Lopez v. Doral Bank (In re Lopez)

Citation: 500 B.R. 322Docket: Bankruptcy No. 11-07081 (MCF); Adversary No. 12-00318 (MCF)

Court: United States Bankruptcy Court, D. Puerto Rico; October 22, 2013; Us Bankruptcy; United States Bankruptcy Court

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Plaintiffs Alexis W. Rivera Lopez and Maria A. Benero Martin seek a partial judgment against Defendant Doral Bank for willfully violating the automatic stay and Chapter 7 discharge injunction. Doral Bank has not opposed the Motion for Partial Summary Judgment despite receiving multiple extensions. Key undisputed facts include: both Debtors filed separate Chapter 7 petitions on August 23, 2011; notices regarding the bankruptcy filings were sent to creditors, including Doral, on August 24, 2011; Doral is listed as holding a secured claim of $128,043.92; both petitions were consolidated; Doral’s representative filed a Notice of Appearance on December 12, 2011; the Debtors were discharged on March 20, 2012, with notice sent to Doral; and Doral made over two dozen calls to the Debtors seeking payment after the discharge, while also filing a collection and foreclosure complaint against them in Puerto Rico’s Court of First Instance. The court can grant partial summary judgment if the motion and supporting materials demonstrate the movant's entitlement under Fed. R. Civ. P. 56 and Fed. R. Bankr. P. 7056. The automatic stay and discharge injunction are fundamental protections under bankruptcy law, providing Debtors with relief from creditor collection efforts and a chance for financial renewal.

In Laboy v. FirstBank P.R., the automatic stay under 11 U.S.C. § 362(a) is highlighted as a crucial protection for debtors, halting lawsuits and creditor actions, including collection efforts, upon the filing of a bankruptcy petition. The stay aims to provide debtors with relief and the ability to exempt certain assets to facilitate a fresh start. Individuals harmed by willful violations of the stay may recover actual and potentially punitive damages as per 11 U.S.C. § 362(k).

Debtors alleged that Doral violated the automatic stay by filing a Notice of Appearance and Request for Notice in their bankruptcy case. However, the court ruled that this action did not constitute a willful violation of the stay. The court clarified that such filings are not deemed acts against the debtor or the estate as proscribed by the Bankruptcy Code. It cited the case of Knowles v. Bayview Loan Servicing LLC, which similarly found that filing a proof of claim does not violate the stay, as it is authorized under bankruptcy law. The court emphasized that Doral's actions were merely procedural and in compliance with local rules requiring formal appearances by legal counsel. Consequently, the court denied the Debtors’ request for partial summary judgment regarding the alleged violation of the automatic stay.

Debtors assert that Doral violated the automatic stay by making over two dozen phone calls during March and April 2012, which is supported by an unanswered request for admissions. Under Federal Rule of Bankruptcy Procedure 7036, Doral's failure to respond is deemed an admission of the calls made during that timeframe. The automatic stay, effective from August 23, 2011, ended on March 20, 2012, meaning calls made after the latter date did not violate the stay, while those made between March 1 and March 19, 2012, did. Due to ambiguity in the request regarding the specific dates of the calls, the court cannot grant partial summary judgment on the stay violation, leaving the Debtors to prove the details at trial.

Regarding the discharge order, Debtors claim that Doral initiated a collection action post-discharge. Under Section 524(a), the discharge protects Debtors from further collection efforts on discharged debts, voiding any judgment related to such debts and serving as an injunction against any collection actions. The discharge takes effect immediately upon entry of the order, reinforcing the prohibition on attempts to collect pre-petition obligations once the discharge is granted.

A creditor that attempts to collect on a prepetition debt after a bankruptcy discharge is liable for violating the discharge injunction under Section 524. While Section 524(a) does not prohibit all post-discharge actions, it specifically enjoins personal collection efforts against the debtor, classifying them as in personam actions that violate the discharge. Conversely, actions to enforce a lien against property are considered in rem actions and are permissible post-discharge. In this case, Doral maintained a valid mortgage lien on the debtors' real property and could pursue foreclosure, which is allowed even after the discharge. However, Doral also sought to collect a prepetition debt from the debtors, which constitutes a violation of the discharge injunction. The court grants partial summary judgment in favor of the debtors, affirming that Doral violated the discharge by filing a collection complaint but not regarding the foreclosure action. Additionally, Doral's phone calls demanding payment after the discharge order are violations, while calls made before the discharge date are not. The court schedules a trial to address the telephone call violations and potential damages. The motion for partial summary judgment is granted in part and denied in part, with specific instructions for a joint pretrial report.