494 B.R. 507
Bankr. E.D. Cal.2011Background
- Debtors Norlund filed Chapter 7 and sought to surrender their Hayfork, CA home to Bank of America (BofA).
- BofA held first three deeds of trust on the property and pursued relief from stay but did not foreclose.
- Discharge entered Oct 7, 2009; debtors vacated the home Oct 20, 2009.
- BofA sent a stream of 24 communications Oct 2009–Aug 2010 urging payment despite discharge.
- Debtors reopened case to compel BofA to take possession/foreclosure and stop contacting them.
- Court found BofA willfully violated the discharge injunction and ordered remedies including damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did BofA violate the discharge injunction by its letters and notices? | Nordlunds: 24 communications targeted discharged debt; violated injunction. | BofA: some letters were informational or allowed under 524(j) or non-debt-collection. | Yes; the communications collectively violated the discharge injunction. |
| Does 11 U.S.C. § 524(j) apply to shield the communications? | Nordlunds: § 524(j) inapplicable since not principal residence at time of notices. | BofA relied on § 524(j) to justify ongoing communications. | No; § 524(j) does not apply here. |
| What remedies are available for contempt and what is the appropriate award? | Damages, fees, and emotional distress may be recoverable under § 105(a) for contempt. | Limit remedies to fees/costs per Walls; emotional distress not recoverable. | Court awarded compensatory damages, attorneys’ fees, costs, lost wages, and emotional distress (Mrs. Nordlund $5,000; Mr. Nordlund $35,000); ongoing penalties for further communications. |
| Should emotional distress be available as a remedy for discharge-injunction violations? | Emotional distress compensable under Walls and Dyer for civil contempt. | Walls restricts private right of action; argues no emotional distress damages. | Yes; emotional distress damages are recoverable under § 105(a) for willful violations. |
| Are the awards duplicative or applicable to BAC/BofA as the same entity? | Treat BAC as same as BofA for purposes of deceptive conduct. | Distinction immaterial; actions attributable to same loan servicing. | Treat BAC and BofA as one for ruling purposes. |
Key Cases Cited
- Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir. 2002) (civil contempt damages permitted for discharge-injunction violations)
- In re ZiLOG, Inc., 450 F.3d 996 (9th Cir. 2006) (contempt standards and burden of proof under §105(a))
- In re Dyer, 322 F.3d 1178 (9th Cir. 2003) (civil contempt penalties include compensatory damages and fees; punishments discouraged)
- Dawson v. Washington Mutual Bank (In re Dawson), 390 F.3d 1139 (9th Cir. 2004) (emotional distress recognized where relevant to discharge-injunction violation)