Bank of America, N.A. v. Desert Canyon Homeowners Association et al

Filing 58

ORDER that the motion to dismiss ECF No. 8 is granting in part and denying in part. Signed by Judge Miranda M. Du on 10/31/2017. (Copies have been distributed pursuant to the NEF - KW) (Main Document 58 replaced on 10/31/2017) (KW).

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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***

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BANK OF AMERICA, N.A.,

Case No. 2:17-cv-00663-MMD-NJK
Plaintiff,

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v.

(Def.’s Motion to Dismiss – ECF No. 8)

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DESERT CANYON HOMEOWNERS
ASSOCIATION; SFR INVESTMENTS
POOL 1, LLC; and ABSOLUTE
COLLECTION SERVICES, LLC,
Defendants.

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SFR INVESTMENTS POOL1, LLC,

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Counter/Cross Claimant,
v.

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ORDER

BANK OF AMERICA, N.A.; BAYVIEW
LOAN SERVICING, LLC; TIMOTHY
GOERING, an individual; ADRIAN
GOERING, an individual,

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Counter/Cross Defendants.

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I.

SUMMARY

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Before the Court is Defendant Desert Canyon Homeowners’ Association’s (“Desert

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Canyon” or “HOA”) motion to dismiss (“Motion”) (ECF No. 8). The Court has reviewed

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Plaintiff Bank of America, N.A.’s response (ECF No. 17) and Desert Canyon’s reply (ECF

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No. 18). Defendant SFR Investments Pool 1, LLC (“SFR”) filed an untimely response (ECF

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No. 22) to which Desert Canyon replied (ECF No. 26). The Court agrees with Desert

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Canyon that the Court should disregard SFR’s response as the Motion addresses only

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Plaintiff’s claims against Desert Canyon.

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II.

RELEVANT FACTS

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The following facts are taken from the Complaint. (ECF No. 1.) In August 2008,

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Timothy and Adrian A. Goering (“Borrowers”) obtained a loan (“Loan”) in the amount of

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$226,395.00 evidenced by a note and secured by a deed of trust (“DOT”) on property

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located in Desert Canyon (“the Property”). Plaintiff subsequently acquired the Loan.

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On August 9, 2012, Desert Canyon recorded a notice of default and election to sell

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to satisfy the delinquent assessment lien. On January 7, 2013, Desert Canyon recorded a

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notice of trustee’s sale, which listed the amount due to the HOA as $4,063.84. Plaintiff’s

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predecessor attempted to remit payment to Desert Canyon to satisfy the super-priority

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amount owed to the HOA. However, Desert Canyon foreclosed on the Property on March

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12, 2013. A trustee’s deed upon sale in favor of SFR was recorded on March 14, 2013.

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SFR paid $10,000.
Plaintiff asserts three claims against the HOA—quiet title/declaratory relief, breach

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of NRS § 116.1113, and wrongful foreclosure.

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III.

LEGAL STANDARD

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A court may dismiss a plaintiff’s complaint for “failure to state a claim upon which

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relief can be granted.” Fed. R. Civ. P. 12(b)(6). A properly pleaded complaint must provide

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“a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.

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R. Civ. P. 8(a)(2); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). While Rule 8

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does not require detailed factual allegations, it demands more than “labels and

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conclusions” or a “formulaic recitation of the elements of a cause of action.” Ashcroft v.

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Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555). “Factual allegations

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must be enough to rise above the speculative level.” Twombly, 550 U.S. at 555. Thus, to

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survive a motion to dismiss, a complaint must contain sufficient factual matter to “state a

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claim to relief that is plausible on its face.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550

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U.S. at 570).

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In Iqbal, the Supreme Court clarified the two-step approach district courts are to

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apply when considering motions to dismiss. First, a district court must accept as true all
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well-pleaded factual allegations in the complaint; however, legal conclusions are not

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entitled to the assumption of truth. Id. at 678. Mere recitals of the elements of a cause of

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action, supported only by conclusory statements, do not suffice. Id. at 678. Second, a

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district court must consider whether the factual allegations in the complaint allege a

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plausible claim for relief. Id. at 679. A claim is facially plausible when the plaintiff’s

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complaint alleges facts that allow a court to draw a reasonable inference that the

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defendant is liable for the alleged misconduct. Id. at 678. Where the complaint does not

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permit the court to infer more than the mere possibility of misconduct, the complaint has

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“alleged—but it has not show[n]—that the pleader is entitled to relief.” Id. at 679 (alteration

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in original) (internal quotation marks omitted). When the claims in a complaint have not

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crossed the line from conceivable to plausible, the complaint must be dismissed. See

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Twombly, 550 U.S. at 570.

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IV.

DISCUSSION

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Desert Canyon argues that Plaintiff’s claims are time-barred or, in the alternative,

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subject to dismissal under Rule 12(b)(6). (ECF No. 8 at 3-10.) The Court agrees that two

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of Plaintiff’s claims—breach of NRS § 116.1113 and wrongful foreclosure—are time-

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barred. The Court finds that Plaintiff states a claim for quiet title and declaratory relief.

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A.

Statute of Limitations

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Desert Canyon argues that Plaintiff’s claims accrued at the time of the foreclosure

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sale. (Id. at 3.) Plaintiff counters that it only realized its injury when the Nevada Supreme

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Court decided SFR Investments Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408 (Nev. 2014),

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clarifying that the foreclosure sale on a homeowner’s association lien extinguishes a first

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deed of trust. (ECF No. 17 at 5.) However, this Court has held that a cause of action

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accrues at the time of the foreclosure sale in homeowner’s association foreclosure cases

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such as this. See Goldsmith Enterprises, LLC v. U.S. Bank, N.A., No. 2:15-cv-00991-

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MMD-PAL, 2017 WL 4172266, at *3 (D. Nev. Sept. 20, 2017). Here, Plaintiff’s causes of

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action accrued when the foreclosure sale took place, on March 12, 2013. (ECF No. 1 at

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6.)
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Claims based on duties imposed by statute must be brought within three years.

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NRS § 11.190(3)(a). Accordingly, Plaintiff’s second claim—for breach of the duty of good

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faith imposed by NRS § 116.1113—is subject to this statute of limitations. See Nationstar

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Mortg., LLC v. Amber Hills Homeowners Ass’n, No. 2:15-cv-01433-APG-CWH, 2016 WL

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1298108, at *5 (D. Nev. March 31, 2016). Plaintiff’s third claim—for wrongful foreclosure—

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is also subject to this statute of limitations because the claim challenges Desert Canyon’s

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authority to conduct the foreclosure under NRS chapter 116. Id. Plaintiff argues that the

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six-year statute of limitations for actions based upon contract (NRS § 11.190(1)(b)) applies

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because its wrongful foreclosure claim arises from violation of contractual obligations

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imposed by the CC&Rs. (ECF No. 17 at 6.) However, Desert Canyon correctly notes that

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Plaintiff was not a party to these purported contracts. (ECF No. 18 at 4.) Moreover, the

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complaint alleges that NRS chapter 116 requires Desert Canyon to comply with its

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obligations under the CC&Rs. (ECF No. 1 at 12.) Plaintiff’s wrongful foreclosure claim is

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based on duties imposed by statute and thus barred by the three-year statute of limitations.

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To the extent that Desert Canyon argues that Plaintiff’s quiet title claim is also time-

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barred (see ECF No. 8 at 4), the Court is unpersuaded. The statute of limitations for quiet

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title claims in Nevada is five years. Scott v. Mortg. Elec. Registration Sys., Inc., 605 F.

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App’x 598, 600 (9th Cir. 2015) (citing NRS §§ 11.070, 11.080). Accordingly, the court finds

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that Plaintiff’s quiet title claim is not time-barred.

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B.

Quiet Title/Declaratory Relief

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Desert Canyon argues that Plaintiff fails to state a claim because Plaintiff failed to

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name the legal owner of the Property (purportedly a necessary and indispensable party)

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as a defendant and failed to make several critical allegations, including that Plaintiff paid

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all debts owed on the property and that Plaintiff foreclosed on the prior homeowner. (ECF

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No. 8 at 7-8.)

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Desert Canyon’s contention that Plaintiff failed to name the legal owner of the

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Property does not appear to be correct. Plaintiff alleges that SFR purchased the Property

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at the foreclosure sale. (ECF No. 1 at 6.) Presumably, SFR has remained the legal owner
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of the Property, and Desert Canyon has offered no evidence to the contrary. (See ECF

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No. 8 at 7-8.)

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Furthermore, Plaintiff need not allege that it paid all debts on the Property or that it

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foreclosed on the Property to state a claim. In Nevada, a quiet title action “may be brought

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by any person against another who claims an estate or interest in real property, adverse

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to the person bringing the action, for the purpose of determining such adverse claim.” NRS

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§ 40.010. “A plea to quiet title does not require any particular elements, but ‘each party

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must plead and prove his or her own claim to the property in question’ and a ‘plaintiff’s

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right to relief therefore depends on superiority of title.’” Chapman v. Deutsche Bank Nat’l

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Tr. Co., 302 P.3d 1103, 1106 (Nev. 2013) (quoting Yokeno v. Mafnas, 973 F.2d 803, 808

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(9th Cir. 1992)).

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Desert Canyon has not provided any authority in support of its argument that

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Plaintiff’s security interest in the Property does not qualify as “an interest in real property”

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for the purposes of NRS § 40.010. A number of courts in Nevada, including the Nevada

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Supreme Court, have entertained quiet title actions substantially similar to this one. See,

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e.g., Shadow Wood Homeowners Ass’n, Inc. v. N.Y. Cmty. Bancorp., Inc., 366 P.3d 1105

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(Nev. 2016); Bank of N.Y. Mellon v. Legends Maint. Corp., No. 2:16-cv-02567-MMD-GWF,

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2017 WL 3813904, at *2-3 (D. Nev. Aug. 31, 2017).

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Desert Canyon further insists Plaintiff’s declaratory relief claim duplicates its quiet

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title claim and fails because it does not arise from a justiciable controversy. (ECF No. 8 at

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8-9.) Under Nevada law, a party asserting a declaratory relief claim must show, inter alia,

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that a justiciable controversy exists between two parties with adverse interests. County of

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Clark, ex. Rel., Univ. Med. Ctr. v. Upchurch, 961 P.2d 754, 757 (Nev. 1998). That two

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claims seek similar relief is not a basis to dismiss either claim, and a justiciable controversy

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exists between Plaintiff and the HOA because Plaintiff contends the foreclosure sale is

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either void or did not extinguish its DOT.

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V.

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.

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It is therefore ordered that the motion to dismiss (ECF No. 8) is granted in part and

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denied in part. It is granted with respect to the second and third claims for relief. It is denied

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with respect to the first claim for relief.

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DATED THIS 31st day of October 2017.

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MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

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