Morales v. Banco Popular De P.R. (In re Morales)

• Decision Date: 18 May 2020
• Docket Number: ADV. PROC. NO. 19-0446 (ESL),CASE NO. 16-09440 (ESL)
• Parties: IN RE: OMAR RAMOS MORALES Debtor OMAR RAMOS MORALES Plaintiff(s) v. BANCO POPULAR DE PUERTO RICO Defendant(s)
• Court: U.S. Bankruptcy Court — District of Puerto Rico

IN RE: OMAR RAMOS MORALES DebtorOMAR RAMOS MORALES Plaintiff(s) v. BANCO POPULAR DE PUERTO RICO Defendant(s)

CASE NO. 16-09440 (ESL)

ADV. PROC. NO. 19-0446 (ESL)

UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO

May 18, 2020

CHAPTER 13

OPINION AND ORDER

This adversary proceeding is before the court upon the motion for partial summary judgment filed by Omar Ramos Morales ("Debtor" or "Plaintiff") on the ground that the uncontested facts show that Banco Popular de Puerto Rico ("BPPR") willfully violated the automatic stay by continuing with collections efforts against the Debtor after the bankruptcy petition was filed. BPPR answered by opposing Debtor's request and by moving on its own motion for summary judgment praying the court to dismiss the complaint as BPPR did not violate the automatic stay. The Debtor filed an opposition to BPPR's motion for summary judgment.

The Debtor filed a petition under chapter 13 of the Bankruptcy Code on October 31, 2016. BPPR was scheduled as a secured creditor and was given notice of the bankruptcy petition filing. On December 20, 2016 BPPR filed a secured claim. The chapter 13 plan dated February 15, 2017 was confirmed on March 2, 2017. The confirmed chapter 13 plan provides that the debtor consents to relief from the automatic stay pursuant to 11 U.S.C. § 362(d) to permit BPPR to enforce its state-law interests against the collateral; and that any deficiency claim filed by BPPR following the disposition of such collateral will be treated as unsecured. There are no pending matters in thebankruptcy case. The Chapter 13 trustee filed a final report on plan completed and for entry of discharge. The discharge order was entered.

The Debtor filed the instant complaint seeking damages for the alleged violation of the automatic stay provisions of 11 U.S.C. §362(a) on October 31, 2019. Defendant answered the complaint. A pretrial was scheduled and held on February 21, 2020. The parties filed a detailed and comprehensive joint pretrial report ("report"). The report submits as uncontested facts the relevant facts which serve as the basis for the pending motions for summary judgment.

Jurisdiction

This court has jurisdiction under 28 U.S.C.§157 (a) (b) (1) and §1334. This action is a core proceeding under 11 U.S.C. §§362 and Fed. R. Bankr. P. 7001. Venue lies in this District pursuant to 28 U.S.C.§§1408;1409 and 1391(b).

Position of the Parties

Debtor/Plaintiff

Debtor alleges that BPPR delivered to him a collection letter demanding immediate payment of the pre-petition arrears regarding the mortgage loan #9489 after the bankruptcy petition was filed. "The collection letter demands payment for the balance of the arrears in the mortgage loan in the amount of $86,454.52 and in summary states: 'you should pay the total amount due owed in any of our branches or send payment by mail immediately' 'We urge you to pay on time to maintain a good credit record.'" Such action, taken with actual knowledge of the filing of the bankruptcy petition and the treatment of the claim in the confirmed chapter 13 plan, constitutes a willful violation of the automatic stay.

The Plaintiff submits that the automatic stay was lifted pursuant to the provisions of the confirmed chapter 13 plan for the exclusive purpose of proceeding with in rem remedies against the collateral. The collection letter demanded immediate payment from the Plaintiff. The letter was not sent with the purpose of enforcing a state law in rem remedies. The three elements for a stay violation are present. Therefore, BPPR is liable for its actions.

The collection letter demands payments for the balance of the arrears in the mortgage loan in the amount of$86,454.52 and states: "you should pay the total amount due owed in any of our branches or send payment by mail immediately" The collection letter also states "[w]e urge you to pay on time to maintain a good credit record." Therefore, BPPR "threatened the Debtor with reporting such debt with the credit bureau agencies and its effects on his credit. It is undisputed that BPPR had notice of the automatic stay entered and in effect in the instant case. Furthermore,BPPR was aware of the provision included in the confirmed plan and the limitations of the stay lifting. The evidence and the uncontested facts proved that BPPR had knowledge of the automatic stay and the provisions of the confirmed plan at least on 6 ways."

The terms of the confirmed plan show that only in rem remedies were allowed. Thus, "[a]ttempts to coerce the Debtor into making payments towards the pre-petition debt were not allowed under the terms of the confirmed plan." There is no reasonable basis to conclude otherwise.

Arguments that the Debtor has continued to occupy his residence for free is not a defense to violations of the automatic stay. "Pursuant to Puerto Rico applicable law, the Plaintiff can occupy the property not only until a judgment is entered in favor of BPPR but until the property is sold at a public auction and title has been properly transferred. Defendant BPPR needs to follow the necessary steps towards the foreclosure of the property. As of for now, Defendant BPPR has admitted that it has not foreclosed on the property. See Defendant's Statement of Uncontested Fact No. 13. Apparently, no foreclosure has been initiated by the Defendant BPPR because it has decided not to. However, what is evident is that defendant decided to continue with collection efforts of coercive nature against the plaintiff after the bankruptcy filing and the confirmation of the plan."

BPPR/Defendant

BPPR admits and agrees that the material facts are uncontested and that there is single exhibit pertinent to this adversary proceeding. What the court must determine is if the mailing of the June 14, 2019 letter from BPPR to the Debtor constituted a violation of the automatic stay provisions of 11 U.S.C. §362 or was in contempt pursuant to 11 U.S.C. §105. BPPR alleges that this adversary proceeding should be disposed of summarily in its favor.

BPPR alleges that plaintiff has failed to meet the three (3) elements for a finding of a 11 U.S.C. §362 automatic stay violation. The elements are: "a debtor alleging a violation of the automatic stay must demonstrate, by a preponderance of the evidence, '(1) that a violation of the automatic stay occurred; (2) that the violation was willfully committed, and (3) that the debtor suffered damage as a result of the violation.'" Rivera v. Oriental Bank, 558 B.R. 36, 41 (Bankr. D.P.R. 2016) (citing Slabicki v. Gleason, 466 B.R. 572, 577-78 (B.A.P. 1^st Cir. 2012).

First, there is no violation of the automatic stay as "Banco Popular's letter dated June 14, 2019 did not violate 11 U.S.C. §362(a)(6). The letter was not an act to collect, assess or recover a claim against the debtor that arose before the commencement of the case. As noted from its tenor,Banco Popular's letter was not a coercive, harassing or collection effort against Plaintiff; it had the intended purpose of providing Plaintiff with options to retain his residence, which could forestall Banco Popular's enforcement of its lien notwithstanding receiving consensual relief from stay 27 months earlier."

Second, BPPR did not willfully violate the automatic stay nor intended the actions which constituted the violation. The "automatic stay which Banco Popular was aware of, had been lifted on March 2, 2017as to Banco Popular. This is a crucial factor in disposing of this adversary proceeding regarding the alleged 11 U.S.C. §362(a)(6) violation. Besides the fact that the automatic stay was no longer in effect, by reviewing the full text of the letter, this Honorable Court can determine that Banco Popular did not intend to collect loan #0705909489 through its June 14, 2019 letter." BPPR reasons that it "was under the reasonable impression that no automatic stay was in effect, and Banco Popular intended to inform Plaintiff of options available to retain his residence without foreclosure proceedings, to which he had consented to 27 months earlier." The court must determine if there is a violation of the automatic stay under the totality of the circumstances, McConnie Navarro v. Banco Popular de Puerto Rico (In re McConnie Navarro), 563 B.R. 127 (Bankr. D. P.R. 2017). It is not per se improper to contact a debtor. Under the totality of circumstances, the statements in the letter show that BPPR "is not attempting to collect the debt as a personal liability."

Third, "Plaintiff cannot prove or sustain damages, because he consented to relief from stay, and Banco Popular's June 14, 2019 letter did not request payment of loan arrears (immediately or within a specific term); contrariwise, it offered Plaintiff several options available to retain his residence. It should be noted that, notwithstanding consenting to relief from stay in his confirmed plan, Plaintiff continued occupying his residence without further payments to or communications with Banco Popular. In other words, Plaintiff had continued to occupy his residence for free, and without further intervention or communications by Banco Popular."

Standard Motion for Summary Judgment

The court relies on the following prior decisions when analyzing the summary judgment standard: In re Román-Perez, 527 B.R. 844, 855 - 856, (Bankr. D.P.R. 2015); In re Otero Rivera, 511 B.R. 6 (Bankr. D.P.R. 2014); and In re Lopez, 492 B.R. 595 (Bankr. D.P.R. 2013).

Rule 56 of the Federal Rules of Civil Procedure is applicable to this proceeding by Rule 7056 of the Federal Rules of Bankruptcy Procedure. Summary judgment should be entered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with theaffidavits, 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. Bankr. P. 7056; see also, In re Colarusso, 382 F.3d 51 (1st Cir. 2004), citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-323, 106...