In Re Larry Robert Foster, BAP No. WW-09-1377-JuHRu.
| Decision Date | 19 July 2010 |
| Docket Number | Adversary No. 08-01150.,Bankruptcy No. 08-15310.,BAP No. WW-09-1377-JuHRu. |
| Citation | 435 B.R. 650 |
| Parties | In re Larry Robert FOSTER, Debtor. Larry Robert Foster, Appellant, v. Double R Ranch Association, Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
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Cawood King Bebout, Law Office of Cawood K. Bebout, Mount Vernon, WA, for Larry Robert Foster.
Bryan L. Page, Zender Thurston, P.S., Bellingham, WA, for Double R Ranch Association.
Before: JURY, HOLLOWELL, and RUSSELL 1 , Bankruptcy Judges.
Debtor Larry Robert Foster filed an adversary proceeding against Double R Ranch Association (the “Association”) seeking a declaration that postpetition homeowners' association (“HOA”) dues he owed to the Association were debts dischargeable under § 1328(a). 2 The Association moved for summary judgment, which the bankruptcy court granted by order entered November 12, 2009. Debtor timely appealed the order.
Debtor asserts the bankruptcy court erred in its ruling because the postpetition HOA dues arose out of a prepetition contract and, therefore, any assessments made after the order for relief constitute prepetition debts that fall within the scope of § 1328(a).
We disagree. Under Washington law, the affirmative covenant to pay HOA dues is not contractual, but is a covenant running with the land. As such, debtor's personal liability for the dues is an incidence of ownership of his property not affected by the filing of his bankruptcy. Accordingly, we AFFIRM.
The facts are undisputed. In 2005, debtor purchased real property located on Crocket Road, Blaine, Washington. The real property was subject to an Amended and Restated Declaration of Covenants (the “Declaration”) providing for the creation of the Association, a Washington non-profit corporation and homeowners' association existing under Wash. Rev.CodeE (“RCW”) § 64.38.005-.060 (2010). In August 2000, the Association recorded the Declaration against debtor's lot and others located within Double R Ranch.
The Declaration provided that the Association could charge each lot owner annual dues and that each owner was personally liable for the assessments. Debtor failed to pay HOA dues for several years prior to his bankruptcy filing.
On August 20, 2008, debtor filed a Chapter 13 petition. Debtor listed his residence in Schedule A and listed the Association as an unsecured creditor holding a claim of $1,131.11 in Schedule F.
On September 4, 2008, debtor filed a proposed plan which did not provide for payment to the Association for either pre or postpetition HOA dues.
On October 2, 2008, the Association filed a proof of claim, asserting a secured claim for $1,265.33 based on prepetition arrears for HOA dues. Attached to the proof of claim was an itemized statement of the dues, late charges, interest and legal fees. Also attached was a “Notice of Lien for Unpaid Assessments” for $1,888.40 dated May 31, 2007, and recorded by the Whatcom County Auditor that same day as Document Number 2070505184. The Notice of Lien erroneously recited that the Association had a lien under RCW § 64.34.364, which provides that unpaid assessments become a lien on an individual's condominium unit under the Washington Condominium Act. 3 The Association is not a condominium association, but a homeowners' association created and governed by RCW § 64.38.005-.060.
On April 2, 2009, the Association objected to the confirmation of debtor's plan on the ground that it did not include any payments for past-due sums or his future HOA dues.
On April 6, 2009, debtor filed two pleadings with hearings scheduled for May 13, 2009. Debtor filed an objection to the Association's claim, contending that it was unsecured and any amounts arising before the order for relief were dischargeable under § 1328(a). Debtor also maintained that Washington law did not provide a statutory lien for common expenses and other obligations owed to homeowners' associations. In response, the Association argued that its lien was not based on statute, but on language contained in the Declaration.
Debtor also filed a motion to avoid the Association's lien on the ground that it constituted a “judicial lien” subject to avoidance. The Association, in opposition, asserted that its lien was not a “judicial lien”, but one arising out of the Declaration.
In addition, on April 6, 2009, debtor filed the adversary complaint against the Association which is at issue in this appeal.
On May 5, 2009, the Association filed a notice and motion for summary judgment in the adversary proceeding. The notice gave debtor until May 6, 2009 to file a response and set a hearing for May 13, 2009. Debtor filed a response on May 11, 2009, requesting a continuance until June 10, 2009 to give him additional time to respond to the motion.
On May 13, 2009, the bankruptcy court heard oral argument on all three matters. The court ruled in favor of the Association, finding that it had a secured claim under the Declaration for dues levied both before and after debtor's bankruptcy petition and that postpetition HOA dues owed by debtor to the Association were not dischargeable under § 1328(a). 4 The court granted summary judgment in favor of the Association and dismissed debtor's adversary proceeding.
On December 2, 2009, debtor filed an amended plan. On March 1, 2010, the bankruptcy court confirmed debtor's amended Chapter 13 plan. Debtor's plan provided for the cure of prepetition HOA dues in the event we affirm the bankruptcy court's ruling that the Association held a secured claim. Otherwise, debtor's plan provided for 0% to unsecured creditors. The plan also stated:
Debtor has objected to the claim of Double R Ranch Association for prepetition homeowners association fees, and has filed an adversary proceeding to determine the dischargeability of the homeowners [sic] association right to collect fees postpetition. The bankruptcy court has dismissed debtor's objection and adversary proceeding, and debtor has appealed the bankruptcy court's rulings on debtor's claim objection and adversary proceeding. Debtor presents this amended plan to obtain a confirmable plan without waiving any rights to contest the court's rulings on any of the foregoing matters.
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. § 1334 over this core proceeding under § 157(b)(2)(I). We have jurisdiction under 28 U.S.C. § 158.
A. Whether the bankruptcy court abused its discretion when it heard the Association's motion for summary judgment on shortened time; and
B. Whether the bankruptcy court erred as a matter of law in concluding that HOA dues assessed and owed after the order for relief were not dischargeable as long as debtor continued to reside on the property.
We review the bankruptcy court's decision to shorten the notice period on a motion for summary judgment for an abuse of discretion. Nunez v. Nunez (In re Nunez), 196 B.R. 150, 155 (9th Cir. BAP 1996) (). We follow a two-part test to determine objectively whether the bankruptcy court abused its discretion. United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir.2009). First, we “determine de novo whether the bankruptcy court identified the correct legal rule to apply to the relief requested.” Id. Second, we examine the bankruptcy court's factual findings under the clearly erroneous standard. Id. at 1262 & n. 20. We must affirm the court's factual findings unless those findings are “(1) ‘illogical,’ (2) ‘implausible,’ or (3) without ‘support in inferences that may be drawn from the facts in the record.’ ” Id. If we determine that the court erred under either part of the test, we must reverse for an abuse of discretion. Id.
We review the bankruptcy court's decision to grant a motion for summary judgment de novo. Sigma Micro Corp. v. Healthcentral.com (In re Healthcentral.com), 504 F.3d 775, 783 (9th Cir.2007).
We review issues of statutory construction and conclusions of law de novo.
Mendez v. Salven (In re Mendez), 367 B.R. 109, 113 (9th Cir. BAP 2007).
Before turning to the merits, we address whether the bankruptcy court's summary judgment ruling in favor of the Association constitutes reversible error when debtor did not receive ten days to respond to the Association's motion as required by Fed.R.Civ.P. 56(c) and the court did not follow its own local rule. The Association served its motion on May 3, 2009. Debtor requested a continuance in writing on May 11, 2009, and then again orally at the hearing held on May 13, 2009, which the court implicitly denied by ruling on the motion.
When the Association filed its motion for summary judgment, the version of Fed.R.Civ.P. 56(c) 5 in place at the time provided that “[t]he motion must be served at least 10 days before the day set for the hearing.” The bankruptcy court's Local Bankruptcy Rule 9013-1(d)(2)(D) lengthened the time to twenty-four days.
The court did not articulate the rule for shortening time on the Association's motion, but we surmise the court acted under Rule 9006(c)(1). That rule allows the bankruptcy court, in the exercise of discretion, to shorten the length of time required or allowed for any act “with or without motion or notice”. Rule 9006(c)(1).
The bankruptcy court noted that the Association's motion for summary judgment, debtor's motion to avoid the Association's lien, debtor's objection to the Association's proof of claim and the Association's objection to confirmation of debtor's Chapter 13 plan were “all connected one way or the other.” Accordingly, the bankruptcy court had discretion to determine whether, in the interest of convenience and judicial economy, consolidation of the Association's motion for...
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