In re Rose

645 B.R. 253

IN RE Kerri L. ROSE, Debtor.

Case No. 6:20-bk-04449-LVV

United States Bankruptcy Court, M.D. Florida, Orlando Division.

Signed August 22, 2022

Filed August 23, 2022

Joshua J. Tejes, Kateryna V. Vykhodets, Upright Law, LLP, Orlando, FL, for Debtor.

ORDER DENYING DEBTOR'S MOTION FOR SANCTIONS

Lori V. Vaughan, United States Bankruptcy Judge

At issue is whether M&T Bank violated the automatic stay and codebtor stay by continuing to send statements to the Debtor's non-filing spouse and informing credit reporting agencies that the Debtor's non-filing spouse made late payments on a debt which the Debtor has no personal liability. Having considered the Debtor's request for sanctions for M&T Bank's alleged violation of the automatic stay and codebtor stay, the evidence presented and argument of counsel, the Court denies the Debtor's request for sanctions for the reasons stated below.

Factual Background

In 2017, Kerri L. Rose ("Debtor") and Michael Rose ("Michael"), who are married, purchased a home located at 3028 Egrets Landing Drive, Lake Mary, FL ("Home"). Michael signed a promissory note in the amount of $222,495 ("Note") to purchase the Home.¹ To secure the Note, Michael and the Debtor gave the lender a mortgage on the Home ("Mortgage").² The lender later assigned the Note and Mortgage to M&T Bank ("Bank").³ The Debtor and Michael own the Property.

On August 6, 2020, the Debtor filed for relief under Chapter 13 of the Bankruptcy Code.⁴ The bankruptcy schedules listed the Debtor's tenancy by the entirety ownership of the Home and provided that the Bank held a $207,000 claim secured by the Home.⁵ The Debtor filed a chapter 13 plan proposing to pay the Bank's claim through the bankruptcy.⁶

The Bank objected to confirmation and filed a secured proof of claim totaling $208,113 ("Claim").⁷ The Claim listed arrears totaling $2,031.56 ("Arrears"). In support of the Claim, the Bank attached a claim summary sheet, the Note, the Mortgage and other supporting documents.⁸ Two weeks after filing the Claim, the Bank filed a Notice of Postpetition Mortgage Fees, Expenses and Charges that asserted attorney's fees totaling $500 for preparing the Claim ("$500 Attorney Fee").⁹ The Debtor amended the chapter 13 plan proposing to pay the Claim, including the Arrears (the "Plan").¹⁰ On December 16, 2020, the Court entered an Order Confirming the Plan ("Confirmation Order"). The Confirmation Order provided that the Bank would receive payments over 60 months consisting of the ongoing mortgage payment, Arrears and $500 Attorney Fee. The Debtor made plan payments to the Chapter 13 trustee, who then disbursed payments to the Bank.

During the Debtor's bankruptcy case, the Bank sent Michael monthly mortgage statements (collectively the "Mortgage Statements") and when the Bank received late payments from the Chapter 13 trustee, the Bank notified credit reporting agencies that Michael had made the late payments.¹¹ The Mortgage Statements—addressed only to Michael—had a "Bankruptcy Message" on the first page, partly bolded and consistent with other print on the document stating the following:

Our records show that you are a debtor in bankruptcy. We are sending this statement to you for informational and compliance purposes only. It is not an attempt to collect a debt against you.

If your bankruptcy plan required you to send your regular monthly mortgage payment to the Trustee, you should pay the Trustee instead of us. Please contact your attorney or the Trustee if you have questions.

If you want to stop receiving statements, write to us at: M&T Bank, Attn: Customer Asset Management, P.O. Box 5111, Buffalo, NY 14240-5155.

Debtor's counsel responded by mailing the Bank two letters (collectively the "Attorney Letters").¹² The Attorney Letters, which are nearly identical, informed the Bank that it violated the chapter 13 codebtor stay by attempting to collect a debt and notifying the credit reporting agencies that Michael made late payments. The Bank continued sending the Mortgage Statements to Michael and notifying the credit reporting agencies of late payments.

On January 11, 2021, the Bank sent Michael a letter informing him he was behind on his mortgage payments and that loss mitigation programs could allow him to keep the Home or avoid a foreclosure ("Loss Mitigation Letter").¹³ The Loss Mitigation Letter began with "[t]he information contained in his letter is for informational purposes only and is not an attempt to collect an obligation" and went on to describe programs such as forbearance, loan modification and deed in lieu of foreclosure. The Bank addressed the Loss Mitigation Letter to Michael only.

Almost a year later, the Bank sent Michael another letter informing him that he was past due for two mortgage payments ("Past Due Letter").¹⁴ The Past Due Letter stated that the Bank was concerned about the missed payments and wanted to assist. A pamphlet titled "Tips to Avoid Foreclosure" was enclosed with the Past Due Letter. Although the Past Due Letter provided a payment address, the amount past due was not provided and stated "[i]f you have already mailed the payments, please accept our thanks." The Past Due Letter was addressed to Michael, not the Debtor.

On June 30, 2021, the Debtor filed the Motion for Sanctions.¹⁵ The Debtor alleged that the Bank violated the automatic stay and codebtor stay by sending the Mortgage Statements, Lost Mitigation Letter and Past Due Letter and by notifying the credit reporting agencies that Michael had made late payments during the bankruptcy case. The Court held an evidentiary hearing on the Motion for Sanctions.¹⁶ The parties examined witnesses, including the Debtor, Michael, Joshua Tejes, who is Debtor's bankruptcy counsel and Tiffany Hall, who is the Bank's representative.¹⁷

The Debtor testified that she wanted to protect the Home and included the payments to the Bank through her bankruptcy plan. The Debtor knew the Bank had contacted Michael, not her, but she was confused about the Mortgage Statements which resulted in her being emotional and scared about losing the Home. Although the Debtor contacted the Bank several times to obtain information, the Bank would not talk with her due to the bankruptcy.

Michael testified that the Mortgage Statements also confused him. The Mortgage Statements referred to him as a debtor—even though he had not filed a bankruptcy case—and included charges for a $500 bankruptcy attorney fee and a $350 bankruptcy attorney fee. The Loss Mitigation Letter and Past Due Letter also confused Michael because he did not know why he was receiving them. Michael contacted the Bank at least three times to discuss the bankruptcy, but only spoke with a Bank representative once. Even though the Mortgage Statements provided a mechanism to stop the statements, Michael did not send any letters requesting that the Bank stop sending the Mortgage Statements.

Tiffany Hall ("Hall"), the Bank's representative, testified that the $500 attorney fee referenced on the Mortgage Statements related to the Notice of Postpetition Mortgage Fees, Expenses and Charges filed in this case—the $500 Attorney Fee. Because the Bank did not timely file a Notice of Postpetition Mortgage Fees, Expenses and Charges for the $350 bankruptcy attorney fee referenced on the Mortgage Statements, the Bank has waived the fee.

Discussion

Filing a petition under the Bankruptcy Code¹⁸ imposes, with certain exceptions, an automatic stay of various acts which attempt to enforce prepetition claims or interfere with property of the estate or the debtor. In re Jacks , 642 F.3d 1323, 1328 (11th Cir. 2011). Individuals injured by any willful violation of the stay provided by § 362 shall recover actual damages, including attorneys’ fees and costs and when appropriate, punitive damages. 11 U.S.C. § 362(k). A "willful" stay violation occurs when the violator knew the automatic stay was invoked and intended the actions which violated the stay. Jove Eng'g v. IRS (In re Jove) , 92 F.3d 1539, 1555 (11th Cir. 1996). The violator's specific intent to violate the automatic stay is not required. Id. See also In re Sanders , Case No. 8:20-bk-02731, 2020 WL 6020347, *2 (Bankr. M.D. Fla. Sept. 15, 2020). Individuals seeking damages for stay violations have the burden of proof to establish that the wrongdoer violated the automatic stay and the violation was willful. In re Rivera , Case No. 6:09-bk-00340-ABB, 2009 WL 3735834, *2 (Bankr. M.D. Fla. Nov. 5, 2009).

The Bank Did Not Violate the Automatic Stay

Although unclear what provisions of § 362(a) the Debtor asserts that the Bank violated, the only provisions that could plausibly apply here are (3), (4), (5) and (6).¹⁹ These provisions enjoin all entities from:

(3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate;

(4) any act to create, perfect, or enforce any lien against property of the estate;

(5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such lien secures a claim that arose before the commencement of the case under this title; and

(6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title.

11 U.S.C. § 362(a)(3)-(6). Automatic stay provisions, however, do have their limits. Section 362(a) protects the debtor, property of the debtor and property of the estate. In re Siskin , 231 B.R. 514, 519 (Bankr. E.D.N.Y. 1999). Non-debtor parties or their property are not protected. Siskin , 231 B.R. at 519. "The automatic stay does not afford protection or relief for the Debtor's family or their property." Siskin , 231 B.R. at 519 quoting In re Sumpter , 171 B.R. 835,843 (Bankr. N.D. Ill 1994).

To begin, the Bank did not violate § 362(a)(6) —any act to collect a prepetition claim against the debtor—because the Bank did not collect and does not have a claim against the Debtor. The Bankruptcy...