Inwood North Homeowners’ Association v. Harris

In 1980 Inwood North Associates filed a declaration of covenants and restrictions for the Inwood North subdivision. The declaration provided that all lots in the subdivision were impressed with covenants and restrictions requiring each person receiving a deed to agree to pay annual assessments and special assessments for capital improvements. The assessments, plus costs of collection and interest, were intended to create a vendor’s lien that ran with the land and bound all subsequent purchasers. The declaration also created the Inwood North Homeowners’ Association (the association) (plaintiff) to enforce the covenants and ensure the preservation of the subdivision. Many lots were sold between 1981 and 1983, and the homeowners’ deeds specifically referenced the maintenance charges or the property records for the declaration. When the assessments for some of those homeowners (defendants) became delinquent, the association sued to recover the amounts due and to foreclose on the vendor’s lien in the declaration. Some of the delinquent homeowners settled their accounts, but others did not, and when the latter homeowners failed to appear after being properly served, the trial court entered a default judgment against them but refused to order foreclosure. The court of appeals affirmed, holding that the state homestead law precluded foreclosure. The association appealed. Under state law, a homestead was generally protected against all debts owed by those who lived in the homestead. The state constitution permitted foreclosure on the homestead for only a few debts, including those “for the purchase money, the taxes due thereon, or for work and material used in constructing improvements thereon.” State law also recognized that (1) a covenant to pay maintenance assessments for common areas touched on and concerned the land and thus ran with the land; (2) a landowner could generally contract with respect to their property in any manner that did not violate public policy; and (3) a contractual lien would be enforced even if it was improperly designated a vendor’s lien. Finally, state courts held that an encumbrance on property cannot be affected by a later impression of the homestead exception on the property.