621 B.R. 1
Bankr. D. Nev.2020Background
- Debtor Antonio Polvorosa filed Chapter 13 on July 17, 2011 to cure $54,933.02 in prepetition mortgage arrears; plan confirmed Feb 29, 2012 provided trustee cure payments and direct post-petition maintenance payments to the servicer.
- GMAC serviced the loan initially; Ocwen acquired servicing post-confirmation and both servicers applied payments to the oldest contractual payment, creating a suspense account for short payments.
- Trustee filed a Notice of Final Cure Payment stating prepetition arrears were paid; Ocwen filed a Final Cure Response acknowledging a post-petition arrearage but did not itemize amounts as Rule 3002.1(g) requires.
- Court entered debtor's discharge July 16, 2015; Ocwen sent one post-discharge mortgage statement (Aug 2015) showing a reinstatement amount (~$16,287) for post-petition missed payments and a suspense/unapplied balance.
- Debtor reopened the case and moved for contempt (sanctions) against Ocwen for alleged violations of the confirmed plan and the discharge injunction based on accounting, rejected cashier’s checks (Stop Code Checks), and an internal Bankruptcy Discharge Reconciliation (BDR).
- After an evidentiary hearing the court concluded Ocwen did not violate the confirmation order or the discharge injunction and denied contempt; it noted Rule 3002.1 issues (Ocwen’s Response lacked itemization) but found relief under Rule 3002.1 inappropriate in this proceeding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ocwen violated the Confirmation Order by misapplying plan and direct payments (contempt) | Ocwen failed to apply trustee cure vs. post-petition payments as plan required, so it violated plan and is in contempt | Plan lacked specific accounting instructions; servicer applied payments by oldest-first and used suspense account; no specific order was violated | Denied — plan did not contain specific, definite accounting directives; contempt not proven |
| Whether Ocwen is liable for failure to apply the Stop Code cashier’s checks | Tendering checks discharged those monthly obligations under Nevada law; Ocwen (successor) should be held in contempt for not crediting them | GMAC (not Ocwen) rejected/handled the checks pre-Ocwen servicing; Ocwen later inherited the account and cannot be held in contempt for GMAC’s earlier processing | Denied — Ocwen did not commit the underlying rejection and no specific plan/order required Ocwen to rectify prior handling |
| Whether the BDR (internal reconciliation) stating missed July–Dec 2011 payments violated the Confirmation Order | BDR shows Ocwen attempted to collect prepetition (discharged) debt, violating discharge and confirmation | BDR was an internal, erroneous analysis that was not relied upon for collection; Ocwen’s public statements and payment history show prepetition arrears were cured | Denied — BDR inaccuracies were internal errors and did not demonstrate collection of discharged prepetition debt |
| Whether Ocwen violated the discharge injunction by attempting to collect discharged prepetition arrears | Ocwen’s post-discharge statements and BDR indicate collection of July 2011 prepetition debt (discharged) | Debtor’s prepetition arrears were cured via plan/trustee payments; post-discharge amounts sought were post-petition maintenance not discharged under §1328(a)(1) | Denied — Ocwen sought post-petition maintenance (non-dischargeable under §1328(a)(1)); no objectively unreasonable basis to find contempt |
Key Cases Cited
- Taggart v. Lorenzen, 139 S. Ct. 1795 (U.S. 2019) (sets "fair ground of doubt" objective standard for civil contempt under discharge injunction; subjective bad faith also relevant)
- Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178 (9th Cir. 2003) (contempt requires clear and convincing proof of violation of a specific and definite court order)
- Renwick v. Bennett (In re Bennett), 298 F.3d 1059 (9th Cir. 2002) (same standard for contempt showing breach of specific order)
- Ameriquest Mtg. Co. v. Nosek (In re Nosek), 544 F.3d 34 (1st Cir. 2008) (confirmed plan that lacks specific accounting directives cannot support contempt for servicer's allocation practices)
- In re Rathe, 114 B.R. 253 (Bankr. D. Idaho 1990) (creditor’s accounting methods cannot be used to circumvent confirmed plan, but accounting disputes do not automatically equate to contempt)
- In re Monroy, 650 F.3d 1300 (9th Cir. 2011) (chapter 13 plans may impose additional reporting/communication duties on secured creditors without violating anti-modification provisions)