493 B.R. 541
Bankr. E.D. Cal.2013Background
- Debtors Landry filed a Chapter 13 petition on May 4, 2011 and the court confirmed their Amended Plan on October 4, 2011.
- The Class 1 Claim secured by the couple's principal residence at 7330 Meadowlark Lane is to be cured with a post-petition payment of $2,200.75 under the plan.
- Defendants Bank of America, N.A. and U.S. Bank, N.A. filed a Notice of Mortgage Payment Change on July 10, 2012 increasing the post-petition payment to $3,399.22, effective August 1, 2012.
- Plaintiffs allege the Notice violated the automatic stay and Rosenthal Act; the latter claim concerns debt-collection practices by the defendants.
- Defendants moved to dismiss the Third and Fourth Causes of Action under Rule 12(b)(6), arguing no stay violation and no Rosenthal Act liability.
- The court granted dismissal of the Third Cause of Action but denied in part the Fourth, allowing the Rosenthal Act claim to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the Notice of Mortgage Payment Change violate the automatic stay? | Plaintiffs contend the notice sought higher payments and post-petition coercion violated the stay. | Defendants argue notice of payment changes is permitted under the plan and Rule 3002.1 and thus not an automatic stay violation. | Third Cause of Action dismissed for failure to state a stay violation. |
| Are Bank of America and U.S. Bank debt collectors under the Rosenthal Act? | Plaintiffs allege defendants are debt collectors subject to Rosenthal Act due to ongoing collection of consumer debt. | Defendants contend creditors servicing their own debt are not Rosenthal Act debt collectors. | Fourth Cause of Action survives; defendants are sufficiently alleged as Rosenthal Act debt collectors. |
| Is the Rosenthal Act claim barred by statutory exemptions or statutory construction? | Rosenthal Act applies broadly to debt collection by creditors and servicers, including secured debt. | There are statutory exemptions for trustees and certain self-dealing creditors; Rosenthal Act should not apply to foreclosures. | Rosenthal Act applies to the defendants; no non-statutory exemption defeats the claim. |
Key Cases Cited
- Piper v. Portnoff Law Assocs., 396 F.3d 227 (3d Cir.2005) (foreclosure efforts do not remove debt from FDCPA coverage)
- Wilson v. Draper & Goldberg, P.L.L.C., 443 F.3d 373 (4th Cir.2006) (foreclosure-related communications can still be debt collection)
- Rusheen v. Cohen, 37 Cal.4th 1048 (Cal. 2006) (abuse of process requires improper use of court process)
- Barquis v. Merchants Collection Assn., 7 Cal.3d 94 (Cal. 1972) (tort of abuse of process and court processes in litigation)