MEMORANDUM OF DECISION
WILLIAM C. HILLMAN, Bankruptcy Judge.
The matter before the Court is the "Motion for Sanctions for Violation of the Discharge Injunction, Fair Debt Collection Practices Act, Fair Credit Reporting Act and M.G.L. c. 93A" (the "Motion for Sanctions") filed by Thomas A. Zine (the "Debtor") and the "Opposition of Bayview Loan Servicing, LLC to Debtor's Motion for Sanctions" (the "Opposition") filed by Bayview Loan Servicing, LLC ("Bayview"). Through the Motion for Sanctions, the Debtor alleges that Bayview and BAC Home Loan Servicing ("BAC"), as servicers for Bank of New York Mellon ("BNY"), violated the discharge injunction and Mass. Gen. Law ch. 93A, § 1 et seq. ("Chapter 93A") by continuing collection efforts post-discharge.
From the outset, I note that the facts are incomplete and confusing. Matters are further complicated by the fact that the Debtor filed his affidavit in support of the Motion for Sanctions (the "Affidavit") with accompanying exhibits after Bayview filed the Opposition, and Bayview's counsel, Attorney Richard Demerle, inexplicably failed to appear at the hearing on the Motion for Sanctions. Notwithstanding these difficulties, the Affidavit and documents attached to thereto, the authenticity of which Bayview has not contested, in conjunction with the Court's own records,
The Debtor filed a voluntary Chapter 7 petition on September 17, 2008. On "Schedule A—Real Property" ("Schedule A"), the Debtor listed an equitable interest in a condominium located at 4945 Cougar Court in Naples, Florida (the "Property"). It is undisputed that the Property was subject to a mortgage securing a loan obligation (the "Mortgage Loan"). On "Schedule D—Creditors Holding Secured Claims" ("Schedule D"), the Debtor listed Countrywide Home Loans ("Countrywide") as holding a mortgage on the Property and Bermuda Palms of Naples ("Bermuda Palms") as holding a statutory lien. On the "Chapter 7 Individual Debtor's Statement of Intention," the Debtor indicated the Property would be surrendered.
On September 18, 2008, Warren Agin was appointed as Chapter 7 trustee (the "Trustee"). The Debtor appeared and was examined at the meeting of creditors held pursuant to 11 U.S.C. § 341 on October 20, 2008, and again on November 6, 2008. The Debtor received a discharge on April 27, 2009. Approximately two months later, on June 24, 2009, BAC, who apparently serviced the Mortgage Loan at that time, reported a zero past due and zero outstanding balance with the following notation: "Chapter 7 bankruptcy; Chapter 7; Included in bankruptcy; Closed 04/09" (the "2009 Credit Report").
On November 19, 2009, BNY
On June 26, 2010, the Trustee filed the "Chapter 7 Trustee's Final Account and Distribution Report Certification that the Estate has Been Fully Administered and Application to be Discharged" (the "Final Report and Account"). I approved the Final Report and Account on July 21, 2010, and entered an order discharging the Trustee and closing the case.
In the Motion for Sanctions, the Debtor reports that the Property was ultimately taken by Bermuda Palms at a foreclosure
Since the foreclosure, the Debtor has been renting a home for himself and his family in anticipation of purchasing a new home once he is financially able. In the Affidavit, the Debtor avers that he obtained another credit report in conjunction with his application for a home mortgage.
The timing and sequence of the credit report and the following events is unclear. In the Affidavit, the Debtor asserts this occurred on November 6, 2012, but the attached credit report is dated November 6, 2013 (the "2013 Credit Report").
Upon discovering that Bayview was reporting the Mortgage Loan as "open" on his credit report, the Debtor notified Bayview's representatives over the phone and faxed them a copy of the discharge order.
Apparently, this was not the end of the matter. In the Affidavit, the Debtor asserts that Bayview "continued to send statements to the Debtor seeking payment," but neither the Affidavit nor the Motion for Sanction indicate when Bayview began sending such statements.
The April Mortgage Statement was the last the Debtor received.
On March 20, 2014, the Debtor, through counsel, sent a demand letter (the "Demand Letter") to Bayview, insisting that it cease and desist all communication with the Debtor.
The Debtor received three written responses to the Demand Letter. The first, dated May 12, 2014, simply acknowledges receipt of the Demand Letter.
The third letter, dated July 8, 2014, came from Attorney Demerle and disputed the Debtor's entitlement to damages under the FDCPA, the FCRA, and Chapter 93A, but suggested Bayview's willingness to discuss the alleged discharge injunction violations.
Prior to receiving any response from Bayview or its counsel, the Debtor moved to reopen the case on May 1, 2014. The motion to reopen was granted on May 20, 2014, and the Debtor filed the Motion for Sanctions on June 24, 2014. After several extensions, Bayview filed the Opposition on July 31, 2014. On the same date, the Debtor filed the Affidavit. BAC, who the Debtor accuses of negligently selling or transferring its servicing rights to Bayview, did not respond to the Motion for Sanctions. On August 1, 2014, I conducted a hearing on the Motion for Sanctions at which neither Bayview nor its counsel appeared. At the conclusion of the hearing, I took the matter under advisement, and afforded the Debtor an opportunity to file a reply to the Opposition, which he did on August 19, 2014.
POSITIONS OF THE PARTIES
A. The Debtor
The Debtor argues that Bayview repeatedly violated the discharge injunction by reporting the Mortgage Loan as due and owing to the three credit reporting bureaus, repeatedly calling him seeking to collect the Mortgage Loan, and sending mortgage statements. He asserts the 2009 Credit Report evidences that the BAC had actual notice of the discharge. Thus, the Debtor contends that Bayview had at least constructive notice of the discharge as BAC's successor in light of the notations regarding bankruptcy contained on his credit reports. In any event, the Debtor argues that Bayview was provided with actual notice of the discharge in November, 2012, when he faxed a copy to Bayview.
The Debtor urges that the case law cited by Bayview is neither binding nor persuasive on this Court, and are otherwise factually distinguishable. He explains that the debtors in In re Vogt
The Debtor also contends that Bayview's credit reporting was inaccurate in several respects. First, by the time Bayview acquired the servicing rights to the Mortgage Loan, the property had been foreclosed and the claim was no longer secured. Second, the Debtor had been previously discharged, so any deficiency arising from the foreclosure is not collectable from him. Third, reporting a balance due
The Debtor further asserts that BAC is liable for the damages he has suffered on account of Bayview's actions because BAC was negligent in selling or transferring their rights in the Mortgage Loan which led to Bayview's collection activity.
In sum, the Debtor seeks attorney's fees, actual and punitive damages, as well as treble damages under Chapter 93A. He asserts that his damages should be calculated by the difference between the interest rate he could have obtained on a new mortgage had Bayview not reported the Mortgage Loan open and the rate he obtained now that the notation has been removed. To the extent necessary, the Debtor requests an evidentiary hearing.
From the outset, Bayview asserts that the first date that the Debtor offers in support of it having actual notice of the discharge is January 20, 2014. In any event, Bayview contends that the discharge injunction does not prohibit a secured creditor from reporting a debt as due and owing. In support, Bayview relies on In re Vogt,
In a Chapter 7 case, unless a party in interest timely objects, "the court shall grant the debtor a discharge."
While there is no specific provision in the Bankruptcy Code to provide redress for violations of the discharge injunction, the First Circuit has held that "`[a] bankruptcy court is authorized to invoke § 105 to enforce the discharge injunction imposed by § 524 and order damages for the [debtor] . . . if the merits so require.'"
To make out a prima facie case for contempt of a discharge order, the debtor must show that the creditor knew that the discharge order entered and intentionally engaged in conduct that violated it.
With respect to the first element, I find that Bayview had notice of the Debtor's discharge prior to the acts in question. Notably, Bayview does not dispute it had notice. Instead, it merely claims that the earliest the Debtor can demonstrate Bayview's actual knowledge is January 20, 2014. To the contrary, the 2013 Credit
As to the second element, the Debtor argues that Bayview violated the discharge injunction by reporting the Mortgage Loan as due and owing to the three credit reporting bureaus, sending mortgage statements, and repeatedly calling him seeking to collect the Mortgage Loan. I will address each allegation seriatim.
Bayview does not dispute, and nor could it, that it has reported the Mortgage Loan as due and owing to the credit bureaus since November, 2012. Instead, Bayview relies on In re Vogt and In re Irby for the proposition that the discharge injunction does not prohibit a secured creditor from reporting an unsatisfied, discharged debt as due and owing to the credit bureaus
It is hornbook law that a Chapter 7 "discharge extinguishes only `the personal liability of the debtor. . . . [and that] the Code provides that a creditor's right to foreclose on a mortgage survives or passes through the bankruptcy."
On the facts before me, I need not tarry over these points because Bayview's reports were blatantly inaccurate from the start. It is undisputed that the Property was foreclosed in January, 2011, long before Bayview became the servicer. When that occurred, the in rem liability for the Mortgage Loan terminated to the extent it was unsatisfied. Thus, in the absence of any liability in personam or in rem, the debt was extinguished. For this reason, Bayview's reliance on In re Vogt and In re Irby is misplaced because it was never a secured creditor.
Admittedly, "[f]alse reporting, if not done to extract payment of the debt, is simply not an act proscribed by the Code."
A review of the April Mortgage Statement establishes that it unambiguously seeks to collect a debt. The April Mortgage Statement was sent four months after Bayview acknowledged the Debtor's discharge. Nevertheless, it repeatedly, in bold, demands a payment of $99,313.86 by May 1, 2014, towards an outstanding balance of $254,699.83.
Finally, the Debtor complains that Bayview repeatedly called him seeking to collect the Mortgage Loan between October, 2012, and December, 2013. As stated above, however, there is some confusion as to the timing of those phone calls. Notwithstanding that observation, the Debtor averred that he received number of collection calls from Bayview over some period of time, which Bayview has not disputed. To the contrary, Bayview simply asserts that the Debtor has not provided enough information—the date and representative he spoke to—to satisfy the clear and convincing standard. I disagree for two reasons: (1) Bayview does not deny calling the Debtor; and (2) that information is contained within Bayview's records. Like the unproduced mortgage statements, these details are more relevant to quantification than liability.
In sum, I find Bayview violated the discharge injunction. In light of the outstanding factual questions, further proceedings will be necessary to quantify the Debtor's damages. I note, however, that the Debtor's claim for treble damages under Chapter 93A is improper for two reasons. First, a claim for a violation of Chapter 93A is a cause of action that must be brought as an adversary proceeding.
As a final note, the Motion for Sanctions also alleges that BAC violated the discharge injunction by negligently transferring the servicing rights of the Mortgage Loan to Bayview. Without more, the Debtor has failed to state a claim against BAC, let alone proven a violation by clear and convincing evidence. Therefore, the Motion for Sanctions must be denied with respect to BAC.
In light of the foregoing, I will enter an order granting the Motion for Sanctions as to the liability of Bayview and scheduling the matter for an evidentiary hearing on damages, but denying the Motion for Sanctions as to BAC.