In re Hill, Bankruptcy No. B88-1513

• Citation: 100 BR 907
• Decision Date: 13 June 1989
• Docket Number: Bankruptcy No. B88-1513,Adv. No. B89-27.
• Parties: In re James G. and Wendy HILL, Debtors. James G. HILL, et al., Plaintiffs, v. WINDWARD HILLS CONDOMINIUM ASSN., Defendants.
• Court: United States Bankruptcy Courts. Sixth Circuit. U.S. Bankruptcy Court — Northern District of Ohio

100 B.R. 907 (1989)

In re James G. and Wendy HILL, Debtors.

James G. HILL, et al., Plaintiffs, v. WINDWARD HILLS CONDOMINIUM ASSN., Defendants.

Bankruptcy No. B88-1513, Adv. No. B89-27.

United States Bankruptcy Court, N.D. Ohio, E.D.

June 13, 1989.

Thomas F. Sheehan, Sheehan & Sheehan, Cleveland, Ohio, for plaintiffs.

Dwight A. Miller, Stavole & Miller, Cleveland, Ohio, for defendants.

MEMORANDUM OF OPINION AND ORDER

RANDOLPH BAXTER, Bankruptcy Judge.

James and Wendy Hill, (Debtors) seek a determination of the dischargeability of certain maintenance fees assessed against them during their ownership of a condominium unit under the auspices of the Defendant Windward Hills Condominium Association (WHCA). In July of 1979, the Debtors purchased one of WHCA's condominium units (the Unit) and have continued to occupy the premises to the present time. On April 11, 1988, the Debtors sought relief by filing their joint petition under Chapter 7. As condominium owners, they were obligated to pay monthly maintenance fees, in addition to their mortgage note obligation. Upon the panel Trustee's motion, the Debtors' interest in the Unit was abandoned to them on July 22, 1988. Thereafter they continued occupancy of the Unit. When property is abandoned by the Trustee, the property is no longer property of the estate and the estate, consequently has no interest in the property. See H.R. Rep. No. 95-595, 95th Cong., 1st Sess., at 343 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787; In re Cruseturner, 8 B.R. 581 (Bankr.D.Utah 1981). Once abandoned, their mortgage lender commenced foreclosure proceedings which ultimately extinguished their title interest in the Unit. They presently occupy the Unit as lessees of the foreclosure sale purchaser.

Subsequently, the Debtors obtained their Chapter 7 discharge on July 27, 1988. It is undisputed that the Debtors made no maintenance fee payments on the Unit to WHCA between the petition filing date and the date the Unit was abandoned. It is further undisputed that the Debtors made no timely maintenance fee payments during the period post-abandonment and the date the Unit was sold on December 15, 1988, while continuing to occupy the Unit. Post-discharge, but prior to case closing, WHCA filed a state court proceeding to collect the maintenance fees from the Debtors. This adversary proceeding ensued.

The principal issues to be resolved are two-fold: (1) Whether the subject maintenance fees are dischargeable and (2) Whether WHCA violated the automatic stay in pursuing its State Court action against the Debtors?

In their Complaint, the Debtors contend that the subject maintenance fees were a prepetition obligation and thusly were fully dischargeable. They further contend that the WHCA violated the automatic stay provisions of the Bankruptcy Code by pursuing collection actions against them in State Court. Contrarily, WHCA contends that the Debtor's required maintenance fees were postpetition obligations wholly unaffected by the Chapter 7 discharge. It further contends that its State Court action against the Debtors was not in violation of the automatic stay since it was never stayed from collecting the maintenance fees by the Chapter 7 petition filing.

As a unit owner, the Debtors were automatically members of the Unit owners association or WHCA. Their conduct and interest respecting their unit was regulated by a Declaration of Condominium Ownership (DCO) and the by-laws of WHCA. (See Ex. A). In pertinent part, the by-laws required the following:

On or before January 1st of the ensuing year, and the first of each and every month of said year, each Owner shall be obligated to pay to the Association or as it may direct one-twelfth (1/12) of the assessment made pursuant to this paragraph. All payments, if not paid by the 10th day of each month shall be subject to a late charge of Five Dollars ($5.00) to be levied by the Association. (Ex. A, By-laws of WHCA).

The above-quoted language clearly indicates that the maintenance fee obligation does not accrue until the first of each month. It is uncontested that the Debtors occupied their unit postpetition, prior to abandonment of same, without paying their monthly assessments. As such, their estate was benefitted by their continued...