625 B.R. 843
Bankr. M.D.N.C.2021Background
- Debtor Wendy Bivens filed Chapter 13 on July 31, 2014; plan was confirmed to cure a prepetition mortgage arrearage and to have ongoing postpetition mortgage payments paid through the Chapter 13 Trustee.
- Creditor CitiMortgage (and successors) filed a proof of claim; Trustee later filed a Notice of Final Cure and servicing respondent agreed arrearage was cured and postpetition payments were current. Debtor received a Chapter 13 discharge on June 1, 2020.
- After discharge, Shellpoint sent a Notice of Default/Intent to Accelerate; Debtor alleges this resulted from prior misapplication of plan payments and later transfers of the account with an inflated balance.
- Debtor reopened the case and filed an adversary complaint (Aug–Sep 2020) asserting three claims against CitiMortgage: violation of the § 524(i) discharge injunction, violation of the automatic stay (§ 362), and failure to provide Rule 3002.1(c) notices.
- CitiMortgage moved to dismiss under Rule 12(b)(6); the court considered pleadings and oral argument and denied the motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CitiMortgage violated 11 U.S.C. § 524(i) by willfully failing to credit plan payments | Bivens alleges CitiMortgage willfully misapplied plan payments (to arrearage, wrong months, etc.), causing inflated balance and foreclosure threats | CitiMortgage moved to dismiss, disputing the sufficiency of the allegations (no viable §524(i) claim) | Complaint plausibly alleges willful misapplication and material injury; §524(i) claim survives dismissal |
| Whether misapplication constituted a willful violation of the automatic stay (§ 362) | Misapplied payments were transferred and led successor servicer to attempt collection, so the act was a willful stay violation causing damages | CitiMortgage contends internal bookkeeping entries that were not communicated cannot violate the stay (citing Mann) | Allegations distinguishable from Mann; pleaded facts permit inference of an intentional act with knowledge of the stay and resulting damages—claim survives dismissal |
| Whether CitiMortgage violated Bankruptcy Rule 3002.1(c) by failing to give notice of postpetition fees/charges | Bivens alleges postpetition fees (late charges, attorney fees, inspections, tech/appraisal/e‑invoice fees, etc.) were assessed and transferred without Rule 3002.1(c) notice, preventing challenge under Rule 3002.1(e) | CitiMortgage argued dismissal; defense at trial could be substantially justified or harmless | Court finds pleading adequate to state a Rule 3002.1(c) violation and seek sanctions under Rule 3002.1(i); claim survives dismissal |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must allege sufficient facts to state a plausible claim)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions not entitled to an assumption of truth on a motion to dismiss)
- Williams v. Citifinancial Servicing LLC (In re Williams), 612 B.R. 682 (Bankr. M.D.N.C. 2020) (misapplied plan payments and transferred accounts can constitute § 524(i) and stay violations)
- Ridley v. M&T Bank (In re Ridley), 572 B.R. 352 (Bankr. E.D. Okla. 2017) (elements of § 524(i) explained)
- Mann v. Chase Manhattan Mort. Corp., 316 F.3d 1 (1st Cir. 2003) (internal bookkeeping entries that are never communicated do not violate the stay)
- Citizens Bank v. Strumpf (In re Strumpf), 37 F.3d 155 (4th Cir. 1994) (willful stay violation requires intentional act with knowledge of the stay)
- Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) (bankruptcy court authority to impose contempt sanctions for violations of discharge injunction)
- Nemet Chevrolet, Ltd. v. ConsumerAffairs.com, Inc., 591 F.3d 250 (4th Cir. 2009) (pleading rules regarding nonconclusory factual allegations)