Nationstar Mortgage, LLC v. SFR Investments Pool 1, LLC

Filing 81

ORDERED that Nationstar's motion for summary judgment (ECF No. 60 ) is denied. SFR's motion for summary judgment (ECF No. 65 ) is granted. Nationstar's motion for leave to file supplemental memorandum (ECF No. 77 ) is granted. Clerk is directed to enter judgment in accordance with this order and close this case. Signed by Judge Miranda M. Du on 1/15/2019. (Copies have been distributed pursuant to the NEF - DRM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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NATIONSTAR MORTGAGE LLC, a
Delaware limited liability company,

Case No. 2:16-cv-00703-MMD-GWF
ORDER

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Plaintiff,
v.

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SFR INVESTMENTS POOL 1, LLC, a
Nevada limited liability company, et al.,

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Defendants.
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I.

SUMMARY

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This dispute arises from the foreclosure sale of property to satisfy a homeowners’

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association lien. Before the Court is Plaintiff Nationstar Mortgage, LLC’s (“Nationstar”)

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motion for summary judgment (ECF No. 60) and Defendant SFR Investments Pool 1,

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LLC’s (“SFR”) motion for summary judgment (ECF No. 65). The Court has reviewed the

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various replies and responses thereto. (ECF Nos. 70, 71, 72, 74, 75.) The Court has also

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considered Nationstar’s motion for leave to file supplemental briefing (ECF No. 77), SFR’s

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response (ECF No. 78), and Nationstar’s reply (ECF No. 79). For the following reasons,

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the Court grants Nationstar’s motion for leave to file supplemental briefing, denies

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Nationstar’s motion for summary judgment, and grants SFR’s motion for summary

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judgment.

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II.

BACKGROUND

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The following facts are undisputed unless otherwise indicated.

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Adrian and Mercedes Ocan (“Borrowers”) purchased real property (“Property”)

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within Boulder Creek Homeowners Association (“HOA”) on March 24, 2006.1 (ECF No. 60

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Property is located at 632 Blue Crystal Creek Road in Henderson, Nevada.
(ECF No. 60 at 2; ECF No. 65 at 3.)

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at 2; ECF No. 65 at 4.) Borrowers executed a Deed of Trust (“DOT”) and Note for

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$425,228. (ECF No. 60 at 2; ECF No. 65 at 4.) The DOT was recorded on March 29, 2006.

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(ECF No. 60 at 2; ECF No. 65 at 4.)

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Borrowers filed a Chapter 7 bankruptcy petition in the United States Bankruptcy

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Court, District of Nevada, on June 4, 2010. (ECF No. 77-1 at 22.) The HOA caused to be

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recorded a notice of delinquent assessment against the Property on January 27, 2011.

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(Id.) The HOA then caused to be recorded a notice of default and election to sell under

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the HOA’s lien against the Property, although the Property was not sold until several years

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later. (Id.; see also ECF No. 60 at 3; ECF No. 65 at 6.) The Chapter 7 trustee was

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discharged and the bankruptcy case was closed on October 14, 2011. (Id.)
Nationstar was assigned the DOT on August 16, 2013. (ECF No. 60 at 3; ECF No.
65 at 5.)

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The HOA caused to be recorded a notice of sale on February 19, 2014. (ECF No.

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60 at 3; ECF No. 65 at 5.) The HOA foreclosed and sold the property to SFR on March

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14, 2014, for $21,000 (“HOA Sale”). (ECF No. 60 at 3.)

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Nationstar initiated this action on March 30, 2016 (ECF No. 1) and filed the First

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Amended Complaint (“FAC”) on July 10, 2017 (ECF No. 22). The FAC asserts the

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following claims: (1) quiet title/declaratory relief against SFR and the HOA; (2) unjust

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enrichment against SFR; (3) wrongful foreclosure against the HOA, Nevada Association

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Services, Inc. (“HOA Trustee”), and unnamed defendants; (4) negligence against the

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HOA, HOA Trustee, and unnamed defendants; (5) negligence per se against the HOA,

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HOA Trustee, and unnamed defendants; (6) breach of contract against the HOA and

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unnamed defendants; (7) misrepresentation against the HOA; and (8) tortious interference

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with contract against all Defendants. (Id. at 11-19.) Plaintiff seeks a declaration that the

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first DOT survived the HOA Sale or that the HOA Sale was invalid. (Id. at 19.)

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SFR asserted the following counterclaims: (1) declaratory relief/quiet title; (2)

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preliminary and permanent injunction. (ECF No. 26 at 17-18.) SFR seeks a declaration

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that the HOA Sale was valid and that SFR is the rightful owner of the Property. (Id. at 18.)
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III.

LEGAL STANDARD

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“The purpose of summary judgment is to avoid unnecessary trials when there is no

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dispute as to the facts before the court.” Nw. Motorcycle Ass’n v. U.S. Dep’t of Agric., 18

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F.3d 1468, 1471 (9th Cir. 1994). Summary judgment is appropriate when the pleadings,

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the discovery and disclosure materials on file, and any affidavits “show that there is no

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genuine issue as to any material fact and that the moving party is entitled to a judgment

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as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). An issue is

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“genuine” if there is a sufficient evidentiary basis on which a reasonable fact-finder could

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find for the nonmoving party and a dispute is “material” if it could affect the outcome of the

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suit under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

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Where reasonable minds could differ on the material facts at issue, however, summary

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judgment is not appropriate. See id. at 250-51. “The amount of evidence necessary to

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raise a genuine issue of material fact is enough ‘to require a jury or judge to resolve the

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parties’ differing versions of the truth at trial.’” Aydin Corp. v. Loral Corp., 718 F.2d 897,

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902 (9th Cir. 1983) (quoting First Nat’l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89

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(1968)). In evaluating a summary judgment motion, a court views all facts and draws all

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inferences in the light most favorable to the nonmoving party. Kaiser Cement Corp. v.

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Fishbach & Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986).

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The moving party bears the burden of showing that there are no genuine issues of

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material fact. Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982). Once the

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moving party satisfies Rule 56’s requirements, the burden shifts to the party resisting the

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motion to “set forth specific facts showing that there is a genuine issue for trial.” Anderson,

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477 U.S. at 256. The nonmoving party “may not rely on denials in the pleadings but must

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produce specific evidence, through affidavits or admissible discovery material, to show

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that the dispute exists,” Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991),

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and “must do more than simply show that there is some metaphysical doubt as to the

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material facts.” Orr v. Bank of Am., NT & SA, 285 F.3d 764, 783 (9th Cir. 2002) (quoting

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Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). “The mere
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existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient.”

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Anderson, 477 U.S. at 252.

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IV.

NATIONSTAR’S MOTION FOR SUMMARY JUDGMENT (ECF NO. 60)

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Nationstar moves for summary judgment on the grounds that (1) the statute

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governing the HOA Sale—NRS § 116.3116 et seq.—is facially unconstitutional; (2) the

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sales price was inadequate and the circumstances of the HOA Sale were unfair; and (3)

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the HOA Sale is void because it was noticed in violation of the automatic stay in the

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Borrowers’ bankruptcy case. SFR opposes each of these arguments and also argues that

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Nationstar lacks standing to assert some of its claims. The Court rejects SFR’s standing

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arguments and denies Nationstar’s motion for summary judgment on the merits.

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A.

Standing

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SFR argues that Nationstar lacks standing in two ways. First, SFR seems to argue

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that Nationstar lacks prudential standing to pursue its quiet title claim. (See ECF No. 72 at

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10 (“Nothing in Bourne Valley relieves [Nationstar] of its obligation to prove it is the proper

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party to be challenging the Association foreclosure sale.”).) Prudential standing

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“encompasses the general prohibition on a litigant’s raising another person’s legal rights,

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the rule barring adjudication of generalized grievances more appropriately addressed in

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representative branches, and the requirement that a plaintiff’s complaint fall within the

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zone of interests protected by the law invoked.” Freedom Mortg. Corp. v. Las Vegas Dev.

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Grp., LLC, 106 F. Supp. 3d 1174, 1179 (D. Nev. 2015) (quoting United States v.

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Lazarenko, 476 F.3d 642, 649-50 (9th Cir. 2007)). “The question of prudential standing is

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often resolved by the nature and source of the claim. Essentially, the standing question in

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such cases is whether the [statute] on which the claim [relies] properly can be understood

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as granting persons in the plaintiff’s position a right to judicial relief.” Id. (quoting The

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Wilderness Soc’y v. Kane County, 632 F.3d 1162, 1169 (10th Cir. 2011)).

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SFR argues that Nationstar lacks prudential standing because Nationstar has failed

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to demonstrate that it is currently entitled to enforce the DOT and Note. (See ECF No. 72

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at 10.) Nationstar addresses the Note first, arguing that it need not show entitlement to
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enforce the Note in order to obtain a declaration that the DOT survived the HOA

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foreclosure sale. (ECF No. 74 at 4.) The Court agrees—whether Nationstar has authority

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to enforce the Note is irrelevant to its quiet title claim. Nationstar also addresses the DOT,

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arguing that it has introduced sufficient evidence—namely, the DOT and the relevant

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assignments—to demonstrate it is the current recorded beneficiary of the DOT. (ECF No.

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74 at 5 (citing ECF Nos. 60-1, 60-2, 60-3).) Nationstar also notes that SFR has not

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produced any evidence to the contrary. (Id. at 4.) The Court agrees with Nationstar that

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there is no genuine dispute as to whether Nationstar is the current recorded beneficiary of

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the DOT. Accordingly, the Court rejects SFR’s argument that Nationstar lacks prudential

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standing to pursue its quiet title claim.

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Second, SFR argues that Nationstar lacks Article III standing to raise a procedural

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due process challenge to the HOA Sale because it received actual notice of the sale. (ECF

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No. 72 at 19.) The Court need not decide this issue because Nationstar’s procedural due

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process argument relies on outdated authority, as discussed infra Section IV(B).

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B.

Bourne Valley

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Nationstar first argues that the HOA Sale did not extinguish the DOT because the

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Nevada statute governing the HOA Sale—NRS § 116.3116—is facially unconstitutional.

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(ECF No. 60 at 4.) But Nationstar’s argument is based solely on a Ninth Circuit decision

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that no longer controls: Bourne Valley Court Tr. v. Wells Fargo Bank, NA, 832 F.3d 1154

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(9th Cir. 2016). There, the Ninth Circuit found that NRS § 116.3116 violated mortgage

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lenders’ due process rights by requiring mortgage lenders to “opt in” to receive notice of

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an HOA’s intent to foreclose on a lien. Id. at 1158. The appellee argued that NRS §

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116.3116 actually mandated notice to all junior lienholders—not just those who opted in—

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by incorporating the notice provision of NRS § 107.090, but the Ninth Circuit expressly

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rejected that argument. Id. at 1159. The Ninth Circuit reasoned that reading the notice

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provision of NRS § 107.090 into NRS § 116.3116 “would impermissibly render the express

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notice provisions of Chapter 116 entirely superfluous.” Id.

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The Nevada Supreme Court had a different take on the interplay between NRS §

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116.3116 and NRS § 107.090. In SFR Investments Pool 1, LLC v. Bank of New York

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Mellon, 422 P.3d 1248, 1253 (Nev. 2018), the court determined that NRS § 116.3116 in

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fact did incorporate the mandatory notice provisions of NRS § 107.090. Thus, HOAs were

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required to provide foreclosure notices to all junior lienholders, even those who did not

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“opt in.”

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The Nevada Supreme Court has final say on interpretation of Nevada law,

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Christiana Tr. v. SFR Investments Pool 1, LLC, No. 2:16-CV-00684-GMN-CWH, 2018 WL

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6603643, at *3 (D. Nev. Dec. 17, 2018) (citing Sass v. Cal. Bd. of Prison Terms, 461 F.3d

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1123, 1129 (9th Cir. 2006)), and Bourne Valley “is only binding in the absence of any

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subsequent indication from the [Nevada] courts that [the Ninth Circuit’s] interpretation was

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incorrect,” id. (alterations in original) (citing Owen v. United States, 713 F.2d 1461, 1464

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(9th Cir. 1983)). Given that the Nevada Supreme Court’s decision eliminated the basis of

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the Ninth Circuit’s decision, “Bourne Valley is no longer controlling authority with respect

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to NRS 116.3116’s notice provisions and, consequently, its finding of facial

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unconstitutionality.” Id. The Court thus rejects Nationstar’s argument because it is based

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solely on Bourne Valley rather than any independent theory of unconstitutionality.

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C.

Equitable Relief

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Nationstar further argues that it is entitled to summary judgment because the sales

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price was inadequate and the circumstances of the HOA Sale were unfair. (ECF No. 60 at

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9.) The Nevada Supreme Court has held that “courts retain the power to grant equitable

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relief from a defective foreclosure sale.” Shadow Wood Homeowners Ass’n v. New York

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Cmty. Bancorp., 366 P.3d 1105, 1110 (Nev. 2016). For instance, a court may set aside a

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sale where there is inadequacy of price as well as proof of slight evidence of fraud,

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unfairness, or oppression. Nationstar Mortg., LLC v. Saticoy Bay LLC Series 2227 Shadow

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Canyon, 405 P.3d 641, 643, 648 (Nev. 2017) (also stating inadequacy of price “should be

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considered with any alleged irregularities in the sale process to determine whether the

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sale was affected by fraud, unfairness, or oppression”).
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Adequacy of sales price aside, Nationstar has not demonstrated fraud, unfairness

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or oppression. Nationstar argues that the sale was unfair because the HOA represented

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in the covenants, conditions, and restrictions (“CC&Rs”) that the foreclosure sale would

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not extinguish the first DOT. (ECF No. 60 at 10-11.) But the HOA correctly argues that a

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mortgage protection clause alone is insufficient evidence of unfairness to warrant setting

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aside an HOA foreclosure sale. (ECF No. 71 at 5 (citing Bank of New York Mellon v. SFR

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Investments Pool 1, LLC, No. 2:17-CV-256-JCM-NJK, 2018 WL 1002611, at *8 (D. Nev.

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Feb. 21, 2018)).) Given that Nationstar has asserted nothing more than the existence of a

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mortgage protection clause, the Court finds that Nationstar has not demonstrated fraud,

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unfairness, or oppression that would justify setting aside the HOA Sale.

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D.

Violation of Automatic Stay

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Nationstar requested leave to file supplemental briefing (ECF No. 77), and SFR

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opposed the arguments raised therein on the merits rather than on any procedural ground.

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(See ECF No. 78.) Accordingly, the Court grants Nationstar’s request and considers

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Nationstar’s additional argument.

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Nationstar argues that the HOA Sale was void ab initio because the HOA violated

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the automatic stay in the Borrowers’ bankruptcy action when it recorded the HOA sale

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notices. (ECF No. 77 at 2.) However, SFR correctly argues that Nationstar lacks standing

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to give legal effect to violations of the automatic stay. See U.S. Bank Nat’l Ass’n as Tr. for

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Certificate Holders of Haborview Mortg. Loan Tr. 2005-08 v. Heritage Estates

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Homeowners Ass’n, No. 2:16-CV-01385-GMN-CWH, 2018 WL 4623151, at *4 (D. Nev.

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Sept. 26, 2018). “The automatic stay provisions of the bankruptcy code are designed to

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protect debtors only, and do not afford non-parties to the bankruptcy case any rights.” Id.

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(citations omitted). Nationstar’s relationship with the bankruptcy proceedings—that the

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debtors also possessed an interest in the Property for which Nationstar seeks to quiet

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title—is “insufficient to confer standing.” Id. (citation omitted).
Accordingly, the Court will deny Nationstar’s motion for summary judgment.

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V.

SFR’S MOTION FOR SUMMARY JUDGMENT (ECF NO. 65)

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SFR argues that it is entitled to summary judgment because the DOT was

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extinguished by the HOA’s non-judicial foreclosure sale under NRS § 116.3116 et seq.

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(ECF No. 65 at 7, 15.) Nationstar’s arguments in response are predicated on Bourne

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Valley, but Bourne Valley is no longer controlling authority, as discussed supra Section

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IV(B).
Accordingly, the Court grants SFR’s motion for summary judgment.

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VI.

CONCLUSION

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The Court notes that the parties made several arguments and cited to several cases

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not discussed above. The Court has reviewed these arguments and cases and determines

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that they do not warrant discussion as they do not affect the outcome of the motions before

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the Court.
It is therefore ordered that Nationstar’s motion for summary judgment (ECF No. 60)

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is denied.
It is further ordered that SFR’s motion for summary judgment (ECF No. 65) is

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granted.
It is further ordered that Nationstar’s motion for leave to file supplemental

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memorandum (ECF No. 77) is granted.
The Clerk is directed to enter judgment in accordance with this order and close this

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case.
DATED THIS 15th day of January 2019.

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MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

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