Bank of America, N.A. v. SFR Investments Pool 1, LLC et al

Filing 25

ORDER. IT IS HEREBY ORDERED that Monterosso's Motion to Dismiss, 10 , is GRANTED in part and DENIED in part, pursuant to the foregoing.IT IS FURTHER ORDERED that BANA's claims for breach of contract, breach of the covenant of good faith, wrongful foreclosure, breach of Nev. Rev. Stat. § 116.1113, and negligent misrepresentation are DISMISSED without prejudice.Signed by Chief Judge Gloria M. Navarro on 1/31/16. (Copies have been distributed pursuant to the NEF - PS)

1

UNITED STATES DISTRICT COURT

2

DISTRICT OF NEVADA

3

BANK OF AMERICA, N.A.,
4

Plaintiff,

5

vs.

6

SFR INVESTMENTS POOL 1, LLC, et al.,
7

Defendants.

8
9

)
)
)
)
)
)
)
)
)

Case No.: 2:15-cv-0693-GMN-VCF
ORDER

Pending before the Court is the Motion to Dismiss, (ECF No. 10), filed by Defendant

10

Monterosso Premier Homeowners Association (“Monterosso”). Plaintiff Bank of America,

11

N.A. (“BANA”) filed a Response, (ECF No. 21), and Monterosso replied, (ECF No. 22).

12
13

For the reasons set forth herein, the Motion will be granted in part and denied in part.
I.

14
15
16
17

This case arises out of a dispute over the effects of Monterosso’s foreclosure on a
“super-priority” interest in real property under Nevada Revised Statutes § 116.3116, which was
allegedly performed in violation of applicable Covenants, Conditions and Restrictions
(“CC&Rs”). (Compl., ECF No. 1).

18
19
20
21
22

BACKGROUND

Specifically, this case centers upon interests held by the parties in real property located
at 5339 Altadona Avenue, Las Vegas, Nevada, 89141 (the “Property”). (Id. ¶ 7). On July 25,
2005, Andrew and Grace Sachs obtained a loan in the amount of $358,000 that was secured by
a Deed of Trust on the Property. (Deed of Trust, ECF No. 1-1).1 The Deed of Trust was
subsequently assigned to BANA on August 22, 2011. (Assignment, ECF No. 1-2).

23
24
25
1

As matters of public record, the Court takes judicial notice of the documents attached to the Complaint. See Lee
v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).

Page 1 of 5

1

On August 23, 2011, Alessi and Koenig, LLC, (“A&K”) as trustee for Monterosso,

2

recorded a Notice of Delinquent Assessment Lien against the Property for $1,030. (Notice of

3

Delinquent Assessment Lien, ECF No. 1-3). On February 7, 2012, A&K recorded a Notice of

4

Default and Election to Sell, warning that Monterosso would foreclose on its lien unless the

5

assessment payments were brought up to date. (Notice of Default, ECF No. 1-4).

6

On December 7, 2012, A&K recorded a Notice of Trustee’s Sale, which indicated that

7

the total amount of the unpaid balance owed to Monterosso was $5,470. (Notice of Sale, ECF

8

No. 1-5). On January 9, 2013, Defendant SFR Investments Pool 1, LLC purchased the property

9

at a trustee’s sale for $15,800. (Trustee’s Deed Upon Sale, ECF No. 1-7).

10

In the Complaint, BANA alleges that it had requested, in March 2012, that Monterosso

11

identify the amount representing the “super-priority” portion of its lien so BANA could remit

12

payment of that sum. (Compl. ¶¶ 27-28). BANA asserts that Monterosso failed to respond to

13

this request and did not provide any information to otherwise assist BANA in determining the

14

amount of the super-priority interest. (Id. ¶ 28). Furthermore, BANA alleges that Monterosso’s

15

recorded CC&Rs contain a “mortgage protection clause” which provides that Monterosso’s

16

liens are subordinate to senior deeds of trust. (Id. ¶ 31).

17

Based on these allegations, the Complaint sets forth claims against Monterosso for: (1)

18

quiet title/declaratory relief; (2) breach of contract; (3) breach of the covenant of good faith and

19

fair dealing; (4) wrongful foreclosure; (5) breach of Section 116.1113 of the Nevada Revised

20

Statutes; and (6) negligent misrepresentation. (Id. ¶¶ 34-93). BANA’s claims, with the

21

exception of its claim for quiet title and declaratory relief, center upon the allegation that

22

Monterosso failed to comply with the mortgage protection clause of the CC&Rs, and that it

23

made numerous misrepresentations as to the status of BANA’s interest in the Property. See,

24

e.g., (id. ¶¶ 53, 58, 60, 67, 68, 75).

25

Page 2 of 5

1

In the instant Motion, Monterosso argues that BANA’s claims should be dismissed for

2

lack of subject matter jurisdiction.

3

II.

4

LEGAL STANDARD
Rule 12(b)(1) of the Federal Rules of Civil Procedure permits motions to dismiss for

5

lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). When subject matter jurisdiction is

6

challenged, the burden of proof is placed on the party asserting that jurisdiction exists. Scott v.

7

Breeland, 792 F.2d 925, 927 (9th Cir. 1986) (holding that “the party seeking to invoke the

8

court’s jurisdiction bears the burden of establishing that jurisdiction exists”). Accordingly, the

9

court presumes that there is a lack of subject matter jurisdiction unless a plaintiff can prove

10

otherwise in response to a motion to dismiss. Kokkonen v. Guardian Life Ins. Co. of Am., 511

11

U.S. 375, 376-78 (1994).
“Ordinarily, a case dismissed for lack of subject matter jurisdiction should be dismissed

12
13

without prejudice so that a plaintiff may reassert his claims in a competent court.” Frigard v.

14

United States, 862 F.2d 201, 204 (9th Cir. 1988) (per curiam). However, where there is no way

15

to cure the jurisdictional defect, dismissal with prejudice is proper. See id.

16

III.

17

DISCUSSION
In its Motion, Monterosso argues that the Court lacks subject matter jurisdiction over

18

this case because BANA has failed to comply with Nevada Revised Statutes § 38.310 by first

19

submitting its claims to mediation before the Real Estate Division of the Nevada Department of

20

Business and Industry (“NRED”). This section provides:

21
22
23
24

“No civil action based upon a claim relating to [t]he interpretation,
application or enforcement of any covenants, conditions or
restrictions applicable to residential property . . . or [t]he procedures
used for increasing, decreasing or imposing additional assessments
upon residential property, may be commenced in any court in this
State unless the action has been submitted to mediation . . . .”

25

Page 3 of 5

1

Nev. Rev. Stat. § 38.310(1). Subsection (2) continues by stating that a “court shall dismiss any

2

civil action which is commenced in violation of the provisions of subsection 1.” Nev. Rev. Stat.

3

§ 38.310(2).

4

Though BANA states that none of its claims require interpretation of the CC&Rs, this

5

assertion is belied by the Complaint’s numerous allegations that BANA is entitled to relief due

6

to Monterosso’s failure to adhere to the CC&Rs’ requirements. Indeed, BANA’s claim for

7

breach of contract directly asserts that BANA is entitled to damages as a result of Monterosso’s

8

violation of the mortgage protection clause contained in the CC&Rs. (Compl. ¶¶ 49-55).

9

Similarly, BANA’s claim for breach of the covenant of good faith and fair dealing is premised

10

upon the assertion that Monterosso failed to adhere to the mortgage protection clause’s “spirit

11

and intention.” (Id. ¶¶ 56-62). Moreover, the remaining claims against Monterosso, with the

12

exception of the quiet title cause of action, each allege that Monterosso violated its duties under

13

the mortgage protection clause or made false representations as to the clause’s effect upon

14

BANA’s interest in the Property. (Id. ¶¶ 67, 76, 84).

15

Accordingly, as BANA’s claims for breach of contract, breach of the covenant of good

16

faith and fair dealing, wrongful foreclosure, breach of Nev. Rev. Stat. § 116.1113, and

17

negligent misrepresentation each rely upon the assertion that the mortgage protection clause

18

was breached or its effect misrepresented, the Court finds that these claims are related to the

19

interpretation and application of the CC&Rs. Thus, because these claims were not submitted to

20

mediation prior to the filing of this action, the Court lacks subject matter jurisdiction, and will

21

dismiss these claims without prejudice. See Nev. Rev. Stat. § 38.310(2).

22

As to BANA’s remaining cause of action against Monterosso, the Nevada Supreme

23

Court has held that claims which “directly relate[] to an individual’s right to possess and use his

24

or her property” are exempt from the mediation requirements of Nev. Rev. Stat. § 38.310.

25

McKnight Family, L.L.P. v. Adept Mgmt., 310 P.3d 555, 559 (Nev. 2013). The Nevada

Page 4 of 5

1

Supreme Court has applied this exemption to claims for quiet title, but the same reasoning also

2

applies to declaratory relief claims in which a lender seeks to determine the validity of a

3

foreclosure sale conducted by a homeowner association. U.S. Bank, Nat. Ass’n v. NV Eagles,

4

LLC, No. 2:15-CV-00786-RCJ, 2015 WL 4475517, at *3 (D. Nev. July 21, 2015) (finding that

5

a lender’s claim seeking both quiet title and declaratory relief was exempt from the mediation

6

requirement of Nev. Rev. Stat. § 38.310). In this instance, BANA seeks both quiet title and

7

declaratory relief regarding its rights to the Property.2 Accordingly, the Court finds that this

8

claim is exempt from the mediation requirement of Nev. Rev. Stat. § 38.310, and the Motion to

9

Dismiss will be denied as to this claim.

10

IV.

11
12

CONCLUSION
IT IS HEREBY ORDERED that Monterosso’s Motion to Dismiss, (ECF No. 10), is

GRANTED in part and DENIED in part, pursuant to the foregoing.

13

IT IS FURTHER ORDERED that BANA’s claims for breach of contract, breach of

14

the covenant of good faith, wrongful foreclosure, breach of Nev. Rev. Stat. § 116.1113, and

15

negligent misrepresentation are DISMISSED without prejudice.

16
17

31
DATED this _____ day of January, 2016.

18
19

___________________________________
Gloria M. Navarro, Chief Judge
United States District Judge

20
21
22
23
24
25

2

Though Monterosso argues that it does not assert any present claim to the Property, BANA’s cause of action, in
addition to seeking quiet title, requests a declaration of rights following the trustee’s sale, and thus states a valid
claim against Monterosso. See U.S. Bank, Nat. Ass'n v. NV Eagles, LLC, No. 2:15-CV-00786-RCJ, 2015 WL
4475517, at *3 (D. Nev. July 21, 2015) (“Although these Defendants argue that they do not have a present
interest in the Property, Plaintiff’s claim is structured as either a cause of action for quiet title or for declaratory
judgement . . . . As such, the Court finds that the validity of the sale effectuated by NAS at the direction of the
HOA remains at issue here.”).

Page 5 of 5