453 B.R. 728
Bankr. M.D. Tenn.2011Background
- Debtor Sheryl Pigg filed chapter 7 bankruptcy on September 21, 2010, surrendering the condo at River Plantation after May 2010 Nashville floods.
- BAC/Bank of America held a properly perfected mortgage on the Unit; Belle Management Corp. acted as HOA management for River Plantation.
- The Unit was heavily damaged; the debtor evacuated and did not occupy the Unit since filing; the automatic stay was lifted after discharge.
- HOA dues and assessments continued to accrue post-petition, with a filed but pending collection posture by the HOA.
- Bank and HOA claimed priority over the other liens; Bank changed locks through its agent, asserting possession of the Unit for its benefit.
- Trustee reported no assets, but the court contemplated equitable relief to address post-petition HOA liabilities and preserve the debtor’s fresh start.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Priority of HOA lien vs Bank after possession | Pigg/Hoa lien should have priority post-possession. | Bank’s lien remains superior; possession not relinquished by Bank under deed of trust. | HOA lien has priority after Bank took possession. |
| Dischargeability under 523(a)(16) and equity relief | Post-petition HOA fees nondischargeable; equitable relief permitted. | Code — no equitable override; standard nondischargeability applies as long as interest exists. | Court fetters dischargeability and fashions equitable relief to protect the debtor's fresh start. |
| Court's authority to craft equitable remedies under 11 U.S.C. §105(a) | Equity can set aside discharge and order sale to eliminate ongoing HOA liability. | Equity must respect Bankruptcy Code limitations; no override of nondischargeable fees. | Court exercised §105(a) powers to set aside discharge temporarily and order a trustee sale to balance interests. |
| Appropriate mechanism to resolve competing liens | Deed in lieu or foreclosure to stop HOA accrual. | Foreclosure not required unless necessary; sale free and clear possible with consent conditions. | Trustee sale under §363(f) with consent deemed by inaction of Bank and HOA; proceeds prioritization set. |
Key Cases Cited
- In re Gulf States Steel, Inc. of Alabama, 285 B.R. 497 (Bankr.N.D.Ala. 2002) (consent to sale under §363(f)(2) can be inferred from conduct)
- In re Shary, 152 B.R. 724 (Bankr.N.D.Ohio 1993) (implicit consent to sale when opposed party does not object)
- In re Borders Group, Inc., 453 B.R. 477 (Bankr.S.D.N.Y. 2011) (consistent treatment of sale consent via lack of objection)
- Allen v. Baugus, 31 Tenn. (1 Swan) 404 (1852) (equity to do complete justice and fashion remedies)
- Burem v. Harville, 174 S.W.2d 663 (Tenn.App. 1943) (equitable relief permits corrections and remedies)
- Carter-Jones Lumber Co. v. Dixie Distributing Co., 166 F.3d 840 (6th Cir. 1999) (equity powers constrained by Bankruptcy Code)