Navarro v. Banco Popular De Puerto Rico (In re Navarro)

• Decision Date: 09 January 2017
• Docket Number: ADV. PROC. NO. 15–00235 (ESL),CASE NO. 10–04937 (ESL)
• Citation: 563 B.R. 127
• Parties: IN RE: Ingard Cecile MCCONNIE NAVARRO, Debtor Ingard Cecile McConnie Navarro, Plaintiff v. Banco Popular De Puerto Rico; DLJ Mortgage Capital, Inc. ; Select Portfolio Servicing, Inc., Defendants
• Court: U.S. Bankruptcy Court — District of Puerto Rico

563 B.R. 127

IN RE: Ingard Cecile MCCONNIE NAVARRO, DebtorIngard Cecile McConnie Navarro, Plaintiff

v.Banco Popular De Puerto Rico; DLJ Mortgage Capital, Inc. ; Select Portfolio Servicing, Inc., Defendants

CASE NO. 10–04937 (ESL)

ADV. PROC. NO. 15–00235 (ESL)

United States Bankruptcy Court, D. Puerto Rico.

Signed January 9, 2017

Ada M. Conde, Rafael St. Germain, San Juan, PR, for Debtor/Plaintiffs.

Vivian Ortiz Ponce, Cardona Jimenez Law Office, San Juan, PR, Melissa Hernandez Carrasquillo, Fiddler Gonzalez & Rodriguez, Hato Rey, PR, for Defendants.

OPINION AND ORDER

Enrique S. Lamoutte, United States Bankruptcy Judge

This adversary proceeding is before the court upon the Motion for Summary Judgment filed by Ingard Cecile McConnie Navarro (hereinafter referred to as the "Plaintiff" or "Debtor") arguing that creditor Banco Popular de Puerto Rico and Select Portfolio Servicing, as servicing agent for DLJ Mortgage Capital, Inc. (hereinafter referred to as "BPPR", "SPS" and "DLJ Mortgage" respectively) violated the discharge injunction when they filed a foreclosure action in state court and sent collection letters disguised as a "statement for informational purposes only" to collect on a discharged debt (Docket No. 18). BPPR in its Reply to Plaintiff's Motion for Summary Judgment contends that the mortgage loan was not subject to discharge because the mortgage deed was presented pre-petition to the Property Registry and the deed was recorded post-discharge in conformity with the relation back principles of 11 U.S.C. §§ 362(b)(3), 544(a) & 546(b)(1)(A) and of Article 53 of the Puerto Rico Mortgage Law which causes the recordation of a timely presented mortgage deed to relate back to the date of presentation of the mortgage deed which is the date of perfection of the security interest (Docket No. 24). DLJ and SPS in their Opposition to Plaintiff's Motion for Summary Judgment and Cross Motion for Summary Judgment argue that the letters sent by SPS provided information related to DLJ's exercise of its in rem rights over the real property and did not demand payment from the Debtor. DLJ argues that it has a valid and enforceable lien over Debtor's real property and as a secured creditor it can foreclose on the mortgaged property (Docket No. 28). The Debtor filed her Reply to BPPR's, DLJ's and SPS' Replies to Debtor's Motion for Summary Judgment arguing that "... since the State Court found that the property was registered to another entity and not the debtor, and the Banco Popular did not take any steps to cure the defect, this interrupts the "relate back" principle, thus leaving the discharged debt fully discharged." (Docket No. 36). Subsequently, DLJ and SPS filed their Sur-reply and the Debtor filed her Reply to the Sur-reply (Docket Nos. 37 & 42). For the reasons stated below the Plaintiff's Motion for Summary Judgment is hereby denied and DLJ and SPS' Opposition to Motion for Summary Judgment is hereby granted.

Jurisdiction

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a). This is a core proceeding pursuant to 28 U.S.C. §§ 157(b)(1) and (b)(2)(A), (I) & (K). Venue of this proceeding is proper under 28 U.S.C. §§ 1408 and 1409.

Facts and Procedural Background

The Debtor filed a bankruptcy petition under Chapter 7 of the Bankruptcy Code on June 5, 2010 (lead case No. 10–04937¹ ). The Debtor in her Schedule A (Real Property) scheduled the apartment at Palmas del Mar with a current value of $210,000 and a secured claim in the amount of $206,758.78. The Debtor in Schedule D (Creditors Holding Secured Claims) listed Banco Popular as the mortgage lien holder over the apartment at Palmas del Mar in the amount of $206,758.78. On July 13, 2010, the 341 meeting of creditors was held and closed (lead case, Docket No. 8). On July 15, 2010, the Chapter 7 Trustee filed the Report of No Distribution (lead case, Docket No. 9). On July 16, 2010, the Chapter 7 Trustee filed a Notice of Abandonment of Property informing that he intends to abandon the Palmas del Mar apartment (lead case, Docket No. 10). On September 14, 2010, the Court ordered the discharge of the Debtor pursuant to 11 U.S.C. § 727 (lead case, Docket No. 15). On September 24, 2010, the Order Discharging Trustee and Closing the Case was entered (lead case, Docket No. 17). The case was closed on September 24, 2010. On November 14, 2010, BBPR filed a Notice of Appearance (lead case, Docket No. 19).

Subsequently, on March 10, 2014, the Debtor filed a second bankruptcy petition under Chapter 13 of the Bankruptcy Code (second case No. 14–01796² ). The Debtor in her Schedule A (Real Property) scheduled the apartment at Palmas del Mar with a current value of $175,000 and a secured claim in the amount of $0. The 341 meeting of creditors was initially scheduled for April 16, 2014 and it was continued twice until it was held and closed on June 3, 2014 (second case, Docket No. 5, 20, 24, 28 & 34). On August 8, 2014, the Debtor's plan of reorganization dated March 10, 2014 was confirmed (second case, Docket No. 39). The plan of reorganization disclosed that Debtor did not have any secured claims.

On October 3, 2014, DLJ Mortgage Capital Inc. filed a Motion Requesting Relief from the Automatic Stay pursuant to 11 U.S.C. § 362(d)(1) requesting that the automatic stay be lifted to continue with the state foreclosure proceedings against the real property. DLJ stated that pursuant to a title study dated July 24, 2014, the Debtor is the owner of the mortgaged property and has failed to comply with the terms and conditions of the mortgage and is in arrears since April 2014 and thus, the principal owed is in the amount of $215,300 plus interests accrued, $2,710.68 in late charges, $250 for attorney's fees and $176 in filing fees (second case, Docket No. 42). On October 13, 2014, the Debtor filed her Reply to Motion Filed by DLJ Mortgage Capital Requesting the Lift of the Automatic Stay Pursuant to 11 U.S.C. § 362 (second case, Docket No. 49). On October 28, 2014, a hearing regarding the motion to lift the automatic stay was held and the court ordered as follows: "1–Debtor shall provide to movant all documents (in Spanish) in support of its position within 10 days. 2–DLJ shall move the court within 14 days thereafter stating its position to the defense raised by debtor. 3– The parties will jointly move the court 10 days thereafter informing on the status of the contested matter and if an evidentiary hearing is necessary (with estimate of time). 4–If an evidentiary hearing is scheduled, the parties shall file 7 days prior to the same; the uncontested facts and proposed findings on the contested facts, each finding shall make a reference to either a document (Exhibit) or witness" (second case, Docket No. 50). On December 22, 2014, the Court ordered the following:

"Upon the parties' failure to comply with this court's order of October 28, 2014 (dkt # 50), and it being moving creditor's burden, DLJ is hereby ordered to show cause within 21 days why the motion should not be denied for the failure to prosecute" (second case, Docket No. 53). On January 12, 2015, SPS as servicing agent of DLJ filed a Motion Requesting Extension of Time to File Response to Order to Show Cause (second case, Docket No. 55) and the same was granted on January 13, 2015 (second case, Docket No. 56). On January 14, 2015, Debtor filed a Motion for Extension of Time and to Inform (second case, Docket No. 57) and the same was granted on January 16, 2015 (second case, Docket No. 60).

On January 14, 2015, SPS as servicing agent of DLJ filed its Response to Order and Request that Relief from Stay be Granted arguing that invalidating a lien on a real property is different than placing an embargo on a property. The state court, "...simply denied a request to place an embargo on the property since it had not been properly registered in the name of the Debtor at the time of the request (it was pending review and inscription)(second case, Docket No. 58). On January 16, 2015, the court denied DLJ's motion premised upon relief from the automatic stay without prejudice to moving the court after the extension granted to Debtor's motion (dkt # 57) and the parties' compliance with this court's order of October 28, 2014 (dkt# 50) (second case, Docket No. 61).

On March 13, 2015, the court scheduled a hearing regarding DLJ's motion for relief from the automatic stay and the Debtor's reply for July 7, 2015 (second case, Docket No. 67). On July 1, 2015, the Debtor and SPS as the servicing agent for DLJ filed a Joint Motion Requesting Extension of Time of thirty (30) days to file the proposed findings of fact and conclusions of law (second case, Docket No. 69) and the same was granted on July 2, 2015.

On October 11, 2015, the Debtor filed a Motion Requesting Reopening (lead case, Docket No. 21) in order to proceed with the adversary proceeding against BPPR, SPS and DLJ premised upon the alleged violation of the discharge injunction. Also on that same date, the Debtor filed a Request for Consolidation Pursuant to Rule 1015 of the Bankruptcy Rules and Request of Order of Stay of Proceedings in Case No. 14–01796 (lead case, Docket No. 22). On November 2, 2015, the court granted Debtor's request to reopen the case (lead case, Docket No. 24). On January 6, 2016, the Debtor filed a Motion to Withdraw the Request for Consolidation Pursuant to Rule 1015 of the Bankruptcy Rules and Request to Vacate Hearing (lead case, Docket No. 28) and the same was granted on January 7, 2016 (lead case, Docket No. 29).

The hearing on the relief from the automatic stay was rescheduled to October 27, 2015 (second case, Docket No. 70). On October 20, 2015, the court ordered as follows: "[u]pon DLJ Mortgage Capital Inc. (DLJ) failure to file the proposed findings of fact and conclusions of law as ordered by this court on July 2, 2015 (dkt # 70), DLJ's motion to lift the automatic stay (dkt # 42) is hereby denied without prejudice. The hearing scheduled for October...