Debtors fail to show bank violated discharge injunction

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Where debtors asserted that a bank violated the discharge injunction, but their arguments had already been rejected by courts, misapprehended the law or stated claims that were implausible, the bank was granted judgment on the pleadings.

Background

This case involves pro se debtors, James Andrew Hegedus and Virginia Ellen Hegedus, who have engaged in litigation in multiple courts over multiple years, stemming largely from a foreclosure action. This time, the debtors repeat their charge that the defendant violated the discharge injunction plus again assert other nonbankruptcy claims.

Before the court are two motions. One is a “motion to grant judgment” filed by the plaintiffs (who are the debtors in the underlying bankruptcy case), The second is a motion for judgment on the pleadings and for a prefiling injunction against the plaintiffs filed by the defendant, U.S. Bank National Association, not in its individual capacity but solely as trustee for the NRZ Pass-Through Trust IX.

Analysis

The plaintiffs received a chapter 7 bankruptcy discharge on Dec. 24, 2019. They allege U.S. Bank violated their discharge injunction. They point to four grievances against U.S. Bank: (1) U.S. Bank failed to initiate its own foreclosure proceeding in the Delaware courts and instead substituted itself for Bank of New York, Mellon; (2) U.S. Bank relied upon the Bank of New York, Mellon’s foreclosure judgment that, according to the Hegeduses, was voided by the bankruptcy discharge order; (3) U.S. Bank through its servicers sent correspondence to the plaintiffs and (4) a servicer made telephone calls to the plaintiffs. The court finds that plaintiffs have not pleaded sufficient facts supporting their claim that the defendant violated the discharge injunction under any of these theories.

First, the plaintiffs allege U.S. Bank had “never foreclosed” on the property because it did not initiate the judicial foreclosure action in its own name, but instead was substituted for the Bank of New York, Mellon. Essentially, the plaintiffs are challenging U.S. Bank’s standing to proceed with the foreclosure sale. This exact argument has been adjudicated by the state court more than once and each time the state court found against the plaintiffs on these arguments.

Second, the plaintiffs contend the foreclosure judgment order was voided by the bankruptcy discharge. This argument rests on the baseless and erroneous assertion that the state court judicial foreclosure process at issue is a determination of personal liability on a personal debt (yielding an unsecured money judgment) instead of a state law process to enforce a mortgage on real estate.

The judgment was not an unsecured personal judgment for unpaid indebtedness. The foreclosure judgment order was part of the judicial process to enforce the mortgage. The foreclosure judgment was therefore an order to enforce in rem rights that survived the bankruptcy discharge. The Delaware judgment order was not voided by the bankruptcy discharge.

Third, the plaintiffs allege U.S. Bank attempted to collect a discharged debt in violation of the discharge injunction by sending mailed correspondence. For the plaintiffs’ allegation to survive, the facts must show the correspondence was an attempt to collect a debt and not an informational statement. Here, each of the documents plainly explain they are for informational and compliance purposes and not for the purpose of collecting the debt.

Lastly, the plaintiffs allege that between October 2020 and February 2021 they received 39 phone calls from Shellpoint. But the plaintiffs never connect the listing of the name of the servicer on the call log with any actual demand for payment. Indeed, the plaintiffs cite no facts to show the calls were attempts from U.S. Bank or its loan servicer to collect the debt from them personally.

For these reasons, this court concludes that the plaintiffs’ pleadings do not contain sufficient facts that, accepted as true, state a claim to relief that is plausible on its face. In fact, after considering all the factual allegations in the plaintiffs’ pleadings, this court finds no “well-pleaded allegation” that it can accept as true.

Plaintiffs’ motion for judgment on the pleadings denied. Defendant’s motion for judgment on the pleadings granted.

Hegedus v. U.S. Bank National Association as Trustee, Case No. 22-05007, Feb. 15, 2023. WDVA Bankr. at Harrisonburg (Connelly). VLW No. 023-4-005. 26 pp.