William R. Sawyer, United States Bankruptcy Judge.
This Adversary Proceeding is before the Court on Defendant Carrington Mortgage Services, LLC's, Motion to Dismiss. (Doc. 9). Plaintiffs Kenneth and Billie Golden filed a memorandum opposing the motion. (Doc. 13). Carrington Mortgage filed a reply. (Doc. 14). The Court conducted a hearing on the matters on April 11, 2017. The question is whether a complaint is sufficient to survive a Fed. R. Civ. P. 12(b)(6) Motion when it merely alleges that a mortgage holder violated the discharge injunction by sending routine notices concerning mortgage servicing and foreclosure to a debtor after a discharge in bankruptcy. For the reasons set forth below, the motion is GRANTED and this Adversary Proceeding is DISMISSED WITH PREJUDICE.
The Goldens filed a petition in bankruptcy pursuant to Chapter 7 of the Bankruptcy Code on August 30, 2010, initiating Case No. 10-11675. They falsely represented that they did not own any real property on Schedule A and they did not schedule Defendant Carrington Mortgage as the holder of a secured claim on Schedule D. (Case No. 10-11675, Doc. 1). The Goldens reported a foreclosure suit in their Statement of Financial Affairs but inaccurately indicated its status as having been disposed of by way of a judgment. In fact, a foreclosure suit was filed against the Goldens in Florida State Court but it was still pending at the time they filed their Chapter 7 petition here. Moreover, the Debtor's made no mention of the property in their Statement of Intention.
On October 15, 2010, BAC Home Loans (which appears to be Carrington's predecessor in interest) filed a Motion for Relief From the Automatic Stay. (10-11675, Doc. 16). This Court granted the motion on November 10, 2010. (10-11675, Doc. 26). Subsequently, the Goldens received a Chapter 7 discharge on December 21, 2010. (Case No. 10-11675, Doc. 30).
On December 20, 2016, the Goldens filed a complaint alleging that Carrington violated the discharge injunction and the Fair Debt Collection Practices Act ("FDCPA"). (Doc. 1). Specifically, the Debtors stated that Carrington mailed them Mortgage Statements, Delinquency Notices, Notices of Lender Placed Hazard Coverage, and a Notice of Intent to Foreclose. The Goldens alleged that Carrington "has absolutely no legitimate reason to correspond with Plaintiffs regarding the Property." (Doc. 1, Para. 37). The Goldens now seek damages
The question here is whether a complaint, alleging that a mortgage holder violates the discharge injunction when it sends routine notices concerning mortgage servicing and foreclosure, states a claim for which relief may be granted. The Court will consider the scope of the discharge injunction and delineate permissible conduct involving routine mortgage servicing from impermissible conduct violating the discharge injunction.
This Court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1334(b);
Motions to dismiss are governed by Rule 12(b)(6), Fed. R. Civ. P., which is made applicable to this proceeding by Rule 7012, Fed. R. Bankr. P. The standard applied when considering a motion to dismiss was recently described by the Eleventh Circuit as follows:
A discharge in bankruptcy "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 such debt as a personal liability of the debtor." 11 U.S.C. § 524(a)(2). While the statute does not specifically provide for damages, courts frequently award actual damages under a court's inherent contempt powers.
Acts intended to collect a debt "as a personal liability of the debtor" after a discharge in bankruptcy potentially make the actor liable to the debtor for any resulting damages. 11 U.S.C. § 524. However, it is well established that a discharge in bankruptcy does not affect the attachment of a mortgage to property of the debtor.
There is considerable case law supporting the proposition that acts reasonably taken to service a mortgage or to foreclose a mortgage do not violate the discharge injunction, even if the debtor discharged his personal liability on the indebtedness secured by the mortgage. Last year, this Court handed down a decision dismissing a complaint that alleged a violation of the automatic stay, holding that the acts of sending monthly mortgage statements and notices concerning hazard insurance did not violate the automatic stay.
Other courts have also held that acts taken to service or foreclose a mortgage do not violate the automatic stay.
This is not to say that a mortgage servicer may never be found to have violated the discharge injunction.
In the case at bar, the Goldens failed to alleged that the creditor did anything beyond routine mortgage loan servicing. After one strips the Goldens' complaint of its hyperbole, its conclusory allegations, and legal conclusions, very little of substance is left. The well-plead facts that remain are unremarkable and fail to allege that the Creditor intended to violate the discharge injunction. Thus, the complaint in this case does not state a claim for which relief may be granted.
The Goldens allege in their complaint that "Defendant has absolutely no legitimate reason to correspond with Plaintiffs regarding the Property." (Doc. 1, Para. 37). That assertion is contrary to the rule of
The Golden's complaint states that they vacated the property subject to the mortgage in "early 2010," which is prior to the filing a their petition. (Doc. 1, Para. 13). They further allege — disingenuously — that this is why they did not schedule the indebtedness on the mortgage on Schedule D. (Doc. 1, Para 10). The fact that the Goldens moved out of their house did not effect a transfer of title to the mortgagee, nor did it change the status of their obligation under the mortgage. To be sure, when the Golden's received their Chapter 7 discharge, they were relieved of their personal obligation under the mortgage, prior to that time, their obligation was unaffected by their change of address. Thus, the mortgagee had a "legitimate reason" to contact Debtor about the mortgage servicing and foreclosure.
The Plaintiffs bring a claim under the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C. § 1692) in addition to their claim of a violation of the discharge injunction. This claim depends upon Plaintiffs successfully establishing a violation of the discharge injunction. The Court will not reach the question here as to whether a violation of the discharge injunction is a violation of the FDCPA. As the Plaintiffs complaint fails to establish a violation of the discharge injunction, their FDCPA claim necessarily fails. This decision should not be read for the proposition that a violation of the discharge injunction necessarily entails a violation of the FDCPA.
This Court categorically rejects the Goldens' assertion that Carrington "has absolutely no legitimate reason to correspond with Plaintiffs regarding the Property." The discharge in bankruptcy does not destroy Carrington's mortgage and it retains a legal right to foreclose its mortgage and, by extension, to do all necessary acts to foreclose its mortgage. The Debtor's complaint lacks well-pled facts supporting a finding that Carrington "knew" the discharge injunction was in place and that Carrington "intended" to violate the injunction. When the complaint is stripped of its hyperbole and unfounded conclusions, it is left with nothing but allegations of routine mortgage servicing that fail to state a claim for which relief may be granted. The Court will, by way of a separate document, grant Carrington's Motion to Dismiss and DISMISS this Adversary Proceeding WITH PREJUDICE.
Done this 12