Nationstar Mortgage LLC v. Falls at Hidden Canyon Homeowners Association et al
Filing
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ORDER granting ECF No. 38 Motion to Dismiss (see order for details); giving Plaintiff 30 days to file second amended complaint. Signed by Judge Robert C. Jones on 6/14/2017. (Copies have been distributed pursuant to the NEF - KR)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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NATIONSTAR MORTGAGE, LLC,
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Plaintiff,
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2:15-cv-01287-RCJ-NJK
vs.
ORDER
FALLS AT HIDDEN CANYON
HOMEOWNERS ASSOCIATION et al.,
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Defendants.
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This case arises from a residential foreclosure by the Falls at Hidden Canyon
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Homeowners Association (“the HOA”) for failure to pay HOA fees. Pending before the Court is
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the HOA’s Motion to Dismiss. (ECF No. 38.) For the reasons given herein, the Court grants the
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Motion.
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I.
FACTS AND PROCEDURAL BACKGROUND
In October 2005, non-party Gwendolyn L. Farrow obtained a $256,500 mortgage loan to
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purchase property located at 1852 Fossil Butte Way, North Las Vegas, Nevada 89032 (“the
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Property”). (Am. Compl. ¶¶ 7, 13, ECF No. 36.) Non-party The Bank of New York Mellon
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(“BNYM”) acquired the note and Deed of Trust (“DOT”) by Corporate Assignment of Deed of
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Trust recorded March 24, 2010. (Id. at ¶ 14.)
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On January 5, 2011, as a result of the homeowners’ failure to pay HOA fees, the HOA
recorded a lien for delinquent assessments. (Id. at ¶ 16.) The HOA later recorded a notice of
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default and election to sell on March 11, 2011, and a notice of trustee’s sale on July 28, 2011.
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(Id. at ¶¶ 17–18.) On April 8, 2011, BNYM requested, through its agent, a payoff ledger
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identifying the amount of the superpriority portion of the HOA’s lien. The HOA refused to
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provide the ledger. (Id. at ¶ 25.) On November 15, 2011, the HOA foreclosed on the Property,
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acquiring the Property itself for the sale price of $9,850. (Id. at ¶ 27.) The HOA then assigned the
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Property to Defendant Las Vegas Development Group, LLC (“LVDG”) by quitclaim deed
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recorded November 23, 2011. (Id. at ¶ 28.) LVDG then quitclaimed its interest in the Property to
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non-party Airmotive Investments, LLC. (Id. at ¶ 29.) Plaintiff Nationstar Mortgage, LLC
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(“Plaintiff”) alleges it later obtained its interest in the Property from BNYM by a Corporate
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Assignment of Deed of Trust recorded November 21, 2014. (Id. at ¶ 15.)
On July 8, 2015, Plaintiff brought this action for quiet title and declaratory judgment,
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violation of NRS 116.1113, wrongful foreclosure, and injunctive relief. On April 26, 2017,
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Plaintiff filed a First Amended Complaint (“FAC”). The HOA now moves the Court to dismiss
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the FAC. (Mot. Dismiss, ECF No. 38.)
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II.
MOTION TO DISMISS STANDARD
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Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the
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claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of
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what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47
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(1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action
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that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule
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12(b)(6) tests the complaint’s sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n, 720
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F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for
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failure to state a claim, dismissal is appropriate only when the complaint does not give the
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defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell
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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is
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sufficient to state a claim, the court will take all material allegations as true and construe them in
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the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th
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Cir. 1986). The court, however, is not required to accept as true allegations that are merely
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conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden
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State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).
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A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a
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plaintiff must plead facts pertaining to his own case making a violation “plausible,” not just
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“possible.” Ashcroft v. Iqbal, 556 U.S. 662, 677–79 (2009) (citing Twombly, 550 U.S. at 556)
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(“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to
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draw the reasonable inference that the defendant is liable for the misconduct alleged.”). That is,
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under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a
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cognizable cause of action (Conley review), but also must allege the facts of his case so that the
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court can determine whether the plaintiff has any basis for relief under the cause of action he has
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specified or implied, assuming the facts are as he alleges (Twombly-Iqbal review).
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“Generally, a district court may not consider any material beyond the pleadings in ruling
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on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the
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complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner
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& Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents
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whose contents are alleged in a complaint and whose authenticity no party questions, but which
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are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6)
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motion to dismiss” without converting the motion to dismiss into a motion for summary
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judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule
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of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay
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Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court
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considers materials outside of the pleadings, the motion to dismiss is converted into a motion for
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summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.
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2001).
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III.
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ANALYSIS
a. Statute of Limitations
i. The applicable limitations periods for claims arising from the
foreclosure sale began running at the time of foreclosure.
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“In determining whether a statute of limitations has run against an action, the time must
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be computed from the day the cause of action accrued. A cause of action ‘accrues’ when a suit
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may be maintained thereon.” Clark v. Robison, 944 P.2d 788, 789 (Nev. 1997) (internal citation
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omitted). “If the facts giving rise to the cause of action are matters of public record then ‘[t]he
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public record gave notice sufficient to start the statute of limitations running.’” Job’s Peak Ranch
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Cmty. Ass’n, Inc. v. Douglas Cty., No. 55572, 2015 WL 5056232, at *3 (Nev. Aug. 25, 2015)
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(quoting Cumming v. San Bernardino Redev. Agency, 101 Cal. App. 4th 1229, 125 Cal. Rptr. 2d
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42, 46 (Ct. App. 2002)); see also Allen v. Webb, 485 P.2d 677, 684 (Nev. 1971) (Gunderson, J.,
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concurring) (concluding that, where a written document regarding real property was not properly
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recorded, there was not proper notice of the conveyance of that property so as to trigger the
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statute of limitations period on a quiet title action).
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Plaintiff’s interest in the Property was called into question at the time of the foreclosure
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sale due to NRS 116.3116(2), which gives priority to that portion of an HOA lien consisting
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solely of unpaid HOA assessments accrued during the “nine months immediately preceding
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institution of an action to enforce the lien.” It is clear that Plaintiff’s predecessor-in-interest
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could have brought an action to quiet title against the HOA at any time following the HOA’s
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foreclosure sale, in order to obtain a declaration that the sale had not extinguished its interest in
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the Property. Similarly, Plaintiff’s predecessor-in-interest could have asserted claims for
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violation of NRS 116.1113 and wrongful foreclosure as soon as it obtained facts to support a
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contention that the HOA’s sale of the Property was improper. There is no indication in the FAC
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that such facts were obtained any later than at the time of foreclosure. Therefore, the Court finds
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that the statutes of limitations applicable to Plaintiff’s claims against the HOA began to run, at
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the latest, on the date of recordation of the foreclosure deed—November 16, 2011. See Weeping
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Hollow Ave. Tr. v. Spencer, 831 F.3d 1110, 1114 (9th Cir. 2016) (emphasis added) (“Under
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Nevada law, Spencer could have brought claims challenging the HOA foreclosure sale within
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five years of the sale.”); Scott v. Mortg. Elec. Registration Sys., Inc., 605 F. App’x 598, 600 (9th
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Cir. 2015); Bank of Am., N.A. v. Antelope Homeowners’ Ass’n, No. 2:16-cv-449, 2017 WL
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421652, at *3 (D. Nev. Jan. 30, 2017) (Mahan, J.); Nationstar Mortg. LLC v. Amber Hills II
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Homeowners Ass’n, No. 2:15-cv-01433, 2016 WL 1298108, at *3 (D. Nev. Mar. 31, 2016)
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(Gordon, J.).
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ii. The quiet title claim is subject to a five-year statute of limitations.
In Nevada, the statute of limitations for quiet title claims is five years. See Nev. Rev. Stat.
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§§ 11.070, 11.080. Plaintiff brought this action within five years of the foreclosure sale.
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Therefore, Plaintiff’s quiet title claim is timely.
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iii. The claim for violation of NRS 116.1113 is subject to a three-year
statute of limitations.
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Plaintiff also alleges violations of NRS 116.1113, which states that “[e]very contract or
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duty governed by this chapter imposes an obligation of good faith in its performance or
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enforcement.” This claim is based “upon a liability created by statute,” Nev. Rev. Stat. §
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11.190(3)(a); thus, the three-year statute of limitations applies. See, e.g., Bank of N.Y. Mellon
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Trust Co., N.A. v. Jentz, No. 2:15-cv-01167-RCJ-CWH, 2016 WL 4487841, at *3 (D. Nev. Aug.
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Park Ave. Homeowners’ Ass’n, No. 2:16-cv-460-JCM-NJK, 2016 WL 5842845, at *3 (D. Nev.
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Oct. 3, 2016). Plaintiff filed this action more than three years after the recordation of the
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foreclosure deed. Therefore, Plaintiff’s claim for violation of NRS 116.1113 is time-barred, and
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is dismissed with prejudice.
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iv. The wrongful foreclosure claim may be subject to either a three-year
or six-year statute of limitations.
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“A wrongful foreclosure claim challenges the authority behind the foreclosure, not the
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foreclosure act itself.” McKnight Family, L.L.P. v. Adept Mgmt., 310 P.3d 555, 559 (Nev. 2013).
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The Nevada Supreme Court has opined that “deciding a wrongful foreclosure claim against a
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homeowners’ association involves interpreting covenants, conditions, or restrictions applicable
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to residential property.” Id. This is so because a wrongful foreclosure claim may lie where the
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HOA’s foreclosure violated either (1) the statute giving the HOA authority to foreclose (i.e.,
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NRS Chapter 116), or (2) the CC&Rs applicable to the foreclosed property. See Long v. Towne,
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639 P.2d 528, 530 (Nev. 1982) (finding no impropriety where “the lien foreclosure sale was
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conducted under authority of the CC&Rs and in compliance with NRS 107.080”). The
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procedural requirements of NRS Chapter 116 may not be waived in the CC&Rs “except as
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expressly provided in Chapter 116.” SFR Investments Pool 1 v. U.S. Bank, 334 P.3d 408, 419
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(Nev. 2014), reh’g denied (Oct. 16, 2014) (internal brackets and quotation marks omitted) (citing
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NRS 116.1104). Therefore, the CC&Rs may not ease the procedural requirements of Chapter
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116, nor alter the statute’s substantive effect. However, an HOA could theoretically comply with
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Chapter 116 and nonetheless fail to comply with supplementary or heightened procedural
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requirements contained in the CC&Rs. In such a case, no wrongful foreclosure claim would arise
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from statute, but may arise from the CC&Rs.
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A wrongful foreclosure action based on an alleged failure to comply with Chapter 116 is
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subject to the three-year statute of limitations for claims based “upon a liability created by
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statute.” Nev. Rev. Stat. § 11.190(3)(a); see also Amber Hills II Homeowners Ass’n, 2016 WL
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1298108, at *5; Park Ave. Homeowners’ Ass’n, 2016 WL 5842845, at *3. Therefore, to the
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extent Plaintiff alleged wrongful foreclosure based on the requirements of Chapter 116, this
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claim is dismissed because it was not brought within three years of the recordation of the
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foreclosure deed.
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On the other hand, a wrongful foreclosure claim arising from a failure to comply with the
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applicable CC&Rs is not based on an obligation created by a statute; rather, it arises from a
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“contract, obligation, or liability founded upon an instrument in writing.” NRS § 11.190(1)(b).
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Therefore, where a wrongful foreclosure claim is based on a violation of the CC&Rs, a six-year
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statute of limitations applies. Here, however, the FAC does not allege that any Defendant failed
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to comply with the CC&Rs when foreclosing on the Property. Accordingly, Plaintiff’s wrongful
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foreclosure claim is dismissed without prejudice.
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b. Quiet Title
The Court will not dismiss Plaintiff’s first cause of action, for quiet title and declaratory
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judgment, for failure to state a claim. Plaintiff’s claim is premised on several theories, including:
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(1) the unconstitutionality of the NRS Chapter 116 (see Bourne Valley Court Trust v. Wells
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Fargo Bank, NA, 832 F.3d 1154 (9th Cir. 2016)); (2) the rejected tender of the superpriority
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amount of the HOA’s lien; and (3) the commercial unreasonableness of the foreclosure sale,
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based primarily on a grossly inadequate sale price. This Court has found that all of these theories
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can support a quiet title claim, and on multiple occasions has granted summary judgment in favor
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of first deed of trust holders on the bases of Fourteenth Amendment due process and rejected
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tender. See, e.g., Absolute Bus. Sols., Inc. v. Mortg. Elec. Registration Sys., Inc., No. 2:15-cv-
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01325, 2017 WL 2259826, at *2 (D. Nev. May 23, 2017) (summary judgment based on Bourne
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Valley); U.S. Bank, Nat’l Ass’n v. NV Eagles, LLC, No. 2:15-cv-00786, 2017 WL 2259768, at *4
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(D. Nev. May 23, 2017) (summary judgment based on rejected tender).
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However, the Court agrees with the HOA that Plaintiff has failed to join a necessary party
in this litigation. Under Federal Rule of Civil Procedure 19(a)(1):
A person who is subject to service of process and whose joinder will not deprive
the court of subject-matter jurisdiction must be joined as a party if . . . (B) that
person claims an interest relating to the subject of the action and is so situated that
disposing of the action in the person’s absence may: (i) as a practical matter
impair or impede the person’s ability to protect the interest; or (ii) leave an
existing party subject to a substantial risk of incurring double, multiple, or
otherwise inconsistent obligations because of the interest.
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Here, the chain of title documents referenced in the FAC facially indicate that LVDG
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quitclaimed its interest in the Property to non-party Airmotive Investments, LLC on or around
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January 5, 2017. (Am. Compl. ¶ 29, ECF No. 36.) It appears Airmotive is the current owner of
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the Property, and as such, is a necessary party in this case. Airmotive has an interest in the
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subject of this action, and adjudicating Plaintiff’s quiet title claim in Airmotive’s absence would
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certainly impede Airmotive’s ability to protect that interest.
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Therefore, the Court will dismiss the first cause of action, with leave to amend, to allow
Plaintiff to join Airmotive as a defendant.
c. Injunctive Relief
Injunctive relief, is a remedy, not an underlying substantive claim. Tyler v. Am. Home
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Mortgage, No. 3:10–cv–00042, 2011 WL 5025234 at *6 (D. Nev. Oct. 21, 2011) (Reed, J.)
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(citing In re Wal–Mart Wage & Hour Emp’t Practices Litig., 490 F. Supp. 2d 1091, 1130 (D.
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Nev. 2007)); see also Jensen v. Quality Loan Service Corp., 702 F. Supp. 2d 1183, 1201 (E.D.
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Cal. 2010) (“An injunction is a remedy, not a separate claim or cause of action. A pleading can . .
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. request injunctive relief in connection with a substantive claim, but a separately pled claim or
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cause of action for injunctive relief is inappropriate.”). Therefore, the purported cause of action
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for injunctive relief is dismissed with prejudice.
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CONCLUSION
IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 38) is GRANTED.
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Plaintiff’s second and fourth causes of action, for violation of NRS 116.1113 and injunctive
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relief, respectively, are DISMISSED WITH PREJUDICE. Plaintiff’s third cause of action for
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wrongful foreclosure is DISMISSED WITHOUT PREJUDICE consistent with the Court’s
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analysis above. Plaintiff’s first cause of action for quiet title is DISMISSED WITH LEAVE TO
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AMEND. Plaintiff shall have thirty days from the entry of this order to file a second amended
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complaint, joining Airmotive Investments, LLC as a party.
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IT IS SO ORDERED. June 14, 2017
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_____________________________________
ROBERT C. JONES
United States District Judge
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