604 B.R. 826
9th Cir. BAP2019Background
- Debtor Maria Basave de Guillen fell behind on HOA assessments for a Buena Park condominium; Highland Greens recorded a Notice of Delinquent Assessment Lien in 2008 and an amendment in 2011 that purported to include future assessments.
- Highland Greens obtained a 2012 state-court default money judgment and recorded it; no foreclosure sale occurred prepetition.
- Debtor filed Chapter 13 in 2018; Highland Greens filed a proof of claim (~$64,137) asserting the lien secured both the judgment and post-notice assessments, interest, fees, and costs.
- Debtor objected, arguing the recorded notice did not secure amounts accruing after recordation, among other challenges; Highland Greens relied on its CC&Rs and Bear Creek to argue for a continuing lien.
- The bankruptcy court sustained the objection in part: it held the recorded notice did not create a continuing lien and limited the secured claim to the recorded prepetition judgment amount (rest classified unsecured).
- The BAP affirmed, concluding the CC&Rs did not authorize a continuing lien and the Davis‑Stirling Act’s notice scheme bars adding future assessments to an existing notice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a recorded HOA notice can secure assessments that accrue after recordation (a “continuing lien”) | Debtor: notice-lien is limited to amounts stated at time of recordation; future delinquencies require new notice | Highland Greens: CC&Rs and Bear Creek allow a continuing lien; notice may include future accruals | Held: No continuing lien; lien limited to amounts specified in the recorded notice; future delinquencies require new lien/notice |
| Whether CC&Rs here authorize inclusion of future assessments in the lien | Debtor: CC&Rs do not authorize continuing lien; notice inconsistent with governing documents | Highland Greens: CC&Rs permit liens to include subsequent delinquencies (argues applicability) | Held: CC&Rs in this case do not authorize a continuing lien; Notice language conflicted with CC&Rs |
| Whether Davis‑Stirling Act authorizes or permits a continuing lien despite governing documents | Debtor: Act’s strict notice/itemization requirements mean lien limited to stated amount | Highland Greens: statutory scheme and some precedent support practical, continuing enforcement without successive notices | Held: Davis‑Stirling Act does not permit adding future assessments to an existing notice; notice requirements must be strictly construed |
| Whether Bear Creek controls and requires recognition of continuing liens statewide | Debtor: Bear Creek is distinguishable and inconsistent with Diamond and statutory notice scheme | Highland Greens: Bear Creek supports continuing lien and should be followed absent contrary authority | Held: Bear Creek is factually distinguishable and would likely not be followed by the California Supreme Court; BAP declines to apply it here |
Key Cases Cited
- United States v. Ron Pair Enters., 489 U.S. 235 (U.S. 1989) (rules on starting point for statutory and contract interpretation)
- Bear Creek Master Ass'n v. Edwards, 130 Cal. App. 4th 1470 (Cal. Ct. App. 2005) (Court of Appeal held lien notices and CC&Rs could support including post‑recordation assessments)
- Diamond v. Superior Court, 217 Cal. App. 4th 1172 (Cal. Ct. App. 2013) (Davis‑Stirling Act pre‑lien and pre‑foreclosure notice requirements are mandatory and to be strictly construed)
- Diamond Heights Village Ass'n v. Financial Freedom Senior Funding Corp., 196 Cal. App. 4th 290 (Cal. Ct. App. 2011) (assessment lien merger into judgment and related lien principles)
- Veal v. Am. Home Mortg. Serv., Inc. (In re Veal), 450 B.R. 897 (9th Cir. BAP 2011) (de novo review for statutory and contract interpretation in claim‑objection appeals)
- Renwick v. Bennett (In re Bennett), 298 F.3d 1059 (9th Cir. 2002) (contract interpretation under California law reviewed de novo)