The Bank of New York Mellon v. Stone Canyon West Homeowners Association et al

Filing 91

ORDER Denying Plaintiff's 75 Motion for Summary Judgment. SFR's 76 Motion for Summary Judgment is Granted. The Clerk of Court is instructed to close the case and enter judgment accordingly. Signed by Chief Judge Gloria M. Navarro on 3/19/2019. (Copies have been distributed pursuant to the NEF - SLD)

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1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 4 5 6 7 8 9 10 11 12 13 BANK OF NEW YORK MELLON, F/K/A ) BANK OF NEW YORK, AS SUCCESSOR IN) INTEREST TO JPMORGAN CHASE BANK, ) N.A., AS TRUSTEE FOR THE ) STRUCTURED ASSET MORTGAGE ) INVESTMENTS II TRUST 2006-AR6, ) MORTGAGE PASS-THROUGH ) CERTIFICATES, SERIES 2006-AR6, ) ) Plaintiff, ) vs. ) ) STONE CANYON WEST HOMEOWNERS ) ASSOCIATION, et al., ) ) Defendants. ) ) 14 Case No.: 2:16-cv-01904-GMN-CWH ORDER Pending before the Court is the Motion for Summary Judgment, (ECF No. 75), filed by 15 Plaintiff Bank of New York Mellon (“BNYM”) and Cross Defendant Nationstar Mortgage, 16 LLC (“Nationstar”) (collectively “Plaintiffs”). Defendant SFR Investments Pool, LLC (“SFR”) 17 filed a Response, (ECF No. 80), and Plaintiffs filed a Reply, (ECF No. 81). Also pending 18 before the Court is SFR’s Motion for Summary Judgment, (ECF No. 76), to which Plaintiffs 19 filed a Response, (ECF No. 79), and SFR filed a Reply, (ECF No. 82). 20 For the reasons discussed herein, Plaintiffs’ Motion for Summary Judgment is DENIED 21 and SFR’s Motion for Summary Judgment is GRANTED. 22 I. BACKGROUND 23 This case arises from the non-judicial foreclosure on real property located at 7972 24 Laurena Avenue, Las Vegas, Nevada 89147 (the “Property”). (See Deed of Trust, Ex. 1 to Pl.’s 25 MSJ, ECF No. 75-1). In 2006, Juan A. Chacon (“Chacon”) financed his purchase of the Page 1 of 16 1 Property by way of a loan in the amount of $188,000.00 secured by a deed of trust (the 2 “DOT”). (Id.). BNYM became beneficiary under the DOT through an assignment recorded on 3 March 16, 2012, (see Assignment, Ex. 2 to Pl.’s MSJ, ECF No. 75-2), and Nationstar is 4 BNYM’s loan servicer, (see Nationstar’s Request for Foreclosure Notices, Ex. 10 to Pl.’s MSJ, 5 ECF No. 75-10). 6 Upon Chacon’s failure to pay all amounts due, Stone Canyon West Homeowners 7 Association (“HOA”), through its agent Nevada Association Services, Inc. (“NAS”), recorded a 8 notice of delinquent assessment lien in March 2010 and a subsequent notice of default and 9 election to sell in June 2010. (See Notice of Delinquent Assessment, Ex. 4 to Pl.’s MSJ, ECF 10 No. 75-4); (Notice of Default and Election to Sell, Ex. 5 to Pl.’s MSJ). During the time period 11 that Chacon’s account was in collections, Chacon made payments toward his delinquent 12 account totaling $905.00. (See NAS Collections File at 4–6, Ex. 5 to Pl.’s MSJ, ECF No. 75-5). 13 On July 2, 2013, NAS recorded a notice of foreclosure sale stating a public auction 14 would take place on July 28 of that year. (Notice of Sale, Ex. 7 to Pl.’s MSJ, ECF No. 75-7). 15 At the sale, SFR purchased the Property for $13,000 and recorded a foreclosure deed on August 16 5, 2013. (Foreclosure Deed, Ex. 8 to Pl.’s MSJ, ECF No. 75-8). 17 Plaintiffs bring this quiet title action seeking a declaration that the DOT continues to 18 encumber the Property and that SFR’s interest in the Property is subject to this encumbrance. 19 (See Compl. ¶¶ 26–73, ECF No. 1).1 SFR asserts competing declaratory and injunctive relief 20 counterclaims against Plaintiffs,2 as well as crossclaims against Chacon for declaratory and 21 injunctive relief. (See Answer 14:8–16:5, ECF No. 20). 22 23 24 1 Plaintiffs’ wrongful foreclosure and breach of NRS 116.1113 claims are no longer at issue in light of the parties’ stipulation to dismiss these claims against HOA, (ECF Nos. 86, 87). 25 2 The parties stipulated to dismissing SFR’s slander of title claim against Plaintiffs, (ECF Nos. 70, 71), leaving only the declaratory and injunctive relief claims. Page 2 of 16 1 2 II. LEGAL STANDARD The Federal Rules of Civil Procedure provide for summary adjudication when the 3 pleadings, depositions, answers to interrogatories, and admissions on file, together with the 4 affidavits, if any, show that “there is no genuine dispute as to any material fact and the movant 5 is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). Material facts are those that 6 may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 7 A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to 8 return a verdict for the nonmoving party. Id. “Summary judgment is inappropriate if 9 reasonable jurors, drawing all inferences in favor of the nonmoving party, could return a verdict 10 in the nonmoving party’s favor.” Diaz v. Eagle Produce Ltd. P’ship, 521 F.3d 1201, 1207 (9th 11 Cir. 2008) (citing United States v. Shumway, 199 F.3d 1093, 1103–04 (9th Cir. 1999)). A 12 principal purpose of summary judgment is “to isolate and dispose of factually unsupported 13 claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). 14 In determining summary judgment, a court applies a burden-shifting analysis. “When 15 the party moving for summary judgment would bear the burden of proof at trial, it must come 16 forward with evidence which would entitle it to a directed verdict if the evidence went 17 uncontroverted at trial. In such a case, the moving party has the initial burden of establishing 18 the absence of a genuine issue of fact on each issue material to its case.” C.A.R. Transp. 19 Brokerage Co. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citations omitted). In 20 contrast, when the nonmoving party bears the burden of proving the claim or defense, the 21 moving party can meet its burden in two ways: (1) by presenting evidence to negate an 22 essential element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving 23 party failed to make a showing sufficient to establish an element essential to that party’s case 24 on which that party will bear the burden of proof at trial. Celotex Corp., 477 U.S. at 323–24. If 25 the moving party fails to meet its initial burden, summary judgment must be denied and the Page 3 of 16 1 court need not consider the nonmoving party’s evidence. Adickes v. S.H. Kress & Co., 398 U.S. 2 144, 159–60 (1970). 3 If the moving party satisfies its initial burden, the burden then shifts to the opposing 4 party to establish that a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. 5 Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute, 6 the opposing party need not establish a material issue of fact conclusively in its favor. It is 7 sufficient that “the claimed factual dispute be shown to require a jury or judge to resolve the 8 parties’ differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors 9 Ass’n, 809 F.2d 626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid 10 summary judgment by relying solely on conclusory allegations that are unsupported by factual 11 data. Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go 12 beyond the assertions and allegations of the pleadings and set forth specific facts by producing 13 competent evidence that shows a genuine issue for trial. Celotex Corp., 477 U.S. at 324. 14 At summary judgment, a court’s function is not to weigh the evidence and determine the 15 truth but to determine whether there is a genuine issue for trial. Anderson, 477 U.S. at 249. The 16 evidence of the nonmovant is “to be believed, and all justifiable inferences are to be drawn in 17 his favor.” Id. at 255. But if the evidence of the nonmoving party is merely colorable or is not 18 significantly probative, summary judgment may be granted. Id. at 249–50. 19 III. DISCUSSION 20 Plaintiffs move for summary judgment on their quiet title claim, asserting that Chacon’s 21 payments to NAS preserved their DOT by extinguishing the HOA superpriority lien before the 22 sale. (Pl.’s MSJ 9:19–10:22, ECF No. 75). Plaintiffs further contend that the DOT survived 23 because the foreclosure was conducted pursuant to a facially unconstitutional statute and, 24 alternatively, the Property’s inadequate sales price, in conjunction with other evidence of 25 unfairness, warrants setting aside the sale on equitable grounds. (Id. 5:5–9:18, 10:23–15:20). Page 4 of 16 1 SFR seeks judgment in the form of a declaration that it is the title holder to the Property 2 and that Plaintiffs’ DOT was extinguished by the foreclosure sale. (SFR’s MSJ 27:2–5, ECF 3 No. 76). SFR asserts that Plaintiff’s quiet title claim is barred by the applicable statute of 4 limitations and, even if timely, cannot survive because Plaintiffs are without standing to bring 5 the claim. (Id. 20:7–23:9); (see also SFR’s Resp. 6:21–10:15, ECF No. 80). 6 7 The Court begins with the threshold issues of the timeliness of Plaintiffs’ claim, the constitutionality of NRS Chapter 116, and Plaintiffs’ standing to bring this action. 8 A. Statute of Limitations 9 According to SFR, Plaintiffs’ quiet title claim is time-barred because the Complaint was 10 filed outside of the applicable three-year limitations period prescribed by NRS 11.190(3)(a). 11 (Id. 10:20–12:11). Plaintiffs respond, asserting that under NRS 11.080, a five-year limitations 12 period governs the claim. (Pl.’s Resp. 6:3–17, ECF No. 79). 13 Courts in this District apply either the four-year limitations period under NRS 11.220, or 14 else the five-year period set forth in NRS 11.070 and 11.080 to a lienholder’s quiet title claim. 15 See, e.g., Bank of Am., N.A. v. Azure Manor/Rancho de Paz Homeowners Ass’n, No. 2:16-cv- 16 00764-GMN-GWF, 2019 WL 636973, at *3 (D. Nev. Feb. 14, 2019); Wilmington Tr., Nat’l 17 Ass’n v. Royal Highlands St. & Landscape Maint. Corp., No. 2:18-cv-00245-JAD-PAL, 2018 18 WL 2741044, at *2 (D. Nev. June 6, 2018). See also Saticoy Bay LLC Series 2021 Gray Eagle 19 Way v. JPMorgan Chase Bank, 388 P.3d 226, 232 (Nev. 2017); Weeping Hollow Ave. Tr. v. 20 Spencer, 831 F.3d 1110, 1114 (9th Cir. 2016). 21 Plaintiffs’ Complaint was filed less than four years after the July 2013 foreclosure sale. 22 (See Compl., ECF No. 1) (filed August 10, 2016); (see also Foreclosure Deed, Ex. 8 to Pl.’s 23 MSJ, ECF No. 75-8). Therefore, the quiet title claim is timely under any potentially applicable 24 limitations period, whether it be NRS 11.220, 11.070, or 11.080. 25 Page 5 of 16 1 The Court rejects SFR’s argument that NRS 11.190(3)(a) controls. That statute provides 2 a three-year limitations period for “[a]n action upon a liability created by statute, other than a 3 penalty or forfeiture.” See NRS 11.190(3)(a). Despite bringing the claim under 28 U.S.C. § 4 2201, NRS 30.040, and NRS 40.010, (see Compl. ¶ 46), Plaintiffs’ plea to quiet title does not 5 constitute liability created by statute. See Torrealba v. Kesmetis, 178 P.3d 716, 722 (Nev. 2008) 6 (“The phrase ‘liability created by statute’ means a liability which would not exist but for the 7 statute.”) (quoting Gonzalez v. Pac. Fruit Exp. Co., 99 F. Supp. 1012, 1015 (D. Nev. 1951)). 8 Plaintiffs seek a declaration concerning the viability of its DOT by invoking the court’s long- 9 standing “inherent equitable powers” to settle title disputes. Shadow Wood HOA v. N.Y. Cmty. 10 Bancorp., 366 P.3d 1105, 1111 (Nev. 2016) (reaffirming that NRS 40.010 “essentially codified 11 the court’s existing equity jurisprudence”) (citing Clay v. Scheeline Banking & Tr. Co., 159 P. 12 1081, 1082 (Nev. 1916) (“[T]here is practically no difference in the nature of the action under 13 our statute and as it exists independent of statute.”)). Because actions to quiet title exist 14 independent of statute under a court’s inherent equitable jurisdiction, NRS 11.190(3)(a) does 15 not apply. 16 B. Constitutionality of NRS Chapter 116 17 Next the Court turns to the parties’ dispute as to whether the Ninth Circuit’s decision in 18 Bourne Valley Court Tr. v. Wells Fargo Bank, NA, 832 F.3d 1154 (9th Cir. 2016), cert. denied, 19 No. 16-1208, 2017 WL 1300223 (U.S. June 26, 2017), compels the Court to find that Plaintiffs’ 20 DOT survived the HOA foreclosure sale. (Pl.’s MSJ 5:5–8:11); (SFR’s MSJ 12:19–15:26). 21 In Bourne Valley, the Ninth Circuit held that NRS 116.3116’s notice provisions violated 22 lenders’ due process rights because the scheme “shifted the burden of ensuring adequate notice 23 from the foreclosing homeowners’ association to a mortgage lender.” Bourne Valley, 832 F.3d 24 at 1159. The Ninth Circuit, interpreting Nevada law, declined to embrace the appellant’s 25 argument that NRS 107.090, read into NRS 116.31168(1), mandates that HOAs provide notice Page 6 of 16 1 to lenders even absent a request. Id. Accordingly, the absence of mandatory notice provisions 2 rendered the statutory scheme facially unconstitutional. Id. at 1158–60. 3 Bourne Valley’s construction of Nevada law is “only binding in the absence of any 4 subsequent indication from the [Nevada] courts that [the Ninth Circuit’s] interpretation was 5 incorrect.” Owen v. United States, 713 F.2d 1461, 1464 (9th Cir. 1983). “[W]here the 6 reasoning or theory of . . . prior circuit authority is clearly irreconcilable with the reasoning or 7 theory of intervening higher authority, [a court] should consider itself bound by the later 8 controlling authority . . . .” Miller v. Gammie, 335 F.3d 889, 892–893 (9th Cir. 2003). “[A] 9 [s]tate’s highest court is the final judicial arbiter of the meaning of state statutes.” Sass v. 10 California Bd. of Prison Terms, 461 F.3d 1123, 1129 (9th Cir. 2006) (citing Gurley v. Rhoden, 11 421 U.S. 200, 208 (1975)); see also Knapp v. Cardwell, 667 F.2d 1253, 1260 (9th Cir. 1982) 12 (“State courts have the final authority to interpret, and, where they see fit, to reinterpret the 13 states’ legislation.”). 14 In SFR Invs. Pool 1, LLC v. Bank of New York Mellon, the Nevada Supreme Court 15 expressly declined to follow Bourne Valley and held that NRS 107.090 is incorporated into 16 NRS 116.31168, thus requiring that HOAs “provide foreclosure notices to all holders of 17 subordinate interests, even when such persons or entities did not request notice.” 422 P.3d 18 1248, 1253 (Nev. 2018) (en banc). As this Court previously explained, the Nevada Supreme 19 Court’s holding is clearly irreconcilable with the Ninth Circuit’s finding of unconstitutionality 20 because the Ninth Circuit premised its conclusion on NRS Chapter 116’s lack of mandatory 21 notice provisions. Christiana Tr. v. SFR Invs. Pool 1, LLC, No. 2:16-cv-00684-GMN-CWH, 22 2018 WL 6603643, at *3 (D. Nev. Dec. 17, 2018). Because the Nevada Supreme Court has 23 since interpreted NRS Chapter 116 as mandating notice, the rationale underlying the Bourne 24 Valley decision no longer finds support under Nevada law. See Rodriguez v. AT&T Mobility 25 Servs. LLC, 728 F.3d 975, 979 (9th Cir. 2013) (recognizing that cases are “clearly Page 7 of 16 1 irreconcilable” where the “relevant court of last resort . . . undercut[s] the theory or reasoning 2 underlying the prior circuit precedent.”); see e.g, Toghill v. Clarke, 877 F.3d 547, 556–60 (4th 3 Cir. 2017). 4 In short, Bourne Valley’s holding that NRS Chapter 116 is facially unconstitutional is 5 clearly irreconcilable with the Nevada Supreme Court’s subsequent pronouncement. Because 6 the Nevada Supreme Court has final say on the meaning of Nevada statutes, Bourne Valley is 7 no longer controlling authority with respect to NRS 116.3116’s notice provisions and, 8 consequently, its finding of facial unconstitutionality. Accordingly, to the extent Plaintiffs, in 9 the instant Motion, seek to prevail based upon Bourne Valley, the Court rejects this theory. 10 C. Standing 11 According to SFR, Plaintiffs lack standing because they have not produced “the original, 12 wet-ink endorsed Note,” or demonstrated the “chain of ownership of the Note and the DOT.” 13 (SFR’s Resp. 6:21–10:15). Both arguments are without merit. 14 It is well established that a quiet title action may be advanced by “any person against 15 another who claims an estate or interest in real property, adverse to the person bringing the 16 action, for the purpose of determining such adverse claim.” Chapman v. Deutsche Bank Nat’l 17 Trust Co., 302 P.3d 1103, 1106 (Nev. 2013). Plaintiffs seek a declaration as to the viability of 18 their lien interest relative to SFR’s interest. SFR appears to conflate Plaintiffs’ declaratory 19 relief action with one for enforcement of the note and DOT through foreclosure. See Edelstein 20 v. Bank of New York Mellon, 286 P.3d 249, 258 (Nev. 2012) (“[T]o foreclose, one must be able 21 to enforce both the promissory note and the deed of trust.”) (emphasis added). As to SFR’s 22 chain-of-title contention, SFR offers no competing evidence to rebut BNYM’s production of 23 the DOT, as well as the subsequent assignment by which BNYM gained all beneficial interest 24 in the same. (See Deed of Trust, Ex. 1 to Pl.’s MSJ); (Assignment, Ex. 2 to Pl.’s MSJ). 25 Page 8 of 16 1 Accordingly, the Court rejects SFR’s argument that BNYM is without standing to bring the 2 instant quiet title action. 3 D. Tender of the Superpriority Portion of HOA’s Lien 4 Plaintiffs argue that under the Nevada Supreme Court’s decision in Golden Hill, a 5 homeowner’s payments may extinguish an HOA’s superpriority lien and consequently preserve 6 a lender’s DOT. (Pl.’s MSJ 9:20–10:7). According to Plaintiffs, Golden Hill controls this case 7 because Chacon’s payments totaling $905.00 to HOA satisfied the superpriority lien. (Id. 8 10:14–22). SFR responds that homeowners cannot discharge an HOA’s superpriority lien as a 9 matter of law and regardless, the evidence Plaintiffs rely upon indicates that Chacon’s 10 11 payments fell short of HOA’s superpriority lien amount. (SFR’s Resp. 14:1–25:18). Under NRS 116.3116, 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 the deed of trust. See 13 NRS 116.31166(1); see also SFR Invs. Pool 1 v. U.S. Bank, 334 P.3d 408, 414 (Nev. 2014). 14 The superpriority portion of the lien consists of “the last nine months of unpaid HOA dues and 15 maintenance and nuisance-abatement charges,” while the subpriority piece consists of “all other 16 HOA fees or assessments.” SFR Invs., 334 P.3d at 411; Horizons at Seven Hills Homeowners 17 Ass’n v. Ikon Holdings, LLC, 373 P.3d 66, 70–74 (Nev. 2016). 18 In Golden Hill, the Nevada Supreme Court held that a homeowner’s tender of the full 19 superpriority amount discharged an HOA’s superpriority lien, invalidating the ensuing sale to 20 the extent it extinguished the lender’s deed of trust. See Saticoy Bay LLC 2141 Golden Hill v. 21 JPMorgan Chase Bank, No. 71246, 408 P.3d 558, 2017 WL 6597154, at *1 (Nev. 2017) 22 (unpublished). In that case, there was “undisputed evidence that the former homeowner made 23 payments sufficient to satisfy the superpriority component of the HOA lien and that the HOA 24 applied those payments to the superpriority component of the former homeowner’s outstanding 25 balance.” Id. Page 9 of 16 1 In a subsequent unpublished decision, the Nevada Supreme Court declined to apply 2 Golden Hill despite undisputed evidence showing the former homeowner’s payments exceeded 3 the HOA superpriority lien amount. SFR Invs. Pool 1, LLC v. Wells Fargo Bank, N.A., No. 4 70471, 432 P.3d 172, 2018 WL 6609670, at *1 (Nev. 2018) (unpublished). The Court 5 explained that “the record does not establish that the HOA in this case allocated or had an 6 obligation to allocate the former homeowner’s payment,” toward the superpriority component 7 of HOA’s lien. Id. In a footnote, the Supreme Court noted that Golden Hill was “premised on” 8 the assumption that a homeowner may cure the default as to HOA’s superpriority lien, but “the 9 issue was undeveloped in that it had not been timely and coherently briefed.” Id. at *1 n.2. 10 In light of these two pronouncements, this Court has narrowly construed Golden Hill as 11 requiring both “tender of the proper amount,” as well as “evidence that the HOA, or its agent, 12 was obligated to apply the payment to the superpriority portion of the HOA lien or that the 13 HOA did in fact apply the payment in this manner.” See, e.g., U.S. Bank Nat’l Ass’n v. SFR 14 Invs. Pool 1, LLC, No. 2:16-cv00576-GMN-NJK, 2019 WL 303004, at *6 (D. Nev. Jan. 22, 15 2019); Bank of Am., N.A. v. SFR Invs. Pool 1, LLC, No. 2:15-cv-00692-GMN-CWH, 2018 WL 16 4704031, at *5 (D. Nev. Sept. 29, 2018). Here, NAS and HOA’s accounting ledgers for the Property show that after NAS 17 18 recorded the delinquent assessment lien on March 19, 2010, Chacon made six payments to 19 HOA totaling $905.00. (See NAS Collection File at 4–5, Ex. 5 to Pl.’s MSJ, ECF No. 75-5). 20 HOA’s monthly assessments were $59.50 during the 2009 calendar year, and $62.45 beginning 21 in 2010. (Id. at 4, 8). Thus, at most, the common-assessments portion of the superpriority lien 22 was $544.35.3 As for maintenance or nuisance-abatement costs, the ledgers are without any 23 24 25 At the time of service of the notice of delinquent assessment lien, Chacon was delinquent on six months’ worth of assessments, meaning the common-assessments portion of the HOA superpriority lien was undisputedly less than $544.35. (See NAS Collection File at 5–6, 8); see also Bank of Am., 427 P.3d at 117 (“[T]he superpriority portion of an HOA lien includes only charges for maintenance and nuisance abatement, and nine months of unpaid assessments.”) (emphasis added). Therefore, Chacon’s payments exceeded the superpriority amount 3 Page 10 of 16 1 indication that such costs were incurred, (id. at 8), and SFR does not point to any evidence 2 suggesting otherwise. Accordingly, the maximum amount of the HOA lien was $544.35, or 3 nine months’ worth of common assessments, and Chacon’s installment payments amounting to 4 $905 exceeded the HOA superpriority lien.4 5 Pursuant to Golden Hill, the Court next turns to whether HOA was either obligated to, or 6 did in fact, apply Chacon’s payment to its superpriority lien. While it is undisputed that 7 Chacon’s $905.00 payment accounted for more than nine-months’ worth of common 8 assessments, Plaintiffs have not demonstrated that these payments were applied to HOA’s 9 superpriority lien or that HOA was obligated to apply these payments in this manner. Despite 10 Plaintiffs’ insistence that “HOA applied [Chacon’s] payments, extinguishing the superpriority 11 piece of the lien,” Plaintiffs do not cite to any factual evidence in the record to support this 12 conclusion. (Pl.’s MSJ 10:21–22); (Pl.’s Reply 6:6–7). In place of admissible evidence, 13 Plaintiffs solely cite to Golden Hill for this proposition. This is insufficient to shift the 14 summary-judgment burden to SFR. 15 In summary, Plaintiffs have not established an essential fact to meet its prima facie case 16 under Golden Hill. Accordingly, the Court denies Plaintiffs’ Motion for Summary Judgment 17 insofar as it is premised upon Chacon extinguishing the HOA superpriority lien. The Court 18 will now address Plaintiffs’ remaining arguments in favor of its quiet title claim. 19 E. Equitable Grounds for Setting Aside the Sale 20 Plaintiffs put forth the following arguments to establish the foreclosure sale should be 21 equitably set aside: (1) the Property sold for a grossly inadequate price; (2) HOA’s CC&Rs 22 23 even if Chacon’s delinquency extended to nine months of assessments as SFR urges. (See SFR’s Resp. 23:23– 24:8, ECF No. 80) (“[A]t a minimum, the assessments piece would be $544.35[.]”). 24 4 25 The ledger also provides that collection costs and late fees were incurred. (NAS Collection File at 8). It is well established that an HOA’s superpriority lien “does not include an additional amount for the collection fees and foreclosure costs that an HOA incurs preceding a foreclosure sale.” Horizons at Seven Hills v. Ikon Holdings, 373 P.3d 66, 73 (Nev. 2016); see also Bank of Am., 427 P.3d at 117. Page 11 of 16 1 provide that “the foreclosure sale will not extinguish the first deed of trust”; and (3) the 2 CC&Rs, in conjunction with HOA’s post-sale distribution of the sale’s proceeds, suggest HOA 3 intended a subpriority-only sale. (Pl.’s MSJ 12:2–15:20). 4 Courts possess the inherent power, based in equity, to settle quiet title disputes. Shadow 5 Wood HOA v. N.Y. Cmty. Bancorp., 366 P.3d 1105, 1110 (Nev. 2016). In determining whether 6 an HOA’s non-judicial foreclosure sale may be set aside on equitable grounds, the relevant 7 inquiry is “whether the sale was affected by fraud, unfairness, or oppression.” Nationstar 8 Mortg., LLC v. Saticoy Bay LLC Series 2227 Shadow Canyon, 405 P.3d 641, 646 (Nev. 2017). 9 The burden of establishing that a foreclosure sale should be set aside rests with the party 10 11 12 challenging the sale. Id. at 646. 1. Grossly Inadequate Price Plaintiffs argue that the Court should equitably set aside the sale based upon the 13 Property’s grossly inadequate sale price. (Pl.’s MSJ 14:12–15:3). According to Plaintiffs, 14 SFR’s purchase of the Property for $13,000 represented 10.4% of the Property’s fair market 15 value and, therefore, the sale price is inadequate as a matter of law. (Id. 14:27–15:3). 16 “[M]ere inadequacy of price is not in itself sufficient to set aside the foreclosure sale, but 17 it should be considered together with any alleged irregularities in the sales process to determine 18 whether the sale was affected by fraud, unfairness, or oppression.” Shadow Canyon, 405 P.3d at 19 648 (declining to adopt a bright-line rule to equitably set aside a sale “based solely on price.”). 20 Because a low sale price is insufficient as a matter of law, the Court turns to Plaintiffs’ 21 additional equitable arguments. 22 23 2. Mortgagee Protection Clause Plaintiffs contend that HOA, through its CC&Rs, represented that its superpriority lien 24 “would be subordinate to the deed of trust,” and that “enforcement of its lien would not impair 25 the rights of the beneficiary under the deed of trust.” (Pl.’s MSJ 15:11–16). Plaintiffs continue Page 12 of 16 1 that while this clause, in and of itself, serves as evidence of unfairness, the mortgagee 2 protection clause also suggests that HOA intended a subpriority-only sale. (Id. 12:3–14:5). 3 The Nevada Supreme Court has repeatedly held that an HOA’s CC&Rs, including those 4 that provide for mortgagee protection, do not supersede the statutory structure of NRS Chapter 5 116. See SFR Invs. Pool 1, 334 P.3d at 418–19 (“‘Nothing in [NRS] 116.3116 expressly 6 provides for a waiver of the HOA’s right to a priority position for the HOA’s super priority 7 lien.’. . . The mortgage savings clause thus does not affect NRS 116.3116(2)’s application in 8 this case.”) (citation omitted); Ikon Holdings, 373 P.3d at 73–74 (holding that an HOA’s CC&R 9 provisions in contravention of NRS Chapter 116 “are superseded by statute and are thus 10 negated.”); see also RLP-Vervain Court, LLC v. Wells Fargo, No. 65255, 2014 WL 6889625, at 11 *1 (Nev. Dec. 5, 2014) (unpublished) (declining to consider certified question of “whether an 12 association may validly subordinate its assessment lien” in its CC&Rs because “there is 13 controlling Nevada precedent” on point). 14 Additionally, other than the existence of the mortgagee protection clause itself, Plaintiffs 15 have not pointed to evidence of resulting unfairness, such as chilled bidding. Even if Plaintiffs 16 did adduce evidence that potential bidders had notice of HOA’s CC&Rs, it is “presumed that 17 any potential bidders also were aware of NRS 116.1104.” US Bank, N.A. v. SFR Invs. Pool 1, 18 LLC, No. 71414, 414 P.3d 809, 2018 WL 1448248, at *2 (Nev. 2018) (unpublished) (citing 19 Smith v. State, 151 P. 512, 513 (Nev. 1915) (“Every one is presumed to know the law and this 20 presumption is not even rebuttable.”)). The Court accordingly rejects this argument. 21 22 3. The Purported “Subpriority-Only” Sale Relatedly, Plaintiffs argue that HOA intended a subpriority-only sale based upon the 23 mortgagee protection clause as well as the post-sale distribution of proceeds. (Pl.’s MSJ 12:2– 24 14:2, ECF No. 75). Neither of these assertions, however, supports an inference that HOA did 25 not intend to foreclose on its superpriority lien. The foreclosure notices, as well as the Page 13 of 16 1 foreclosure deed, constitute prima facie evidence that HOA foreclosed on its superpriority lien. 2 The notice of default and election to sell states that Chacon failed to pay monthly assessments 3 due from October 1, 2009, denoting that the HOA lien was comprised of nine months’ worth of 4 common assessments. (See Notice of Default, Ex. 6 to Pl.’s MSJ, ECF No. 75-6). The notice of 5 foreclosure sale specifies that the winning bidder will acquire “all right, title, and interest,” to 6 the Property, and SFR’s foreclosure deed provides that HOA, in fact, conveyed “right, title and 7 interest” in the Property “without warranty express or implied.” (See Notice of Sale, Ex. 7 to 8 Pl.’s MSJ, ECF No. 75-7); (Foreclosure Deed, Ex. 8 to Pl.’s MSJ, ECF No. 75-8). These 9 representations demonstrate that HOA did not elect to conduct a subpriority-only sale. See 10 Bank of New York Mellon v. K&P Homes, LLC, No. 71273, 404 P.3d 403, 2017 WL 4790995, 11 at *1 (Nev. 2017) (unpublished) (holding that the foreclosures notice’s reference to unpaid 12 common assessments coupled with a foreclosure deed language stating that HOA conveys “all 13 its right, title and interest” constitutes prima facie evidence that HOA foreclosed on the 14 superpriority portion of its lien.); PNC Bank, Nat’l Ass’n v. Saticoy Bay LLC Series 9320 Mt. 15 Cash Ave. UT 103, No. 69595, 395 P.3d 511, 2017 WL 2334492, at *2 (Nev. 2017) 16 (unpublished) (“[W]e conclude that the language in the pre-sale notices constituted prima facie 17 evidence that the HOA was foreclosing on a lien comprised of monthly assessments.”). 18 In light of these representations, the alleged improper distribution of post-sale proceeds 19 is not enough to support a finding that HOA only foreclosed on the subpriority-portion of its 20 lien. First, an HOA’s “post-sale distribution of proceeds ha[s] no bearing on the events leading 21 up to and during the sale.” Bank of Am., N.A. v. Saticoy Bay LLC Series 716 Fiesta Del Rey, 22 No. 73623, 433 P.3d 262, 2019 WL 292773, at *2 (Nev. 2019) (unpublished). More 23 significantly, NRS 116.31166(2) absolves SFR of “any responsibility to see that the sale 24 proceeds are properly distributed.” Shadow Canyon, 405 P.3d at 650 (recognizing that under 25 NRS 116.31166(2), a lender’s “recourse, if any, is against the HOA or its agent that conducted Page 14 of 16 1 the sale and distributed the proceeds”); see also NRS 116.31166(2) (“The receipt for the 2 purchase money contained in such a deed is sufficient to discharge the purchaser from 3 obligation to see to the proper application of the purchase money.”). 4 To recap, Plaintiffs have not met their burden of demonstrating factual disputes as to 5 whether Chacon’s payments were credited to HOA’s superpriority lien or that the foreclosure 6 sale was sufficiently tainted with fraud, oppression, or unfairness to warrant setting aside the 7 sale on equitable grounds. Therefore, the Court denies Plaintiffs’ Motion for Summary 8 Judgment on its quiet title and declaratory relief claims. 9 F. SFR’s Motion for Summary Judgment 10 Given the lack of any genuine factual dispute as to Plaintiffs’ theories supporting its 11 quiet title claim, summary judgment in SFR’s favor is warranted against Plaintiffs and Chacon. 12 See SFR Invs. Pool 1, 334 P.3d at 419 (“NRS 116.3116(2) gives an HOA a true superpriority 13 lien, proper foreclosure of which will extinguish a first deed of trust.”). Finding no legal or 14 equitable basis to invalidate the sale, SFR’s purchase of the Property extinguished the DOT and 15 any remaining interest Plaintiffs or Chacon possessed with respect to the Property. See NRS 16 116.3116(2); (see also Statutory Foreclosure Notices, ECF Nos. 75-4, 75-5, 75-7); (Foreclosure 17 Deed, ECF No. 75-8). SFR’s Motion for Summary Judgment on its declaratory relief claim 18 against Plaintiffs is granted. With respect to Chacon, SFR’s request for declaratory relief is 19 likewise granted to the extent Chacon asserts any adverse interest in the Property.5 20 /// 21 /// 22 /// 23 /// 24 25 As Chacon has not appeared in this action, SFR has moved for clerk’s entry of default, (ECF No. 68), which the clerk of court subsequently entered on January 26, 2018, (ECF No. 69). 5 Page 15 of 16 1 2 3 4 5 IV. CONCLUSION IT IS HEREBY ORDERED that Plaintiffs’ Motion for Summary Judgment, (ECF No. 75), is DENIED. IT IS FURTHER ORDERED that SFR’s Motion for Summary Judgment, (ECF No. 76), is GRANTED. 6 The Clerk of Court is instructed to close the case and enter judgment accordingly. 7 19 DATED this _____ day of March, 2019. 8 9 10 _________________________________ Gloria M. Navarro, Chief Judge United States District Judge 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Page 16 of 16

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