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FILED

JUN 14 2016

SUSAN M. SPRAUL, CLERK

U.S. BKCY. APP. PANEL

OF THE NINTH CIRCUIT

ORDERED PUBLISHED

UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

In re: ) BAP No. NV-15-1380-BDF

)

GIL KABILING and LINDA ) Bk. No. 2:11-bk-11458-LED

KABILING, )

)

Debtors. )

_____________________________ )

)

DESERT PINE VILLAS HOMEOWNERS )

ASSOCIATION, )

)

Appellant, )

)

v. ) O P I N I O N

)

GIL KABILING; LINDA KABILING, )

)

Appellees. )

______________________________)

Argued and Submitted on May 19, 2016

at Las Vegas, Nevada

Filed – June 14, 2016

Appeal from the United States Bankruptcy Court

for the District of Nevada

Honorable Laurel E. Davis, Bankruptcy Judge, Presiding

 

Appearances: Steven T. Loizzi, Jr. of Alessi & Koenig, LLC,

argued for appellant Desert Pine Villas Homeowners

Association; Malik W. Ahmad of the Law Office of

Malik W. Ahmad argued for Appellees Gil Kabiling

and Linda Kabiling.

 

Before: BARASH,1 DUNN, and FARIS, Bankruptcy Judges.

1 Hon. Martin R. Barash, United States Bankruptcy Judge

for the Central District of California, sitting by designation.
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BARASH, Bankruptcy Judge:

Secured Creditor Desert Pine Villas Homeowners Association

appeals from the bankruptcy court’s order finding it in contempt

for violating the section 5242 discharge injunction and awarding

compensatory damages in favor of debtors, Gil Kabiling and Linda

Kabiling. We AFFIRM the bankruptcy court’s judgment.

FACTUAL BACKGROUND

A. Prepetition Events and the Debtors’ Chapter 7 Bankruptcy

Case

Appellees Linda Kabiling (“Linda”)3 and her then-husband,

Gil Kabiling (“Gil,” and with Linda, the “Debtors”), owned a

condominium located in Las Vegas, Nevada (the “Property”), which

was part of a common interest development. The Debtors used the

Property as a rental property and resided elsewhere. The

Property was subject to a Declaration of Covenants, Conditions,

and Restrictions (“CC&Rs”) in favor of Appellant Desert Pine

Villas Homeowners Association (“Desert Pines”). The CC&Rs

require homeowners, such as the Debtors, to pay regular

homeowners association (“HOA”) assessments and grant Desert Pines

a lien against each condominium unit for any delinquent

assessments, late fees, interest, and collection fees and costs. 

At some point in time prior to filing their bankruptcy case, the

2 Unless specified otherwise, all chapter and section

references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532.

3 Because both of the Debtors retain the same surname, we

refer to them by their first names to identify them. No

disrespect is intended by their first name references.

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Debtors became delinquent in paying assessments to Desert Pines

and liens arose against the Property to the extent of those

delinquencies. The Debtors received collection notices from

Desert Pines, and from counsel for Desert Pines, Alessi & Koenig,

LLC (“Alessi & Koenig”).

On February 1, 2011, the Debtors filed a voluntary chapter 7

petition (the “Petition Date”) along with a Statement of

Intention asserting that they would abandon the Property. On

their Schedule F, the Debtors listed a debt owed to “original

creditor Desert Pine Villas / 6134 Pine Villa Ave. #103/HO

#23141” for assessor’s parcel number 138-11-517-007 in care of

“Alessi & Koenig, LLC, 9500 W. Flamingo Rd., Suite 100, Las

Vegas, NV 89147.”

The Debtors received their discharge on June 28, 2011. A

discharge order, including an “Explanation of Bankruptcy

Discharge in a Chapter 7 Case” (the “Discharge Order”), was

mailed to creditors on June 30, 2011, by the Bankruptcy Noticing

Center. The Discharge Order includes the following admonition:

The discharge prohibits any attempt to collect from the

debtor a debt that has been discharged. For example, a

creditor is not permitted to contact a debtor by mail,

phone, or otherwise, to file or continue a lawsuit, to

attach wages or other property, or to take any other

action to collect a discharged debt from the

debtor . . . A creditor who violates this order can be

required to pay damages and attorney’s fees to the

debtor.

Among the entities served with the Discharge Order was “Alessi &

Koenig, LLC, 9500 W. Flamingo Rd., Suite 100, Las Vegas, NV

89147-5720.”

///

///

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B. Post-discharge Events and the Filing of the Quiet Title

Action

Desert Pines nonjudicially foreclosed on its HOA liens in

2013 and thereby acquired title to the Property. On December 15,

2014, in the District Court for Clark County Nevada, Desert

Pines, through its counsel, Alessi & Koenig, filed a complaint

against the Debtors and three additional named defendants (the

“Complaint”) seeking to quiet title to the Property and confirm

that it held good title to the Property based on its nonjudicial

foreclosure in 2013 (the “Quiet Title Action”). The Complaint

alleged that the Debtors were “the former record owners of the”

Property, that Linda took title to the Property in 2005, and that

Linda was indebted to Desert Pines:

22. Defendant Linda . . . failed to pay her regular

assessments and further failed to comply with other

requirements set forth in the CC&Rs and other related

governing documents.

* * *

30. Defendant Linda . . . failed to meet her

obligations to pay assessments pursuant to CC&Rs and

NRS 116, et al.

The Complaint also included a demand for attorneys’ fees to

be awarded against the Debtors and their co-defendants:

41. It has been necessary for Plaintiff to employ the

legal services of [Alessi & Koenig], as duly licensed

and practicing attorneys in the State of Nevada to file

and litigate this action, and reasonable attorneys’

fees should be awarded to Plaintiff, to be paid by

Defendants.

PRAYER FOR RELIEF

WHEREFORE, Plaintiffs pray for judgment against

Defendants and each them as follows:

* * * 

3. For reasonable attorneys’ fees . . . .

Desert Pines served the Complaint on the Debtors, who

thereafter retained counsel to respond on their behalf. The

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Debtors’ counsel sent a January 26, 2015 letter to Alessi &

Koenig alleging that the filing of the Complaint violated the

discharge injunction. Alessi & Koenig’s first substantive

response to this allegation consisted of an April 2, 2015 email

from Steven Loizzi of Alessi & Koenig (the “A&K Email”),

acknowledging that the Discharge Order applied to the prepetition

HOA delinquency but denying that the Complaint violated the

discharge injunction:

THIS CASE DOES NOT SEEK MONEY, SET OFF, PROPERTY, OR

ANYTHING ELSE FROM YOUR CLIENTS . . . our action is NOT

intended to collect, recover, or offset any debt as a

personal liability of the debtors . . . again, we are

not trying to collect any debt from the debtors. The

discharge eliminated the personal liability of the

debtors for the HOA assessments . . . .

(Emphasis in original).

After reopening their bankruptcy case, the Debtors filed

their motion to have Desert Pines found in contempt based on the

filing and service of the Complaint (the “Debtors’ Contempt

Motion”). The bankruptcy court conducted an initial hearing on

the Debtors’ Contempt Motion on June 30, 2015, and thereafter

conducted an evidentiary hearing on August 6, 2015 (the

“Evidentiary Hearing”). The parties stipulated to the admission

of various exhibits; both Debtors and Harold Barling, president

of the board of directors of Desert Pines, testified. At the

conclusion of the Evidentiary Hearing, the bankruptcy court took

the matter under submission.

On October 20, 2015, the court issued its memorandum of

decision finding that Desert Pines (1) knew of the existence and

scope of the Discharge Order and (2) intended to file and serve

the Complaint on the Debtors. The bankruptcy court determined

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that the filing and service of the Complaint violated the

Discharge Order because it was based on Desert Pines’ prepetition

relationship with the Debtors and included an attorneys’ fee

demand that appeared to arise out of discharged claims. The

bankruptcy court found Desert Pines in contempt and held it

liable for the Debtors’ compensatory damages in the amount of

$8,928.00. Desert Pines timely appealed.

JURISDICTION

The bankruptcy court had jurisdiction under 28 U.S.C.

§§ 1334 and 157(b)(2)(O). We have jurisdiction under 28 U.S.C.

§ 158.

ISSUE

Whether the bankruptcy court erred when it determined that

Desert Pines willfully violated the discharge injunction.

STANDARDS OF REVIEW

The bankruptcy court’s decision to impose civil contempt

sanctions for a violation of the discharge injunction is reviewed

for an abuse of discretion. Nash v. Clark Cty. Dist. Attorney’s

Office (In re Nash), 464 B.R. 874, 878 (9th Cir. BAP 2012). 

Under the abuse of discretion standard, the first step is to

determine de novo whether the court applied the correct legal

rule. United States v. Hinkson, 585 F.3d 1247, 1261-62 (9th Cir.

2009) (en banc). If it failed to do so, it abused its

discretion. Mujica v. AirScan, Inc., 771 F.3d 580, 589 (9th Cir.

2014). If the court applied the correct legal rule, the second

step is to determine whether the court’s application of the law

to the facts was: “(1) ‘illogical,’ (2) ‘implausible,’ or

(3) without ‘support in inferences that may be drawn from the

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record.’” Id. (quoting Hinkson, 585 F.3d at 1262).

DISCUSSION

A discharge in a bankruptcy case “operates as an injunction

against the commencement or continuation of an action, the

employment of process, or an act, to collect, recover or offset

any [prepetition] debt as a personal liability of the debtor.” 

§ 524(a)(2). A violation of this discharge injunction is

enforced through the court’s civil contempt authority under

section 105(a). Renwick v. Bennett (In re Bennett), 298 F.3d

1059, 1069 (9th Cir. 2002). The debtor has the burden of

proving, by clear and convincing evidence, that the offending

creditor knowingly and willfully violated the discharge

injunction. ZiLOG, Inc. v. Corning (In re ZiLOG, Inc.), 450 F.3d

996, 1007 (9th Cir. 2006). The offending creditor acts knowingly

and willfully if (1) it knew the discharge injunction was

applicable and (2) it intended the actions which violated the

injunction. Id.

With respect to the first prong, a creditor cannot be held

in contempt for violating a discharge injunction unless it has

actual knowledge of the injunction, which is a question of fact. 

ZiLOG, 450 F.3d at 1008. If the creditor disputes that it had

such knowledge, an evidentiary hearing is required. Id. Actual

knowledge of the discharge injunction does not end the inquiry,

however, as the creditor also must be aware that its claim

against the debtor was subject to the discharge injunction. 

Emmert v. Taggart (In re Taggart), 548 B.R. 275, 288 (9th Cir.

BAP 2016). “Whether a party is aware that the discharge

injunction is applicable to his or her claim is a fact-based

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inquiry which implicates a party’s subjective belief, even an

unreasonable one.” Id.

With respect to the second prong, courts employ the same

analysis regarding violations of the discharge injunction as they

do with violations of the automatic stay. Id. The focus is on

whether the creditor’s conduct violated the injunction and

whether that conduct was intentional; it does not require a

specific intent to violate the injunction. Knupfer v. Lindblade

(In re Dyer), 322 F.3d 1178, 1191 (9th Cir. 2003) (citing Hardy

v. United States (In re Hardy), 97 F.3d 1384, 1390 (11th Cir.

1996); and Havelock v. Taxel (In re Pace), 67 F.3d 187, 191 (9th

Cir. 1995)).

The bankruptcy court applied the correct legal standard in

determining whether Desert Pines willfully violated the Discharge

Order. The bankruptcy court expressly cited to ZiLOG and its

progeny for the two-part test to determine whether the knowing

and willful standard had been met. After conducting an initial

hearing on the Debtors’ Contempt Motion, the bankruptcy court

conducted an evidentiary hearing at which the parties were

allowed to present live testimony and submit stipulated

documentary evidence. The evidentiary record in this case

supports the bankruptcy court’s ultimate conclusion that Desert

Pines knew that the Discharge Order applied and that Desert Pines

intended the actions that violated the discharge injunction.

A. Desert Pines Knew That the Discharge Injunction Applied to

its Prepetition Claims Against the Debtors.

Desert Pines does not dispute that it had actual knowledge

of the Discharge Order entered in the Debtors’ bankruptcy case on

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June 28, 2011. Desert Pines admits that the Debtors listed

Alessi & Koenig on their Schedule F as an agent for Desert Pines

with respect to the Property. The record is clear that Alessi &

Koenig was served on June 30, 2011, by the Bankruptcy Noticing

Center with a copy of the Discharge Order at Alessi & Koenig’s

address listed on Schedule F. Desert Pines admits that Alessi &

Koenig received the Discharge Order and admits that Alessi &

Koenig represents Desert Pines with respect to the Debtors and

the Property. Indeed, at the Evidentiary Hearing, Desert Pines’

president, Harold Barling, acknowledged that Desert Pines had

been notified of the Debtors’ discharge either directly or

through Alessi & Koenig. The bankruptcy court’s conclusion that

Desert Pines had actual knowledge of the Discharge Order is

supported by the record and is neither illogical nor implausible.

Desert Pines, moreover, does not assert that it believed

that its prepetition claim against the Debtors was excepted from

the discharge. There is ample evidence in the record that Desert

Pines knew that the Discharge Order applied to its prepetition

claims against the Debtors. The bankruptcy court quoted at

length from the Discharge Order served on Alessi & Koenig

regarding the scope of the injunction. At the Evidentiary

Hearing, Mr. Barling testified that he knew that the entry of the

bankruptcy discharge precluded Desert Pines from collecting

delinquent sums owed by the Debtors. After filing the lawsuit,

Alessi & Koenig sent an email to the Debtors’ counsel which

expressly states that the “discharge eliminated the personal

liability of the debtors for the HOA assessments.” These

statements corroborate Mr. Barling’s testimony that Desert Pines

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knew that the Discharge Order meant Desert Pines could not try to

collect the prepetition delinquent assessments from the Debtors. 

Thus, the bankruptcy court’s conclusion that Desert Pines knew

that the Discharge Order applied to its prepetition claims

against the Debtors is supported by the record and is neither

illogical nor implausible.

B. Desert Pines Intentionally Filed the Complaint Which

Violated the Discharge Injunction.

1. Desert Pines Acknowledges That It Filed and Served the

Complaint Against the Debtors.

At the Evidentiary Hearing, Mr. Barling testified that

Desert Pines retained Alessi & Koenig to file the Quiet Title

Action and that the lawsuit was a prerequisite to obtaining title

insurance to sell the Property. He also testified to his

understanding that quieting title required providing notice of

the quiet title action to the Debtors in the event they wished to

intervene. During oral argument at the June 30, 2015 hearing,

counsel for Desert Pines specifically admitted that Desert Pines

filed the Complaint in the Quiet Title Action, that it named the

Debtors as defendants, and that it sought recovery of attorneys’

fees and costs. Thus, the record supports the bankruptcy court’s

conclusion that Desert Pines intended to file the Quiet Title

Action. The only remaining question is whether the filing of the

Complaint violated the Discharge Order.

2. The Complaint Violated the Discharge Injunction.

Desert Pines argues that the Complaint could not have

violated the Discharge Order because it sought only a declaration

that it held good title to the Property and did not seek to

collect, recover, or offset any of the delinquent prepetition HOA

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assessments.

The mere filing of a complaint against a debtor by a

prepetition creditor does not necessarily violate the discharge

injunction. For example, pursuing a post-discharge lawsuit in

which the debtor is named as a putative party to collect from a

collateral source, such as an insurance policy or an uninsured

employers’ fund, does not violate section 524 provided “the

plaintiff makes it clear that it is not naming the debtor as a

party for anything other than formal reasons.” Ruvacalba v.

Munoz (In re Munoz), 287 B.R. 546, 550 (9th Cir. BAP 2002)

(citing Patronite v. Beeney (In re Beeney), 142 B.R. 360, 363

(9th Cir. BAP 1992)).

But that is not the case here. The Complaint repeatedly

alleges that Linda failed to pay her HOA assessments to Desert

Pines and utterly fails to mention that the Debtors’ prepetition

delinquencies had been discharged under section 524(a). Further,

the Complaint makes no attempt to communicate that the Debtors

were named only as putative parties, that no amounts were being

sought from the Debtors, or that the only circumstance in which

fees might be sought was if the Debtors elected to oppose the

relief requested.4 To the contrary, the Complaint alleges that

Desert Pines was required to incur attorneys’ fees to file the

4 The bankruptcy court noted that Desert Pines’ counsel

could have contacted the Debtors prior to filing the Complaint to

explain the quiet title relief and request that the Debtors file

a “Disclaimer of Interest” with respect to the Property. Counsel

rejected the suggestion because “there are thousands of these

quiet title actions filed every single day . . . . No one does

that in any situation where there’s been a bankruptcy because

it’s only a title action.” Hr’g Tr. (June 30, 2015) at 11:19-23.

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action and prays for a fee award against each of the named

defendants, including the Debtors. Nothing within the four

corners of the Complaint indicates that Desert Pines was not

seeking an attorneys’ fee award from the Debtors.

Desert Pines argues that it should not be held in contempt

because the Discharge Order does not prohibit it from seeking

attorneys’ fees in a post-discharge lawsuit against the Debtors. 

This argument is without merit. The argument is premised on

(1) an incomplete description of the applicable law and (2) the

incorrect assumption that the attorneys’ fees asserted in the

Complaint were clearly post-discharge debts.

A chapter 7 discharge releases the debtor from personal

liability for debts arising “before the date of the order for

relief under this chapter.” § 727(b). A “debt” means a

liability on a claim. § 101(12). While state law ordinarily

determines whether a claim exists, federal law determines whether

such claim arose prepetition or postpetition. SNTL Corp. v.

Centre Ins. Co. (In re SNTL Corp.), 571 F.3d 826, 839 (9th Cir.

2009); ZiLOG, 450 F.3d at 1000.

The general rule in the Ninth Circuit is that “a claim

arises, for purposes of discharge in bankruptcy, at the time of

the events giving rise to the claim, not at the time the

plaintiff is first able to file suit on the claim.” O’Loghlin v.

Cty. of Orange, 229 F.3d 871, 874 (9th Cir. 2000) (plaintiff’s

claims against debtor were discharged to the extent based on

pre-discharge violations of the Americans with Disabilities Act

despite plaintiff not receiving right-to-sue letter until

post-discharge, but claims based on post-discharge violations

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were not discharged).5

Desert Pines’ demand for attorneys’ fees in the Quiet Title

Action appears to be based on prepetition events. The Complaint

alleges: (1) Linda took title to the Property in 2005; (2) Linda

failed to pay assessments; (3) by operation of the CC&Rs, Desert

Pines obtained a lien against the Property to the extent of such

delinquent assessments, late fees, interest, and collection fees

and costs; and (4) Desert Pines foreclosed nonjudicially on the

Property in 2013. Desert Pines does not dispute that the

delinquent assessments arose prior to the Petition Date. Thus,

the only relationship described in the Complaint between the

Debtors and the Property is based on pre-discharge circumstances.

Moreover, the Complaint does not identify any postpetition

conduct by the Debtors, any postpetition default by the Debtors,

or any postpetition contract between Desert Pines and the Debtors

on which the Quiet Title Action was based. It appears that –-

other than the 2013 nonjudicial foreclosure -- the only events on

which that action could be based took place prepetition. Thus,

Desert Pines’ demand for attorneys’ fees in the Complaint appears

to be based on those events and discharged obligations. Under

O’Loghlin, Desert Pines’ demand for attorneys’ fees is reasonably

construed as an attempt to collect a claim that arose

5 A narrow exception to this rule, not applicable here,

recognizes that even if a creditor’s underlying substantive claim

against the debtor arose prepetition, postpetition attorneys’

fees “are not discharged where post-petition, the debtor

voluntarily commences litigation or otherwise [postpetition]

voluntarily ‘return[s] to the fray’” of litigation commenced

prepetition. Boeing N. Am., Inc., v. Ybarra (In re Ybarra), 424

F.3d 1018, 1026 (9th Cir. 2005).

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pre-discharge.

It does not matter whether Desert Pines believed in good

faith that including a demand for attorneys’ fees in the

Complaint would not violate the discharge injunction. Dyer, 322

F.3d at 1191; Taggart, 548 B.R. at 287. By including allegations

regarding prepetition debts of the Debtors, failing to disclose

that those debts were discharged, and failing to make explicit

that the Debtors were named only as putative parties from whom no

sums were sought, Desert Pines violated the discharge

injunction.6 The bankruptcy court did not abuse its discretion

in reaching this conclusion and finding Desert Pines in contempt.

CONCLUSION

For the reasons stated, we AFFIRM the bankruptcy court’s

judgment.

6 In its opening brief, Desert Pines also complains that

the Debtors’ counsel “sent an extortion letter” to Alessi &

Koenig allegedly in violation of the Rules of Professional

Conduct. The relevance of Desert Pines’ argument is unclear. 

Section 524(a) includes express anti-waiver provisions and

therefore nothing a debtor does, or fails to do, post-discharge

diminishes or abrogates the discharge injunction. Rooz v. Kimmel

(In re Kimmel), 378 B.R. 630, 638 (9th Cir. BAP 2007) (“[T]he

chapter 7 discharge is absolute and, in light of the anti-waiver

provisions of § 524(a), does not admit of an equitable exception

that would permit it to be waived by postdischarge conduct.”);

Lone Star Security & Video, Inc. v. Gurrola (In re Gurrola), 328

B.R. 158, 172 (9th Cir. BAP 2005) (“The gravamen of our analysis

is that § 524(a) eliminates the revival of the discharged debt as

a remedy for postpetition misconduct.”).

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