In re Hart

• Decision Date: 27 March 2000
• Docket Number: Adversary No. 98-2170.,Bankruptcy No. 98-18529-JNF
• Citation: 246 BR 709
• Parties: In re Joseph L. HART, Debtor. Joseph L. Hart, Plaintiff, v. GMAC Mortgage Corporation And Federal National Mortgage Association, Defendants.
• Court: U.S. Bankruptcy Court — District of Massachusetts

246 B.R. 709 (2000)

In re Joseph L. HART, Debtor Joseph L. Hart, Plaintiff, v. GMAC Mortgage Corporation And Federal National Mortgage Association, Defendants.

Bankruptcy No. 98-18529-JNF, Adversary No. 98-2170.

United States Bankruptcy Court, D. Massachusetts.

March 27, 2000.

COPYRIGHT MATERIAL OMITTED

Harvey S. Shapiro, Collier, Shapiro & McCutcheon, Cambridge, MA, for Plaintiff, Joseph L. Hart.

Daniel P. Murphy, Harmon Law Offices, for Defendants GMAC Mortgage & FNMA.

MEMORANDUM

JOAN N. FEENEY, Bankruptcy Judge.

I. INTRODUCTION

The matters before the Court are the Second Amended Adversary Complaint filed by Joseph L. Hart (the "Debtor") against GMAC Mortgage Corporation ("GMAC") and Federal National Mortgage Association ("Fannie Mae") (collectively, the "Defendants") and GMAC's objection to confirmation of the Debtor's First Amended Chapter 13 Plan.¹ The issue presented is whether GMAC and Fannie Mae are liable to the Debtor for damages because of improper attempts to collect the Debtor's mortgage debt.

The Debtor's Second Amended Adversary Complaint, which was filed on July 1, 1998, contains seven counts as follows: Count I — Breach of Contract; Count II — Violation of Mass. Gen. Laws Ann. Ch. 163, § 60 (West 1991 & Supp.1999); Count III — Violation of the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692o (West 1998)("FDCPA"); Count IV — Violation of Massachusetts Consumer Credit Cost Disclosure Act, Mass. Gen. Laws Ann. Ch. 140D, §§ 1-34 (West 1991 & Supp.1999) ("MCCCDA"); Count V — Violation of the Truth in Lending Act, 15 U.S.C. §§ 1601-1667e (West 1998) ("TILA"); Count VI — Violation of the Automatic Stay; and Count VII — Violation of Massachusetts Consumer Protection Act, Mass. Gen. Laws Ann. Ch. 93A, §§ 1-11 (West 1997) ("Chapter 93A"). GMAC and Fannie Mae answered the Second Amended Complaint. In accordance with the Court's pre-trial order, the parties filed a 31-page Joint Pre-Trial Memorandum on November 8, 1999.

The Court conducted a two-day trial on December 7, 1999 and January 5, 2000 at which four witnesses testified and 55 exhibits were accepted into evidence.² At the conclusion of the Debtor's case, the Defendants moved for a directed verdict. The Court now denies the Defendants' Motion for a Directed Verdict and makes its findings of fact and conclusions of law in accordance with Fed. R. Bankr.P. 7052.

II. FACTS

A. The Debtor's Chapter 13 Case

The Debtor filed a voluntary Chapter 13 petition on September 1, 1998. On September 16, 1998, he filed Schedules, a Statement of Financial Affairs and a Chapter 13 Plan. On Schedule A-Real Property, he listed an ownership interest in a single family home located at 34 Messinger Street, Mattapan, Massachusetts (the "Property"), which he valued at $97,300.00. On Schedule B-Personal Property, the Debtor listed, inter alia, a claim against GMAC and Fannie Mae in the amount of $2,000, characterizing the claim as an "off-set." On Schedule D-Creditors Holding Secured Claims, he listed four secured creditors: Fannie Mae as the holder of a first mortgage on the Property in the sum of $104,720.30; "GE Capital c/o LOG Asset Recovery Services, Inc." as the holder of a second mortgage on the Property in the sum of $14,750.00; Monogram Credit Card Bank of Georgia ("Monogram") with a judicial lien in the sum of $6,500.00; and the Boston Water & Sewer Commission with a statutory lien in the sum of $733.84. On Schedule F-Creditors Holding Unsecured Nonpriority Claims, the Debtor listed a single creditor, Tremont Credit Union f/k/a Massachusetts Federal Credit Union, with a claim in the sum of $5,246.81. On Schedules I and J-Current Income and Expenses of Individual Debtors, the Debtor disclosed that he was a school teacher with the Boston Public Schools on disability leave. He indicated that his net monthly income was $3,773.00 and that his monthly expenses totaled $2,758.11, leaving excess monthly income of approximately $1,000.00 to fund a Chapter 13 Plan.

On January 25, 1999, the Debtor filed his First Amended Chapter 13 Plan pursuant to which he proposed to pay, through his plan, mortgage arrearages of $1,821.21 to Fannie Mae.³ The Debtor also proposed to pay $2,658.24 to G.E. Capital Mortgage Services pursuant to an Assented to Motion to Compromise Claim and Modify Rights of Creditor G.E. Capital Mortgage Services, which motion was approved by this Court on March 3, 1999.

The Debtor proposed to pay certain secured claims directly, namely a monthly mortgage payment of $933.11 to Fannie Mae; a lump sum payment of $2,000.00 to G.E. Mortgage Capital Services and a lump sum payment of $733.84 to the Boston Water & Sewer Commission. The Debtor also represented that he would pay 100% of his unsecured claims, including the unsecured claim of Monogram arising from the avoidance of its judicial lien pursuant to 11 U.S.C. § 522(f) and the unsecured claim of Boston Edison, an added creditor, with a claim in the sum of $224.33.

GMAC filed an objection to the Debtor's First Amended Chapter 13, stating that its prepetition arrearage was $10,723.61 as set forth in its proof of claim filed on February 9, 1999.⁴ It also observed that its claim was the subject of this adversary proceeding.

B. Facts Giving Rise to the Debtor's Complaint

The Debtor is a retired, sixty year old, former music teacher with the Boston Public Schools. At the time he commenced his Chapter 13 case, he was on disability leave. At the time of trial, he had retired. He purchased his home in Mattapan in 1971 with financing provided by the Charlestown Savings Bank. (Exhibit 1).⁵ On September 22, 1989, the Debtor borrowed $108,500.00 from Commonwealth Mortgage Corporation secured by a mortgage on the Property. (Exhibit 3). Proceeds of the loan were used to discharge Charlestown Savings Bank's mortgage. The note executed by the Debtor provided for interest at the rate of 10.625%, payable in monthly installments of $1,002.65, and contained a maturity date of October 21, 2019. Under the terms of the note, the Debtor was entitled to make full or partial prepayments of principal without penalty. Late charges were due and payable for payments made "by the end of 15 calendar days" after the due date, which was the first day of the month.

Fannie Mae acquired the note and mortgage granted by the Debtor to Commonwealth Mortgage Company, and, on July 17, 1992, GMAC acquired servicing rights for the loan. (Exhibit 6). When GMAC acquired servicing rights, the Debtor was in arrears with respect to his mortgage payments. (Exhibit 6, Trial Transcript, 1/5/00, p. 9).

In late 1992 and 1993, the Debtor stopped making mortgage payments for 13 months and contemplated filing a bankruptcy petition. (Transcript, 12/7/99, p. 65). In the fall of 1993, he requested a loan modification, which request was granted by GMAC's Loss Mitigation Department. Pursuant to a letter dated October 14, 1993 (Exhibit 4B), GMAC, through Kim Murphy, a Loss Mitigation Specialist, advised the Debtor that it had approved his request for a loan modification. In her letter, Ms. Murphy outlined the terms as follows:

1. Fixed rate mortgage to a modified fixed mortgage.

2. Current interest rate of 10.625% to 7.625% for the remaining term of the loan.

3. The payment change will be effective with the October 01, 1993.sic

4. There will be a modification process fee of $500.00 which has been received.

5. The term of the loan will be extended by thirteen months.⁶

6. The delinquent escrows must be brought current by the mortgagor in the amount of $2,109.52 (received).

7. The mortgagor will be responsible for attorney\'s fees of $3,287.46 (received).

GMAC, through Ms. Murphy, also advised the Debtor that his new, monthly principal and interest payment would be $768.69 and that the escrow payment for insurance and taxes would be $153.02. On November 4, 1993, the Debtor executed the Loan Modification Agreement, which reflected a principal balance of $106,843.32 and a maturity date of November 1, 2020. (Exhibit 4A).

The Debtor made regular payments under the Loan Modification Agreement for approximately four years until August of 1997 when he failed to make two mortgage payments. (Exhibits 12 and 13).⁷ At this point in time, the Debtor had incurred late charges totaling $607.11. (Joint Pre-Trial Memorandum at ¶ 11). The Debtor testified that he missed the mortgage payments in the summer of 1997 because he needed to have the Property repainted.

In September of 1997, the Debtor contacted GMAC about the missed August and September payments. (Exhibit 5, entry for 9/24/97). GMAC maintained a record of contacts made by the Debtor called a Collection History Report. In addition to entries prepared by GMAC employees, it contained automated or computer generated entries pertinent to the Debtor's loan. This record, in which the Debtor is referred to as "MR," reveals the following:

TELEPHONED. CONVERT OTHER DLQ REASON: ..⁸

MR CLD IN. VERIFIED RES PHONE AND ADRESS. MR STATED HE WANTED TO SEND IN 1200 A MONTH TILL CURRENT. ADVSD HIM THAT WOULD NEED FINANCIALS AS WOULD TAKE ABOUT 6 MONTHS. MR DID NOT WANT TO DO, SD WOULD SEND IN OCT ONE PAYMENT. ADVSD OF BREACH. ADVSD REPAY. MR WANTED TO GIVE FINANCIALS. ADVSD MR TO GET TOGETHER. MR SD WOULD DO NOW. RECOMENDED CALLING BACK. MR GOT TOGETHER. TOOK ABOUT 20 MIN TO GET FINANCIAL INFO AS MR NOT COMPLETELY SURE ON ELECTRIC. ADVSD MR WITH SURPLUS SHOULD BE ABLE TO DO IN 3 MONTHS. MR SD IMPOSSIBLE. ADVSD NEED MOR ACCURATE INFO THEN. ADVSD MR WOULD SET FOR 6 MONTHS. NEED SIGNED REPAY WITH FIRST PAYMENT OR WOULD BE RETRND. ADVSD NEEDS TO SEND DEPOSIT O/N TO BE IN ON THE 18TH. ADVSD WOULD EFFECT CREDIT. INCLUDES ACCRUING L/C BUT NOT PAST DUE. ADVSD WOULD VOID IF ONE DAY LATE OR NSF. MR STATED THAT HE DOES NOT LIKE CREDIT ISSUE.

ADVSD MR SHOULD PLAN TO SAVE 300 A MONTH TO PAY MORTGAGE IN THE SUMMER AS HE IS A TEACHER. MR SD HE DID BUT HOUSE NEEDED PAINTING AND COST HIM 1400 TO HAVE DONE. DINNEBIER BRENT

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