In re: Leah Ahn
NC-16-1421-BJuF
| 9th Cir. BAP | Nov 2, 2017Background
- Ahn acquired one unit in a three-unit San Francisco building subject to a single shared mortgage and an Amended Tenancy-in-Common (TIC) Agreement allocating mortgage shares and providing remedies for nonpayment.
- The Sangers (co-owners) paid Ahn’s share of mortgage payments after she defaulted and obtained an arbitration award and state-court judgment ordering Ahn to reimburse them and pay attorney’s fees; an Abstract of Judgment was recorded.
- Ahn filed Chapter 7 the day before a sheriff’s sale; she received a discharge and the case was closed; the discharge did not, at that time, resolve ongoing state-court collection activity.
- After discharge Ahn and the Sangers litigated in state court and on appeal over added mortgage payments and post-judgment attorney’s fees; the Sangers pursued motions to amend the judgment and enforce lien rights, and sent notices demanding payment and compliance with the TIC covenants.
- Ahn moved for contempt in bankruptcy alleging the Sangers’ post-discharge actions violated the § 524 discharge injunction and sought damages and return of payments she made to avoid foreclosure; the bankruptcy court denied contempt, finding the Sangers were preserving in rem rights and did not willfully violate the injunction.
- On appeal the BAP held the appeal was not moot and affirmed: the Sangers’ actions enforced in rem rights under the TIC and California cotenancy law (and the judgment), and voluntary payments by Ahn did not show a violation of the discharge injunction.
Issues
| Issue | Plaintiff's Argument (Ahn) | Defendant's Argument (Sangers) | Held |
|---|---|---|---|
| Mootness of appeal | Appeal not moot; relief (damages) still available | Appeal not moot; but argued against relief | Not moot; BAP can grant effective relief (damages) |
| Whether post-discharge efforts to amend judgment and seek fees violated § 524 discharge injunction | Actions sought to collect discharged personal liability and thus violated injunction | Actions preserved/enforced in rem rights and sought unpaid postpetition mortgage shares not discharged | No violation; acts aimed at in rem rights or non-discharged obligations |
| Liability for ongoing shared mortgage obligations after discharge | Ahn: discharge extinguished liability because she wasn't borrower on loan | Sangers: TIC covenants and California cotenancy law create continuing obligation and lien/right to reimbursement/foreclosure | Held: obligations run with the land or arise under cotenancy law; discharge did not eliminate in rem rights |
| Payments Ahn made post-discharge to Sangers and NAV re: encumbrance | Payments coerced; acceptance violated injunction | Payments were voluntary to retain property; NAV enforced non-monetary covenant, not collection of discharged debt | Held: payments voluntary; acceptance not a violation; NAV enforced covenant running with the land and did not collect discharged personal debt |
Key Cases Cited
- Johnson v. Home State Bank, 501 U.S. 78 (1991) (discharge extinguishes personal liability but leaves in rem rights intact)
- ZiLOG, Inc. v. Corning (In re ZiLOG, Inc.), 450 F.3d 996 (9th Cir.) (contempt requires willful violation and proof by clear and convincing evidence)
- I.R.S. v. Pattullo (In re Pattullo), 271 F.3d 898 (9th Cir. 2001) (mootness doctrine in bankruptcy appeals)
- Motor Vehicle Cas. Co. v. Thorpe Insulation Co. (In re Thorpe Insulation Co.), 677 F.3d 869 (9th Cir.) (equitable mootness principles)
- Renwick v. Bennett (In re Bennett), 298 F.3d 1059 (9th Cir.) (use of § 105 contempt for discharge violations)
- Suter v. Goedert, 504 F.3d 982 (9th Cir.) (appellate review of jurisdiction/mootness)
- Boeing N. Am., Inc. v. Ybarra (In re Ybarra), 424 F.3d 1018 (9th Cir.) (post-discharge litigation resumption can make later fees nondischargeable)