Jones v. Wells Fargo Home Mortgage, Inc. (In re Jones)

Jones v. Wells Fargo Home Mortgage, Inc. (In re Jones)

This Emerging Issues Analysis examines a bankruptcy court's decision to order the implementation of certain accounting procedures where punitive damages alone would not make the mortgage company change its behavior. The court relied on its own inherent authority as well as the authority granted by 11 U.S.C. § 105(a).

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The author writes: In Jones v. Wells Fargo Home Mortgage, Inc. (In re Jones), 418 B.R. 687, 2009 Bankr. LEXIS 3317 (Bankr. E.D. La. Oct. 1, 2009), the bankruptcy court considered how to enforce its earlier judgment that a mortgage creditor willfully and egregiously violated the automatic stay imposed by 11 U.S.C. § 362 when it charged the debtor's account with unreasonable fees and costs. The court concluded that it could consider alternate remedies, such as punitive damages, but ultimately decided that punitive damages would not have the desired effect of getting this particular mortgage company to change its behavior. Accordingly, the court used its authority under 11 U.S.C. § 105(a), and its inherent authority, to order the implementation of certain accounting procedures designed to ensure that the pleadings filed by the mortgage creditor would be accurate or immediately corrected.

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The authority of bankruptcy courts to issue civil sanctions is well settled. In re Terrebonne Fuel & Lube, Inc., 108 F.3d 609 (5th Cir. 1997). It springs from two sources: section 105 of the Bankruptcy Code, id. at 613, and the court's inherent authority, see, e.g., In re Yorkshire LLC, 540 F.3d 328 (5th Cir. 2008) (affirming bankruptcy court's inherent authority to issue sanctions); Citizens Bank & Trust Co. v Case, 937 F.2d 1014, 1023 (5th Cir. 1991). Section 105(a) provides:

The court may issue any order, process or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process.                

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