CATHY N. BATES, a/k/a Lynn Cathy Bates, a/k/a Cathy Lynn Nichols; and TIMOTHY J. BATES, Appellants,
CITIMORTGAGE, INC., s/b/m to ABN AMRO Mortgage Group, Inc.; and FEDERAL HOME LOAN MORTGAGE CORPORATION, Appellees, VICTOR W. DAHAR, Trustee.
FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW
HAMPSHIRE [Hon. Steven J. McAuliffe, U.S. District Judge]
Harman, Kristina Cerniauskaite, and Harman Law Offices, on
brief for Appellants.
Gregory N. Blase, David D. Christensen, and K&L Gates
LLP, on brief for Appellees.
Lynch, Thompson, and Barron, Circuit Judges.
THOMPSON, Circuit Judge.
N. Bates and Timothy J. Bates (our Appellants, whom we also
call the Bateses) went bankrupt and Appellees foreclosed on
their home. At the end of the tax year, they each received an
IRS Form 1099-A in the mail alerting them that the
foreclosure might have tax consequences. The Bateses sued our
Appellees, claiming that the Forms were a coercive attempt to
collect on the mortgage debt--a debt Appellees have no right
to collect because it was discharged during the Bateses'
Chapter 7 proceedings. The bankruptcy court and the district
court found the Forms were not objectively coercive attempts
to collect a debt. We agree, and so we affirm.
Bateses took out a loan from Appellee CitiMortgage, Inc.
s/b/m to ABN AMRO Mortgage Group, Inc.
("CitiMortgage") secured by a mortgage on their
home in Newport, New Hampshire. The Bateses filed for Chapter
7 bankruptcy in 2008 and their mortgage debt was discharged
in 2009. The Bateses entered into a Loan Modification
Agreement with CitiMortgage after the discharge. Under that
Agreement, the Bateses did not reaffirm personal liability
for the mortgage, but they could avoid foreclosure and stay
in their home as long as they continued to make payments to
CitiMortgage. The Bateses eventually stopped making payments,
CitiMortgage foreclosed, and the Bateses moved out in October
January 2012, the Bateses each received an IRS Form 1099-A
("1099-A Form" or "Form") in the mail.
According to the instructions on the back of the Forms,
"[c]ertain lenders who acquire an interest in property
that was security for a loan . . . must provide you with this
statement. You may have reportable income or loss because of
such acquisition or abandonment." Both Forms listed the
lender as "Freddie Mac" (also known as Federal Home
Loan Mortgage Corporation, our other Appellee) "c/o
CitiMortgage." And, as of the time of acquisition, the
Forms listed the "balance of principal outstanding"
as $194, 624 and the fair market value of the property as
$168, 000. Box Five on the Forms was checked, indicating that
"the borrower was personally liable for the repayment of
the debt." The front of the Forms also says "This
is important tax information and is being furnished to the
Internal Revenue Service. If you are required to file a
return, a negligence penalty or other sanction may be imposed
on you if taxable income results from this transaction and
the IRS determines that it has not been reported."
pause here to note that a discharged debt can count as
taxable income. 26 U.S.C. § 61(a)(12). But, as Appellees
point out (and the Bateses do not dispute), debt discharged
in bankruptcy proceedings (like the Bateses') and on a
qualified principal residence (like the Bateses') does
not. 26 U.S.C. § 108(a)(1)(A), (E). The Bateses'
1099-A Forms directed them to "Pub. 4681 for information
about foreclosures and abandonments." That publication
explains: "Debt canceled in a title 11 bankruptcy case
is not included in your income." I.R.S., Dep't of
the Treasury, Publication 4681: Canceled Debts,
Foreclosures, Repossessions, and Abandonments (for
Individuals) 4 (2011),
Bateses do not claim that they owed any taxes as a result of
the foreclosure or the Forms.
the Bateses say the 1099-A Forms reported bad information.
After their bankruptcy, the Bateses were no longer personally
liable for the mortgage debt, so they say Freddie Mac should
not have checked the box showing the opposite. Timothy Bates
averred that he called Appellees about his Form and was told
that the debt was not discharged because it was a secured
debt. The Bateses' attorney later sent a letter to
Freddie Mac pointing out that the Bateses' mortgage was
discharged in bankruptcy and demanding the revocation of the
1099-A Forms. The Bateses say they were terrified they would
owe additional income taxes unless they resolved the matter
with Freddie Mac or CitiMortgage. Freddie Mac did not revoke
the Forms and claims they are accurate.
other important detail: the Bateses received a prerecorded
phone call from CitiMortgage on June 11, 2013, requesting
proof of insurance on their old home; insurance was required
under the terms of their former mortgage agreement. The phone
call upset Timothy Bates: "it seemed we would never be
free from the debt to CitiMortgage."
2013, about one month before receiving the last-straw phone
call from CitiMortgage, the Bateses filed a motion to reopen
their bankruptcy proceedings, then sued CitiMortgage and
Freddie Mac for attempting to collect on the discharged
mortgage debt in violation of the discharge injunction
provisions of 11 U.S.C. § 524(a). Following
cross-motions for summary judgment, the bankruptcy court
granted the Bateses summary judgment on their claim that the
2013 phone call violated the discharge injunction, though it
later found the Bateses did not prove any damages on this
claim. The bankruptcy court granted summary judgment for our
Appellees on all of the Bateses' other claims, including
their claim that the 1099-A Forms violated the discharge
injunction. The bankruptcy court found the Forms gave the
Bateses "no objective basis" to believe Appellees
were trying to collect the discharged mortgage debt. The
Bateses appealed the bankruptcy court's rulings on
damages and the 1099-A Forms. The district court affirmed
both. The Bateses now appeal the bankruptcy court's
ruling on the 1099-A Forms to us.