Villanueva v. First Bank P.R. (In re Villanueva)

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IN RE: JOSE R SOTO VILLANUEVA JOSE R. SOTO VILLANUEVA; JOCELINE ORTIZ POLACO Debtor IN RE: ERIC NIEVES LOPEZ Debtor IN RE: CARMEN MILAGROS MALDONADO DELGADO Debtor JOSE R. SOTO VILLANUEVA; JOCELINE ORTIZ POLACO; ERIC NIEVES LOPEZ; CARMEN MILAGROS MALDONADO DELGADO Plaintiffs v. FIRST BANK PUERO RICO; SANTANDER FINANCIAL SERVICES, INC. Defendants

Nos. 16-08627 (ESL), 17-0255 (ESL), 19-04425 (ESL)

Adversary No. 22-00023 (ESL)

United States Bankruptcy Court, D. Puerto Rico

December 5, 2024

CHAPTER 13

CHAPTER 7

RE WILLFUL VIOLATION OF THE DISCHARGE INJUNCTION; ACTUAL AND PUNITIVE DAMAGES

OPINION AND ORDER GRANTING MOTION TO DISMISS

Enrique S. Lamoutte, United States Bankruptcy Judge

This case is before the court upon the Motion to Dismiss Plaintiffs' Amended Class Action Complaint Under Fed.R.Civ.P. 12(b)(6) and 12(b)(7) (the "Motion to Dismiss", dkt. #96) filed by Santander Financial Services, Inc. ("Santander Financial"), the Debtors' opposition (dkt. #119) and Santander Financial's reply (dkt. #129).

For the reasons discussed below, the Motion to Dismiss (dkt. #96) is GRANTED.

Factual and Procedural Background

I. The Bankruptcy Case of Plaintiff Soto, Bankr. Case No. 16-08627

1. On October 29, 2016, José R. Soto Villanueva and Joceline Ortiz Polaco ("Plaintiff Soto") filed a voluntary petition under Chapter 13 of the Bankruptcy Code. See Bankr. Case No. 16-08627, dkt. #1.

2. "BC Santander" was scheduled as a creditor holding unsecured claims in the amounts of $41,380.00 (#8009) and $5,143.00 (#5521), and an interest in a checking account with "Santander Bank" was disclosed. See Bankr. Case No. 16-08627, dkt. #1, p. 24-25 (Schedule E/F), p. 15 (Schedule A/B).

3. Notice of the bankruptcy filing was sent to BC Santander at "PO BOX 362589, San Juan, PR 00936-2589". Certificate of Service, Bankr. Case No. 16-08627, dkt. #7.

4. On February 1, 2017, "Banco Santander Puerto Rico" filed Proof of Claim No. 5 in the unsecured amount of $42,575.00, and disclosed its notice address as follows: "PO BOX 362589, San Juan, PR 00936". Proof of Claim No. 5, Bankr. Case No. 16-08627, p. 3.^[1]

5. On June 14, 2017, Plaintiff Soto filed an Objection to Proof of Claim Filed by First Bank de PR, which was granted as unopposed on August 23, 20217. See Bankr. Case No. 16-08627, ECF Nos. 41, 46.

6. On October 20, 2021, the Court entered an Order of Discharge under 11 U.S.C. § 1328(a). See Bank. Case No. 16-08627, dkt. #93.

7. Notice of the Order of Discharge was sent to BC Santander at "PO BOX 362589, San Juan, PR 00936-2589". Certificate of Service, Bankr. Case No. 16-08627, dkt. #94.

II. The Bankruptcy Case of Plaintiff Nieves, Bankr. Case No. 17-02550

8. On April 12, 2017, Eric Nieves Lopez ("Plaintiff Nieves") filed a voluntary petition under Chapter 7 of the Bankruptcy Code. See Bankr. Case No. 17-02550, dkt. #1.

9. "Banco Santander" was scheduled as a creditor holding an unsecured claim in the amount of $843.66 (#7702) and "Banco Santander de PR" was scheduled as a creditor holding an unsecured claim in the amount of $495.62 (#6245). See Schedule E/F, Bankr. Case No. 17-02550, dkt. #1, p. 25.

8. Notice of the bankruptcy filing was sent to Banco Santander and Banco Santander de PR at "PO BOX 362589, San Juan, PR 00936-2589". See Certificate of Service, Bank. Case No. 17-02550, dkt. #6.

9. On May 17, 2017, the Chapter 7 Trustee filed a Report of No Distribution. See Bankr. Case No. 17-02550, dkt. #14. 9.

10. On October 20, 2021, the Court entered an Order of Discharge under 11 U.S.C. § 727. See Bankr. Case No. 17-02550, dkt. #22.

11. Notice of the Order of Discharge was sent to Banco Santander and Banco Santander de PR at "PO BOX 362589, San Juan, PR 00936-2589". Certificate of Service, Bankr. Case No. 17-02550, dkt. #24.

III. The Bankruptcy Case of Plaintiff Maldonado, Bankr. Case No. 19-04425

12. On August 2, 2019, Carmen Maldonado Delgado ("Plaintiff Maldonado") filed a voluntary petition under Chapter 13 of the Bankruptcy Code. See Bankr. Case No. 19-04425, dkt. #1.

13. "Banco Santander" was scheduled as a creditor holding an unsecured claim in the amount of $23,305.00 (#46xx) and "Banco Santander Visa" was scheduled as a creditor holding an unsecured claim in the amount of $450.49 (#1689). See Schedule E/F, Bankr. Case No. 17-02550, dkt. #1, p. 28. 14. Notice of the bankruptcy filing was sent to Banco Santander and Banco Santander Visa at "268 PONC E[sic] DE LEON, San Juan, PR 00918" and "GPO BOX 2589, San Juan, PR 00936", respectively. See Certificate of Service, Bankr. Case No. 19-04425, dkt. #8.

15. On September 4, 2019, "Santander" filed Proofs of Claim Nos. 1 and 2 in the unsecured amounts of $23,294.70 and $501.26, respectively, and disclosed its notice address as follows: "268 PONC E[sic] DE LEON, San Juan, PR 00918". Proof of Claim No. 1, Bankr. Case No. 19-04425, p. 1; Proof of Claim No. 2, Bankr. Case No. 19-04425, p. 1.^[2]

16. On May 17, 2021, the case was converted to Chapter 7. See Bankr. Case No. 19-04425, dkt. #29.

17. On June 23, 2017, the Chapter 7 Trustee filed a Report of No Distribution. See Bankr. Case No. 19-04425, dkt. #37.

18. On August 24, 2021, the Court entered an Order of Discharge under 11 U.S.C. § 727. See Bankr. Case No. 19-04425, dkt. #44.

19. Notice of the Order of Discharge was sent to Banco Santander and Banco Santander Visa at "268 PONC E[sic] DE LEON, San Juan, PR 00918" and "PO BOX 2589, San Juan, PR 00936". Certificate of Service, Bankr. Case No. 19-04425, dkt. #46.

IV. Facts Common to Each Plaintiff

20. On or about February 1, 2022, that is, after the entry of each discharge order, a letter was allegedly issued to each Plaintiff (the "Letter") stating that (a) "Luna acquired the Bankruptcy Account", (b) "the Bankruptcy Account 'remain in full force and effect and are now enforceable by the New Lender' ", and (c) "[a]ll future payments of interest, principal, or other charges payable by you under the Personal Loan shall be made payable to the Servicer and shall be sent to the Servicer…", and "demand[ing] that payments on the Bankruptcy Account be made to Luna". See dkt. #31, ¶¶ 27-29, 40-42, 55-57.

21. The Letter reads as follows:

Luna Chica, LLC [Santander Logo]

February 1, 2022 [Plaintiff Name] [Plaintiff Address]

Re: [Account Number]

To: [Plaintiff Name]

The above Personal Loan has been sold and conveyed to Luna Chia, LLC ("New Lender") by Santander Financial Services, Inc. All of the terms and conditions of the account remain in full force and effect and are now enforceable by the New Lender.

The New Lender has appointed Island Portfolio Services, LLC, as the services of the Personal Loan ("Servicer"). All future payments of interest, principal or other charges payable by you under the Personal Loan shall be made payable to the Servicer and shall be sent to the Servicer as follows:

Regular Mail & Overnight:

Island Portfolio Services, LLC

PO Box 361110

San Juan, PR 00936-1110

(866) 417-6501 or (787) 303-8531

Make Check Payable to:

Island Portfolio Services, LLC

Please note that any ACH or auto-debits that you had previously setup with Santander Financial Services, Inc. are no longer in effect. To reestablish your ACH or auto-debit service please contact the Servicer.

Please contact the Servicer at the address and phone number given below if you have any questions.

Island Portfolio Services, LLC

PO Box 361110

San Juan, PR 00936-1110

(866) 417-6501 or (787) 303-8531

Very truly yours,

Santander Financial Services, Inc. Luna Chica, LLC

Letter Issued to Plaintiff Soto, dkt. #20, p. 5, dkt. #96-1, dkt. #119-1; Letter Issued to Plaintiff Maldonado, dkt. #20, p. 6; and Letter Issued to Plaintiff Nieves, dkt. #20, p. 7.^[3]

22. On April 25, 2022, Debtors filed, and thereafter amended^[4], the present Class Action Complaint (the "Complaint", dkt. #1, 31) against Santander Financial and First Bank Puerto Rico ("First Bank", collectively with Santander Financial, the "Defendants"), asserting one (1) cause of action, violation of the discharge injunction and civil contempt. Debtors allege that the Defendants violated the discharge intinction "by continuing [] collection efforts against Plaintiffs" (dkt. #31, ¶ 62) through the "s[ale] and/or transfer[] [of] the discharged debt to Luna Chica, LLC…" (id., ¶¶ 26, 39, 54, 66), and by issuing "a collection letter informing that Luna acquired the Bankruptcy Account and demand[ing] that payments … be made to Luna" (id., ¶¶ 27, 40, 55). Debtors also allege that First Bank "has a history of selling debts[] previously discharged in a bankruptcy proceeding, in violations of the discharge injunction" (id., ¶ 68), and request the court certify a class pursuant to Fed.R.Civ.P. 23 (id., ¶¶ 84-86). As a result of the forgoing allegations, Debtors seek actual damages of $5,000.00 per Plaintiff, punitive damages of $10,000.00 per Plaintiff, costs and attorneys' fees (id., ¶¶ 78-81).

23. On August 31, 2022, Debtors filed, and thereafter amended, a Class Action Complaint in the U.S. District Court for the District of Puerto Rico (the "District Court") against Island Portfolio Services LLC ("Island Portfolio") and Luna Chica, LLC ("Luna Chica"), asserting three (3) counts of violations to the Fair Debt Collection Practices Act (the "FDCPA"), 15 U.S.C. § 1692 et seq., and one (1) count of violation of the discharge injunction, each arising from the Letter allegedly issued by Island Portfolio in conjunction with Luna Chica, dated as of February 1, 2022. See Case No. 22-cv-01417 (SCC) (the "First District Court Action")^[5].

24. On October 26, 2023, First Bank filed an Answer to Complaint (dkt. #28), asserting various affirmative defenses.

25. On November 28, 2022, Santander Financial, a dissolved entity^[6], was...