The Plaintiff/debtor brings this adversary proceeding against Defendants (PPR and DE III), alleging they sought to coerce the Plaintiff into paying her discharged loan in violation of the discharge injunction of 11 U.S.C. §524(a). The parties filed cross-motions for summary judgment on liability. The court granted the Plaintiff’s motion in part, finding that DE III violated the discharge injunction by requiring the Plaintiff to reaffirm and reinstate her discharged second deed of trust loan as a condition to remain in her home after DE III foreclosed. At the time, the amount of the first deed of trust loan exceeded the value of the home, thus rendering valueless the discharged second deed of trust loan held by DE III.
In September 2005, the Plaintiff purchased her home (the “Property”) for $284,000. The Plaintiff financed the purchase by entering into a first deed of trust loan with Countrywide Home Loans. She also entered into a second deed of trust loan—the loan at issue here—with Intervale Mortgage Corporation for $49,650 (the “Loan”).
On October 12, 2011, DE III acquired the Loan for $2,880.92. At that time, the Loan had an outstanding balance of $48,912.12. The Defendants are in the business of purchasing non-performing deed of trust notes at a discount and attempting to turn them into performing notes. In general, the Defendants do not wish to foreclose on the real property that secures the loan. Instead, they seek to have the defaulting homeowners pay the mortgage loan. The Defendants engage in a number of activities in an attempt to collect the loans. If the defaulting homeowners refuse to respond or negotiate a payment plan with the Defendants, they leverage the foreclosure and eviction process in an effort to get the homeowners to start paying on the note. Between October 2011 and December 2012, DE III attempted to contact the Plaintiff several times for the purpose of reviewing debt repayment options. DE III issued a Notice of Intent to Foreclose on January 20, 2012.
In response to the foreclosure action, the Plaintiff filed a petition for Chapter 7 relief on February 8, 2012. She received a discharge on May 16, 2012. DE III received notice of the bankruptcy case and notice of the Plaintiff’s discharge.
DE III renewed foreclosure proceedings against the Property in December 2012. The foreclosure sale occurred on February 27, 2013, where DE III purchased the Property for $19,000, subject to the first deed of trust lien. The deadline for filing exceptions to the sale was April 17, 2013. The Plaintiff did not file any exceptions, and the Circuit Court ratified the sale on April 22, 2013.
On May 6, 2013, DE III filed a motion seeking possession of the Property. The Circuit Court entered a judgment of possession in favor of DE III on June 24, 2013. On July 2, 2013, DE III issued a notice of eviction, and a County sheriff served the Plaintiff with an order of eviction on July 20, 2013.
The Plaintiff’s Schedule B listed the value of the Property as $183,600. On Schedule D, the first deed of trust loan was listed as $261,254, and the Loan was $48,912.
The Defendants do not dispute that the value of the Property and the amount of the first deed of trust loan at the time of the foreclosure sale were more or less the amounts stated by the Plaintiff in her schedules. Accordingly, at the time of the foreclosure sale, the amount outstanding on the first deed of trust loan was substantially greater than the value of the Property, thereby rendering the Loan wholly unsecured.
On July 22, 2013, the Plaintiff filed an emergency motion to stay the eviction and set aside the foreclosure. The Circuit Court denied the motion. On July 24, 2013, the Plaintiff called DE III’s attorney, Cindy Diamond, seeking options to stop the eviction. Ms. Diamond stated that the Plaintiff called asking how she could stop the eviction and explaining that she wished to remain in the Property. Ms. Diamond directed the Plaintiff to reach out to DE III to work out an agreement.
On July 25, 2013, Barbara Faust, a workout specialist for DE III, sent the Plaintiff a hand-written note offering to work out an agreement to keep the Plaintiff in her home. The note requested the Plaintiff call DE III, which she did. On July 29, 2013, the Plaintiff spoke with Patricia Cruz Gonzalez, a Spanish-speaking workout specialist, who explained that the eviction process would cease if the Plaintiff would agree to a workout agreement. The next day, DE III sent the Plaintiff a proposed agreement (the “Agreement”).
The Agreement, written in English, included a hand-written note in Spanish asking the Plaintiff to sign the Agreement, have it notarized, and return it with a copy of her driver’s license. Under the terms of the Agreement, DE III was to modify the Loan provided that the Plaintiff made monthly installment payments of $471.25 per month over thirty years. In addition, the Agreement required the Plaintiff to make a one-time “arrears payment” on the Loan of $3,000. In total, the Agreement would have obligated the Plaintiff to pay $81,600, which was $5,454.04 more than the original payoff balance under the Loan. If the Plaintiff failed to meet her obligation under the Agreement, DE III would “take such actions as it deems appropriate . . . [including] to enforce any and all other rights then existing under the terms of the [Loan]. . . .” The Plaintiff did not sign the Agreement.
On August 20, 2013, the Plaintiff filed a motion to reopen her Chapter 7 case and for contempt sanctions, and filed an emergency motion for a temporary restraining order enjoining the Plaintiff’s eviction. On August 22, 2013, the court granted the motion to reopen, and on August 23, 2013, the court issued a temporary restraining order enjoining the Defendants from evicting the Plaintiff, taking any additional action to foreclose upon her home, or making any additional efforts to collect upon the Loan. DE III subsequently re-conveyed the Property back to the Plaintiff.
After the close of discovery, the Defendants and the Plaintiff filed cross-motions for summary judgment. On September 30, 2016, the court granted summary judgment to the Plaintiff on the liability of DE III for its attempt to coerce the Plaintiff into reaffirming her discharged debt.
At trial, the Plaintiff argued that the Defendants’ actions in initiating and completing foreclosure on the Property and seeking to evict her were an attempt to coerce her into paying the discharged loan as a personal liability. She asserted that this improper use of the Defendants’ foreclosure and eviction rights violated 11 U.S.C. §524(a), in addition to the violation determined by the court on summary judgment.
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