Kingston at Wakefield Homeowners Association, Inc. v. Kim Dehavion Castell

UNPUBLISHED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Affirmed by unpublished per curiam opinion.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Unpublished opinions are not binding precedent in this circuit.

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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

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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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