611 B.R. 701
Bankr. M.D. Fla.2019Background:
- Debtors filed Chapter 13 on June 15, 2012; plan confirmed required curing a $7,856.59 mortgage arrearage and continuing payments on the homestead mortgage.
- Mortgage claim transferred through servicers: Homeward → Ocwen → FNMA/Seterus (Seterus became servicer Oct. 6, 2015); debtors completed plan and received discharge Aug. 8, 2017.
- Trustee’s Notice and FNMA/Seterus’ response established debtors had made payments through June 1, 2017; debtors owed the July 2017 payment only.
- From April 2018–May 2019 Seterus (and later Mr. Cooper) sent repeated default letters and statements demanding unpaid amounts already paid, continued after counsel’s written “Notice of Violation of Order of Discharge,” and incorrectly reported delinquencies to credit bureaus (reducing Jessie Ferris’ score ~100 points).
- Debtors reopened the case and filed an Amended Motion for Sanctions; trial found Seterus/Mr. Cooper willfully failed to credit March–June 2017 payments and caused material injury.
- Court awarded attorneys’ fees and costs, $10,000 emotional distress damages, and $25,000 punitive damages; separate order to be entered.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did servicers willfully fail to credit payments received under confirmed plan (11 U.S.C. § 524(i))? | Debtors: servicers ignored Trustee’s concession and counsel’s notice and repeatedly demanded paid amounts. | Servicers (Mr. Cooper): errors stemmed from an incorrect prepetition arrearage listed in debtors’ proof of claim. | Willful failure proven: servicers put on notice, produced no proof of a procedural mistake; presumption of intent absent proof otherwise. |
| Did the failure cause material injury? | Debtors: ongoing collection notices, credit reporting, and emotional harm show material injury. | Servicers: minimal offer for damages; argued relatively small harm if any. | Material injury found based on protracted, intentional conduct and credit reporting consequences. |
| Are attorneys’ fees and costs recoverable and reasonable? | Debtors sought $20,213.10 based on contemporaneous time records and lodestar. | No effective challenge to reasonableness at trial. | Fees and costs awarded in full as reasonable. |
| Are emotional distress and punitive damages warranted and amounts appropriate? | Debtors sought damages for depression, anxiety, insomnia, and family harm; requested compensatory and punitive relief. | Servicers suggested a nominal award if any (e.g., $250/month suggestion). | Court found conduct egregious and protracted; awarded $10,000 emotional distress and $25,000 punitive damages. |
Key Cases Cited
- Hardy v. United States, 97 F.3d 1384 (11th Cir. 1996) (describing discharge injunction and fresh-start purpose)
- In re McLean, 794 F.3d 1313 (11th Cir. 2015) (discharge prevents pressure to repay discharged debt)
- Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) (civil contempt sanctions require no fair ground of doubt about unlawfulness)
- Lodge v. Kondaur Capital Corp., 750 F.3d 1263 (11th Cir. 2014) (emotional-distress damages standards when conduct is egregious)
- Dawson v. Washington Mut. Bank, F.A., 390 F.3d 1139 (9th Cir. 2004) (egregious creditor conduct may obviate corroboration for emotional-distress claims)