In re Newcomer

• Decision Date: 29 April 2009
• Docket Number: Bankruptcy No. 02-13178.,Adversary No. 07-00479.
• Parties: In re Kevin NEWCOMER, Debtor. Kevin Newcomer, et al., Plaintiffs, v. Litton Loan Servicing, L.P., Defendant.
• Court: U.S. Bankruptcy Court — District of Maryland

416 B.R. 166

In re Kevin NEWCOMER, Debtor.

Kevin Newcomer, et al., Plaintiffs, v. Litton Loan Servicing, L.P., Defendant.

Bankruptcy No. 02-13178.

Adversary No. 07-00479.

United States Bankruptcy Court, D. Maryland, at Greenbelt.

April 29, 2009.

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Laura J. Margulies, Laura Margulies & Associates, LLC, Rockville, MD, for Debtor.

MEMORANDUM OPINION

THOMAS J. CATLIOTA, Bankruptcy Judge.

Debtor Kevin K. Newcomer (the "Plaintiff") and his wife, Louise M. Newcomer ("Mrs.Newcomer") (collectively, the "Plaintiffs") have brought this action against Litton Loan Servicing, LP ("Defendant"). The Amended Complaint asserts four counts: Count 1, violation of the automatic stay of § 362 of the Bankruptcy Code; Count 2, violation of § 1327 of the Bankruptcy Code; Count 3, violation of § 1328 of the Bankruptcy Code; and Count 4, intentional infliction of emotional distress.¹ The parties have filed cross-motions for summary judgment (Docket Nos. 134 and 136), and oppositions thereto (Docket Nos. 148 and 149). The Court held a hearing on these and other matters on April 15, 2009. For the reasons stated herein, the Court will:

• Deny Defendant's motion on the grounds that any counts are barred by the statute of limitations;

• Grant Defendant's motion as to Mrs. Newcomer on all four counts based on her lack of standing;

• Grant Plaintiff's motion on Count 1 for violation of the automatic stay resulting from Defendant's issuance of the March 11 Acceleration Letter and the March 12 Acceleration Letter (as defined herein), with the issue of damages reserved for trial;

• Grant Defendant's motion on Count 1 for violation of the automatic stay resulting from Defendant's issuance of the Validation Notice (as defined herein);

• Grant Defendant's motion on Count 1 to the extent it seeks summary judgment that Defendant's phone calls to Mrs. Newcomer did not violate the automatic stay;

• Deny both Plaintiff's and Defendant's motions on Count 1 to the extent they seek summary judgment that Defendant's phone calls to Plaintiff (as opposed to Mrs. Newcomer) did or did not, as the case may be, violate the automatic stay, which claims will be determined at trial;

• Deny both Plaintiff's and Defendant's motions as to Count 2;

• Deny both Plaintiff's and Defendant's motions as to Count 3;

• Grant Defendant's motion for summary judgment on Count 4.

STATEMENT OF FACTS

On March 13, 2002, Plaintiff filed for Chapter 13 relief in this Court, initiating Case No. 02-13178. Mrs. Newcomer did not join in the petition and was not a debtor in bankruptcy at any time after Plaintiff commenced his case.

Prior to the filing, on or about May 20, 1996, Mrs. Newcomer executed a promissory note in favor of First Savings Mortgage Corporation in the principal amount of $89,350 (the "Note"). The Note was secured by Mrs. Newcomer's deed of trust (the "Deed of Trust") against 2617 Newton Street, Wheaton, MD (the "Property").

At the time Mrs. Newcomer executed the Note and Deed of Trust, Plaintiff did not own an interest in the Property. He is not and has never been a party to the Note or the Deed of Trust.

Plaintiff acquired an interest in the Property in 2002. Mrs. Newcomer executed and had recorded a quitclaim deed dated June 2, 2002, transferring her interest in the Property to herself and Plaintiff, as tenants by the entirety. A handwritten notation on the quitclaim deed states that "Kevin and Louise have made all mortgage payments and will continue to make all mortgage payments in the future. No Grantor or grantee is assuming liability for a debt or is being relieved of liability for debt in this transaction."

There is no dispute that the precipitating cause of Plaintiffs bankruptcy filing was that the Note was in default. At that time, the Note and Deed of Trust were serviced by Homecomings Financial, LLC ("Homecomings"). Homecomings filed a Proof of Claim in the case seeking payment in the amount of $9,735.32 for missed monthly mortgage payments plus late fees and unspecified additional expenses of $2,947.75, for a total arrearage claim under the Note of $12,683.07.

Plaintiff filed a Chapter 13 Plan (the "Plan") on March 28, 2002. The Plan provided, in relevant part, that "the trustee will cure all pre-petition arrears, costs and fees in full (100%), required by 11 USC § 1325(a)(5) on the following claim ... Homecomings Financial Network." The Plan was confirmed by Order Confirming Plan entered on October 22, 2002.

The servicing rights on the Note and Deed of Trust were transferred from Homecomings to Defendant in January or February, 2004. There is no dispute between the parties that Defendant had actual notice of Plaintiff's Chapter 13 filing by February 13, 2004 at the latest.

Defendant's internal documents obtained by Plaintiffs in discovery reflect that Defendant made numerous calls to the Plaintiffs' residence during February and March 2004, and sent three letters addressed to Mrs. Newcomer. These calls and letters are the subject of Plaintiffs' claims under Count 1, and will be addressed more fully in the discussion of Count 1 in Section D., infra.

On October 19, 2006, the Chapter 13 Trustee filed the Notice of Plan Completion. Plaintiff received his discharge on October 19, 2006, and the Trustee filed the Final Report and Account on January 10, 2007. The Final Report and Account reflects that Defendant was paid $12,683.07 under the Plan. The bankruptcy case was closed on January 16, 2007.

On February 28, 2007, Plaintiff filed a motion to reopen the bankruptcy case in order to file a motion to hold Defendant in contempt for violating the discharge injunction of 11 U.S.C. § 524. The contempt motion was filed as an exhibit to the motion to reopen. The Court reopened the bankruptcy case on March 12, 2007, and the contempt motion was filed the next day. The contempt motion asserted that Plaintiff made all of his payments under the Plan and kept the Note payments current post-petition, but nevertheless Defendant, in violation of the Bankruptcy Code, charged late fees and asserted that the Note was in default.

On June 19, 2007, Plaintiff withdrew the contempt motion and filed this adversary proceeding. In the original complaint, Plaintiffs brought ten counts for relief. Numerous counts were dismissed by the Court on Defendant's motion to dismiss or were withdrawn by Plaintiffs. Plaintiffs filed an Amended Complaint (the "Amended Complaint") on December 12, 2007, bringing the four counts described above. No motion to dismiss the Amended Complaint was filed by Defendant.

STANDARDS FOR SUMMARY JUDGMENT

Federal Rule of Civil Procedure 56(c), made applicable in adversary proceedings by Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment shall be granted forthwith "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c). Summary judgment may only be awarded by a court when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Mercantile Peninsula Bank v. French (In re French), 499 F.3d 345, 351 (4th Cir.2007) (citation omitted).

"One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses ...." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "[S]ummary judgment will not lie if the dispute about a material fact is `genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). When considering a motion for summary judgment, a court "must consider whether a reasonable jury could find in favor of the nonmoving party, taking all inferences to be drawn from the underlying facts in the light most favorable to the nonmovant." In re French, 499 F.3d at 352 (quoting In re Apex Express Corp., 190 F.3d 624, 633 (4th Cir.1999)). See also Board of Education of Independent School District No. 92 of Pottawatomie County v. Earls, 536 U.S. 822, 849, 122 S.Ct. 2559, 153 L.Ed.2d 735 (2002) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)) ("On summary judgment the inferences to be drawn from the underlying facts contained in [affidavits, attached exhibits, and depositions] must be viewed in the light most favorable to the party opposing the motion.").

CONCLUSIONS OF LAW

Generally speaking, the claims in the Amended Complaint fall into two categories. In the first category, Plaintiffs contend that calls made by Defendant's representatives to Plaintiffs and letters sent by Defendant to Mrs. Newcomer violated the automatic stay of § 362. In the second category, Plaintiffs contend that Defendant ignored its obligations under the Plan and Bankruptcy Code by maintaining an accounting system that was incapable of properly applying payments in a Chapter 13 case. Plaintiffs contend that Defendant's accounting system required it to apply every payment received—whether it was a post-petition loan payment made directly by the Plaintiffs or a pre-petition arrearage payment made by the Trustee under the Plan—to the earliest scheduled payment due. According to Plaintiffs, while they were making timely post-petition loan payments, Defendant was crediting those funds as if they were intended for pre-petition payments that had been missed by Plaintiffs. Thus, according to Plaintiffs, Defendant was incapable of determining whether Plaintiffs remained current on post-petition payments, it improperly charged late fees, and it improperly asserted that Plaintiffs were in default under the Note and Plan. Defendant counters...