Desert Pine CVillas Homeowners Assoc. v. Kabiling (In re Kabiling)

Summarized by David Hercher , U.S. Bankruptcy Court, District of Oregon
9 years 8 months ago

Citation:

In re Kabiling, No. NV-15-1380-BDF (9th Cir. B.A.P. June 14, 2016). Ordered published.

Tag(s):

Ruling:

A creditor violates the discharge injunction by requesting an award of attorney fees against debtors in a post-foreclosure quiet-title action commenced by the creditor.

Procedural context:

After filing their chapter 7 petition, debtors husband and wife gave notice of intent to abandon rental real property, which was encumbered by a homeowners association lien. The debtors received their discharge. The association nonjudicially foreclosed on its lien and acquired title to the property and then filed a complaint against the debtors to quiet title to the property. In the complaint, the association demanded an award of attorney fees against the debtors. The debtors reopened their bankruptcy case and moved to have the association found in contempt based on the filing and service of the complaint with its attorney-fees demand. The bankruptcy court found the association in contempt and liable for compensatory damages. On appeal, the BAP affirmed.

Facts:

A creditor can be held in contempt for violating the discharge injunction if it had actual knowledge of the injunction and it was aware that its claim against the debtor was subject to the discharge injunction. Whether the creditor is aware that the discharge injunction applies to the creditor’s claim is a fact-based inquiry, which implicates the creditor’s subjective belief, even an unreasonable one. The debtor need not prove that the creditor specifically intended to violate the injunction.

Judge(s):

Martin R. Barash, Bankruptcy Judge for the Central District of California, sitting by designation, and Randall L. Dunn and Robert J. Faris, Bankruptcy Appellate Panel Judges.

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