United States District Court, N.D. Illinois, Eastern Division
THOMAS CZERNIAK and CAROL J. CZERNIAK, Plaintiffs,
SERVIS ONE, INC., d/b/a BSI FINANCIAL SERVICES and VENTURES TRUST 2013-I-HR by MCM CAPITAL PARTNERS LLC, Trustee Defendants.
MEMORANDUM OPINION AND ORDER
J. Tharp, Jr. United States District Judge
BSI Financial Services and Ventures Trust have moved to
dismiss Plaintiff Thomas and Carol Czerniaks' complaint
for failure to state a claim under Fed.R.Civ.P. 12(b)(6).
They object that the Fair Debt Collection Practices Act does
not apply to them, that an element of a Telephone Consumer
Protection Act claim has not been adequately pled, and that
other causes of action have not been alleged with sufficient
specificity. Because the Czerniaks' allegations are
sufficient as to all counts, the motion to dismiss is denied.
and Carol Czerniak are a married couple living in Chicago,
Illinois. Compl. ¶ 4. On April 3, 2006, they obtained a
mortgage from Mortgage Electronic Systems, Inc.
(“MERS”) on their home in Chicago. Id.
at ¶ 8. At some point later, they defaulted on the
mortgage (exactly when is unclear) and on September 26, 2013,
they filed for bankruptcy. Id. at ¶ 10. On
October 15, 2013, MERS assigned the Czerniaks' mortgage
to CitiMortgage, Inc., and the Czerniaks listed CitiMortgage
as a secured creditor on their Schedule D bankruptcy forms.
Id. at ¶ 11-12. CitiMortgage was provided with
notice of the Czerniak's bankruptcy but chose not to
attend the November 12, 2013 creditor meeting. Id.
at ¶ 15-16. The Czerniaks submitted a modified Chapter
13 plan on November 13, 2013, in which they agreed to
surrender their home in full satisfaction of their mortgage.
Id. at ¶ 17-18. CitiMortgage did not object,
and the Czerniak's plan was approved on December 9, 2013.
Id. at ¶ 19.
moved to be relieved of the automatic bankruptcy stay on
February 24, 2014, which was granted the same day. Compl.
¶ 21-22. The motion acknowledged the intent to surrender
the property and appears to have been understood as an effort
to pursue a quick foreclosure. See Id . at ¶
21. The order allowed CitiMortgage, “its principals,
agents, successors and/or assigns” to “pursue all
non bankruptcy [sic] remedies and work out options as to the
property commonly known as 6236 W. 64th Street, Chicago,
IL.” See In re Czerniak, No. 13-37976, Dkt. 26
(N.D. Ill. Bnkr. Feb. 25, 2014). The Czerniaks “fully
performed their duties as set forth in their Confirmed
Chapter 13 Plan” and the bankruptcy court entered a
discharge order on April 14, 2014. Compl. ¶ 23-24.
problems began the following year, when on January 8, 2015,
defendant BSI Financial Services sent the Czerniaks a letter
informing them that their (former) mortgage loan had been
sold to defendant Ventures Trusts on December 18, 2014.
Id. at ¶ 32-33. BSI's letter did not
identify who the prior creditor had been on the loan.
Id. at ¶ 34. On January 28, 2015, the Czerniaks
received a statement stating that $14, 096.57 was due in four
days, that they owed over $224, 000 in principal, and that
they were 484 days delinquent on their home, which could
result in foreclosure. Id. at ¶ 35. Two days
later, Thomas received at least four calls regarding the
mortgage on his cell phone while Carol received at least one
on her cell phone. Id. at ¶ 36-37. On February
2, 2015, they received a letter from BSI stating “the
servicing of your mortgage loan is being transferred,
effective January 20, 2015” and that the new servicer
would begin collecting from them. Id. at ¶ 39.
The same day, Thomas received at least three calls on his
cell phone from BSI regarding the debt. Id. at
¶ 42. Two days later (on February 4), the Czerniaks
received another letter, indicating they owed over $252, 000
and that they had thirty days to dispute the validity of
their debt. Id. at ¶ 45-46.
February 11, Thomas Czerniak did just that, sending a letter
disputing the debt and explaining that the mortgage had been
discharged in bankruptcy (even going so far as to include a
copy of the discharge order from the bankruptcy court).
Compl. ¶ 47-48. BSI received the dispute letter, but
called Thomas on his cell phone twice on February 19
regarding the debt. Id. at ¶ 49. Without
obtaining any debt verification, BSI sent the Czerniaks
another letter on February 24, which identified itself as an
attempt to collect a debt regarding home insurance.
Id. at ¶ 50-51. On February 27, BSI sent a
mortgage statement stating the Czerniaks owed $20, 126.98 in
two days and had outstanding principal of over $224, 000
which could lead to foreclosure. Id. at ¶ 52.
They received a similar statement on March 18. Id.
at ¶ 55. BSI also continued to call Thomas, three times
on February 27 and once on March 11, April 13, and June 11.
Id. at ¶ 53, 54, 56, 57. The Czerniaks, after
six months of “emotional distress and mental
anguish” and being “led to believe that their
bankruptcy had no legal effect and that they were still
obligated on the subject debt, ” filed this lawsuit on
July 24, 2015 alleging violations of the Fair Debt Collection
Practices Act (“FDCPA, ” 15 U.S.C. § 1692),
the Telephone Consumer Protection Act (“TCPA, ”
47 U.S.C. § 227), the bankruptcy discharge injunction
(11 U.S.C. § 524), and the Illinois Consumer Fraud Act
(“ICFA, ” 815 ILCS 505/1(e)). Compl. ¶
motion to dismiss, a plaintiff need only allege the facts
that provide “the grounds of his entitlement to relief,
” and does not need “detailed factual
allegations.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007). The defendants raise a number of
arguments as to why this case should be dismissed under
Fed.R.Civ.P. 12(b)(6). First, they argue that the FDCPA does
not apply to BSI because it is not a debt collector. Second,
they argue that the TCPA claims fail because the use of an
automatic telephone dialing system (“ATDS”) was
not adequately alleged. Third, they argue the claims that the
bankruptcy discharge injunction was violated do not provide
BSI “fair notice of the grounds upon which the claims
against it are based.” Def.'s Mem. at 12-13, ECF
No. 12. Similarly, they allege the ICFA claim must be
dismissed because it “leaves the Defendant and the
court unable to ascertain the nature of Plaintiffs'
claims.” Id. at 14. As discussed below, none
of these arguments are meritorious, and therefore the motion
to dismiss is denied.
The FDCPA Applies to BSI
BSI argues that the Czerniak's FDCPA claim must fail
because BSI is not a “debt collector” and
therefore not subject to the statute at all. A “debt
collector” is defined in the statute as “any
person who uses any instrumentality of interstate commerce or
the mails in any business the principal purpose of which is
the collection of any debts, or who regularly collects or
attempts to collect, directly or indirectly, debts owed or
due or asserted to be owed or due another” but does not
include “any person collecting or attempting to collect
any debt owed or due or asserted to be owed or due another to
the extent such activity. . . concerns a debt which was not
in default at the time it was obtained by such person.”
15 U.S.C. § 1692a(6)(F). BSI asserts that the loan was
not “in default” because the bankruptcy court had
already discharged personal liability on the debt.
See Def.'s Mot. at 8.
the Seventh Circuit has created an exception for the
“in default” rule where the “parties to the
assignment are mistaken about the true status” of the
loan. Schlosser v. Fairbanks Capital Corp., 323 F.3d
534, 539. In that case, a mortgage holder's records
indicated that the loan was in default although the debtors
were in fact current. See Id . at 535-36. The holder
committed various FDCPA violations, but later claimed it
could not be held liable for them because the debt was not in
fact in default. The Seventh Circuit held such an escape
hatch made “little sense” and would create
“little incentive to acquire accurate information about
the true status of the loan because, in the context of the
mistake in this case, its ignorance leaves it free form the
statute's requirements.” Id. at 538.
situation is the same here. BSI incorrectly treated the
Czerniaks' mortgage as in default, even though they no
longer owed anything because the debt had been discharged in
bankruptcy. To exempt BSI from liability for the actions it
took while trying to collect a debt it believed it was owed
would encourage unscrupulous behavior such as attempts to
collect on discharged mortgages. Not only are these tactics
as oppressive and distressing as when they are used on actual
debtors, they are perhaps even more so when the alleged
debtor has already gone through the crucible of bankruptcy.
Another court of this district has already ruled on this same
argument by BSI on substantially similar facts and found that
BSI is still subject to the FDCPA. See Ananthapadmanabhan
v. BSI Fin. Servs., Inc., No. 15 C 5412, 2015 WL
8780579, at *3 (N.D. Ill.Dec. 15, 2015). This Court agrees
and finds BSI, by asserting to the Czerniaks that the debt
was in default and attempting to collect it, is still subject
to the FDCPA as a debt collector despite the actual discharge
of the debt in bankruptcy.
Use of an Autodialer or ATDS Has Been ...