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Goudelock v. Sixty-01 Association of Apartment Owners

United States Court of Appeals, Ninth Circuit

July 10, 2018

Penny D. Goudelock, Appellant,
v.
Sixty-01 Association of Apartment Owners, Appellee.

          Argued and Submitted February 6, 2018 Seattle, Washington

          Appeal from the United States District Court for the Western District of Washington Marsha J. Pechman, Senior District Judge, Presiding D.C. No. 2:15-cv-01413-MJP

          Amanda K. Rice (argued), Jones Day, Detroit, Michigan; Nathaniel P. Garrett, Jones Day, San Francisco, California; Christina L. Henry, Henry DeGraaff & McCormick P.S., Seattle, Washington; for Appellant.

          Stephen M. Smith (argued), Sound Legal Partners PLLC, Kenmore, Washington, for Appellee.

          J. Erik Heath, San Francisco, California, as and for Amicus Curiae National Association of Consumer Bankruptcy Attorneys.

          Before: Milan D. Smith, Jr. and Mary H. Murguia, Circuit Judges, and Eduardo C. Robreno, [*] District Judge.

         SUMMARY[**]

         Bankruptcy

         The panel reversed the district court's decision affirming the bankruptcy court's summary judgment in favor of a condominium association, which sought in an adversary proceeding to determine the dischargeability of a debtor's personal obligation to pay condominium association assessments that accrued between the date the debtor filed her Chapter 13 bankruptcy petition and the date the condominium unit was foreclosed upon.

         Agreeing with the reasoning of the Seventh Circuit in a Chapter 7 case, the panel held that condominium association assessments that become due after a debtor has filed for bankruptcy under Chapter 13 are dischargeable under 11 U.S.C. § 1328(a). The panel concluded that the debt arose prepetition and was not among exceptions listed in § 1328(a). The panel held that the Takings Clause was not implicated because the condominium association retained its in rem interest. The panel also concluded that equitable arguments did not override the express provisions of the Bankruptcy Code.

          OPINION

          ROBRENO, DISTRICT JUDGE

         Appellant Penny Goudelock appeals the district court's affirmance of the bankruptcy court's grant of summary judgment in favor of appellee, Sixty-01 Association of Apartment Owners ("Sixty-01"). The issue is whether condominium association ("CA") assessments that become due after a debtor has filed for bankruptcy under Chapter 13 of the Bankruptcy Code are discharged upon confirmation of the plan. We have jurisdiction pursuant to 28 U.S.C. § 158(d)(1). We conclude that such assessments are dischargeable under 11 U.S.C. § 1328(a) and, accordingly, reverse and remand.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         The facts are not in dispute. Goudelock purchased a condominium unit in Redmond, Washington in 2001. Her deed was subject to a declaration of covenants and restrictions (the "Declaration") that was recorded against the property in 1978. The Declaration provides that Sixty-01, a CA, may charge property owners assessments for monthly fees and for maintenance, repairs, and capital improvements.

         The Declaration grants Sixty-01 two methods for collecting unpaid assessments. It provides that all unpaid assessments: (1) constitute a lien on the condominium unit, enforceable through foreclosure; and (2) create a personal obligation through which Sixty-01 can bring suit for damages against the owner of the condominium unit.[1]

         Goudelock stopped paying the CA assessments in 2009 and Sixty-01 sought to enforce its lien by initiating foreclosure proceedings in state court. Goudelock moved out of her condominium unit and, in March of 2011, filed for bankruptcy under Chapter 13. As part of her Chapter 13 plan, Goudelock surrendered the condominium unit. Sixty-01 filed a proof of claim attesting to $18, 780.39 in unpaid CA assessments and noted that they continued to accrue at a monthly rate of $388.46. Before the plan was confirmed by the bankruptcy court, Sixty-01 canceled the foreclosure sale because the mortgage lender paid the outstanding assessments. The condominium unit sat unoccupied until ...


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