Rosado v. Banco Popular De Puerto Rico, BAP No. PR 16-016, BK Casae No. 11-02825-BKT

Case Type:
Consumer
Case Status:
Affirmed
Citation:
BAP No. PR 16-016, BK Casae No. 11-02825-BKT (1st Circuit, Jan 04,2017) Published
Tag(s):
Ruling:

 By asserting their claim under § 524(a)(2), the Debtors undertook the burden of demonstrating clearly and convincingly that Banco Popular: (1) had notice of their discharge; (2) intended the actions which constituted the violation; and (3) improperly coerced or harassed them to pay a discharged debt. See In re Lumb, 401 B.R. at 8. Clear and convincing proof requires "an abiding conviction that the truth of . . . factual contentions [is] ‘highly probable.’"   The debtors did not carry their burden on the third element or under Rule 59(e).

Procedural context:

The denial of a motion for contempt is reviewed . . . for abuse of discretion." Champlin v. Hallisey, No. 95-1030, 1995 WL 620979, at *1 (1st Cir. Oct. 19, 1995) (citations omitted); see also In re Baer, No. 11-8062, 2012 WL 2368698, at *3 (B.A.P. 6th Cir. June 22, 2012) (stating that bankruptcy court’s determination that creditor did not violate discharge injunction is reviewed for abuse of discretion). We also review the Order Denying Reconsideration for abuse of discretion. In re Monahan, 497 B.R. at 646 (citation omitted). "Abuse of discretion exists when a relevant factor deserving of significant weight is overlooked, or when an improper factor is accorded significant weight, or when the court considers the appropriate mix of factors, but commits a palpable error of judgment in calibrating the decisional scales." Berliner v. Kusek (In re Kusek), 461 B.R. 691, 696 (B.A.P. 1st Cir. 2011) (citing Ameriquest Mortg. Co. v. Nosek (In re Nosek), 609 F.3d 6, 9 n.4 (1st Cir. 2010)). Section 524 establishes the discharge injunction. See 11 U.S.C. § 524; see also Best v. Nationstar Mortg. LLC (In re Best), 540 B.R. 1, 8 (B.A.P. 1st Cir. 2015). Section 524(a)(2) provides that a discharge "operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any [discharged] debt as a personal liability of the debtor . . . ." 11 U.S.C. § 524(a)(2). "[T]he scope of the injunction is broad, and bankruptcy courts may enforce it through [ ] § 105 . . . ." Canning v. Beneficial Me., Inc. (In re Canning), 706 F.3d 64, 69 (1st Cir. 2013); see also Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439, 444-45 (1st Cir. 2000) (stating bankruptcy courts may invoke § 105 to enforce the discharge injunction). Bankruptcy courts are empowered "to order monetary relief, in the form of actual damages, attorney fees, and punitive damages, when creditors have engaged in conduct that violates § 524." Bessette, 230 F.3d at 445 (citations omitted). "[A]ny sanctions imposed for violations [are] in the nature of civil contempt." In re Canning, 706 F.3d at 69 (citation omitted). To prevail on a § 524(a)(2) claim, a debtor must establish that the creditor "‘(1) ha[d] notice of the debtor’s discharge . . . ; (2) intend[ed] the actions which constituted the violation; and (3) act[ed] in a way that improperly coerc[ed] or harass[ed] the debtor.’" Bates v. CitiMortgage, Inc. (In re Bates), No. 16-1228, 2016 WL 7229754, at *2 (1st Cir. Dec. 14, 2016) (quoting In re Best, 540 B.R. at 9). "We assess whether conduct is improperly coercive or harassing under an objective standard—the debtor’s subjective feeling of coercion or harassment is not enough." Id. at *3 (citing Pratt v. G.M.A.C. (In re Pratt), 462 F.3d 14, 19 (1st Cir. 2006); Lumb v. Cimenian (In re Lumb), 401 B.R. 1, 6 (B.A.P. 1st Cir. 2009)). While there is no "specific test to determine whether a creditor’s conduct meets this objective standard," the circuit considers "the facts and circumstances of each case, including factors such as the immediateness of any threatened action and the context in which a statement is made." Id. (citation omitted) (internal quotations omitted). An action is coercive when it is "tantamount to a threat," or places the debtor "between a rock and a hard place" in which he would lose either way. Diamond v. Premier Capital, Inc. (In re Diamond), 346 F.3d 224, 227 (1st Cir. 2003) (citation omitted) (internal quotations omitted). "the discharge injunction [ ] does not prohibit every communication between a creditor and debtor—only those designed to collect, recover or offset any [discharged] debt as a personal liability of the debtor." In re Best, 540 B.R. at 9 (quoting In re Gill, 529 B.R. 31, 37 (Bankr. W.D.N.Y. 2015))(internal quotations omitted).

Facts:

The mortgagee, Banco Popular, was granted relief from the automatic stay to foreclose on debtors' real property.  Subsequently, the debtors received a discharge under 727.  On January 25, 2016, the Debtors filed a motion for an order of contempt (the "Contempt Motion") against Banco Popular pursuant to § 105, asserting that the bank continued efforts to foreclose using the "ordinary foreclosure" method, an in personam remedy. This, according to the Debtors, constituted a violation of the § 524(a)(2) discharge injunction. The Debtors elaborated that Puerto Rico’s statutory scheme governing foreclosures provides three ways to foreclose a mortgage: "the summary foreclosure proceeding, the civil action for foreclosure, and the ordinary civil action for collection of money." According to the Debtors, only the summary foreclosure proceeding is an in rem remedy; the others necessarily involve an attempt to recover a debt as an in personam liability. According to the Debtors, only the summary foreclosure proceeding is an in rem remedy; the others necessarily involve an attempt to recover a debt as an in personam liability. Thus, the Debtors contended that after the entry of the Discharge Order, Banco Popular should have "filed a summary foreclosure procedure." In addition, the Debtors maintained that Banco Popular’s foreclosure judgments were void because each contained a determination of the Debtors’ personal liability. Banco Popular countered that after obtaining relief from the automatic stay, it "informed" the local court that it intended to proceed exclusively in rem, that it waived any right to proceed in personam, and that it would not seek to collect a deficiency from the Debtors.  The Bankruptcy Court denied the debtors' motion for contempt against the mortgagee.  The debtors then filed a motion to reconsider which was also denied.

Judge(s):
Feeney, Cary and Fagone

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