Nationstar Mortgage LLC v. Sommerset Homeowners Association et al

Filing 101

ORDER. IT IS ORDERED that 87 plaintiff U.S. Bank, National Associations motion forsummary judgment is GRANTED. IT IS FURTHER ORDERED that plaintiff U.S. Bank, National Associations alternativedamages claims against defendants Sommerset Homeowners Association and Alessi & Koenig,LLC are DISMISSED as moot. IT IS FURTHER ORDERED that 88 defendant Sommerset Homeowners Associations motion forsummary judgment is DENIED as moot.I FURTHER ORDER the parties to confer regarding whether U.S. Bank was properlysubstituted as a counterclaimant, and if so, whether it intends to pursue the unjust enrichmentclaim. By 8/14/2020, the parties shall file either a stipulation regarding the status of thisclaim or a status report briefly setting forth the parties positions. Signed by Judge Andrew P. Gordon on 7/16/2020. (Copies have been distributed pursuant to the NEF - JQC)

Case 2:16-cv-00571-APG-EJY Document 101 Filed 07/16/20 Page 1 of 8

1

UNITED STATES DISTRICT COURT

2

DISTRICT OF NEVADA

3 U.S. BANK, NATIONAL ASSOCIATION,
4

Plaintiff

5 v.
6 SOMMERSET HOMEOWNERS
ASSOCIATION, et al.,
7
Defendants
8

Case No.: 2:16-cv-00571-APG-EJY
Order (1) Granting U.S. Bank’s Motion for
Summary Judgment, (2) Dismissing U.S.
Bank’s Alternative Damages Claims as
Moot, (3) Denying Sommerset’s Motion for
Summary Judgment as Moot, and
(4) Setting Deadline for Parties to Address
the Unjust Enrichment Counterclaim
[ECF Nos. 75, 87, 88]

9
10

Plaintiff U.S. Bank, National Association sues to determine whether a deed of trust still

11 encumbers property located at 6609 Ives Avenue in Las Vegas following a non-judicial
12 foreclosure sale conducted by a homeowners association (HOA), defendant Sommerset
13 Homeowners Association (Sommerset). U.S. Bank seeks a declaration that the HOA sale did not
14 extinguish the deed of trust and it asserts alternative damages claims against Sommerset and
15 Sommerset’s foreclosure agent, defendant Alessi & Koenig LLC (Alessi).1 Defendant
16 Leodegario Salvador (Salvador) purchased the property at the HOA foreclosure sale. In the
17 consolidated action, Salvador v. Nationstar Mortgage, LLC, 2:16-cv-00919-APG-EJY, Salvador
18 sued U.S. Bank’s predecessor, Nationstar Mortgage, LLC (Nationstar), to quiet title. Nationstar
19 counterclaimed for declaratory relief and asserted an unjust enrichment claim against Salvador.
20 2:16-cv-00919-APG-EJY, ECF No. 9.
21

Defendant Sommerset moves to dismiss, arguing that U.S. Bank’s damages claims are

22 time-barred and allegations arising from a violation of the CC&Rs’ mortgage protection clause
23
1

A clerk’s entry of default was entered against Alessi in November 2018. ECF No. 62.

Case 2:16-cv-00571-APG-EJY Document 101 Filed 07/16/20 Page 2 of 8

1 fail to state a claim. U.S. Bank2 responds that its claims are not untimely because they do not
2 accrue until the court finds the deed of trust was extinguished. Alternatively, U.S. Bank argues
3 that it is entitled to equitable tolling. Finally, U.S. Bank asserts that its complaint refers to the
4 CC&Rs as an aspect of Sommerset’s bad faith in conducting the sale.
5

Sommerset also moves for summary judgment, this time arguing that U.S. Bank’s

6 declaratory relief claim is also untimely. Sommerset further contends the sale did not violate due
7 process and the notices were sent to all interested parties as required. Additionally, Sommerset
8 contends that tender was not futile and U.S. Bank and its predecessors made no tender attempt.
9 Sommerset also argues that even if tender was futile, it did not act in bad faith, so the result
10 would be a declaration that the deed of trust survived the sale but there would be no basis to
11 award damages against Sommerset. Sommerset asserts there is no fraud, oppression, or
12 unfairness that would justify equitably setting aside the sale. Finally, Sommerset argues there is
13 no evidence of bad faith or wrongful foreclosure to support the damages claims.
14

U.S. Bank opposes Sommerset’s motion and also moves for summary judgment on its

15 declaratory relief claim. U.S. Bank raises a variety of arguments as to why the deed of trust
16 survived the sale, including that Sommerset did not foreclose on a superpriority lien, that tender
17 would have been futile, that the homeowner paid the superpriority amount before the sale, that
18 Sommerset did not provide the required notices, and that the sale violates due process as applied.
19 Alternatively, U.S. Bank argues the sale should be equitably set aside.
20

Salvador opposes U.S. Bank’s motion but does not move for summary judgment.

21 Salvador joins Sommerset’s arguments, and he also contends he is a bona fide purchaser.
22
2

23

At the time the response was filed, Nationstar Mortgage, LLC was the plaintiff. ECF No. 80.
U.S. Bank has since substituted into the case as the plaintiff. ECF No. 86. For ease of reference,
I characterize the response to the motion to dismiss as U.S. Bank’s.
2

Case 2:16-cv-00571-APG-EJY Document 101 Filed 07/16/20 Page 3 of 8

1

The parties are familiar with the facts so I will not repeat them here except where

2 necessary to resolve the motions. I grant U.S. Bank’s motion because the former homeowner
3 paid the superpriority amount prior to the HOA sale, thereby preserving the deed of trust.
4 Because the HOA sale did not extinguish the deed of trust, I dismiss as moot U.S. Bank’s
5 damages claims against Sommerset and Alessi and deny as moot Sommerset’s motion for
6 summary judgment. Finally, I set a deadline for the parties to address whether U.S Bank is
7 substituted as counterclaimant for Nationstar’s unjust enrichment counterclaim, and if so,
8 whether U.S. Bank intends to pursue that counterclaim.
9 I. ANALYSIS
10

Summary judgment is appropriate if the movant shows “there is no genuine dispute as to

11 any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
12 56(a), (c). A fact is material if it “might affect the outcome of the suit under the governing law.”
13 Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if “the evidence
14 is such that a reasonable jury could return a verdict for the nonmoving party.” Id.
15

The party seeking summary judgment bears the initial burden of informing the court of

16 the basis for its motion and identifying those portions of the record that demonstrate the absence
17 of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The
18 burden then shifts to the non-moving party to set forth specific facts demonstrating there is a
19 genuine issue of material fact for trial. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531
20 (9th Cir. 2000); Sonner v. Schwabe N. Am., Inc., 911 F.3d 989, 992 (9th Cir. 2018) (“To defeat
21 summary judgment, the nonmoving party must produce evidence of a genuine dispute of material
22 fact that could satisfy its burden at trial.”). I view the evidence and reasonable inferences in the
23

3

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1 light most favorable to the non-moving party. James River Ins. Co. v. Hebert Schenk, P.C., 523
2 F.3d 915, 920 (9th Cir. 2008).
3

A. Timeliness

4

Sommerset and Salvador contend that U.S. Bank’s declaratory relief claim is subject to a

5 three-year limitation period, so it is untimely. I have previously ruled that the four-year catchall
6 limitation period in § 11.220 applies to claims under § 40.010 brought by a lienholder seeking to
7 determine whether an HOA sale extinguished its deed of trust. See Bank of Am., N.A. v. Country
8 Garden Owners Ass’n, No. 2:17-cv-01850-APG-CWH, 2018 WL 1336721, at *2 (D. Nev. Mar.
9 14, 2018). The HOA sale was conducted on September 26, 2012, and the trustee’s deed upon
10 sale was recorded on October 2, 2012. ECF No. 87-14. U.S. Bank’s predecessor filed this
11 lawsuit on March 15, 2016. Consequently, the declaratory relief claim is timely.
12

B. Merits

13

A homeowner’s payments can cure the superpriority default. 9352 Cranesbill Tr. v. Wells

14 Fargo Bank, N.A., 459 P.3d 227, 230 (Nev. 2020). In general, “[w]hen a debtor partially
15 satisfies a judgment, that debtor has the right to make an appropriation of such payment to the
16 particular obligations outstanding.” Id. (quotation omitted). “The debtor must direct that
17 appropriation at the time the payment is made.” Id. (quotation omitted). If the debtor does not
18 direct how to apply the payment, then the creditor may decide how to allocate it. Id. “If neither
19 the debtor nor the creditor makes a specific application of the payment, then it falls to the court
20 to determine how to apply the payment” by reference to “the basic principles of justice and
21 equity so that a fair result can be achieved.” Id. (quotation omitted).
22

On April 1, 2008, Sommerset charged a quarterly assessment in the amount of $66.12

23 and a reserve quarterly assessment in the amount of $25. ECF No. 87-6 at 5. On April 14, the

4

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1 homeowner paid $91.86, which, because of other fines and late charges on the account, dropped
2 his balance to $50. Id. Sommerset charged another quarterly assessment of $66.12 and a reserve
3 quarterly assessment of $25 on July 1, 2008. Id. No other assessments were charged before the
4 notice of delinquent assessment lien was recorded on August 22, 2008. ECF No. 87-4. Although
5 there are various fines for violations, there is no evidence of nuisance abatement or maintenance
6 charges. ECF No. 87-6 at 5.
The homeowner made another payment in the amount of $91.86 on September 8, 2008.3

7

8 Id. at 6. But the homeowner continued to be charged for late fees and fines for violations on the
9 property. Id. at 16. In December 2009, Sommerset told the homeowner that it would reverse all
10 fines and late fees on the property if the homeowner paid $635.62, “which is assessment costs
11 and collection fees.” Id. at 7. The letter also advised that the homeowner must also pay Alessi’s
12 collection fees. Id. The letter stated that “[o]nce the association has received notification from
13 Alessi & Koenig that you have paid all association fees and attorney fees in full, the association
14 will initiate the credit of” the late fees and fines. Id. In response to this letter, the homeowner
15 paid $635.62 in December 2009. Id. at 9. In the “for” line on the check it states: “account
16 balance Somerset [sic] HOA.” Id. It appears Alessi forwarded $388.36 of this payment to
17 Sommerset. Id. at 27. The homeowner made more payments in January, March, and August
18 2010, and January, April, July, and October 2011 in the amount of $91.86 each. Id. at 10-11, 14,
19 17-19. Alessi sent portions of these payments to Sommerset. Id. at 27-28. The HOA’s ledger
20 does not show payments applied to particular line items, instead payments were applied to a
21
22
3

23

The checks are signed by someone other than the homeowner, but there is no dispute the checks
were tendered on the homeowner’s behalf. I therefore refer to these payments as coming from
the homeowner.
5

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1 running balance. Id. at 5, 15-16. There is no evidence of Sommerset’s policy regarding how it
2 would apply payments from homeowners.
3

The only evidence of the homeowner’s intent on how to apply the payments comes from

4 the December 2009 letter and subsequent payment. In response to Sommerset’s letter notifying
5 the homeowner that all late fees and fines would be waived and assessments and costs would be
6 satisfied if he paid $635.62, he paid that amount. That strongly suggests the homeowner
7 intended this payment to go toward all of the overdue assessments, including those within the
8 superpriority amount. To the extent the homeowner’s intent is unclear, and even if the evidence
9 does not show how Sommerset applied the payments other than to a running balance, I would
10 allocate the payments to the superpriority amount for many of the same reasons set forth in
11 Deutsche Bank Nat’l Tr. Co. v. SFR Investments Pool 1, LLC, No. 2:14-cv-01131-APG-VCF,
12 2020 WL 3470304, at *4 (D. Nev. June 24, 2020).
13

U.S. Bank thus has met its initial burden of establishing the superpriority amount and that

14 the homeowner’s payments were applied to pay off the superpriority amount. The burden thus
15 shifts to the defendants to present evidence raising a genuine dispute. The defendants have not
16 done so. Indeed, Sommerset appears to concede that the homeowner satisfied the superpriority
17 amount. See ECF No. 90 at 13 (“The HOA does not dispute that the evidence presented by
18 Plaintiff establishes that the homeowner’s pre-foreclosure payments exceeded the nine-month
19 amount of the HOA’s assessments; however, the HOA disputes the legal effect of the payments
20 to the extent that Plaintiff alleges the HOA is liable for any damages to Plaintiff.”). Because the
21 superpriority lien was satisfied before the sale, the deed of trust was preserved by operation of
22 law. See Bank of Am., N.A. v. SFR Investments Pool 1, LLC, 427 P.3d 113, 116 (Nev. 2018) (en
23 banc). And because the sale was void as to the deed of trust by operation of law, Salvador’s

6

Case 2:16-cv-00571-APG-EJY Document 101 Filed 07/16/20 Page 7 of 8

1 bona fide purchaser status is irrelevant. Id. at 121. I therefore grant U.S. Bank’s motion as to the
2 parties’ declaratory judgment and quiet title claims. Because the HOA sale did not extinguish
3 the deed of trust, I dismiss as moot U.S. Bank’s alternative damages claims against Sommerset
4 and Alessi, and I deny as moot Sommerset’s motion for summary judgment.
5

In the consolidated action, Nationstar filed an unjust enrichment counterclaim against

6 Salvador. In this case, U.S. Bank was substituted as plaintiff, but the substitution does not make
7 clear if U.S. Bank was substituted as counterclaimant as well. See ECF Nos. 77, 86. No party
8 moved for summary judgment on the unjust enrichment counterclaim. Consequently, it is
9 unclear whether this claim remains pending. I therefore direct the parties to confer on whether
10 U.S. Bank was properly substituted as a counterclaimant, and if so, whether it intends to pursue
11 the unjust enrichment claim. If the parties can agree, they must file a stipulation regarding the
12 status of this claim. If they cannot agree, they must file a status report briefly setting forth the
13 parties’ positions.
14 II. CONCLUSION
15

I THEREFORE ORDER that plaintiff U.S. Bank, National Association’s motion for

16 summary judgment (ECF No. 87) is GRANTED as follows: It is hereby declared that the non17 judicial foreclosure sale conducted by Sommerset Homeowners Association on September 26,
18 2012 did not extinguish the deed of trust and the property located at 6609 Ives Avenue in North
19 Las Vegas, Nevada remains subject to the deed of trust.
20

I FURTHER ORDER that plaintiff U.S. Bank, National Association’s alternative

21 damages claims against defendants Sommerset Homeowners Association and Alessi & Koenig,
22 LLC are DISMISSED as moot.
23

7

Case 2:16-cv-00571-APG-EJY Document 101 Filed 07/16/20 Page 8 of 8

1

I FURTHER ORDER that defendant Sommerset Homeowners Association’s motion for

2 summary judgment (ECF No. 88) is DENIED as moot.
3

I FURTHER ORDER the parties to confer regarding whether U.S. Bank was properly

4 substituted as a counterclaimant, and if so, whether it intends to pursue the unjust enrichment
5 claim. By August 14, 2020, the parties shall file either a stipulation regarding the status of this
6 claim or a status report briefly setting forth the parties’ positions.
7

DATED this 16th day of July, 2020.

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9

ANDREW P. GORDON
UNITED STATES DISTRICT JUDGE

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