Summary:
Ms. Swink filed her first Chapter 13 bankruptcy in 2013 and, perhaps unwisely, proposed a plan with her mortgage payment to Fannie Mae being made directly. Twice during that case, Fannie Mae filed Motions for Relief, asserting that Ms. Swink was delinquent on payments, but then in both instances withdrawing those motions after its attorney represented to the court that Ms. Swink had brought her account current. Ms. Swink completed her Chapter 13 case and pursuant to the bankruptcy court's Standing Order at that time, the mortgage account was determined to be current. After the discharge and closing of the bankruptcy case, Fannie Mae commenced foreclosure.
Ms. Swink filed a second bankruptcy two days after a foreclosure sale was held (but still within the upset period) This foreclosure also resulted in her homeowner's insurance being cancelled, due to a inaccurate statement by Fannie Mae that the property was no longer owned by Ms. Swink.) Ms. Swink later commenced an Adversary Proceeding against Fannie Mae asserting violation of §524(i), RESPA,
Fannie Mae first argued that §524(i) was inapplicable as it was treated as a long-term nondischargeable debt in the first case. The bankruptcy court "easily dispensed" with this argument as § 524(i) is clearly applicable to long-term debts that are not discharged at the end of a bankruptcy plan. See Carnegie v. Nationstar Mortg., LLC (In re Carnegie), 621
B.R. 392, 403–409 (Bankr. M.D.N.C. 2020). Further, Fannie Mae attempted to argue that the Proof of Claim, the payment histories and communications between the parties that Ms. Swink asserted showed inaccuracies and errors should be used as the basis for dismissal of the case. The bankruptcy court not only rejected this, as it would invert the standard under 12(b)(6) of viewing the evidence in the light most favorable to the plaintiff, but as the representations by the attorney for Fannie Mae in the first case were binding on it when:
(1) Made during a judicial proceeding;
(2) Deals with a fact; and
(3) Is deliberate, clear, and unambiguous.”
Further, the bankruptcy court was not persuaded that Fannie Mae, through its servicer Mr. Cooper, corrected any failures under §524(i), when it acknowledge an error and "committed to advancing the account by 10 installments". The same day it made it committed to such, Mr. Cooper submitted an Affidavit in the foreclosure action asserting a continued default.
Continuing to Ms. Swink's claims against Fannie Mae for violations of the FDCPA, RESPA, N.C.G.S. § 45, and other common law causes of action, the bankruptcy court held that it did have "related to" jurisdiction under 28 U.S.C. §157(b)(1), as these non-bankruptcy claims arose before the commencement of the current bankruptcy case and accordingly were both assets of the bankruptcy estate and could "conceivably have any effect on the estate being administered in bankruptcy." The bankruptcy court then found that as a result of the purported violations Ms. Swink had asserted actual damages and declined to dismiss those causes of action.
Commentary:
The present Rule 3002.1 would have avoided much of this, as both Rule 3002.1(c) would have obligated Fannie Mae to disclose asserted fees and charges and Rules 3002.1(f),(g) & (h) would have flushed out any assertion of delinquency at the end of the case or affirmatively and explicitly resulted in an order determining the mortgage to be current.
In the present case, Fannie Mae's current counsel argued that the withdrawal of the Motion for Relief was in error as Ms. Swink was delinquent at that time. That withdrawal occurred October 10,2017. When Ms. Swink filed her second bankruptcy on September 27, 2019, Fannie Mae would still have been able to raise a malpractice claim against that attorney. Further, since the two-year Statute of Limitations for malpractice claims must be raised as an affirmative defense, Fannie Mae could still assert such against its earlier attorneys. (That creditors routinely file Proofs of Claim for stale debts, was recognized by the Supreme Court in Midland Funding v. Johnson.) While the idea of "professional courtesy" would seem to preclude that sort of claim, particularly in public, the similar concept of "common decency" on the part of Fannie Mae does not seem to extend to Ms. Swink.
For a copy of the opinion, please see:
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