544 B.R. 315
Bankr. E.D.N.C.2016Background
- Debtor Dianna Borgus owned a condominium subject to Driftwood Manor Owners Association covenants requiring periodic assessments; she filed Chapter 13 on April 2, 2012 and converted to Chapter 7 on August 8, 2014, stating intent to surrender the unit.
- Plaintiff filed a proof of claim for prepetition assessments and later sought nondischargeability of post-petition, pre-conversion assessments (total $7,522.61) as an exception to discharge under 11 U.S.C. § 523(a)(16).
- Plaintiff filed an adversary complaint (originally under § 503), then a Second Amended Complaint adding § 523(a)(16); debtor moved for summary judgment asserting (1) § 523(a)(16) refers to the conversion date (making the debts dischargeable) and (2) the amended complaint was time-barred / did not relate back.
- Plaintiff moved for summary judgment arguing “order for relief” in § 523(a)(16) means the original petition date, so post-petition/pre-conversion assessments are nondischargeable, and sought attorneys’ fees under the declaration and N.C. statute.
- Court found the § 523(a)(16) claim timely (Rule 4007 allows complaints other than those governed by § 523(c) to be filed at any time) and held the phrase "order for relief" in § 523(a)(16) refers to the petition date (not the conversion date), rendering the post-petition/pre-conversion assessments nondischargeable.
- Court awarded plaintiff reduced attorneys’ fees ($6,443.75) after applying reasonableness reductions for lumping, vague entries, ministerial tasks, and disproportion to the amount in controversy; total nondischargeable judgment = $13,966.36.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Timeliness of § 523(a)(16) claim | No deadline applies; Rule 4007(b) permits such complaints anytime; alternatively, amended complaint relates back to original | The § 523(a)(16) claim was added after the deadline and does not relate back because it raises different facts | Claim timely: Rule 4007(b) permits it; in any event the amendment relates back — timely |
| Meaning of "order for relief" in § 523(a)(16) (petition date vs conversion date) | "Order for relief" means petition date; otherwise conversion would enable debtors to escape HOA assessments; aligns with Hijjawi | § 348(b) makes "order for relief under this chapter" the conversion date; read with §§ 348, 523, 727, debts pre-conversion should be dischargeable | "Order for relief" in § 523(a)(16) refers to the petition date; post-petition, pre-conversion HOA assessments are nondischargeable under § 523(a)(16) |
| Interaction of § 348 and exceptions to discharge (§ 523) | § 348(b) exceptions are narrow; omission of § 523(a)(16) from § 348(b) shows Congress intended petition date for § 523(a)(16) | § 348(b) should be read with § 727 and § 523 to effect conversion-date treatment | Court gives effect to plain text and structure: § 348(b) does not alter the meaning of "order for relief" in § 523(a)(16); petition date controls |
| Attorneys' fees entitlement and amount | Entitled to fees under association declaration and N.C. law; requested fees reasonable | Debtor challenged reasonableness and amount | Fees allowed but reduced 50% for excessive, vague, lumped and ministerial billing; awarded $6,443.75; fees nondischargeable as attendant to nondischargeable debt |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- United States v. Ron Pair Enters., Inc., 489 U.S. 235 (statutory text is controlling)
- Hijjawi v. Five North Wabash Condominium Ass’n, 495 B.R. 839 (N.D. Ill. 2013) (held "order for relief" in § 523(a)(16) is petition date)
- Rosenfeld v. River Place East Housing Corp. (In re Rosenfeld), 23 F.3d 833 (4th Cir. 1994) (policy considerations for debtors attempting reorganization)