Batali v. Mira Owners Association (In re Batali)

Summarized by David Hercher , U.S. Bankruptcy Court, District of Oregon
10 years 2 months ago

Citation:

In re Batali, No. WW-14-1557-KiFJu (9th Cir. B.A.P. Dec. 7, 2015).

Tag(s):

Ruling:

A chapter 13 discharge will not discharge postpetition dues owed to a Washington-state condominium association. Not-for-publication memorandum.

Procedural context:

Debtors’ confirmed chapter 13 plan provides for the surrender of their Washington-state condo to the secured lender and the condo owners’ association. Debtors filed a motion for a determination that the postpetition association dues would be discharged by their chapter 13 discharge and that their plan eliminated the association’s right to assert a claim against them for postpetition assessments. The bankruptcy court denied the motion. On appeal, the BAP affirmed.

Facts:

Under Washington-state law, the affirmative covenant to pay homeowners’ association dues is not contractual, but is a covenant running with the land. As such, a debtor’s personal liability for dues is an incident of ownership of the property not subject to discharge under section 1328(a). Surrender of property under a plan does not effect a transfer of the property; it means only that the debtor will make the collateral available so the secured creditor can, if it so chooses, exercise its state-law rights in the collateral. Nondischargeable liability to an association continues to accrue as long as the debtor maintains a legal, equitable, or possessory interest in the property. Although debtors gave up possession of the condo before the petition date, they did not divest themselves of their legal and equitable ownership interests in it before the foreclosure. Because debtors owned the condo until the foreclosure, the dues assessed between the petition date and the foreclosure will not be discharged under section 1328(a).

Judge(s):

Ralph B. Kirscher, Meredith A. Jury, and Robert J. Faris, Bankruptcy Judges.

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