Onenoa Faitalia v. Village Park Cmty. Ass'n

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 5, 2018
• Docket: 16-60100
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JUL 5 2018 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

In re: ONENOA FAAVEVELA FAITALIA No. 16-60100 and SOI FAITALIA, BAP No. 16-1170 Debtors, ______________________________ MEMORANDUM* ONENOA FAAVEVELA FAITALIA and SOI FAITALIA,

Appellants,

v.

VILLAGE PARK COMMUNITY ASSOCIATION,

Appellee.

Appeal from the Ninth Circuit Bankruptcy Appellate Panel Kurtz, Jury, and Taylor, Bankruptcy Judges, Presiding

Argued and Submitted June 14, 2018 Honolulu, Hawaii

Before: TASHIMA, W. FLETCHER, and HURWITZ, Circuit Judges.

Onenoa and Soi Faitalia (the “Faitalias”), Chapter 13 debtors, appeal a

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. decision of the Bankruptcy Appellate Panel (“BAP”) reversing a bankruptcy court

order awarding attorney’s fees against the Village Park Community Association

(“Village Park”) under Haw. Rev. Stat. § 421J-10(a). We have jurisdiction under 28

U.S.C. § 158(d)(1), and affirm the BAP decision.

1. The Faitalias own a home (the “Property”) subject to the Declaration of

Protective Covenants for Village Park, a homeowner’s association. Village Park

recorded a lien against the Property for delinquent assessments and, after the

Faitalias filed for Chapter 13 bankruptcy, filed a proof of claim asserting a fully

secured claim for the assessments. The bankruptcy court held that Village Park’s

claim was unsecured, because the value of the Property was less than the first-

priority mortgage held by a lender. See 11 U.S.C. § 506(a)(1) (“An allowed claim

of a creditor secured by a lien on property in which the estate has an interest . . . is a

secured claim to the extent of the value of such creditor’s interest in the estate’s

interest in such property . . . and is an unsecured claim to the extent that the value of

such creditor’s interest . . . is less than the amount of such allowed claim.”).

2. The BAP correctly held that the Faitalias were not entitled to attorney’s fees

because, by filing a proof of claim and disputing its priority, Village Park did not

engage in any action covered by § 421J-10(a).1

1 “[W]e generally presume that claims enforceable under applicable state law will be allowed in bankruptcy unless they are expressly disallowed.” Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 452 (2007).

2 A. Section 421J-10(a) provides that attorney’s fees shall be awarded against

the homeowner’s association in an action “[c]ollecting any delinquent assessments,”

“[f]oreclosing any lien,” or “[e]nforcing any provision of the association documents”

if “the association is not the prevailing party.” But, “[f]iling a claim in a . . . chapter

13 case . . . is not an act that personally targets the debtor or the debtor’s property.

Rather, its purpose is to obtain a distribution from the chapter 13 bankruptcy estate.”

In re Clayton, No. 09-03379-FLK13, 2010 WL 4008335, at *3 (Bankr. E.D. Wash.

Oct. 12, 2010). Indeed, once the Faitalias filed for bankruptcy, Village Park was

prohibited from taking the actions described in the fee statute, because the automatic

stay applies to all proceedings seeking to “enforce any lien against property” and “to

collect, assess, or recover a claim.” See 11 U.S.C. § 362(a)(4), (6).

B. Nor was Village Park “not the prevailing party” under § 421J-10(a). The

bankruptcy judge did not deny or reduce Village Park’s claim for the delinquent

assessments, invalidate the lien under state law, or find the association documents

unenforceable; he merely found the claim had a lower priority status under

bankruptcy law than Village Park asserted, and converted it into an unsecured

claim.2 Although Village Park was perhaps “not the prevailing party” with respect

2 Indeed, unless the Faitalias complete the Chapter 13 plan, the lien will not be permanently displaced. See Victorio v. Billingslea, 470 B.R. 545, 554 (S.D. Cal. 2012) (“In a chapter 13, lien avoidance is established at confirmation of the debtor’s chapter 13 plan, but it does not become permanent until the debtor completes all payments under the plan and receives a discharge.”).

3 to its assertion of the claim’s secured status, that issue does not fall under the purview

of § 421J-10(a).

AFFIRMED.3

3 The Faitalias’ motions to strike, Dkts. 28 and 38, are DENIED.