Brown v. Bank of Am. (In re Brown)

Citation481 B.R. 351
Decision Date01 November 2012
Docket NumberBankruptcy No. 09–25942–CMB.
PartiesIn re Judy D. BROWN, Debtor. Judy D. Brown, Movant, v. Bank of America, Respondent.
CourtUnited States Bankruptcy Courts. Third Circuit. U.S. Bankruptcy Court — Western District of Pennsylvania

OPINION TEXT STARTS HERE

Paula J. Cialella, New Castle, PA, Debtor.

MEMORANDUM OPINION

CARLOTA M. BÖHM, Bankruptcy Judge.

The matter before the Court is the Debtor's motion seeking an award of damages on the basis of alleged violations of the discharge injunction by Bank of America.1 For the reasons stated herein, this Court finds that, while most of the Debtor's allegations were not proven to be violations of the discharge injunction, certain statements mailed to the Debtor by Bank of America seek payment of a discharged debt. Accordingly, this Court finds that Bank of America is in contempt of court for sending said statements to the Debtor in violation of the order granting a discharge to the Debtor. Appropriate sanctions are imposed.

I. Background and Procedural History2

Bank of America is the authorized servicing agent for the holder of the mortgage on the Debtor's residence located at 2017 West Washington Street, New Castle, PA 16101 (the “Property”). The loan secured by the mortgage was insured by the Federal Housing Administration (“FHA”). A mortgage foreclosure action was commenced in 2007 against the Debtor in the Court of Common Pleas in Lawrence County, Pennsylvania. Judgment was entered in favor of the lender. 3 However, the Property was not sold at sheriff's sale, and the Debtor continued to reside in the Property.

Subsequently, on August 14, 2009, the Debtor commenced her bankruptcy case. According to the Debtor, she filed the bankruptcy case to force the completion of the foreclosure. Shortly thereafter, the holder of Debtor's mortgage, Bank of New York as Trustee for the Certificateholders of CWMBS 2003–R4, filed a motion for relief from the automatic stay. On October 7, 2009, a default order was entered modifying the automatic stay and permitting the movant “to foreclose on its mortgage or take any legal or consensual action for enforcement of its right to possession of, or title to, said premises (such actions include but are not limited to the signing of a deed in lieu of foreclosure or entering into a loan modification agreement)....” The case proceeded with little activity. The Debtor was granted her discharge on December 2, 2009, and the case was closed.

Despite the judgment entered in favor of the lender in 2007 and the fact that relief from stay was granted in the bankruptcy case, the Property has yet to be sold at a sheriff's sale. The Debtor remains in the residence. Although Bank of America contends that the reason for the delay is an issue with the title that must be resolved, the Debtor disputes that there is an obstacle to completing the foreclosure.

On May 29, 2012, the Debtor, acting pro se, filed a motion, accompanied by numerous exhibits, in her closed bankruptcy case alleging violations of the discharge injunction by Bank of America and seeking “punitive damages in the amount of $65,000 for the emotional pain and suffering imposed upon her....” The motion was denied without prejudice due only to the fact that the case was closed. The Debtor filed a motion to reopen the case, which was granted, and a new motion, with some variation from the first, again alleging violations of the discharge injunction. The new motion sought damages in the amount of $124,000, consisting of $80,000 in punitive damages and $44,000 for discretionary damages. Bank of America responded denying any violation of the discharge injunction.

The evidentiary hearing in this matter was held on September 10, 2012. Debtor was the only witness. As the Debtor is acting without counsel, the Court has shown leniency toward the Debtor in construing her submissions and her arguments. Furthermore, the Court granted the admission of Debtor's exhibits over Bank of America's general objection to relevance due to Debtor's pro se status thereby providing her with a full opportunity to prove her case and explain the relevance of the exhibits. The Court reserved the ability to analyze the relevance of Debtor's exhibits after the conclusion of the hearing once the Debtor presented her entire case.

At the conclusion of the hearing, the parties were provided the opportunity to submit briefs. Both Debtor and Bank of America filed briefs, and the matter is now ripe for decision.

II. Findings of Fact

At the outset, the Court notes that all of the documents submitted have been thoroughly reviewed and considered, including the documents attached to each of the Debtor's motions for sanctions.4 However, documents which the Court determined to be irrelevant to this matter may not be directly addressed herein as those items did not assist the Court in reaching a decision. Based upon the relevant, credible evidence submitted at the evidentiary hearing, the testimony of the Debtor, and the entire record of this proceeding, the Court finds as follows: 5

1. Despite the judgment entered in favor of the lender in 2007 and the fact that relief from stay was granted in the bankruptcy case in 2009, the Property has yet to be sold at a sheriff's sale, and the Debtor remains in the residence.

2. After the Debtor was granted a discharge in her bankruptcy case, the Debtor contacted Bank of America (directly and indirectly through various agencies which then forwarded her questions and concerns to Bank of America) to inquire about the origination and servicing of the loan.

3. After the Debtor was granted a discharge in her bankruptcy case, she was contacted by Bank of America by phone and through various correspondence, including notices and several statements.

4. After the debtor was granted a discharge in her bankruptcy case, Bank of America continued to report a delinquency code with respect to the loan to the FHA and Department of Housing and Urban Development (HUD) for purposes of a system maintained to track loan delinquencies.

5. Based upon the only evidence produced with respect to the effect of the delinquency code reported to FHA and HUD on the Debtor, removing the delinquency code from the system was not necessary in order for the Debtor to obtain another FHA loan.6

6. Although the Debtor has not made a mortgage payment since 2007, due to an error by Bank of America, a mortgage payment for May 2012 appeared on the Debtor's credit report.

The Court now turns to whether any or all of Bank of America's conduct violated the discharge injunction.

III. Conclusions of Law

The Debtor made a number of allegations regarding improper conduct by Bank of America throughout this proceeding. However, unless such conduct constitutes a violation of the discharge injunction, it is not relevant to the matter before the Court and will not be addressed herein.7Although the Debtor asserts that Bank of America's conduct has impaired her fresh start, the imposition of sanctions is appropriate only if a party took action prohibited by § 524(a). See Paul v. Iglehart (In re Paul), 534 F.3d 1303, 1307 (10th Cir.2008).

Section 524 of the Bankruptcy Code “enjoins, among other things, any act to collect or recover as a personal liability of a debtor in bankruptcy a debt that was discharged in accordance with § 727(a) of the Bankruptcy Code.” See Bonanno v. HSBC Card Servs. (In re Bonanno), Adv. No. 08–7035 BM, 2009 WL 8556815, at *3, 2009 Bankr.LEXIS 5544, at *6 (Bankr.W.D.Pa. March 24, 2009). Specifically, § 524(a)(2), provides that a discharge “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor ... [.] The Debtor contends that Bank of America violated the injunction and that she is entitled to an award of damages.

Although the Third Circuit has yet to address “whether § 524 implies a private right of action, either alone or through § 105(a),8 ... the weight of circuit authority is that it does not.” Joubert v. ABN AMRO Mortg. Group, Inc. (In re Joubert), 411 F.3d 452, 456 (3d Cir.2005). Unlike a violation of the automatic stay for which a remedy is provided under § 362(k)(1), § 524 does not explicitly set forth a substantive right to remedy a discharge injunction violation. See Bonanno, 2009 WL 8556815, at *3, 2009 Bankr.LEXIS 5544, at *7. Courts have determined that the remedy available to a debtor asserting a violation of the discharge injunction is a civil contempt proceeding pursuant to § 105(a). See Bonanno, 2009 WL 8556815, at *5, 2009 Bankr.LEXIS 5544, at *12–13.

In order to establish civil contempt, the debtor must prove that (1) a valid court order existed; (2) the alleged contemnor knew of the order; and (3) the contemnor disobeyed the order.” See Bonanno, 2009 WL 8556815, at *6, 2009 Bankr.LEXIS 5544, at *13–14.9 In this case, there has been no dispute regarding the validity of the discharge order entered on December 2, 2009 nor has Bank of America contended at any time that it lacked knowledge of the order after it was entered. Therefore, the remaining issue before this Court is whether any of the actions taken by Bank of America constitute a violation of that order, i.e., an attempt to collect a discharged debt.

The Order granting discharge provides, in pertinent part, as follows:

The discharge prohibits any attempt to collect from the debtor a debt that has been discharged. For example, a creditor is not permitted to contact a debtor by mail, phone, or otherwise, to file or continue a lawsuit, to attach wages or other property, or to take any other action to collect a discharged debt from the debtor.... A creditor who violates this order can be required to pay damages and attorney's fees to the debtor.

However, a creditor may have the right to enforce a valid lien, such as a mortgage or security interest, against the debtor's property after the bankruptcy, if that lien was not avoided or eliminated in the bankruptcy case....

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