In re Cantrell

605 B.R. 841

IN RE: Simone CANTRELL, Debtor.

Case No. BG 10-03241

United States Bankruptcy Court, W.D. Michigan.

Signed August 14, 2019

Simone Cantrell, Grand Rapids, Michigan, pro se Debtor.

Cheryl D. Cook, Esq. and Brian L. Groen, Esq., Rochester, Michigan, attorneys for Bank of America, N.A.

Dawn N. Williams, Esq., Grand Rapids, Michigan, attorney for Select Portfolio Servicing, Inc.

OPINION REGARDING DEBTOR'S MOTIONS FOR CONTEMPT AND VIOLATION OF DISCHARGE INJUNCTION

James W. Boyd, United States Bankruptcy Judge

I. INTRODUCTION.

Simone Cantrell (the "Debtor") filed her chapter 7 bankruptcy case on March 6, 2010, over nine years ago. The Debtor's bankruptcy schedules showed that she owned a residence located at 660 Everglade in Grand Rapids, Michigan, subject to two mortgage liens, the first of which was serviced by Bank of America Home Loans. The mortgage debt was not reaffirmed, the case was administered in a typical manner, and the Debtor received her discharge on June 15, 2010. The trustee filed his Report of No Distribution on August 1, 2011, and the case was closed on September 19, 2011.

The Debtor, with her bankruptcy discharge, had presumably obtained her opportunity for a fresh start and moved on with her life. However, despite the bankruptcy case, the Debtor and her family continued to occupy their residence and make payments on the mortgage debt. This arrangement continued for approximately seven years, until the Debtor eventually stopped making her payments sometime in 2017 and the lender's assignee foreclosed on the property.

Then, on November 8, 2018, the Debtor filed a motion to reopen her bankruptcy case alleging that Bank of America ("BOA"), the original mortgage loan servicer, and Select Portfolio Servicing, Inc. ("SPS"), the entity that took over servicing in 2017, had violated the discharge injunction by attempting to collect a prepetition debt and by foreclosing on her home. The court reopened the case on December 19, 2018. The Debtor filed her Motion for Contempt on December 28, 2018, and an amended Motion for Contempt on February 22, 2019. The Debtor's motions assert that BOA and SPS should be held in contempt of court for their alleged violations of the discharge injunction.¹ Specifically, she alleges that BOA violated the discharge injunction by sending her monthly statements, entering into a Loan Modification Agreement with her, and sending her related solicitations about modification options. After servicing responsibilities transferred to SPS, the Debtor alleges that SPS also violated the discharge injunction by sending monthly statements and by placing more than seventeen phone calls to the Debtor's residence. The Debtor requests damages of approximately $160,000 for these alleged violations.

BOA and SPS maintain that the post-discharge statements and communications sent to the Debtor were for informational purposes only and were not attempts to collect the mortgage debt from the Debtor personally. To the extent any communications are construed as efforts to collect payments from the Debtor, BOA and SPS argue that the communications fall under § 524(j), which permits secured creditors to seek or obtain periodic payments in lieu of pursuing in rem relief on their lien so long as the actions are undertaken in the ordinary course of business.

II. JURISDICTION.

The court has jurisdiction over this bankruptcy case. 28 U.S.C. § 1334. The bankruptcy case and all related proceedings have been referred to this court for decision. 28 U.S.C. § 157(a) ; L. Civ. R. 83.2(a) (W.D. Mich.). The Debtor's claims for alleged violations of the discharge injunction are core proceedings and this court has authority to enter a final order. 28 U.S.C. § 157(b)(2)(O) ; In re Perviz , 302 B.R. 357, 365 (Bankr. N.D. Ohio 2003).

III. FINDINGS OF FACT.

Since the re-opening of her bankruptcy case, the Debtor has represented herself pro se . Her original Motion for Contempt included 237 pages of exhibits consisting of correspondence and other information the Debtor received from BOA and SPS, mostly after her bankruptcy filing. The amended motion also included 224 pages of exhibits, most of which are the same as those attached to the original motion.² In addition, the Debtor submitted an Affidavit of Damages in support of her motions. (Dkt. No. 40.) BOA and SPS both filed responses to the Debtor's amended motion, which also attach various exhibits. At a hearing held before this court on April 11, 2019, the parties stipulated that the court could consider all exhibits attached to the parties' respective pleadings in deciding the Debtor's motions. The Debtor filed a Motion for Discovery on April 18, 2019, seeking additional discovery on both BOA and SPS. (Dkt. No. 51.) The court denied the motion for the reasons set forth in its Order Denying Debtor's Motion for Discovery. (Dkt. No. 52.) The court has carefully reviewed all of the exhibits. The following findings of fact are based on those documents and the overall record in this bankruptcy case.

The Debtor purchased her residence located at 660 Everglade, Grand Rapids, Michigan in June of 2005. She financed the purchase by obtaining a loan for $95,600 which was secured by a mortgage on the property. The lender was America's Wholesale Lender and MERS, as nominee for America's Wholesale Lender, was the mortgagee. (SPS's Response to Debtor's Amended Motion for Contempt, Dkt. No. 41, at Exh. 1.) Bank of America was the servicer of the loan until servicing transferred to SPS on July 16, 2017. (SPS Response, Dkt. No. 41, at Exh. 2.)

When the Debtor filed her bankruptcy case in March 2010, she listed her real property on Schedule A and indicated that its fair market value was $123,600. Schedule D identifies two creditors with security interests in the property: creditor "Bac Home Loans Servici" [sic] is listed as being owed $91,343.00 on a first mortgage, and HSBC Mortgage Corp. is identified as being owed $22,665.00 on a second mortgage. The Debtor's Statement of Intention indicates her intent to reaffirm both debts. The Debtor has stated, both in her pleadings and at the hearings on her contempt motions, that she believed she had entered into a reaffirmation agreement with BOA prior to her discharge being issued on June 15, 2010. However, the court's docket does not reflect a reaffirmation agreement with either BOA or HSBC, nor any other activity concerning the Debtor's residence. Neither secured creditor filed a claim, a motion for relief from stay, or any other appearance in the case. The trustee did not administer or sell the property, which was ultimately abandoned back to the Debtor when the case was closed on September 19, 2011.

Throughout her bankruptcy case and after its conclusion, the Debtor continued to reside in the property and continued making periodic payments to Bank of America. During this time period, the Debtor received various correspondence from Bank of America which is described in greater detail below.

On May 14, 2014, the Debtor executed a Home Affordable Modification Agreement with Bank of America. (SPS Response, Dkt. No. 41, Exh. 4; BOA Response, Dkt. No. 42, Exh. 1.) The Modification Agreement changed the terms of Debtor's mortgage such that the monthly principal and interest payment amount was reduced from $711.56 to $564.09, plus an estimated monthly escrow amount of $227.38 (same as the pre-modification amount). The mortgage interest rate was reduced to 4.750% from 8.125%. The principal balance increased to $90,055.41 because it included all amounts and arrearages that were past due upon the effective date of the modification. The Modification Agreement included, at paragraph 1H, the following language:

I was discharged in a Chapter 7 bankruptcy proceeding subsequent to the execution of the [prior] Loan Documents. Based on this representation, Lender agrees that I will not have personal liability on the debt pursuant to this Agreement.

(SPS Response, Dkt. No. 41, Exh. 4.) The Debtor does not dispute that she signed the Modification Agreement, although she asserts that BOA "induced" her to enter into the agreement.

Servicing of the Debtor's loan was transferred to SPS in July of 2017. The Debtor was informed of the servicing transfer by letter dated July 17, 2017. (SPS Response, Dkt. No. 41, Exh. 2.) Like almost all of the correspondence sent to the Debtor by BOA and SPS, the letter includes as statement at the bottom of the first page which reads: "This information is intended for informational purposes only and is not considered an attempt to collect a debt." (Id .) The second page includes a more detailed disclaimer: "This statement does not represent and is not intended to be a demand for payment. This notice is for informational purposes only. If you have filed bankruptcy or have been discharged in bankruptcy, please be advised that you should contact legal counsel with any questions regarding the mortgage." (Id .)

The original mortgagee, MERS, assigned its interest to The Bank of New York Mellon on March 13, 2018. (SPS Response, Dkt. No. 41, Exh. 3.) SPS and the Bank of New York Mellon initiated foreclosure proceedings in May of 2018, due to the Debtor's default in making payments on the loan. The Debtor attempted to stop the foreclosure process by filing two civil suits against SPS and other named defendants in the United States District Court for the Western District of Michigan. The District Court ultimately rejected the Debtor's assertions that the foreclosure was invalid because of the bankruptcy discharge and dismissed the law suits. However, the District Court's dismissal was without prejudice to the Debtor's ability to bring claims regarding possible violations of the discharge injunction to the extent the defendants took actions beyond in rem foreclosure of the mortgage. (See U.S. District Court Case Nos. 1:18-cv-00610-RJJ-PJG, 1:18-cv-00840-RJJ-PJG; BOA Response, Dkt. No. 42, Exh. 2.) The property was sold to LNT Ventures, LLC, at a...