In re Chen

• Decision Date: 07 September 2006
• Docket Number: No. 03-10711-RGM.,03-10711-RGM.
• Citation: 351 B.R. 355
• Court: U.S. Bankruptcy Court — Eastern District of Virginia
• Parties: In re Fen CHEN, Debtor.

Page 355

351 B.R. 355

In re Fen CHEN, Debtor.

No. 03-10711-RGM.

United States Bankruptcy Court, E.D. Virginia, Alexandria Division.

September 7, 2006.

Grace W. Kao, Alexandria, VA, for Debtor.

MEMORANDUM OPINION

ROBERT G. MAYER, Bankruptcy Judge.

The principal question presented in this case is whether a condominium unit owners' association may demand that a debtor pay condominium assessments, attorney's fees, costs and interest discharged in bankruptcy but included in a memorandum of lien, the enforcement of which is barred by the statute of limitations. The secondary issue raised is whether the condominium may demand that the debtor pay attorney's fees for releasing two judgment liens the debtor paid in additional to attorney's fees previously awarded to it in the two judgments themselves.

Procedural Background

Fen Chen filed a voluntary petition in bankruptcy pursuant to chapter 13 of the Bankruptcy Code in this count on February 13, 2003. His chapter 13 plan was confirmed. On April 13, 2006, the debtor was authorized to refinance his principal residence which is a condominium unit, pay all liens in full and pay the chapter 13 trustee an amount sufficient to complete his chapter 13 plan. At closing, the Council of Co-Owners of Bolling Brook Towers Condominium demanded payment of two judgment liens, two memoranda of lien, an unsecured post-petition special assessment, and legal fees related, to the preparation of a payoff letter and the release of the liens. Mr. Chen objected to the payment of the expired memoranda of lien and additional attorney's fees, paid them under protest, and filed this motion for a refund.

Factual Background

Mr. Chen bought a condominium unit at Bolling Brook Towers Condominium 1992. On April 14, 1997, the condominium filed two memoranda of lien. The first memorandum asserted a lien for unpaid assessments for the months from July 1996, through January 1997, together with interest, costs, attorney's fees, and a returned check fee, all totaling $2,567.67.¹ The lien was released on August 23, 1999. The condominium filed a second lien also on April 14, 1997. It claimed a lien for the condominium assessment due on February 1, 1997, together with interest, costs, and reasonable attorney's fees, all totaling $762.28.²

About April 15, 1997, the condominium filed suit against the debtor in state court for $2,764.95 plus interest, costs, and reasonable attorney's fees. The affidavit attached to the warrant in debt stated that the debtor owed condominium fees for the months of February 1996, through and including February 1997, that is, the assessments claimed in both memoranda of lien filed on April 14, 1997. On August 27, 1997, the condominium was awarded judgment for all of the condominium fees claimed, costs of $30.00, and attorney's fees of $1,650.00. The judgment was docketed on October 30, 1997, and created a lien on the condominium unit.

On November 19, 1997, the condominium again filed two memoranda of condominium lien. The first one asserted condominium assessments due from March 1997, through August 1997, costs, and attorney's fees for a total of $2,148.00.³ This memorandum of lien was also released on August 23, 1997. The second memorandum of lien was also filed on November 19, 1997. It claimed one condominium assessment which was due on September 1, 1997. It claimed a lien for $748.00 which included costs and attorney's fees.⁴

In early 1998, the condominium issued a garnishment summons in execution of the August 27, 1997 judgment. At least in part in response to the garnishment, the debtor filed his first petition in bankruptcy on March 27, 1998. The petition was filed .under chapter 7. He filed a suggestion in bankruptcy and the garnishment was dismissed by the condominium noting that the debtor had filed a petition in bankruptcy. The debtor received his discharge on July 2, 1998.

On December 18, 1998, the condominium filed a bill of complaint seeking to enforce its four memoranda of lien and its judgment lien. The condominium took a nonsuit on August 11, 1999, and, as noted above, released its two facially invalid memoranda of lien on August 23, 1999 — the April 14, 1997 memorandum asserting a lien of $2,567.67 and the November 19, 1997 memorandum asserting a lien of $2,148.00.

Mr. Chen filed a second petition in bankruptcy in this court on October 9, 2001. The case was filed under chapter 13. The debtor successfully completed his chapter 13 plan and was granted a chapter 13 discharge on August 29, 2002.

On February 13, 2003, the debtor filed this case, his third petition in bankruptcy. This one was also under chapter 13. When the petition in bankruptcy was filed, the debtor was in arrears two months in the payment of his condominium fees but fell further behind during the pendency of the case. The condominium was granted relief from the automatic stay on December 15, 2004, to obtain a judgment against the debtor for the assessments then due and to docket any resulting judgment. See In re Reynard, 250 B.R. 241 (Bankr. E.D.Va.2000); In re Leaven, 190 B.R. 536 (Bankr.E.D.Va.1995). The condominium obtained a judgment on February 24, 2005, and docketed it on November 9, 2005, thereby creating a judgment lien on the debtor's condominium unit. In June 2006, after having been authorized by this court to refinance his mortgage, the debtor paid off all liens of record and completed his chapter 13 plan. In order to complete the settlement, the debtor paid, under protest, amounts demanded by the condominium arising from the two time-barred but unreleased memoranda of lien and additional legal fees.

Condominium's Position,

The condominium argues that its two memoranda of lien were not affected by the debtor's bankruptcy discharges. A discharge granted by § 524 of the Bankruptcy Code only discharges the debtor's personal liability with respect to a discharged debt. While his personal liability for the unpaid condominium assessments was discharged, the liens arising from the memoranda of lien and the first judgment passed through his bankruptcies unaffected by his discharges. Johnson v. Home State Bank, 501 U.S. 78; 84, 111 S.Ct. 2150, 2154, 115 L.Ed.2d 66 (1991).

The condominium further argues that under the Condominium Act, Va.Code § 55-79.41 et seq., it has two liens for unpaid condominium assessments under Va.Code § 55-79.84(A); it timely perfected the liens as required by Va.Code § 55-79.84(C); the liens were not paid or satisfied and, they therefore were not required to be released under Va.Code § 55-79.84(F). Consequently, the memoranda of lien remain liens on the condominium unit. The assumption made by the condominium is that a lien for unpaid condominium assessments, once perfected, "retains its validity and continuing nature until such time as the underlying debt secured thereby is paid or otherwise satisfied." Memorandum of Law at ¶ 9, quoting a 1989 Virginia circuit court decree. That is, a lien for condominium assessments perfected by a memorandum of lien remains a lien until the condominium is required to release it under Va.Code § 55-79.84(F) even if the enforcement of the memorandum of lien is itself barred by the statute of limitations contained in Va.Code § 55-79.84(D).⁵

The condominium further argues that it did not violate the discharge stay imposed by § 524 of the Bankruptcy Code because it did nothing to collect the discharged debt. It merely left the unenforceable memoranda of lien of record, expecting and finally receiving, a payoff request. It then prepared a payoff statement for the closing agent at the request of the closing agent that included the amounts due under its duly perfected, allegedly extant, but clearly unenforceable, condominium lien.

Discussion

I. Validity of Condominium Lien

The law in Virginia is well established. The Virginia Supreme Court stated:

Textbook writers and other authorities are generally agreed that there is a distinction between a pure statute of limitations, which must be specifically pleaded, and a special limitation prescribed by a statute creating a new right; for example, the limitation of one year for instituting an action for wrongful death and the limitation of six months within which a suit may be brought to enforce a mechanic's lien. In the given instances, the right to bring the suit and the jurisdiction of the court is dependent upon the suit being brought within the period of limitation. Savings Bank of Richmond v. Powhatan Clay Mfg. Co., [102 Va. 274, 46 S.E. 294 (1904)]; Dowell v. Cox, 108 Va. 460, 62 S.E. 272; Leesburg v. Loudoun Nat'l Bank, 141 Va. 244, 126 S.E. 196; American Mutual Liability Ins. Co. v. Hamilton, 145 Va. 391, 135 S.E. 21. The declaration or the bill in such cases is demurrable not only where it shows on its face that the prescribed period has elapsed; but also unless it affirmatively shows that such period has not expired. The statute relates to the very right of the action as well as the remedy. This rule is consonant with reason, and obtains in Virginia and most of the States. Burks' Pleading and Practice (3d Ed.), pages 213, 214.

In Barton's Chancery Practice (3d Ed.), Volume I, at page 26, it is said: `In Virginia it is now settled that the statute of limitations cannot be taken advantage of by demurrer except where a statute creates a right which did not exist at common law and fixes a term within which that right may be enforced then, unless the bill seeking to enforce such right affirmatively shows that the suit was brought within the time limited by the statute, it will be bad on demurrer.'

Branch v. Branch, 172 Va. 413, 417, 2 S.E.2d 327, 329 (1939) superseded by statute on other grounds, Va.Code (1950) § 8.01-235, as recognized in Harper v. City Council of Richmond, 220 Va. 727, 737-38, 261 S.E.2d 560, 566-67 (1980) (see discussion below). See also Barksdale v. H.O. Engen, Inc., 218 Va. 496, 498, 237 S.E.2d 794, 796 (1977) (""We have long recognized that there is a...