Reba Danastorg

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UNITED STATES BANKRUPTCY COURT
FOR THE
DISTRICT OF MASSACHUSETTS
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
In re
REBA DANASTORG, 	Chapter 13
Debtor 	Case No. 07-12948-JNF
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MEMORANDUM
I. INTRODUCTION
The matters before the Court are the “Objection to Confirmation of Debtor’s
Amended Chapter 13 Plan by Secured Creditor,” filed by the Whiting Lane Condominium
Trust (the “Condo Trust”) and the Debtor’s Objection to the Proof of Claim filed by the
Condo Trust. The Court heard the matters on December 13, 2007 and took them under
advisement. 	The Condo Trust and the Debtor filed briefs by the January 21, 2008 and
February 7, 2008 deadlines imposed by the Court.
II. BACKGROUND
Reba Danastorg (the “Debtor”) filed a Chapter 13 petition on May 11, 2007. She filed
her Schedules and Chapter 13 plan on May 29, 2007. On Schedule A-Real Property, she
listed an ownership interest in property she identified as 3 Whiting Road, Hingham (the
“Property”). 	She valued the Property at $733,000. 	On Schedule D-Creditors Holding
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Secured Claims, she listed “Homecome Fin” as the holder of a mortgage on the Property
in the sum of $476,250. On Scheduled F-Creditors Holding Unsecured Nonpriority Claims,
she listed the Condo Trust with a claim in the sum of $6,967.12 for “2006-2007 condo fees.”
On June 26, 2007, the Debtor filed a First Amended Chapter 13 Plan. Although she
did not amend Schedule D, in her amended plan, in Section I, captioned “Secured Claims,”
the Debtor listed the Condo Trust and proposed to pay it “priority condo fees” in the sum
of $1,440 and a “non priority condo fee” in the sum of $2,722, as well as mortgage arrears
in the sum of $97,252.80.
On September 21, 2007, the Condo Trust filed its objection to confirmation of the
Debtor’s amended Chapter 13 plan. Referencing its proof of claim and attaching the same
accounting that it attached to its proof of claim to its objection, the Condo Trust stated that
it was owed $7,267 and that the Debtor misstated the prepetition arrearage due for unpaid
condominium fees and attorneys’ fees, all of which it claimed were secured by the
Property.
On October 22, 2007, the Debtor filed an objection to the Condo Trust’s proof of
claim. The Debtor complained that the Condo Trust filed its proof of claim without proper
supporting documentation, including 1) prepetition condo fees paid by the Debtor; 2) an
itemization of the bill for legal fees; and 3) proof that the Condo Trust followed the notice
requirements set forth in Mass. Gen. Laws ch. 183A, § 6 in order to perfect its lien. The
Debtor also objected to the proof of claim, arguing that pursuant to 11 U.S.C. § 523(a)(16),
“the debtor is not obligated to pay any prepetition condominium association fees, late fees,
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costs or attorney’s fees. . . .” Although the Debtor stated that the Condo Trust may have
a priority lien for postpetition delinquent “common expenses,” it asserted that the lien does
not include amounts attributable to special assessments, late charges, fines, penalties, and
interest assessed by the Condo Trust. It added that the Condo Trust’s failure to send the
Debtor’s first mortgagee notice of the 60 day delinquency of common expenses affects the
priority of the amount it may be able to collect.
The Condo Trust filed an Opposition to the Debtor’s Objection to its proof of claim.
It attached copies of two 	letters that it sent by first class, certified mail to the Debtor,
“Homecomings Financial,” Robert McCarthy, Trustee of the McCarthy Realty Trust, and
Lee S. Kaplan. 	In the first letter, dated August 25, 2006, the Condo Trust, through its
attorney, notified the Debtor that she was delinquent in the payment of condominium fees
for the months of April, May June, July, and August of 2006 in the amount of $1,200.
Additionally, it claimed it was entitled to “late fees for the period April 2006 to the present
in the amount of $125; May 2006 in the amount of $1000, June 2006 in the amount of $75.00,
July 2006 in the amount of $50.00 and August 2006 in the amount of $25.00.” It observed
that “[t]hese assessments are for the total amount due and owing of $1,575.00.” The Condo
Trust also asserted that it was entitled to attorney’s fees and costs totaling $285.36. 	It
demanded payment within 30 days.
In the second letter, dated November 1, 2006, which the Condo Trust sent by first
class, certified mail to the same parties identified above, the Condo Trust notified the
Debtor that it intended to institute an action to collect amounts due and owing and to
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The Condo Trust listed late charges for “April 2006-October 2006 @1
$25/month.” Of course, $25 multiplied by seven does not equal $875. The Court is
unable to explain this error.
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enforce its lien because the delinquency had not been cured. It stated that $1,920 was due
for common expenses for eight months beginning in April 2006. It also sought late charges
of $875 and collection costs of $678.92. 	The Condo Trust advised the Debtor that she1
should “be aware that, should legal action be necessary, the Trust’s lien will have priority
over the mortgage to the extent of the common charges due for up to six months, plus
collection cost and attorney fees [sic].”
III. APPLICABLE LAW
The Debtor argues that prepetition condominium fees are dischargeable under
section 523(a)(16). That section excepts from discharge “any debt -
for a fee or assessment that becomes due and payable after the order for relief
to a membership association with respect to the debtor’s interest in a unit
that has condominium ownership, in a share of a cooperative corporation, or
a lot in a homeowners association, for as long as the debtor or the trustee has
a legal, equitable, or possessory ownership interest in such unit, such
corporation, or such lot, but nothing in this paragraph shall except from discharge
the debt of a debtor for a membership association fee or assessment for a period
arising before entry of the order for relief in a pending or subsequent bankruptcy
case . . . .
11 U.S.C. § 523(a)(16)(emphasis supplied). 	Thus, section 523(a)(16) specifically excepts
from discharge in a Chapter 7 case, postpetition condominium fees. Such postpetition fees
would not normally be discharged as the Chapter 7 discharge pertains to “debts that arose
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Section 727(b) provides:2
Except as provided in section 523 of this title, a discharge under
subsection (a) of this section discharges the debtor from all debts that
arose before the date of the order for relief under this chapter, and any
liability on a claim that is determined under section 502 of this title as if
such claim had arisen before the commencement of the case, whether or
not a proof of claim based on any such debt or liability is filed under
section 501 of this title, and whether or not a claim based on any such debt
or liability is allowed under section 502 of this title.
11 U.S.C. §727(b).
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before the date of the order for relief.”2
In Chapter 13, section 1328 of the Bankruptcy Code governs the discharge. 	It
provides that “the court shall grant the debtor a discharge of all debts provided for by the
plan or disallowed under section 502 of this title, except any debt - (2) of the kind specified
in section 507(a)(8)(C) or in paragraph (1)(B), (1)(C), (2), (3), (4), (5), (8), or (9) of section
523(a).” 11 U.S.C. § 1328(a). Section 1328 does not mention section 523(a)(16), and the
Court finds that section 523(a)(16) is inapplicable to Chapter 13 cases, where the Debtor has
an ongoing duty to pay postpetition obligations, such as utilities and condominium fees,
as they come due. 	Moreover, section 523(a)(16) is not relevant because it pertains to
unsecured debts, and the Condo Trust, as discussed more fully below, has a statutory lien
against the Property which the Debtor must address in accordance with the provisions of
Chapter 13.
The legislature of the Commonwealth has provided a statutory lien for common
expenses and other obligations owed to condominium associations. Section 6(a) of Mass.
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Gen. Laws ch. 183(a) provides in relevant part:
(a)(i) Except as provided in clause (ii) herein, all common expenses must be
assessed against all units in accordance with their respective percentages of
undivided interest in the common areas and facilities. The organization of unit
owners shall have a lien on a unit for any common expense assessment levied against
that unit 	from 	the 	time 	the 	assessment 	becomes 	due. 	Common 	expense
assessments must be made at least annually, based on a budget adopted at
least annually in accordance with the master deed, trust, or by-laws.
(ii) If any expense is incurred by the organization of unit owners as a result of the
unit owner’s failure to abide by the requirements of this chapter or the requirements
of the master deed, trust, by-laws, restrictions, rules or regulations, or by the
misconduct of any unit owner, or his family members, tenants, or invitees,
the organization of unit owners may assess that expense exclusively against the unit
owner and such assessment shall constitute a lien against that unit from the time the
assessment is due, and such assessment shall be enforceable as a common expense
assessment under this chapter. Notwithstanding the provisions of clause (1), the
organization of unit owners may assess the cost of maintaining, repairing or
replacing a limited common area and facility, solely to the owner of the unit
to which a limited common area and facility is appurtenant, allocated, or
designated, and such assessment shall be enforceable as a common expense
assessment under this chapter; in the alternative, the organization of unit
owners may require the owner of the unit to which a limited common area
and facility is appurtenant, allocated, or designated to maintain, repair, or
replace such limited common area and facility without the intervention of the
organization of unit owners. . . . The organization of unit owners may also assess
any fees, attorneys’ fees, charges, late charges, fines, costs of collection and
enforcement, court costs, and interest charged pursuant to this chapter against the
unit owner and such assessment shall constitute a lien against the unit from the time
the assessment is due, and shall be enforceable as common expense assessments
under this chapter.
(b) The unit owner shall be personally liable for all sums assessed for his
share of the common expenses including late charges, fines, penalties, and
interest assessed by the organization of unit owners and all costs of collection
including attorneys' fees, costs, and charges.
c) When any portion of the unit owner’s share of the common expenses has
been delinquent for at least sixty days subsequent to April 1, 1993, the
organization of unit owners shall send a notice stating the amount of the
delinquency to the unit owner by certified and first class mail. The
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organization of unit owners shall also send a notice stating the amount of the
delinquency to the first mortgagee by certified and first class mail, provided,
that the first mortgagee has informed the organization of unit owners of its
name and mailing address. Furthermore, thirty days prior to the filing of an
action by the organization of unit owners to enforce its lien for delinquent common
expenses, the organization of unit owners shall send a notice stating its intention to
file said action to the first mortgagee by certified and first class mail, provided that
the first mortgagee has informed the organization of unit owners of its name
and mailing address. . . .
A lien under this section shall be enforced in the manner provided in sections
five and five A of chapter two hundred and fifty-four. Such lien is prior to all
other liens and encumbrances on a unit except (i) liens and encumbrances
recorded before the recordation of the master deed, (ii) a first mortgage on
the unit recorded before the date on which the assessment sought to be
enforced became delinquent, and (iii) liens for real estate taxes and other
municipal assessments or charges against the unit. This lien is also prior to the
mortgages described in clause (ii) above to the extent of the common expense
assessments based on the budget adopted pursuant to subsection (a) above which
would have become due in the absence of acceleration during the six months
immediately preceding institution of an action to enforce the lien and to the extent
of any costs and reasonable attorneys’ fees incurred in the action to enforce the lien,
provided however, that the amount of attorneys’ fees incurred prior to
January 1, 1993 which shall be prior to the mortgage described in clause (ii)
above shall be limited to no more than two thousand and five hundred
dollars, and provided further, that payment of the assessments with respect
to such six month period, and to the extent of any costs or reasonable
attorneys’' fees incurred in said action, shall serve to discharge such lien to
the extent that such lien is prior to such mortgages described in clause (ii)
above. The priority amount shall not include any amounts attributable to special
assessments, late charges, fines, penalties, and interest assessed by the organization
of unit owners. The failure of the organization of unit owners to send the first
mortgagee either the notice of sixty day delinquency of common expenses,
as described above, or the thirty day notice of intent to file an action to
enforce the lien for delinquent common expenses, as described above, shall
not affect the priority lien of the organization of unit owners for up to six
months’ common expenses, but the priority amount shall not include any
costs or attorneys’ fees incurred in the action to enforce the lien. . . . Recording
of the master deed constitutes record notice and perfection of this lien; no further
recordation of any claim of lien for assessment under this section is required.
Neither this section nor anything contained in sections five or five A of
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chapter two hundred and fifty-four shall be deemed to prohibit actions to
recover sums for which this subsection creates a lien or to prohibit an
organization of unit owners from taking a deed in lieu of enforcement of the
lien created by this section. . . .
Mass. Gen. Laws ch. 183A, § 6.
Section five of chapter 254 provides:
A . . . lien established under section six of chapter one hundred and
eighty-three A . . . shall be enforced by a civil action brought in the superior
court for the county where such land lies or in the district court in the judicial
district where such land lies. The plaintiff shall bring his action in his own behalf
and in behalf of all other persons in interest who shall become parties. An attested
copy of the complaint, which shall contain a brief description of the property
sufficient to identify it, and a statement of the amount due, shall be filed in the
registry of deeds and recorded as provided in section nine within thirty days of the
commencement of the action, or such lien shall be dissolved. All other parties in
interest may appear and have their rights determined in such action, and at
any time before entry of final judgment, upon the suggestion of any party in
interest that any other person is or may be interested in the action, or of its
own motion, the court may summon such person to appear in such cause on
or before a day certain or be forever barred from any rights thereunder. . . .
Mass. Gen. Laws ch. 254, § 5. Neither the Debtor nor the Condo Trust represented that the
Condo Trust commenced an action against the Debtor in the Superior Court. Accordingly,
the record is devoid of any information that would warrant a finding that the Condo
Trust’s statutory lien was dissolved by operation of law.
IV. DISCUSSION
The Court finds, based upon the plain language of Mass. Gen. Laws ch. 183A, § 6(a),
that the Condo Trust has a statutory lien with respect to all common expenses, fees,
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The Court is unaware of whether the Condo Trust commenced an action3
against the Debtor to enforce its lien before she filed her Chapter 13 case. If it has done
so and failed to record a copy of the complaint, its lien, at least to the extent of the
amount set forth in the complaint, would be dissolved. See Mass. Gen. Laws 254, § 5. If
it complied with the statute, the extent of its lien could be augmented by costs of
collection and enforcement, court costs, and interest charged. See Mass. Gen. Laws ch.
183A, § 6(a)(ii).
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attorneys’ fees, charges, late charges, and fines. 	The Court further finds that a portion of3
the Condo Trust’s lien, pursuant to the second paragraph of section 6(c), is entitled to
priority over all other liens except 1) liens and encumbrances recorded before the
recordation of the master deed, 2) a first mortgage recorded before the date of the
assessment sought to be enforced became delinquent, and 3) liens for real estate taxes and
other municipal assessments. 	Based upon the existing record, the Condo Trust has a
statutory lien entitled to priority over the first mortgage 	in the amount of 	$1,440 for
common expenses plus “any costs and reasonable attorneys’ fees incurred in the action to
enforce the lien,” but excluding “amounts attributable to special assessments, late charges,
fines, penalties , and interest assessed by the organization of unit owners,” assuming that
the Debtor’s mortgage with Homecomings Financial preceded the delinquency. Although
the full extent of the Condo Trust’s lien is not entitled to priority over the mortgage debt
and tax liens, it remains a lien against the property subordinate to real estate taxes and the
first mortgage; it is not discharged except in accordance with the provisions of a confirmed
plan and Chapter 13 of the Bankruptcy Code.
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V. CONCLUSION
In view of the foregoing, the Court shall enter an order sustaining the Condo Trust’s
objection to the Debtor’s First Amended Chapter 13 Plan and overruling the Debtor’s
objection to the Condo Trust’s proof of claim.
By the Court,
____________________________
Joan N. Feeney
United States Bankruptcy Judge
Dated: February 22, 2008
cc: Lawrence S. Levin, Esq., Richard S. Ravosa, Esq., Chapter 13 Trustee
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