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In re Ogden

United States District Court, D. Colorado

March 18, 2016

BRENDA A. OGDEN, Appellee. PNC BANK N.A., Appellant,



This matter is before the Court on PNC Bank N.A.’s (PNC) appeal from the judgment of the bankruptcy court, which awarded actual damages, punitive damages, and attorney’s fees for PNC’s violation of the automatic stay. This Court exercises jurisdiction over the appeal pursuant to 28 U.S.C. § 1334(a) and 28 U.S.C. § 158(a)(1). The Court has reviewed the record and the briefs of the parties. For the reasons set forth below, the bankruptcy court’s judgment is affirmed.


The Court finds that the following facts are supported by substantial evidence in the record, and that the factual findings of the bankruptcy judge referenced below are not clearly erroneous.

This appeal is rooted in a history of animosity between the two parties. On January 14, 2002 Appellee Brenda A. Ogden secured a loan for her primary residence. Appellant PNC services that loan. ECF No. 7-1 at 10. Ogden has initiated various lawsuits against PNC since 2002, “alleging erroneous charges applied to her loan and misapplication of her mortgage payments.” ECF No. 7-3 at 290.

On April 28, 2011 Ogden filed a voluntary petition for relief under Chapter 13 of the United States Bankruptcy Code.[1] ECF No. 7-1 at 10. Prior to her bankruptcy petition, she had missed seven mortgage payments. Id. PNC filed a proof of claim, which asserted that Ogden owed $10, 497.39 before she filed for bankruptcy. ECF No. 7-3 at 291. This pre-petition debt included the seven missed payments, escrow advances from PNC, and other fees and costs. Id. On March 12, 2012 the bankruptcy court confirmed Ogden’s Chapter 13 plan, which detailed how she would cure her arrears and other charges while proceeding to pay her monthly mortgage payments. Id. Around the same time, Ogden also filed suit in federal district court, claiming that PNC violated the Real Estate Settlement Procedures Act and the Truth in Lending Act. Id. The parties settled in June 2012.[2] Id.

When Ogden filed for bankruptcy, an automatic stay issued. The stay prohibits PNC from continuing or initiating certain proceedings against Ogden during the pendency of her bankruptcy petition. Despite the existence of the stay, PNC sent Ogden two letters (collectively “the Letters”). ECF No. 7-1 at 5–6.

The first letter, dated November 2, 2012 (the “November Letter”), informed Ogden that she was approved to enter “into a Trial Period Plan for a mortgage modification.” Id. at 6. The letter explained that the modification would offer Ogden “more affordable mortgage payments or more manageable terms.” Id. It then detailed the mortgage modification process, including a payment schedule for three payments she would need to make to complete the trial payment plan. Id. Ogden did not sign up for the trial payment plan. ECF No. 7-3 at 291.

Additionally, the November Letter made multiple references to foreclosure. Id. The second paragraph is preceded by a bolded header stating “To Suspend Foreclosure.” ECF No. 7-1 at 6. The letter stated, “[i]f you contact us or make payment by November 16, 2012 to indicate your intent to accept this offer, we will not refer your loan to foreclosure or if your loan has been referred to foreclosure, we will suspend foreclosure. However, if you do not . . . foreclosure proceedings may continue.” Id. Other mentions of foreclosure appeared in later sections of the letter. Id. at 6–7.

In December 2012 Ogden asked PNC for an explanation of why it had offered her a significant decrease in her monthly payment in the November Letter. ECF No. 7-3 at 292. She also requested a history of her loan payments, a reinstatement quote, and a payoff quote. Id. She did not receive a detailed response. Id. Rather, PNC sent “form letters” with general proclamations that it was “researching her loan.” Id.

On January 2, 2013 PNC sent Ogden the second letter (the “January Letter”). ECF No. 7-1 at 5. This letter informed Ogden that the “review of [her] hardship assistance request ha[d] been completed, ” but that PNC could not approve her request for assistance. Id. The letter then referenced the November Letter’s offer of a loan modification and stated, “[w]e did not receive your scheduled loan payments as outlined in the agreement.” Id. It also stated, “[p]lease note that the servicing of your loan will continue per the terms of your Note and Mortgage, including foreclosure proceedings and normal credit bureau reporting. If foreclosure activity was previously suspended on your loan, it has now resumed.” Id.

Shortly after Ogden received the January Letter, PNC sent her an “escrow analysis.” ECF No. 7-3 at 292. The escrow analysis reflected an increase to her monthly payment. Id. PNC filed notice of this change pursuant to the requirements of Rule 3002.1 on January 26, 2013, and it attached the escrow analysis to the filing, but it gave no indication as to why it had increased her payments. Id.

On January 29, 2013 Ogden filed for a proceeding before the bankruptcy court. At that time, Ogden was “current on her post-petition obligations.” ECF No. 7-3 at 8. The bankruptcy court subsequently held two trials on Ogden’s claims that PNC “violated the automatic stay, the confirmation order, [Ogden’s] chapter 13 plan, and Fed. R. Bankr. P. 3002.1.” Id. at 290. The first trial (the Adversary Proceeding) focused on “[PNC’s] accounting for payments received post-petition but before the completion of [Ogden’s] plan.” Id. Bankruptcy Judge Elizabeth E. Brown became aware of the Letters during the Adversary Proceeding. Id.

During a deposition conducted in advance of the Adversary Proceeding, PNC provided a reinstatement quote to Ogden that was current as of August 15, 2013. Id. at 292. The reinstatement quote reflected “additional post-petition fees and corporate advances in excess of $5, 500.” A PNC representative Dorothy Thomas testified regarding those additional charges at the Adversary Proceeding. Thomas stated that the reinstatement quote reflected the amount needed to bring the loan “contractually current.”[3] Id. As Judge Brown summarized, this quote “essentially ignored the bankruptcy by providing numbers as if the Debtor was not curing the pre-petition arrears through her plan.” Id.

During her testimony Thomas also attempted to explain why PNC sent the form letters. Essentially, PNC maintains two sets of books in accounting for Ogden’s post-petition mortgage payments. The first is for the purpose of the bankruptcy proceedings, and the second is an accounting as if Ogden had never filed for bankruptcy. Id. For bankruptcy purposes, PNC applies each of Ogden’s post-petition payments to the month and year in which she actually paid them. Id. In contrast, for non-bankruptcy purposes, PNC applies payments to the “oldest outstanding payment due in accordance with the Debtor’s deed of trust.” Id. at 292–93. Thomas explained that Ogden is current on her post-petition payments as she has made all of the payments scheduled through her bankruptcy plan. Id. at 293. However, PNC does not perceive her to be “contractually current” under the deed of trust as she has yet to pay off all of her pre-petition arrears.[4] Id.

Following the Adversary Proceeding, the bankruptcy court issued an order on the accounting issue and admitted the January Letter into evidence. Id. at 290. Judge Brown entered judgment in Ogden’s favor for the violation of the automatic stay based on the January Letter. She also awarded actual damages of $14, 889.57 and punitive damages of $5, 000. The bankruptcy court dismissed Ogden’s remaining claims without prejudice. ECF No. 7-5 at 250. PNC moved for reconsideration, arguing that Ogden had not pled that the Letters violated the automatic stay in her Complaint. Judge Brown “in an abundance of caution” issued an amended order “which omitted any ruling on the letters and dismissed [Ogden’s ] stay violation claims without prejudice.” ECF No. 7-3 at 290. Despite issuing this order, Judge Brown noted that PNC did not demonstrate prejudice related to the omission in the complaint, that it had not made any objection to the evidence about the letters, and that it even cross examined Ogden about the letters. Id. On April 3, 2014 the bankruptcy court issued an order to show cause, requiring PNC to demonstrate why it should not be sanctioned for having sent the Letters to Ogden. Id. At the second trial (the Evidentiary Hearing), the parties did not introduce new testimony. Rather, they argued their respective sides and relied on additional exhibits and the transcript from the Adversary Proceeding. Id.

On June 1, 2015 Judge Brown issued an order finding that PNC had violated the automatic stay by sending the Letters to Ogden. Judge Brown entered judgment against PNC and awarded damages for emotional distress, attorney’s fees, and punitive damages to Ogden. ECF No. 7-3 at 290–300. PNC filed its notice of appeal on June 15, 2015. ECF No. 14 at 8. The appeal became ripe upon the filing of Ogden’s reply brief on October 12, 2015. It was reassigned to this Court the following day.


I. Standard of Review.

The bankruptcy court’s conclusions of law are reviewed de novo. In re Market Center East Retail Property, 730 F.3d 1239, 1244 (10th Cir. 2013). “Whether a party’s actions have violated the automatic stay is a question of law[.]” In re Diviney, 225 B.R. 762, 769 (BAP 10th Cir. 1998) (internal citation omitted). As with all findings of fact, “[w]e review the bankruptcy court’s finding that a creditor’s action constituted a willful violation of the stay for clear error.” Id. (internal citations omitted). “A factual finding is clearly erroneous when it is without factual support in the record, or if the appellate court, after reviewing all the evidence, is left with the definite and firm conviction that a mistake has been made.” In re Scroggin, 364 B.R. 772, 778 (BAP 10th Cir. 2007) (internal quotations and citations omitted). “In reviewing findings of fact, we are compelled to give due regard to the opportunity of the bankruptcy court to judge the credibility of the witnesses.” Id. (citing Fed. R. Bankr. P. 8013).

“An award of sanctions for a violation of the automatic stay is reviewed for an abuse of discretion.” Diviney, 225 B.R. at 769 (internal citation omitted). Under this standard, the “trial court’s decision will not be disturbed unless the appellate court has a definite and firm conviction that the lower court made a clear error of judgment or exceeded the bounds of permissible choice in the circumstances.” McEwen v. City of Norman, Okl., 926 F.2d 1539, 1553–54 (10th Cir. 1991) (internal citation omitted). “An abuse of discretion occurs when the [lower] court’s decision is arbitrary, capricious, or whimsical, or results in a manifestly unreasonable judgment.” (internal citation omitted). In re Corey, 394 B.R. 519, 523 (BAP 10th Cir. 2008). “A de novo standard of review, however, applies when passing on a determination of the constitutionality of punitive damages awards.” In re Culley, 2006 WL 2091199, at *2 (BAP 10th Cir. 2006) (unpublished) (internal citation omitted).

On appeal, “[t]he burden of proof is on the party seeking to reverse a bankruptcy court’s holding.” In re Van Vleet, 461 B.R. 62, 68 (D. Colo. 2010) (internal citation omitted). The appellant must demonstrate that the “court’s holding was clearly erroneous as to its assessment of the facts or erroneous in its interpretation of the law, and not simply that another conclusion could have been reached.” Id. (internal citation omitted).

II. PNC’s Appeal.

PNC argues that the Letters did not violate the automatic stay. ECF No. 14 at 19. Alternatively, the bank attests that, even if the Letters were a violation, Judge Brown erred in awarding actual damages for emotional distress and attorney’s fees. Id. at 20. PNC also claims that this Court should reduce or vacate the bankruptcy court’s award of punitive damages. Id. at 21. Finally, PNC urges this Court to vacate Judge Brown’s order because the doctrine of res ...

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