FILED APR 14 2023 NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT UNITED STATES BANKRUPTCY APPELLATE PANEL OF THE NINTH CIRCUIT

In re: BAP No. NV-22-1181-GCB DAVID ORLANSKY & SHARON LYNN ORLANSKY, Bk. No. 2:20-bk-15132-NMC Debtors.

DAVID ORLANSKY; SHARON LYNN ORLANSKY, Appellants, v. MEMORANDUM* QUICKEN LOANS, LLC, fka QUICKEN LOANS INC., Appellee.

Appeal from the United States Bankruptcy Court for the District of Nevada Natalie M. Cox, Bankruptcy Judge, Presiding

Before: GAN, CORBIT, and BRAND, Bankruptcy Judges.

INTRODUCTION

Chapter 13 1 debtors David and Sharon Lynn Orlansky (“Debtors”)

appeal the bankruptcy court’s order denying their motion for sanctions

* This disposition is not appropriate for publication. Although it may be cited for whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential value, see 9th Cir. BAP Rule 8024-1. 1 Unless specified otherwise, all chapter and section references are to the

Bankruptcy Code, 11 U.S.C. §§ 101–1532, and all “Rule” references are to the Federal Rules of Bankruptcy Procedure. against creditor Rocket Mortgage, LLC f/k/a Quicken Loans, LLC f/k/a

Quicken Loans, Inc. (“Rocket”) for its alleged willful violations of

§ 362(a)(1), (3), and (6). Debtors asserted that Rocket violated the automatic

stay by including on Debtors’ billing statements $950 for attorney’s fees

incurred in connection with the case and by collecting and retaining those

fees. The bankruptcy court held that the billing statements were permitted

informational communications that did not violate the stay.

Although the statements included a standard disclaimer that they

were provided for informational purposes, Rocket listed the attorney’s fees

as part of the total amount due, instead of including them with prepetition

arrears in a section that clearly indicated amounts to be paid though the

plan, separate from ongoing monthly payments. By including the fees as

part of Debtors’ ongoing monthly payments, Rocket was attempting to

coerce payment and collect a prepetition debt outside of the bankruptcy

process. Any informational purpose served by including the attorney’s fees

on the monthly statements was severely undercut by separating those fees

from other prepetition amounts and adding them to the total monthly

payment. We REVERSE and REMAND.

FACTS

Debtors filed their chapter 13 petition in October 2020. Rocket filed a

proof of claim, evidencing a claim of $160,855.88, secured by Debtors’

residence. Rocket claimed a prepetition arrearage of $52.21 based on a

projected escrow shortage. Pursuant to Rule 3002.1(c), Rocket then filed

2 Official Form 410S2, “Notice of Postpetition Mortgage Fees, Expenses, and

Charges” (“Fee Notice”), in which Rocket asserted a claim for attorney’s

fees consisting of $500 for filing the proof of claim and $450 for reviewing

Debtors’ chapter 13 plan.

After the petition date, Rocket continued sending monthly billing

statements which included the disclaimer:

Our records show that either you are a debtor in bankruptcy or you discharged personal liability for your mortgage loan in bankruptcy. We are sending this statement to you for information and compliance purposes only. It is not an attempt to collect a debt against you. If you want to stop receiving statements, write to us . . . .

On the billing statements, Rocket listed the asserted prepetition arrears in a

section entitled “Amounts Past Due Before Bankruptcy Filing,” which

contained the additional informational statement:

This box shows amounts that were past due when you filed for bankruptcy. It may also include other amounts on your mortgage loan. The Trustee is sending us the payments shown here. These are separate from your regular monthly mortgage payment.

In December 2020, Rocket began listing $950 on Debtors’ billing

statements as “Advances on Your Behalf” under the section entitled “Next

Payment Breakdown (Post-Petition Payment).” Unlike the prepetition

arrears, the amounts in the Next Payment Breakdown (Post-Petition)

3 section were included in the “Total Payment Amount,” which showed the

amount due on the statement due date.2

Debtors paid the $950 fees by June 2021. Thereafter, Rocket continued

sending statements listing $950 as “Advances on Your Behalf” but also

listing $950 as “Partial payment (Unapplied),” which caused the “Total

Payment Amount” to return to the normal monthly payment.

In November 2021, Debtors filed an objection to Rocket’s proof of

claim. Debtors asserted they were always current on their mortgage and,

because the $52.21 claimed by Rocket was for a future escrow shortage, it

was not a legitimate arrearage. They also argued that the $950 attorney’s

fee claim was unnecessary and unwarranted under the loan agreement

because Debtors were not in default.

In response, Rocket agreed to amend its proof of claim to remove the

prepetition arrears, but it maintained that its attorney’s fee claim was

reasonable and recoverable irrespective of whether the loan was in default.

Rocket cited language in the deed of trust that allowed for attorney’s fees if

the creditor was required to participate in a bankruptcy action to protect its

interest.

At the hearing on Debtors’ claim objection, the bankruptcy court

reasoned that the deed of trust authorized Rocket to file a claim for

2 According to Debtors, the “Total Payment Amount” was also stated on the payment coupons attached to the statements. Because Debtors detached and returned the coupons with their payments, the statements in the record do not include the original coupons. 4 attorney’s fees, but Debtors had not yet shown that the asserted fees were

unreasonable. The court continued the hearing and requested

supplemental briefing.

Rocket subsequently filed a notice of withdrawal of the Fee Notice,

and it refunded $950 to Debtors. Rocket then amended its proof of claim to

remove the asserted $52.21 arrearage.

In February 2022, Debtors filed a motion for contempt and argued

that Rocket willfully violated the automatic stay by including the $950

attorney’s fee claim on their monthly billing statements. They further

contended that Rocket violated the stay by wrongfully taking possession

of, and retaining, Debtors’ $950 payment, which they characterized as

property of the estate.

In opposing the motion for contempt, Rocket argued that it did not

violate the stay because Rule 3002.1(c) specifically authorizes a creditor to

provide notice of fees incurred after the petition date in connection with a

claim secured by Debtors’ principal residence. It maintained that the

attorney’s fees were not subject to the automatic stay because they arose

from postpetition actions, and there was no coercion or harassment

involved in its billing statements, which were provided for informational

purposes. Rocket noted that, rather than contacting Rocket about the fees,

Debtors paid $950 after waiting over five months, then waited several

months to file their motion for contempt. Rocket argued the fees were

5 reasonable and authorized under the loan documents, and because it

withdrew the Fee Notice, the contempt motion was moot.

Though the fees were assessed postpetition, Debtors argued they

were part of Rocket’s prepetition claim under the holding of SNTL Corp. v.

Centre Insurance Co. (In re SNTL Corp.),

(9th Cir. 2009). They

suggested Rocket was conflating its Fee Notice, which was required under

Rule 3002.1(c), with its improper addition of attorney’s fees to Debtors’

monthly billing statements. They argued that Rocket added the fees to the

billing statements to collect the fees, which Debtors paid out of fear, and

refunding the fees did not negate Rocket’s stay violation.

After holding the continued hearing on Debtors’ claim objection and

the hearing on Debtors’ motion for contempt, the court took both matters

under submission. It entered a written order resolving both issues on

August 18, 2022.

The bankruptcy court sustained Debtors’ claim objection, and it

determined that the attorney’s fees were a prepetition claim. But the court

held that Rocket did not violate the automatic stay by including the fees in

the billing statements because the statements were permitted

communications, and Debtors had an interest in receiving information

about the status of their mortgage to formulate their plan. The bankruptcy

court reasoned that Debtors had notice of the fees in November 2020,

pursuant to the Fee Notice, but did not immediately dispute the fees by

filing a motion under Rule 3002.1(e). The court concluded that Debtors

6 paid the fees voluntarily, not because of undue pressure caused by the

billing statements. Debtors timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under

and

157(b)(2)(A). We have jurisdiction under

.

ISSUE

Did the bankruptcy court err by denying Debtors’ motion for

contempt for a willful violation of the automatic stay?

STANDARD OF REVIEW

We review de novo whether a creditor has violated the automatic

stay. Zotow v. Johnson (In re Zotow),

(9th Cir. BAP 2010).

Under de novo review, “we consider a matter anew, as if no decision had

been made previously.” Francis v. Wallace (In re Francis),

(9th Cir. BAP 2014).

DISCUSSION

Upon filing a bankruptcy petition, the Bankruptcy Code protects a

debtor’s interests by imposing an automatic stay on collection of

prepetition debts. City of Chicago v. Fulton,

, 589 (2021). The

automatic stay “is designed to effect an immediate freeze of the status

quo by precluding and nullifying post-petition actions, judicial or

nonjudicial, in nonbankruptcy fora against the debtor or affecting the

property of the estate.” Mwangi v. Wells Fargo Bank, N.A. (In re Mwangi),

(9th Cir. 2014) (quoting Hillis Motors, Inc. v. Haw. Auto.

7 Dealers' Ass'n,

, 585 (9th Cir. 1993)). The specific actions subject

to the automatic stay are described in § 362(a).

The parties agree that Rocket’s claim for attorney’s fee is a prepetition

debt subject to the automatic stay. Debtors argue that Rocket violated

§ 362(a)(1) and (a)(6) by including its claim for attorney’s fees on Debtors’

billing statements, which they assert was an attempt to collect a prepetition

debt. Debtors also argue that Rocket violated § 362(a)(3) by retaining the

payment, which they characterize as wrongfully withholding possession of

property of the estate. The pertinent subsections provide that the filing of a

bankruptcy petition creates a stay of:

(1) the commencement or continuation . . . of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; ... (3) any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate; ... (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title[.]

(a).

Section 362(k)(1) requires that “an individual injured by any willful

violation of a stay provided by this section shall recover actual damages,

8 including costs and attorneys’ fees, and, in appropriate circumstances, may

recover punitive damages.” A creditor commits a willful violation of the

stay if it knows of the stay and its actions that violate the stay are

intentional. Eskanos & Adler, P.C. v. Leetien,

(9th Cir.

2002). Because the bankruptcy court determined that the statements did not

constitute a stay violation, it did not decide whether Debtors were entitled

to damages under § 362(k).

Debtors do not identify any “action or proceeding” that Rocket

commenced or continued against them. Thus, § 362(a)(1) is inapplicable.

Assuming Debtors made the payment from estate property, the payment

ceased to be estate property once Rocket received and deposited the funds

into its own account. See Cano v. GMAC Mortg. Corp.,

(Bankr. S.D. Tex. 2009) (citing Citizens Bank of Md. v. Strumpf,

(1995)). Additionally, “mere retention of property does not violate

§ 362(a)(3),” Fulton, 141 S. Ct. at 589, and thus, Rocket’s actions did not

violate § 362(a)(3).

However, communications from a creditor can constitute an “act to

collect a prepetition debt” under § 362(a)(6). Section 362(a)(6) does not

prohibit all communications from a creditor to a debtor. In re Zotow,

(citing Morgan Guar. Tr. Co. of N.Y. v. Am. Sav. & Loan Ass’n,

(9th Cir. 1986); Connor v. Countrywide Bank, N.A. (In re

Connor),

(Bankr. D. Haw. 2007)). “[M]ere requests for

payment” alone do not violate the automatic stay. Morgan,

.

9 And because information from a mortgage lender is important to a chapter

13 debtor prior to plan confirmation, statements “simply providing

information to a debtor are permissible communications that do not run

afoul of the stay.” In re Zotow,

(citations omitted).

On the other hand, “[p]rohibited communications include those

where direct or circumstantial evidence shows the creditor’s actions were

geared toward collection of a prepetition debt, were accompanied by

coercion or harassment, or otherwise put pressure on the debtor to pay.”

When evidence of harassment or coercion is present, a disclaimer that the

billing statement is for “informational purposes only” is ineffective.

.

Whether a particular communication from a creditor violates the stay

is a “fact-driven inquiry which makes any bright line test unworkable.”

at 258 (citing Henry v. Assocs. Home Equity Servs., Inc.,

(C.D. Cal. 2002)). Consequently, we must examine both the substance and

the context of a particular communication to determine whether it violates

the stay.

Although the billing statements included a standard disclaimer that

they were for informational purposes, the substance and context show they

were geared toward collecting the attorney’s fees. Had Rocket listed the

attorney’s fees in the section with prepetition arrears—which clearly

indicated the fees were separate from ongoing payments and would be

paid through the plan—we would conclude that the statements were

10 merely informational. But, by separating the fees from the other amounts to

be paid through the plan, and instead listing the fees as part of regular

monthly payments, we are left with only one reasonable interpretation:

unlike the asserted prepetition arrears, Rocket sought immediate payment

of the attorney’s fees, to be paid with ongoing postpetition mortgage

payments.

Debtors ordinarily expect negative consequences resulting from a

failure to make ongoing mortgage payments, and here, Debtors reasonably

expected that payment of the total monthly amount was necessary to keep

their mortgage current. Rocket’s inclusion of the fees in the total monthly

amount due thus operated in a manner to pressure or coerce payment.

Rocket argues that because it had a right to charge fees under the

deed of trust, and it provided the Fee Notice under Rule 3002.1(c), it did

not violate the stay by including the fees on Debtors’ statements. Rocket

asserts that Debtors had a procedural avenue to contest the fees under Rule

3002.1(e) but waited several months, and therefore, the court did not err by

denying sanctions.

We agree that Rocket had a right, and an obligation, to file the Fee

Notice, but that does not insulate it from stay violations caused by

subsequent attempts to collect the fees directly from Debtors. Rule 3002.1(c)

requires a lender to provide notice of fees, expenses, or charges incurred in

connection with its clam which are recoverable against a debtor or a

11 debtor’s property. 3 Official Form 410S2 states that a Rule 3002.1(c) notice is

filed as a supplement to the creditor’s proof of claim, and section 4.5 of

Nevada’s form chapter 13 plan specifically provides for payment through

the plan of fees asserted under Rule 3002.1(c).

Any informational purpose served by including the fees on Debtors’

monthly statements was undercut by the official procedure for providing

notice of the fees. Once Rocket filed the Fee Notice, Debtors had to either

dispute the fees under Rule 3002.1(e) or pay the claim through their plan.

In other words, Debtors had to address the asserted fees as part of the

bankruptcy process. 4 Moreover, because Rocket separated the attorney’s

fees from other prepetition claims, the “informational purpose” of the

billing statements appears to have been that the fees were different from

other prepetition claims.

In holding that the statements violated the automatic stay, we stress

that the context of creditor communications is relevant. Rocket could have

easily averted the violation by listing the fees with prepetition arrears in

the section which indicated those amounts were not part of ongoing

payments. It is incumbent upon creditors who send postpetition

3 The notice is mandatory. Rule 3002.1(i) allows the court to sanction a creditor for failure to provide notice of fees, expenses, and charges under Rule 3002.1(c) by precluding the creditor from later presenting evidence omitted from the required notice, and by awarding appropriate relief, including reasonable expenses and attorney’s fees. 4 Debtors filed an amended plan in which they listed the $950 claim and

proposed to stay payment pending their objection. 12 communications to clarify they are not attempting to collect prepetition

debts. Here, Rocket created a situation where the standard disclaimer was

clearly contradicted by a demand for payment. Though we expect damages

in this case to be relatively minimal, we conclude that the statements

constituted a violation of § 362(a)(6).

CONCLUSION

Based on the foregoing, we REVERSE and REMAND the bankruptcy

court’s order denying Debtors’ motion for contempt.

13