In re Parker

• Decision Date: 29 January 2019
• Docket Number: Case No. 14-44083 CN
• Parties: In re: SARAH-JANE PARKER, Debtor.
• Court: U.S. Bankruptcy Court — Northern District of California

In re: SARAH-JANE PARKER, Debtor.

Case No. 14-44083 CN

UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA

January 29, 2019

The following constitutes the order of the Court.

Chapter 13

MEMORANDUM DECISION AFTER TRIAL

On February 22, 2017, this court consolidated for trial debtor Sarah-Jane Parker's claims against respondents Bayside Court Owners Association, Inc. ("BCOA"), Laurence Jennings, Raj Patel, Justin Hu, Lawrence Drouin, and Andrew Cantor, Esq. (collectively, "respondents") for alleged violations of the automatic stay and discharge injunction. After a contentious pre-trial period, the court conducted a multi-day trial on Parker's claims. Parker asserts that respondents' collective settlement demands, HOA invoices and fines, and rental of her condominium unit violated the automatic stay and the discharge injunction. She asks that this court award substantial damages under Bankruptcy Code §§ 105 and 362(k). All appearances were made on the record. Parker's claims are core proceedings under 28 U.S.C. § 157(b), and the following constitutes this court's findings of fact and conclusions of law under Federal Rule of Bankruptcy Procedure 7052(a).

Parker filed her Chapter 13 bankruptcy on October 8, 2014 and received her Chapter 13 discharge on December 1, 2015. BCOA received notice of her Chapter 13 bankruptcy and her Chapter 13 discharge.¹ When Parker filed her Chapter 13, she and BCOA were embroiled in contentious litigation in Alameda County Superior Court in which BCOA sought to collect unpaid HOA dues arising from Parker's ownership of Unit 990 at the BCOA run condominium complex in Oakland, California ("Unit 990"). Parker's pre-petition HOA obligations arose from BCOA's Declaration of Covenants, Conditions and Restrictions dated May 22, 2000, which were duly recorded with the Alameda County Recorder's Office (the "CC&Rs").² Unit 990 is the largest unit in the BCOA complex, and its annual HOA dues represent 12% of BCOA's annual assessment revenue.

Parker's Chapter 13 plan treatment of her interest in Unit 990 was straightforward. Parker owned Unit 990 when she filed her Chapter 13, and she listed on her Bankruptcy Schedule D unpaid Alameda County real property taxes, first and second deeds of trust, and BCOA's disputed HOA liens. Unit 990 was in foreclosure on the petition date, and her bankruptcy filing stayed the junior deed of trust holder's trustee sale. Parker's amended Chapter 13 plan was confirmed on December 17, 2014 (the "Plan"). The Plan "surrendered" Unit 990 to her secured creditors - including BCOA - and provided stay relief (upon confirmation) to allow her secured creditors "to exercise [their] right[s] against [their] collateral." The Plan also revested Unit 990's title in Parker. While Parker retained title to Unit 990, she otherwise abandoned the property. Parker moved to Frisco, Texas in October 2014 shortly after she filed her Chapter 13, and she did not rent Unit 990 in her absence.

Despite obtaining stay relief through the confirmation order, BCOA filed a motion for relief from the automatic stay on March 13, 2015, which Parker did not oppose. BCOA described its stay relief motion as a request for a "comfort order." BCOA's motion argued that Unit 990 was worth less than the secured debt against it, and that its negative equity (combined with Parker's failure to pay her pre and post-petition assessments) justified relief from the automatic stay. BCOA's prayer for relief sought, in part, "That the automatic stay be terminated so that BCOA may exercise or causeto be exercised any and all rights under the CC&R's and any and all rights after the foreclosure sales, including, but not limited to, the right to consummate foreclosure proceedings on the Property and the right to proceed in unlawful detainer." This court's relief from stay order simply provided that the "Motion is granted." Parker thereafter obtained her Chapter 13 discharge on December 1, 2015.

Parker's post-petition difficulties with BCOA arose from a series of intertwining facts: 1) Parker retained title to Unit 990 until the first deed of trust holder foreclosed on November 21, 2016; 2) in the interim, Parker did not pay Unit 990's HOA assessments and fines; and 3) Parker's unpaid HOA obligations created significant financial angst for BCOA.

BCOA filed a $163,249.18 proof of claim in Parker's Chapter 13 for unpaid pre-petition HOA dues and fines.³ While Parker's Chapter 13 bankruptcy filing stayed the parties' Alameda County Superior Court litigation, BCOA did not curtail its collection efforts. Shortly after Parker filed her Chapter 13, BCOA sent Parker's counsel, Fong & Fong, an aggressive offer (by email) to settle the Superior Court litigation. Even though BCOA was well aware of her bankruptcy filing, it demanded, among other things, that Parker pay it $25,000 "plus any additional legal costs incurred after 10/31/2014 right up until Settlement Agreement signing by Parker, and continue her efforts to sell Unit 990, from which BCOA will accept "60 cents on the dollar for its existing liens." The settlement offer also stated that "If the offer is not accepted, we will be moving forward with our lawsuit with new counsel, and cross-complaining Unit 990's tenant and realtor among other things-inclusive of filing multiple adverse claims with the Bankruptcy Court. This will occur if you manage to maintain the Chapter 13 filing (which is full of errors by the way) vis a vis the Trustee's current valid move to dismiss, or convert to a Chapter 7 as has always been expected. (The original Chapter 13 being a familiar stall tactic-just as it was for BCOA Unit C in 2006-2008)."⁴ In mid-December 2014, BCOA's attorney, respondent Andrew Cantor, sent a virtually identical settlement offer under his own letterhead to Fong & Fong. Parker did not respond to these offers.

Parker's silence did not deter BCOA. In early December 2014, BCOA sent to Parker (by email and regular postal service) a "BCOA Late Payment & Notice of Delinquency" demanding payment of her entire pre-petition delinquency (there stated to be $169,669.88). She received a similar "Late Payment Demand & Notice of Delinquency" in early January 2015, which demanded payment of $196,256.71. Both of these invoices were accompanied by "cover" emails which requested immediate payment of these amounts. At trial, Jennings admitted that BCOA should not have issued these invoices, and that he had instructed BCOA's billing department to send invoices with a watermark stating "FOR INFORMATIONAL PURPOSES ONLY.⁵" Jennings did not explain, however, why Parker needed this reminder after two years of litigation and her decision to surrender Unit 990. BCOA also demanded that Parker pay Unit 990's post-petition annual assessments. In December 2014, BCOA invoiced Parker for her 2015 annual HOA assessment of more than $22,000.00, and similarly issued in January 2016 an invoice for her entire 2016 HOA assessment. In April 2016, BCOA issued an omnibus invoice to Parker, which included all unpaid post-petition assessments and fines, including the 2016 HOA assessment.

BCOA also sought to collect a "retro-assessment" from Parker that covered her pre-petition ownership of Unit 990. In May 2015, Fong & Fong⁶ received a "BCOA Member Account Invoice" which demanded that Parker pay $9,856.25 as a "retro-assessment." In its accompanying letter, BCOA informed Parker that this amount arose from its 2015 "remapping project" of the entirecondominium development. BCOA asserted that the remapping indicated that "Unit 990 was previously assessed at 6088 sqft, but has been found through onsite verification and map examination to actually be 6672 sqft in assessable area. . . . These areas must be assessed in accordance with BCOA CC&R 6.2.3." Unit 990 was one of several units that received retro-assessments. Parker did not respond to or pay this retro-assessment.⁷

BCOA also rejected Parker's early effort to do more than just "surrender" Unit 990 to her secured creditors. In a letter dated October 29, 2014, Parker's bankruptcy counsel offered to transfer Unit 990 to Ocwen Loan Servicing (the senior secured lender), Vida Capital (the junior lender), and BCOA in satisfaction of the claims against the property. Parker proposed "to transfer legal and equitable title to [Ocwen], Vida Capital or [BCOA] in satisfaction of claims against the property. Please advise in writing if [you] desire[] to accept surrender of this property by November 6, 2014. Upon approval of the Bankruptcy Court, Debtor will execute either a quitclaim, deed in lieu of foreclosure or other transfer document in favor of the accepting creditor." Jennings testified that the November 6^th response date did not provide BCOA's board of directors with enough time to consider the offer. Drouin also testified that he did not think that the offer was "serious" given the short deadline. BCOA did not ask Parker to extend the deadline, and Parker did not renew her offer.

Having failed to settle the Alameda County Superior Court litigation and unwilling to accept title to Unit 990⁸, BCOA developed several strategies to turn Unit 990 into an assessment paying unit. Commencing in December 2014, BCOA began notifying Parker that Unit 990 was in substantial non-compliance with the CC&Rs. When Parker failed to respond to these notices, BCOA fined her and sent her collection invoices. For example, in February 2015, BCOA imposedfines for:

1. Failure to pay property taxes (a $500 fine);

2. Failure to pay assessments (a $500 fine);

3. Failure to pay City taxes (a $500 fine);

3. Failure to advise of tenant identity and lease arrangements (a $500 fine); and

4. Acting in a manner which generally reduces general building security (a $500 fine).

In late April 2015, BCOA imposed (after complying with its CC&R's notice requirements) additional fines for:

1. Five "counts" of Hanging An Item Weighing In Excess of Ten Pounds from the Ceiling of Your unit ($2500.00 in fines);

2....