Canning, III v. Beneficial Maine, Inc.
706 F.3d 64
| 1st Cir. | 2013Background
- Cannings filed a Chapter 7 bankruptcy on March 5, 2009 seeking to surrender their residence.
- Beneficial Maine, HSBC Mortgage Services, and HSBC Mortgage Corp. refused to foreclose or release the lien.
- Cannings' schedules showed $186,521 debt secured by a residence valued at about $130,000, with surrender contemplated.
- Beneficial initially dismissed state foreclosure proceedings due to bankruptcy filings.
- Cannings sent demand letters post-discharge: foreclose or release the lien; Beneficial offered settlement or short sale instead.
- Bankruptcy court and BAP ruled Beneficial’s conduct did not violate the discharge injunction; Cannings appealed further.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Beneficial’s actions violated discharge injunctions | Cannings: Pratt controls; coercive post-discharge demands breached §524(a). | Beneficial: rights under state-law liens and alternatives (settlement/short sale) complied with law. | No reversible error; no coercive conduct found under Pratt; discharge injunction not violated. |
| Whether Pratt governs misalignment with real-estate collateral | Cannings: Pratt facts closely mirror case; coercive coercion evident. | Beneficial: Pratt distinguished; real estate with value allows settlement options. | Pratt distinguished; Pratt not controlling; no coercion shown here. |
| Whether collateral value and creditor options negate coercion | Cannings: value may appreciate; coercion possible. | Beneficial offered settlement/short sale; not paying in full required. | Record lacks coercion evidence; creditor could negotiate without coercion. |
Key Cases Cited
- In re Pratt, 462 F.3d 14, 462 F.3d 14 (1st Cir. 2006) (secure creditor cannot coercively demand payment to release lien when collateral may be insufficient)
- ZiLOG, Inc. v. Corning (In re ZiLOG, Inc.), 450 F.3d 996, 450 F.3d 996 (9th Cir. 2006) (burden on debtor to prove discharge-injunction violation)
- In re Healthco Int'l, Inc., 132 F.3d 104, 132 F.3d 104 (1st Cir. 1997) (standard of review for bankruptcy decisions; clear error/de novo)
- Marrama v. Citizens Bank of Mass., 549 U.S. 365, 549 U.S. 365 (U.S. 2007) (fresh start purpose of Bankruptcy Code)
- River Place E. Hous. Corp. v. Rosenfeld, 23 F.3d 833, 23 F.3d 833 (4th Cir. 1994) (ongoing burdens of owning property are nondischarged)