Young v. 1200 Buena Vista Condominiums

• Decision Date: 27 August 2012
• Docket Number: No. 12cv0786.,12cv0786.
• Citation: 477 B.R. 594
• Parties: Bradley J. YOUNG, Appellant, v. 1200 BUENA VISTA CONDOMINIUMS, 1200 Buena Vista Unit Owners Association, City of Pittsburgh, County of Allegheny, PNC Bank, N.A., Appellees.
• Court: U.S. District Court — Western District of Pennsylvania

477 B.R. 594

Bradley J. YOUNG, Appellant,

v.1200 BUENA VISTA CONDOMINIUMS, 1200 Buena Vista Unit Owners Association, City of Pittsburgh, County of Allegheny, PNC Bank, N.A., Appellees.

No. 12cv0786.

United States District Court,

W.D. Pennsylvania.

Aug. 27, 2012.

Phillip S. Simon, Pittsburgh, PA, for Appellant.

S. James Wallace, Griffith, McCague & Wallace, P.C., Jeffrey R. Hunt, Goehring, Rutter & Boehm, Pittsburgh, PA, for Appellees.

Memorandum Opinion re: Appeal from Bankruptcy Court (Doc. No. 1)

ARTHUR J. SCHWAB, District Judge.

I. Introduction

Bradley J. Young (“Young”) appeals from a Final Order of the United States Bankruptcy Court for the Western District of Pennsylvania dismissing his adversarial proceeding against 1200 Buena Vista Condominiums, et al (“Buena Vista”).¹ Doc. Nos. 1 and 1–7.² The Bankruptcy Court held that the lien held by Buena Vista was a security interest, and not a statutory lien, within the meaning of the Bankruptcy Code. In re Young ( “Young II” ), 467 B.R. 792, 800–05 (Bankr.W.D.Pa.2012). Young originally filed for Chapter 13 bankruptcy in 2009 (“2009 bankruptcy proceeding”). Doc. No. 6, 23. The Bankruptcy Court dismissed the case without prejudice in July, 2011. Id., 24. Young then filed for Chapter 13 bankruptcy in November, 2011 (“underlying bankruptcy proceeding”). Doc. No. 7, 10–11. That same month, Young filed an adversarial proceeding in the Bankruptcy Court, which attempted to partially avoid the lien held by Buena Vista,³ or in the alternative sought relief under 11 U.S.C. § 522(f). Id. at 27. The Bankruptcy Court dismissed the adversarial proceeding. Doc. No. 1–7; Young II, 467 B.R. 792. Young appealed arguing that the Bankruptcy Court erred in characterizing the lien held by Buena Vista as a security interest rather than a statutory lien. For the reasons that follow, the Court agrees with Young and therefore, the decision of the Bankruptcy Court will be REVERSED.

II. Jurisdiction and Standard of Review

The Bankruptcy Court had jurisdiction pursuant to 28 U.S.C. § 157.⁴ Young sought certification from the Bankruptcy Court to file a direct appeal to the United States Court of Appeals for the Third Circuit pursuant to 28 U.S.C. § 158(d)(2)(A). Doc. No. 1–10. The Bankruptcy Court denied the request. Doc. No. 1–12. This Court has jurisdiction pursuant to 28 U.S.C. § 158(a)(1).

The standard of review is the same for the District Court and for the Court of Appeals, both of which review findings of fact for clear error and exercise plenary review over questions of law. In re Mintze, 434 F.3d 222, 227–28 (3d Cir.2006); In re Schick, 418 F.3d 321, 323 (3d Cir.2005). When considering a mixed question of fact and law, the issue must be broken down into its component parts, with underlying questions of fact being reviewed for clear error and underlying questions of law being reviewed de novo. Hornick v. I.R.S., 252 B.R. 897, 899 (W.D.Pa.2000) (Lee, J.) (citing In re Brown, 951 F.2d 564 (3d Cir.1991)).

III. Factual Background

There are no disputes with respect to the facts of this case. Young and his ex-wife jointly conveyed to Young, individually, the deed for the condominium as issued on November 1, 1991.⁵ Doc. No. 8, 19. The deed provided that it was, “[t]ogether with and subject to those rights, duties and obligations as set forth in the aforementioned Declaration of Condominium and as set forth in the By–Laws of the 1200 Buena Vista Condominium.” Id.

The Declaration of Condominium provides, in relevant part:

Assessment of Charges. All sums assessed by resolutions duly adopted by the Association against any Unit for the share of Common Expenses chargeable to that Unit shall constitute a lien against the affected Unit in accordance with the Act[ ⁶] and also shall be the personal liability of the Owner of the Unit so assessed and shall, until fully paid, constitute a lien against such Unit which shall be enforceable as provided in the Act or as otherwise permitted by law.

All present and future Unit Owners and Residents of Units shall be subject to and shall comply with the provisions of this Declaration and the By—Laws as they may be amended from time to time. The acceptance of a Deed or execution of a lease or contract conveying an interest in, or the occupancy of, any Unit shall constitute such agreement.

Id., 17; Bankr.W.D. Pa. No. 11–26777, Doc. No. 37–3, 15. The By–Laws provide, in relevant part:

Lien for Assessment—The Association shall have a lien on a Unit for any Assessment levied against that Unit from the time the Assessment becomes due together with any interest payable pursuant hereto. The Association's lien may be foreclosed in like manner as a mortgage on real estate. If an Assessment is payable in installments, the full amount of the Assessment becomes effective as a lien from the time the first installment thereof becomes due. In accordance with the provisions of Section 3315 of the Act, such lien shall be prior to all other liens and encumbrances of a Unit except [certain exceptions relating to mortgages and taxes.]

Id., 18. Sometime during the year 2000, Young stopped paying his assessment, and on February 27, 2009, Buena Vista obtained a judgment against Young in the amount of $14,900. Young II, 467 B.R. at 795–96 (citing In re Young ( “Young I” ), 2011 WL 7110250, *1 (Bankr.W.D.Pa. March 4, 2011)). The judgment, however, remained unpaid. During the 2009 bankruptcy proceeding, Young filed an objection to the lien of Buena Vista which was denied by the Bankruptcy Court.⁷Young I, 2011 WL 7110250, *3.

In the underlying bankruptcy proceeding, Young admitted that the feasibility of his Chapter 13 plan was contingent on a large percentage of Buena Vista's lien being avoidable.⁸Young II, 467 B.R. at 799 (citing recording of oral argument before the Bankruptcy Court). This case presents the issue of whether the condominium lien that Young is trying to partially avoid is a statutory lien or security interest under the Bankruptcy Code. While Young, the appellant, argues that the Bankruptcy Court erred in concluding that the condominium lien was a security interest and thus was not (partially) avoidable, Buena Vista, the appellee, contends that the Bankruptcy Court was correct in its assessment of the lien.⁹

IV. Discussion

This case raises a question of statutory interpretation with respect to 11 U.S.C. § 101(53) and its interaction with 68 Pa.C.S. § 3315. As the United States Supreme Court has stated, “[i]nitially, it is worth recalling that Congress worked on the formulation of the [Bankruptcy] Code for nearly a decade. It was intended to modernize the bankruptcy laws, [ ] and as a result made significant changes in both the substantive and procedural laws of bankruptcy.” United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 240, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989) (citing Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50, 52–53, 102 S.Ct. 2858, 73 L.Ed.2d 598 (1982)).

As the Bankruptcy Court in this case aptly stated (and the parties do not dispute):

The Bankruptcy Code identifies and recognizes three types of liens: judicial liens, security interests, and statutory liens. A judicial lien is defined as a “lien obtained by judgment, levy, sequestration, or other legal or equitable process or proceeding.” 11 U.S.C. § 101(36). A “security interest” is defined as a “lien created by an agreement.” 11 U.S.C. § 101(51). Finally, the Bankruptcy Code defines a “statutory lien” as a lien that arises “solely by force of a statute on specified circumstances or conditions, [or lien of distress for rent, whether or not statutory, but does not include security interest or judicial lien, whether or not such interest or lien is provided by or is dependent on a statute and whether or not such interest or lien is made fully effective by statute.]” 11 U.S.C. § 101(53).

Young II, 467 B.R. at 800.

The United States Supreme Court has noted that:

In such a substantial overhaul of [secured creditors and secured claims], it is not appropriate or realistic to expect Congress to have explained with particularity each step it took. Rather, as long as the statutory scheme is coherent and consistent, there generally is no need for a court to inquire beyond the plain language of the statute.

Ron Pair Enterprises, 489 U.S. at 240–41, 109 S.Ct. 1026.

A. Statutory Liens and Security Interests are Mutually Exclusive

A prima facie issue is whether the lien in this case can be both a security interest and a statutory lien under the Bankruptcy Code. As with all questions of statutory interpretation, the statute's language is the first thing that must be examined in determining if the liens are mutually exclusive. Ron Pair Enterprises, 489 U.S. at 241, 109 S.Ct. 1026 (citing Landreth Timber Co. v. Landreth, 471 U.S. 681, 685, 105 S.Ct. 2297, 85 L.Ed.2d 692 (1985)). Title 11 does not contain any provision which states that the three types of liens either are, or are not, mutually exclusive. See generally11 U.S.C. § 101 et seq.

Thus, it is appropriate to examine the legislative history of the Bankruptcy Code to determine whether Congress intended that the three types of liens be mutually exclusive. The legislative history to the Code explicitly states that these “three categories are mutually exclusive and are exhaustive except for certain common law liens.” H.R.Rep. No. 595, 95th Cong., 1st Sess. 312 (1977), 1978 U.S.C.C.A.N. 5963, 6269; see also Young II, 467 B.R. at 801;In re Aikens, 87 B.R. 350 (Bankr.E.D.Pa.1988). Because condominium liens are a creation of statute, 68 Pa.C.S. § 3315, they cannot be common law liens. In re Chen, 351 B.R. 355, 361 (Bankr.E.D.Va.2006). Thus, the lien at issue in this case must either be a statutory lien, a judicial lien, or a security interest. It cannot be both a statutory lien and a security interest. ¹⁰

B. Condominium Liens Automatically Arise Under Pennsylvania Law

In Gateway Towers Condominium Assoc. v. Krohn, 845 A.2d 855 (Pa.Sup...