THE CALIFORNIA STATE AND FEDERAL COURTS WERE BUSY IN 2018 DECIDING CASES THAT WILL SIGNIFICANTLY IMPACT COMMUNITY ASSOCIATIONS. THE BELOW CASE SUMMARIES INCLUDE MANY OF THE CRITICAL RULINGS.
1.
1. ASSESSMENT COLLECTIONS:
Goudelock v. Sixty-01 Association of Apartment Owners
TAKEAWAY - Condominium owner’s personal obligation to pay monthly assessments due after owner files Chapter 13 Bankruptcy, but before Chapter 13 plan was confirmed, is discharged when owner successfully completes Chapter 13 reorganization payment plan.
FACTS - Owner purchased a condominium in 2001. Te deed authorized the Association to levy assessments for monthly fees, maintenance, repairs, and capital improvements, and specified two collection methods: First, as a lien on the condominium unit, enforceable through foreclosure; and second, as a personal obligation enforceable through a civil action for damages against the owner of the condominium.
Te owner stopped paying the monthly assessments in 2009 and, in March of 2011, filed for bankruptcy under Chapter 13. As part of the Chapter 13 plan, the owner surrendered the condominium unit. Before the plan was confirmed by the bankruptcy court, the Association canceled a non- judicial foreclosure sale because the mortgage lender paid the outstanding assessments that had accrued between 2009 and 2011. Te condominium unit sat unoccupied until 2015, when the mortgage lender foreclosed on it. Tree months before owner completed Chapter 13 plan obligations and received a
discharge pursuant to 11 U.S.C. § 1328(a), Association brought suit in Bankruptcy Court to determine the dischargeability of owner’s personal obligation to pay the post-petition assessments that had accrued between March 2011 (when the Chapter 13 petition was filed) and February 2015 (when the condominium unit was foreclosed upon by lender).
COURT’S RULING - The ultimate issue
whether the obligation to pay assessments arose when owner bought the property, or whether the obligation to pay arose with each monthly assessment. The Ninth Circuit Court held that the personal obligation to pay the assessments was not the result of a separate, post-petition transaction, but was created when the owner took title to the condominium unit. As a result, the debt for the assessments arose pre-petition and was dischargeable under Section 1328(a), unless the Bankruptcy Code provides an exception to discharge. Under 11 U.S.C. § 523(a)(16), post- petition association assessments are excepted from discharge for petitions under Sections 727 (Chapter 7), 1141 (Chapter 11), 1228(a) and (b) (Chapter 12), and Section 1328(b) (Chapter 13 cases where the debtor is discharged without completing all plan payments). In holding that the owner’s post- petition assessments were dischargeable, the Court also noted the absence from the list of discharge exceptions in Section 1328(a) (the section governing discharges after a debtor complete its Chapter 13 payment plan) of any reference to Section 523(a)(16) (the only provision which excepts post-petition association assessments from discharge).
17
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32
