United States Bankruptcy Appellate Panel of the Ninth Circuit
In re: MARIA A. BASAVE DE GUILLEN, Debtor.
MARIA A. BASAVE DE GUILLEN, Appellee. HIGHLAND GREENS HOMEOWNERS ASSOCIATION OF BUENA PARK, Appellant,
and Submitted on May 23, 2019 at Pasadena, California
from the United States Bankruptcy Court for the Central
District of California Honorable Catherine E. Bauer,
Bankruptcy Judge, Presiding
A. Maloney of Fiore, Racobs & Powers argued for
Charity Manee argued for Appellee.
Before: LAFFERTY, SPRAKER, and TAYLOR, Bankruptcy Judges.
LAFFERTY, BANKRUPTCY JUDGE
Greens Homeowners Association ("Highland Greens")
appeals the bankruptcy court's order sustaining in part
Debtor Maria Basave de Guillen's objection to Highland
Greens' proof of claim. The bankruptcy court found that,
under California law, Highland Greens' recorded notice of
lien for delinquent homeowners assessments on Debtor's
condominium did not secure amounts accruing after the
recordation of the lien. Accordingly, the bankruptcy court
limited Highland Greens' secured claim to the amount of
its recorded pre-petition state court judgment, classifying
the remainder of the claim as unsecured.
Debtor fell behind on the homeowners association
("HOA") dues on her condominium in Buena Park,
California (the "Property"). As a consequence,
Highland Greens recorded a Notice of Delinquent Assessment
Lien (the "Notice") against the Property on
December 1, 2008. Highland Greens recorded an amendment to
the Notice in April 2011 (the "2011 Amendment").
Both the Notice and the 2011 Amendment purported to include,
in the amount subject to the lien, unpaid assessments and
charges accruing after the date of the notice.
August 2011, Highland Greens sued Debtor in state court to
enforce its lien and, in April 2012, obtained a default
judgment for foreclosure and a money judgment of $21, 398.02
(consisting of $10, 140 principal, attorney's fees of
$10, 273.12, and collection costs of $2, 885, minus a $1,
900.10 payment). The money judgment was subsequently
recorded, and Highland Greens began the foreclosure process,
but no sale was ever conducted.
filed a chapter 13 case on February 28, 2018. On Schedule D,
she listed two debts to Highland Greens secured by the
Property, one for $8, 000, described as "interest on
claim," and another for $40, 000, described as
"assessments and attorney's fees." Her proposed
plan provided for payment of both claims in full, with
interest at ten percent on the $40, 000 claim.
Greens then filed a proof of claim for $64, 137.20,
purportedly secured by the Property, with interest at twelve
percent. The itemization attached to the proof of claim
indicated that it consisted of: (1) the April 2012 money
judgment of $21, 398.02; (2) $8, 572.63 in interest on the
judgment; (3) post-judgment assessments through February 1,
2018 of $14, 060; (4) late charges of $690; (5) post-judgment
interest of $7, 207.44; (6) post-judgment attorney's fees
and costs of $13, 729.11; less (7) a payment credit of $1,
520. The attachment to the proof of claim explained that the
post-judgment assessments were secured by the Property
pursuant to the Declaration of Covenants, Conditions and
Restrictions ("CC&Rs") recorded in 1964 against
the Property. Highland Greens also asserted that it was
entitled to twelve percent interest on any delinquent amounts
pursuant to California Civil Code § 5650(b)(3).
Greens attached eight pages of the CC&Rs to its proof of
claim. The relevant provision (paragraph 12(b)) provides,
among other things, that if a delinquency in assessments is
not paid within ten days after delivery of a notice of
default, the Board of Governors may file a claim of lien; the
provision then lists the information that must be included in
such claim of lien. The paragraph continues, "[u]pon
recordation of a duly executed original or duly executed copy
of such claim of lien by the Recorder of the County of Orange
the lien claimed therein shall immediately attach and become
effective, subject only to the limitations hereinafter set
forth. Each default shall constitute a separate basis for a
claim of lien or a lien."
filed an objection to Highland Greens' claim. She argued:
(1) the claim should be disallowed in its entirety for lack
of supporting documentation; (2) most of the claim should be
reclassified as unsecured because Highland Greens did not
comply with the procedures set forth in the Davis-Stirling
Common Interest Development Act ("Davis-Stirling
Act" or the "Act"), specifically, California
Civil Code §§ 5660 and 5676, and there was no basis
to find an equitable lien; (3) only the portion of the debt
representing the amount owing under the judgment may be
classified as secured; (4) the attorney's fee portion of
the claim should be disallowed as unreasonable and
unsupported; and (5) the claim should not include future
assessments because Debtor was current postpetition on those
Greens filed an opposition in which it asserted: (1) the
Notice recorded in 2008 complied with all procedural
requirements and in any event had been adjudicated valid by
the state court in the foreclosure lawsuit; (2) Debtor was
barred by issue preclusion from challenging the validity of
the lien; (3) Highland Greens was entitled under California
Civil Code § 5650(b)(3) to twelve percent interest on
the post-judgment assessments and related fees and costs; (4)
Highland Greens was entitled to submit cost bills for its
judgment enforcement activities, which increased the judgment
amount; and (5) the assessment lien was a "continuing
lien"; thus, assessments that became delinquent after
the recordation of the lien were appropriately included in
the amount secured by the lien, citing Bear Creek Master
Ass'n v. Edwards, 130 Cal.App.4th 1470, 1489 (2005).
filed a reply in which she argued that the Davis-Stirling Act
prohibited Highland Greens from asserting a continuing lien.
She contended that Bear Creek was not binding on the
bankruptcy court and that federal courts in California had
held to the contrary, citing In re Warren, No.
15-CV-03655-YGR, 2016 WL 1460844 (N.D. Cal. Apr. 13, 2016),
and In re Guajardo, No. 15-31452 DM, 2016 WL 943613
(Bankr. N.D. Cal. Mar. 11, 2016).
initial hearing on Debtor's objection, counsel for
Highland Greens stated that the HOA was relying on the
assessment lien rather than the judgment lien as the basis
for its security interest. The bankruptcy court requested
further detail as to how the different components of the
claim amount were calculated and continued the matter for
further briefing, which the parties submitted.
final hearing on the claim objection, the bankruptcy court
did not rule on the reasonableness of the attorney's fees
or any of the other arguments raised by Debtor. But it ruled
that under applicable law there was no continuing lien based
on the Notice. As such, the only basis for Highland
Greens' security interest was its judgment
lien. Accordingly, the court sustained
Debtor's objection in part, allowing Highland Greens'
claim in full but reclassifying it as $29, 970.65 secured
(principal of $21, 398.02 plus pre-petition interest of $8,
572.63) and the $34, 166.55 balance as unsecured. Shortly
thereafter, the court entered its order on the Debtor's
claim objection, and Highland Greens timely
bankruptcy court had jurisdiction under 28 U.S.C.
§§ 1334 and 157(b)(2)(B). We have jurisdiction
under 28 U.S.C. § 158.
bankruptcy court err in sustaining in part Debtor's
objection to Highland Greens' claim?
appeal involves issues of statutory and contract
interpretation, which we review de novo. See Veal v. Am.
Home Mortg. Serv., Inc. (In re Veal), 450 B.R. 897, 918
(9th Cir. BAP 2011) (citations omitted) (an order sustaining
or overruling a claim objection "can raise legal issues
(such as the proper construction of statutes and rules) which
we review de novo . . . ."); Renwick v. Bennett (In
re Bennett), 298 F.3d 1059, 1064 (9th Cir. 2002)