Incompetence Does Not Excuse Stay Violation

Posted by NCBRC - August 2, 2016

A mortgage creditor violated the automatic stay by mistakenly filing a claim to which it had no rights and by failing to immediately return payments on that claim it had received by the trustee. In re Mocella, 552 B.R. 706, No. 10-42287 (Bankr. N.D. Ohio 2016).

Joseph J. and Kimberly A. Mocella filed chapter 13 bankruptcy in June, 2010, and listed a debt to GMAC of approximately $10,000.00, secured by their car. GMAC filed a proof of claim (claim 2) for the secured debt. Nationstar Mortgage filed a proof of claim for over $76,000.00 secured by the Mocellas’ residence. On December 4, 2014, Nationstar filed a Transfer of Claim in which it stated that GMAC had transferred claim 2 to Nationstar. In fact, Nationstar intended to file the Transfer of Claim for a bulk servicing transfer from Ocwen Loan Servicing relating to an unsecured HomeSaver Loan Nationstar had given the Mocellas.

After the erroneous claim transfer was filed in the bankruptcy court, the chapter 13 trustee made three payments to Nationstar totaling almost $300.00 on the debt that had been mistakenly designated as transferred. Nationstar applied those payments to the mortgage. Five months after having filed the Transfer of Claim, Nationstar withdrew it. It did not return the funds received on that debt, however, and claimed not to have received letters from the trustee seeking return of the payments. In October, 2015, the trustee filed the current motion for contempt and Nationstar returned the erroneous payments shortly after that.

The court began with a finding that Nationstar violated the automatic stay, section 362, in that at the time Nationstar filed the Transfer of Claim: 1) the automatic stay was in effect, 2) Nationstar knew of the bankruptcy, and 3) the transfer was an intentional act. Nationstar’s retention of the funds paid to it by reason of the transfer of claims was also an exercise of control over property of the estate in violation of section 362(a)(3). Nationstar’s defense that its error was essentially due to its inability to keep track of its claims or where it applied funds exacerbated rather than ameliorated its wrongful conduct. The court found Nationstar’s transfer of GMAC’s claim entirely unjustified, wanton, reckless and “wholly irrational.”

The court turned to damages under section 362(k). Mr. Mocella testified that he incurred damages when he negotiated the purchase of a new truck using the GMAC car for trade-in only to discover that he was still indebted to GMAC under the lending agreement. His claimed expenses included missing work and driving to and from the truck dealership, and loss of the use of any car for a period of time. He was disappointed and embarrassed when, after telling his friends and co-workers that he was buying the new truck, he found he could not. He also suffered anxiety, and tightness in his chest, and high blood pressure, upon learning that Nationstar’s error prevented the negotiated deal from going through.

The court found that Mr. Mocella’s substantiated out-of-pocket expenses were limited to $5.00 travel costs. As to his emotional and lost-opportunity damages the court found that there was insufficient evidence to support monetary compensation.

The court turned to attorney’s fees as actual damages under section 362(k). Mr. Mocella’s attorney filed an itemized “fee supplement” related to the contempt action, showing his time ($300/hour), as well as time spent by his legal staff ($250/hr, $200/hr, $125/hr) and paralegals ($100/hr). The court rejected Nationstar’s argument that the itemized fee statement required independent documentation, noting that it is customary to rely on an attorney fee statement when determining an attorney fee award.

Addressing Nationstar’s contention that Mr. Mocella’s hourly rate of $300/hr was too high, the court noted that Nationstar’s counsel charged $435/hr and an associate in his firm with the same years of experience as Mr. Mocella’s attorney charged $315/hr. The court applied the lodestar method and awarded $17,750.00 in attorney fees.

As to punitive damages, the Mocellas sought $100/day, from the date Nationstar filed its Transfer of Claim motion through the date they returned the money for a total of $33,700.00.

The court found that, at best, Nationstar’s conduct was “reckless indifference,” and its evasive and unapologetic behavior once its mistake came to light demonstrated “unabashed arrogance.” “Based on the egregious conduct of Nationstar and Nationstar’s total lack of understanding that what it did was wholly unreasonable, the Court can think of no more appropriate case than this one for an award of punitive damages.” The court went on to find that the $33,700.00 demanded by the Mocellas would not be sufficient punishment. The court noted that the criminal penalty for filing a false statement on a claim transfer is $500,000.00. Finding no evidence of intentional fraud, however, the court halved that penalty and awarded $250,000.00 in punitive damages.

In sum, the court granted Mocella’s motion for contempt and awarded $17,755.00 in actual damages and punitive damages in the amount of $250,000.00, for a total of $267,755.00.

Mocella Bankr ND Ohio opinion June 2016





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