Rosenfeld, In re
| Decision Date | 04 May 1994 |
| Docket Number | No. 93-1596,93-1596 |
| Parties | , 25 Bankr.Ct.Dec. 981, Bankr. L. Rep. P 75,871 In re Jeffrey ROSENFELD, Debtor. RIVER PLACE EAST HOUSING CORPORATION, Board of Directors, Plaintiff-Appellee, v. Jeffrey ROSENFELD, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fourth Circuit |
ARGUED: Robert Benton Baumgartner, Fairfax, VA, for appellant. Denise Lenore Palmieri, Palmieri & Palmieri, P.C., Vienna, VA, for appellee. ON BRIEF: Robert L. Isaacs, Third Year Law Student, Fairfax, VA, for appellant.
Before HAMILTON, Circuit Judge, CHAPMAN, Senior Circuit Judge, and YOUNG, Senior United States District Judge for the District of Maryland, sitting by designation.
Affirmed by published opinion. Senior Judge CHAPMAN wrote the opinion, in which Judge HAMILTON and Senior District Judge JOSEPH H. YOUNG joined.
The issue presented is whether a discharge in bankruptcy relieves a debtor from personal liability for post-petition assessments of cooperative housing dues. The bankruptcy court held that post-petition assessments arise from a pre-petition contract and are therefore included in the discharge. The district court reversed and concluded that a cooperative's right to payment of post-petition dues does not arise until the dues are assessed and were not discharged. We affirm the decision of the district court.
River Place East Housing Corporation is a housing cooperative association which came into existence in 1982. In January 1983, Jeffrey Rosenfeld, an attorney, acquired 1590 shares of River Place and a possessory interest in a River Place apartment under a proprietary lease assigned to him by the prior owner. TrustBank Savings financed and holds a first deed of trust on Rosenfeld's River Place apartment. Rosenfeld acquired the River Place apartment as an investment and has never resided there.
A Declaration of Covenants, Easements and Liens ("the Declaration") creates and governs the River Place cooperative. The Declaration includes a covenant running with the land which obligates the owners of the cooperative to pay cooperative association dues as they are assessed. At some point Rosenfeld ceased to pay his dues, and River Place suspended his right to use the association's common areas and has never reinstated that right. This has caused appellant no inconvenience as he has never occupied his apartment nor recently rented it.
Rosenfeld filed Chapter 7 bankruptcy in October 1990. River Place was named, scheduled and noticed as a creditor. Rosenfeld listed the debt to River Place for unpaid pre-petition dues, but did not schedule post-petition dues as a potential liability or a contingent future obligation. He did not list his covenant to pay association dues as an executory contract. He did not list his cooperative interest as an asset or a lease interest, but incorrectly stated that it was being foreclosed.
When Rosenfeld realized that TrustBank Savings had not foreclosed, he signed a consent order granting TrustBank relief from the automatic stay. Rosenfeld claimed that he intended to abandon all interest in the unit. TrustBank has not foreclosed, and Rosenfeld has asserted no ownership interest in the unit and has not leased the apartment to anyone since his bankruptcy petition, but he has not conveyed his interest to TrustBank in lieu of foreclosure or otherwise disposed of his interest. He is still the record title holder.
On February 13, 1991 the bankruptcy court granted Rosenfeld a discharge, which included $2300 in pre-petition assessments of River Place dues.
In December 1991, River Place brought suit against Rosenfeld in state court seeking cooperative association dues from November 1, 1990 through April 30, 1992 and costs, attorney's fees, and interest. The post-petition assessments exceeded $3000 as of the date of the lawsuit.
In June 1992, Rosenfeld filed a Motion for Contempt against River Place in the bankruptcy court claiming that his bankruptcy discharge extinguished any personal liability for pre-petition and post-petition cooperative assessments, and therefore River Place's suit to collect post-petition assessments violated the permanent stay. Alternatively, Rosenfeld argued that the post-petition assessments were invalid because he had abandoned his cooperative interest and because the proprietary lease under which he held his possessory interest was unenforceable because such lease was not assumed by the bankruptcy trustee. Rosenfeld sought attorney's fees under Virginia Code Section 55-472(G).
The bankruptcy court found that River Place's right to payment for future assessments arose when Rosenfeld contracted to purchase his cooperative interest, but was contingent on Rosenfeld's continued ownership of the interest. It concluded that this debt was pre-petition because the obligation to pay existed pre-petition, even though payment was not due until post-petition, citing In re A.H. Robins Co., Inc., 63 B.R. 986 (Bankr.E.D.Va.1986), aff'd, 839 F.2d 198 (4th Cir.1988). The bankruptcy court found that Rosenfeld's personal liability for post-petition assessments had been discharged, and none of the exceptions to discharge contained in the Bankruptcy Code applied and that River Place violated the permanent stay by attempting to collect the post-petition assessments. It ordered River Place to discontinue any further collection efforts, but denied Rosenfeld's request for sanctions because there was legal authority to support River Place's argument that the petition assessments were not discharged.
River Place appealed to the federal district court. Rosenfeld cross-appealed the bankruptcy court's failure to award attorney's fees or rule on the abandonment and lease rejection issues. The district court found that 1) Rosenfeld is still the record owner of the River Place cooperative interest; 2) the post-petition assessments were not discharged; 3) River Place's suit to collect the post-petition assessments did not violate the permanent stay; 4) Rosenfeld did not effectively abandon his River Place interest; 5) Rosenfeld's River Place interest was never treated as a leasehold interest; and 6) Rosenfeld was not entitled to attorneys' fees because the issue of the prevailing party in the state court proceeding had not yet been resolved.
We review the district court's conclusions of law de novo and its findings of fact under the "clearly erroneous" standard. In re Green, 934 F.2d 568, 570 (4th Cir.1991).
A discharge in bankruptcy relieves the debtor of personal liability for all pre-petition debts but those excepted under the Bankruptcy Code. 11 U.S.C.A. Sec. 727 (West 1993). The Code defines "debt" as "liability on a claim." 11 U.S.C.A. Sec. 101(12) (West 1993). A "claim" is defined as a "right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured...." 11 U.S.C.A. Sec. 101(5) (West 1993). Consequently, any right to payment which arises prior to the bankruptcy constitutes pre-petition debt and is discharged, absent an applicable exception. The discharge operates to permanently stay any attempt to hold the debtor personally liable for discharged debts. 11 U.S.C.A. Secs. 524(a)(2) (West 1993).
The question of whether a bankruptcy discharge encompasses post-petition assessments has been addressed in the context of condominium association and homeowners' association dues with inconsistent results. * One line of cases treats the covenant to pay assessments as a contract. Under this view, an association's right to payment arises when the contract is made and is merely contingent on the debtor's continued ownership of the property. Thus, a claim for post-petition assessments arises pre-petition and is extinguished by the bankruptcy discharge. In re Rosteck, 899 F.2d 694, 697 (7th Cir.1990); Matter of Wasp, 137 B.R. 71, 73 (Bankr.M.D.Fla.1992); In re Hodge, Case No. 90-10275-AT (Bankr.E.D.Va. July 20, 1992); In re Miller, 125 B.R. 441, 443 (Bankr.W.D.Pa.1991); In re Cohen, 122 B.R. 755, 758 (Bankr.S.D.Cal.1991); In re Turner, 101 B.R. 751, 754-55 (Bankr.D.Utah 1989); In re Elias, 98 B.R. 332, 337 (N.D.Ill.1989); In re Montoya, 95 B.R. 511, 514 (Bankr.S.D.Ohio 1988); In re Behrens, 87 B.R. 971, 975 (Bankr.N.D.Ill.1988). The bankruptcy court in this case followed this analysis.
The district court's view was consistent with that line of cases which holds an association's claim for post-petition dues does not arise until the dues are assessed. In re Raymond, 129 B.R. 354, 364 (Bankr.S.D.N.Y.1991); In re Hill, 100 B.R. 907, 909 (Bankr.N.D.Ohio 1989); In re Harvey, 88 B.R. 860, 862 (Bankr.N.D.Ill.1988); In re Rink, 87 B.R. 653, 654 (Bankr.D.Colo.1987); In re Horton, 87 B.R. 650, 652 (Bankr.D.Colo.1987). We agree with the district court.
The Virginia Real Estate Cooperative Act provides for allocation of a cooperative's common expenses among its owners pursuant to its declaration. Va.Code Ann. Sec. 55-444 (Michie 1986). Under River Place's declaration, assessments are made on an annual basis and each owner pays one twelfth of his annual assessment each month of the fiscal year. Assessments are used to pay for the upkeep of River Place's parking and recreational facilities and other common expenses. Each owner must pay assessments when due and is personally liable for assessments, but is not responsible for assessments or installments due after his ownership interest ceases.
The Declaration expressly states that it is a covenant running with the land and binds and inures to the benefit of all present and future owners. The Act requires that the Declaration be executed and recorded in the same manner as a deed. Va.Code Ann. Sec. 55-438 (Michie 1986). Rosenfeld never signed the Declaration itself, but his proprietary lease expressly provides that it is subject to...
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