Kirby v. 21ST Mortg. Corp. (In re Kirby)
| Decision Date | 14 May 2019 |
| Docket Number | Bankruptcy Case No. 14-20682-PGC,BAP NO. EP 18-024,Adversary Proceeding No. 17-02007-PGC |
| Parties | Gregory M. KIRBY and Amanda Kirby, Debtors. Gregory M. Kirby, Plaintiff-Appellant, v. 21st Mortgage Corporation, Defendant-Appellee. |
| Court | Bankruptcy Appellate Panels. U.S. Bankruptcy Appellate Panel, First Circuit |
J. Scott Logan, Esq., Portland, on brief for Plaintiff-Appellant.
Eleanor L. Dominguez, Esq., South Portland, on brief for Defendant-Appellee.
Before Godoy, Harwood, and Katz, United States Bankruptcy Appellate Panel Judges.
Gregory M. Kirby ("Mr. Kirby") appeals from the bankruptcy court's order (the "Order") granting summary judgment in favor of 21st Mortgage Corporation ("21st Mortgage") on his complaint alleging that post-discharge communications from 21st Mortgage were attempts to collect a discharged debt in violation of § 524(a)(2)'s discharge injunction and the Fair Debt Collections Practices Act ("FDCPA").1 Mr. Kirby asserts that the bankruptcy court erred in granting summary judgment in favor of 21st Mortgage because: (1) there were genuine issues of material fact which required a trial; and (2) 21st Mortgage failed to establish that its post-discharge correspondence did not violate the discharge injunction as a matter of law.2 Discerning no error, we AFFIRM .
The following facts are undisputed.3
Mr. Kirby and his wife (the "Kirbys") previously owned real property in Brewer, Maine (the "Brewer Property"), subject to a mortgage lien securing a promissory note held by 21st Mortgage. When the Kirbys defaulted on their obligations under the note, 21st Mortgage commenced a state court foreclosure action against them, and the case was promptly transferred to the Foreclosure Diversion Program.4
The day before the initial mediation session scheduled for August 28, 2014, the Kirbys commenced a voluntary bankruptcy case by filing a petition under chapter 7 of the Bankruptcy Code. In their bankruptcy schedules, the Kirbys disclosed their interest in the Brewer Property5 and listed 21st Mortgage as the holder of a $ 343,619 claim secured by a lien on the Brewer Property. The Kirbys' schedules also reflected their intent to retain the Brewer Property and "to explore modification." The Kirbys did not reaffirm the debt to 21st Mortgage. They received chapter 7 discharges pursuant § 727(a) () on December 4, 2014. As 21st Mortgage concedes, it received notice of the entry of the Kirbys' discharges, and the bankruptcy case was closed shortly thereafter.
After the entry of the Kirbys' discharges, the parties resumed mediation under the state court Foreclosure Diversion Program. Between December 2014 and October 2015, the parties engaged in extensive efforts to mediate an alternative to foreclosure. During this ten-month period, the parties participated in three court-sponsored mediation sessions, and the Kirbys pursued other loss mitigation options with 21st Mortgage. Ultimately, the parties were unable to reach a resolution and the case was returned to the foreclosure docket. In October 2016, the state court entered a judgment of foreclosure in favor of 21st Mortgage, and the Brewer Property was sold at a foreclosure auction in February 2017.
But matters did not end there. In March 2017, the bankruptcy case was reopened at Mr. Kirby's request and Mr. Kirby filed a two-count complaint seeking damages against 21st Mortgage on account of his claims that post-discharge written correspondence sent by 21st Mortgage regarding the defaulted loan violated the discharge injunction imposed by § 524(a)(2) of the Code and certain provisions of the FDCPA.
The majority of 21st Mortgage's post-discharge communications were sent between December 2014 and October 2015, while the parties were engaged in mediation and loss mitigation efforts (the "mediation period"). During this period, 21st Mortgage sent nineteen written communications—eight letters relating to Mr. Kirby's request for a loan modification, nine periodic mortgage statements, and two other "mortgage servicing" notices. All of these communications were addressed to Mr. Kirby in the care of his bankruptcy counsel, J. Scott Logan, at Attorney Logan's place of business.6 The specific correspondence is described below.
During the mediation period, 21st Mortgage sent nine monthly mortgage statements, each of which set forth an amount due and a due date, indicated that a late fee would be charged if the payment was not received, and included a payment coupon. At the top of the second page, the statements provided: "This is an attempt to collect a debt and any information obtained will be used for that purpose." ("Collection Notice"). Each statement also contained the following bankruptcy disclaimer:
NOTICE : Please be advised further that this letter constitutes neither demand for payment of the captioned debt nor a notice of personal liability to any recipient hereof who might have received discharge of such debt in accordance with applicable bankruptcy laws or who might be subject to automatic stay of Section 362 of the United States Bankruptcy Code. This letter is being sent to any such parties merely to comply with applicable state law governing foreclosure of liens pursuant to contractual powers of sale.
In January 2015, 21st Mortgage sent a notice (the "ARM Notice") regarding changes to the interest rate on the adjustable rate mortgage. The notice included the current and estimated new interest rates and monthly payments, a payment amount and due date, the loan balance, and the remaining loan term. The letter contained a Collection Notice, but did not include a bankruptcy disclaimer.7
Also in January 2015, 21st Mortgage sent an annual private mortgage insurance disclosure (the "PMI Disclosure"), informing Mr. Kirby of his rights under federal law regarding the cancellation or termination of his private mortgage insurance. It contained a Collection Notice and the same bankruptcy disclaimer as that contained in the mortgage statements.
In April 2015, while mediation was ongoing, the Kirbys submitted a "Making Home Affordable Program Request for Mortgage Assistance" application requesting a loan modification (the "RMA application"). 21st Mortgage sent four letters relating to the application and a fifth letter informing the Kirbys that they did not qualify for a loan modification because the Brewer Property was not their primary residence. Then, in response to the Kirbys' request to continue mediation and discuss further loss mitigation options, 21st Mortgage sent a letter offering a short sale as a possible alternative to foreclosure. After the Kirbys appealed the denial of their RMA application, 21st Mortgage sent one letter acknowledging their appeal and another reporting that it was upholding its decision. All of these letters contained a Collection Notice and a similar bankruptcy disclaimer:
Please be advised further that this letter constitutes neither demand for payment of the captioned debt nor a notice of personal liability to any recipient hereof who might have received a discharge of such debt in accordance with applicable bankruptcy laws or who might be subject to automatic stay of Section 362 of the United States Bankruptcy Code.
("Bankruptcy Disclaimer").
After mediation and loss mitigation efforts proved unsuccessful and the case was returned to the foreclosure docket, Mr. Kirby's counsel sent a letter to 21st Mortgage dated October 6, 2015 asking 21st Mortgage to "refrain from any further contact with the Debtor" (the "Cease and Desist Letter"). In that letter, Attorney Logan also maintained that 21st Mortgage violated the discharge injunction by sending a mortgage statement dated September 14, 2015, but he did not contend that any of the other 18 communications sent during the mediation period violated the discharge injunction. After receiving the Cease and Desist Letter, 21st Mortgage continued to send written communications, although no communications related to the defaulted loan were sent following the February 2017 foreclosure sale.
Between October 2015 and November 2016, 21st Mortgage sent: (1) an annual escrow account disclosure statement (the "Escrow Account Disclosure") listing current and new payment information, the escrow account activity for the current year, and a projection for the next year; (2) a letter regarding a possible short sale as an alternative to foreclosure (the "Short Sale Letter"); and (3) another PMI Disclosure. All of these communications included the Bankruptcy Disclaimer and were addressed to Mr. Kirby in the care of his counsel. Both the PMI Disclosure and Short Sale Letter contained a Collection Notice, but the Escrow Account Disclosure did not.
On January 4, 2016, 21st Mortgage's counsel, Eleanor L. Dominguez, sent a letter directly to the Kirbys at their Saco address (the "Cash-for-Keys Letter").9 This was the first correspondence sent directly to the Kirbys. The letter provided, in relevant part:
Your former attorney, J. Scott Logan, Esq., has given me permission to contact you directly in this foreclosure action. As you know, mediation efforts in this matter were unsuccessful and the above referenced matter will likely be scheduled for trial soon. At trial, my client, MidFirst Bank,[10 ] will seek a foreclosure judgment. In Maine, lenders may seek borrowers for any deficiency between the ultimate sales price of a foreclosed property and the fair market value of the same. Because you have both been discharged in bankruptcy , my client would like to offer you a Consent Judgment with a waiver of deficiency and Cash-for-Keys assistance rather than...
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