Thomas v. Seterus Inc. (In re Thomas)

554 B.R. 512

In re Jack R. Thomas, Angela S. Thomas, DebtorsJack R. Thomas and Angela S. Thomas, Plaintiffs

v.Seterus Inc. and JPMorgan Chase, Defendants

Case No. 15-30401-WRS

Adv. Pro. No. 16-3045-WRS

United States Bankruptcy Court, M.D. Alabama.

Signed August 5, 2016

Charles E. Grainger, Grainger Legal Services, LLC, Montgomery, AL, for Plaintiffs.

Matthew Thomas Mitchell, Elizabeth Jordan Teague, Burr & Forman, LLP, John D. Collins, Maynard Cooper & Gale, P.C., Birmingham, AL, Joshua B. White, Stephens Millirons, P.C., Huntsville, AL, for Defendants.

MEMORANDUM OPINION

William R. Sawyer, United States Bankruptcy Judge

This adversary proceeding is before the Court on the motion to dismiss filed by Defendant JPMorgan Chase (“Chase”). (Doc. 12). Plaintiffs Jack and Angela Thomas (“Plaintiffs”) allege that Chase willfully violated the automatic stay by sending them monthly mortgage statements and letters threatening to charge them for force-placed hazard insurance on the mortgaged property. (Doc. 1). They also argue that Chase is responsible for the actions of its mortgage servicer, Defendant Seterus, Inc. (“Seterus”). Plaintiffs have filed a response to Chase's motion to dismiss, to which Chase filed a reply, and the Court heard oral argument from counsel for both parties at a hearing on July 19, 2016. (Docs. 14 and 16). For the reasons set forth below, Chase's motion to dismiss is GRANTED.

I. FACTS & PROCEDURAL HISTORY

A. Bankruptcy

Plaintiffs filed Chapter 7 bankruptcy on February 16, 2015. (Case No. 15–30401). At the time of their filing, Plaintiffs owed Chase $134,489 on a note that was secured by a mortgage on real property in Prattville, Alabama (“the Property”), and their schedules indicated their intent to surrender the Property. (Case No. 15–30401, Doc. 1). Chase moved for relief form the automatic stay with respect to the Property on April 8, 2015, and the Court granted the motion on May 5, 2015. (Case No. 15–30401, Docs. 15 and 21). Plaintiffs obtained a Chapter 7 discharge on July 2, 2015 without reaffirming their debt to Chase. (Case No. 15–30401, Doc. 37).

B. Monthly Mortgage Statements

Starting on April 1, 2015, Chase began mailing monthly mortgage statements to Plaintiffs, examples of which are attached as exhibits to Chase's motion and to Plaintiffs' response brief. (Doc. 12, Ex, B; Doc. 14, Ex. A). Each of the statements are two pages long. The front of the first page recites the original and unpaid principal balances and the monthly payment. Separated from this information and prominently featured at the bottom of the first page is the following disclaimer:

To the extent your original obligation was discharged, or is subject to an automatic stay of bankruptcy under Title 11 of the United States Code, this statement is for compliance and/or informational purposes only and does not constitute an attempt to collect a debt or to impose personal liability for such obligation. However, a secured party retains rights under its security instrument, including the right to foreclose its lien.

(Doc. 12, Ex. B; Doc. 14, Ex. A) (bold type in original). Below this statement is a reference to a “bankruptcy information page” included with the statement—the second page. The back side of the first page lists contact information for several of Chase's departments, as well as information on how to make payments. At the bottom of the back side of the first page under the heading “Important Bankruptcy Information ” the statement adds a second disclaimer: “If you or your account is subject to pending bankruptcy proceedings, or if you received a bankruptcy discharge, this statement is for informational purposes only and is not an attempt to collect a debt.” (Doc. 12, Ex. B; Doc. 14, Ex. A).

The second page has the heading “Bankruptcy Information ” and notes at the top of the body of the statement that “ACCOUNT STATEMENT IS FOR INFORMATIONAL PURPOSES ONLY .” It lists the bankruptcy chapter filed, the interest rate, and the principal balance, and provides a phone number to contact “Bankruptcy Customer Service.” Below that information on the second page is a bold-type disclaimer identical to the one found on the front of the first page, and below that is a payment stub. The back side of the second page is blank except for the payment stub, which requests that any change in address or phone number be noted. (Doc. 12, Ex. B; Doc. 14, Ex. A).

C. Hazard Insurance Letters

Chase also mailed Plaintiffs “several” letters requesting information of hazard insurance on the Property, an example of which is attached as an exhibit to Chase's motion. (Doc. 12, Ex. D). Seven pages long, the letter warns that if Plaintiffs do not provide proof of insurance on the Property, Chase would purchase insurance and hold Plaintiffs liable for it. The first paragraph of the first page includes the following statement:

Because hazard insurance is required on your property, we plan to buy insurance for your property . You must pay us for any period during which the insurance we buy is in effect but you do not have insurance.

(Doc. 12, Ex. D) (bold type in original). The letter includes charts comparing the benefits to Plaintiffs of purchasing their own insurance versus the consequences of force-placed insurance. It also includes two pages of answers to “frequently asked questions,” as well as a page detailing the required coverage of the hazard insurance. On the last page, under the heading “IMPORTANT BANKRUPTCY INFORMATION ,” the letter suggests that Plaintiffs refer the letter to their bankruptcy attorney and includes the following disclaimer:

To the extent your original obligation was discharged, or is subject to an automatic stay of bankruptcy under Title 11 of the United States Code, this notice is for compliance and/or informational purposes only and does not constitute an attempt to collect a debt or to impose personal liability for such obligation.

(Doc. 12, Ex. D) (bold type in original).

D. Seterus's Conduct

On August 1, 2015, Chase transferred Plaintiffs' mortgage loan to Seterus, who “began making multiple harassing phone calls to Plaintiffs to collect on the debt[,]” notwithstanding Plaintiffs informing Seterus that they had filed bankruptcy. (Doc. 1). Seterus likewise mailed monthly mortgage statements and letters threatening to purchase force-placed hazard insurance on the Property at Plaintiffs' expense. On January 14, 2016, Seterus notified Plaintiffs that it had purchased hazard insurance on the Property at a monthly premium of $1,761.76 and was holding Plaintiffs responsible for the premiums. Seterus was still engaging in this conduct at the time Plaintiffs filed suit.

E. Adversary Proceeding

Plaintiffs initiated this adversary proceeding on May 16, 2016 against Chase and Seterus, alleging that their activity willfully violated the automatic stay. (Doc. 1). Seterus answered with a general denial. (Doc. 6). Chase filed a motion to dismiss, arguing that the monthly mortgage statements did not violate the automatic stay because they were not attempts to collect the debt from Plaintiffs personally. (Doc. 12). Chase also asserts that its letters regarding hazard insurance did not violate the automatic stay because the letters were necessary for Chase to comply with the Real Estate Settlement Procedures Act (“RESPA”). (Doc. 12).

Plaintiffs respond that the communication of a debt to the debtor or to a third party is an “act to collect” the debt in violation of the automatic stay. (Doc. 14). They argue that, given the circumstances in which Chase sent its mortgage statements, the statements would be objectively understood as pressuring them to pay Chase. They further argue that the disclaimers are too equivocal to shield Chase from liability, and that providing information is not a legitimate basis for sending the statements. (Doc. 14). Plaintiffs assert that Chase's letters threatening to hold them responsible for hazard insurance also violate the automatic stay because they had no continuing duty to maintain insurance once they surrendered the Property and vacated it. They argue the obligation to maintain insurance was a pre-petition in personam obligation arising out of their mortgage contract that they discharged along with the rest of their mortgage debt. (Doc. 14). Finally, Plaintiffs argue that they are entitled, at this procedural posture, to a presumption that Chase is responsible for Seterus's actions on the grounds that they have an agency relationship and that Chase failed to notify Seterus of the bankruptcy. (Doc. 14).

In its reply, Chase reiterates that the monthly mortgage statements did not violate the automatic stay, and argues it cannot violate the automatic stay by complying with RESPA. (Doc. 16). Chase also argues that Plaintiffs are still contractually obligated to provide insurance on the Property so long as it remains in their name. (Doc. 16). Finally, Chase argues that Plaintiffs must plead facts demonstrating that it has an agency relationship with Seterus, and that Plaintiffs are not entitled to a presumption on that point.

II. LAW

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b) and 157(a), and the District Court's General Order of Reference dated April 25, 1985. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A). This is a final order.

A. Standard of Review

Rule 12(b)(6), as incorporated by FED. R. BANKR. P. 7012(b), authorizes a court to dismiss complaints that fail to “state a claim upon which relief can be granted.” FED. R. CIV. P. 12(b)(6). A court's analysis of a complaint in the context of a motion to dismiss is a two-step process. First, the court must identify, and cull, pleadings that are mere legal conclusions or “[t]hreadbare recitals of the elements of a cause of action,” for such pleadings “are not entitled to the assumption of truth.” Ashcroft v. Iqbal, 556 U.S. 662, 678–79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Second, “[w]hen there are well-pleaded factual allegations, a court should assume...