1 RECOMMENDED FOR FULL-TEXT PUBLICATION File Name: 16b0003p.06


### BANKRUPTCY APPELLATE PANEL OF THE SIXTH CIRCUIT

_________________

In re: B YRON G. J ACKSON , Debtor

. ┐ │ │ ┘ No. 15-8037

Appeal from the U.S. Bankruptcy Court - Cleveland No. 14-13977—Jessica E. Price Smith, Judge. Decided and Filed: August 4, 2016
Before: DELK, HUMPHREY and OPPERMAN, Bankruptcy Appellate Panel Judges.

_________________ COUNSEL

ON BRIEF: Erika R. Finley, Jose ph E. DiBaggio, KAMAN & CU SIMANO, Cleveland, Ohio, for Appellant. Byron G. Jackson, Shaker Heights, Ohio, pro se.

OPINION

GUY R. HUMPHREY, Bankruptcy Appellate Pa nel Judge. This appeal concerns whether the bankruptcy court abused its disc retion in determining that a condominium
association violated a debtor’s Chapter 7 discharge in re-scheduling a sheriff’s sale in a prepetition foreclosure action upon issuance of the discharge and closing of the case and in assessing fees associated with the re-scheduling of the foreclosure sale. For the reasons that follow, the panel finds that the court abused it s discretion in sanction ing the association for violating the debtor’s discharge.

STATEMENT OF ISSUES
The issues on appeal are whether the bank ruptcy court abused its discretion in determining a condominium association violated the chapter 7 discharge order entered in an individual debtor’s case through the scheduling of a sheriff’s sa le to complete a pre-petition 

### >No. 15-8037 In re Jackson Page 2

foreclosure, awarding monetary sanctions against the condomin ium association, and enjoining the condominium association from re-scheduling the sheriff’s sale.

JURISDICTION AND STANDARD OF REVIEW
The Bankruptcy Appellate Panel of the Sixth Circuit has jurisdiction to decide this appeal. The United States District Court for the Northern District of Ohio has authorized appeals to the Panel, and neither party has timely elected to have these appeals heard by the district court. 28 U.S.C. §§ 158(b)(6), (c)(1). A bankruptcy court’s final order may be appealed as of right pursuant to 28 U.S.C. § 158(a)(1). For purposes of appeal, an order is final if it “ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.” Midland Asphalt Corp. v. United States, 489 U.S. 794, 798, 109 S. Ct. 1494, 1497 (1989) (citation and quotation marks omitted). An order sanctioning a party and imposing a sum certain amount in damages is a final order. See Church Joint Venture, L.P. v. Blasingame (In re Blasingame) , 525 B.R. 675, 678 (B.A.P. 6th Cir. 2015).
A bankruptcy court’s decision to sanction is reviewed fo r an abuse of discretion. Badovick v. Greenspan (In re Greenspan) , 464 B.R. 61, 2011 WL 310703, at *1 (B.A.P. 6th Cir. Feb. 2, 2011) (table) (citing B-Line, LLC v. Wingert er (In re Wingerter) , 594 F.3d 931, 936 (6th Cir. 2010)). See also Mayor and City Couns el of Baltimore v. W. Va. (In re Eagle Picher Indus., Inc.) , 285 F.3d 522, 527 (6th Cir. 2002) (equitable de terminations subjec t to an abuse of discretion standard) (citations omitted). “An abuse of discretion is defined as a ‘definite and firm conviction that the [court below] comm itted a clear error of judgment.’” Id. at 529 (internal citation omitted). The particular factual findings of the bankruptcy court are reviewed for “clear
error.” Behlke v. Eisen (In re Behlke) , 358 F.3d 429, 433 (6th Cir. 2004) (citations omitted). Sanctions premised “upon an erroneous view of the law or an erroneous assessment of the evidence are necessarily an abuse of discretion.” In re Royal Manor Mgmt. Inc. , 525 B.R. 338, 346 (B.A.P. 6th Cir. 2015) (citing Cooter & Gell v. Hartmarx Corp. , 496 U.S. 384, 405, 110 S. Ct. 2447, 2461 (1990)).No. 15-8037 In re Jackson Page 3

FACTS
On June 19, 2014 the debtor Byron Jackson (“Jack son”) filed, pro se, a petition for relief under Chapter 7 of the Bankruptcy Code. On July 9, 2014 mortgagee Bank of America (“BOA”), moved for relief from stay and for ab andonment of real prope rty located at 16100 Van Aken Boulevard #402, Shaker Heights, Ohio (the “Condominium”). The Condominium was listed on Jackson’s petition as his residence. In addition to seeking re lief from the stay, BOA sought in rem relief for two years under 11 U.S.C. § 362(d)(4)(B), alle ging a substantial arrearage on the mortgage loan and also noting prior bankruptcy filings, either by Jackson or one of his parents, that included the Condominium as scheduled property. Ja ckson’s objection to the motion was overruled and the relief was grante d through an order entered on August 19, 2014. However, BOA and Jackson entered into a lo an modification agreement relating to the Condominium and the court approved it. 1

The Carlton House Condominium Unit Own ers Association of Cuyahoga County (“Carlton House”) filed a similar motion to the BOA motion, seeking relief from the stay, abandonment, and in rem relief. The significant difference was it sought a permanent in rem order. At the hearing, Carlton House stated it was seeking in rem relief because of the multiple bankruptcy filings related to th e Condominium. The bankruptcy court stated that the postpetition amounts were current “and the issue seems to be the desi re to move forward with the foreclosure for the outstanding [pre-petition] a pproximately $5,900 is what I’m going to take into consideration . . . .” September 9, 2014 Hr’g Tr. 8:20-23, ECF No. 121. After a hearing, the bankruptcy court denied Carlton Ho use’s motion for a permanent in rem order for lack of cause. The language of the court’s order suggests that th e court found the two year in rem bar sufficient:

1 This apparent contradiction in BOA’s approach to this mortgage loan is explained in that the loan modification was based upon a settlement BOA entered with the Justice Department. As stated by BOA counsel at the relief from stay hearing: The modification had to be offered to the Debtor, because this is a Fannie Mae loan. And due to the mortgage settlement through the Department of Justice it had to be offered to him as a streamlined modification. It has been approved. However, notwithstanding the approval, Bank of America is of a position that this motion isn’t necessarily based on the status of the mortgage . . . . Our fear is that even with a loan modification the Debtor can default next month, and we would be back to square one and starting this process all over again and trying to get this property liquidated for another eight-plus years. July 22, 2014 Hr’g Tr. 3:10-22, ECF No. 119.No. 15-8037 In re Jackson Page 4

“[t]he Court previously entered a two year in rem sanction with respect to the same property . . . .” Order, Dec. 9, 2014, ECF No. 84.
Jackson received his Chapter 7 discharge on December 9, 2014 and the case was closed. Almost immediately thereafter Carlton House f iled a praecipe in the state court foreclosure
action to schedule a sheriff’s sale on the Condominium. This was the final step in a foreclosure action commenced in the Cuyahoga County Court of Common Pleas in January 2008 by Countrywide Home Loans, BOA’s predecessor. Carlton House and Countrywide previously obtained a decree of foreclosure in July of 2009. 2 Carlton House Condo. Unit Owners Ass’n of Cuyahoga County’s Response in Opposition to Debt or’s Motion to Reopen Bankruptcy Case at 16-20, Jan. 27, 2015, ECF No. 97. The judgment stat ed that “upon issuance of a Praecipe for Order of Sale by Plaintiff’s a ttorney and/or Defendant Carlton House’s attorney, the Clerk of
Court must issue an order of Sa le to the Sheriff commanding him to . . . sell the premises as upon execution and according to law, free and clear of the interest of all part ies to this action.” Id. at 19.
On January 21, 2015 Jackson moved to re-open his bankruptcy case for two reasons. The first was to avoid Carlton House’s liens pursuant to 11 U.SC. § 522(f)(1)(A) . The court rejected this reason at the hearing on the motion to re-ope n, recognizing that Carl ton House’s liens were statutory under Ohio law, not judi cial, and therefore could not be avoided pursuant to that section of the Bankruptcy Code. 3 The second asserted reason was th at Carlton House was attempting to collect discharged debts. Jackson wanted the bank ruptcy court to “vacate and or stay the Sheriff Sale set for February 9, 2015” on the Condom inium. Motion to Reopen Case No. 14-13977 Under 11 U.S.C. 350(b) and to Vacate/Stay Sheri ff Sale Set for February 9, 2015 and Request to Expedite Emergency Hearing at 2, Jan. 21, 2015, ECF No. 93.
At a January 28, 2015 hearing the bankruptcy c ourt expressed its concern that Carlton
House’s continuation of the foreclosure lacked a legitimate purpose because Carlton House was

2 Carlton House was a necessary party to the for eclosure. Ohio Rev. Co de § 5311.18(B)(3).
3 The statutory lien extends to all “expenses that are chargeable against the unit and that remain unpaid for ten days after any portion has become due and payable.” Ohio Rev. Code § 5311.18(A)(1). The lien becomes effective upon the date a certificate of lien is filed with the county recorder in the county where the property is situated. Ohio Rev. Code § 5311.18(A)(3).No. 15-8037 In re Jackson Page 5

unlikely to receive funds from a sheriff’s sale. Counsel for Carlton House told the bankruptcy

court: [s]o the Board of Directors, they have an obligation, a duty, to stop the bleed, to get a new homeowner into this property who is going to have the intent to pay fees. Whereas, the current owner, as ev idenced by the total delinquency, has not expressed that desire or intent to resolve this ma tter with the Association. Therefore, it is the only judicial remedy at this point in time. Jan. 28, 2015 Hr’g Tr. 9:10-17, ECF No. 122. The court responded that:
Okay. But – and, again, the last statem ent that you made about expressing an intent to resolve this makes it seem[] like the point of this foreclosure is to get the payment part of it resolved, because there actually isn’t the possibility for payment in this foreclosure. Th at’s what I’m concerned with.

Id. at 9:18-24. The court acknowledged that the st ate court previously granted a decree of foreclosure and Carlton House was not require d to show any equity under state law but
nevertheless was concerned that “t he purpose [is] to really force payment as opposed to foreclose and obtain in rem relief[.]” Id. at 10:19-20. The court entered an order re-openi ng the case to
determine whether the foreclosure was a dis guised in personam action against Jackson, in contempt of the discharge order.
The contempt hearing was scheduled on an expedited basis. 4 Carlton House appeared at the hearing through counsel and sought admission of one exhibit, a stat ement of fees owed.
Carlton House did not have a w itness to authenticate the docum ent and the bankruptcy court determined that, without admissible evidence, Car lton House was “in violation of the show cause order.” Feb. 6, 2015 Hr’g Tr. 4:2, ECF No. 123. Furt her, the court ordered th at “[t]he sale that is scheduled for Monday [February 9, 2015] is ordered to be stopped, and we will have a further hearing on whether additional sanctions are appropriate.” Id. at 4:3-5. The bankruptcy court further stated it was “perplexed” why “the co ndo association didn’t just recertify the postpetition, post-discharge liens and proceed in a ne w [foreclosure] action and thereby making this

4 Prior to the reopening of the case, Jackson did not file a separate contempt motion. After the hearing was re-scheduled from February 6 to March 3, 2015, Jackson filed a sanctions motion and the clerk issued a deficiency notice for a lack of notice. The bankruptcy court neve r directly addressed the sanctions motion in its written decision.No. 15-8037 In re Jackson Page 6

not even an issue, as opposed to moving forward under questiona ble circumstances and then not showing up.” Id. at 4:24-5:5. The hearing wa s continued to March 3, 2015.
The contempt hearing proceeded on March 3rd. Transactions relating to the ownership of the Condominium from June 2007, when Jackson ac quired it, were reviewed. Exhibit Tender Sheet, Joint Ex. B, ECF No. 112, Mar. 03, 2015. 5 In May 2009 Jackson quitclaimed the Condominium to his parents. Joint Ex. C. In March 2014 Jackson’s parents quitclaimed the Condominium back to him, but that deed was not recorded until September 2014, after the bankruptcy was filed. Joint Ex. D.
Scott Sauter, the chief operating officer of Continental Management, testified on behalf of Carlton House as its management agent. Sa uter testified concerni ng a post-petition account statement for condominium fees owed by Jackson (t he “Account Statement”). Joint Ex. A. The statement ran from July 2014, after the petition date, through February 28, 2015. Sauter stated the pre-petition account statement was not used, so Continental Management was only addressing the post-petition fees due . Referencing the Account Stat ement, Sauter testified that Jackson made three post-petition payments and atthe time of the hearing the delinquent postpetition balance was $3,300.76.
Sauter also explained the charges on th e Account Statement, including a $390.81 “A1” charge entered each month for Carlton House’s ma intenance fee, various $25 administrative fees for late monthly payments, and a monthly $83.29 “C1” charge for reserves for long-term repairs.
He testified that the Account Statement also includes a Ja nuary 7, 2015 $802.95 charge for postpetition “attorney fees.” Of the $802 charged, Sauter testif ied that “about 600, $612” was for filing a praecipe to schedule the sheriff’s sa le. Mar. 3, 2015 Hr’g Tr. 12:22, ECF No. 124. There was no testimony as to the remaining $200.
Additionally, Sauter testified that Carlton Hous e pays for water, sewer, and gas for all the units. However, each unit must reimburse Carlton House for the cost of gas. If a unit owner does not pay, the other unit owners are responsibl e for paying those costs from their assessments.

5 All the admitted exhibits may be found in the Exhibit Tender Sheet, ECF No. 112, Mar. 3, 2015.No. 15-8037 In re Jackson Page 7

The next witness was Charles Burkett, Jr., th e Treasurer of the Carlton House Board. Burkett was asked about the previ ously scheduled sheriff sale.
Q. And were you aware that Carlton H ouse Condominium Asso ciation ordered a sheriff’s sale on this property?
A. Yes. Q. And why did the Association order a sheriff’s sale? A. Because we were legally entitled to do so. And as part of our collection policy, we pursue all options that we’re legally entitled to take. It’s fairly straightforward, and that’s a policy that’s in force rega rdless of who the person is who may be delinquent. If I were to fall delinquent, I would expect that my colleagues would enforce the same procedure against me. Q. And does the board have any duty to do that? A. Absolutely. Q. Could you explain? A. We have a fiduciary responsibility to the rest of the unit owners, many of whom are elderly people on fixed incomes. And to the degree that one unit owner doesn’t pay, then the other unit owners have to pay, which means that maintenance fees go up. And for people who are on fixed incomes, as we discussed at our last annual meeting, that can be very concerning. Because for many of the retired people, their income doesn’t go up. So if we have to raise fees, then that poses a real hardship.

. . . Q. And what contributing factors, if any, in terms of finances have led to any financial deficiencies? A. The foreclosures that have occurred in the building, unit owners who don’t pay is really the Achilles heel. And in this case it’s gone on since 2007, so it’s been detrimental to the financial health of the building.
Mar. 3, 2015 Hr’g Tr. 16:9-17:8; 18:3 -9, ECF No. 124 (emphasis added).

Jackson testified on his own behalf at the h earing. He stated that he made payments
which were not included on the Account Statem ent. Jackson agreed $474.10 was listed as a payment made on November 4, 2014, but indicat ed he made additional payments between September 4, 2014 and November 2014. He later indicated that the a dditional payment may have been late October or early November, but had no receipt for that additional payment.No. 15-8037 In re Jackson Page 8

Jackson testified that he receive d the post-petition statement by mail but could not recall the date.
Id. at 23-27.
At the conclusion of the hearing, the court rule d in favor of Jackson in an oral decision.
The court stated that:
Taking a look at the posture of this case , where we have the value of the property being significantly lower than what the fi rst lien on the proper ty is and the value of the condominium associat ion liens, which would have come after, that coupled with the testimony with respect to the s hortfall in the accounts leads me to the conclusion that the purpose of moving fo rward with the foreclosure was an attempt to force payment of the outstanding amounts.

Id. at 59:15-24. The court further noted that:
And though I understand the condominium association followed its counsel in believing that it was appropriate to con tinue the foreclosure, I find that the continuation of the previous foreclosure is a violation of the discharge. In addition to that finding, having review ed the documents with respect to what was paid and what was believed to have been paid, I make the following findings: The statement credits that were presen ted by the condominium association show that as of March 1, 2015, there was $5,138.65 that was due. That amount included $2,132.95 for attorney’s fees. The testimony presented demonstrated that based upon the receipts that were presented and the r ecollection of Mr. Jackson that there would have been $2,434.29 that was paid. Reviewing all the information, I make the following determination: The sanctions in this case will be as follows. For violation of the discharge injunction, the attorney’s fees of $2,132.95 shall be waiv ed and removed from the outstanding balance due by Mr. Jackson. By continuing the initial foreclosure, which created the $800 charge, that was the initial viol ation. And then th e continuing fees which accrued in connection with defe nding this action and stopping that foreclosure would be a cont inuation of that violati on. And so those are all removed. There is an additional sanction of $474.10 recognized for the October payment that was alleged to be made but does not appear to be on the statement, and then a credit of $25 for the September paymen t, where the money order shows that it would have been purchased before the September 10 date for the assessment of a late fee but was not applie d until November of 2015. There is credit given for the $482.89 payment that was made in February but has not yet been received. So at present ther e would be an outstanding balance due to the condo association of $2,497.81. It is – that still is the amount due. That amount is going to remain due and owing. And as [to] what I believe should haveNo. 15-8037 In re Jackson Page 9

occurred in this case, the condo association is within its right if that amount is not paid to begin the foreclosure again. So as a recap, this continua tion of the foreclosure shou ld not have happened. You have a situation here where you have on- going post-petition f ees that can be certified, and that foreclosure can be done. There was a modification in the original case that conclude d the underlying foreclosure. And although I appreciate the condo association and their c ounsel intending to ride the coattails of that action, because of the nature of the action and the – what appears to have been the intent of this action, the appropriate action would have been to institute your own foreclosure for the post-petiti on amounts that were not paid, not to continue the pre-peti tion amount . . . Id. at 60:2-62:7 (emphasis added).
On September 25, 2015 the bankruptcy court en tered its “Memorandum of Opinion and Order.” ECF No. 125 ( In re Jackson , 539 B.R. 327 (Bankr. N.D. Oh io 2015)). The bankruptcy court re-stated its legal conclusion that the foreclosure by Carlton House was an attempt to coerce Jackson to pay the pre-petition fees ow ed on the Condominium. The court noted that
Carlton House stated it had no in tention of resolving the paymen t issue and therefore “compelled [Jackson] to resolve the issue by entering into payment arrangements for the discharged debt, or
lose his home. Based on these fa cts, I find that Carlton House sc heduled the foreclosure sale in order to induce Debtor to pa y a debt for which he is no longer personally liable.” Id. at 332.

DISCUSSION

I. The Bankruptcy Court’s Conclusion th at the Foreclosure was a “Disguised” In Personam Collection of Discharged Debts was an Abuse of Discretion While a debtor may not pursue a private right of action for a violati on of the discharge by a creditor under § 524 of the Ba nkruptcy Code, he may pursue a motion for contempt of the discharge order. Pertuso v. Ford Motor Credit Co. , 233 F.3d 417, 421 (6th Cir. 2000). Contempt is a violation of “a definite and specifi c order of the court requiring him to perform or refrain from performing a part icular act or acts with knowle dge of the court’s order.” Elec. Workers Pension Trust Fund of Local Uni on # 58, IBEW v. Gary’s Elec. Serv. Co. , 340 F.3d 373, 379 (6th Cir. 2003) (internal citation omitted). It was Jackson’s burden to show, by clear and convincing evidence, that Carlton House knowingly violated the discharge order. In re
Franks , 363 B.R. 839, 843 (Bankr. N.D. Ohio 2006) (citations omitted). Carlton House does notNo. 15-8037 In re Jackson Page 10

dispute it was aware of the disc harge order and that its represen tatives intended their actions, but only whether those actions did in fa ct violate the discharge order.
The discharge of personal obligations through a Chapter 7 discharge does not terminate a secured creditor’s in rem rights unless the cred itor’s lien was avoided during the bankruptcy. Carlton House’s Ohio statutory lien continued post-discharge. Thus, while Carlton House was not entitled to proceed in personam against Jack son for discharged pre-petition debts, it could proceed in rem against the Condominium for all sums secured by the lien, both prepetition and post-petition.
The bankruptcy court stated that “[r]eviewi ng the testimony of witne sses, and noting that
none of Carlton House’s witnesses stated that replacing Debtor with a paying unit owner was a motivating factor in scheduling the sheriff’s sale , the Court finds that Carlton House scheduled
the sale of the condominium unit in order to obtain the funds it needed to maintain and repair the property.” In re Jackson , 539 B.R. 327, 332 (Bankr. N.D. Ohio 2015). However, the testimony
of Burkett was clear that Carlton House was str uggling to address concer ns arising out of home owners being delinquent on their condominium assessments and f ees. The delinquency owed to Carlton House for the Condominium had been an issue since 2007. Burkett’s testimony was
consistent with Carlton House’s legal position that the foreclos ure was in order to “stop the bleed” and have a reliable, paying ow ner take title to the Condominium. 6

The bankruptcy court concluded that “[b]ut, by sche duling the sheriff’s sale, [Jackson] is compelled to resolve the issue by entering into payment arrangements for the discharged debt, or
lose his home.” Id. at 332. The court concluded that the for eclosure sale was scheduled to induce payment of discharged pre-petition condominium fees. However, all foreclosure litigation potentially can induce payments of discharged debt to avoid a foreclosure sale, since a lien, like the statutory lien of Carlton House, applies to all the underlying indebtedness – whether discharged personally as to the property owne r or not. The evidence is that Carlton House

6 It appears that the bankruptcy court gave significant weight to a statement of Carlton House’s counsel during the hearing on the motion to reop en: The contempt decision stated that Carlton House alleges that “[Jackson] had expressed no intent to resolve the payment issue, and th at it was its policy to reject current payments without a payment arrangement, because ther e was a foreclosure pending.” In re Jackson , 539 B.R. 327, 330 (Bankr. N.D. Ohio 2015). But the evidence at the contempt hearing showed that such a policy was based on the conclusion that unless the arrearages could be paid, the best decision for Carlton House was to foreclose to “stop the bleed.”No. 15-8037 In re Jackson Page 11

wanted Jackson removed from the Condominium due to the arrears owed and Jackson’s history of failing to reliably pay the dues and assessments owed. The only legal redress available to Carlton House was completing the long delayed for eclosure by scheduling the sheriff’s sale. The bankruptcy court’s reasoning, left to stand, would allow bankr uptcy courts to second-guess a state court foreclosure order, conducted in compliance with state law (as further addressed below), as a disguised effort to collect discharged debts.
The bankruptcy court appeared to give lit tle weight to the unique situation of a condominium (or similar) associatio n. Carlton House is not a gard en variety mortgagee or lien holder. It has statutory obligations to other unit owners under Ohio law. See Ohio Rev. Code § 5311.041(B) (stating that common expenses such as administration, maintenance, security, and recreation facilities shall be determined on a pe r unit basis). Carlton House had reason to be concerned that, without a foreclosure sale, J ackson may not pay the ongoing post-petition fees
and assessments or the arrears that existed at th e time of discharge. Th e bankruptcy court also did not consider how the multiple prior bankruptcy filings and transfers of the Condominium to
insiders informed Carlton H ouse’s decision-making process.
The court focused on the lack of equity in the Condominium due to the primacy of the mortgagee’s lien. The bankruptcy court did not consider that: (1) the costs of completing the foreclosure would be paid to Carlton House; 7 (2) that the burden was on Jackson to show contempt; and (3) that the sale price for a fore closure cannot be known until the sale actually occurs. By not considering such factors, the bankruptcy court effectiv ely imposed an “equity requirement” that is not part of the Ohio for eclosure sale process and, again, misunderstands the
motivation of Carlton House. The conclusion th at Carlton House was pursuing this matter as a disguised in personam action is an abuse of discretion.

7 The foreclosure decree provided that the sheriff would pay the costs of the action, including the costs Carlton House spent scheduling the multiple sheriff sales in the past. Carlton House Condo. Unit Owners Ass’n of Cuyahoga County’s Response in Opposition to Debtor’s Motion to Reopen Bankruptcy Case, Ex. C, ECF No. 97, Jan. 27, 2015.No. 15-8037 In re Jackson Page 12

II. The Injunction Prohibiting Carlton Ho use from Enforcing the Prepetition Foreclosure Judgment was an Abuse of Discretion As part of its remedy, the bankruptcy cour t erroneously enjoined Carlton House from further enforcement of its prepetition forecl osure judgment: “Carlton House may not proceed with any further action to prosecute the pre-pe tition foreclosure or th e attendant sale.” In re
Jackson , 539 B.R. 327, 333 (Bankr. N.D. Ohio 2015). However, due to the doctrine of lis pendens, codified at Ohio Revised Code § 2703.26, it may be legally impossible for Carlton House to exercise the option th e bankruptcy court suggested, a new post-petition foreclosure, because an action is already pending. See Avco Fin. Servs. Loan, Inc. v. Hale , 520 N.E.2d 1378 (Ohio Ct. App. 1987) (“[W]hile the foreclosure action . . . is pending, no other action may be commenced concerning the property.”); Martin, Rochford & Durr v. Lawyer’s Title Ins. Corp. , 619 N.E.2d 1130, 1131 (Ohio Ct. App. 1993) (lis pe ndens applies between the time of the foreclosure judgment and the sheriff’s sale).
Regardless, mandating that Carlton House pur sue a separate post-petition foreclosure is
inconsistent with the state court foreclosure decr ee. Rather than confine the contempt remedy to addressing any improper in personam collectio n, the bankruptcy court effectively permitted a
collateral attack on that state c ourt foreclosure judgment in not a llowing that judgment to be effectuated by Carlton House under any circumstances . The foreclosure judgment is a property interest which replaced its lien and it is entitled to enforcement as part of Carlton House’s in rem rights.
Finally, while the court acknowledged that a cr editor such as Carlton House retains its in rem rights if the creditor’s lien is not avoided in the bankruptcy, the court refused to allow
Carlton House to exercise those in rem rights as to the prepet ition amounts owed. The stated rationale was that Carlton House was only enforci ng its in rem rights to coerce the Debtor into paying the prepetition fees owed. As explained, the record does not support that conclusion, but, looking beyond this fact pattern, such a standard would chill secured credito rs’ exercise of their in rem rights. Again, any exerci se of in rem rights includes either the in tended or unintended consequence of requiring the debtor to volunta rily cure arrearages, including prepetition arrearages, or face the loss of the collateral. A foreclosure does not distinguish betweenNo. 15-8037 In re Jackson Page 13

prepetition and post-petition amounts owed. While such a distincti on is, of course, crucial if a creditor is attempting to collect from the debt or personally and not agai nst the property, for in rem purposes, the creditor may enforce its lien as to all sums due, not just post-petition arrears.

III. The Bankruptcy Court Abused its Disc retion in Determining That Carlton House’s Post-Petition Assessment of “Attorney Fees” Related to the Scheduling of the Foreclosure Sale Violated Jackson’s Discharge The bankruptcy court found that the $802 in post-petition “attorney fees” 8 should not have been charged to Jackson, but only in rem to the Condominium as part of the state court
foreclosure. Jackson , 539 B.R. at 333 . The court found the attempt to collect these fees was an attempt to setoff discharged pre-petition obligations. Id. 9

As an initial matter, Carlton House may char ge reasonable attorney fees under state law to collect delinquent obligations. See Nottingdale Homeowners’ Assoc., Inc. v. Darby , 514 N.E.2d 702, 707 (Ohio 1987) (requiring unit owner to pay attorney fees associated with a foreclosure action is not void as ag ainst public policy, if the fees ar e “fair, just and reasonable”);
See also Ohio Rev. Code § 5311.18(A)(2)(c) (unit owners ’ association’s lien includes delinquent collection costs and attorney fees). Carlton House cannot charge atto rney fees to collect discharged in personam debts, however, because th at would violate the de btor’s discharge.
The bankruptcy court believed that Carlton House was required to initiate a new postpetition foreclosure to collect atto rney fees because the scheduling of the foreclosure sale was an attempt to collect a pre-petition debt. The bankruptcy court cited Siegel v. Fed. Home Loan Mortg. Corp. , 143 F.3d 525 (9th Cir. 1998). In Siegel , a debtor pursued a post-petition tort and breach of contract action against a mortgagee related to foreclosures upon two properties in which he had an ownership interest. The actio n was barred by res judicata because the debtor

8 As noted, about $600 of the $802.95 in attorney fees was the court fee for the post-petition, post-discharge praecipe required by the state cour t to schedule the sheriff’s sale.
9 The evidence of the attemp t to collect from Jackson, beyond the fo reclosure itself being interpreted as a “disguised” in personam action, was th e single Account Statement sent to J ackson post-discharge. The $802.95 in “attorney fees” was included in that Acc ount Statement. It was un clear from the reco rd if the Statement was sent as a routine matter of collection, condominium policy, or as part of the foreclosure procedure. Neither party addressed at the hearing the reason Carlton House sent it despite the fact it is the only possible evidence of a post-discharge attempt to collect funds from Jackson. Ultimately, th e bankruptcy court’s decision is mostly based on the conclusion that the foreclosure was a disguised in personam action.No. 15-8037 In re Jackson Page 14

failed to object to the mortgagee’ s proof of claim during the bankrup tcy. Relevant to the instant case, the mortgagee was awarded attorney fees in defending the tort and breach of contract action. The debtor argued that the attorney fee claim was discharged in the bankruptcy, along with the pre-petition note. The Ninth Circuit found that the debtor did not have any personal liability for the pre-petition note or related attorney fees or costs. However, because the debtor pursued a separate post-petition action, the mortga gee defendant could be awarded attorney fees.
In this appeal, the bankruptcy court construe d the post-discharge foreclosure sale and the sending of the Account Statement that included all post-petition costs, including the $802, as impermissible because it was an attempt to offset the costs of collecting a pre-petition debt. The court seemed to suggest if the f ees were related to a post-petition foreclosure, the fees would be acceptable: “[h]ere, the attorney fees charged to [Jackson] were not incurred by his initiating new, post-petition litigation on pre-pe tition claims of Carlton House.” Jackson , 539 B.R. at 333

. However, the fees are not a setoff of any discha rged obligation, but instea d a post-petition charge owed by Jackson, as a unit owner of Carlton H ouse. Further, the bankruptcy court, citing Siegel , stated that “[w]hen the possibility of a claim agai nst the debtor was fixed and entirely out of his hands before he entered bankruptcy and liability was contingent upon what others might do, the debt is discharged.” Id. Jackson voluntarily continued to maintain his interest in the condominium post-petition and Carlton House had ongoing post-petition obliga tions that are not related to the in personam co llection of a pre-petition debt. Siegel is inapposite.
The effect of a Chapter 7 discharge on the post-petition obligations owed to
condominium associations is addres sed by Bankruptcy Code § 523(a)(16):
A discharge under section 727 . . . does not discharge an indivi dual from any debt—

. . . for a fee or assessment that becomes due a nd payable after the order for relief to a membership association with respect to the debtor’s interest in a unit that has condominium ownership . . . for as long as the debtor or the trustee has a legal, equitable, or possessory ownership interest in such unit . . . but nothing in this paragraph shall except from discharge th e debt of a debtor for a membershipNo. 15-8037 In re Jackson Page 15

association fee or assessment for a peri od arising before entr y of the order for relief in a pending or subsequent bankruptcy case. 10
11 U.S.C. § 523(a)(16). This section resolves any issue as to Car lton House’s fees or assessments being deemed pre-peti tion as long as those f ees or assessments are “due or payable” post-petition regardless of when the claim arose. See In re Barr , 457 B.R. 733, 737 (Bankr. N.D. Ill. 2011) (“The special Assessment was made tw o months after the petition date and did not become due or payable until after that date. This result is in conformity with the legislative
intent of the statute because the Debtors have en joyed the benefits of pos t-petition ownership and possession.”); In re Langenderfer , 2012 Bankr. LEXIS 1809, at *4-8, Case No. 10-31741 (Bankr. N.D. Ohio Apr. 23, 2012) (debtor with legal title to the condominium could not discharge post-petition fees or assessments). Ne ither the parties nor the bankruptcy court in its
oral or written decision addre ssed § 523(a)(16). However, under its plain meaning, the court fee of $600 for the praecipe and the ba lance of $202 in unspecified pos t-petition attorney fees are
each a “fee.” See In re Burgueno , 451 B.R. 1, 4 (Bankr. D. Ariz . 2011) (post-peti tion attorney fees constitute a “fee” within the meaning of § 523(a)(16)); Oakland Ridge Homeowners Assoc. v. Braverman (In re Braverman) , 463 B.R. 115 n. 5 (Bankr. N.D. Ill. 2011) (citing In re Burgueno, 451 B.R. at 4-5) (“Even if the Declarati on did not specifically make the Association’s attorney’s fees an assessment, the fees are at least arguably a “fee” for purposes of section 523(a)(16).”). The record does not provide any evidence that the $802.95 in charges are inconsistent with Jackson’s continuing, post-pet ition obligation to pay fees and assessments to Carlton House. Those charges were not discharg ed because they were “due or payable” postpetition and cannot be a basis for finding Carlton House viol ated Jackson’s discharge.

10 Liability of Chapter 13 debtors for post-petition condominium association fees and assessments has generated a fair amount of case law. The reason is that § 1328 does not list § 523(a)(16) debts as an exception to a Chapter 13 discharge. See, e.g. Foster v. Double R Ranch Assoc. (In re Foster) , 435 B.R. 650, 658-59 (B.A.P. 9th Cir. 2010) (§ 523(a)(16) discharge exception does not apply to the chapter 13 discharge under § 1328(a)). See also Maple Forest Condo. Ass’n v. Spencer (In re Spencer) , 457 B.R. 601 (E.D. Mich. 2011) (reviewing the past case law theories and deciding, whethe r viewed as a contractual right or a property right, assessments of condominium fees post-petition are post-petition claims that are not subject to the debtor’s discharge); In re Kahn , 504 B.R. 409 (Bankr. D. Md. 2014) (stay lifted in Chapter 13 due to unpaid post-petition assessments; however, court noted, upon plan consummation, all assessments would be discharged and the condominium association would be limited to in

rem relief). The Panel expresses no opinion on the dischargeability of condominium fees and assessments in Chapter 13.No. 15-8037 In re Jackson Page 16

CONCLUSION

For the reasons stated, the bankr uptcy court’s decision is reve rsed and the sanctions order is vacated in its entirety.