Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

In re Kirby

United States Bankruptcy Appellate Panel of the First Circuit

May 14, 2019

GREGORY M. KIRBY and AMANDA KIRBY, Debtors.
v.
21ST MORTGAGE CORPORATION, Defendant-Appellee. GREGORY M. KIRBY, Plaintiff-Appellant, Adversary Proceeding No. 17-02007-PGC

          Appeal from the United States Bankruptcy Court for the District of Maine (Hon. Peter G. Cary, U.S. Bankruptcy Judge)

          J. Scott Logan, Esq., on brief for Plaintiff-Appellant.

          Eleanor L. Dominguez, Esq., on brief for Defendant-Appellee.

          Before Godoy, Harwood, and Katz, United States Bankruptcy Appellate Panel Judges.

          KATZ, U.S. BANKRUPTCY APPELLATE PANEL JUDGE.

         Gregory M. Kirby ("Mr. Kirby") appeals from the bankruptcy court's order (the "Order") granting summary judgment in favor of 21st Mortgage Corporation ("21st Mortgage") on his complaint alleging that post-discharge communications from 21st Mortgage were attempts to collect a discharged debt in violation of § 524(a)(2)'s discharge injunction and the Fair Debt Collections Practices Act ("FDCPA").[1] Mr. Kirby asserts that the bankruptcy court erred in granting summary judgment in favor of 21st Mortgage because: (1) there were genuine issues of material fact which required a trial; and (2) 21st Mortgage failed to establish that its post-discharge correspondence did not violate the discharge injunction as a matter of law.[2]Discerning no error, we AFFIRM.

         BACKGROUND

         The following facts are undisputed.[3]

         Mr. Kirby and his wife (the "Kirbys") previously owned real property in Brewer, Maine (the "Brewer Property"), subject to a mortgage lien securing a promissory note held by 21st Mortgage. When the Kirbys defaulted on their obligations under the note, 21st Mortgage commenced a state court foreclosure action against them, and the case was promptly transferred to the Foreclosure Diversion Program.[4]

         The day before the initial mediation session scheduled for August 28, 2014, the Kirbys commenced a voluntary bankruptcy case by filing a petition under chapter 7 of the Bankruptcy Code. In their bankruptcy schedules, the Kirbys disclosed their interest in the Brewer Property[5] and listed 21st Mortgage as the holder of a $343, 619 claim secured by a lien on the Brewer Property. The Kirbys' schedules also reflected their intent to retain the Brewer Property and "to explore modification." The Kirbys did not reaffirm the debt to 21st Mortgage. They received chapter 7 discharges pursuant § 727(a) (relieving them of personal liability for the debt to 21st Mortgage) on December 4, 2014. As 21st Mortgage concedes, it received notice of the entry of the Kirbys' discharges, and the bankruptcy case was closed shortly thereafter.

         After the entry of the Kirbys' discharges, the parties resumed mediation under the state court Foreclosure Diversion Program. Between December 2014 and October 2015, the parties engaged in extensive efforts to mediate an alternative to foreclosure. During this ten-month period, the parties participated in three court-sponsored mediation sessions, and the Kirbys pursued other loss mitigation options with 21st Mortgage. Ultimately, the parties were unable to reach a resolution and the case was returned to the foreclosure docket. In October 2016, the state court entered a judgment of foreclosure in favor of 21st Mortgage, and the Brewer Property was sold at a foreclosure auction in February 2017.

         But matters did not end there. In March 2017, the bankruptcy case was reopened at Mr. Kirby's request and Mr. Kirby filed a two-count complaint seeking damages against 21st Mortgage on account of his claims that post-discharge written correspondence sent by 21st Mortgage regarding the defaulted loan violated the discharge injunction imposed by § 524(a)(2) of the Code and certain provisions of the FDCPA.

         I. Events and Correspondence During the Mediation Period

         The majority of 21st Mortgage's post-discharge communications were sent between December 2014 and October 2015, while the parties were engaged in mediation and loss mitigation efforts (the "mediation period"). During this period, 21st Mortgage sent nineteen written communications-eight letters relating to Mr. Kirby's request for a loan modification, nine periodic mortgage statements, and two other "mortgage servicing" notices. All of these communications were addressed to Mr. Kirby in the care of his bankruptcy counsel, J. Scott Logan, at Attorney Logan's place of business.[6] The specific correspondence is described below.

         A. Monthly Mortgage Statements

         During the mediation period, 21st Mortgage sent nine monthly mortgage statements, each of which set forth an amount due and a due date, indicated that a late fee would be charged if the payment was not received, and included a payment coupon. At the top of the second page, the statements provided: "This is an attempt to collect a debt and any information obtained will be used for that purpose." ("Collection Notice"). Each statement also contained the following bankruptcy disclaimer:

NOTICE: Please be advised further that this letter constitutes neither demand for payment of the captioned debt nor a notice of personal liability to any recipient hereof who might have received discharge of such debt in accordance with applicable bankruptcy laws or who might be subject to automatic stay of Section 362 of the United States Bankruptcy Code. This letter is being sent to any such parties merely to comply with applicable state law governing foreclosure of liens pursuant to contractual powers of sale.

         B. ARM Notice

         In January 2015, 21st Mortgage sent a notice (the "ARM Notice") regarding changes to the interest rate on the adjustable rate mortgage. The notice included the current and estimated new interest rates and monthly payments, a payment amount and due date, the loan balance, and the remaining loan term. The letter contained a Collection Notice, but did not include a bankruptcy disclaimer.[7]

         C. PMI Disclosure

         Also in January 2015, 21st Mortgage sent an annual private mortgage insurance disclosure (the "PMI Disclosure"), informing Mr. Kirby of his rights under federal law regarding the cancellation or termination of his private mortgage insurance. It contained a Collection Notice and the same bankruptcy disclaimer as that contained in the mortgage statements.

         D. Loss Mitigation Letters[8]

         In April 2015, while mediation was ongoing, the Kirbys submitted a "Making Home Affordable Program Request for Mortgage Assistance" application requesting a loan modification (the "RMA application"). 21st Mortgage sent four letters relating to the application and a fifth letter informing the Kirbys that they did not qualify for a loan modification because the Brewer Property was not their primary residence. Then, in response to the Kirbys' request to continue mediation and discuss further loss mitigation options, 21st Mortgage sent a letter offering a short sale as a possible alternative to foreclosure. After the Kirbys appealed the denial of their RMA application, 21st Mortgage sent one letter acknowledging their appeal and another reporting that it was upholding its decision. All of these letters contained a Collection Notice and a similar bankruptcy disclaimer:

Please be advised further that this letter constitutes neither demand for payment of the captioned debt nor a notice of personal liability to any recipient hereof who might have received a discharge of such debt in accordance with applicable bankruptcy laws or who might be subject to automatic stay of Section 362 of the United States Bankruptcy Code.

("Bankruptcy Disclaimer").

         II. Post-Mediation Correspondence

         After mediation and loss mitigation efforts proved unsuccessful and the case was returned to the foreclosure docket, Mr. Kirby's counsel sent a letter to 21st Mortgage dated October 6, 2015 asking 21st Mortgage to "refrain from any further contact with the Debtor" (the "Cease and Desist Letter"). In that letter, Attorney Logan also maintained that 21st Mortgage violated the discharge injunction by sending a mortgage statement dated September 14, 2015, but he did not contend that any of the other 18 communications sent during the mediation period violated the discharge injunction. After receiving the Cease and Desist Letter, 21st Mortgage continued to send written communications, although no communications related to the defaulted loan were sent following the February 2017 foreclosure sale.

         A. Escrow Account Disclosure, Short Sale Letter, and PMI Disclosure

         Between October 2015 and November 2016, 21st Mortgage sent: (1) an annual escrow account disclosure statement (the "Escrow Account Disclosure") listing current and new payment information, the escrow account activity for the current year, and a projection for the next year; (2) a letter regarding a possible short sale as an alternative to foreclosure (the "Short Sale Letter"); and (3) another PMI Disclosure. All of these communications included the Bankruptcy Disclaimer and were addressed to Mr. Kirby in the care of his counsel. Both the PMI Disclosure and Short Sale Letter contained a Collection Notice, but the Escrow Account Disclosure did not.

         B. The Cash-for-Keys Letter

         On January 4, 2016, 21st Mortgage's counsel, Eleanor L. Dominguez, sent a letter directly to the Kirbys at their Saco address (the "Cash-for-Keys Letter").[9] This was the first correspondence sent directly to the Kirbys. The letter provided, in relevant part:

Your former attorney, J. Scott Logan, Esq., has given me permission to contact you directly in this foreclosure action. As you know, mediation efforts in this matter were unsuccessful and the above referenced matter will likely be scheduled for trial soon. At trial, my client, MidFirst Bank, [10] will seek a foreclosure judgment. In Maine, lenders may seek borrowers for any deficiency between the ultimate sales price of a foreclosed property and the fair market value of the same. Because you have both been discharged in bankruptcy, my client would like to offer you a Consent Judgment with a waiver of deficiency and Cash-for-Keys assistance rather than proceed to trial. For MidFirst, it saves the time and expense of a trial. For you, you do not have to worry about ever being pursued for a deficiency and you will receive up to $1, 000.00 payable after foreclosure sale and inspection, if you agree to the conditions set forth in the attached Cash-for-Keys Agreement.

(emphasis added). Although the letter did not contain a pro forma bankruptcy disclaimer, it acknowledged that the Kirbys had each received a bankruptcy discharge. The letter was accompanied by a draft consent judgment of foreclosure and order of sale; however, the record reflects that Mr. Kirby's counsel did not include the draft judgment and order of sale in either the exhibits to the complaint or as part of the summary judgment record.

         C. The Right to Cure Notice

         In March 2016, Attorney Dominguez sent a Notice of Mortgagor's Right to Cure (the "Right to Cure Notice") to Mr. Kirby at both the Saco and Brewer addresses, notifying him that he was in default, that he could cure the default by making certain payments, and that 21st Mortgage intended to foreclose on the mortgage if he did not cure the default. The Right to Cure Notice contained a Collection Notice and the following bankruptcy disclaimer on the last page:

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. However, a secured party retains rights under its security instrument, including the right to foreclose its lien.

         D. The State Court Pleading

         In July 2016, 21st Mortgage filed a pleading in the state court foreclosure action (the "State Court Pleading"), which provided on the last page: "Defendants are already liable for costs and attorney's fees associated with the enforcement of the note and mortgage." In the proceedings below, however, Mr. Kirby only submitted the final page of the State Court Pleading on which the allegedly objectionable language appeared and, therefore, the precise nature of the document and the context in which this statement appeared are not apparent from the summary judgment record.

         III. The Adversary Proceeding

         Mr. Kirby's complaint contained two counts.[11] In Count I, he alleged that 21st Mortgage's post-discharge communications were coercive attempts to collect a debt in violation of the discharge injunction and that he was entitled to actual damages (including costs and attorney's fees) and punitive damages pursuant to § 105(a). In Count II, Mr. Kirby asserted that 21st Mortgage's post-discharge communications were unlawful debt collection practices under the FDCPA. In his prayer for relief, he asked for actual damages and a sanction of "up to $1, 000.00 per violation[.]"

         21st Mortgage filed a motion for summary judgment (the "Summary Judgment Motion"), asserting that there were no genuine issues of material fact and that, as a matter of law, its actions did not violate the discharge injunction.[12] 21st Mortgage acknowledged that it had notice of Mr. Kirby's discharge and had sent a total of 22 post-discharge communications regarding the defaulted loan, [13] but contended that none of those communications improperly harassed or coerced Mr. Kirby to pay a discharged debt in violation of the discharge injunction.

         In his objection to the Summary Judgment Motion (the "Objection"), Mr. Kirby argued that 21st Mortgage, having notice of the entry of his discharge, sent at least nine and "possibly as many as twenty-six" mortgage statements and "at least ten other communications" which "demanded payment" from him in violation of the discharge injunction.[14] He did not raise any factual disputes regarding the substance of the written communications identified in the Summary Judgment Motion or the circumstances under which they were sent. Rather, he argued that there were material "issues" in dispute as to whether the disclaimer language "insulate[d]" 21st Mortgage from liability for discharge injunction violations. Additionally, he contended that any mitigating effect of the bankruptcy disclaimers was offset by the numerous other "demands for payment" made by 21st Mortgage, such as the Cash-for-Keys Letter, the Right to Cure Notice, and the State Court Pleading.

         In support of his Objection, Mr. Kirby submitted two (almost identical) affidavits of his counsel, Attorney Logan, [15] which primarily listed the communications prepared and/or sent by 21st Mortgage or its counsel, including the Cash-for-Keys Letter, the State Court Pleading, and 21st Mortgage's internal mortgage servicing notes. Mr. Kirby also ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.