Bank of America, N.A. v. Copper Creek Estates Homeowners Association et al

Filing 30

ORDER denying 24 Motion for Summary Judgment. FURTHER ORDERED that claims (2) through (4) of BANA's 1 complaint be, and the same hereby are, DISMISSED WITHOUT PREJUDICE. Signed by Judge James C. Mahan on 5/9/2017. (Copies have been distributed pursuant to the NEF - JM)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 DISTRICT OF NEVADA 6 *** 7 BANK OF AMERICA, N.A., 8 Plaintiff(s), 9 10 11 Case No. 2:16-CV-447 JCM (GWF) ORDER v. COPPER CREEK ESTATES HOMEOWNERS ASSOCIATION, et al., Defendant(s). 12 13 Presently before the court is plaintiff/counterdefendant Bank of America, N.A., successor 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 James C. Mahan U.S. District Judge by merger to BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP’s (“BANA”) motion for summary judgment. (ECF No. 24). Defendants/counterclaimants Premier One Holdings, Inc. (“Premier”) and Weisun Property, Inc. (“Weisun”) filed a response (ECF No. 25), to which BANA replied (ECF No. 27). I. Facts This case involves a dispute over real property located at 6700 Prairie Dusk Drive, Las Vegas, Nevada 89122 (the “property”). On June 28, 2010 Dawn Garrett obtained a loan in the amount of $168,992.00 to purchase the property, which was secured by a deed of trust recorded on June 28, 2010. (ECF No. 1). The deed of trust was assigned to BANA via an assignment of deed of trust recorded on June 7, 2011. (ECF No. 1). On June 24, 2011, defendant Nevada Association Services, Inc. (“NAS”), acting on behalf of defendant Copper Creek Estates Homeowners Association (the “HOA”), recorded a notice of delinquent assessment lien, stating an amount due of $1,134.70. (ECF No. 1). On August 24, 1 2011, NAS recorded a notice of default and election to sell to satisfy the delinquent assessment 2 lien, stating an amount due of $2,339.50. (ECF No. 1). 3 In October 2011, BANA requested a ledger from the HOA/NAS identifying the 4 superpriority amount allegedly owed to the HOA. (ECF No. 1). The HOA/NAS allegedly refused 5 to provide a ledger. (ECF No. 1). BANA calculated the superpriority amount to be $630.00 and 6 tendered that amount to NAS on December 21, 2011, which NAS allegedly refused. (ECF No. 1). 7 On July 16, 2013, NAS recorded a notice of trustee’s sale, stating an amount due of 8 $5,208.58. (ECF No. 1). On September 13, 2013, Premier purchased the property at the 9 foreclosure sale for $11,000.00. (ECF No. 1). A trustee’s deed upon sale in favor of Premier was 10 recorded on September 13, 2013. (ECF No. 1). A short form deed of trust was recorded against the property in favor of Weisun on October 11 12 16, 2014. (ECF No. 1). 13 On March 2, 2016, BANA filed the underlying complaint, alleging four causes of action: 14 (1) quiet title/declaratory judgment against all defendants; (2) breach of NRS 116.1113 against 15 NAS and the HOA; (3) wrongful foreclosure against NAS and the HOA; and (4) injunctive relief 16 against Premier. (ECF No. 1). On June 29, 2016, Premier filed an answer and counterclaim against BANA for quiet title 17 18 and declaratory relief. (ECF No. 20). 19 In the instant motion, BANA move for summary judgment on its claims against the HOA, 20 NAS, Premier, and Weisun, as well as against Premier and Weisun’s counterclaims against BANA. 21 (ECF No. 24).1 22 II. Legal Standard 23 The Federal Rules of Civil Procedure allow summary judgment when the pleadings, 24 depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 25 The court notes that BANA’s response (ECF No. 24) misstates several facts, including but not limited to the following: (1) “Arlington West’s September 13, 2013 non-judicial foreclosure sale” (ECF No. 24 at 1 (emphasis added)); and (2) “The court should grant summary judgment in favor of BANA on BANA's claims against Copper Creek, NAS, Jessup, Jessup Series IV as well as against Jessup and Jessup Series IV's counterclaims against BANA” (ECF No. 24 at 26 (emphasis added)). Arlington West, Jessup, and Jessup Series IV are not parties in the instant matter. 1 26 27 28 James C. Mahan U.S. District Judge -2- 1 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 3 “to isolate and dispose of factually unsupported claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 4 323–24 (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 be 7 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 moving 10 party must first satisfy its initial burden. “When the party moving for summary judgment would 11 bear the burden of proof at trial, it must come forward with evidence which would entitle it to a 12 directed verdict if the evidence went uncontroverted at trial. In such a case, the moving party has 13 the initial burden of establishing the absence of a genuine issue of fact on each issue material to 14 its case.” C.A.R. Transp. Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) 15 (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 essential 18 element of the non-moving party’s case; or (2) by demonstrating that the nonmoving party failed 19 to make a showing sufficient to establish an element essential to that party’s case on which that 20 party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323–24. If the moving 21 party fails to meet its initial burden, summary judgment must be denied and the court need not 22 consider the nonmoving party’s evidence. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 159– 23 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’ differing James C. Mahan U.S. District Judge -3- 1 versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass’n, 809 F.2d 626, 2 631 (9th Cir. 1987). 3 In other words, the nonmoving party cannot avoid summary judgment by relying solely on 4 conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 1040, 5 1045 (9th Cir. 1989). Instead, the opposition must go beyond the assertions and allegations of the 6 pleadings and set forth specific facts by producing competent evidence that shows a genuine issue 7 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 III. Discussion 15 A. Claims (2) through (4) 16 As an initial matter, the court dismisses, without prejudice, claims (2) through (4) of 17 BANA’s complaint (ECF No. 1). 18 Claims (2) and (3) are dismissed without prejudice for failure to mediate pursuant to NRS 19 38.330. See, e.g., Nev. Rev. Stat. § 38.330(1); McKnight Family, L.L.P. v. Adept Mgmt., 310 P.3d 20 555 (Nev. 2013). Subsection (1) of NRS 38.310 sets forth prerequisites for commencing a civil 21 action and provides, in relevant part: 22 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 Nev. Rev. Stat. § 38.310(1). Subsection (2) continues by stating that a “court shall dismiss any 26 civil action which is commenced in violation of the provisions of subsection 1.” Nev. Rev. Stat. 27 § 38.310(2). 23 28 James C. Mahan U.S. District Judge -4- 1 “A wrongful foreclosure claim challenges the authority behind the foreclosure, not the 2 foreclosure act itself.” McKnight Family, L.L.P., 310 P.3d at 559 (citing Collins v. Union Fed. 3 Sav. & Loan, 662 P.2d 610, 623 (Nev. 1983)). “The material issue in a wrongful foreclosure claim 4 is whether ‘the trustor was in default when the power of sale was exercised.’” Turbay v. Bank of 5 Am., N.A., No. 2:12-CV-1367-JCM-PAL; 2013 WL 1145212, at *4 (quoting Collins, 662 P.2d at 6 623). “Deciding a wrongful foreclosure claim against a homeowners’ association involves 7 interpreting covenants, conditions or restrictions applicable to residential property.” McKnight 8 Family, L.L.P., 310 P.3d at 559. “This type of interpretation falls under NRS 38.310.” Id. 9 Additionally, NRS 38.310 applies to laws “contain[ing] conditions and restrictions applicable to 10 residential property.” Id. at 558. 11 Similarly, BANA’s breach of NRS 116.1113 claim alleges NRS violations, which require 12 an interpretation of the regulations and statutes that contained conditions and restrictions 13 applicable to the property so as to fall within the scope of NRS 38.310. 14 BANA asserts that NRS 38.330’s mediation requirement is not applicable because it 15 submitted a demand for mediation to the Nevada Real Estate Division (“NRED”) on NOctober 29, 16 2015, but NRED failed to schedule the mediation within the time period required by NRS 17 38.330(1). (ECF No. 1 at 3). The court disagrees. 18 While NRS 38.330(1) explains the procedure for mediation,2 NRS 38.310 is clear in 19 providing that no civil action may be commenced “unless the action has been submitted to 20 mediation.” Specifically, subsection (1) goes on to state in relevant part: 21 22 23 24 If the parties participate in mediation and an agreement is not obtained, any party may commence a civil action in the proper court concerning the claim that was submitted to mediation. Any complaint filed in such an action must contain a sworn statement indicating that the issues addressed in the complaint have been mediated pursuant to the provisions of NRS 38.300 to 38.360, inclusive, but an agreement was not obtained. Nev. Rev. Stat. § 38.330(1) (emphasis added). While BANA has submitted a request for 25 mediation, the parties have not participated in mediation. Moreover, nothing in NRS 38.330 26 27 Subsection (1) of NRS 38.330 states that “[u]nless otherwise provided by an agreement of the parties, mediation must be completed within 60 days after the filing of the written claim.” Nev. Rev. Stat. § 38.330(1). 2 28 James C. Mahan U.S. District Judge -5- 1 provides that NRED’s failure to appoint a mediator within 60 days constitutes exhaustion, nor does 2 the statute place the burden on NRED to complete mediation within a specified period of time. 3 Thus, BANA has not exhausted its administrative remedies and must mediate certain claims prior 4 to initiating an action in court 5 Further, NRS 38.350 expressly tolls the statute of limitations applicable to BANA’s claims 6 that are subject to mediation under NRS 38.310. Specifically, NRS 38.350 provides that “[a]ny 7 statute of limitations applicable to a claim described in NRS 38.310 is tolled from the time the 8 claim is submitted to mediation . . . until the conclusion of mediation . . . of the claim and the 9 period for vacating the award has expired.” Nev. Rev. Stat. § 38.350. Therefore, BANA’s claims 10 are not prejudiced by the statute’s requirement that the parties participate in mediation prior to 11 initiating an action in court. 12 BANA’s complaint does not allege that mediation under NRS 38.330 has been completed. 13 Specifically, the complaint does not contain a sworn statement indicating that the issues set forth 14 in the complaint have been mediated, but no agreement was obtained. See Nev. Rev. Stat. § 15 38.330(1). Consequently, BANA must first submit claims (2) and (3) to mediation pursuant to 16 NRS 33.310 before proceeding with such claims in this court. See e.g., U.S. Bank, N.A. v. 17 Woodchase Condo. Homeowners Ass’n, No. 215CV01153APGGWF, 2016 WL 1734085, at *2 18 (D. Nev. May 2, 2016); Saticoy Bay, LLC Series 1702 Empire Mine v. Fed. Nat’l Mortg. Ass’n, 19 No. 214-cv-01975-KJD-NJK, 2015 WL 5709484, at *4 (D. Nev. Sept. 29, 2015). 20 Count (4) is dismissed without prejudice because the court follows the well-settled rule in 21 that a claim for “injunctive relief” standing alone is not a cause of action. See, e.g., In re Wal– 22 Mart Wage & Hour Emp’t Practices Litig., 490 F. Supp. 2d 1091, 1130 (D. Nev. 2007); Tillman 23 v. Quality Loan Serv. Corp., No. 2:12-CV-346 JCM RJJ, 2012 WL 1279939, at *3 (D. Nev. Apr. 24 13, 2012) (finding that “injunctive relief is a remedy, not an independent cause of action”); Jensen 25 v. Quality Loan Serv. Corp., 702 F. Supp. 2d 1183, 1201 (E.D. Cal. 2010) (“A request for 26 injunctive relief by itself does not state a cause of action.”). 27 28 James C. Mahan U.S. District Judge -6- 1 B. Claim (1)3 2 Under Nevada law, “[a]n action may be brought by any person against another who claims 3 an estate or interest in real property, adverse to the person bringing the action for the purpose of 4 determining such adverse claim.” Nev. Rev. Stat. § 40.010. “A plea to quiet title does not require 5 any particular elements, but each party must plead and prove his or her own claim to the property 6 in question and a plaintiff’s right to relief therefore depends on superiority of title.” Chapman v. 7 Deutsche Bank Nat’l Trust Co., 302 P.3d 1103, 1106 (Nev. 2013) (internal quotation marks and 8 citations omitted). Therefore, for plaintiff to succeed on its quiet title action, it needs to show that 9 its claim to the property is superior to all others. See also Breliant v. Preferred Equities Corp., 10 918 P.2d 314, 318 (Nev. 1996) (“In a quiet title action, the burden of proof rests with the plaintiff 11 to prove good title in himself.”). 12 Section 116.3116(1) of the NRS gives an HOA a lien on its homeowners’ residences for 13 unpaid assessments and fines. Nev. Rev. Stat. § 116.3116(1). Moreover, NRS 116.3116(2) gives 14 priority to that HOA lien over all other liens and encumbrances with limited exceptions—such as 15 “[a] first security interest on the unit recorded before the date on which the assessment sought to 16 be enforced became delinquent.” Nev. Rev. Stat. § 116.3116(2)(b). 17 The statute then carves out a partial exception to subparagraph (2)(b)’s exception for first 18 security interests. See Nev. Rev. Stat. § 116.3116(2). In SFR Investment Pool 1 v. U.S. Bank, the 19 Nevada Supreme Court provided the following explanation: 20 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. 21 22 23 334 P.3d 408, 411 (Nev. 2014) (“SFR Investments”). 24 Chapter 116 of the Nevada Revised Statutes permits an HOA to enforce its superpriority 25 lien by nonjudicial foreclosure sale. Id. at 415. Thus, “NRS 116.3116(2) provides an HOA a true 26 superpriority lien, proper foreclosure of which will extinguish a first deed of trust.” Id. at 419; see 27 3 28 James C. Mahan U.S. District Judge 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 2011–13, when the events giving rise to this litigation occurred. -7- 1 also Nev. Rev. Stat. § 116.31162(1) (providing that “the association may foreclose its lien by sale” 2 upon compliance with the statutory notice and timing rules). 1. Rejected Tender 3 4 In the instant motion, BANA argues that its December 21st tender to NAS preserved the 5 sonority of BANA’s deed of trust. (ECF No. 24 at 5). BANA asserts that it calculated the 6 superpriority amount to be $630.00 and tendered that amount to NAS on December 21, 2011, 7 which NAS allegedly refused. (ECF No. 24 at 7). 8 The court disagrees. BANA did not tender the amount sent forth in the notice of default, 9 which stated an amount due of $2,339.50. Rather, BANA tendered a lesser amount, the amount it 10 calculated to be sufficient—specifically, $630.00. 11 Under NRS 116.31166(1), the holder of a first deed of trust may pay off the superpriority 12 portion of an HOA lien to prevent the foreclosure sale from extinguishing that security interest. 13 See Nev. Rev. Stat. § 116.31166(1); see also SFR Investments, 334 P.3d at 414 (“But as a junior 14 lienholder, U.S. Bank could have paid off the SHHOA lien to avert loss of its security . . . .”); see 15 also, e.g., 7912 Limbwood Ct. Trust v. Wells Fargo Bank, N.A., et al., 979 F. Supp. 2d 1142, 1149 16 (D. Nev. 2013) (“If junior lienholders want to avoid this result, they readily can preserve their 17 security interests by buying out the senior lienholder’s interest.” (citing Carillo v. Valley Bank of 18 Nev., 734 P.2d 724, 725 (Nev. 1987); Keever v. Nicholas Beers Co., 611 P.2d 1079, 1083 (Nev. 19 1980))). 20 The superpriority lien portion, however, consists of “the last nine months of unpaid HOA 21 dues and maintenance and nuisance-abatement charges,” while the subpriority piece consists of 22 “all other HOA fees or assessments.” SFR Investments, 334 P.3d at 411 (emphasis added); see 23 also 7912 Limbwood Ct. Trust, 979 F. Supp. 2d at 1150 (“The superpriority lien consists only of 24 unpaid assessments and certain charges specifically identified in § 116.31162.”). 25 BANA merely presumed, without adequate support, that the amount set forth in the notice 26 of default included more than the superpriority lien portion and that a lesser amount based on 27 BANA’s own calculations would be sufficient to preserve its interest in the property. See 28 generally, e.g., Nev. Rev. Stat. § 107.080 (allowing trustee’s sale under a deed of trust only when James C. Mahan U.S. District Judge -8- 1 a subordinate interest has failed to make good the deficiency in performance or payment for 35 2 days); Nev. Rev. Stat. § 40.430 (barring judicially ordered foreclosure sale if the deficiency is 3 made good at least 5 days prior to sale). 4 The notice of default recorded August 24, 2011, set forth an amount due of $2,339.50. 5 (ECF No. 1). Rather than tendering the $3,339.32 due so as to preserve its interest in the property 6 and then later seeking a refund of any difference, BANA elected to pay a lesser amount ($630.00) 7 based on its unwarranted assumption that the amount stated in the notice included more than what 8 was due. See SFR Investments, 334 P.3d at 418 (noting that the deed of trust holder can pay the 9 entire lien amount and then sue for a refund). Had BANA paid the amount set forth in the notice 10 of default ($2,339.50), the HOA’s interest would have been subordinate to the first deed of trust. 11 See Nev. Rev. Stat. § 116.31166(1). 12 After failing to use the legal remedies available to BANA to prevent the property from 13 being sold to a third party—for example, seeking a temporary restraining order and preliminary 14 injunction and filling a lis pendens on the property (see Nev. Rev. Stat. §§ 14.010, 40.060)— 15 BANA now seeks to profit from its own failure to follow the rules set forth in the statutes. See 16 generally, e.g., Barkley’s Appeal. Bentley’s Estate, 2 Monag. 274, 277 (Pa. 1888) (“In the case 17 before us, we can see no way of giving the petitioner the equitable relief she asks without doing 18 great injustice to other innocent parties who would not have been in a position to be injured by 19 such a decree as she asks if she had applied for relief at an earlier day.”); Nussbaumer v. Superior 20 Court in & for Yuma Cty., 489 P.2d 843, 846 (Ariz. 1971) (“Where the complaining party has 21 access to all the facts surrounding the questioned transaction and merely makes a mistake as to the 22 legal consequences of his act, equity should normally not interfere, especially where the rights of 23 third parties might be prejudiced thereby.”). 24 In presuming that an “offer” to pay constitutes a “tender” of payment, BANA cites to Stone 25 Hollow Ave. Trust v. Bank of Am., Nat’l Ass’n, 382 P.3d 911 (Nev. 2016), for the proposition that 26 an offer to pay the superpriority amount prior to the foreclosure sale preserves the lender’s deed 27 of trust. (ECF No. 24 at 5-8). 28 James C. Mahan U.S. District Judge -9- 1 The Stone Hollow court, however, made no such holding. To the contrary, the Stone 2 Hollow court held that “[w]hen rejection of a tender is unjustified, the tender is effective to 3 discharge the lien.” 382 P.3d at 911. BANA has not set forth any evidence as to a tender in a 4 sufficient amount. 5 Based on the foregoing, BANA has failed to sufficiently establish that it tendered a 6 sufficient amount prior to the foreclosure sale so as to render Premier’s title subject to BANA’s 7 deed of trust. 8 2. Due Process 9 BANA argues that the HOA lien statute is facially unconstitutional because it does not 10 mandate notice to deed of trust beneficiaries. (ECF No. 24 at 8–11). BANA further contends that 11 any factual issues concerning actual notice is irrelevant pursuant to Bourne Valley Court Trust v. 12 Wells Fargo Bank, N.A., 832 F.3d 1154 (9th Cir. 2016) (“Bourne Valley”). (ECF No. 24 at 8–11). 13 The Ninth Circuit held that NRS 116.3116’s “opt-in” notice scheme, which required a 14 HOA to alert a mortgage lender that it intended to foreclose only if the lender had affirmatively 15 requested notice, facially violated mortgage lenders’ constitutional due process rights. Bourne 16 Valley, 832 F.3d at 1157–58. The facially unconstitutional provision, as identified in Bourne 17 Valley, exists in NRS 116.31163(2). See id. at 1158. At issue is the “opt-in” provision that 18 unconstitutionally shifts the notice burden to holders of the property interest at risk. See id. 19 To state a procedural due process claim, a claimant must allege “(1) a deprivation of a 20 constitutionally protected liberty or property interest, and (2) a denial of adequate procedural 21 protections.” Brewster v. Bd. of Educ. of Lynwood Unified Sch. Dist., 149 F.3d 971, 982 (9th Cir. 22 1998). BANA has satisfied the first element as a deed of trust is a property interest under Nevada 23 law. See Nev. Rev. Stat. § 107.020 et seq.; see also Mennonite Bd. of Missions v. Adams, 462 U.S. 24 791, 798 (1983) (stating that “a mortgagee possesses a substantial property interest that is 25 significantly affected by a tax sale”). However, BANA fails on the second prong. 26 Due process does not require actual notice. Jones v. Flowers, 547 U.S. 220, 226 (2006). 27 Rather, it requires notice “reasonably calculated, under all the circumstances, to apprise interested 28 parties of the pendency of the action and afford them an opportunity to present their objections.” James C. Mahan U.S. District Judge - 10 - 1 Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950); see also Bourne Valley, 2 832 F.3d at 1158. 3 Here, adequate notice was given to the interested parties prior to extinguishing a property 4 right. In fact, BANA acknowledges having received the notice of default. (ECF No. 24-7 at 6 5 (“This letter is in response to your Notice of Default with regard to the HOA assessments 6 purportedly owed on the above described real property.”). As a result, the notice of trustee’s sale 7 was sufficient notice to cure any constitutional defect inherent in NRS 116.31163(2) as it put 8 BANA on notice that its interest was subject to pendency of action and offered all of the required 9 information. 10 3. Supremacy Clause 11 BANA argues that the HOA lien statute cannot interfere with the federal mortgage 12 insurance program or extinguish mortgage interests insured by the FHA. (ECF No. 24 at 12–17). 13 The single-family mortgage insurance program allows FHA to insure private loans, 14 expanding the availability of mortgages to low-income individuals wishing to purchase homes. 15 See Sec’y of Hous. & Urban Dev. v. Sky Meadow Ass’n, 117 F. Supp. 2d 970, 980–81 (C.D. Cal. 16 2000) (discussing program); W Wash. & Sandhill Homeowners Ass’n v. Bank of Am., N.A., No. 17 2:13-cv-01845-GMN-GWF, 2014 WL 4798565, at *1 n.2 (D. Nev. Sept. 25, 2014) (same). If a 18 borrower under this program defaults, the lender may foreclose on the property, convey title to 19 HUD, and submit an insurance claim. 24 C.F.R. § 203.355. HUD’s property disposition program 20 generates funds to finance the program. See 24 C.F.R. § 291.1. 21 Allowing an HOA foreclosure to wipe out a first deed of trust on a federally-insured 22 property thus interferes with the purposes of the FHA insurance program. Specifically, it hinders 23 HUD’s ability to recoup funds from insured properties. As this court previously stated in 24 SaticoyBayLLC, Series 7342 Tanglewood Park v. SRMOF II 2012-1 Trust, the court reads the 25 foregoing precedent to indicate that a homeowners’ association foreclosure sale under NRS 26 116.3116 may not extinguish a federally-insured loan. No. 2:13–CV–1199 JCM (VCF), 2015 WL 27 1990076, at *4 (D. Nev. Apr. 30, 2015). 28 James C. Mahan U.S. District Judge - 11 - 1 However, the instant case is distinguishable from these cases in that, here, FHA is not a 2 named party. Neither the complaint nor the counterclaim seeks to quiet title against FHA. Thus, 3 this argument provides no support for BANA as the outcome of the instant case has no bearing on 4 FHA’s ability to quiet title. 4. Commercial Reasonability 5 6 BANA contends that judgment in its favor is appropriate because the sale of the property 7 for 7% of its fair market value is grossly inadequate as a matter of law. (ECF No. 24 at 18–21). 8 BANA further argues that the Shadow Wood court adopted the restatement approach, quoting the 9 opinion as holding that “[w]hile gross inadequacy cannot be precisely defined in terms of a specific 10 percentage of fair market value, generally a court is warranted in invalidating a sale where the 11 price is less than 20 percent of fair market value.” (ECF No. 24 at 18) (emphasis omitted). 12 NRS 116.3116 codifies the Uniform Common Interest Ownership Act (“UCIOA”) in 13 Nevada. See Nev. Rev. Stat. § 116.001 (“This chapter may be cited as the Uniform Common- 14 Interest Ownership Act”); see also SFR Investments, 334 P.3d at 410. Numerous courts have 15 interpreted the UCIOA and NRS 116.3116 as imposing a commercial reasonableness standard on 16 foreclosure of association liens.4 17 In Shadow Wood, the Nevada Supreme Court held that an HOA’s foreclosure sale may be 18 set aside under a court’s equitable powers notwithstanding any recitals on the foreclosure deed 19 where there is a “grossly inadequate” sales price and “fraud, unfairness, or oppression.” 366 P.3d 20 at 1110; see also Nationstar Mortg., LLC v. SFR Invs. Pool 1, LLC, 184 F. Supp. 3d 853, 857–58 21 (D. Nev. 2016). 22 4 23 24 25 26 27 28 James C. Mahan U.S. District Judge In other words, “demonstrating that an association sold a property at its 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”). - 12 - 1 foreclosure sale for an inadequate price is not enough to set aside that sale; there must also be a 2 showing of fraud, unfairness, or oppression.” Id. at 1112; see also Long v. Towne, 639 P.2d 528, 3 530 (Nev. 1982) (“Mere inadequacy of price is not sufficient to justify setting aside a foreclosure 4 sale, absent a showing of fraud, unfairness or oppression.” (citing Golden v. Tomiyasu, 387 P.2d 5 989, 995 (Nev. 1963) (stating that, while a power-of-sale foreclosure may not be set aside for mere 6 inadequacy of price, it may be if the price is grossly inadequate and there is “in addition proof of 7 some element of fraud, unfairness, or oppression as accounts for and brings about the inadequacy 8 of price” (internal quotation omitted)))). 9 Despite BANA’s assertion to the contrary, the Shadow Wood court did not adopt the 10 restatement. In fact, nothing in Shadow Wood suggests that the Nevada Supreme Court’s adopted, 11 or had the intention to adopt, the restatement. Compare Shadow Wood, 366 P.3d at 1112–13 (citing 12 the restatement as secondary authority to warrant use of the 20% threshold test for grossly 13 inadequate sales price), with St. James Village, Inc. v. Cunningham, 210 P.3d 190, 213 (Nev. 2009) 14 (explicitly adopting § 4.8 of the Restatement in specific circumstances); Foster v. Costco 15 Wholesale Corp., 291 P.3d 150, 153 (Nev. 2012) (“[W]e adopt the rule set forth in the Restatement 16 (Third) of Torts: Physical and Emotional Harm section 51.”); Cucinotta v. Deloitte & Touche, 17 LLP, 302 P.3d 1099, 1102 (Nev. 2013) (affirmatively adopting the Restatement (Second) of Torts 18 section 592A). Because Nevada courts have not adopted the relevant section(s) of the restatement 19 at issue here, the Long test, which requires a showing of fraud, unfairness, or oppression in addition 20 to a grossly inadequate sale price to set aside a foreclosure sale, controls. See 639 P.2d at 530. 21 Nevada has not clearly defined what constitutes “unfairness” in determining commercial 22 reasonableness. The few Nevada cases that have discussed commercial reasonableness state, 23 “every aspect of the disposition, including the method, manner, time, place, and terms, must be 24 commercially reasonable.” Levers v. Rio King Land & Inv. Co., 560 P.2d 917, 920 (Nev. 1977). 25 This includes “quality of the publicity, the price obtained at the auction, [and] the number of 26 bidders in attendance.” Dennison v. Allen Grp. Leasing Corp., 871 P.2d 288, 291 (Nev. 1994) 27 (citing Savage Constr. v. Challenge–Cook, 714 P.2d 573, 574 (Nev. 1986)). 28 James C. Mahan U.S. District Judge - 13 - 1 Nevertheless, BANA fails to set forth sufficient evidence to show fraud, unfairness, or 2 oppression so as to justify the setting aside of the foreclosure sale. BANA relies on its repeated 3 assertion that BANA tendered the superpriority amount to show fraud, unfairness, or oppression. 4 However, as the discussed in the previous section, the amount due on the date of BANA’s tender 5 was set forth in the notice of default, specifically, $2,339.50. Rather than tendering the noticed 6 amount under protest so as to preserve its interest and then later seeking a refund of the difference 7 in dispute, BANA chose not to tender a lesser amount ($630.00), an amount it calculated to be the 8 superpriority portion. 9 Accordingly, BANA’s commercial reasonability argument fails as a matter of law as it 10 failed to set forth evidence of fraud, unfairness, or oppression. See, e.g., Nationstar Mortg., LLC 11 v. SFR Investments Pool 1, LLC, No. 70653, 2017 WL 1423938, at *2 n.2 (Nev. App. Apr. 17, 12 2017) (“Sale price alone, however, is never enough to demonstrate that the sale was commercially 13 unreasonable; rather, the party challenging the sale must also make a showing of fraud, unfairness, 14 or oppression that brought about the low sale price.”). 15 5. Bona Fide Purchaser Status 16 Because the court has concluded that BANA failed to properly raise any equitable 17 challenges to the foreclosure sale, the court need not address BANA’s argument that Premier was 18 not a bona fide purchaser for value. See id. at *3 n.3 (citing Shadow Wood, 366 P.3d at 1114). 19 20 21 6. Retroactivity BANA contends that SFR Investments should not be applied retroactively to extinguish the first deed of trust. (ECF No. 24 at 24–25). 22 The Nevada Supreme Court has since applied the SFR Investments holding in numerous 23 cases that challenged pre-SFR Investments foreclosure sales. See, e.g., Centeno v. Mortg. Elec. 24 Registration Sys., Inc., No. 64998, 2016 WL 3486378, at *2 (Nev. June 23, 2016); LN Mgmt. LLC 25 Series 8301 Boseck 228 v. Wells Fargo Bank, N.A., No. 64495, 2016 WL 1109295, at *1 (Nev. 26 Mar. 18, 2016) (reversing 2013 dismissal of quiet-title action that concluded contrary to SFR 27 Investments, reasoning that “the district court’s decision was based on an erroneous interpretation 28 of the controlling law”); Mackensie Family, LLC v. Wells Fargo Bank, N.A., No. 65696, 2016 WL James C. Mahan U.S. District Judge - 14 - 1 315326, at *1 (Nev. Jan. 22, 2016) (reversing and remanding because “[t]he district court’s 2 conclusion of law contradicts our holding in SFR Investments Pool 1 v. U.S. Bank”). Thus, SFR 3 Investments applies to this case. 4 In light of the foregoing, BANA has failed to show that it is entitled to judgment as a matter 5 of law on its claims against the HOA, NAS, Premier, and Weisun. Nor has BANA shown that it 6 is entitled to judgment as a matter of law on Premier’s and Weisun’s counterclaims. 7 IV. Conclusion 8 Accordingly, 9 IT IS HEREBY ORDERED, ADJUDGED, and DECREED that BANA’s motion for 10 11 12 13 14 15 summary judgment (ECF No. 24) be, and the same hereby is, DENIED. IT IS FURTHER ORDERED that claims (2) through (4) of BANA’s complaint (ECF No. 1) be, and the same hereby are, DISMISSED WITHOUT PREJUDICE. DATED May 9, 2017. __________________________________________ UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28 James C. Mahan U.S. District Judge - 15 -

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