Court Opinion

ID: 2754174
Source: CourtListenerOpinion
Date Created: 2014-11-21 20:01:04.094236+00
Date Added: 2024-06-11T12:22:03.283795
License: Public Domain

UNPUBLISHED

                   UNITED STATES COURT OF APPEALS
                       FOR THE FOURTH CIRCUIT

                               No. 13-1884

KINGSTON AT WAKEFIELD HOMEOWNERS ASSOCIATION, INC.,

                 Plaintiff - Appellant,

           v.

KIM DEHAVION CASTELL,

                 Defendant - Appellee,

           and

JOHN F. LOGAN,

                 Trustee.

Appeal from the United States District Court for the Eastern
District of North Carolina, at Raleigh.   Terrence W. Boyle,
District Judge. (5:13-cv-00001-BO)

Argued:   September 17, 2014              Decided:     November 21, 2014

Before KING and     FLOYD,   Circuit   Judges,   and   HAMILTON,   Senior
Circuit Judge.

Affirmed by unpublished per curiam opinion.

ARGUED: Nelson Glenn Harris, HARRIS & HILTON, PA, Raleigh, North
Carolina, for Appellant. Robert Lee Roland, IV, Raleigh, North
Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

      The sole dispute on appeal is whether the bankruptcy court

erred   in    treating     a      particular         creditor’s    claim    in   this

bankruptcy action as unsecured as opposed to secured.                        As the

second layer of appellate review, we affirm the district court’s

affirmance of the bankruptcy court’s treatment of the claim as

unsecured.

                                          I.

      This    action   began       when     Kim      Castell    (Debtor)    filed   a

voluntary petition for relief under Chapter 13 of the Bankruptcy

Code on June 20, 2012.             At the time, Debtor was delinquent in

dues she owed the Kingston at Wakefield Homeowners Association,

Inc. (the HOA) in the amount of $678.75.                       The debt arose from

Debtor’s ownership of real property in the Kingston at Wakefield

Plantation subdivision (the Subdivision), which real property is

subject to the recorded Declaration of Covenants, Conditions,

and   Restrictions     for       Kingston       at    Wakefield   Plantation     (the

Declaration).

      The    HOA   filed     a    proof     of       secured   claim   in   Debtor’s

bankruptcy action in the amount of $678.75, asserting that the

debt is secured by a lien on Debtor’s real property in the

Subdivision.       Debtor objected to the HOA’s assertion that the

claim is secured.        According to Debtor, the delinquent dues are

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only entitled to treatment as a general unsecured claim because

the   HOA   never   obtained    a   lien      on   Debtor’s    real     property   in

accordance with the North Carolina Planned Community Act (the

Planned Community Act), which provides, in relevant part:

      Any assessment attributable to a lot which remains
      unpaid for a period of 30 days or longer shall
      constitute a lien on that lot when a claim of lien is
      filed of record in the office of the clerk of superior
      court of the county in which the lot is located
      . . . . Once filed, a claim of lien secures all sums
      due the association through the date filed and any
      sums due to the association thereafter.

N.C. Gen. Stat. § 47F-3-116(a).

      In response, the HOA did not dispute that it failed to

comply with the Planned Community Act.               Rather, the HOA took the

position     that   “[i]t      is   not       necessary       for   a    homeowners

association to file a lien in accordance with the provisions of

the Planned Community Act to have a valid security interest in

the Property.”       (J.A. 15).        The HOA attached a copy of the

Declaration to its response.

      Of relevance on appeal, Article V, Section 1, Subsection

(a) of the Declaration provides that annual assessments of the

HOA “shall be a charge and continuing lien on the Lot against

which such assessment is made.”               (J.A. 25).       Also of relevance

on appeal, Article V, Section 12 of the Declaration, entitled

“Assessment Lien and Foreclosure,” provides, in relevant part:

      All sums assessed in the manner provided in this
      Article but unpaid, shall . . . become a continuing

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     lien and charge on the Lot owned by the defaulting
     Owner   and  improvements   thereon   covered  by  such
     assessment, as of the assessment due date . . . . To
     evidence the aforesaid assessment lien, which remains
     unpaid for a period of 30 days or longer the Board
     shall prepare a written notice of assessment lien
     setting forth the amount of the unpaid indebtedness,
     the name of the Owner of the Lot and improvements
     thereon covered by such lien and a description of the
     Lot.   Such notice shall be signed by an officer or
     authorized agent of the Association and shall be
     recorded in the Office of the Clerk of Superior Court
     of Wake County, North Carolina. Such lien for payment
     of assessments shall attach with the priority above
     set forth from the date that such payment becomes
     delinquent and may be enforced by the foreclosure of
     the defaulting Owner’s Lot and improvements thereon by
     the Association in like manner as a mortgage or deed
     of trust with power of sale on real property under
     Article 2A of Chapter 45 of the North Carolina General
     Statutes subsequent to the recording of a notice of
     assessment   lien   as   provided   above   and/or  the
     Association may institute suit against the Owner
     personally obligated to pay the assessments and/or
     foreclosure of the aforesaid lien judicially or may
     seek other available remedy or relief. . . .        The
     provisions of this Article V shall be in addition to
     the provisions of applicable laws relating to liens
     established as herein provided.

(J.A. 28).

     The bankruptcy court held a hearing on Debtor’s objection

and the HOA’s response.      The HOA argued that it held a common

law lien on Debtor’s real property in the Subdivision in the

amount of $678.75 based upon the language in the Declaration

providing that the annual assessments of the HOA “shall be a

charge   and   continuing   lien   on   the   Lot   against   which   such

assessment is made.”    (J.A. 25).      The bankruptcy court sustained

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Debtor’s objection to treatment of the HOA’s claim as secured as

opposed to unsecured, reasoning as follows:

       Because [the HOA] never filed a notice of lien with
       the Clerk of the Superior Court of Wake County, its
       prepetition claim for delinquent homeowners dues and
       assessments was never perfected under N.C. Gen. Stat.
       § 47F-3-116 or Article V, Section 12 of its own
       declaration, both requiring written notice of the
       assessment lien to be recorded with the Clerk of the
       Superior Court of Wake County.

(J.A. 77).

       The HOA appealed the ruling to the district court, which

affirmed on the reasoning of the bankruptcy court.             This timely

appeal followed.

                                    II.

       On appeal, the HOA continues to maintain that its claim is

secured and asks us to reverse the district court’s affirmance

of the bankruptcy court on that basis.               With respect to the

Planned Community Act, the HOA concedes that it did not file a

claim of lien with the Office of the Clerk of Superior Court of

Wake County, North Carolina on Debtor’s real property in the

Subdivision,    and   therefore,   cannot    avail   itself   of   the   lien

foreclosure remedy of North Carolina General Statute § 47F-3-

116.     The   HOA   contends,   however,   that   such   noncompliance   is

irrelevant to its ability to assert a secured claim on Debtor’s

real property in the Subdivision under common law based upon the

                                     5
Declaration.          This    is    because,     the    HOA    argues,    the    Planned

Community       Act    is     not    the   exclusive          vehicle    by     which     a

homeowners’ association in North Carolina can enforce a lien for

unpaid assessments on a homeowner’s property.                           In support of

this argument, the HOA points to North Carolina General Statute

§ 47F-3-116(d), which provided during the time period relevant

to this case:

     (d) This section does not prohibit other actions to
     recover the sums for which subsection (a) of this
     section creates a lien or prohibit an association
     taking a deed in lieu of foreclosure.

N.C. Gen. Stat. § 47F-3-116(d) (2011).

     With respect to the language of Article V, Section 12 of

the Declaration, the HOA argues that such language “provides for

a continuing lien and charge as of the assessment due date,

which may be evidenced by filing with the Wake County Clerk of

Superior Court, but which, in any event, exists and binds the

Owners    and    its    heirs,       successors        and    assigns,   without        any

filing.”    Appellant’s Br. at 23.               Based upon this argument, the

HOA urges us to conclude that it has a lien on Debtor’s real

property in the Subdivision that is enforceable under common law

regardless of whether the HOA filed written notice of such lien

with the Office of the Clerk of Superior Court of Wake County.

     We affirm the district court’s affirmance of the bankruptcy

court’s    treatment         of    the   HOA’s    claim       as   unsecured.       Even

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assuming arguendo         that    the    Planned        Community   Act    is   not       the

exclusive vehicle by which a homeowners’ association in North

Carolina     can    enforce      a     lien       for   unpaid   assessments         on    a

homeowner’s    property,         the    HOA’s       common   law    lien    theory        is

inconsistent       with   the        detailed       procedure    for   obtaining           an

assessment     lien       against       a     homeowner’s        property       in        the

Subdivision.       The HOA’s position ignores the mandatory nature of

the plain language of Article V, Section 12 of the Declaration

detailing the steps the HOA must take to obtain an assessment

lien.   (J.A. 28) (“To evidence the aforesaid assessment lien . .

. the Board shall prepare a written notice of assessment lien .

. ., . . . [s]uch notice shall be signed by an officer or

authorized agent of the Association and shall be recorded in the

Office of the Clerk of Superior Court of Wake County, North

Carolina).     The record is undisputed that the HOA did not comply

with these lien procedures.                 Accordingly, assuming arguendo the

validity of the HOA’s argument regarding the Planned Community

Act not providing an exclusive remedy, we affirm the district

court’s affirmance of the bankruptcy court’s treatment of the

HOA claim as unsecured.

                                                                                AFFIRMED

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