Court of Appeals of Texas, Second District, Fort Worth
Appeal from the 158th District Court Denton County, Texas
Trial Court No. 17-3380-158
Sudderth, C.J.; Pittman and Bassel, JJ.
Griffin Parc Residential Association, Inc. (the HOA) raises
one issue challenging a summary judgment obtained by Appellee
John C. King (Owner). Owner owns a lot in the Griffin Parc
subdivision administered by the HOA. The trial court rendered
judgment that the HOA acted in violation of the Bankruptcy
Code's automatic stay when it sent Owner notice of the
amount of the HOA's annual maintenance assessment. The
trial court found that the notice was a part of the
collection process for unpaid assessments, that the notice
was a necessary act to create an assessment lien against
Owner's property, and that the bankruptcy stay in effect
when the notice was sent made the notice void because it was
a part of the lien-creation process.
disagree. Both the lien and the debt that obligated Owner to
pay the assessment existed long before the notice was sent.
The notice merely quantified the debt that Owner was
previously obligated to pay as a result of his ownership of a
lot in the subdivision administered by the HOA. Thus, the
notice did not create or enforce a lien and did not violate
the automatic stay. We reverse the judgment of the trial
court and render judgment in favor of the HOA.
filed an "Application for Expedited Foreclosure
Proceeding Pursuant to Rule 736 of the Texas Rules of Civil
Procedure" in which it sought to foreclose its lien on a
lot in the subdivision that the HOA administered.
See Tex. Prop. Code Ann. § 209.0092;
Tex.R.Civ.P. 736.1. Owner resided on the lot. The lien that
the HOA sought to foreclose allegedly was defaulted after
Owner failed to pay the HOA's 2016 maintenance
responded to the HOA's foreclosure action by filing a
suit for declaratory judgment. That suit stayed the
foreclosure action because it "put in issue . . .
[the] enforcement of the . . . lien" that was the basis
of the HOA's suit. See Tex. R. Civ. P. 736.11.
Owner alleged that he had filed a bankruptcy proceeding under
Chapter 7 of the United States Bankruptcy Code before the HOA
sent notice of the 2016 annual maintenance assessment. Though
Owner conceded that the lien that the HOA sought to foreclose
had its origins in the Declaration governing the subdivision
filed in 2001, he contended that the notice was
"necessary" to enforce the lien that the HOA sought
to foreclose. Specifically, Owner alleged that
the 2001 lien, while forming a basis for Griffin Parc's
claim of its lien rights, and without which it could not,
fifteen years later, claim a right of foreclosure, was merely
necessary but not sufficient to enforce an assessment. Other
things had to take place, namely: Assessment of the amount
due for 2016, notice of the . . . annual assessment,
non-payment on or before the due date, the assessment lien
which arose on the delinquency date, and later a
notice of assessment lien.
"[these] additional, necessary steps [were required] to
make the 2001 lien effective [but] were void ab initio"
because the Bankruptcy Code stayed the ability of any
creditor to create a lien against property that was part of a
bankruptcy estate. See 11 U.S.C.A. § 362(a)
parties filed cross-motions for summary judgment. The trial
court granted Owner's motion for summary judgment and
denied the HOA's. The summary-judgment order included a
finding that the HOA had sent notice of the assessment that
was the basis for its foreclosure claim during the time that
a creditor's actions were stayed by the Bankruptcy Code.
For this reason, the judgment decreed that the notice
"was ineffective notice, necessary to create an
assessment lien which assessment lien was essential to [the
HOA's] enforcement action." Owner nonsuited other
claims made in his declaratory-judgment action, making the
trial court's summary-judgment order a final judgment.
The HOA appealed.
legal effect of the notice sent by the HOA to Owner and the
nature of the HOA's lien are hotly contested, and we will
deal with the factual details of the notice and lien during
our discussion of the document in which they have their
origin. But this appeal also turns on the timing of certain
events because they establish the framework of the two
underlying questions that we must resolve: (1) when did the
HOA's lien and the debt to pay the assessment come into
existence, and (2) during what period did the provisions of
the Bankruptcy Code impact the HOA's actions.
timing of the four pivotal events in this case's
chronology is undisputed. First, in 2001, the developer of
the subdivision that included the lot at issue filed in the
appropriate deed records a "Declaration Of Covenants,
Conditions[, ] And Restrictions For Griffin Parc" (the
Declaration) that created covenants to establish the rules
and regulation of the HOA. Second, Owner purchased his lot in
the subdivision in 2004. Third, Owner filed his Chapter 7
bankruptcy proceeding on November 3, 2015. Fourth, sometime
in late December 2015 or early January 2016, the HOA sent
Owner a notice of the 2016 annual maintenance assessment due
agree that the notice was sent during the time that the
Bankruptcy Code stayed the ability of a creditor to create or
enforce a lien. Other acts relating to the assessment lien,
such as filing notice of the lien in the relevant deed
records and the suit to foreclose the lien, occurred after
Owner was discharged from bankruptcy and after the stay no
longer was in effect.
The Standard of Review Governing Cross-Motions for Summary
apply a de novo standard of review to summary judgments.
Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862
(Tex. 2010). "When competing summary-judgment motions
are filed, 'each party bears the burden of establishing
that it is entitled to judgment as a matter of
law.'" Tarr v. Timberwood Park Owners Ass'n,
Inc., 556 S.W.3d 274, 278 (Tex. 2018) (quoting City
of Garland v. Dallas Morning News, 22 S.W.3d 351, 356
(Tex. 2000)). "[I]f 'the trial court grants one
motion and denies the other, the reviewing court should
determine all questions presented' and 'render the
judgment that the trial court should have
rendered.'" Id. (quoting City of
Garland, 22 S.W.3d at 356).
How the provisions of the Bankruptcy Code overlay this
Bankruptcy Code creates distinctions that frame this appeal.
The distinctions begin with the principle that a creditor may
have the right to pursue a debtor in bankruptcy personally
and that a discharge in bankruptcy may not free the debtor
from ongoing personal liability on the debt. But a
complication arises if the creditor chooses the wrong time in
the process to create a lien to secure the debt. The creditor
may find that the Bankruptcy Code voids that attempt even
though that creditor could otherwise pursue the debtor to
collect the debt.
relies on these distinctions to argue that no matter whether
he might have been personally liable for the 2016 annual
maintenance assessment or whether the HOA might have pursued
a judgment for the assessment, the HOA's attempt to
create or to enforce a lien to secure that debt during the
bankruptcy stay was void. His premise is that the notice
created the lien because it was a precondition to the
enforcement of the lien securing payment of the assessment
and that the HOA sent the notice during the automatic
bankruptcy stay that made its act void because the Bankruptcy
Code stayed that action. This argument creates our starting
point to describe the bankruptcy principles and the terms
that govern here when we as a state court apply federal
bankruptcy law to resolve a state-court foreclosure suit.
filing of a bankruptcy petition "operates as a
stay" of certain actions, mostly of creditors against
debtors who have filed bankruptcy. See 11 U.S.C.A.
§ 362(a). Whether the stay stops a creditor from taking
an action against a debtor often turns on the time that the
debt arises. Debts that arise after the filing of a
bankruptcy petition, termed post-petition debts, may often be
pursued and collected from a bankruptcy debtor. In re
Zamora, No. 11-52138C, 2012 WL 4501680, at *1-2
(Bankr.W.D.Tex. Sept. 28, 2012) (mem. op.). The HOA and Owner
agree that the annual maintenance assessment in this case was
a post-petition debt because it became due after the filing
of Owner's bankruptcy petition.
the stay does not prohibit collection efforts for a
post-petition debt against the debtor personally, that does
not mean the creditor may also take actions impacting
property held by the bankruptcy estate. Once a bankruptcy is
filed, the debtor and the bankruptcy estate exist in two
separate entities. The bankruptcy estate usually consists of
property owned by the debtor when he or she files bankruptcy.
See 11 U.S.C.A. § 541(a)(1) (West 2016); R.
Hassell Builders, Inc. v. Texan Floor Serv., Ltd., 546
S.W.3d 816, 827 (Tex. App.-Houston [1st Dist.] 2018, pet.
denied) ("The Bankruptcy Code defines 'property of
the estate' broadly to include 'all legal or
equitable interests of the debtor in property as of the
commencement of the [bankruptcy] case.'" (quoting
Houston Pipeline Co. v. Bank of Am., N.A., 213
S.W.3d 418, 424 (Tex. App.-Houston [1st Dist.] 2006, no
pet.))). Some property, such as the lot that was
Owner's homestead, can pass out of the bankruptcy estate
while the bankruptcy case is pending.
automatic stay prevents a creditor from taking certain
actions against the property of the estate, even though the
creditor is pursuing a post-petition debt. See
Zamora, 2012 WL 4501680, at *2 ("However, 'the
right to undertake collection activity, including filing a
lawsuit, to collect a post-petition debt does not allow all
collection activities.'" (quoting Montclair
Prop. Owners Ass'n v. Reynard (In re Reynard), 250
B.R. 241, 245 (Bankr. E.D. Va. 2000))). The aspect of the
automatic stay at issue in this case prevents "any act
to create, perfect, or enforce any lien against property of
the estate." See 11 U.S.C.A. § 362(a)(4).
In other words, the stay may not impede a creditor from
pursuing a debtor personally on a post-petition debt, but it
may prevent the creditor from creating, perfecting, or
enforcing a lien on property of the bankruptcy estate to
secure that debt. And if the attempt to create or enforce
the lien occurs while the stay is in effect, that act has no
effect; the Texas Supreme Court is clear that acts in
violation of the stay are not merely voidable but void.
See York v. State, 373 S.W.3d 32, 38 (Tex. 2012);
Cont'l Casing Corp. v. Samedan Oil Corp., 751
S.W.2d 499, 501 (Tex. 1988).
not every debt is discharged in bankruptcy. One debt excepted
from discharge in a Chapter 7 proceeding (such as Owner
for a fee or assessment that becomes due and payable after
the order for relief to a membership association with respect
to the debtor's interest in . . . a lot in a
homeowners['] association, for as long as the debtor or
the trustee has a legal, equitable, or possessory ownership
interest in . . . such lot . . . .
11 U.S.C.A. § 523(a)(16) (West 2016). Thus, Owner's
discharge-the relief that bankruptcy gives for liability on
the debt-did not include the debt for the post-petition
assessment that began this controversy.
status of the debt and the fact that Owner did not receive a
discharge from it has no impact on the question we face. Our
question focuses on whether sending the notice of the
assessment during the period the stay was in place
"created" or "enforced" the lien that the
HOA sought to foreclose. See id. § 362(a)(4).
In its most general terms, the question is whether sending
notice of the assessment created the lien because it was some
type of precondition to the HOA's ability to claim a lien
against the lot and whether the attempt to perform that
precondition during the period of the stay effectively
rendered the attempt void. This question is not impacted
because Owner was not discharged for the underlying debt. As
we have described, the bankruptcy scheme creates situations
where even if the debt survives the process, a lien created
during the period of time the stay is in place is void.
another point of clarification, the issue before us deals
only with whether a lien secured the 2016 assessment. We do
not deal with whether the owner of a lot would be liable for
the assessments occurring after the discharge and whether the
lot would stand as security for that debt.
A determination of the effect of the bankruptcy stay requires
an examination of when the HOA's assessment lien came
outlined bankruptcy principles that mark a temporal boundary
during which a lien cannot be created or enforced cause a
quandary when applied to the lien at issue in this appeal-the
lien the HOA sought to foreclose because Owner failed to pay
the 2016 annual maintenance assessment. We must decide
whether that lien was created when the Declaration governing
the HOA was filed, more than fifteen years before the
bankruptcy stay went into effect, or whether the lien is not
fully created and enforceable until the HOA's notice was
sent during the period the stay was in place. In other words,
does the lien circle over the lot like the development's
Griffin namesake, waiting to pounce if the assessment is not
paid, or does it rise like a phoenix each year if a lot owner
does not pay the annual maintenance assessment?
not clear from Owner's argument whether he is arguing
that the acts of the HOA created or enforced a lien in
violation of section 362(a)(4). We interpret his argument and
the recitations in the trial court's judgment to mean
that the notice created the debt to pay the assessment and
that without that debt, the lien did not exist.
If there were no notice of assessment, there would be no
due date, no delinquency date, no continuing debt, no lien,
no notice of lien, and no foreclosure. [The HOA] would
have us engage in a form of time travel, that in July of 2001
[Owner's] unpaid assessment, from fifteen years later,
had already created an [enforceable] lien. It might have
been a lien, but it lacked a piece to its effectiveness: the
unpaid amount on the delinquency date. Notice and ...