Nacinovich v. Holiday City at Berkeley S'holders Corp. (In re Nacinovich)
| Decision Date | 31 May 2013 |
| Docket Number | Adversary No.: 13-1074 (MBK),Case No.: 12-30874 (MBK) |
| Parties | In re: MICHAEL NACINOVICH and DEBORAH ANN NACINOVICH, Debtors. MICHAEL NACINOVICH, Plaintiff, v. HOLIDAY CITY AT BERKELEY SHAREHOLDERS CORPORATION, Defendant. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
NOT FOR PUBLICATION
Mary Beth Schroeder, Esq.
Law Office of Lee Gottesman
Attorney for Debtor Michael Nacinovich
Attorney for Holiday City at Berkeley Shareowners Corporation (improperly pled as Holiday
City at Berkeley Shareholders Corporation)
MICHAEL B. KAPLAN, U.S.B.J.
MEMORANDUM DECISIONI. Introduction
The instant Adversary Proceeding was filed by Plaintiff, Debtor ("Plaintiff") based upon allegations that Defendant, Holiday City at Berkely Shareowners Corporation ("Holiday City") attempted to collect a debt from Plaintiff which had been previously discharged. On April 4, 2013, the Plaintiff filed a Motion for Summary Judgment ("Motion"). On April 22, 2013, Holiday City filed an Opposition and Cross Motion for Summary Judgment ("Cross Motion") seeking a ruling in its favor. The Court has reviewed the pleadings submitted and entertained oral argument on April 29, 2013. Additionally, supplemental briefing was permitted and considered. The Court issues the following ruling:
II. Jurisdiction
The Court has jurisdiction over this contested matter under 28 U.S.C. §§ 1334(b) and 157(a) and the Standing Order of the United States District Court dated July 10, 1984, as amended September 18, 2012, referring all bankruptcy cases to the bankruptcy court. This matter is a core proceeding within the meaning of 28 U.S.C. §§ 157(b)(2)(K) and (O). Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
III. Background
On August 23, 2012, Plaintiff, together with his wife, filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. The Petition filed by the Plaintiff listed Holiday City as a creditor in connection with unpaid maintenance fees relating to non-residential real property located in an age-restricted senior community operated by Holiday City. The property was abandoned by the Trustee on October 27, 2012 and Plaintiff and his wife received an Order ofDischarge from the Court on November 30, 2012.
On or about November 21, 2012, the Plaintiff received a billing statement from Holiday City which listed outstanding charges in the amount of $2,290.00. Thereafter, the Plaintiff filed the adversary proceeding arguing that Holiday City's remittance of the statement amounts to an in personam attempt to collect an underlying pre-petition debt in violation of the automatic stay. Holiday City contends that it made no attempt to collect, but that it merely supplied an updated status ledger reflecting the balance of the assessments remaining unpaid.
In addition, Holiday City states that it recorded a lien against the property in question on May 18, 2009 in the amount of $570.00. See Attachment to Certification of Counsel, Docket Entry No. 6-2 at *4. Holiday City therefore asserts that it was permitted to take action to recover its lien against the property after it was abandoned. In light of the fact that the property was abandoned on October 27, 2012, Holiday City contends that it permissibly provided an updated ledger of outstanding maintenance assessments to the Plaintiff on November 21, 2012. Holiday City further asserts that it is a secured creditor and that it remains permitted to collect upon its liens on the property.
The Court notes that the amount listed on the updated billing statement, $2,900.00, is significantly higher than the amount of the recorded lien, $570.00. As a result, during oral argument on this matter the Court questioned the reason for this discrepancy. Counsel for Holiday City explained that the increase was due to fees and assessments which accrued as a result of additional missed payments. The Court requested supplemental briefing on this issue, which Holiday City provided. In its supplemental brief, Holiday City contends that, "in addition to the May, 2009 recorded lien on the Property, Holiday City carries an automatic lien on the Property upon the failure to pay maintenance assessments pursuant to the recorded December23, 1969 Declaration of Covenants and Restrictions." Holiday City's Brief in Further Support of Motion for Summary Judgment, Docket Entry No. 7, *5.
For the reasons that follow, the Court finds that Holiday City possesses a lien on the property for the full amount of the outstanding indebtedness and, accordingly, the automatic stay pursuant to 11 U.S.C. § 362(a) does not proscribe efforts by Holiday City to pursue collection of its in rem claim. The Court will grant summary judgment in favor of Holiday City.
IV. Discussion
As an initial matter, the Court determines that the remittance of the billing statement to the Plaintiff does, in fact, constitute a collection attempt on behalf of Holiday City. There could be no purpose for the letter other than to remind the Plaintiff of his alleged obligation to elicit payment. However, the inquiry does not end here. Holiday City holds a recorded lien on the property in the amount of $570.00. As a result, Holiday City is permitted to pursue an in rem action against the collateral in that amount. Had the billing statement sent to the Plaintiff reflected only the amount of the recorded lien, submission of same clearly would not be a violation of the automatic stay. However, Holiday City presented to the Plaintiff a billing statement which claimed an amount greater than the amount of the recorded lien. Therefore, remittance of the letter could be deemed an impermissible attempt to collect on the difference if Holiday City does not possess a valid lien on the additional amount.
If it is determined that Holiday City's lien is limited to the amount of the recorded lien, as alleged by the Plaintiff, then the additional fees included in the billing statement are unsecured and pursuit of them in any form constitutes a violation of the automatic stay. If, however, Holiday City holds a lien against the property in the full amount of the billingstatement, as alleged by Holiday city, then that full amount remains a valid in rem claim and remittance of the billing statement reflecting that full amount is not a violation of the automatic stay since such action occurred after the abandonment of the property by the Chapter 7 Trustee. Therefore, the outcome of the pending summary judgment motions, and the outcome of the entire adversary proceeding, will turn on whether Holiday City possesses a lien limited to the amount of the recorded lien, or in the amount of the recorded lien plus accrued fees and assessments.
Holiday City points to its recorded Declaration of Covenants and Restrictions dated December 23, 1969 as the document which controls this issue. Indeed, the language of this document dictates that non-payment of assessments, together with interest and cost of collection, shall constitute a continuing lien on the property. The Court must determine whether to enforce the terms of this document.
The Court first looks to the nature of the residential development known as Holiday City. It is a common interest housing subdivision, managed by a homeowners association, which is governed by its own, privately created set of rules.
Homeowners associations in common interest developments (as opposed to condominiums) do not arise out of a statute. Highland Lakes Country Club & Cmty. Ass'n v. Franzino, 186 N.J. 99, 110, 892 A.2d 646 (2006). A homeowners association is created by filing a "declaration of covenants, conditions and restrictions contained in deeds and association bylaws." Ibid. The covenants include restrictions and conditions that run with the land and **167 bind all current and future property owners. Ibid. The bylaws set forth rules and regulations governing the association's members. Id. at 111, 892 A.2d 646.
Although those who purchase properties subject to the rules of a homeowners association forego certain liberties, they receive benefits in exchange:
Restrictive covenants are used to maintain or enhance the value of land by reciprocal undertakings that restrain or regulate groups of properties. These covenants are common in condominium and other "common-interest" housing subdivisions. Prior to selling the first unit or plat, the subdivision or condominium owner creates a declaration or master deed that contains all of the restrictions. Property owners who purchase their properties subject to such restrictions give up a certain degree of individual freedom in exchange for the protections from living in a community of reciprocal undertakings.
Sbraga, 421 N.J. Super. at 71 (quoting Villas W. II of Willowridge Homeowners Ass'n, Inc. v. McGlothin, 885 N.E. 2d 1274, 1278-79 (Ind. 2008), cert. denied, — U.S. —, 129 S.Ct. 1527 (2009) (citation and footnote omitted). Consequently, the Plaintiff in this case received certain protections and benefits by subjecting himself to the bylaws contained inHoliday City's Declaration of Covenants and Restrictions. It logically follows, therefore, that the Plaintiff should be held to the terms to which he agreed when he purchased the property in question. Additionally, the Plaintiff has not argued that the terms of Holiday City's Declaration of Covenants and Restrictions are unreasonable or...
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