Matter of Mattera

• Decision Date: 07 January 1997
• Docket Number: Bankruptcy No. 89-03436.
• Citation: 203 BR 565
• Parties: In the matter of Evelyn J. MATTERA, Debtor.
• Court: U.S. Bankruptcy Court — District of New Jersey

203 B.R. 565 (1997)

In the matter of Evelyn J. MATTERA, Debtor.

Bankruptcy No. 89-03436.

United States Bankruptcy Court, D. New Jersey.

January 7, 1997.

Andrew Vazquez-Schroedinger, David Paul Daniels, P.C., Camden, NJ, for Debtor.

James E. Clubb, Jr., Ocean City, MD, for Council of Unit Owners, Ocean High, Inc.

OPINION ON DEBTOR'S

MOTION TO REOPEN CASE

JUDITH H. WIZMUR, Bankruptcy Judge.

On debtor's motion to reopen her completed Chapter 13 case, we are called upon to determine the dischargeability of time-share assessments levied after debtor was issued her Chapter 13 discharge, where the debtor's plan provided for the surrender of her time-share interest, and where the debtor made no use of the time-share following the filing of the petition.

FACTS

Debtor Evelyn J. Mattera filed a petition under Chapter 13 of the Bankruptcy Code on May 4, 1989. Her proposed Chapter 13 plan reflected an intention to surrender a two week time-share interest she held in Ocean High Condominiums, Ocean City, Maryland. She listed Berkley Federal Savings of Newark, New Jersey as the secured lienholder on this interest. The value of debtor's interest was noted on the schedules as $20,000 with the secured claim of Berkley Federal noted as $20,000. Ocean High Condominium Associates was also included as a secured creditor. The extent of the Condominium Associates's claim was not listed. Notice of the filing, the proposed plan and the scheduling for the case was sent to both creditors on May 25, 1989. Debtor's plan was confirmed on May 7, 1990 without objection. After all payments under the plan had been completed, debtor received a discharge on April 12, 1993, and her case was closed on April 14, 1993.

Debtor's motion to reopen her case was filed on November 14, 1995, in response to a judgment entered in the District Court of Maryland for Worcester County, under Case No. 0204-0000930-95, in favor of the Council of Unit Owners — Ocean High, Inc.¹ for unpaid condominium assessments that had accrued subsequent to the date of debtor's discharge. The judgment covers assessments for the period of January 1, 1994 to the present. Debtor asserts that she filed an answer to the complaint, raising the defense of her earlier bankruptcy, but did not attend the hearing. A judgment of default was entered on September 20, 1995 in the amount of $2,255.90 plus fees and costs.

By her motion, debtor seeks to vacate this judgment, asserting (1) that she had intended to surrender this property pursuant to her confirmed Chapter 13 Plan, (2) that her discharge terminated any relationship between Ocean High and herself, and (3) that the state court judgment violated 11 U.S.C. § 524. Debtor certifies that she did not occupy or use the time-share unit following the filing of her bankruptcy petition. Although she made no payments to Berkley Federal following the filing, she indicates that the bank's records now reflect a zero balance due from her, with no indication as to whether the obligation was assigned to a third party or charged off.

Debtor maintains that any recourse for unpaid post-petition assessments should be limited to a lien on the time-share unit, and should not be imposed as a personal obligation against her following her Chapter 13 discharge. She contends that post-petition assessments arising out of a pre-petition contract are discharged because they may be categorized as a contingent, unmatured liability that falls within the broad definition of a "claim" under the Bankruptcy Code. Debtor complains that she "has completed her obligations in her Chapter 13 filing and . . . has sought a `fresh start' but has now been saddled with a judgment for an obligation from which she has gained no benefit." Debtor's Letter Brief at 5.

In response, Ocean High acknowledges debtor's bankruptcy filing and debtor's proposal to surrender her interest in the condominium pursuant to her Plan. Ocean High contends, however, that there is no indication in the Plan as to whom the interest was to have been surrendered, and that as of this date, there is no evidence that a surrender was actually accomplished. A search of the Worcester County, Maryland, Land Records shows that title to the time-share remains in the debtor's name.² Ocean High contends that debtor's discharge is limited to prepetition assessments. Since she is still the record owner of the time-share interest, she should remain obligated to pay the outstanding post-discharge assessments.

According to Ocean High, the agreement to pay dues contained in the deed and the condominium declaration is not an executory contract that could have been rejected by the trustee, but rather a covenant that runs with the land. Liability for post-petition assessments thus attaches to the owner of the property, and as a "recordation" state, the state of Maryland considers the record owner to be the rightful owner of the property in question. Accordingly, Ocean High argues that its post-petition assessments do not constitute a pre-petition "claim" for purposes of debtor's bankruptcy, and that as the current record owner, debtor is liable for the post-petition assessments. Moreover, Ocean High questions our jurisdiction to resolve this matter as debtor's case is now closed.

DISCUSSION

I.

We agree with Ocean High that after a bankruptcy case is closed, the bankruptcy court loses jurisdiction to resolve issues arising between parties to the bankruptcy. However, Ocean High's challenge to our jurisdiction in this matter fails to take into account the express authority granted the court under 11 U.S.C. § 350(b). Section 350(b) provides that a "case may be reopened in the court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause." See also Fed. R.Bankr.P. 5010 ("A case may be reopened on motion of the debtor or other party in interest pursuant to § 350(b) of the Code."). "`The right to reopen the case depends upon the circumstances of the individual case and the decision whether to reopen is committed to the court's discretion.'" In re Winebrenner, 170 B.R. 878, 881 (Bankr.E.D.Va.1994) (quoting In re Carter, 156 B.R. 768, 770 (Bankr.E.D.Va.1993)). See also Judd v. Wolfe, 78 F.3d 110, 116 (3d Cir.1996) (decisions to reopen are reviewed under an abuse of discretion standard); In re Figlio, 193 B.R. 420, 424 (Bankr.D.N.J.1996) ("The decision to reopen the case is within the broad discretion of the bankruptcy court."). Debtor's motion here seeks relief from a post-petition claim that she alleges was discharged as an in personam claim against her upon completion of her Chapter 13 plan. We must exercise our discretion to reopen the case to resolve this issue, and will grant debtor's motion to reopen.

II.

The issue of whether or not postpetition condominium or time-share common-area maintenance fees or assessments may be discharged by a debtor as a pre-petition obligation has been debated in the case law. The dispute centers around the proper reach of the definition of a "claim" under the Bankruptcy Code. Three lines of thought have evolved addressing the issue.

Following the Seventh Circuit's decision in In re Rosteck, 899 F.2d 694, 696 (7th Cir. 1990), one line of cases holds that post-petition condominium or time-share assessments are dischargeable because the debt due from the debtor to the association arose prior to the filing of the petition. The Rosteck court determined that although the obligation due from the debtor at filing was not fixed or matured, and was contingent on future ownership, the liability would be discharged as a "claim" under the definitional structure of the Bankruptcy Code. 11 U.S.C. § 101(5). The term "claim" is defined in the Code as a right to payment, whether or not such right is liquidated, unliquidated, fixed, contingent, matured or unmatured. Id.

Other courts have followed Rosteck, or have independently reached the same conclusion.³See, e.g., In re Elias, 98 B.R. 332, 337 (N.D.Ill.1989) (assessments that accrue post-petition but arise from a pre-petition contract are "debts"); In re Lamb, 171 B.R. 52, 55 (Bankr.N.D.Ohio 1994) (the contractual obligation to pay the assessments existed prepetition and was thus a contingent claim subject to discharge); In re Garcia, 168 B.R. 320 (Bankr.E.D.Mich.1993) (fees are subject to discharge as pre-petition debt subject to debtor's exercise of statutory right to redeem); In re Wasp, 137 B.R. 71, 72 (Bankr. M.D.Fla.1992) ("Any Association fees coming due after Debtors' filing of their bankruptcy petition were no more than unmatured portions of their original liability to the Association."). See also In re Affeldt, 164 B.R. 628, 631 (Bankr.D.Minn.1994), aff'd on other grounds 60 F.3d 1292 (8th Cir.1995) (district court follows Rosteck but circuit declines to adopt either Rosteck or Rosenfeld based upon record presented).⁴

A second line of cases, most notably the Fourth Circuit's decision in In re Rosenfeld, 23 F.3d 833, 837 (4th Cir.), cert. denied ___ U.S. ___, 115 S.Ct. 200, 130 L.Ed.2d 131, reh'g denied ___ U.S. ___, 115 S.Ct. 622, 130 L.Ed.2d 530 (1994), rejects the conclusion that the assessments are dischargeable as pre-petition debts, concluding instead that an association has no claim against the debtor until each assessment becomes due. Rosenfeld focused on Virginia state law, under which a person is responsible for payment of assessments during the period of ownership, and on association documents which stated that the obligation to pay assessments is "a covenant running with the land and binds and inures to the benefit of all present and future owners." Id. The obligation is "a function of owning the land with which the covenant runs", and does not arise "from a pre-petition contractual obligation." Id.⁵ The court concluded that the association's right to payment for the common expenses did not arise until post-petition, and is therefore not discharged. Id. at 838.

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