Inwood North Homeowners' Ass'n, Inc. v. Harris

• Decision Date: 15 July 1987
• Docket Number: C-5285,Nos. C-5283,s. C-5283
• Citation: 736 S.W.2d 632
• Parties: INWOOD NORTH HOMEOWNERS' ASSOCIATION, INC., Petitioner, v. Charlie HARRIS, Jr., et al. and Rolando M. Pamilar, et al., Respondents.
• Court: Texas Supreme Court

Page 632

736 S.W.2d 632

INWOOD NORTH HOMEOWNERS' ASSOCIATION, INC., Petitioner, v. Charlie HARRIS, Jr., et al. and Rolando M. Pamilar, et al.,

Respondents.

Nos. C-5283, C-5285.

Supreme Court of Texas.

July 15, 1987.

Lou W. Burton, Burton & Associates, P.C., Houston, for petitioner.

Merrill Shields, Dula, Shields & Egbert, Houston, for respondents.

Rolando M. Pamilar, Flor F. Lacambra, Jorge Custodio, pro se.

ROBERTSON, Justice.

This case involves a suit between a homeowners' association and homeowners who are delinquent in their payment of neighborhood assessments. The issue before this court is whether the homestead laws of Texas protect the homeowners against foreclosure for their failure to pay the assessments.

The trial court granted a default judgment against the several homeowners in the amounts they were in arrears, but refused to allow the homeowners' association to foreclose on the homes to collect the sums due. The court of appeals affirmed, 707 S.W.2d 127. We reverse the judgment of the court of appeals.

In December 1980, Inwood North Associates filed a declaration of covenants and restrictions for the Inwood North subdivision in the Harris County real property records. The declaration provided that all the lots within the subdivision were impressed with certain covenants and restrictions and that such would run with the land and be binding upon all parties acquiring rights to any of the property therein. The declaration thereafter created Inwood North Homeowners' Association, a nonprofit corporation, to enforce the various restrictive covenants and to ensure the preservation of the uniform development plan. Under Article IV of the declaration, each person receiving a deed for a lot in the subdivision "is deemed to covenant and agree to pay the Association the following: (a) annual assessment or charges; and (b) special assessments for capital improvements." These assessments, plus interest and costs of collection, were designated to be "a charge on the land and shall be secured by a continuing Vendor's Lien upon the Lot against which such assessments or charges are made."

Many lots in the subdivision were bought between 1981-83, and the respondents here were among the purchasers. The deeds given to the various homeowners contained specific references to the maintenance charges, or in some cases to the property records where the declaration was filed. When some of the homeowners became lax in the payment of their assessment charges, the Association brought suit to recover the amounts due and sought to foreclose on the "Vendor's Lien" contained in the declaration. While many of the delinquent sums were subsequently received, several homeowners failed to settle their accounts. When these homeowners failed to appear at trial after being properly served, the trial court rendered a default judgment against them.

In upholding the trial court's refusal to order foreclosure, the court of appeals held that no proper vendor's lien was formed by the declarations, thus holding the homestead laws of this State precluded foreclosure. While we recognize that no vendor's lien was present, we disagree with the result reached by the court of appeals.

It is unquestioned that an owner of land may contract with respect to their property as they see fit, provided the contracts do not contravene public policy. Goodstein v. Huffman, 222 S.W.2d 259, 260 (Tex.Civ.App.--Dallas 1949, writ ref'd). Therefore, the developer of the subdivision, as owner of all land subject to the declaration, is entitled to create liens on his land to secure the payment of assessments. Cf. Hodges v. Roberts, 74 Tex. 517, 519-20, 12 S.W. 222, 223 (1889). The declarations in question provided that the assessments "shall be secured by a continuing vendor's lien." It does not seem likely that a true vendor's lien exists in the present case because the assessment charges were not part of the purchase price of the property. Furthermore, there is no deed of trust which would have acknowledged the prior lien. Lifemark Corp. v. Merritt, 655 S.W.2d 310, 313 (Tex.App.--Houston [14th Dist.] 1983, writ ref'd n.r.e.). Much more probable is its existence as a contractual lien, as several older decisions hold that a contractual lien will be enforced regardless of the fact that it was improperly designated as a "vendor's lien." E.g. Maryland Casualty Co. v. Willig, 10 S.W.2d 415, 419 (Tex.Civ.App.--Waco 1928, writ ref'd).

Creation of a contractual lien depends only on evidence apparent from the language of the agreement that the parties intended to create a lien. Dabney v. Schutze, 228 S.W. 176, 177 (Tex.Comm'n App.1921, judgmt adopted). Furthermore, under Moore v. Smith, 443 S.W.2d 552 (Tex.1969), this court must consider the assessment provisions and lien as a whole and must not overthrow the clear and explicit intentions of the parties. See Cartwright v. Trueblood, 90 Tex. 535, 39 S.W. 930, 932 (1897). It seems clear from the language used in the agreement that the owner intended to provide for such liens, and we would be remiss in not conforming this decision to such an intent. With this decision made we turn to the crux of this case; the effect of Texas homestead law on the lien in question.

As a general rule, a homestead is protected against all debts of those who live in that homestead. The only debts which may be collected by foreclosure on the homestead are delineated in Article XVI, § 50 of the Texas Constitution. That section provides:

The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale for the payment of all debts except for the purchase money, the taxes due thereon, or for work and material used in constructing improvements thereon, and in this last case, only when the work and material are contracted for in writing.... No mortgage, trust deed or other lien on the homestead shall ever be valid, except for the purchase money therefor, or improvements made thereon, as hereinbefore provided, whether such mortgage, or trust deed, or other lien, shall have been created by the owner alone, or together with his or her spouse....

TEX. CONST. Art. XVI, § 50 (1845, amended 1973).

Since the early days of Texas jurisprudence, it has been expressed that the

homestead exemption was founded on principles of soundest policy ... Its design was not only to protect citizens and their families from destitution, but also to cherish and support in bosoms of individuals, those feelings of sublime independence which are so essential to maintenance of free institutions.

Franklin v. Coffee, 18 Tex. 413, 416 (1857). This court has often said that interpretation of the homestead laws are to be made liberally. E.g. Cocke v. Conquest, 120 Tex. 43, 35 S.W.2d 673, 678 (1931). Homestead rights, however, may not be construed so as to avoid or destroy pre-existing rights. Minnehoma Financial Co. v. Ditto, 566 S.W.2d 354, 357 (Tex.Civ.App.--Fort Worth 1978, writ ref'd n.r.e.). It has long been held that an encumbrance existing against property cannot be affected by the subsequent impression of the homestead exception on the land. Farmer v. Simpson, 6 Tex. 303, 310 (1851). As said by this court many years ago, "[A] previously acquired lien, whether general or special, voluntary or involuntary, cannot be subsequently defeated by the voluntary act of a debtor in attempting to make property his homestead." Gage v. Neblett, 57 Tex. 374, 378 (1882). Thus, we reaffirm that when the property has not become a homestead at the execution of the mortgage, deed of trust or other lien, the homestead protections have no application even if the property later becomes a homestead.

Thus, this case revolves around when the lien attached on the property. If it occurred simultaneously to or after the homeowners took title, there is authority which would deem the homestead right superior. See Freiberg v. Walzem, 85 Tex. 264, 20 S.W. 60, 61 (1892). On the other hand, if the lien attached prior to the claimed homestead right and the lien is an obligation that would run with the land, there would be a right to foreclose.

In Texas, a covenant runs with the land when it touches and concerns the land; relates to a thing in existence or specifically binds the parties and their assigns; is intended by the original parties to run with the land; and when the successor to the burden has notice. Westland Oil Devel. Corp. v. Gulf Oil Corp., 637 S.W.2d 903, 910-11 (Tex.1982); Williams, Restrictions on the Use of Land; Covenants Running with the Land at Law, 27 Tex.L.Rev. 419, 423 (1949). The covenant to pay maintenance assessments for the purpose of repairing and improving the common areas and recreational facilities of Inwood North touches and concerns the land. See 5 R. POWELL, THE LAW OF REAL PROPERTY § 673 at 60-46 (15th ed. 1986) (a covenant to pay for the maintenance of subdivision facilities both benefits and burdens the property of each individual landowner, thus, it runs with the land); see also RESTATEMENT OF PROPERTY § 537 at 3224 (1944). The Declaration of Covenants evidences the intent of the original parties that the covenant run with the land, and the covenant specifically binds the parties, their successors and assigns. Because the property in question was conveyed in a succession of fee simple estates, the requirement of privity is satisfied. Westland Oil, 637 S.W.2d at 910-11. Consequently, the covenant in question satisfies the requirements of a covenant running with the land. Furthermore, the deeds signed by each of the homeowners made reference to the assessments that would be due, thus each of the homeowners had notice of what their obligations were, and a purchaser with constructive notice of restrictive covenants becomes bound by them. Selected Lands Corp. v. Speich, 702 S.W.2d 197, 199-200 (Tex.App.--Houston [1st Dist.] 1985, writ ref'd n.r.e.). Moreover, a purchaser is bound by the terms of instruments in his chain...