Arias v. Franklin Credit Mgmt. Corp. (In re Arias)

• Decision Date: 01 February 2023
• Docket Number: 20-02350 (ESL),Adversary 22-00004
• Parties: IN RE VILMA IVELISSE VICENTE ARIAS, Debtor v. FRANKLIN CREDIT MANAGEMENT CORPORATION; BOSCO CREDIT X, LLC.; VILMAARIAS BONETA; JOSÉ RAMÓN CARRIÓN MORALES ON HIS OFFICIAL CAPACITY AS CHAPTER 13 TRUSTEE Defendant VILMA IVELISSE VICENTE ARIAS Plaintiff
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — District of Puerto Rico

IN RE VILMA IVELISSE VICENTE ARIAS, Debtor

VILMA IVELISSE VICENTE ARIAS Plaintiff v. FRANKLIN CREDIT MANAGEMENT CORPORATION; BOSCO CREDIT X, LLC.; VILMAARIAS BONETA; JOSÉ RAMÓN CARRIÓN MORALES ON HIS OFFICIAL CAPACITY AS CHAPTER 13 TRUSTEE Defendant

No. 20-02350 (ESL)

Adversary No. 22-00004

United States Bankruptcy Court, D. Puerto Rico

February 1, 2023

CHAPTER 13

OPINION AND ORDER

ENRIQUE S. LAMOUTTE, UNITED STATES BANKRUPTCY JUDGE.

This adversary proceeding is before the court upon the Complaint (Docket No. 1) filed and thereafter amended, by the Debtor-Plaintiff seeking a declaratory judgment as to the validity of creditor's lien and a determination on the liability of such creditor and its servicer for statutory damages, costs and attorneys' fees for alleged violations of the Fair Debt Collection Practices Act (the "FDCPA"), 15 U.S.C. §§ 1692 -1692p, on account of false, misleading, and deceptive representations made in monthly statements and collection letters issued by the creditor's servicer in a pending bankruptcy proceeding. Also pending before this Court are the following related motions: Motion to Dismiss (Docket No. 12), First Motion for Leave (Docket No. 25) Opposition to Motion to Dismiss (Docket No. 26) Opposition to Plaintiff's Request to Amend Complaint (Docket No. 32), Reply to Opposition to Motion to Dismiss (Docket No. 33), the Second Motion for Leave (Docket No. 39) and the Second Amended Complaint (Docket Nos. 39-1, 40), Response to Court Order (Dk. #34 & 37) and Reply to Defendant's Opposition to Plaintiff's Request to File Amended Complaint (Docket No. 41), Sur-Reply to Leave to Amend Complaint and Opposition to Mootness of Dismissal (Docket No. 46), Answer to Court Order (Dk. #48) (Docket No. 53), and Reply to Answer to Court Order at Dk. No. 53 (Docket No. 56).

For the reasons discussed below, the Debtor-Plaintiff's Second Motion for Leave (Docket No. 39) is GRANTED, the proposed Second Amended Complaint (Docket Nos. 39-1, 40) is allowed, and the Motion to Dismiss (Docket No. 12) is DENIED.

JURISDICTION

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a). This is a core proceeding pursuant to 28 U.S.C. §§ 157(a) and (b). Venue of this proceeding is proper under 28 U.S.C. §§ 1408 and 1409.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Bankruptcy Case, Bankr. Case No. 20-02350

1. On June 18, 2020, the Debtor-Plaintiff filed a voluntary petition under Chapter 13 of the Bankruptcy Code, Schedules, Statement of Current Monthly and Disposable Income Calculation, and Statement of Financial Affairs. See Bankr. Case No. 20-02350, Docket No. 1.

2. The Debtor-Plaintiff disclosed Franklin Credit Management [Corporation] ("Franklin Credit") as having an unsecured claim of $378,384.18. See Schedule D, Bankr. Case No. 20-02350, Docket No. 1, p. 29.

3. The Debtor-Plaintiff also claimed a property in Brighton Country Club, Dorado (the "Property"), whose disclosed value is of $144,000, as exempt. See Schedule C, Bankr. Case No. 20-02350, Docket No. 1, p. 22.

4. Franklin Credit does not contest that it received notice of the bankruptcy filing to the following address: PO BOX 829629, Philadelphia, PA 19182-9629. See Creditor Matrix, Bankr. Case No. 20-02350, Docket No. 1, p. 66; Certificate of Service, Docket No. 7.

5. Franklin Credit did not file a proof of claim prior to the August 27, 2020, claim's bar date. See Notice of Chapter 13 Bankruptcy Case, Bankr. Case No. 20-02350, Docket No. 4; Certificate of Service, Bankr. Case No. 20-02350, Docket No. 7.

6. On September 23, 2020, the Debtor-Plaintiff filed a Chapter 13 Plan dated 9/23/2020 (the "Plan", Bankr. Case No. 20-02350, Docket No. 32) proposing the following treatment for unsecured claims: "[a]llowed nonpriority unsecured claims that are not separately classified will be paid pro rata … [from] [t]he funds remaining after disbursements have been made to all other creditors provided for in this plan[,] [or] [i]f the estate … were liquidated under chapter 7," "100% of the Allowed Unsecured Claims based on a yearly interest rate of 3.25%", whichever option "provid[es] the largest payment". Id., p. 3, § 5.1, p. 4, § 8.9.

7. Franklin Credit did not file an objection to the confirmation of the Plan.

8. On October 19, 2020, the Bankruptcy Court issued an Order Confirming Plan. See Bankr. Case No. 20-02350, Docket No. 35.

9. As of the undesigned date, a discharge has not been granted.

II. The Adversary Proceeding, Adv. Proc. No. 22-00004

10. On January 25, 2022, the Debtor-Plaintiff filed a Complaint (Docket No. 1) against Franklin Credit, asserting three (3) cause of action. First, a declaratory judgment as to the validity of Franklin Credit's lien over the Property (id., p. 11, ¶ 47). Second, that Franklin Credit has made "false, misleading, and deceptive representations in multiple monthly statements and collection letters" (id., p. 12, ¶ 69) alleging that "(a) amounts are due and owing on the Consumer Debt; (b) that monthly payments are due and owing on the Consumer Debt; and (c) that the Consumer Debt is a secured claim "collateralized by the [Property]" (id., p. 12, ¶ 71) in violation of Section 1692e(2)(a), (5) and (10) of the FDCPA, 11 U.S.C. § 1692e(2)(A), (5), (10). And Third, that Franklin Credit, in issuing the aforementioned monthly statements and collection letters, has communicated directly with the Debtor-Plaintiff despite the latter being represented by counsel in violation of Section1692c(a)(2) of the FDCPA, 15 U.S.C. § 1692c(a)(2). As a result of the forgoing allegations, the Debtor-Plaintiff seeks the cancellation and avoidance of the Security Agreement and the Purchase Deed and an order directing the Property Registry to delete their presentation on account of Count I, and an award of statutory damages, costs and attorneys' fees pursuant to 15 U.S.C. § 1692k on account of Counts II and III^[1].

11. On March 28, 2022, Franklin Credit filed a Motion to Dismiss (Docket No. 12), averring that Count I of the Complaint should be dismissed under Fed.R.Civ.P. 12(b)(7) for failure to join required parties --Bosco Credit X, LLC ("Bosco"), the holder of the mortgage loan and lien the Debtor-Plaintiff seeks to avoid, and Vilma Arias Boneta ("Arias Boneta"), the co-debtor on the loan encumbering the Property-- pursuant to Fed.R.Civ.P. 19, and under Fed.R.Civ.P. 12(b)(6) for failure to state a claim for which relief can be granted. Franklin Credit further avers that the FDCPA violation claims should be dismissed under Fed.R.Civ.P. 12(b)(6) for failure to state a claim for which relief can be granted because the Debtor-Plaintiff is precluded from seeking relief under the FDCPA following her filing for bankruptcy, citing Simmons v. Roundup Funding, LLC, 622 F.3d 93, 96 (2nd Cir. 2010), and Román-Pérez v. Operating Partners Co. (In re Román-Pérez), 527 B.R. 844 (Bankr. D.P.R. 2015), among others.

12. On June 17, 2022, the Debtor-Plaintiff filed a Motion for Leave to File Amended Complaint (the "First Motion for Leave", Docket No. 25) to include Arias Boneta as a plaintiff, and Bosco as a defendant. The proposed Amended Complaint is attached as Exhibit I thereto (the "First Amended Complaint", Docket No. 25-1).

13. Also on June 17, 2022, the Debtor-Plaintiff filed an Opposition to Motion to Dismiss (Docket No. 26)., averring that, with respect to the failure to join required party allegation, dismissal "is not the 'appropriate action.' Rather … the appropriate action is to amend the Complaint to join the alleged indispensable party" (id., pp. 1-2, ¶ 3). Debtor-Plaintiff also avers that an FDCPA claim is not precluded by the Bankruptcy Code for, among other things, the claims are "not that the collection activity was procedurally improper (i.e., stayed by the Automatic Stay); rather, that the collection activity was false. Moreover, Plaintiff makes allegations … entirely unrelated to any Bankruptcy Code provision, the Automatic Stay, the Discharge Injunction, etc.[, and] [b]ecause Plaintiff's claims are grounded on actual violations of the FDCPA (i.e., false statements, and/or direct communication with Plaintiff's despite Plaintiff's legal representations), [they] are in no way precluded by the Bankruptcy Code" (id., p. 4, ¶ 7), and arguing that In re Román-Pérez is "about avoiding double dipping,' that is, a Debtor who secures damages for violations of the Bankruptcy Code may not, IN ADDITION, also seeks damages under other statutory provisions [whereas] [h]ere, the Debtor has not sought damages under the Bankruptcy Code. Thus, there is no 'double dipping' concerns…" (id., p. 6, ¶ 10).

14. On July 22, 2022, Franklin Credit filed an Opposition to Plaintiff's Request to Amend Complaint (Docket No. 32), averring that because Vilma Arias Boneta is proposed to be added as a plaintiff, over whom "this Court would lack jurisdiction", the "amended complaint does not comply with [Fed. R. Bank. P.] 7019" (id., pp. 2-3, ¶¶ 7, 9, 11), thus leave to amend should be denied, and Count I dismissed for failure to include a required party under Fed.R.Civ.P. 19.

15. Also on July 22, 2022, Franklin Credit filed a Reply to Opposition to Motion to Dismiss (Docket No. 33) averring that the holding in In re Román-Pérez, supra, "does not mean that all possible claims under the FDCPA are precluded by the Bankruptcy Code, only those for which a cause of action or redress is already available to the debtor under the provisions of the Bankruptcy Code" (id., p. 4, ¶ 13). Further, Franking Credit avers that "Plaintiff … is … choosing to ignore the remedies available to her under the Bankruptcy Code, to exclusively seek remedies based on the FDCPA; as the allegations in the complaint, if proven, would afford plaintiff a redress pursuant ...