In re: Stephen Whitman-Nieves; Josephine M. Barnes Adams v. Puerto Rico Federal Credit Union

• Court: United States Bankruptcy Court, D. Puerto Rico
• Decided: October 3, 2014
• Docket: 12-00392
• Status: Unknown

Opinion

1 IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF PUERTO RICO 2

3 IN RE: CASE NO. 12-00519 (ESL)

4 STEPHEN WHITMAN-NIEVES; CHAPTER 7 JOSEPHINE M. BARNES ADAMS 5

6 Debtors STEPHEN WHITMAN-NIEVES; ADV. PROC. NO. 12-00392 (ESL) 7 JOSEPHINE M. BARNES ADAMS

8 Plaintiffs

9 vs. 10 PUERTO RICO FEDERAL CREDIT 11 UNION

12 Defendant

13 NORMA ADAMS-IRIZARRY 14 Party in Interest 15 ROBERTO ROMÁN VALENTIN 16

17 Chapter 7 Trustee

18 OPINION AND ORDER 19 This case is before the court upon the Motion for Summary Judgment (Docket No. 50) 20 filed by defendant Puerto Rico Federal Credit Union (“PRFCU”) arguing that the automatic stay 21 and the discharge injunction provided for in 11 U.S.C. §§ 362 and 524 do not apply to non- 22 debtor third parties. Also before the court is the Response in Opposition to Defendant’s Motion 23 for Summary Judgment (the “Opposition”, Docket No. 51) filed by the Plaintiffs contending that 24 the protection of the automatic stay and discharge injunction is applicable to a non-debtor third 25 party, namely the guarantor and party in interest, Ms. Norma Adams-Irizarry (the “Guarantor” 26 or “Ms. Adams”), who is the mother of co-debtor Josephine M. Barnes-Adams (“Barnes- 27 1 Adams”). For the reasons stated herein the Motion for Summary Judgment (Docket No. 50) is 2 granted in part and denied in part. 3 Jurisdiction 4 The court has jurisdiction pursuant to 28 U.S.C. §§ 157(a) and 1334(b). This is a core 5 proceeding pursuant to 28 U.S.C. § 157(b)(2)(F). Fed. Rs. Bankr. P. 7001(2) and 7001(9) 6 provide that proceedings to determine the validity, priority or extent of a lien or other interest in 7 property and to obtain a declaratory judgment relating to such validity are adversary 8 proceedings. 9 Material Uncontested Facts 10 From the totality of the record, undisputed documents, stipulations and admissions made 11 by the parties in the instant case, the courts finds uncontested the following material facts under 12 Fed. R. Civ. P. 56: 13 1. On July 8, 2011, co-debtor Barnes-Adams renewed a loan with the PRFCU. The 14 loan is evidenced through Promissory Note No. 131248 signed by Barnes-Adams in the amount 15 of $10,600. See Docket Nos. 1, p. 22, 45, p. 2, ¶ 1, 50, p. 3, ¶ 3, and 51, p. 5. Her membership 16 number with the PRFCU is 26983. See Docket No. 1, pp. 22 and 24. 17 2. On July 8, 2011, co-debtor Barnes-Adams signed a Pignoration and 18 Authorization Document. See Docket Nos. 1, p. 29, 45, p. 2, ¶ 2, 50, p. 3, ¶ 4, and 51, p. 5. The 19 document states as follows:

20 In consideration of all and any loan granted, that may be granted, or continue to be granted up to now and to the credit financing facilities granted during the past, 21 that may granted [sic] or continue to be granted in the future by the [PRFCU] to 22 the undersigned, and/or from now on jointly denominated “the Debtors”[], by virtue of the present document, the undersigned pledges, assigns, leaves as surety, 23 gives, and transfers to the [PRFCU], in order to guarantee and assure payment of all and any other debts and obligations of the debtors, irrespectively of the kind 24 and nature of such debts and obligations, that are due or are currently required, or 25 that will become past due and are required in the future, plus interests, late payment charges, surcharges, costs, expenses, disbursements, and attorney’s fees 26 in case of nonpayemt authorize the [PRFCU] to withdraw and collect all the money deposited in the undersigned credit account, as well as the interest due, 27 proceed and payable now and prospectively in relation to the money deposited 1 …

2 [x] Loan type L10.2 member # 26983 in the amount of $10,600.00 for 48 months 3 Biweekly, TOTALLY GUARANTEED by the following share certificate(s): 70005784 I9.1 female member #24613. 4 It is construed that the undersigned may be able to withdraw from the shares 5 account pledged by those amounts exceeding the due balance of the obligations 6 plus interests and surcharges.

7 Docket No. 1, p. 24. 8 On that date, the Pignoration and Authorization Document was only signed by Barnes-Adams 9 (PRFCU member 26983) and an officer from PRFCU. 10 3. On September 28, 2011, PRFCU “through its representative Eric Sánchez, 11 Service and Credit Supervisor, subscribed … a letter where certifies that Plaintiffs[’] loan was 12 guaranteed by [the Guarantor’] savings certificate” (Docket No. 45, p. 3, ¶ 15). The letter was 13 subscribed by PRFCU’s Service Supervisor, addressed to the Guarantor referencing account 14 number 24613 and states as follows:

15 According to your request, we certify that at the present you have a savings certificate I9.1 in the amount of $10,600.00 in our institute since 07/08/2011. 16 Such [certificate] guarantees the personal loan L10.2 in the name of Josephine 17 Barnes Adams, member number 26983.

18 Docket No. 1, pp. 18-19. 19 4. On January 29, 2012, the Plaintiffs filed a Chapter 7 Bankruptcy Petition along 20 with corresponding schedules (Lead Case Docket Nos. 1-3). On Schedule D they included 21 PRFCU as a partially secured creditor with the following explanation:

22 07/2011 Personal loan that is partially secured with stocks held and also as collateral a certificate of Deposit of the account codebtor, Ms. Adams (mother of 23 Mrs. Barnes). Debt is to be re-affirmed by debtor. 24 Lead Case Docket No. 1, p. 25. 25 26 5. PRFCU was notified of the bankruptcy filing by the Plaintiffs. See Docket Nos. 27 45, p. 2, ¶ 4, 50, p. 3, ¶ 7, and 51, p. 5. 1 6. On February 24, 2012, PRFCU “through its representative Mr. Angel Calderín, 2 Collection Supervisor, subscribed …. a letter where [it] certifies that Plaintiffs[’] loan was 3 guaranteed by [the Guarantor’s] savings certificate” (Docket No. 45, p. 3, ¶ 16). The letter was 4 subscribed by PRFCU’s Collection Supervisor, addressed to co-debtor Barnes-Adams 5 referencing account number 26983 and states as follows:

6 According to your request, we certify that at the present you have an active loan with our institution. Said loan is guaranteed with a certificate in the name of 7 Norma Adams Irizarry and described according as it appears in form 8 19.70005784:

9 Type of loan: L10.2 Amount financed: $10,600.00 10 Current balance: $9,202.55 11 Monthly payment: $248.88 Docket No. 1, pp. 20-21. 12 7. On February 2012, PRFCU “learned that Debtors’ account was not secured by 13 Party in Interest, Mrs. Norma Adams certificate of deposit” (Docket No. 45, p. 3, ¶ 17). 14 8. On March 2, 2012, Ms. Adams, to wit, the Guarantor, signed the Pignoration 15 and Authorization Document securing Barnes-Adams’ pre-petition loan with PRFCU. See 16 Docket No. 45, p. 2, ¶ 6, 50, p. 4, ¶ 8. 17 9. On May 9, 2012, the court entered the Discharge of Joint Debtors (Lead Case 18 Docket No. 19), which was notified to PRFCU. Also see Docket Nos. 45, p. 2, ¶ 7, and 50, p. 5, 19 ¶ 21. 20 10. On July 2012, PRFCU sent a payment booklet addressed to co-debtor Barnes- 21 Adams to the following address: Cond. Plaza Antillana Edificio 22 Apt. 2201 San Juan, PR 22 00918. See Docket No. 45, p. 2, ¶ 8, and 50, p. 4, ¶ 10. The address belongs to the Guarantor, 23 Ms. Adams. See Docket Nos. 1, p. 5, ¶ 6, 50, p. 4, ¶ 10, and 51, p. 5. 24 11. During the pendency of the Lead Case, PRFCU was represented by counsel 25 (Docket No. 50. p. 4, ¶ 11), who received notice of all events in the bankruptcy proceeding. See 26 Docket No. 45, p. 2, ¶ 9. 27 1 Procedural Background 2 On October 25, 2012, the Plaintiffs filed the instant Complaint (Docket No. 1) that 3 initiated the instant adversary proceeding alleging that: (a) on March 2, 2012, the Guarantor 4 visited the offices of PRFCU to request a copy of the documents signed at the date of the 5 Plaintiffs’ loan and that because she was told that it was not signed and she was given a 6 document for her signature; (b) during the months of January and February of 2012, PRFCU 7 collected the loan monthly payments on the loan; (c) PRFCU received notice of the discharge 8 order in the lead bankruptcy case and had full knowledge of the automatic stay provisions and 9 the discharge injunction; (d) pursuant to 11 U.S.C. § 524, PRFCU was required to stop any and 10 all collection of monies against the Plaintiffs and their property; (e) on July of 2012, the 11 Plaintiffs received, through a mail sent to the Guarantor’s address, a payment notebook 12 addressed to co-debtor Barnes-Adams requesting a payment of $1,259.59 on or before July 8, 13 2012 and subsequent monthly payments in the amount of $248.88 until July 8, 2013; (f) the 14 Plaintiffs have not been able to enjoy the protections afforded by the automatic stay and the 15 discharge injunction; (g) PRCFU’s actions have caused the Plaintiffs severe embarrassment, 16 harassment, emotional distress and anxiety episodes that have jeopardized their marriage due to 17 stressful situations and the relationship between co-debtor Barnes-Adams and her mother, the 18 Guarantor; and (h) PRCFU has limited the Guarantor’s access to her property by retaining the 19 certificate of deposit as collateral to the Plaintiff’s discharged loan because the Guarantor signed 20 the Pignoration and Authorization Document on March 2, 2012. The Plaintiffs claim damages, 21 costs and attorney’s fees under 11 U.S.C. §§ 105, 362 and 524. 22 On November 14, 2013, the parties filed a Joint Pretrial Report (Docket No. 45) with 23 stipulations of fact. 24 On December 30, 2013, PRFCU filed the Motion for Summary Judgment (Docket No. 25 50). In regards to the automatic stay, PRFCU alleges that: (a) although Section 362 of the 26 Bankruptcy Code precludes all proceedings against a debtor immediately following the filing of 27 a bankruptcy petition, the protection is for the sole benefit and protection of the debtor and of 1 property of the estate; (b) “property of the estate” as defined in Section 541 of the Bankruptcy 2 Code does not include property belonging to a third party; (c) Section 362(c)(3)(B) is the only 3 section in which a protection for a party in interest is provided and requires that such party 4 requires so by a motion to that effect, which the Guarantor did not request; (d) the Guarantor’s 5 certificate of deposit was intended to serve as collateral for the loan renewed by the Plaintiff s 6 and cannot be considered property of the estate because it belongs to non-debtor Ms. Adams; (e) 7 the automatic stay can only be extended to guarantors of a loan in Chapters 12 or 13, not 8 Chapter 7 like the instant case; (f) the mere act of requesting non-debtor Guarantor to sign a 9 Pignoration and Authorization Document, which she voluntary did on her visit to PRFCU’s 10 office, cannot be construed as a collection effort that violates the automatic stay. In regards to 11 the discharge violation, the Plaintiffs contend that: (a) Section 524 of the Bankruptcy Code is 12 inapplicable to non-debtor parties; (b) the discharge injunction should not preclude PRFCU 13 from their ability to recover a debt from a non-debtor; (c) Ms. Adams is a guarantor who 14 voluntarily pledged her personal certificate of deposit in guarantee of a loan obtained by the 15 Plaintiffs, which makes the discharge injunction inapplicable to her, meaning that neither her, 16 nor her certificate of deposit, are protected by provisions of 11 U.S.C. § 524; and (d) PRFCU 17 cannot be held liable for violating a discharge injunction because it does not apply to third 18 parties and/or their respective personal property. 19 On January 13, 2014, the Plaintiffs filed their Response to PRFCU (Docket No. 51). In 20 regards to the violation of the automatic stay, the Plaintiffs argue that: (a) the Guarantor is a 21 party in interest; (b) a party in interest like the Guarantor has the right to be heard under 11 22 U.S.C. § 1109; (c) under 11 U.S.C. § 105, no provision of the Bankruptcy Code for the raising 23 of an issue by party in interest shall be construed to preclude the court from, sua sponte, taking 24 any action or making any determination necessary or appropriate to enforce or implement court 25 orders or rules, or to prevent an abuse of process; (d) the Guarantor is protected by the 26 automatic stay under 11 U.S.C. § 362(k)(1) and has standing to be heard and recover actual and 27 punitive damages under 11 U.S.C. §§ 1109(b) and 105. In regards to the alleged discharge 1 injunction violation, the Plaintiffs contend that Section 524(a)(2) of the Bankruptcy Code “puts 2 into effect a broad injunction to cover not only legal proceedings, but also any other acts of 3 creditors whether directed at the debtor or at anyone else” (Docket No. 51, p. 9). They conclude 4 that the Guarantor “is covered upon the protections of the discharge injunction as of the acts 5 perpetrated by [PRFCU]’s [sic] to collect a discharge [sic] debt”. Id. at p. 9. 6 On January 29, PRFCU filed a an Answer to Plaintiff’s [] Response in Opposition to 7 Defendant’s Motion for Summary Judgment (Docket No. 52) arguing that 11 U.S.C. § 1109 is 8 applicable only to Chapter 11 cases, not Chapter 7 cases like the instant one and reiterating that 9 the discharge of a Chapter 7 does not eradicate liability to third parties. 10 Applicable Law & Analysis 11 (A) Standard for Summary Judgment 12 Fed. R. Civ. P. 56, applicable in bankruptcy proceedings through Fed. R. Bankr. P. 13 7056, provides that summary judgment should be entered “if the pleadings, depositions, 14 answers to interrogatories, and admissions on file, together with the affidavits, if any, show that 15 there is no genuine issue as to any material fact and that the moving party is entitled to a 16 judgment as a matter of law.” Also see In re Colarusso, 382 F.3d 51, 58 (1st Cir. 2004), citing 17 Celotex Corp. v. Catrett, 477 U.S. 317, 322-323 (1986). “The summary-judgment procedure 18 authorized by Rule 56 is a method for promptly disposing of actions in which there is no 19 genuine issue as to any material fact or in which only a question of law is involved.” 10A 20 Wright, Miller & Krane, Federal Practice and Procedure: Civil 3d § 2712. “Rule 56 provides 21 the means by which a party may pierce the allegations in the pleadings and obtain relief by 22 introducing outside evidence showing that there are no fact issues that need to be tried.” Id. 23 Summary judgment is not a substitute for a trial of disputed facts; the court may only determine 24 whether there are issues to be tried, and it is improper if the existence of a material fact is 25 uncertain. Id. The moving party must “show that there is no genuine issue as to any material 26 fact and that the moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). 27 1 For there to be a “genuine” issue, facts which are supported by substantial evidence 2 must be in dispute, thereby requiring deference to the finder of fact. Furthermore, the disputed 3 facts must be “material” or determinative of the outcome of the litigation. Hahn v. Sargent, 523 4 F.2d 461, 464 (1st Cir. 1975), cert. denied, 425 U.S. 904 (1976). When considering a petition 5 for summary judgment, the court must view the evidence in the light most favorable to the 6 nonmoving party. Poller v. Columbia Broadcasting Systems, Inc., 368 U.S. 464, 473 (1962); 7 Daury v. Smith, 842 F.2d 9, 11 (1st Cir. 1988). 8 The moving party invariably bears both the initial as well as the ultimate burden in 9 demonstrating its legal entitlement to summary judgment. Adickes v. Kress & Co., 398 U.S. 10 144, 157 (1970). Also see López v. Corporación Azucarera de Puerto Rico, 938 F.2d 1510, 11 1516 (1st Cir. 1991). It is essential that the moving party explain its reasons for concluding that 12 the record does not contain any genuine issue of material fact in addition to making a showing 13 of support for those claims for which it bears the burden of trial. Bias v. Advantage 14 International, Inc., 905 F.2d 1558, 1560-1561 (D.C. Cir. 1990), cert. denied, 498 U.S. 958 15 (1990). 16 The moving party cannot prevail if any essential element of its claim or defense requires 17 trial. López, 938 F.2d at 1516. In addition, the moving party is required to demonstrate that 18 there is an absence of evidence supporting the nonmoving party’s case. Celotex, 477 U.S. at 19 325. Also see Prokey v. Watkins, 942 F.2d 67, 72 (1st Cir. 1991); Daury, 842 F.2d at 11. In its 20 opposition, the nonmoving party must show genuine issues of material facts precluding 21 summary judgment; the existence of some factual dispute does not defeat summary judgment. 22 Kennedy v. Josepthal & Co., Inc., 814 F.2d 798, 804 (1st Cir. 1987). Also see Kauffman v. 23 Puerto Rico Telephone Co., 841 F.2d 1169, 1172 (1st Cir. 1988). A party may not rely upon 24 bare allegations to create a factual dispute but is required to point to specific facts contained in 25 affidavits, depositions and other supporting documents which, if established at trial, could lead 26 to a finding for the nonmoving party. Over the Road Drivers, Inc. v. Transport Insurance Co., 27 637 F.2d 816, 818 (1st Cir. 1980). 1 The moving party has the burden to establish that it is entitled to summary judgment; no 2 defense is required where an insufficient showing is made. López, 938 F.2d at 1517. The 3 nonmoving party need only oppose a summary judgment motion once the moving party has met 4 its burden. Adickes, 398 U.S. at 159. 5 Fed. R. Civ. P. 56 was extensively rewritten in 2010. See 10B Wright, Miller & Krane 6 Federal Practice & Procedure: Civil 3d § 2737. Amended subsection (a) of Fed. R. Civ. P. 56 7 now includes express authority for judgment on less than the entire case denominating it in its 8 subsection title as “Partial Summary Judgment”, which allows summary judgment “upon all or 9 any part” of a claim or defense by any party. See Surita Acosta v. Reparto Saman Inc. (In re 10 Acosta), 464 B.R. 86, 94 (Bankr. D.P.R. 2011). 11 The uncontested facts in the instant case stem from undisputed documents, stipulations 12 and admissions made by the parties. 13 (B) Violation to the Automatic Stay 14 The Plaintiffs allege that PRFCU violated the automatic stay: (a) when it collected from 15 the Plaintiffs post-petition loan payments for the months of January and February of 2012; and 16 (b) when it obtained the Guarantor’s signature on the Pignoration and Authorization Document 17 perfecting PRFCU’s security interest post-petition, which is null and void under 11 U.S.C. § 18 362. See the Complaint, Docket No. 1, p. 8, ¶ 10, and p. 10, ¶ 17. PRFCU’s Motion for 19 Summary Judgment seeks to only dismiss the allegations regarding the Guarantor’s post-petition 20 signature on the Pignoration and Authorization Document arguing that the automatic stay does 21 not apply to the Guarantor, Ms. Adams, and therefore it did not violate the same. The Plaintiffs 22 reply that the Guarantor is a party in interest under 11 U.S.C. § 1109, which entitles her to a 23 right to be heard and to claim and receive damages under 11 U.S.C. § 362(k)(1). See Docket 24 No. 51, p. 8. 25 The court denies the Plaintiffs’ argument under 11 U.S.C. § 1109, for it is only 26 applicable to Chapter 11 cases, not Chapter 7 like the instant one. 27 1 “Two of the fundamental underpinnings of the [Bankruptcy] Code are the automatic stay 2 and the discharge injunction. The automatic stay has broad application and prevents creditors 3 from seeking to collect a pre-petition debt from debtors or assets of the [bankruptcy] estate. The 4 discharge injunction safeguards the ‘fresh start’ of debtors by permanently enjoining creditors 5 from collecting discharged debts.” Alley v. Saxon Mortg. Servs. (In re Alley), 2014 Bankr. 6 LEXIS 2843 at *5, 2014 WL 2987656 at *2 (Bankr. D. Me. 2014) (citations omitted). 7 “The automatic stay imposes on non-debtor parties an affirmative duty of compliance.” 8 Otero López v. Dep’t of Treasury of P.R. (In re Otero López), 492 B.R. 595, 607 (Bankr. D.P.R. 9 2013), citing Sternberg v. Johnston, 595 F.3d 937, 943 (9th Cir. 2010). To ensure compliance, 10 Section 362(k) of the Bankruptcy Code provides the necessary means to redress violations of 11 the stay: “an individual injured by a willful violation of a stay provided by this section shall 12 recover actual damages, including costs and attorneys’ fees, and in appropriate circumstances, 13 may recover punitive damages”. 11 U.S.C. § 362(k)(1). “A debtor seeking damages under this 14 section bears the burden of proving by a preponderance of the evidence the following three 15 elements: (1) that a violation of the automatic stay occurred; (2) that the violation was willfully 16 committed; and (3) that the debtor suffered damages as a result of the violation.” Slabicki v. 17 Gleason (In re Slabicki), 466 B.R. 572, 577-578 (B.A.P. 1st Cir. 2012), citing In re Panek, 402 18 B.R. 71, 76 (Bankr. D. Mass. 2009). “A willful violation does not require a specific intent to 19 violate the automatic stay.” In re Otero López, 492 B.R. at 607. “The standard for a willful 20 violation of the automatic stay ... is met if there is knowledge of the stay and the defendant 21 intended the actions which constituted the violation.” Fleet Mortgage Group v. Kaneb, 196 22 F.3d 265, 269 (1st Cir. 1999). “The debtor has the burden of providing the creditor with actual 23 notice. Once the creditor receives actual notice, the burden shifts to the creditor to prevent 24 violations of the automatic stay.” Id. at 269. “In cases where the creditor received actual notice 25 of the automatic stay, courts must presume that the violation was deliberate.” Id. at 269. 26 The Guarantor is not a debtor in the instant case. Co-debtor Barnes-Adams’ filial 27 relationship to Ms. Adams does not make her a debtor nor transfers to her the protections 1 afforded in the Bankruptcy Code applicable to Chapter 7 cases. Generally, the automatic stay 2 “does not… protect nonparties, such as, for example, guarantors of debtor’s debt”. Hon. Nancy 3 C. Dreher, Hon. Joan N. Feeney and Michael J. Stepan, Esq. Bankruptcy Law Manual § 7:4 4 Vol. 1 (5th ed. 2013-1), pp. 1488-1489. Also see Naval Stores Suppliers, Inc. v. LGS 5 Consulting, LLC, 2010 U.S. Dist. LEXIS 120889 at **13-14, fn. 7, 2010 WL 4608749 (Bankr. 6 D.R.I. 2010) (“Section 362 [of the Bankruptcy Code] does not apply automatically to actions 7 against debtor’s principals, partners, officers, employees, guarantors, or sureties”); Rhode Island 8 Hosp. Trust Nat’l Bank v. Dube, 136 F.R.D. 37, 39 (D.R.I. 1990); Winters v. George Mason 9 Bank, 94 F.3d 130, 133 (4th Cir. 1996) (“It is well settled that the automatic stay does not apply 10 to non-bankrupt codebtors, nor does the automatic stay prevent actions against guarantors of 11 loans”); In re Kevin W. White, 415 B.R. 696, 698 (Bankr. N.D. Ill. 2009) (“Generally, the 12 automatic stay protects the bankruptcy debtor and does not bar suits against third parties, such 13 as nondebtor entities, even when wholly owned by the debtor, or the debtor’s insurers, 14 guarantors, and sureties”). 15 In Credit Alliance Corp. v. Williams, 851 F.2d 119, 121 (4th Cir. 1988), the U.S. Court 16 of Appeals for the Fourth Circuit explained that:

17 Nothing in § 362 suggests that Congress intended that provision to strip from the creditors of a bankrupt debtor the protection they sought and received when they 18 required a third party to guaranty the debt. Congress knew how to extend the 19 automatic stay to non-bankrupt parties when it intended to do so. Chapter 13, for example, contains a narrowly drawn provision to stay proceedings against a 20 limited category of individual cosigners of consumer debts. See 11 U.S.C. § 1301(a). No such protection is provided to the guarantors of Chapter 11 21 bankrupts[1] by § 362(a). 22 The U.S. Court of Appeals for the First Circuit (the “First Circuit”) has ruled that the 23 automatic stay provisions of Section 362 “apply only to the bankrupt debtor” and “[c]ourts that 24 have come to a different conclusion do not appear to have done so on the basis that § 362 25 requires such a result, but rather that additional considerations warrant a stay as to all 26 defendants.” Austin v. Unarco Industries, Inc., 705 F.2d 1, 5 (1st Cir. 1983). Courts that have 27 1 allowed a narrow exception to the general rule that the automatic stay is not available to third 2 parties take into consideration the following reasoning: In order for relief for such non-bankrupt defendants to be available under (a)(1), 3 there must be “unusual circumstances”. … This “unusual situation”, it would seem, arises when there is such identity between the debtor and the third-party 4 defendant that the debtor may be said to be the real party defendant and that a 5 judgment against the third-party defendant will in effect be a judgment or finding against the debtor. 6 A.H. Robins Co. v. Piccinin, 788 F.2d 994, 999 (4th Cir. 1985), cert. denied, 479 7 U.S. 876 (1986). 8 In In re Bora Bora, Inc., 424 B.R. 17 (Bankr. D.P.R. 2010), the debtor in possession 9 filed a motion requesting that the protection of the automatic stay under 11 U.S.C. § 362(a)(1) 10 be extended to its non-debtor president and guarantor, and a motion requesting that the court 11 enjoin a creditor from continuing a collection action against the president and guarantor, based 12 on his personal guaranty contract with the creditor. The court first determined that “Section 13 362(a)(1) provides for an automatic stay of any judicial proceeding against the debtor, thereby 14 protecting the debtor and not prohibiting actions against non debtor third parties or co- 15 defendants.” Id. at 23. Notwithstanding, “the power of the bankruptcy courts to enjoin certain 16 actions not subject to the automatic stay, such as an action against non debtor parties, has been 17 recognized, when such action is interfering improperly with the purposes of the bankruptcy law 18 or the debtor’s reorganization efforts”. Id. at 23, citing A.H. Robins Co. v. Piccinin, supra. 19 Hence, courts may issue “preliminary injunction extending the section 362(a) stay protection to 20 non-debtors … analyz[ing] both whether the extension of the stay under Section 362(a) is 21 proper and whether the issuance of an injunction under [Section] 105(a) is proper, which means 22 that in order for the injunction to be issued the requirements of both statutes must be satisfied.” 23 In re Bora Bora, Inc., 424 B.R. at 24. Hence, courts that have extended the automatic stay to 24 non debtor third parties when “unusual circumstances” exist, “such as when (i) the non-debtor 25 and debtor enjoy such an identity of interests that the suit of the non-debtor is essentially a suit 26 against the debtor; or (ii) the third-party action will have an adverse impact on the debtor’s 27 1 ability to accomplish reorganization.” Id. at 27, citing In re Philadelphia Newspapers, LLC, 407 2 B.R. 606, 616 (E.D. Pa. 2009). 3 In the instant case, the Plaintiffs have not alleged or demonstrated any such unusual 4 situation or circumstance. Nor did they request the automatic stay to be extended to the 5 Guarantor prior to alleging that she is entitled to its protection. Hence, the general rule that a 6 non-debtor guarantor is not entitled to the protection of the automatic stay prevails. The 7 Plaintiffs therefore cannot seek to void the Pignoration and Authorization Document under 11 8 U.S.C. § 362(a) upon the Guarantor’s post-petition signature on it nor claim damages under 11 9 U.S.C. § 362(k). 10 (C) Violation to the Discharge Injunction 11 The Plaintiffs were granted discharge on May 9, 2012 (Lead Case Docket No. 19). They 12 allege that PRFCU violated the discharge injunction when on July of 2012 it sent a payment 13 booklet addressed to co-debtor Barnes-Adams to the Guarantor’s address requesting payments 14 of $1,259.58 and subsequent monthly payments in the amount of $248.88. See the Complaint, 15 Docket No. 1, p. 9, ¶ 15. PRFCU contends that the Guarantor is not a debtor in this case and 16 hence the debt was not discharged in regards to her. See Docket No. 52, p. 4, ¶ 15. The 17 Plaintiffs reply that the discharge injunction afforded in Section 524(a)(2) of the Bankruptcy 18 Code “puts into effect a broad injunction to cover not only legal proceedings, but also any other 19 acts of creditors whether directed at the debtor or at anyone else” (Docket No. 51, p. 9, 20 emphasis in the original). 21 “[U]nder § 524(a)(2), a discharge operates as an injunction against the enforcement of 22 any discharged debt as a personal liability of the debtor, including the continuation of legal 23 process, offsets, or other collection efforts against the debtor, even if the debtor waived the right 24 to discharge with respect to the debt.” Hon. Nancy C. Dreher, Hon. Joan N. Feeney and 25 Michael J. Stepan, Esq. Bankruptcy Law Manual § 8:2 Vol. 2 (5th ed. 2013-1), pp. 7-9. In other 26 words, “a discharge in bankruptcy relieves a debtor from all pre-petition debt, and § 524(a) 27 1 permanently enjoins creditor actions to collect discharged debts”. Bessette v. Avco Fin. 2 Services, Inc., 230 F.3d at 444. 3 In Delgado Laboy v. FirstBank P.R. (In re Delgado Laboy), 2010 Bankr. Lexis 345 at 4 **15-18, 2010 WL 427780 at **5-6 (Bankr. D.P.R. 2010), this court summarized the effect of 5 the discharge injunction in Section 524(a)(2) of the Bankruptcy Code as follows:

6 The effect of a bankruptcy discharge is that it “operates as an injunction against the commencement or continuation of an action, the employment of process, or an 7 act to collect, recover or offset any such debt as a personal liability of the debtor, 8 whether or not discharge of such debt is waived.” 11 U.S.C. § 524(a)(2). The discharge injunction is the mechanism which allows the debtor to commence 9 debt-free his or her fresh start. See In re Latanowich, 207 B.R. 326, 334 (Bankr. D. Mass. 1997) (“The purpose of the permanent injunction set forth at § 524(a)(2) 10 and reiterated in the discharge order is to effectuate one of the primary purposes 11 of the Bankruptcy Code: to afford the debtor a financial fresh start.”); Green v. Welsh, 956 F.2d. 30, 33 (2nd Cir. 1992); Baker v. Sommerville Mun. Fed. Credit 12 Union (In re Baker), 2006 Bankr. Lexis 3183 (Bankr. D. Mass. 2006). The discharge injunction is like a permanent extension of the automatic stay under 11 13 U.S.C. § 362(a) of the Bankruptcy Code and thus, includes all types of collection activity such as; letters, phone calls, threats of criminal proceedings or other 14 adverse actions brought about with the purpose of debt repayment. See Alan N. 15 Resnick & Henry J. Sommer, 4 Collier on Bankruptcy ¶ 524.02[2] (15th ed. 2009); Ung v. Boni (In re Boni), 240 B.R. 381, 384 n.5 (B.A.P. 9th Cir. 1999). 16 Moreover, “[c]reditors are obligated to maintain procedures to ensure that they do not violate section 524, and may be held liable for damages and attorney’s fees if 17 they do not.” Alan N. Resnick & Henry J. Sommer, 4 Collier on Bankruptcy ¶ 524.02[b] (15th ed. 2009). See In re Roush, 88 B.R. 163, 165 (Bankr. S.D. Ohio 18 1988); Faust v. Texaco (In re Faust), 270 B.R. 310, 317 (Bankr. M.D. Ga. 1998); 19 In re Nassoko, 405 B.R. 515, 521 (Bankr. S.D.N.Y. 2009). “Although § 524(a), which establishes the discharge injunction, does not include a specific provision 20 setting out available remedies for violations of the discharge injunction, bankruptcy courts invoke § 105(a), which grants bankruptcy court’s broad 21 equitable powers, to enforce the discharge injunction, using the mechanism of civil contempt action.” Parker v. Boston Univ. (In re Parker), 334 B.R. 529, 537- 22 538 (Bankr. D. Mass. 2005). See U.S. v. Rivera Torres (In re Rivera Torres), 309 23 B.R. 643,647 (B.A.P. 1st Cir. 2004); In re Pratt, 324 B.R. [1, 5 (Bankr. D. Me. 2005)]; Bessette v. Avco Fin. Servs., Inc., 230 F. 3d 439, 445 (1st Cir. 2000), cert. 24 denied, 532 U.S. 1048, 121 S. Ct. 2016, 149 L. Ed. 2d 1018 (2001).

25 The standard for a willful violation of the discharge injunction under § 524(a)(2) is met if the defendant had knowledge of the discharge injunction and the same 26 intended the actions which constituted the violation. See Fleet Mortg. Group, Inc. 27 v. Kaneb, 196 F. 3d 265, 268 (1st Cir. 1999); In re Pratt, 462 F. 3d at 21 (1st Cir. 2006); Alan N. Resnick & Henry J. Sommer, 4 Collier on Bankruptcy ¶ 524.02[2][c] (15th ed. 2009). The defendant must have actual or constructive 1 knowledge of the discharged debt for the knowledge requirement to be satisfied. See Torres v. Chase Bank U.S.A., N.A. (In re Torres), 367 B.R. 478, 490 (Bankr. 2 S.D.N.Y. 2007). Civil contempt must be proven by clear and convincing 3 evidence. Ellis v. Dunn (In re Dunn), 324 B.R. 175, 179 (D. Mass. 2005). 4 Also see Collins v. Wealthbridge Mortg. Corp. (In re Collins), 474 B.R. 317, 320 (Bankr. D. 5 Me. 2012) (“A creditor violates the discharge injunction when it: (1) commits an act that 6 violates the discharge injunction with the general intent to commit the act and (2) acts with 7 knowledge of the discharge order.”) The court will apply the two-prong test established by the 8 First Circuit in Fleet Mortg. Group, Inc. v. Kaneb, 196 F. 3d at 268, and In re Pratt, 462 F. 3d at 9 21, to determine if there was a willful violation to the discharge injunction in the instant case. 10 “To be contumacious, the creditor’s action must operate to coerce or harass the debtor 11 improperly.” In re Collins, 474 B.R. at 320. In the First Circuit, “courts are to use an objective 12 test in determining whether a creditor’s actions were improperly coercive under the 13 circumstances.” Lumb v. Cimenian (In re Lumb), 401 B.R. 1, 6 (B.A.P. 1st Cir. 2009). In Pratt, 14 the First Circuit defined the “objectively coercive” standard explaining that “even legitimate 15 state-law rights exercised in a coercive manner might impinge upon the important federal 16 interest served by the discharge injunction, which is to ensure that debtors receive a ‘fresh start’ 17 and are not unfairly coerced into repaying discharged prepetition debts.” 462 F.3d at 19. 18 “While there appears to be no parallel First Circuit definition for harassment, Congress clearly 19 intended that any behavior engaged in by a creditor that pressures a debtor to repay a discharged 20 debt in any way is prohibited by § 524”. In re Collins, 474 B.R. at 320, citing Senate Report 21 No. 95-989 (“[11 U.S.C. § 524(a)] has been expanded ... to cover any act to collect, such as 22 dunning by telephone or letter, or indirectly through friends, relatives, or employers, 23 harassment, threats of repossession, and the like. The change is ... intended to insure that once a 24 debt is discharged, the debtor will not be pressured in any way to repay it.”). In each case, the 25 conduct of the imputed discharge violation must be assessed “in the context of its particular 26 facts.” In re Schlichtmann, 375 B.R. 41, 95 (Bankr. D. Mass 2007), citing Pratt, 462 F.3d at 19. 27 1 “Although Section 524(a) provides that a debtor is no longer personally liable to a 2 creditor, Section 524(e) of the Code provides that the discharge ‘does not affect the liability of 3 any other entity on, or the property of any other entity for, such debt.’” In re Morris, 430 B.R. 4 824, 828 (Bankr. W.D. Tenn. 2010), quoting 11 U.S.C. § 524(e). In other words, Section 5 524(e) “does not eradicate liability of third parties…”. Simpson v. Rodgers (In re Rodgers), 6 266 B.R. 834, 836 (Bankr. W.D. Tenn. 2001). In Green v. Welsh, 956 F.2d 30, 33 (2nd Cir. 7 1992), the U.S. Court of Appeals for the Second Circuit stated that the language in Section 8 524(e) “reveals that Congress sought to free the debtor of his personal obligations while 9 ensuring that no one else reaps a similar benefit”. Moreover, the First Circuit has established 10 that Section 524(e) “has been interpreted as preserving the liability of a guarantor on the 11 obligations of a debtor whose debts have been discharged in bankruptcy”. Federal Deposit Ins. 12 Corp. v. Ponce, 904 F.2d 740, 748 (1st Cir. 1990). 13 In the instant case, the discharge injunction afforded to the Plaintiffs does not extend to 14 the Guarantor. Therefore, the debt is not discharged in regards to Ms. Adams. From the 15 stipulated facts, however, it is clear that PRFCU made a collection effort against co-debtor 16 Barnes-Adams through her mother, the Guarantor. See Docket No. 45, p. 2, ¶ 8. Such action is 17 prohibited by 11 U.S.C. § 524(a). See In re Collins, 474 B.R. at 320, citing Senate Report No. 18 95-989 (“[11 U.S.C. § 524(a)] has been expanded ... to cover any act to collect, such as dunning 19 by telephone or letter, or indirectly through friends, relatives, or employers, harassment, threats 20 of repossession, and the like. The change is ... intended to insure that once a debt is discharged, 21 the debtor will not be pressured in any way to repay it.”). Therefore, the court finds that when 22 PRFCU sent the payment booklet to co-debtor Bares Adams at her mother’s address, to wit, the 23 Guarantor, it violated the discharge injunction. 24 Conclusion 25 In view of the foregoing, the Motion for Summary Judgment (Docket No. 50) is hereby 26 partially granted to dismiss the causes of actions relating to the violations to the automatic stay 27 as they pertain to the Guarantor, her alleged damages and to void the Pignoration and 1 || Authorization Document. It is denied as to the dismissal of the violation to the discharge 2 || injunction. 3 A pretrial hearing on the remaining controversies and damages resulting from PRFCU’s 4 || violation of the discharge injunction is hereby scheduled for November 21, 2014 at 9:30 a.m. 5 SO ORDERED. 6 Partial judgment will be entered accordingly. 7 In San Juan, Puerto Rico, this 3 day of October, 2014. 8 ? terrane 10 tnitedd seates Rankraeey Jndga 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27

17.