561 B.R. 598
1st Cir. BAP2017Background
- Debtors filed Chapter 7 in March 2011, listing Banco Popular as secured creditor on two Bayamón, PR properties; discharge entered April 2015.
- Banco Popular had pending prepetition foreclosure judgments on both properties (2003 and 2009) and obtained relief from the automatic stay before the Debtors’ discharge.
- Debtors moved for contempt under 11 U.S.C. § 105 / § 524(a)(2), alleging Banco Popular continued foreclosure in a manner that sought in personam liability (i.e., wrong foreclosure procedure) and thus violated the discharge injunction.
- Banco Popular informed the local court it would proceed in rem only and waived any personal-deficiency claim; it filed Spanish-language exhibits in opposition.
- Bankruptcy court denied the Contempt Motion without a hearing and denied reconsideration under Rule 59(e); Debtors appealed both orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Banco Popular violated the § 524(a)(2) discharge injunction by continuing foreclosure proceedings | Debtors: continuation of foreclosure under an "ordinary" (in personam) procedure after discharge showed intent to collect personally and violated the injunction | Banco Popular: had relief from stay, informed local court it would proceed in rem only and waived personal collection; foreclosure enforced valid lien | Held: No abuse of discretion in denying contempt—Debtors failed to prove coercion/harassment element by clear and convincing evidence |
| Whether bankruptcy court erred by accepting Spanish-language exhibits from Banco Popular | Debtors: acceptance of Spanish exhibits was reversible error | Banco Popular: submission was proper; local practice/context supported it | Held: Court need not decide; even if error, Contempt Motion was facially deficient so Spanish documents would not change outcome |
| Whether Debtors were entitled to an evidentiary hearing on the Contempt Motion | Debtors: should have received a hearing before denial | Banco Popular: parties submitted papers; no disputed facts requiring a hearing | Held: No due process violation; denial without hearing not an abuse where no disputed factual issues and no hearing requested below |
| Whether bankruptcy court abused discretion by denying reconsideration under Rule 59(e) | Debtors: asked reconsideration claiming prior rulings misapplied foreclosure law and procedure | Banco Popular: motion was a re-litigation attempt; no new evidence or manifest error | Held: Denial affirmed—Rule 59(e) relief is extraordinary; Debtors provided neither manifest error nor newly discovered evidence |
Key Cases Cited
- Canning v. Beneficial Me., Inc., 706 F.3d 64 (1st Cir. 2013) (bankruptcy courts may enforce the discharge injunction under § 105)
- Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439 (1st Cir. 2000) (bankruptcy courts can order monetary relief for discharge violations)
- Bates v. CitiMortgage, Inc., 844 F.3d 300 (1st Cir. 2016) (elements for § 524(a)(2) claim include notice, intent, and improper coercion/harassment; coercion assessed objectively)
- Diamond v. Premier Capital, Inc., 346 F.3d 224 (1st Cir. 2003) (coercive action is tantamount to a threat or places debtor between rock and hard place)
- Dávila v. Corporación de Puerto Rico Para La Difusión Pública, 498 F.3d 9 (1st Cir. 2007) (federal litigation is generally conducted in English)