In re: Michael Batali and Kellie Batali ( 2015 )

  •                                                            FILED
                                                                DEC 01 2015
     1                         NOT FOR PUBLICATION          SUSAN M. SPRAUL, CLERK
                                                              U.S. BKCY. APP. PANEL
                                                              OF THE NINTH CIRCUIT
     4                             OF THE NINTH CIRCUIT
     5   In re:                        )      BAP No.     WW-14-1557-KiFJu
     6   MICHAEL BATALI and            )      Bk. No.     11-10114
         KELLIE BATALI,                )
     7                                 )
                         Debtors.      )
     8                                 )
     9   MICHAEL BATALI;               )
         KELLIE BATALI,                )
    10                                 )
                         Appellants,   )
    11                                 )
         v.                            )      M E M O R A N D U M1
    12                                 )
    13                                 )
                         Appellee.     )
    14   ______________________________)
    15                 Argued and Submitted on September 25, 2015,
                                  at Seattle, Washington
                                 Filed - December 1, 2015
                      Appeal from the United States Bankruptcy Court
    18                    for the Western District of Washington
    19            Honorable Marc L. Barreca, Bankruptcy Judge, Presiding
         Appearances:     Richard J. Wotipka of Broihier & Wotipka argued for
    21                    appellants Michael and Kellie Batali; Thomas J. Coy
                          of Condominium Law Group PLLC argued for appellee
    22                    Mira Owners Association.
         Before:     KIRSCHER, JURY and FARIS, Bankruptcy Judges.
                This disposition is not appropriate for publication.
    27   Although it may be cited for whatever persuasive value it may have
         (see Fed. R. App. P. 32.1), it has no precedential value. See 9th
    28   Cir. BAP Rule 8024-1.
     1        Debtors Michael and Kellie Batali (“Debtors”) appeal an order
     2   denying the discharge of their postpetition condominium
     3   association assessments.   For the reasons discussed, we AFFIRM.
     5        The facts are undisputed.2   Debtors filed their voluntary
     6   chapter 133 petition on January 6, 2011.   On schedule A, Debtors
     7   listed, in addition to their residence and undeveloped land, an
     8   investment condominium located in Kirkland, Washington (“Kirkland
     9   Condominium”) with a value of $225,000.    Debtors’ schedules also
    10   disclosed that Bank of America, N.A. held two liens against the
    11   Kirkland Condominium originating from a first and second mortgage.
    12   Debtors also listed “Mira Condominium Owners” as a secured
    13   creditor with a lien against the Kirkland Condominium, describing
    14   the lien as:
    15        Lien: condo assoc. statutory lien
              Security: [Debtors’] investment condominium
    16        Past Homeowners Dues & Water/Sewer
    17   Debtors did not list the debt owed to “Mira Condominium Owners” as
    18   contingent, unliquidated or disputed.   Debtors did not schedule
    19   any postpetition assessments as potential liabilities or
    20   contingent future obligations.
    21        Debtors’ statement of monthly net income contained on their
    23        2
                Because the record did not include some relevant documents,
         we exercised our discretion to reach the merits of the appeal by
    24   independently reviewing the bankruptcy court’s electronic docket
         and the imaged documents attached thereto. See O’Rourke v.
    25   Seaboard Sur. Co. (In re E.R. Fegert, Inc.), 
    887 F.2d 955
    , 957-58
         (9th Cir. 1988); Atwood v. Chase Manhattan Mortg. Co.
    26   (In re Atwood), 
    293 B.R. 227
    , 233 n.9 (9th Cir. BAP 2003).
    27        3
                Unless specified otherwise, all chapter, code, and rule
         references are to the Bankruptcy Code, 11 U.S.C. §§ 101–1532, and
    28   the Federal Rules of Bankruptcy Procedure, Rules 1001–9037.
     1   schedule J disclosed their average monthly income as $18,874.00
     2   and their average monthly expenses as $21,420.42, which included
     3   monthly installment payments of $2,846.00 on the Kirkland
     4   Condominium.
     5        Debtors’ revised first amended chapter 13 plan (“Amended
     6   Plan”) filed September 9, 2011, did not provide for any
     7   postpetition payments either within the plan or outside the plan
     8   on the Kirkland Condominium and provided for the surrender of that
     9   property.   The Amended Plan provided:   payments over sixty months;
    10   that the Kirkland Condominium would be surrendered to Bank of
    11   America, N.A. and “Mira Condominium Owners” upon confirmation; and
    12   that “all creditors to which the debtor is surrendering property
    13   pursuant to this section are granted relief from the automatic
    14   stay to enforce their security interest against the property
    15   including taking possession and sale[.]”   The bankruptcy court
    16   confirmed the Amended Plan on October 28, 2011.
    17        The bankruptcy court granted relief from the automatic stay
    18   to the secured lender on the Kirkland Condominium on September 9,
    19   2013, thereby permitting the secured lender to foreclose upon and
    20   obtain possession of the Kirkland Condominium.    The secured lender
    21   foreclosed on the Kirkland Condominium on July 25, 2014.
    22   Likewise, on February 6, 2014, Mira Owners Association (“MOA”)
    23   sought “relief from the automatic stay for purposes of pursuing a
    24   judgment against the Debtor for [postpetition] assessments, dues,
    25   costs, fees, and other charges.”   MOA attached a copy of the
    27   its motion to modify stay.   The Declaration, recorded in King
    28   County, Washington, on December 20, 2006, provides:   in
     1   Section 17.1, that MOA “has a lien on a Unit for any unpaid
     2   Assessment levied against a Unit from the time the Assessment is
     3   due[;]” and in Section 17.5, that “all sums assessed by the
     4   Association chargeable to any Unit, including all charges provided
     5   in this Article, shall be the personal obligation of the Owner of
     6   the Unit when the Assessment is made.”   Debtors did not oppose
     7   MOA’s motion.   On March 5, 2014, the bankruptcy court entered an
     8   order granting MOA relief from the automatic stay.4   That order
     9   specifically provided:
    10            1. In addition to the relief from stay accorded
             against the property pursuant to Debtors’ Chapter 13
    11       Plan, Paragraph V, the automatic stay of [] § 362(a)
             shall be and hereby is terminated as to Creditor so that
    12       Creditor may enforce its rights at state law stay [sic]
             for purposes of pursuing a judgment against the Debtors
    13       for [postpetition] assessments, dues, costs, fees, and
             other charges.
              On April 8, 2014, MOA sent Debtors a letter demanding that
    16        4
                MOA asserted in its motion to modify stay that Debtors owed
         $17,218.41 in postpetition arrears. MOA also maintained:
                   Creditor is a Washington nonprofit corporation and
    18        is the community association for The Mira Condominium.
    19                                   * * *
    20             Pursuant to Creditor’s recorded condominium
              declaration and [WASH. REV. CODE (“RCW”) §] 64.34.364,
    21        Creditor has a statutory lien which arises automatically
              and is perfected at the time assessments come due, and
    22        which lien acts as security for its debt against the
                                         * * *
              Debtor’s obligation to pay [postpetition] assessments is
    25        an obligation arising out of a covenant running with the
              land, and is not subject to the discharge. Foster v.
    26        Double R Ranch Ass’n (In re Foster), 
    435 B.R. 650
              Cir. BAP 2010). Debtor is personally liable for all
    27        [postpetition] assessments coming due until such time as
              the property is foreclosed on, and such assessments are
    28        not affected by the bankruptcy. Id.
     1   they pay $26,507.96 in postpetition condominium association dues,
     2   fees and interest through May 12, 2014.   On or about August 25,
     3   2014, MOA filed an action against Debtors in the Superior Court of
     4   the State of Washington, King County, seeking an award of
     5   “$28,672.30 for past due assessments, fees, interest, and
     6   attorney’s fees and costs, plus interest and attorney’s fees and
     7   costs which become due before entry of judgment, together with
     8   interest[.]”
     9        Thereafter, Debtors filed on October 8, 2014, a motion
    10   seeking a determination that: (1) the postpetition condominium
    11   association dues for the Kirkland Condominium would be discharged
    12   by Debtors’ chapter 13 discharge; and (2) Debtors’ confirmed
    13   Amended Plan eliminated MOA’s right to assert a claim against
    14   Debtors for postpetition assessments.   MOA opposed Debtors’
    15   motion.
    16        The bankruptcy court orally denied Debtors’ motion at a
    17   hearing held November 6, 2014.5   The bankruptcy court, adopting
    18   the reasoning set forth by the Panel in Foster v. Double R Ranch
    19   Ass’n (In re Foster), 
    435 B.R. 650
     (9th Cir. BAP 2010), concluded
    20   that the “ongoing ownership of property with a running covenant
    21   creates a postpetition claim even if the debtor does not use the
    22   property.”   The bankruptcy court then rejected Debtors’ res
                At the hearing, the bankruptcy court noted that the
    24   determination of whether a debt is dischargeable is a matter
         generally determined in an adversary proceeding. Debtor and MOA
    25   both waived the procedural elements afforded by Rule 7001 and
         agreed that the bankruptcy court could decide Debtors’ motion as a
    26   contested matter. See United Student Aid Funds, Inc. v. Espinosa,
    559 U.S. 260
    , 272 (2010) (“Due process requires notice ‘reasonably
    27   calculated, under all the circumstances, to apprise interested
         parties of the pendency of the action and afford them an
    28   opportunity to present their objections.’”).
     1   judicata argument, concluding that the confirmed Amended Plan did
     2   “not effectuate a transfer of the property[,]” and did not
     3   expressly provide for the discharge of any postpetition
     4   condominium association dues.   The bankruptcy court entered a
     5   written order on November 13, 2014, which memorialized its oral
     6   ruling by providing that “the [Debtors’ postpetition] homeowner
     7   assessments are not subject to discharge in this case.”
     8        Debtors timely appealed.   Debtors also sought reconsideration
     9   of the bankruptcy court’s November 13, 2014 order.   On
    10   February 20, 2015, the bankruptcy court granted Debtors’ request
    11   for reconsideration and entered a revised order that confined its
    12   ruling solely to the dischargeability of postpetition assessments
    13   in Debtors’ chapter 13 bankruptcy case.
    14                             II. JURISDICTION
    15        The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334
    16   and 157(b)(2)(I).   We have jurisdiction under 28 U.S.C. § 158.
    17                                 III. ISSUE
    18   1.   Whether Debtors’ confirmed Amended Plan discharged Debtors’
    19        postpetition condominium association dues.
    20   2.   Whether postpetition condominium association dues on property
    21        surrendered under the terms of a confirmed chapter 13 plan
    22        are dischargeable under § 1328(a).
    23                         IV. STANDARDS OF REVIEW
    24        In reviewing a bankruptcy court's determination of an
    25   exception to discharge, we review its findings of fact for clear
    26   error.   Oney v. Weinberg (In re Weinberg), 
    410 B.R. 19
    , 28 (9th
    27   Cir. BAP 2009).   We review issues of statutory construction and
    28   conclusions of law de novo.   Mendez v. Salven (In re Mendez),
    367 B.R. 109
    , 113 (9th Cir. BAP 2007).
     2                              V. DISCUSSION
     3        Debtors contend that three issues exist on appeal: (1) that
     4   the confirmed Amended Plan will discharge the postpetition
     5   condominium association dues owed to MOA and that the plan is res
     6   judicata; (2) that the postpetition condominium association dues
     7   will be discharged under § 1328(a); and (3) that the bankruptcy
     8   court inappropriately ruled that Debtors’ postpetition condominium
     9   association dues would not be dischargeable under chapter 7 of the
    10   Bankruptcy Code.   The bankruptcy court’s Amended order entered
    11   February 20, 2015, renders Debtors’ third argument on appeal moot
    12   and we will not discuss this issue further.
    13        A.   Binding Effect of Confirmation
    14        Debtors argue that the terms of their confirmed Amended Plan
    15   bind MOA and will result in the discharge of MOA’s claim for
    16   postpetition condominium association dues.    The premise of this
    17   argument is correct.   Section 1327(a) provides:
    18       The provisions of a confirmed plan bind the debtor and
             each creditor, whether or not the claim of such creditor
    19       is provided for by the plan, and whether or not such
             creditor has objected to, has accepted, or has rejected
    20       the plan.
    21   § 1327(a); Fadel v. DCB United LLC, Tr. of the Eisenhower UDT 7-
    22   22-11 (In re Fadel), 
    492 B.R. 1
    , 9-10 (9th Cir. BAP 2013).   The
    23   bankruptcy court confirmed the Amended Plan on October 28, 2011.
    24   MOA had notice of the Amended Plan and did not object.   Thus, the
    25   confirmed Amended Plan is binding upon MOA.
    26        However, Debtors’ confirmed Amended Plan made no mention of
    27   discharging Debtors’ postpetition liability to MOA and thus cannot
    28   bind MOA with respect to the dischargeability of the postpetition
     1   assessments.      Simply stated, MOA received neither the notice nor
     2   the due process required by the Rules and Espinosa for a discharge
     3   of Debtors’ postpetition condominium association dues.
     4        The Panel further notes that the bankruptcy court granted MOA
     5   relief from the automatic stay on March 5, 2014, so MOA could
     6   specifically “pursu[e] a judgment against the Debtors for
     7   [postpetition] assessments, dues, costs, fees, and other charges.”
     8   The March 5, 2014 order is directly at odds with Debtors’ argument
     9   here.       Debtors did not seek reconsideration of or appeal that
    10   order, which is now final.
    11        B.        Discharge of Postpetition Condominium Association Dues
                        Under § 1328(a)
    13        The record does not establish whether Debtors have completed
    14   their Amended Plan’s payments and are now eligible for a discharge
    15   under § 1328(a).      A prerequisite to the discharge on any debt
    16   under § 1328(a) is that Debtors complete all the payments due
    17   under the terms of their confirmed Amended Plan.6      See e.g.,
    18   In re Khan, 
    504 B.R. 409
    , 413 (Bankr. D. Md. 2014) (“Until the
    19   discharge is entered, Debtor is stuck for the payment of [his
    20   postpetition condominium association fees].”).
    21        The issue of whether postpetition homeowner or condominium
    22   association assessments are dischargeable has been litigated
    23   through several cases.      See e.g., In re Horton, 
    87 B.R. 650
    , 652
    24   (Bankr. D. Colo. 1987) (a chapter 7 debtor’s postpetition
    25   homeowners’ association assessments were not discharged; “[t]he
    27           6
                If this case were converted to chapter 7 or if Debtors were
         to seek a hardship discharge under § 1328(b), the Panel’s analysis
    28   would not be necessary as the matter would be governed by statute.
     1   benefits of owning property go hand in hand with the burdens
     2   arising from ownership”); In re Rink, 
    87 B.R. 653
    , 654 (Bankr. D.
    3 Colo. 1987
    ) (postpetition condominium assessments are not
     4   discharged, but “the estate is responsible for any [postpetition]
     5   condominium assessments which arise during the administration of
     6   the estate”); In re Montoya, 
    95 B.R. 511
    , 513 (Bankr. S.D. Ohio
     7   1988) (In a chapter 7 case, the “fees assessable against a debtor
     8   pursuant to a declaration of condominium ownership and the by-laws
     9   of a unit owner association may be discharged as an unmatured
    10   claim where the debtor abandons the condominium and all rights
    11   associated with such ownership before or upon the bankruptcy
    12   filing”); and In re Elias, 
    98 B.R. 332
    , 337 (N.D. Ill. 1989)
    13   (“[C]ondominium assessments that accrue postpetition but arise out
    14   of a prepetition contract are ‘debts’ within the meaning of
    15   [§] 101(11) and are dischargeable in a Chapter 7 proceeding.”)
    16        In 1990, the Seventh Circuit Court of Appeals, in
    17   In re Rosteck, 
    899 F.2d 694
    , 695 (7th Cir. 1990), considered in a
    18   chapter 7 case “whether the bankruptcy court’s December 1983
    19   discharge order discharged the Rostecks’ obligation to pay
    20   [postpetition] condominium assessments” for a condominium in which
    21   the debtors did not reside.   The court in Rosteck answered that
    22   question by examining when the debt arose.    Id.   According to that
    23   court, the condominium declaration was a prepetition contract from
    24   which the postpetition assessments arose.    Id. at 696-97.
    25   Consequently, because the debtors’ “debt for future assessments,
    26   based on their [prepetition] agreement to pay those assessments,
    27   existed when they filed their bankruptcy petition, that debt was
    28   discharged by the bankruptcy court in its discharge order.”    Id.
     1   at 697.    The condominium association in Rosteck argued that
     2   allowing debtors in bankruptcy to escape postpetition assessments,
     3   while still possibly residing in their homes, afforded debtors a
     4   “head start” rather than a “fresh start.”    Id.    The Rosteck court
     5   admitted that its decision could be “troubling” but reasoned:
     6          [W]e think the broad language Congress used in the
                Bankruptcy Code compels the result we reach. We have no
     7          power to change that language to reach a more palatable
                result. Contingent debts are still debts, and Congress
     8          has not exempted the type of debt in this case from
    10   Id.    Other courts reached a similar conclusion,   See, e.g.,
    11   In re Cohen, 
    122 B.R. 755
    , 758 (Bankr. S.D. Cal. 1991);
    12   In re Garcia, 
    168 B.R. 320
    , 324-25 (Bankr. E.D. Mich. 1993).
    13          In 1994, the Fourth Circuit Court of Appeals considered facts
    14   similar to those in Rosteck and reached a different conclusion on
    15   the issue of whether “a discharge in bankruptcy relieves a debtor
    16   from personal liability for [postpetition] assessments of
    17   cooperative housing dues.”    River Place E. Hous. Corp. v.
    18   Rosenfeld (In re Rosenfeld), 
    23 F.3d 833
    , 835 (4th Cir. 1994).
    19   The chapter 7 debtor in Rosenfeld did not live in the property
    20   and, in fact, had signed a consent order granting the mortgage
    21   lienholder relief from the automatic stay.    Id.   The debtor,
    22   however, retained ownership of the property.    Id.   The court in
    23   Rosenfeld, like the court in Rosteck, first considered the
    24   definition of the terms “debt” and “liability on a claim.”       Id. at
    25   836.    But the court in Rosenfeld declined to follow Rosteck and
    26   its progeny, which held that an association’s right to payment of
    27   dues arises when the contract is made and is contingent on the
    28   debtor's continued ownership of the property, and instead
     1   concluded that postpetition assessments do not arise until they
     2   are assessed.   The court in Rosenfeld reasoned that “the
     3   obligation to pay assessments is a function of owning the land
     4   with which the covenant runs” and the “obligation to pay the
     5   assessments arose from [the debtor’s] continued ownership of the
     6   property and not from a [prepetition] contractual obligation.”
     7   Id.   The court in Rosenfeld explained:
     8         [The debtor’s] personal liability under the covenant to
               pay assessments is not destroyed by River Place’s access
     9         to alternative remedies, and even if Rosenfeld has not
               exercised the benefits of ownership, as title holder he
    10         has the legal right to do so. In order to terminate his
               responsibility for assessments, Rosenfeld must transfer
    11         title to the property, if necessary by a deed in lieu of
               foreclosure. In re Horton, 87 B.R. at 652; In re Rink,
    12         87 B.R. at 654. His consent to an order granting the
               mortgage holder relief from the automatic stay did not
    13         end his ownership.
    14   Id. at 838.
    15         In 1994, Congress responded to Rosteck7 and its progeny by
    16   adding § 523(a)(16) to the Code.   The Bankruptcy Reform Act of
    17   1994 became Public Law No. 103-394 on October 22, 1994, and
    18   excepted from discharge under §§ 727, 1141, 1228(a), 1228(b) or
    19   1328(b):
    20         [A] fee or assessment that becomes due and payable after
               the order for relief to a membership association with
    21         respect to the debtor’s interest in a dwelling unit that
               has condominium ownership or in a share of a cooperative
    22         housing corporation, but only if such fee or assessment
               is payable for a period during which—
                    (A) the debtor physically occupied a dwelling unit
    24              in the condominium or cooperative project; or
                Legislative history indicates that The Bankruptcy Reform
    26   Act of 1994 was in the drafting stages as early as January of
         1994. Also, statements made on October 4, 1994, at 140 Cong. Rec.
    27   H. 10753 cite only Rosteck. It logically follows that the
         addition of § 523(a)(16) to the Code was a response to Rosteck and
    28   its progeny, and not a response to Rosenfeld.
     1            (B) the debtor rented the dwelling unit to a tenant
                  and received payments from the tenant for such
     2            period,
     3       but nothing in this paragraph shall except from
             discharge the debt of a debtor for a membership
     4       association fee or assessment for a period arising
             before entry of the order for relief in a pending or
     5       subsequent bankruptcy case.
     6        Section 523(a)(16) remained unchanged until the passage of
     7   the Bankruptcy Abuse Prevention and Consumer Protection Act of
     8   2005 (“BAPCPA”), Pub. L. 109-8 Stat. 23 § 442 (Apr. 20, 2005),
     9   when Congress amended § 523(a)(16) to include homeowners’
    10   associations and to delete the requirement that debtors physically
    11   reside in or collect rents from the unit.   Section 523(a)(16) now
    12   excepts from discharge:
    13       [A] fee or assessment that becomes due and payable after
             the order for relief to a membership association with
    14       respect to the debtor’s interest in a unit that has
             condominium ownership, in a share of a cooperative
    15       corporation, or a lot in a homeowners association, for
             as long as the debtor or the trustee has a legal,
    16       equitable, or possessory ownership interest in such
             unit, such corporation, or such lot, but nothing in this
    17       paragraph shall except from discharge the debt of a
             debtor for a membership association fee or assessment
    18       for a period arising before entry of the order for
             relief in a pending or subsequent bankruptcy case[.]
    20   After § 523(a)(16) was added to the Code in 1994, and putting
    21   aside the issue concerning homeowner associations, the primary
    22   area of litigation concerning § 523(a)(16) shifted to chapter 13
    23   bankruptcy cases.
    24        In 1997, a bankruptcy court considered whether postpetition
    25   time-share assessments relating to a surrendered time-share
    26   interest were discharged in a debtor’s chapter 13 bankruptcy.
    27   In re Mattera, 
    203 B.R. 565
     (Bankr. D.N.J. 1997).   Following the
    28   language of § 1328(a), the court in Mattera framed the issue as
     1   two-fold: “[W]hether the association’s [postpetition] assessments
     2   constitute a ‘debt’ under [] § 1328(a), and, if so, whether that
     3   debt has been ‘provided for’ by debtor’s Chapter 13 plan.”    Id. at
     4   570.    The court, believing “that the Rosteck opinion best
     5   reflect[ed] a plain reading of the statutory definition of
     6   ‘claim’” and interpreting the terms “debt” and “claim” broadly,
     7   concluded:
     8          [A]t the time of the filing of debtor's Chapter 13
                petition, the obligation of the debtor to Ocean High for
     9          [postpetition] assessments was a contingent, unmatured,
                unliquidated, unfixed right to payment which constituted
    10          a “claim” and a “debt” for § 1328(a) discharge purposes.
                The claim was contingent upon the retention of ownership
    11          by the debtor, and the regular assessment of fees by the
                association. The claim was not fixed in terms of a
    12          certain and definite amount due at the time of the
                filing of the petition. The debt would mature each month
    13          as assessments were made by the association.
    14   Id. at 571.    The Mattera court went on to explain:
    15          Our conclusion that [postpetition] assessments
                constitute claims within the definition of [] § 101(5)
    16          and may, therefore, be discharged as an in personam
                obligation of the debtor does not mean that if the
    17          debtor continues to use the unit and/or receives benefit
                from it, that she may do so without compensating the
    18          association. While this factual scenario is not
                directly implicated here because debtor has certified
    19          that she did not use or benefit from the time-share
                following the filing of the petition, liability for
    20          [postpetition] use and occupancy, on theories of unjust
                enrichment and/or quantum meruit, might be available.
    21          See, e.g., In re Lamb, 
    171 B.R. 52
    , 55 (Bankr. N.D. Ohio
    23   Id. at 572.    As to the second prong of the issue, the court in
    24   Mattera concluded that the debtor’s postpetition assessments were
    25   provided for in the plan because debtor’s plan provided for the
    26   surrender of the time-share and specifically listed the time-share
    27   association as a secured creditor.      Id.
    28          Years later, in a factual scenario alluded to but not present
     1   in Mattera, the Ninth Circuit Bankruptcy Appellate Panel addressed
     2   whether a chapter 13 “debtor’s obligation to pay [homeowners’
     3   association (“HOA”)] dues after the order for relief [was] an
     4   affirmative covenant that runs with the land, unaffected by
     5   debtor’s discharge, or [was] it . . . a contractual obligation
     6   between the parties, making it a dischargeable prepetition debt.”
     7   In re Foster, 435 B.R. at 658.    Importantly, the debtor in Foster
     8   did not intend to surrender his home, but instead, merely sought
     9   to discharge his postpetition homeowner association dues.
    10        The debtor in Foster raised two arguments on appeal.     The
    11   first argument involved whether § 523(a)(16) is applicable to
    12   § 1328(a); the parties conceded that § 523(a)(16) was inapplicable
    13   to a discharge under § 1328(a).    Id. at 657-58.   The second
    14   argument involved whether the postpetition HOA dues constituted
    15   prepetition debts that arose out of a prepetition contract.      Id.
    16   In addressing the debtor’s second argument, the Panel in Foster
    17   did not answer the specific question of “[w]hether the omission of
    18   § 1328(a) in § 523(a)(16) or vice versa [was] a statutory
    19   misstep.”   Id. at 659.   Instead, the Panel concluded that “[u]nder
    20   Washington law, the affirmative covenant to pay HOA dues is not
    21   contractual, but is a covenant running with the land.    As such,
    22   debtor’s personal liability for the dues is an incidence of
    23   ownership of his property not affected by the filing of his
    24   bankruptcy.”   Id. at 653.
    25        In reaching its decision, the Panel first examined Rosteck,
    26   Rosenfeld and the history of § 523(a)(16).    Because of the broad
    27   dischargeability provisions afforded chapter 13 debtors, the Panel
    28   expressed its “doubt [that] the omission of § 1328(a) in
     1   § 523(a)(16) or vice versa evinces a legislative intent to
     2   discharge postpetition HOA dues under § 1328(a) when the debtor
     3   used the cure and maintenance provisions under chapter 13 to stay
     4   in his or her property.”      435 B.R. at 559.
     5        The Panel in Foster then examined Washington law and
     6   concluded:
     7        [U]nder Washington law and the Declaration, debtor’s
              obligation to pay the HOA dues was a function of owning
     8        the land with which the covenant runs and not from a
              prepetition contractual obligation. As such, the
     9        holding in Rosenfeld is persuasive. It follows that
              debtor’s liability is “not ‘rooted in the
    10        [prebankruptcy] past’, but rather [is] rooted in the
              estate in property itself.”
    12   Id. at 660-61 (quoting Beeter v. Tri–City Prop. Mgmt. Servs., Inc.
    13   (In re Beeter), 
    173 B.R. 108
    , 122 (Bankr. W.D. Tex. 1994)).          The
    14   Panel concluded that the Rosenfeld approach was consistent with
    15   the RESTATEMENT (THIRD) OF PROPERTY.    Id. at 661.   And finally, the
    16   Panel in Foster noted the different treatment of property rights
    17   and contract rights under the Bankruptcy Code:
    18        While a debtor’s personal obligation under a contract
              may be discharged in most instances, “bankruptcy power
    19        is subject to the Fifth Amendment’s prohibition against
              taking private property without compensation.”
    20        In re Rivera, 
    256 B.R. 828
    , 834 (Bankr. M.D. Fla. 2000)
              (quoting United States v. Sec. Indus. Bank, 
    459 U.S. 70
    21        75 [] (1982)). “A homeowners’ association’s right to
              impose postpetition assessments pursuant to a recorded
    22        Declaration of Covenants and Restrictions is within the
              scope of the traditional property interests protected by
    23        the Fifth Amendment.” Rivera, 256 B.R. at 834.
    24             Although § 101(5)(A) defines a “claim” as a “right
              to payment”, “[t]he key to distinguishing a right to
    25        payment that is or is not subject to . . . discharge is
              simply whether the right to payment is based on a
    26        property interest or something else.” Id. at 833.
              Since Washington law does not view the Declaration as a
    27        contract (or “something else”) and the affirmative
              covenant to pay HOA dues is one that runs with the land,
    28        it follows that the Association's right to payment of
     1      unassessed postpetition HOA dues is based on a property
            interest not subject to discharge under § 1328(a). The
     2      Rivera court explained the reason for this rule:
     3           A covenant running with the land, including any
                 express provision for the debtor to be personally
     4           obligated to pay the homeowners’ association, is an
                 integral part of the property which the debtor
     5           acquired when the debtor acquired title to the
                 property. The debtor never had title clear of the
     6           previously recorded covenant running with the land.
                 Even though a mortgage and deed may be executed
     7           simultaneously, they are separate transactions.
                 The debtor’s acceptance of a deed and the
     8           corresponding recorded covenants, however, is one
                 single and inseparable transaction. Therefore, to
     9           release the debtor from a recorded covenant is to
                 take a property interest away from the homeowners'
    10           association and give the debtor a property interest
                 which the debtor never had in the first place. Any
    11           release from a covenant would in effect be a forced
                 conveyance of a property interest from the
    12           homeowners’ association to the debtor, something
                 clearly beyond the scope of the Chapter 7
    13           discharge.
    14      Rivera, 256 B.R. at 833–34.
    15           Accordingly, we hold that, as a matter of law,
            debtor’s personal liability for HOA dues continues
    16      postpetition as long as he maintains his legal,
            equitable or possessory interest in the property and is
    17      unaffected by his discharge. In essence, the ‘running’
            covenant rule in this case boils down to one of ‘you
    18      stay, you pay’ since debtor’s confirmed plan indicates
            he will stay in his home by curing prepetition default
    19      on his mortgage and maintain on-going payments through
            his confirmed Chapter 13 plan.
    21 Foster, 435 at 661.
    22      Under Washington law, the Foster Panel found that a recorded
    23 condominium declaration, such as MOA’s, runs with the land and is
    24 a property right that cannot be extinguished in a bankruptcy.   The
    25 “you stay, you pay” rule is the logical extension of that finding;
    26 as long as a debtor continues to have an interest in the property
    27 at issue, he cannot discharge the postpetition assessments that
    28 arise from the covenant that runs with the property.
     1      Debtors construe Foster’s holding as simply one of “you stay,
     2 you pay,” and argue it is not controlling because Debtors have not
     3 occupied the Kirkland Condominium during the postpetition period
     4 and have indicated their intent to surrender it pursuant to the
     5 terms of their confirmed Amended Plan.   Rather, citing
     6 In re Coonfield, 
    517 B.R. 239
     (Bankr. E.D. Wash. 2014), Debtors
     7 argue that “[MOA’s] claim for the ongoing assessments that are at
     8 issue . . . is merely the ‘contingent”, ‘unmatured’ and
     9 ‘unliquidated’ portion of [MOA]’s pre-petition claim and its
    10 status as a debt for purposes of discharge under []§ 1328(a) is
    11 not dependant on characterization of the obligation as one arising
    12 from ‘a covenant running with the land’ versus one ‘flowing from a
    13 contract.’”
    14      The court in Coonfield held that the chapter 13 debtors could
    15 discharge their postpetition homeowner association dues,
    16 reasoning:
    17           A contrary interpretation of the law divests []
            § 523(a)(16) of significance. If personal liability on
    18      such obligations arise [postpetition] as the Homeowners
            Association urges, [§] 523(a)(16) is rendered
    19      meaningless and simply restates a principle already
            infused in bankruptcy law; i.e., that a right to payment
    20      arising [postpetition] is not subject to discharge.
    21 Id. at 243.   Coonfield’s reasoning is not persuasive.    First,
    22 Coonfield runs contrary to our precedent in Foster.   Moreover, as
    23 discussed earlier, Congress added § 523(a)(16) to the Code in
    24 response to Rosteck, which held that the debtors’ postpetition
    25 condominium assessments were discharged because they were debts
    26 stemming from a prepetition contractual obligation.   Congress’s
    27 concern with Rosteck’s holding could only be that the postpetition
    28 assessments were not debts, or if they were debts, that they were
     1 not prepetition debts.    This highlights the flaw in Coonfield’s
     2 analysis, and also the ambiguity created by the absence of a
     3 reference to § 523(a)(16) in § 1328(a)(2).
     4      Foster is well-reasoned and consistent with canons of
     5 statutory construction set forth by both the Supreme Court and the
     6 Ninth Circuit Court of Appeals.     Foster dictates that the Debtors
     7 in this case may not extinguish MOA’s recorded Declaration and may
     8 not discharge their postpetition assessments, even though they did
     9 not reside in the Kirkland Condominium postpetition.     Unlike the
    10 court in Coonfield, the Panel in Foster was not persuaded “that
    11 § 523(a)(16) establishes generally that postpetition HOA dues
    12 constitute ‘claims’ or ‘debts’ which can be discharged [under
    13 § 1328(a)].”   Foster, 435 B.R. at 659.    The Panel’s reasoning in
    14 Foster was two-fold.    Id.    First, § 523(a)(16) is not applicable
    15 to a discharge under § 1328(a), and second, “state law governs the
    16 substance of claims.”    Id.   As discussed earlier, the Panel in
    17 Foster found the holding in Rosenfeld persuasive and concluded
    18 that under Washington law, “the HOA dues [were] a function of
    19 owning the land with which the covenant runs” and as a
    20 consequence, “the Association’s right to payment of unassessed
    21 postpetition HOA dues is based on a property interest not subject
    22 to discharge under § 1328(a).”     Id. at 660-61.
    23      Foster holds that the nondischargeable liability continues to
    24 accrue “as long as [the debtor] maintains his legal, equitable or
    25 possessory interest in the property . . . .”     Id. at 661 (emphasis
    26 added).   While the Debtors had given up possession of the Kirkland
    27 Condominium, they had not divested themselves of their legal and
    28 equitable ownership interests in it.      As the bankruptcy court
     1 correctly noted, surrender under the plan “[did] not effectuate a
     2 transfer of the property.”    See Pratt v. Gen. Motors Acceptance
     3 Corp. (In re Pratt), 
    462 F.3d 14
    , 18-19 (1st Cir. 2006);
     4 In re Rosa, 
    495 B.R. 522
    , 523 (Bankr. D. Haw. 2013) (“surrender
     5 does not transfer ownership of the surrendered property.   Rather,
     6 ‘surrender’ means only that the debtor will make the collateral
     7 available so the secured creditor can, if it chooses to do so,
     8 exercise its state law rights in the collateral”); In re Gollnitz,
    456 B.R. 733
    , 736 (Bankr. W.D.N.Y. 2011) (“Authorization for
    10 surrender does not constitute a transfer of title.   Rather,
    11 transfer requires both the surrender of an interest and its
    12 acceptance.”).   Subject to exceptions not applicable here, under
    13 Washington law, “[e]very conveyance of real estate, or any
    14 interest therein . . . shall be by deed[.]”   RCW § 64-04.010.    To
    15 qualify as a deed, an instrument must comply with RCW § 64.04.020,
    16 which requires that “[e]very deed shall be in writing, signed by
    17 the party bound thereby, and acknowledged by the party before some
    18 person authorized by this act to take acknowledgments of deeds.”
    19 The confirmed Amended Plan does not substitute for a deed.
    20      Under the facts as presented, Debtors were the owners of the
    21 Kirkland Condominium until July 25, 2014, when the secured lender
    22 foreclosed.   As such, the postpetition condominium association
    23 dues assessed between Debtors’ petition date and July 25, 2014,
    24 are not discharged under § 1328(a).
    25                              VI. CONCLUSION
    26      For the foregoing reasons, we AFFIRM the ruling of the
    27 bankruptcy court.