Green Tree Servicing LLC v. SFR Investments Pool1, LLC et al

Filing 87

ORDER that 68 Motion for Summary Judgment is GRANTED. FURTHER ORDERED that 69 Motion for Summary Judgment is DENIED. Signed by Judge James C. Mahan on 2/23/17. (Copies have been distributed pursuant to the NEF - MMM)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 *** 7 8 GREEN TREE SERVICING LLC, Plaintiff, 9 ORDER v. 10 11 Case No. 2:15-cv-00476-JCM-VCF SFR INVESTMENTS POOL 1, LLC, et al., Defendants. 12 Presently before the court is defendant SFR Investments Pool 1, LLC (“SFR”) motion for 13 14 summary judgment (ECF No. 68), in which defendant Elkhorn Community Association (the 15 “HOA”) joined (ECF No. 72). Plaintiff Ditech Financial, LLC fka Green Tree Servicing LLC 16 (“Ditech”) filed a response (ECF No.76), to which SFR replied (ECF No. 80). Also before the court is Ditech’s motion for summary judgment. (ECF No. 69). The 17 18 HOA (ECF No. 75) and SFR (ECF No. 78) filed responses. 19 I. 20 21 22 Facts This case involves a dispute over real property located at 7701 Flourish Springs St., Las Vegas, NV 89131 (the “property”). On November 26, 2007, Sharon Cochran purchased the property and borrowed 23 $184,000.00 from Countrywide Bank, FSB, which was secured by a deed of trust recorded 24 December 13, 2007. (ECF No. 44). The deed of trust was assigned to Bank of America, N.A., 25 successor by merger to BAC Home Loans Servicing, LP fka Countrywide Home Loans 26 Servicing, LP (“BANA”) via an assignment of deed of trust recorded on October 5, 2011. (ECF 27 No. 44). BANA assigned the deed of trust to plaintiff Ditech via an assignment of deed of trust 28 recorded October 14, 2013. (ECF No. 44). On January 12, 2012, third-party defendant Absolute 1 Collection Services, LLC (“ACS”), acting on behalf of the HOA, recorded a notice of delinquent 2 assessment lien, stating an amount due of $1,796.31. (ECF No. 44). On April 06, 2012, ACS 3 recorded a notice of default and election to sell to satisfy the delinquent assessment lien. (ECF 4 No. 44). On August 02, 2012, ACS recorded a notice of trustee’s sale, stating an amount due of 5 $3,534.75. (ECF No. 44). ACS mailed by certified mail the notice of foreclosure sale to BANA. 6 (ECF No. 68, exh. A-1). On December 11, 2012, SFR purchased the property at the foreclosure sale for $8,100.00. 7 8 (ECF No. 44). A trustee’s deed upon sale was recorded December 13, 2012. (ECF No. 44). On March 16, 2015, Ditech filed the original complaint (ECF No. 1), which it amended 9 10 on June 24, 2015 (ECF No. 30), and then again on December 18, 2015 (ECF No. 44). In its 11 second amended complaint, Ditech alleges five causes of action: (1) declaratory judgment 12 against SFR and the HOA; (2) quiet title against SFR; (3) breach of NRS 116.1113 against the 13 HOA; (4) wrongful foreclosure against the HOA; and (5) injunctive relief against SFR. (ECF 14 No. 44). On April 17, 2015, SFR filed a counter/crossclaim for quiet title and injunctive relief. 15 16 (ECF No. 13). On May 20, 2015, the HOA filed a third-party complaint against ACS, alleging (1) 17 18 breach of contract, (2) indemnity, and (3) contribution. (ECF No. 21). In the instant motions, SFR and Ditech both move for summary judgment in their favor. 19 20 The court will address each as it sees fit.1 21 II. 22 23 Legal Standard The Federal Rules of Civil Procedure allow summary judgment when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if 24 25 26 27 28 1 As an initial matter, the court takes judicial notice of the following recorded documents: first deed of trust (ECF No. 69, exh. A); notice of delinquent assessment (ECF No. 1-7); notice of default and election to sell (ECF No. 70 at 8–10); notice of trustee’s sale (ECF No. 70 at 22–23); trustee’s deed upon sale (ECF No. 70 at 75–79); and assignments of deed of trust (ECF No. 69, exhs. E, F). See, e.g., United States v. Corinthian Colls., 655 F.3d 984, 998– 99 (9th Cir. 2011) (holding that a court may take judicial notice of public records if the facts noticed are not subject to reasonable dispute); Intri-Plex Tech., Inv. v. Crest Grp., Inc., 499 F.3d 1048, 1052 (9th Cir. 2007). 2 1 any, show that “there is no genuine dispute as to any material fact and the movant is entitled to a 2 judgment as a matter of law.” Fed. R. Civ. P. 56(a). A principal purpose of summary judgment is “to 3 isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 4 (1986). 5 For purposes of summary judgment, disputed factual issues should be construed in favor 6 of the non-moving party. Lujan v. Nat’l Wildlife Fed., 497 U.S. 871, 888 (1990). However, to 7 be entitled to a denial of summary judgment, the nonmoving party must “set forth specific facts 8 showing that there is a genuine issue for trial.” Id. 9 In determining summary judgment, a court applies a burden-shifting analysis. The 10 moving party must first satisfy its initial burden. “When the party moving for summary 11 judgment would bear the burden of proof at trial, it must come forward with evidence which 12 would entitle it to a directed verdict if the evidence went uncontroverted at trial. In such a case, 13 the moving party has the initial burden of establishing the absence of a genuine issue of fact on 14 each issue material to its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 15 474, 480 (9th Cir. 2000) (citations omitted). 16 By contrast, when the nonmoving party bears the burden of proving the claim or defense, 17 the moving party can meet its burden in two ways: (1) by presenting evidence to negate an 18 essential element of the non-moving party’s case; or (2) by demonstrating that the nonmoving 19 party failed to make a showing sufficient to establish an element essential to that party’s case on 20 which that party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323–24. If 21 the moving party fails to meet its initial burden, summary judgment must be denied and the court 22 need not consider the nonmoving party’s evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 23 144, 159–60 (1970). 24 If the moving party satisfies its initial burden, the burden then shifts to the opposing party 25 to establish that a genuine issue of material fact exists. See Matsushita Elec. Indus. Co. v. Zenith 26 Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, the 27 opposing party need not establish a material issue of fact conclusively in its favor. It is sufficient 28 that “the claimed factual dispute be shown to require a jury or judge to resolve the parties’ 3 1 differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 2 809 F.2d 626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid summary judgment by relying solely 3 4 on conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 5 1040, 1045 (9th Cir. 1989). Instead, the opposition must go beyond the assertions and 6 allegations of the pleadings and set forth specific facts by producing competent evidence that 7 shows a genuine issue for trial. See Celotex, 477 U.S. at 324. 8 At summary judgment, a court’s function is not to weigh the evidence and determine the 9 truth, but to determine whether there is a genuine issue for trial. See Anderson v. Liberty Lobby, 10 Inc., 477 U.S. 242, 249 (1986). The evidence of the nonmovant is “to be believed, and all 11 justifiable inferences are to be drawn in his favor.” Id. at 255. But if the evidence of the 12 nonmoving party is merely colorable or is not significantly probative, summary judgment may be 13 granted. See id. at 249–50. 14 II. Discussion 15 Under Nevada law, “[a]n action may be brought by any person against another who 16 claims an estate or interest in real property, adverse to the person bringing the action for the 17 purpose of determining such adverse claim.” Nev. Rev. Stat. § 40.010. “A plea to quiet title 18 does not require any particular elements, but each party must plead and prove his or her own 19 claim to the property in question and a plaintiff’s right to relief therefore depends on superiority 20 of title.” Chapman v. Deutsche Bank Nat’l Trust Co., 302 P.3d 1103, 1106 (Nev. 2013) (internal 21 quotation marks and citations omitted). Therefore, for plaintiff to succeed on its quiet title 22 action, it needs to show that its claim to the property is superior to all others. See also Breliant v. 23 Preferred Equities Corp., 918 P.2d 314, 318 (Nev. 1996) (“In a quiet title action, the burden of 24 proof rests with the plaintiff to prove good title in himself.”). 25 A. Conclusive Recitals2 26 2 27 28 The 2015 Legislature revised Chapter 116 substantially. 2015 Nev. Stat., ch. 266. Except where otherwise indicated, the references in this order to statutes codified in NRS Chapter 116 are to the version of the statutes in effect in 2011–12, when the events giving rise to this litigation occurred. 4 1 Section 116.3116(1) of the Nevada Revised Statutes gives a homeowners’ association a 2 lien on its homeowners’ residences for unpaid assessments and fines; moreover, NRS 3 116.3116(2) gives priority to that HOA lien over all other liens and encumbrances with limited 4 exceptions—such as “[a] first security interest on the unit recorded before the date on which the 5 assessment sought to be enforced became delinquent.” Nev. Rev. Stat. § 116.3116(2)(b). 6 The statute then carves out a partial exception to subparagraph (2)(b)’s exception for first 7 security interests. See Nev. Rev. Stat. § 116.3116(2). In SFR Investment Pool 1 v. U.S. Bank, 8 the Nevada Supreme Court provided the following explanation: 9 10 11 12 13 14 As to first deeds of trust, NRS 116.3116(2) thus splits an HOA lien into two pieces, a superpriority piece and a subpriority piece. The superpriority piece, consisting of the last nine months of unpaid HOA dues and maintenance and nuisance-abatement charges, is “prior to” a first deed of trust. The subpriority piece, consisting of all other HOA fees or assessments, is subordinate to a first deed of trust. 334 P.3d 408, 411 (Nev. 2014) (“SFR Investments”). Chapter 116 of the Nevada Revised Statutes permits an HOA to enforce its superpriority 15 lien by nonjudicial foreclosure sale. Id. at 415. Thus, “NRS 116.3116(2) provides an HOA a 16 true superpriority lien, proper foreclosure of which will extinguish a first deed of trust.” Id. at 17 419; see also Nev. Rev. Stat. § 116.31162(1) (providing that “the association may foreclose its 18 lien by sale” upon compliance with the statutory notice and timing rules). 19 20 21 22 23 Subsection (1) of NRS 116.31166 provides that the recitals in a deed made pursuant to NRS 116.31164 of the following are conclusive proof of the matters recited: (a) Default, the mailing of the notice of delinquent assessment, and the recording of the notice of default and election to sell; (b) The elapsing of the 90 days; and (c) The giving of notice of sale[.] Nev. Rev. Stat. § 116.31166(1)(a)–(c).3 “The ‘conclusive’ recitals concern default, 24 25 26 27 28 3 The statute further provides as follows: 2. Such a deed containing those recitals is conclusive against the unit's former owner, his or her heirs and assigns, and all other persons. The receipt for the purchase money contained in such a deed is sufficient to discharge the purchaser from obligation to see to the proper application of the purchase money. 3. The sale of a unit pursuant to NRS 116.31162, 116.31163 and 116.31164 vests 5 1 notice, and publication of the [notice of sale], all statutory prerequisites to a valid HOA 2 lien foreclosure sale as stated in NRS 116.31162 through NRS 116.31164, the sections 3 that immediately precede and give context to NRS 116.31166.” Shadow Wood 4 Homeowners Assoc., Inc. v. N.Y. Cmty. Bancorp, Inc., 366 P.3d 1105, 1110 (Nev. 2016) 5 (“Shadow Wood”). Nevertheless, courts retain the equitable authority to consider quiet 6 title actions when a HOA’s foreclosure deed contains statutorily conclusive recitals. See 7 id. at 1112. 8 Here, SFR has provided the recorded trustee’s deed upon sale, the recorded notice of 9 delinquent assessment, the recorded notice of default and election to sell, and the recorded notice 10 of trustee’s sale. Pursuant to NRS 116.31166, these recitals in the recorded foreclosure deed are 11 conclusive to the extent that they implicate compliance with NRS 116.31162 through NRS 12 116.31164, which provide the statutory prerequisites of a valid foreclosure. See id. at 1112 13 (“[T]he recitals made conclusive by operation of NRS 116.31166 implicate compliance only 14 with the statutory prerequisites to foreclosure.”). Therefore, pursuant to NRS 116.31166 and the 15 recorded foreclosure deed, the foreclosure sale is valid to the extent that it complied with NRS 16 116.31162 through NRS 116.31164. 17 Importantly, while NRS 116.3116 accords certain deed recitals conclusive effect—e.g., 18 default, notice, and publication of the notice of sale—it does not conclusively, as a matter of law, 19 entitle SFR to success on its quiet title claim. See Shadow Wood, 366 P.3d at 1112 (rejecting 20 contention that NRS 116.31166 defeats, as a matter of law, action to quiet title). Thus, the 21 question remains whether Ditech demonstrated sufficient grounds to justify setting aside the 22 foreclosure sale. See id. “When sitting in equity . . . courts must consider the entirety of the 23 circumstances that bear upon the equities. This includes considering the status and actions of all 24 parties involved, including whether an innocent party may be harmed by granting the desired 25 relief.” Id. 26 27 28 B. Failure to Tender in the purchaser the title of the unit's owner without equity or right of redemption. Nev. Rev. Stat. § 116.31166(2)–(3). 6 1 Ditech fails to allege that BANA, its predecessor-in-interest, tendered the deficiency 2 amount set forth in the notice of trustee’s sale. In fact, Ditech acknowledges that no tender was 3 made or attempted. (See ECF No. 44 at 6 (“On information and belief, had Ditech or anyone 4 else attempted to tender the amounts due under [the HOA’s] claimed lien, [the HOA] and/or its 5 agents would have rejected the attempted tender.”)). 6 Under NRS 116.31166(1), the holder of a first deed of trust may pay off the superpriority 7 portion of an HOA lien to prevent the foreclosure sale from extinguishing that security interest. 8 See Nev. Rev. Stat. § 116.31166(1); see also SFR Investments, 334 P.3d at 414 (“But as a junior 9 lienholder, U.S. Bank could have paid off the SHHOA lien to avert loss of its security . . . .”); see 10 also, e.g., 7912 Limbwood Ct. Trust v. Wells Fargo Bank, N.A., et al., 979 F. Supp. 2d 1142, 11 1149 (D. Nev. 2013) (“If junior lienholders want to avoid this result, they readily can preserve 12 their security interests by buying out the senior lienholder’s interest.” (citing Carillo v. Valley 13 Bank of Nev., 734 P.2d 724, 725 (Nev. 1987); Keever v. Nicholas Beers Co., 611 P.2d 1079, 14 1083 (Nev. 1980))). 15 Here, Ditech does not assert that any attempt to pay the deficiency amount was made. 16 Pursuant to the notice of trustee’s sale, $3,534.75. Had BANA paid the noticed amount, the 17 HOA’s interest would have been subordinate to the first deed of trust. See Nev. Rev. Stat. § 18 116.31166(1); see also SFR Investments, 334 P.3d at 418 (noting that the deed of trust holder can 19 pay the entire lien amount and then sue for a refund). Rather than paying the noticed amount and 20 preserving their interest, Ditech now seeks to profit from its own failure to follow the rules set 21 forth in the statutes. Cf. Nev. Rev. Stat. § 107.080 (allowing trustee’s sale under a deed of trust 22 only when a subordinate interest has failed to make good the deficiency in performance or 23 payment for 35 days); Nev. Rev. Stat. § 40.430 (barring judicially ordered foreclosure sale if the 24 deficiency is made good at least 5 days prior to sale). 25 C. FHA-Insured Loans 26 In its motion, Ditech dedicates several pages arguing that the federal foreclosure bar 27 preempts contrary state law so as to render the foreclosure sale invalid. (ECF No. 69 at 9–24). 28 Ditech, however, fails to explain how this argument is relevant here as no party in the instant 7 1 2 case seeks to quiet title against FHA and FHA is not itself a party. The single-family mortgage insurance program allows FHA to insure private loans, 3 expanding the availability of mortgages to low-income individuals wishing to purchase homes. 4 See Sec’y of Hous. & Urban Dev. v. Sky Meadow Ass’n, 117 F. Supp. 2d 970, 980–81 (C.D. Cal. 5 2000) (discussing program); W Wash. & Sandhill Homeowners Ass’n v. Bank of Am., N.A., No. 6 2:13-cv-01845-GMN-GWF, 2014 WL 4798565, at *1 n.2 (D. Nev. Sept. 25, 2014) (same). If a 7 borrower under this program defaults, the lender may foreclose on the property, convey title to 8 HUD, and submit an insurance claim. 24 C.F.R. § 203.355. HUD’s property disposition 9 program generates funds to finance the program. See 24 C.F.R. § 291.1. 10 Allowing an HOA foreclosure to wipe out a first deed of trust on a federally-insured 11 property thus interferes with the purposes of the FHA insurance program. Specifically, it hinders 12 HUD’s ability to recoup funds from insured properties. As this court previously stated in 13 SaticoyBayLLC, Series 7342 Tanglewood Park v. SRMOF II 2012-1 Trust, the court reads the 14 foregoing precedent to indicate that a homeowners’ association foreclosure sale under NRS 15 116.3116 may not extinguish a federally-insured loan. No. 2:13–CV–1199 JCM (VCF), 2015 16 WL 1990076, at *4 (D. Nev. Apr. 30, 2015). 17 However, the instant case is distinguishable from these cases in that, here, FHA is not a 18 named party. Neither the complaint nor the counterclaim seeks to quiet title against FHA. Thus, 19 this argument provides no support for Ditech as the outcome of the instant case has no bearing 20 on FHA’s ability to quiet title. 21 D. Commercial Reasonability 22 Ditech contends that the foreclosure sale was commercially unreasonable and the court 23 should grant its motion because the purchase price was grossly inadequate and therefore 24 commercially unreasonable. (ECF No. 69 at 24–28). 25 SFR argues that the sale price itself was commercially reasonable and that no evidence of 26 fraud, unfairness, or oppression exists that accounted for or brought about a low sales price. 27 (ECF No. 68 at 12). 28 NRS 116.3116 codifies the Uniform Common Interest Ownership Act (“UCIOA”) in 8 1 Nevada. See Nev. Rev. Stat. § 116.001 (“This chapter may be cited as the Uniform Common- 2 Interest Ownership Act”); SFR Investments, 334 P.3d at 410. NRS Chapter 116 includes an 3 obligation of good faith. See Nev. Rev. Stat. § 116.1113 (“Every contract or duty governed by 4 this chapter imposes an obligation of good faith in its performance or enforcement.”). 5 Furthermore, numerous courts have interpreted the UCIOA and NRS 116.3116 as imposing a 6 commercial reasonableness standard on foreclosure of association liens.4 1. 7 8 9 Inadequate Sale Price & Fraud, Unfairness, or Oppression In Shadow Wood, the Nevada Supreme Court held that an HOA’s foreclosure sale may be set aside under a court’s equitable powers notwithstanding any recitals on the foreclosure deed 10 where there is a “grossly inadequate” sales price and “fraud, unfairness, or oppression.” 366 11 P.3d at 1110; see also Nationstar Mortg., LLC v. SFR Invs. Pool 1, LLC, 184 F. Supp. 3d 853, 12 857–58 (D. Nev. 2016). In other words, “demonstrating that an association sold a property at its 13 foreclosure sale for an inadequate price is not enough to set aside that sale; there must also be a 14 showing of fraud, unfairness, or oppression.” Id. at 1112; see also Long v. Towne, 639 P.2d 528, 15 530 (Nev. 1982) (“Mere inadequacy of price is not sufficient to justify setting aside a foreclosure 16 sale, absent a showing of fraud, unfairness or oppression.” (citing Golden v. Tomiyasu, 387 P.2d 17 989, 995 (Nev. 1963) (stating that, while a power-of-sale foreclosure may not be set aside for 18 mere inadequacy of price, it may be if the price is grossly inadequate and there is “in addition 19 proof of some element of fraud, unfairness, or oppression as accounts for and brings about the 20 21 22 23 24 25 26 27 28 4 See, e.g., Bayview Loan Servicing, LLC v. Alessi & Koenig, LLC, 962 F. Supp. 2d 1222, 1229 (D. Nev. 2013) (“[T]he sale for $10,000 of a Property that was worth $176,000 in 2004, and which was probably worth somewhat more than half as much when sold at the foreclosure sale, raises serious doubts as to commercial reasonableness.”); SFR Investments, 334 P.3d at 418 n.6 (noting bank’s argument that purchase at association foreclosure sale was not commercially reasonable); Thunder Props., Inc. v. Wood, No. 3:14-cv-00068-RCJ-WGC, 2014 WL 6608836, at *2 (D. Nev. Nov. 19, 2014) (concluding that purchase price of “less than 2% of the amounts of the deed of trust” established commercial unreasonableness “almost conclusively”); Rainbow Bend Homeowners Ass’n v. Wilder, No. 3:13-cv-00007-RCJ-VPC, 2014 WL 132439, at *2 (D. Nev. Jan. 10, 2014) (deciding case on other grounds but noting that “the purchase of a residential property free and clear of all encumbrances for the price of delinquent HOA dues would raise grave doubts as to the commercial reasonableness of the sale under Nevada law”); Will v. Mill Condo. Owners’ Ass’n, 848 A.2d 336, 340 (Vt. 2004) (discussing commercial reasonableness standard and concluding that “the UCIOA does provide for this additional layer of protection”). 9 1 2 inadequacy of price” (internal quotation omitted)))). Despite Ditech’s assertion to the contrary, the Shadow Wood court did not adopt the 3 restatement. (See ECF No. 69 at 25). In fact, nothing in Shadow Wood suggests that the Nevada 4 Supreme Court’s adopted, or had the intention to adopt, the restatement. Compare Shadow 5 Wood, 366 P.3d at 1112–13 (citing the restatement as secondary authority to warrant use of the 6 20% threshold test for grossly inadequate sales price), with St. James Village, Inc. v. 7 Cunningham, 210 P.3d 190, 213 (Nev. 2009) (explicitly adopting § 4.8 of the Restatement in 8 specific circumstances); Foster v. Costco Wholesale Corp., 291 P.3d 150, 153 (Nev. 2012) 9 (“[W]e adopt the rule set forth in the Restatement (Third) of Torts: Physical and Emotional Harm 10 section 51.”); Cucinotta v. Deloitte & Touche, LLP, 302 P.3d 1099, 1102 (Nev. 2013) 11 (affirmatively adopting the Restatement (Second) of Torts section 592A). 12 Because Nevada courts have not adopted the relevant section(s) of the restatement at 13 issue here, the Long test, which requires a showing of fraud, unfairness, or oppression in addition 14 to a grossly inadequate sale price to set aside a foreclosure sale, controls. See 639 P.2d at 530. 15 Further, Ditech misstates the restatement approach. In particular, the restatement does 16 not provide that “a grossly inadequate price itself is the proof of unfairness required to set aside a 17 foreclosure sale.” (ECF No. 69 at 26). While Ditech provides an accurate quote of comment B 18 in § 8.3 of the restatement, the portion quoted offers no support to Ditech’s argument that a 19 grossly inadequate price alone is sufficient to prove unfairness. (See ECF No. 69 at 26 (“a 20 foreclosure proceeding that otherwise complies with state law may not be invalidated because of 21 the sale price unless the price is grossly inadequate” (quoting Restatement (Third) of Prop.: 22 Mortgages § 8.3 cmt. b))). 23 Ditech asserts that SFR purchased the property at the foreclosure sale for less than 8% of 24 its fair market value, but fails to provide any evidence to support its assertion of the property’s 25 fair market value. (ECF No. 69 at 27). Ditech argues that regardless, unfairness is satisfied by 26 the HOA’s representation in the CC&Rs that its foreclosure would not extinguish the rights of 27 “defeat or render invalid the rights of the beneficiary under any recorded first deed of trust 28 encumbering a unit, made in good faith and for value[.]” (ECF No. 69 at 27) (capitalizations 10 1 2 omitted). SFR maintains that “not only can SFR show that the sale price itself was commercially 3 reasonable, but there is no evidence of fraud, unfairness or oppression that accounted for or 4 brought about a low sales price.” (ECF No. 68 at 12). Citing to BFP v. Resolution Trust Corp., 5 511 U.S. 531 (1994) (“BFP”), SFR argues that a reasonable value for foreclosed real property is 6 “the price in fact received at the foreclosure sale, so long as all of the requirements of the State’s 7 foreclosure law have been complied with.” (ECF No. 68 at 13). SFR thus concludes that the 8 sale price of $8,800.00 was commercially reasonable because multiple bidders attended the 9 foreclosure sale, of which SFR was the highest bidder. (ECF No. 68 at 14). 10 11 12 SFR’s argument and explanation of BFP, however, conveniently ignores the Supreme Court’s explicit emphasis in that case: 13 We emphasize that our opinion today covers only mortgage foreclosures of real estate. The considerations bearing upon other foreclosures and forced sales (to satisfy tax liens, for example) may be different. 14 BFP, 511 U.S. at 537 n.3. Further, the analysis and holding in BFP is inapplicable here as BFP 15 involved interpreting the phrase “reasonably equivalent value” in § 548(a)(2) of the Bankruptcy 16 Code, which is not at issue in the present case. See id. at 545. 17 Nevada has not clearly defined what constitutes “unfairness” in determining commercial 18 reasonableness. The few Nevada cases that have discussed commercial reasonableness state, 19 “every aspect of the disposition, including the method, manner, time, place, and terms, must be 20 commercially reasonable.” Levers v. Rio King Land & Inv. Co., 560 P.2d 917, 920 (Nev. 1977). 21 This includes “quality of the publicity, the price obtained at the auction, [and] the number of 22 bidders in attendance.” Dennison v. Allen Grp. Leasing Corp., 871 P.2d 288, 291 (Nev. 1994) 23 (citing Savage Constr. v. Challenge–Cook, 714 P.2d 573, 574 (Nev. 1986)). 24 Nonetheless, Ditech’s argument stops short of finishing the quote from § 6.20 of the 25 CC&Rs. (ECF No. 69-11). The section goes on to state “except as may be otherwise required in 26 accordance with NRS 116.3116, as amended.” (ECF No. 69-11). Further, Ditech merely 27 provides page 22 of the CC&Rs and completely omits the rest. (See ECF No. 69-11). Thus, 28 Ditech has failed to set forth sufficient evidence to show inadequate sale price and fraud, 11 1 2 3 unfairness, or oppression so as to justify the setting aside of the foreclosure sale. 2. Bona Fide Purchaser Status Ditech argues that SFR is not a bona fide purchaser for value. (ECF No. 69 at 28). The 4 issue of bona fide purchaser (“BFP”) status is distinct from that of the conclusiveness of deed 5 recitals. Specifically, the issue of BFP status concerns a buyer’s knowledge of competing 6 interests, whereas the other concerns a statutory presumption that can be equitably overcome 7 under Shadow Wood. See, e.g., Nationstar Mortg., LLC, 184 F. Supp. 3d at 859–60. 8 9 A BFP is a person who purchases real property “for a valuable consideration and without notice of the prior equity, and without notice of facts which upon diligent inquiry would be 10 indicated and from which notice would be imputed to him, if he failed to make such inquiry.” 11 Bailey v. Butner, 176 P.2d 226, 234 (Nev. 1947) (emphasis omitted); see also Moore v. De 12 Bernardi, 220 P. 544, 547 (Nev. 1923) (“The decisions are uniform that the bona fide purchaser 13 of a legal title is not affected by any latent equity founded either on a trust, [e]ncumbrance, or 14 otherwise, of which he has no notice, actual or constructive.”). Under Nevada law, “bona fide 15 purchaser” means as follows: 16 17 18 Any purchaser who purchases an estate or interest in any real property in good faith and for valuable consideration and who does not have actual knowledge, constructive notice of, or reasonable cause to know that there exists a defect in, or adverse rights, title or interest to, the real property is a bona fide purchaser. 19 Nev. Rev. Stat. § 111.180(1). In other words, a later-obtained interest can prevail over an 20 earlier-obtained interest where the later purchaser has no knowledge of the previous interest and 21 records his/her interest first. See Nationstar Mortg., LLC, 184 F. Supp. 3d at 860. 22 SFR argues that it paid value, $8,100.00, for the property and took without notice of a 23 competing or superior interest in the property at the time of the foreclosure sale. (ECF No. 68 at 24 15–16). Ditech provides no competent evidence sufficient to raise a genuine dispute as to SFR’s 25 status as a bona fide purchaser. Rather, Ditech merely asserts without adequate support that SFR 26 is a professional property purchaser and thus cannot be a bona fide purchaser. (ECF No. 76). 27 Such conclusory allegations without specific facts supported by competent evidence is 28 insufficient to raise a genuine issue for trial. See Celotex, 477 U.S. at 324. 12 1 In light of the foregoing, the court finds that Ditech is not entitled to summary judgment 2 and has failed to raise a genuine dispute to preclude summary judgment in favor of SFR. 3 Accordingly, the court will grant SFR’s motion for summary judgment on its quiet title claim 4 against Ditech and deny Ditech’s motion for summary judgment. 5 E. Due Process 6 Last, Ditech contends that the foreclosure statute is unconstitutional because “U.S. Bank” 7 was not provided any notice of the superpriority amount. (ECF No. 69 at 3). Ditech thus 8 maintains that “[b]ecause the HOA’s foreclosure sale was conducted pursuant to an 9 unconstitutional statute—both facially and as applied—it is invalid, and summary judgment 10 should be granted in favor of Ditech.” (ECF No. 69 at 4). Further, Ditech argues in its response 11 to SFR’s motion for summary judgment that “whether Ditech or its predecessor had actual notice 12 of the ‘super-priority’ lien amount is irrelevant.” (ECF No. 76 at 6). 13 In Bourne Valley Court Trust v. Wells Fargo Bank, N.A., the Ninth Circuit held that NRS 14 116.3116’s “opt-in” notice scheme, which required a HOA to alert a mortgage lender that it 15 intended to foreclose only if the lender had affirmatively requested notice, facially violated 16 mortgage lenders’ constitutional due process rights. 832 F.3d 1154, 1157–58 (9th Cir. 2016). 17 The facially unconstitutional provision, as identified in Bourne Valley, exists in NRS 18 116.31163(2). See id. at 1158. At issue is the “opt-in” provision that unconstitutionally shifts 19 the notice burden to holders of the property interest at risk. See id. 20 To state a procedural due process claim, Ditech must allege “(1) a deprivation of a 21 constitutionally protected liberty or property interest, and (2) a denial of adequate procedural 22 protections.” Brewster v. Bd. of Educ. of Lynwood Unified Sch. Dist., 149 F.3d 971, 982 (9th 23 Cir. 1998). Ditech has satisfied the first element as a deed of trust is a property interest under 24 Nevada law. See Nev. Rev. Stat. § 107.020 et seq.; see also Mennonite Bd. of Missions v. 25 Adams, 462 U.S. 791, 798 (1983) (stating that “a mortgagee possesses a substantial property 26 interest that is significantly affected by a tax sale”). However, Ditech fails on the second prong. 27 Due process does not require actual notice. Jones v. Flowers, 547 U.S. 220, 226 (2006). 28 Rather, it requires notice “reasonably calculated, under all the circumstances, to apprise 13 1 interested parties of the pendency of the action and afford them an opportunity to present their 2 objections.” Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950); see also 3 Bourne Valley Court Trust, 832 F.3d at 1158. Here, adequate notice was given to the interested parties prior to extinguishing a property 4 5 right. BANA recorded its assignment deed on October 5, 2011. The HOA trustee recorded a 6 notice of default and election to sell on August 2, 2012, and sent (by certified mailed) copies of 7 the notice to interested parties, including BANA. As a result, the notice of trustee’s sale was sufficient notice to cure any constitutional 8 9 defect inherent in NRS 116.31163(2) as it put Ditech and its predecessor BANA on notice that 10 their interest was subject to pendency of action and offered all of the required information. Thus, 11 Ditech’s motion for summary judgment will be denied as to this issue. 12 III. 13 Conclusion Based on the aforementioned, SFR has met its burden of demonstrating that there is no 14 genuine issue of material fact as to its quiet title claim against Ditech and is entitled to judgment 15 as a matter of law. Accordingly, SFR’s motion for summary judgment will be granted. SFR is 16 entitled to a declaratory judgment that Ditech’s first deed of trust was extinguished pursuant to 17 the properly conducted foreclosure sale, whereat SFR purchased the property for value in the 18 amount of $8,100.00 and neither Ditech (or its predecessor) tendered the noticed amount prior 19 thereto. 20 Accordingly, 21 IT IS HEREBY ORDERED, ADJUDGED, and DECREED that SFR’s motion for 22 summary judgment (ECF No. 68) be, and the same hereby is, GRANTED consistent with the 23 foregoing. 24 25 26 IT IS FURTHER ORDERED that Ditech’s motion for summary judgment (ECF No. 69) be, and the same hereby is, DENIED. DATED THIS 23rd day of February, 2017. 27 JAMES C. MAHAN UNITED STATES DISTRICT JUDGE 28 14

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