Ohai v. Delta Cmty. Credit Union (In re Ohai)

Docket Number12-65475-WLH,Adversary Proceeding 23-5041-WLH
Decision Date23 August 2023
PartiesIN RE: EMMANUEL OHAI, Debtor. v. DELTA COMMUNITY CREDIT UNION, PNC BANK NATIONAL ASSOCIATION, INC., DEAN ENGLE & PARK TREE INVESTMENTS, LLC, PARK TREE 20 INVESTMENTS, LLC, FCI LENDER SERVICES, INC., DANIEL I. SINGER & SINGER LAW GROUP, PHILLIP L. JAUREGUI D/B/A JAUREGUI & LINDSAY LLC, MICHAEL W. LINDSEY D/B/A, JAUREGUI & LINDSEY, LLC, MICROBILT CORPORATION, Defendants. EMMANUEL OHAI, Plaintiff,
CourtU.S. Bankruptcy Court — Northern District of Georgia
CHAPTER 7

ORDER ON DELTA COMMUNITY CREDIT UNION'S MOTION TO DISMISS

WENDY L. HAGENAU, U.S. BANKRUPTCY COURT JUDGE

This matter is before the Court on the Motion to Dismiss Complaint filed by Delta Community Credit Union ("Delta") (Doc. No. 11), Plaintiff's Response (Doc. No. 13), and Delta's Reply (Doc. No. 20). The Court has subject matter jurisdiction over Plaintiff's claims pursuant to 28 U.S.C. § 1334(b) and 28 U.S.C. § 157(a), and the claims of violating the automatic stay and the discharge injunction are core proceedings under 28 U.S.C. § 157(b)(2)(A), (G), & (O). See In re Golden, 630 B.R. 896, 920 (Bankr. E.D.N.Y. 2021) (it is axiomatic that this Court has subject matter jurisdiction to consider such core matters); In re Johnson, 575 F.3d 1079, 1083 (10th Cir. 2009); In re Harlan, 402 B.R. 703, 710 (Bankr. W.D. Va. 2009).

I. FACTS

Plaintiff and his now ex-wife purchased their primary residence at 2715 Tradd Court, Snellville, Georgia (the "Tradd Property") in April 2006 and executed a note and security deed in favor of Delta (the "Tradd Mortgage Loan"). In March 2008, Plaintiff and his now ex-wife obtained a home equity loan in the amount of $46,000 from Delta, secured by a second security deed (the "Tradd HELOC"). Plaintiff and his now ex-wife defaulted on the Tradd HELOC in 2010. Delta contacted Plaintiff in September 2011 about a potential modification of the Tradd HELOC. Plaintiff alleges the loan modification was approved, subject to a trial period from November 2011 - February 2012. He alleges Delta sold the loan and/or the servicing rights in early 2012, which prevented him from completing the trial loan modification.

On June 20, 2012, Plaintiff and his now ex-wife filed a petition under Chapter 7 of the Bankruptcy Code. On Schedule D, Delta was listed as holding two secured claims: one for $98,352.00 and another for $39,615.00, both secured by the Tradd Property. The Chapter 7 Trustee, Janet G. Watts, conducted the 341 meeting of creditors on July 17, 2012, and filed a Report of No Distribution on August 16, 2012. The bankruptcy case was closed and discharged on October 5, 2012 (Bankr. Doc. No. 14).[1]

Plaintiff continued to live in the Tradd Property. A foreclosure sale was eventually scheduled for September 3, 2019. Plaintiff applied to Georgia United Credit Union for a mortgage refinance on August 8, 2019 and on August 30, 2019, and also to Delta for a refinancing in October 2019. All were denied (complaint ex 1).

a. District Court Litigation

On May 26, 2020, Plaintiff filed a complaint in the United States District Court for the Northern District of Georgia, Ohai v. Delta Community Credit Union et al Civil Action No. 1:20-cv-02220-SCJ-JEM against Delta and others. Plaintiff alleged violations of several consumer protection statutes (the Fair Credit Reporting Act ("FCRA"), Equal Credit Opportunity Act ("ECOA"), Fair Debt Collection Practices Act ("FDCPA"), Georgia Fair Business Practices Act ("GFBPA")), invasion of privacy, and "defamation-libel". The original complaint did not allege a violation of the automatic stay or discharge injunction. Plaintiff filed an amended complaint (District Court Doc. No. 11) on June 15, 2020. It included claims that Delta violated the ECOA, FCRA, the GFBPA, and the discharge injunction, and engaged in "defamation-libel." The Amended Complaint did not include any claims regarding the automatic stay.

Plaintiff sought to further amend his complaint and filed a Motion for Leave to File the Second Amended Complaint (District Court Doc. No. 108). The court ultimately denied Plaintiff's request to amend the complaint (District Court Doc. No. 149), but the court granted the motion "to the extent that Plaintiff seeks to dismiss his claim for a bankruptcy discharge injunction." Accordingly, the court ruled the First Amended Complaint (District Court Doc. No. 11)-without claim XI regarding the discharge injunction-was the operative complaint (District Court Doc. No. 149 at 45-46.) At this point, then, neither the automatic stay nor the discharge injunction were at issue in the District Court.

Delta filed a motion to dismiss the operative complaint. The District Court dismissed all counts against Delta except for Plaintiff's claim that Delta violated the ECOA when it allegedly denied Plaintiff's application to refinance in October 2019 and allegedly failed to provide requisite notice regarding the application (District Court Doc. No. 236). Accordingly, Count I under the ECOA against Delta remains pending in the District Court.

b. Adversary Proceeding

On March 29, 2023, Plaintiff filed the complaint against Delta (his former mortgage holder), other mortgage holders, debt collectors, and a consumer reporting agency. The complaint relates to two separate properties, but the actions of Delta only relate to his primary residence at 2715 Tradd Court, Snellville, Georgia (the "Tradd Property"). Much of the complaint against Delta alleges it thwarted Plaintiff's ability to obtain a loan modification of the Tradd HELOC by transferring the loan during the trial period. But these acts occurred prior to the filing of the bankruptcy petition, and therefore prior to the imposition of the automatic stay and the entry of discharge.

The complaint alleges Delta violated the automatic stay because, while the bankruptcy case was pending, Delta sent Plaintiff a letter dated September 14, 2012 in which it stated, "We are suspending your services due to Loan Loss due to Bankruptcy." (Doc. No. 1 ex. H.) The letter explained Delta's policy to suspend services when a loss exists on an account, and informed Plaintiff that his checking account would be closed on October 1, 2012. The letter stated other potential effects of suspension included "closing checking accounts, cancellation of on-line banking, direct deposit, check cashing (including Delta Air Lines paychecks), service center transactions, lines of credit including overdraft protection, convenience loans, home equity and Visa (to include any reward points), as well as being removed as joint owner from other Credit Union accounts." The complaint also claims Delta continued to report payment delinquencies to the credit reporting agencies during the bankruptcy case and "communicated directly" with Plaintiff in an attempt to collect the debt.

Plaintiff asserts that Delta violated the discharge injunction by continuing to attempt to collect discharged debt. He claims that, at some point in 2019, Delta's Loss Mitigation Coordinator Cindy Morrow talked with Plaintiff on the telephone and asked "Mr. Ohai, why don't you want to make your 2nd mortgage payments?", and tried to talk him into making a debit card payment on the debt.

Finally, Plaintiff claims Delta violated the discharge injunction by selling one or more of its loans. Plaintiff alleges Delta "decided the way around not being able to recoup the amount for the loans, was to sell the Notes to unsuspecting debt buyers." Delta allegedly first sold the Tradd HELOC in February 2012 (pre-petition) to Sussex Insurance Co. Then Plaintiff received a letter dated May 23, 2017 showing the Tradd HELOC had been sold to Park Tree Investments 20, LLC. The complaint is not clear about if, when, or how, the Tradd Mortgage Loan was sold.

Delta filed the Motion alleging the complaint fails to state a plausible claim for relief because suspending Plaintiff's services at Delta did not amount to an act to collect a debt from Plaintiff while the automatic stay was in place and Delta did not attempt to collect discharged debt.

II. LAW
a. Motion to Dismiss for Failure to State a Claim

Delta seeks dismissal of the complaint pursuant to Federal Rule of Bankruptcy Procedure 12(b)(6), made applicable by Federal Rule of Bankruptcy Procedure 7012, for "failure to state a claim upon which relief can be granted." Fed.R.Civ.P. 12(b)(6). A complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 554, 570 (2007)). A complaint is plausible on its face when the plaintiff pleads factual content necessary for the court to draw the reasonable inference that the defendant is liable for the conduct alleged. Id.

While the plausibility standard "asks for more than a sheer possibility that a defendant has acted unlawfully," Iqbal, 556 U.S. at 678, the purpose of a motion to dismiss is not to resolve disputed facts or decide the merits of a case. Rather, the purpose of a motion to dismiss is to ensure that the plaintiff has provided notice of the grounds which entitle him to relief. Twombly, 550 U.S. at 561. The facts alleged must be taken as true, and dismissal is inappropriate merely because it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits. Official Comm. of Unsecured Creditors of Tousa, Inc. v. Technical Olympic, S.A. (In re Tousa), 437 B.R. 447, 452 (Bankr. S.D. Fla. 2010) (citing Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008)).

b. Automatic Stay

The Bankruptcy Code provides that a creditor must stay all proceedings against a debtor and its property after the...

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