In Re Ezroy C. Spencer

• Citation: 437 B.R. 563
• Decision Date: 06 October 2010
• Docket Number: Bankruptcy No. 09-74255.,Adversary No. 10-04501-PJS.
• Parties: In re Ezroy C. SPENCER, Debtor. Maple Forest Condominium Association, a/k/a Red Maple Lane Association, Plaintiff, v. Ezroy C. Spencer, Defendant.
• Court: United States Bankruptcy Courts. Tenth Circuit. U.S. Bankruptcy Court — Eastern District of Michigan

437 B.R. 563

In re Ezroy C. SPENCER, Debtor.Maple Forest Condominium Association, a/k/a Red Maple Lane Association, Plaintiff,

v.Ezroy C. Spencer, Defendant.

Bankruptcy No. 09-74255.

Adversary No. 10-04501-PJS.

United States Bankruptcy Court,

E.D. Michigan,

Southern Division (Detroit).

Oct. 6, 2010.

Thomas J. Budzynski, Clinton Township, MI, for Plaintiff.

Christopher W. Jones, William D. Johnson, Acclaim Legal Services, Southfield, MI, for Defendant.

Opinion (1) Denying Plaintiff's Motion For Summary Judgment; And (2) Granting In Part And Denying In Part Defendant's Motion For Summary Judgment

PHILLIP J. SHEFFERLY, Bankruptcy Judge.

Introduction

Ezroy C. Spencer (“Debtor”) is a debtor in a Chapter 13 case. Maple Forest Condominium Association, a/k/a Red Maple Lane Association (“Maple Forest”) is a creditor in the Debtor's Chapter 13 case. On February 8, 2010, Maple Forest filed a complaint seeking a declaration that certain debts alleged to be owed by the Debtor to Maple Forest are non-dischargeable. Maple Forest and the Debtor have filed cross motions for summary judgment. On September 24, 2010, the Court heard the cross motions for summary judgment, and took both motions under advisement. For the reasons explained in this opinion, the Court has determined to deny the Plaintiff's motion for summary judgment and grant the Debtor's motion for summary judgment in part and deny it in part.

Jurisdiction

This is a core proceeding under 28 U.S.C. § 157(b)(2)(B) and (I), over which the Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(a) and 157(a).

Facts

On November 5, 2009, the Debtor filed a Chapter 13 petition. The Debtor's schedule A-Real Property-listed the Debtor as fee simple owner of a condominium located at 801 Red Maple Lane, Unit 63, Wixom, Michigan. The Debtor listed the condominium has having a current value of $176,718.00. The Debtor's schedule A stated that the amount of the secured claims with respect to the condominium was $211,693.00. The Debtor's schedule D-Creditors Holding Secured Claims-identified three secured creditors with respect to the condominium. CitiMortgage Inc. was listed as the holder of a first mortgage in the amount of $176,718.00. Guaranty Bank was listed as holding a $33,975.00 secured claim based on an equity line of credit. Maple Forest was listed as the holder of a secured claim for $1,000.00 representing condominium fees.

On January 6, 2010, the Debtor filed an amended Chapter 13 plan. The plan treated all three secured claims as class two continuing claims, and stated that the Debtor would not be making any monthly payments to those three secured creditors, but instead simply stated the language: “Surrender Property” in the section describing the treatment for each of those three secured creditors. In section II. C., the plan provided that the automatic stay would be lifted as to any “collateral treated as surrendered or abandoned” upon confirmation of the plan. In that same paragraph, the plan provided that creditors filing a secured claim secured by collateral that the Debtor's plan proposes to surrender would have 12 months from the date of confirmation in which to amend their claim to establish any deficiency arising from the surrender of such collateral, and that such deficiency claim would be treated as a class eight general unsecured claim.

On January 11, 2010, Maple Forest filed an objection to confirmation of the plan. That objection raised a number of issues, including Maple Forest's assertion that condominium dues assessed to the condominium are non-dischargeable under § 523(a)(16) of the Bankruptcy Code; that the proposed surrender of the condominium is ineffective unless memorialized by execution and delivery of a deed or by foreclosure; and that the plan makes no provision for the payment of condominium dues accruing post-petition. CitiMortgage also filed an objection to the plan, apparently based on its belief that the proposed surrender of the condominium was intended to be in full satisfaction of its mortgage debt. On January 14, 2010, CitiMortgage filed a motion for relief from stay in which it alleged that the approximate market value of the condominium was $176,718.00, and that the debt owed by the Debtor to CitiMortgage was approximately $181,728.00 and, therefore, that there was no equity in the condominium. On February 1, 2010, CitiMortgage filed a certificate of no response to its motion for relief, and the Court entered an order on February 2, 2010 granting CitiMortgage relief from the automatic stay to enforce its remedies. On February 5, 2010, Maple Forest filed an amended objection to confirmation of the plan that mirrored its original objection, but also alleged that the Debtor had failed to maintain the condominium, had failed to winterize it, and that the Debtor's failure had caused broken water pipes, resulting in “several thousand dollars' damage” to the condominium. On the same day that Maple Forest filed its amended objection to confirmation, it also filed this adversary proceeding. The complaint in this adversary proceeding seeks “declaratory relief that the Debtor's post petition obligations and post petition damage to property are not dischargeable.”

On January 22, 2010, Maple Forest filed a proof of claim in the amount of “$1,275.00 Plus post-petition accruing plus atty. fees.” The proof of claim indicated that the basis for the claim was “services,” and that the claim was secured by “real estate.” The attachment to the proof of claim stated that the condominium dues assessed up to the petition date totaled $1,275.00, and further stated that the monthly assessment accruing from December, 2009 forward was $235.00, and that the attorney fees were $1,000.00. At the end of the one page attachment appeared the following statement:

Claims are secured to extent of property value and unsecured thereafter, but are continuing claims post-petition pursuant to 11 U.S.C. § 523(a)(16).

A hearing on confirmation of the Debtor's plan was scheduled for April 20, 2010. On April 19, 2010, Maple Forest filed a notice of withdrawal of its objections to confirmation. There is nothing in the file that explains why the objections were withdrawn. The Court's docket indicates that the confirmation hearing was not called on the Court's contested docket on April 20, 2010, but instead was adjourned by agreement of the Debtor and the Chapter 13 Trustee until May 18, 2010 to permit the Debtor to submit a proposed order confirming plan with any outstanding objections to be resolved prior to submission of the order. On April 24, 2010, without any further hearing, the Court entered by consent an order confirming the Debtor's plan. The order was approved for entry by the Chapter 13 Trustee and by the attorney for CitiMortgage, which was the only creditor or other party in interest with an outstanding objection to the Debtor's plan that had not previously been withdrawn. It appears that the Debtor has made payments to the Chapter 13 Trustee pursuant to the confirmed plan since the date of its confirmation.

Although Maple Forest withdrew its objections to confirmation of the plan, and the plan was confirmed by the Court without objection, Maple Forest's complaint in this adversary proceeding remained pending. The Debtor filed an answer to the complaint, and the Court entered a scheduling order in the adversary proceeding. On August 13, 2010, Maple Forest filed a motion for summary judgment. On August 15, 2010, the Debtor filed a motion for summary judgment. Maple Forest and the Debtor each replied to the other's motion for summary judgment, and both motions were heard by the Court on September 24, 2010.

Maple Forest's complaint is a one count complaint. In its title, it states that Maple Forest seeks “declaratory relief.” In the body of the complaint, Maple Forest alleges that the Debtor retains legal title to the condominium notwithstanding the statement in the Debtor's plan providing for a “surrender” of the condominium to CitiMortgage, Guaranty Bank and Maple Forest. Maple Forest's complaint alleges that condominium association dues continue to accrue with respect to the condominium for as long as the Debtor retains a legal or equitable right in the condominium, and requests that the Court declare that the condominium association dues that become due and payable post-petition are non-dischargeable in the Debtor's Chapter 13 case, based on § 523(a)(16) of the Bankruptcy Code. The complaint further alleges that the Debtor failed to maintain the condominium, allowed insurance to lapse, and discontinued electrical power to the condominium, all of which conduct is alleged to be contrary to the Debtor's “obligations to maintain the property.” The complaint further alleges that the Debtor's actions caused the condominium to deteriorate, resulting in $38,000.00 of damage to the condominium. Maple Forest's complaint seeks a declaration that the damage caused to the condominium by the Debtor's conduct is a debt that is not dischargeable in the Debtor's Chapter 13 case. Finally, the complaint requests that the Court award attorney fees to Maple Forest.

Maple Forest's motion for summary judgment, unlike its complaint, does not rely upon § 523(a)(16) of the Bankruptcy Code as the basis for a determination of non-dischargeability of the condominium association dues that became due and payable post-petition. Maple Forest's motion for summary judgment does not explain why the condominium association dues that become due and payable post-petition should be adjudicated to be non-dischargeable, but instead focuses on the damage alleged to have occurred to the condominium as a result of the Debtor's failure to maintain the condominium. Maple Forest argues that the Debtor's purported surrender of the condominium was ineffective to divest the Debtor of legal or equitable title to the condominium and, therefore, the Debtor remains the holder of both a legal and...