Liberty Lending Services v. Canada

MILLER, Judge,

concurring fully and specially.

While I concur fully in the majority opinion, I write separately to emphasize the deliberate nature of Liberty’s conduct, which is apparently calculated to deprive homeowners such as Canada of the protections of the federal bankruptcy laws, thereby subverting the purpose of those laws. I also write to emphasize that the breach of *742contract claims asserted by Canada are not without precedent — i.e., they are not as far-fetched as Liberty would have us believe.

Liberty’s designated 30 (b) (6) representative testified that with respect to any mortgagor who files for bankruptcy, Liberty automatically orders monthly curbside inspections of the mortgaged property and retains an attorney to protect its interests in the bankruptcy proceeding. Liberty follows this procedure even if the mortgagor has never been in arrears. All charges incurred in connection with the property inspections and legal representation are assessed against the mortgagor’s account. Charges for inspection fees are assessed automatically, on a monthly basis, while charges for reimbursement of attorney fees are assessed at the time Liberty receives the bill for the same. Liberty does not provide its mortgagors, during the pendency of their bankruptcy, notice of the fact of the monthly inspections, the fact that monthly charges are being assessed against the mortgagor’s account for the same, or the amount of those charges. Nor does Liberty inform the mortgagor that attorney fees incurred by Liberty in connection with the bankruptcy will be assessed against their account, or provide notice at the time those fees are actually assessed. Instead, Liberty deliberately withholds such notice and demands for payment until the mortgagor’s bankruptcy is discharged or dismissed — i.e., until the homeowner no longer has the protection of the bankruptcy court and Liberty can be sure that such charges are not subject to approval by that court. Following the resolution of the bankruptcy, Liberty then typically provides notice of the assessments for inspection and attorney fees by sending a standard acceleration letter, such as that received by Canada, giving notice of foreclosure and demanding payment of the entire amount due under the loan agreement.

In light of Liberty’s “standard operating procedures,” Canada premises her breach of contract claims on the theory that, as a matter of law, public policy, or both, the standard security agreement language at issue must be read in conjunction with the spirit and letter of the bankruptcy laws. This theory is supported by bankruptcy precedent. As one court has explained:

Creditors should not be able to assess fees to the account of a person in bankruptcy without the person’s knowledge. A bankruptcy case’s purpose is to allow a debtor to get out of financial trouble. At discharge, a debtor ought to be able to expect he or she has brought his or her secured debts current and wiped out all unsecured debts not paid through a plan. Undisclosed fees prevent a debtor from paying the fees in his or her plan — an option that should not be lost simply because a creditor chooses to not list the fee and *743expects to collect it later. . . . The right to modify a [Chapter 13] plan for post confirmation defaults [resulting from the post-confirmation assessment of fees] is meaningless if a lender can decide which fees and charges it will disclose and which it will hide until the case is complete and execution on debtor’s collateral can be accomplished. Post confirmation charges, if not disclosed, could also thwart the real purpose of a bankruptcy case. A debtor that completes his plan by paying off his lender’s entire arrearage and post-petition installments may find himself in foreclosure the day after a discharge is granted, based on unpaid and undisclosed post confirmation charges and fees. This result is clearly at odds with the notion of providing a successful debtor a fresh start.
Decided September 12, 2008 Reconsideration denied September 29, 2008 Batch & Bingham, Michael J. Bowers, T. Joshua R. Archer, Christopher S. Anulewicz, Marlie A. McDonnell, Morris, Schneider, Prior, Johnson & Freedman, Lori L. McGowan, for appellant.

(Emphasis supplied.) In re Jones, 366 BR 584, 596 (Bankr. E.D. La. 2007) (disapproving lender conduct identical to Liberty’s and rejecting the lender’s argument that it had a contractual right to engage in such conduct). See also In re Sanchez, 372 BR 289, 305 (c) (ii) (Bankr. S.D. Tex. 2007) (“In failing to make the proper disclosures, the [lender] has acted in a manner antithetical to the spirit of the Bankruptcy Code. The three most important words in the bankruptcy system are: disclose, disclose, disclose.”); In re Watson, 384 BR 697, 706-707 (Bankr. D. Del. 2008) (noting that a court has the right to determine “whether asserted fees and charges are reasonable under the mortgage instruments and applicable law,” and that therefore “the assessment of post-confirmation fees must be fully disclosed both to the Debtors and to the Court”); In re Nosek, 363 BR 643, 645 (Bankr. D. Mass. 2007) (“[A lender] cannot use its accounting procedures to contravene the terms of a confirmed Chapter 13 plan and the Bankruptcy Code. [Cit.]”).

In light of the foregoing, it is clear that the central question in this case, common to all class members, is whether standard language found in all security agreements serviced by Liberty does, in fact, grant Liberty the contractual right to engage in the conduct at issue. I therefore fully concur in the majority holding affirming the trial court’s certification of the class.

*744Claeys, McElroy & Macgruder, Angela C. McElroy, Bell & James, John C. Bell, Jr., Bell & Brigham, Leroy W. Brigham, Roy E. Barnes, for appellee.