Hrebal v. Seterus, Inc., Case No. 17-cv-1815 (SRN/SER)

• Court: United States District Courts. 8th Circuit. United States District Court of Minnesota
• Citation: 598 B.R. 252
• Docket Number: Case No. 17-cv-1815 (SRN/SER)
• Parties: Charles HREBAL, Plaintiff, v. SETERUS, INC., Defendant.
• Decision Date: 25 January 2019

598 B.R. 252

Charles HREBAL, Plaintiff,
v.
SETERUS, INC., Defendant.

Case No. 17-cv-1815 (SRN/SER)

United States District Court, D. Minnesota.

Signed January 25, 2019

598 B.R. 256

Mark L. Vavreck, Gonko & Vavreck PLLC, 401 North Third Street, Suite 600, Minneapolis, MN 55401 and Thomas J. Lyons, Jr., Consumer Justice Center PA, 367 Commerce Court, Vadnais Heights, MN 55127 for Plaintiff.

Ernest P. Wagner, Maurice Wutscher LLP, 105 West Madison Street, Suite 1800, Chicago, IL 60602; Eric Tsai, Maurice Wutscher LLP, 71 Stevenson Street, Suite 400, San Francisco, CA 94105; and Andrea M. Hauser, Eldon J. Spencer, Jr. & Paul Shapiro, Leonard, O'Brien, Spencer, Gale & Sayre Ltd., 100 South Fifth Street, Suite 2500, Minneapolis, MN 55402 for Defendant.

MEMORANDUM OPINION AND ORDER

SUSAN RICHARD NELSON, United States District Judge

This litigation arises under the Fair Credit Reporting Act ("FCRA"). In essence, the parties dispute whether Defendant Seterus, Inc. ("Seterus") provided "inaccurate" or "materially misleading" information to the three major credit reporting agencies ("CRAs") in 2016, when Seterus reported Plaintiff Charles Hrebal ("Hrebal") as delinquent on his mortgage, shortly after Hrebal successfully completed a Chapter 13 bankruptcy plan. The parties also dispute whether Seterus's FCRA violations (if any) were willful, as well as whether Seterus's FCRA violations (again, if any) caused Hrebal to suffer actual damages. With discovery complete, both sides now move for summary judgment.

After carefully reviewing the record and applicable case law, the Court grants in part and denies in part Seterus's motion, and denies Hrebal's motion.

I. BACKGROUND

A. The Parties

Plaintiff Charles Hrebal lives in Annandale, Minnesota with his wife, Christina, and three of his four children. (See Tsai Dec., Ex. A [Doc. No. 37] at 9 ("Charles Hrebal Deposition"); Lyons Dec., Ex. I [Doc. No. 44-7] ¶ 8 ("Christina Hrebal Declaration").) Hrebal works in car sales. (See Hrebal Dep. at 9-10.) In October 2007, Hrebal took out a mortgage loan from CitiMortgage, Inc. (See Compl. [Doc. No. 1] ¶ 22]; An. [Doc. No. 7] ¶ 22; see also McNeil Aff., Exs. A-B [Doc. No. 36] ("Original Note and Mortgage").)

Defendant Seterus, Inc. is a national loan servicing company. (See Compl. [Doc. No. 1] ¶ 5; An. [Doc. No. 7] ¶ 5.) Seterus has serviced Hrebal's home mortgage loan since February 1, 2014, when the Federal National Mortgage Association ("Fannie Mae") purchased Hrebal's loan from CitiMortgage, and contracted with Seterus to service Hrebal's loan on its behalf. (See McNeil Aff. [Doc. No. 36] ¶ 4.)

B. The Chapter 13 Bankruptcy

In 2010, Hrebal's car dealership began experiencing financial difficulties. (See Hrebal Dep. at 33.) As such, on September 1, 2010, he filed for Chapter 13 bankruptcy. (See Tsai Dec., Ex. B [Doc. No. 37] ("Chap. 13 Petition"); see generally Lyons Dec., Ex. J [Doc. No. 44-8] ("Bankruptcy Case Docket").) At the time Hrebal filed for bankruptcy, he was four payments behind on his home mortgage, which was

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then owned by CitiMortgage. (See McNeil Aff., Ex. C [Doc. No. 36] at ECF p. 39 ("CitiMortgage Payment History").) Consequently, Hrebal's initial Chapter 13 plan, dated August 27, 2010, stated that Hrebal owed CitiMortgage $ 10,200 in arrears (i.e. , four months' worth of payments), and set forth a plan to repay that debt. (See Tsai Dec., Ex. C [Doc. No. 37] ("First Chapter 13 Plan").)

However, for unclear reasons, on September 22, 2010 CitiMortgage filed a Proof of Claim stating that Hrebal only owed it $ 6,152.37 in pre-petition arrears (i.e. , two months' worth of payments). (See Tsai Dec., Ex. D [Doc. No. 37] ("CitiMortgage Proof of Claim").)¹ A few months later, on January 5, 2011, Hrebal filed an amended Chapter 13 plan reflecting this (lower) arrearage. (See Tsai Dec., Ex. F [Doc. No. 37] ("Am. Chapter 13 Plan"); Bankruptcy Docket, No. 23.) CitiMortgage did not object to this plan, and, on March 18, 2011, the Bankruptcy Court approved Hrebal's amended plan following a hearing. (See Tsai Dec., Ex. G [Doc. No. 37] ("Order Confirming Modified Post-Confirmation Chapter 13 Plan").)

The relevant portion of Hreabl's final confirmed plan stated that Hrebal would cure "the actual amounts of default" by gradually paying $ 6,152.37 to the Trustee, who in turn would pay CitiMortgage. (Am. Chapter 13 Plan § 6.) The plan also stated that Hrebal would "pay the [mortgage] payments that come due after the date the petition was filed directly to the creditor." (Am. Chapter 13 Plan § 6; accord 11 U.S.C. § 1322(b)(5) (allowing an individual who owes arrears on their home mortgage to create a Chapter 13 plan that "provide[s] for the curing of any default within a reasonable time and maintenance of payments while the case is pending").) It is undisputed that, from October 2010 onwards, Hrebal timely made both his plan payments and his regular mortgage payments. (See Tsai Dec., Ex. I [Doc. No. 37] at 33-34 ("Michael McNeil Deposition I").)

According to internal CitiMortgage servicing records produced in discovery, sometime around January 2012, CitiMortgage realized that its Proof of Claim was incorrect. (See Lyons Aff., Ex. D [Doc. No. 47] at ECF pp. 2-3 ("Servicing Notes").) However, despite dozens of internal notes from 2012 through 2014 suggesting that CitiMortgage should file an amended Proof of Claim, including a note stating that an amended Proof of Claim had been sent out "for filing" (see id. at 2), CitiMortgage never in fact amended its Proof of Claim. (See McNeil Dep. I at 22-25 (confirming these facts); Lyons Dec., Ex. A [Doc. No. 44-1] at 88-105 ("Michael McNeil Deposition II") (providing further detail).) Moreover, it seems that, because the Trustee had already paid off the arrears detailed in CitiMortgage's Proof of Claim when CitiMortgage sold Hrebal's loan to Fannie Mae/Seterus in February 2014, Seterus did not investigate this issue any further during the bankruptcy proceeding. (See McNeil Dep. I at 41-45; see also Tsai Dec., Ex. H [Doc. No. 37] ("Trustee Payment History") (showing that the Trustee had paid CitiMortgage its entire $ 6,152.37 Proof of Claim by December 27, 2011).) Rather, Seterus continued to accept Hrebal's normal monthly mortgage payments without filing an amended Proof of Claim or otherwise notifying the Bankruptcy Court or Trustee about the missing arrears. (Id. ) Indeed, when Hrebal called to

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inquire about his mortgage's status during this time period, Seterus appeared to inform him that he was "current on all payments." (See Servicing Notes at ECF p. 93 (noting, in response to a call from Hrebal, that there were "no missing payments" on Hrebal's account); see also C. Hrebal Dec. ¶ 4 (stating that, when Hrebal called Seterus during the bankruptcy, they told him "your account is current"); Hrebal Dep. at 15 (similarly noting that, the first "couple times" he called Seterus, "they said I was fine and there wasn't anything wrong").)

On October 27, 2015, Hrebal successfully completed his modified Chapter 13 plan, and the Bankruptcy Court granted him a discharge under 11 U.S.C. § 727. (See Tsai Dec., Ex. J [Doc. No. 37] ("Bankruptcy Discharge").)

However, the issue of the "missing two payments" returned to the fore on November 3, 2015, when the Bankruptcy Trustee sent Fannie Mae/Seterus a Notice of Final Cure Payment. (See McNeil Aff., Ex. E [Doc. No. 36] ("Notice of Final Cure").) The notice stated that, in the Trustee's view, Hrebal had "paid in full the amount required to cure the default under [CitiMortgage/Fannie Mae's] claim" and requested a response confirming or denying this fact, as well as inquiring if Hrebal was behind on his "post-petition" payments. (Id. ; see also Fed. R. Bankr. P. 3002.1(f) (requiring this notice for claims "secured by a security interest in the debtor's principal residence").)

Fannie Mae/Seterus timely responded, and asserted (seemingly for the first time) that, although Hrebal had "paid in full the amount required to cure the default [prior to the bankruptcy]," "as of November 17, 2015 ... [Hrebal] was [not] current on all post-petition payments, fees, expenses, and charges." (McNeil Aff., Ex. F [Doc. No. 36] ("Response to Notice of Final Cure") (emphasis added); see also Fed. R. Bankr. P. 3002.1(g) (requiring the creditor to file a statement "itemiz[ing] the required cure or postpetition amounts, if any, that the holder contends remain unpaid as of the date of the statement").) In particular, Fannie Mae/Seterus claimed that Hrebal was "past due" on his mortgage payments for October 2015 and November 2015. (Id. )

Because Hrebal knew he had made his mortgage payments for these months (just as he had made all of his required mortgage payments since filing the Chapter 13 petition back in September of 2010), Hrebal (and, apparently, his bankruptcy attorney) assumed Fannie Mae/Seterus was mistaken. (See Hrebal Dep. at 35-37.) Consequently, Hrebal did not follow up on this letter. (Id. at 35-37; cf. Fed. R. Bankr. P. 3002.1(h) (allowing debtor to request a "hearing" after receiving a response to a notice of final care, to "determine whether the debtor...