Morales v.Select Portfolio Servicing (In re Morales)
| Decision Date | 10 September 2019 |
| Docket Number | CASE NO. 15-07075 (ESL),ADV. PROC. 17-00091 |
| Citation | 607 B.R. 16 |
| Parties | IN RE: Noemi Lugo MORALES, Debtor Noemi Lugo Morales, Plaintiff v. Select Portfolio Servicing |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
Homel Mercado Justiniano, Mayaguez, PR, for Plaintiff.
John Doe, pro se.
Jane Roe, pro se.
Insurance Company XYZ, pro se.
Reinsurance Company BCD, pro se.
Jose Luis Ramirez Coll, Antonetti Montalvo & Ramirez-Coll, San Juan, PR, for Defendant.
Insurance Company ABC, pro se.
OPINION AND ORDEREnrique S. Lamoutte, United States Bankruptcy Judge This case is before the court upon the Plaintiff's Statement of Uncontested Facts in Support of Motion for Summary Judgment (Docket No. 48) and Plaintiff's Memorandum of Law in Support of Motion for Summary Judgment (Docket No. 49), and the Defendant's Motion for Summary Judgment and Memorandum of Law in Support Thereof (Docket No. 50). Furthermore, the Defendant filed its Opposition to Plaintiff's Motion for Summary Judgment (Docket No. 59) and Plaintiff filed her Opposition to Defendant's Motion for Summary Judgment (Docket No. 61). The Defendant additionally filed its Reply to Plaintiff's "Motion in Opposition to Defendant's Motion for Summary Judgment" and Motion with Compliance with Order at Docket N. 64 (Docket No. 71).
The Plaintiff filed a chapter 7 bankruptcy petition on September 14, 2015 (Lead Case No. 15-07075). On Schedule A, the Plaintiff disclosed a real property located at Parcelas Aquilino #98, Barrio Ovejas, A[ñ]asco, PR. (Lead Case, Docket No. 8). The Debtor claimed the property exempt pursuant to 31 L.P.R.A § 385(a), 1851 - 18571 . On October 23, 2015, the Chapter 7 Trustee filed a Report of No Distribution (Lead Case, Docket No. 25). On October 27, 2015, Citifinancial Services of Puerto Rico, Inc., DBA CitiFinancial Plus, filed a Motion for Relief of Stay Pursuant to 11 U.S.C. 362 alleging that it was the holder of a mortgage note secured by real property of the Debtor and that, as of October 19, 2015, the Debtor had accrued $6,999.04 in arrears (Lead Case, Docket No. 27). As evidence of security, the creditor included as attachments: (1) the note; (2) the mortgage deed and (3) a title study. On October 28, 2015, the Debtor filed an Answer to Citifinancial Services of Puerto Rico, Inc. Motion for Relief of Stay alleging that the Debtor's property was free of liens, as evidenced by a Certificate from the Registry of Property, Section of Mayaguez and dated October 14, 2015, which did not show the presentation or registration of the mortgage deed (Lead Case, Docket No. 29). On December 9, 2015, Citifinancial Servicing LLC filed a Motion to Withdraw Motion for Relief of Stay at Docket No. 27 (Lead Case, Docket No. 37). On December 24, 2015, the court entered the Order of Discharge (Lead Case, Docket No. 40).
On April 5th, 2017, the Debtor filed a Motion to Reopen Case in order to file an adversary proceeding for violation of the discharge order (Lead Case, Docket No. 44). On the same date, the Debtor filed the present adversary proceeding against Select Portfolio Services Inc. ("SPS") (Docket No. 1). The Plaintiff alleged that SPS was falsely representing that an unsecured discharged debt could be collected after the Debtor received the discharge. She further states that the Creditor falsely represented that the debt was secured with debtor's real property. The Complaint stated that SPS had sent several written communications to the Debtor, requesting the Plaintiff to purchase insurance for the property, offering loss mitigation or repayment alternatives, informing the Plaintiff of mortgage balance and arrears and warnings of the Defendant's foreclosure rights. The Plaintiff alleged that all the collection efforts were willful and with the intent to collect a discharged debt in violation of 11 U.S.C. § 524 and § 727. The Debtor stated that the actions of SPS frustrated the discharge order and had forced the Debtor to incur in unnecessary time, effort and expenses to seek the enforcement of her "rights guaranteed by the bankruptcy code, by contract, and by prior actions of the defendants" She also alleged emotional distress.
SPS filed an Answer to the Complaint on October 27, 2017, denying the Plaintiff's allegations. (Docket No. 31). The Defendant affirmatively alleged that the Deed of Mortgage executed by the Plaintiff was filed for recordation in the Property Registry in 2003, years before the Plaintiff filed for bankruptcy. The defendant stated that Citifinancial Services of Puerto Rico, Inc. had a perfected lien over the Debtor's residence and that, as such, SPS is a secured creditor. The Defendant argued that all the letters sent were related to the enforceable lien on Plaintiff's real property and not an attempt to collect on a personal obligation that had been discharged. Therefore, the Defendant alleged that its actions did not constitute a willful, intentional or deliberate violation to the Bankruptcy Code and that it not engaged in bad faith, coercion or harassment or any egregious conduct.
On October 15, 2018, the Plaintiff filed her Statement of Uncontested Facts in Support of Motion for Summary Judgment (Docket No. 48) and Plaintiff's Memorandum of Law in Support of Motion for Summary Judgment (Docket No. 49). The Plaintiff asserts that she is entitled to partial summary judgment for the Defendant's multiple, willful and egregious actions of seeking to collect a discharged debt and for threatening to foreclose Plaintiff's property over which she claimed the Puerto Rico homestead exemption. The Plaintiff alleges that: (1) the Debtor received a discharge on December 24, 2015; (2) the Debtor claimed the Puerto Rico homestead exemption because she received a Registrar's Certification that stated that there was no lien over the Debtor's real property; (3) Citifinancial Services of Puerto Rico was listed as an unsecured creditor and the Debtor specified that the reason to include it in Schedule F was that the "mortgage was not registered"; (4) Citifinancial Services of Puerto Rico, Inc., DBA Citifinancial Plus filed a Motion for Relief from Stay pursuant to 11 U.S.C. § 362 claiming a secured interest over the Debtor's real property, evidenced by a Title Search which stated there was a presented mortgage deed. However, the Debtor filed her Response to Citifinancial Services of Puerto Rico Inc. Motion for Relief of Stay in which the Plaintiff submitted a Certificate of the Property of Registry of Mayagüez that certified that the property was free and clear of liens. Additionally, on December 9, 2015, Citifinancial Services of Puerto Rico Inc. filed a Motion to Withdraw Motion for Relief from Stay at Docket No. 27. Therefore, Citifinancial took no further action to contest the Debtor's allegation that the debt was unsecured. (5) After the Debtor's discharge Citifinancial Services of P.R. transferred its rights to Select Portfolio Services Inc. ("SPS"); and (6) SPS sent the Debtor several written communications related to the debt claiming that it had a valid lien against the Debtor's property.
The Plaintiff argues that the Creditor "had ample opportunity to challenge Plaintiff's/Debtor's contention that the mortgage deed was not recorded and the property was free and clear of all liens". The Plaintiff finds support in In Re Hawkins, 377 B.R. 761 (2007 BC SD Fla) stating that "[t]he Uncontested Facts in the present case are similar to the ones in the Hawkins case, a Debtor filed a no asset Chapter 7 in which she claimed a homestead exemption on her principal place of residence and she listed Creditor, Citifinancial Services of Puerto Rico as unsecured (Debtor clearly stated that the debt was unsecured because a mortgage was not recorded); the Creditor had all the opportunities as in the case of Hawkins to move for a Motion for Relief of Stay, challenge the discharge, appear at the 341 (a) Meeting, or even do the minimum and file proof of claim, but creditor chose to do nothing and the Debtor/Plaintiff received the discharge". Additionally, the Debtor alleges that as In Re Hawkins, the doctrine of latches applies considering that "...the original creditor had every opportunity to bring to the bankruptcy court any allegation to discuss and verify the existence of a lien and it was then (almost three years ago) when the Debtor could have raised any defense but the creditor withdrew its Motion for Relief form Stay and process ended with a discharge of the Plaintiff/Debtor."
On October 15, 2018, SPS filed its Defendant's Motion for Summary Judgment and Memorandum of Law in Support Thereof (Docket No. 50). The Creditor alleges that it did not violate the discharge injunction imposed by 11 U.S.C. § 524 or § 727 and that at the time of the filing of the bankruptcy petition, SPS had, and still holds, a valid lien over certain property of the Debtor which remain unaffected. The Creditor alleges that the relevant mortgage deed was presented for recordation on October 28, 2003, and that said deed was recorded by operation of Law No. 2162 in Plot No. 7380. The Creditor states that, pursuant to a Certification issued by the Property Registrar on July 11, 2018, the deed was presented in year 2003, and recorded pursuant to Law 216. The creditor states that the registrar clarified in the Certification that when it issued the previous certification it did not include the presentation of the mortgage due to an unknown mistake in the electronic logbooks of the Registry. However, it remains undisputed that over 11 years prior to the filing of the bankruptcy petition the creditor presented the mortgage deed in the Property Registry and, further, upon the enactment of Act 216 the mortgage was automatically recorded as of 2010. Therefore, SPS has a valid pre-petition lien over the Debtor's property. SPS states that a secured creditor may decline to participate in the bankruptcy process without jeopardizing its underlying lien. The creditor...
To continue reading
Request your trial