Comp} at 6 Plaintiff
Arcieca Shepperd cc-signed the mortgage with her
mother Id Plaintiff Jones contends that Aames
United States District Court, delivered to her and Shepperd a substantially
ED Pennsylvania different loan than was discussed in initial
Mary Ellen lONlES,Arcieca Sheppard, Plaintiffs, conversations between the parties without her
v ltnowledge or consent Though Aames had
AAMES FUNDING CORPORATION, et al, communicated to Plaintiffs that the refinancing
Defendants would result in a cash payment to them of $5,000,
No. Civ.A. 04~MC··119. Plaintiffs received only $2,000 from Defendants at
settlement. According to Plaintiffs, the l·IUD~l forrn
Sept 28, 2004 states that Defendants disbursed $3,453 07 to
Brian R Mildenberg, Sherri I Braunstein, Plaintiffs at settlement and assessed them $6,407 73
Mildenberg & Stalbaum PC, Philadelphia, PA, for in various loanrelated fees Id. at 6—7 In addition,
Plaintiff. Plaintiff Jones contends that Aarnes made a
payment to her original mortgage cornpmy that
Barbara Kiely, Philadelphia, PA, Dean C Waldt, exceeded the principal balance on the mortgage by
Ballard Spalrr Andrews &; Ingersoll, LLP, $4,000 without her knowledge, an amount Plaintiff
Voorhees, Ni, for Defendants assumes is a prepayment penalty. Id at 6 Under the
tenns of the Aames loan, Plaintiff, who lives on a
MEMORANDUAJ AND ORDER fixed monthly Social Security income of $579.40, is
required to make monthly payments of $550 43. Id.
DAVTS,.l at8
I. lNTRODUCTlON Defendant Countrywide Home Loans began
servicing the loan at some point in 2002, and
*1 Presently before the Court is the continues to do so Id at 7. Defendant Aames
Recommendation of the Honorable Bruce Fox, assigned the mortgage to Defendant Bankers Trust
United States Bankruptcy Judge, dated July 6, 2004 Company of CA, who securitized the loan into
(Doc No 1) For the reasons that follow, it is Defendant Aames Trust, the current holder of the
hereby ORDERED that the reference in this case is loan. Id. at l0. On or about September 24, 2003,
WITHDRAWN. Plaintiff Jones attempted to rescind the loan by
sending a letter to Defendants, who have failed to
Il FACTUAL AND PROCEDURAL. HISTORY respond to this request in any way Id at l2
Plaintiff alleges that the predatory lending practices
ln or around September of 200}, Plaintiff Mary engaged in by Defendants placed her in an
Jones, an elderly lowdrrconre homeowner, contacted untenable financial position and proximately caused
Defendant Aarnes Funding Corporation, which is her to file for Chapter 13 bankruptcy protection to
licensed to do business in Pennsylvania as Aarnes save her home Id at l0
Horne Loan ("Aarrres"), in an effort to refinance her
mortgage Pl. Amend Compl at 5—6; Def. Aames On March 3, 2004, Plaintiff Mary iones filed an
Funding Corp Answer to Pl Amend Cornpl at 2 adversary complaint against the various Defendants
Aames allegedly advised Tones that consolidating named above, claiming violations of the Truth in
© 2005 Thornson.·'West No Claim to Orig U S Govt Worits

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2004 WL 2203724 (E,D.Pa )
(Cite as: 2004 WL 2203724 (E.D.Pa.))
Lending Act, I5 U S C § i60] et seq ("TILA"), The Supreme Court has held that a finding of fact,
the Home Ownership and Equity ?totection Act ot even if supported by evidence, is clearly erroneous
5994, 5 U S C. § 1639(a) et seq, ("HOEP/if), the "when . . the reviewing court is left with the definite
Real Estate Settlement Procedures Act, t2 USC § and firm conviction that a mistake has been
2501 et seq ("RESPA"), the Equai Credit corarnitted? Berkeiy, 192 BR., at 837 (citing
Opportunity Act, E5 USC § 169i(e) ("ECOA"), United States v United States Gypsum Co., 333
the Fennsylvania Fair Credit Extension Uniformity U S 364, 395, 68 S Ct. 525, 92 L Ed. 746 (1948))
Act, 73 FS § 20l·1 et seq, and common law
breach of contract and fraud Pi Am, Compl at 2 IV DESCUSSION
Piaintiff Sheppard joined the proceedings as
co-rnortgagor of the aileged predatory mortgage by Upon review, this Court agrees with Judge Fox's
way of the First Amended Complaint filed by determination that Plaintiffs claims do not give rise
Plaintiffs on May 18, 2004 Plaintifis have to core bankruptcy proceedings Th Third Circuit
demanded a triai by jury and seek damages and considers a proceeding to be core under 28 USC §
equitabie and declaratory relief Id at 12-13, 14-15, 157 "if it invokes a substantive right provided by
16, 18, l9»20, 22-23; 24425 Ali Defendants have Title 11 cr if it is a proceeding that, by its nature,
answered Piaintiffs Complaint, and have failed to could arise only in the context of a bankruptcy
object or consentto Plaintiffs request forajury trial. case? Torkelsen v. Maggie (fn re Guild and
Gaflery Plus, Inc ), 72 F3d H7], ii7S (Bd
*2 On July 6, 2004, the I-Ionorabie Bruce Fox, CirE996) (quoting In re Marco.; Hook Dev. Park,
United States Bankruptcy Judge, recommended that Inc., 943 F2d 261, 267 (Bd Cir I991)) A core
these proceedings be heard in district, rather than proceeding "rnust have as its foundation the
bankruptcy, court (Doc No 1) Applying Third creation, recognition, or adjudication of rights
Circuit precedent, Judge Fox found that Plaintizffs which would not exist independent of a bankruptcy
claims are non—core claims Recommend at 3 environment aitiiough of necessity there may be
Judge Fox further found that the bankruptcy court peripiteral state law invo1vement" Hctzel dt
does not have subject matter jurisdiction over Buelzleig Inc. vi Orange & Rockland Utils., Inc,
non-core claims unless all parties consent to that 107 BR 234, 39 (D13ei,1989) (quoting Acctyte
court's entry of a final judgment Id. at 4 As Elec. Corp. v Cin} cf`New York, 69 BR i55, 173
Defendants have not consented to a jury trial by the (Bankr E DN Y.1986)), Here, Plaintiffs raise
bankruptcy court on these issues, Judge Fox various federal and state statutory and common law
recommended that this Court recognize the claims against Defendants based on the prepetition
bankruptcy court's lack of jurisdiction and withdraw issuance of and coiiection on an allegedly predatory
the reference Id at 4—5 mortgage These are not claims that arise from a
substantive right provided by federal bankruptcy
lI1.STAN"DARD OF REVIEW iaw, nor are they claims that only arise in the
context of a bankruptcy proceeding See egg., Beard
ln reviewing a bankruptcy court’s recomrnended vt Br·crm.stein, 914 F2d 434, 443 (3d Cir.i990)
findings, the district court applies "a clearly (stating that suit for pre—petition contract damages is
erroneous standard to findings of fact. [and} a de non—core); In re Derienzo, 254 BR 334, 338
novo standard of review to questions of iaw*’ (MDi°a 2000) (holding that ciaimed violations of
Berkezy vt Comma', Interim! Revenue Sew, 192 HLA and Pennsyivania consumer protection laws
BR S35, 837 (ED Pa 1996) (citing, inter alia, were non~core), In re Second Pine, Inc, E0? BR
Universal Mt.•teml.s, Inc v. CA Hztghes & Cor, 669 48, 49 (EDPa1989) (stating that fraudulent
F2:} 98, 102 (3d Cir198i)), ojj"d, t11 1i.3d 125, misrepresentation ciairn based on pre—petition
1997 WL 169267 (1997) De novo review requires representations and reliance was non-core) Because
the district court to make its own iegai conclusions, each of these claims can he brought independent
"without deferential regard to those made by the from the bankruptcy proceedings and can be
bankruptcy court" Fleet Consumer- Discount Cc ve adjudicated according to state and federal iaws
Groves (In re Graves), 156 BR. 949, 954 without reference to the Bankruptcy Code, they are
(EDPal993), cf/'d, 3.3 FBC! 242 (3d Cir 1994). non—corc
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2004 WL 2203724 (E..D.Pa)
(Cite as: 2004 WL 2203724 (E.D.Pa.))
*3 This Court also agrees with Judge Fox‘s finding For all these reasons, the Recommendation of the
that Plaintiffs demand for and Defendants refusal Honorable Bruce Fox, United States Bankruptcy
to consent to a jury trial removes this adversary Judge, dated July 6, 2004 (Doc No E) is
proceeding from the bankruptcy courts jurisdiction. ACCEPTED and the reference in this case is
The Third Circuit has held that "a bankruptcy court WITPEDRAWN An appropriate order follows
cannot conduct a jury trial in a non—core
proceeding " Benml 9`14 F 2d at 443. Section E5? 2004 WL2203T·'24(EDPa)
states that only the district court can enter a final
judgment or order in a non-core matter heard by the Motions, Pleadings and Filings (Back to top)
bankruptcy court 'fhe bankruptcy court is limited to
issuing proposed tindings of fact and taw and the 2;04MC00ll9 (Docket)
district court has the power to conduct a de novo (Jul. 09, 2004)
review of any matter timely and specifically
objected to by the parties. 28 US C § t57(c)(l) END OF DOCUIVENT
The Third Circuits hoiding in Beard is premised on
the conflict between section l57(c)'s limitation on
the bankruptcy court’s ability to render a final
judgment in non-core matters and the Seventh
Amendments guarantee that "no fact tried by a jury
shall be otherwise reexamined in any Court of the
United States, than according to the rules of the
common iaw " Id. Were a fact to be found by a jury
in a non—core proceeding in bankruptcy court, that
fact is potentially reviewabie dc novo by the district
court, a situation that is incompatible with the
Seventh Amendment
In Beami however, the Third Circuit indicated that
a bankruptcy judge could conduct a jury trial in a
non~core proceeding so long as it had the consent of
att parties Id n 14. Consent may be implied, but "a
court should not lightly infer from a 1itigant's
conduct consent to have private state·crcated rights
adjudicated by a non~A.rticle lil bankruptcy judge "
In re Derienzo, 254 BR at 339 (quoting In re
Piorieer Inv. Serve Co., 946 F2d 445, 449 (6th
Cirl99l)) Plaintiffs have demanded a jury trial in
the bankruptcy court on non-core matters. There is
nothing in the record that suggests that Defendants
have expiicitly consented to a jury trial in the
bankruptcy court in addition, Defendants could
have objected to the bankruptcy court‘s Juiy 6, 2004
recommendation for withdrawal, thereby cxpressiy
or implicitiy consenting to the bankruptcy courts
issuance of a final judgement on these matters
Defendants did not do so As such, the bankruptcy
court lacks jurisdiction over these proceedings, and
the reference must be withdrawn pursuant to 28
U S C § 1570:1)
V CONCLUSEDN
© 2005 `l`homsonfWest No Claim to Orig U S Govt Works.