Bank of New York Mellon v. Green Valley South Owners Association No. 1 et al

Filing 60

ORDER Granting Plaintiff/Counterdefendant BNY Mellon's 46 Motion for Summary Judgment. Defendant/Counterclaimant SFR Investments Pool 1, LLC's 45 Motion for Summary Judgment is Denied. The Clerk of the Court shall enter Judgment in favor of Plaintiff/Counterdefendant BNY Mellon and against Defendant/Counterclaimant SFR Investments Pool 1, LLC. Signed by Judge Kent J. Dawson on 9/13/2019. (Copies have been distributed pursuant to the NEF - SLD)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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THE BANK OF NEW YORK MELLON, as
Trustee,

ORDER
Plaintiff,

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Case No. 2:17-cv-2024-KJD-EJY

v.
GREEN VALLEY SOUTH OWNERS
ASSOCIATION NO. 1, et al.,
Defendants.
Pending before the Court are cross-motions for summary judgment filed by plaintiff Bank

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of New York Mellon (#46) and defendant SFR Investments Pool 1, LLC (#48). The parties have

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filed their respective responses and replies.

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BNY Mellon seeks declaratory relief that its deed of trust on a property located at 2856

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Belleza Lane in Henderson, Nevada, survived Green Valley South Owners Association’s

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nonjudicial foreclosure. The bank claims that its predecessor-in-interest tendered the

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superpriority portion of Green Valley’s lien before foreclosure, which cured the superpriority

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lien and voided the foreclosure as to the bank’s deed of trust. Alternatively, BNY Mellon argues

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the foreclosure was unconstitutional or that equity requires the Court to set aside Green Valley’s

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sale. SFR Investments purchased the property at Green Valley’s trustee’s sale and

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counterclaimed for the opposite declaration, namely that Green Valley’s foreclosure and trustee’s

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sale extinguished BNY Mellon’s deed of trust and that SFR Investments purchased the property

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free and clear of the bank’s interest. Both BNY Mellon and SFR Investments move for summary

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judgment on their respective quiet title claims. Because BNY Mellon has demonstrated that its

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predecessor-in-interest validly tendered the superpriority priority portion of Green Valley’s lien

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before foreclosure, Green Valley’s foreclosure did not extinguish the bank’s deed of trust. As a

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result, SFR Investments purchased the property subject to BNY Mellon’s deed of trust.

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I.

Background

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The parties agree on the basic facts. In 2006, cross-defendant Dennis Carroll purchased a

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home located at 2856 Belleza Lane, in Henderson, Nevada. Countrywide Home Loans financed

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the purchase and secured its interest by recording a deed of trust against the property. Deed of

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Trust, ECF No. 47 Ex. 2. The deed of trust listed Dennis Carroll as borrower, Countrywide as

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lender, and Mortgage Electronic Services (“MERS”) as beneficiary under the deed of trust. Id.

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MERS later assigned the deed of trust to plaintiff BNY Mellon. See Assignment, ECF No. 47

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Ex. 3.

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The Belleza Lane property is part of the Green Valley South Owners Association and is

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subject to the association’s Covenants, Conditions, and Restrictions (“CC&Rs”). The CC&Rs

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required Carroll to pay monthly assessments for shared maintenance and general community

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upkeep. Carroll eventually fell behind on his assessments, which caused the association to

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initiate foreclosure proceedings. On September 2, 2011, Green Valley’s agent Nevada

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Association Services recorded a Notice of Delinquent Assessment Lien against the property.

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ECF No. 47 Ex. 4. The notice identified the total past-due amount as $818.70, which included

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late fees, collection costs, and interest. Id. Neither Carroll nor BNY Mellon satisfied the

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outstanding balance. So, on November 2, 2011, Nevada Association Services recorded a Notice

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of Default and Election to Sell. ECF No. 47, Ex. 5. That notice identified the past-due amount as

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$1,813.50 and warned that failure to pay the delinquency could result in foreclosure. Id.

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After receiving the Notice of Default and Election to Sell, BNY Mellon’s predecessor-in-

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interest, Bank of America, retained law firm Miles, Bauer, Bergstrom & Winters to cure the

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superpriority lien. On January 24, 2012, Miles Bauer requested a payoff ledger from Nevada

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Association Services. Its letter acknowledged that a portion of Green Valley’s lien was senior to

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the existing deed of trust and offered to satisfy that amount “whatever it [was].” ECF No. 46 Ex.

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9-2. Nevada Association Services refused to respond to Miles Bauer’s letter and did not provide

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a payoff ledger. Having not received a payoff ledger, Bank of America calculated nine months of

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assessments by referencing a statement of account from a different property in the Green Valley

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South Owners Association. Bank of America determined that nine months of assessments totaled

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$73.50, and on February 16, 2012, Miles Bauer sent Nevada Association Services a check for

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that amount. The association rejected the check.

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After rejecting Miles Bauer’s check, Nevada Association Services proceeded with its

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foreclosure. On April 25, 2012, the association recorded a Notice of Foreclosure Sale. ECF No.

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47 Ex. 6. Four months later, SFR Investments purchased the property at Nevada Association

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Services’ trustee’s sale. SFR Investments recorded a foreclosure deed referencing the trustee’s

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sale on September 12, 2012. ECF No. 47 Ex. 7.

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On July 25, 2017, BNY Mellon brought this suit against Green Valley South Owners

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Association and SFR Investments. Its sole cause of action sought declaratory relief and quiet

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title. Compl. 6, ECF No. 1. BNY Mellon has since voluntarily dismissed Green Valley. ECF No.

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26. SFR Investments answered the bank’s complaint and filed its own quiet title cross-claim and

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counterclaim against former owner Dennis Carroll and BNY Mellon. Answer, ECF No. 33.

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Discovery has closed, and BNY Mellon and SFR Investments both move for summary judgment.

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II.

Legal Standard

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The purpose of summary judgment is to avoid unnecessary trials by disposing of

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factually unsupported claims or defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986);

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Nw. Motorcycle Ass’n v. U.S. Dept. of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994). It is available

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only where the absence of material fact allows the Court to rule as a matter of law. Fed. R. Civ.

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P. 56(a); Celotex, 477 U.S. at 322. Rule 56 outlines a burden shifting approach to summary

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judgment. First, the moving party must demonstrate the absence of a genuine issue of material

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fact. The burden then shifts to the nonmoving party to produce specific evidence of a genuine

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factual dispute for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587

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(1986). A genuine issue of fact exists where the evidence could allow “a reasonable jury [to]

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return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248

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(1986). The Court views the evidence and draws all available inferences in the light most

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favorable to the nonmoving party. Kaiser Cement Corp. v. Fischbach & Moore, Inc., 793 F.2d

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1100, 1103 (9th Cir. 1986). Yet, to survive summary judgment, the nonmoving party must show

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more than “some metaphysical doubt as to the material facts.” Matsushita, 475 U.S. at 586.

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Where parties have filed competing motions for summary judgment, the Court must

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review each motion on its own merits. Fair Housing Council of Riverside Cty., Inc. v. Riverside

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Two, 249 F.3d 1132, 1136 (9th Cir. 2001). In reviewing each motion, the Court views the

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evidence and makes all available inference in favor non-moving party. See Kaiser Cement Corp.,

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793 F.2d at 1103. At bottom, a party does not prevail on summary judgment solely because the

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other party did not prevail. See Riverside Two, 249 F.3d at 1136.

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III.

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BNY Mellon argues that Miles Bauer’s $73.50 offer of tender prior to Green Valley’s

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foreclosure preserved its deed of trust from extinguishment. If not, the bank argues that Green

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Valley’s foreclosure was void because the association foreclosed under an unconstitutional

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version of NRS § 116.3116(2). SFR Investments counters that BNY Mellon’s claims are

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untimely, that Miles Bauer’s tender was invalid for various reasons, and that equity favors SFR

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Investments because it was an innocent third-party purchaser. Because the Court finds BNY

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Mellon’s tender argument to be dispositive, it will not reach the bank’s alternative arguments.
A. BNY Mellon’s Claims are Timely

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Analysis

SFR Investments argues that BNY Mellon’s quiet title claim is untimely because the

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statute of limitations for this type of quiet title and declaratory relief claim is three years, yet the

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bank did not file its complaint until nearly five years after the foreclosure. This is the second

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time that SFR Investments has made this argument. In October of 2017, SFR Investments moved

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to dismiss BNY Mellon’s quiet title claim because it was time barred. Mot. to Dismiss 4–5, ECF

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No. 15. The Court denied the motion, finding that the bank’s quiet title action was subject to a

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five-year statute of limitations. Order 5, ECF No. 30. SFR Investments now asks the Court to

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reconsider.

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The applicable statute of limitations for quiet title claims following a homeowner

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association foreclosure is up for debate in this district.1 The majority of Nevada’s federal district

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Courts in this district are split between a four-year and five-year limitations period in these quiet title
cases. Compare Bank of New York Mellon v. Khosh, No. 2:17-cv-0957-MMD-PAL, 2019 WL 2305146 (D. Nev.
May 30, 2019) (applying five-year statute of limitations to quiet title claim under NRS § 11.070); Newlands Asset

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courts apply a five-year limitations period under NRS §§ 11.070 & 11.080. Sections 11.070 and

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11.080 govern actions “founded upon the title to real property” and actions “for the recovery of

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real property” respectively. The remaining federal district courts apply a four-year limitations

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period under NRS § 11.220’s catch-all provision.

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SFR Investments rejects both the five- and four-year limitations periods in favor of a

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three-year period under NRS § 11.190. Section 11.190 governs “action[s] upon a liability created

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by statute.” SFR Investments argues that the three-year period is appropriate because BNY

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Mellon’s claim is not actually a claim for quiet title; it is a wrongful foreclosure claim

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masquerading as a claim for quiet title. Admittedly, the bank does not claim that it has held title

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to this property, which begs the question: Can a bank quiet title in a property to which it never

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held title? SFR Investments says no. SFR Investments alleges that the bank’s quiet title claim

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must be a challenge to the foreclosure itself because the bank never held title. And because a

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nonjudicial foreclosure is a “liability created by statute,” NRS § 11.190 applies and imposes a

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three-year statute of limitations.

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SFR Investments is correct that if the bank’s claim was indeed a claim for wrongful

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foreclosure, it could be subject to a three-year statute of limitations.2 However, BNY Mellon’s

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claim is not for wrongful foreclosure. A wrongful foreclosure claim challenges the authority

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behind the foreclosure and not the foreclosure act itself. McKnight Family LLP v. Adept Mgmt.

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Servs., 310 P.3d 555, 616 (Nev. 2013). At no point does BNY Mellon challenge Green Valley’s

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authority to foreclose on the Belleza Lane property. In fact, the bank’s correspondence to Nevada

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Association Services recognized that Nevada law allowed the association to foreclose on its

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superpriority lien. See Letter to NAS 2, ECF No. 46 Ex. 9-2. Because BNY Mellon does not

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Holding Tr. v. SFR Invs. Pool 1, LLC, No 3:17-cv-0370-LRH-WGC, 2017 WL 5559956 (D. Nev. Nov. 17, 2017)
(same); Nationstar Mortg., LLC v. Falls at Hidden Canyon Homeowners Ass’n, No. 2:15-cv-1287-RCJ-NJK (D.
Nev. June 14, 2017) (same); HSBC Bank USA, N.A. v. Green Valley Pecos Homeowners Ass’n, Inc., No. 2:16-cv0242-JCM-GWF, 2017 WL 937723 (D. Nev. Mar. 9, 2017) (same) with U.S. Bank v. SFR Invs. Pool 1, LLC, --F.Supp.3d ---, 2019 WL 1383265 (D. Nev. Mar. 27, 2019) (applying four-year catchall provision under NRS
§ 11.220); Nationstar Mortg., LLC v. Safari Homeowners Ass’n, No. 2:16-cv-0542-RFB-CWH, 2019 WL 121960
(D. Nev. Jan. 6, 2019) (same); Bank of America, N.A. v. Country Garden Owners Ass’n, No. 2:17-cv-1850-APGCWH, 2018 WL 1336721 (D. Nev. Mar. 14, 2018)

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Wrongful foreclosure carries either a three-year or four-year limitations period depending upon whether
the claim arises under statute or tort. See Bank of New York v. S. Highlands Cmty. Ass’n, 329 F.Supp3d 1208, 1219
(D. Nev. 2018).

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challenge the authority behind this foreclosure, it has not alleged a wrongful foreclosure claim.

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Therefore, its claim is not subject to § 11.190(3)(a)’s three-year statute of limitations.

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That leaves the four-year limitations period under NRS § 11.220’s catch-all provision or

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the five-year limitations period under NRS §§ 11.070, 11.080. Courts in this district are split on

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the issue. The disagreement boils down to whether these quiet title claims are “founded upon the

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title to real property” under NRS § 11.070 or an attempt to recover property under NRS

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§ 11.080. If so, the five-year limitations period applies. If §§ 11.070 & 11.080 do not apply, the

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Court is left with NRS § 11.220’s four-year catch-all period for actions not covered by the other

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limitations provisions. Both the Ninth Circuit and Nevada Supreme Court have suggested that a

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five-year statute of limitations applies. See Weeping Hollow Ave. Tr. v. Spencer, 831 F.3d 1110,

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1114 (9th Cir. 2016) (citing NRS § 11.070) (“[u]nder Nevada law, [homeowner] could have

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brought claims challenging the HOA foreclosure sale within five years of the sale”); Las Vegas

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Dev. Grp., LLC v. Blaha, 416 P.3d 233, 237 (Nev. 2018) (a claim “seeking to quiet title . . . is

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governed by NRS 11.080, which provides for a five-year statute of limitations”).

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The Court finds again that NRS §§ 11.070’s five-year limitations period governs quiet

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title actions like this one where a lender seeks a declaration that its deed of trust survived a

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homeowner association’s nonjudicial foreclosure. Section 11.070 states:

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No cause of action or defense to an action, founded upon the title to real property
. . . shall be effectual, unless it appears that the person prosecuting the action . . .
was seized or possessed of the premises in question within 5 years.

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Thus, any action founded upon the title of real property must be filed within five years of the

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time their interest was seized or possessed. That includes lenders whose deeds of trust were

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threatened by foreclosure. See Weeping Hollow, 831 F.3d 1110, 1114 (9th Cir. 2016).

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SFR Investments counters that § 11.070 does not apply because it is standing statute and

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not a limitations statute. Def.’s Mot. Summ. J. 9, ECF No. 48. The Court disagrees. Although the

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statute governs who may bring a claim founded upon title to real property, it explicitly states that

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the claim must be brought within five years of that interest being seized or possessed. Thus, the

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plain language of the statute imposes a five-year limitations period. If that were not enough,

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Chapter 11 of the Nevada Revised Statutes—where § 11.070 appears—is titled “Limitations of

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Actions.” Section § 11.070, then, is not exclusively a limitation on standing. BNY Mellon

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brought its claim within five years of Green Valley’s foreclosure. Therefore, BNY Mellon’s

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claim is timely.

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B. BNY Mellon Has Standing to Bring its Claims
Next, SFR Investments claims that BNY Mellon lacks standing to bring a quiet title claim

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because it never held title to the property and because the bank has not proved that both the

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promissory note and deed of trust were validly transferred to the bank. SFR Investments is

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correct that in a foreclosure action, the burden rests with the bank to demonstrate that both the

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note and deed of trust were properly transferred to it before it exercised its foreclosure right. See

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Res.’ Grp., LLC v. Nev. Ass’n Svcs., 437 P.3d 154, 157 (Nev. 2019). “To foreclose, one must be

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able to enforce both the promissory note and the deed of trust.” Edelstein v. Bank of New York

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Mellon, 286 P.3d 249, 258 (Nev. 2012) (emphasis added). But this is not a foreclosure action. It

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is a declaratory relief action seeking to preserve the bank’s interest in the property. BNY Mellon

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need not prove at the outset that it can enforce both the note and deed of trust. Regardless, SFR

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Investments has not provided any evidence that BNY Mellon does not hold both the deed of trust

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and promissory note. Meanwhile, BNY Mellon has provided evidence of the assignment and a

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copy of the note. Therefore, BNY Mellon has standing to bring its claims.

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C. BNY Mellon’s Predecessor-in-Interest Submitted Valid Tender

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Having found that BNY Mellon has standing and that its claims are timely, the Court

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proceeds to the merits of its quiet title claim. The bank’s motion boils down to the validity of

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Miles Bauer’s tender to Nevada Association Services before the foreclosure. SFR Investments

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challenges the admissibility of BNY Mellon’s evidence of tender and the validity of the tender

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itself. Neither argument is persuasive.

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First, SFR Investments contends that the Court should not accept the declaration of

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Douglas Miles of Miles Bauer because BNY Mellon did not disclose Miles as a witness. Because

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the declaration is inadmissible, SFR argues, the rest of the evidence supporting tender is

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unauthenticated and also inadmissible. As a starting point, the moving party at summary

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judgment need not submit evidence that is admissible at the time of summary judgment to

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prevail. Rather, Rule 56 requires the party to present evidence in an admissible form at trial. Fed.

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R. Civ. P. 56(c)(4); Romero v. Nev. Dep’t of Corr., 673 Fed.Appx. 641, 644 (9th Cir. 2016)

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(unpublished). Here, BNY Mellon’s evidence satisfies Rule 56 because it would be admissible at

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trial. Although BNY Mellon did not disclose Douglas Miles as a witness by name, it did disclose

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a corporate designee from Miles Bauer as a witness under Rule 30(b)(6), but SFR Investments

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did not depose that witness. At trial, the bank could call Douglass Miles to testify as to his

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knowledge of the documents supporting tender, and those documents would be admissible under

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the business records exception to the hearsay rule. Therefore, the Court will consider BNY

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Mellon’s evidence of tender.
Next, SFR Investments argues that Miles Bauer’s tender was not valid because it was

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impermissibly conditional. The Nevada Supreme has confirmed that a party’s valid tender before

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foreclosure cures an association’s superpriority lien and voids the foreclosure as to the tendering

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party’s deed of trust. Bank of America, N.A. v. SFR Invs. Pool 1, LLC, 427 P.3d 113, 121 (Nev.

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2018) (“Diamond Spur”). Tender is “valid” if it is payment in full and unconditional, or with

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conditions that the tendering party has a right to request. Id. at 117–118. Diamond Spur

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presented facts nearly identical to these. There, Bank of America calculated nine months of

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assessments and tendered a check for that amount before foreclosure. The bank’s letter to the

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association accompanying its tender included certain conditions, including a “paid-in-full”

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condition, whereby the association’s acceptance of tender would satisfy all of the bank’s

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financial obligations to the association. Id. at 118. Like here, the association rejected the check

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and foreclosed. The association argued that the bank’s tender was incomplete because it did not

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include payment for nuisance and abatement fees and that the tender was impermissibly

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conditional due to the paid-in-full language in the tender letter. Id. at 117–18.

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The Nevada Supreme Court disagreed. It found that the bank’s tender was both “in-full”

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and not impermissibly conditional. Payment in full, according to NRS § 116.3115, includes nine

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months of unpaid assessments and nuisance and abatement fees, if such fees exist. Id. at 117.

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Because there was no evidence that Bank of America owed nuisance and abatement fees, its

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tender of nine months’ unpaid assessments constituted payment in full. Id. Likewise the tender

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was not impermissibly conditional because Bank of America had a right to insist upon the

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conditions it included in its tender. By tendering payment prior to the foreclosure, the bank

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voided the association’s foreclosure of the superpriority lien. The association, therefore, could

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not convey the property free from Bank of America’s deed of trust, and any subsequent

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purchaser took its interest subject to the bank’s. Id. at 121.

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The facts here are nearly identical to Diamond Spur. Miles Bauer calculated the

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superpriority lien amount, sent a check to cure Green Valley’s lien, yet Green Valley rejected the

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check and foreclosed anyway. Despite those similarities, SFR Investments argues that this case is

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different because Miles Bauer’s tender here required the association to waive its right to nuisance

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and abatement fees in violation of NRS § 116. But that did not happen here. There is no evidence

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that BNY Mellon owed nuisance and abatement fees. Miles Bauer’s tender could not require the

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association to waive nuisance and abatement fees that did not exist.

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Further, the conditions that Miles Bauer did include in its tender were conditions that the

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bank was allowed to insist upon. The only acceptable conditions in a valid tender are “receipt of

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full payment or a surrender of the obligation.” Id. at 118 citing Heath v. L.E. Schwartz & Sons,

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Inc., 416 S.E.2d 113, 114–15 (Ga. App. 1992). Here, the only condition Miles Bauer included in

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its tender was that acceptance would result in the bank’s financial obligations to the association

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being “paid in full.” Tender Letter 2, ECF No. 46 Ex. 9-4. That condition falls within the “receipt

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of full payment” condition that the bank was allowed to insist upon. See Diamond Spur, 427

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P.3d at 118.

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At bottom, Miles Bauer’s near identical tender was good enough to preserve a lender’s

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deed of trust in Diamond Spur, and it is good enough to preserve BNY Mellon’s deed of trust

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here. The evidence supporting tender is admissible, and Miles Bauer did not include conditions

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that it was not entitled to include. Therefore, there is no genuine question of fact that BNY

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Mellon’s tender cured Green Valley’s superpriority lien.

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D. Equity Does not Require Extinguishment of BNY Mellon’s Deed of Trust
Finally, SFR Investments argues that the equitable principles of waiver, estoppel, and

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unclean hands require the Court to find that Green Valley’s foreclosure extinguished BNY

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Mellon’s deed of trust. SFR also argues that its status as an innocent third-party purchaser

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protects its interest in the property above the bank’s. Not so. SFR Investments’ bona fide

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purchaser status became irrelevant once the bank proved tender. See Diamond Spur, 427 P.3d at

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121.

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Equity does not compel a different result. BNY Mellon has not waived its right to protect

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its deed of trust, is not estopped from asserting that right, nor does it have unclean hands because

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it allowed Green Valley’s foreclosure to proceed without interceding to halt the foreclosure. That

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argument misses the fact that BNY Mellon cured the superpriority balance of Green Valley’s lien

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before the foreclosure. The bank was under no obligation to intercede or halt the foreclosure

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once it protected its own interest. After all, Green Valley still owned a valid lien for the

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remaining sub-priority fees and was within its right to foreclose on that lien without affecting

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BNY Mellon’s first deed of trust. BNY Mellon, having protected its deed of trust, had no interest

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in halting the subsequent foreclosure because its interest was safe. Therefore, the bank’s failure

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to attend the foreclosure sale and its decision to wait to bring this action do not show that it has

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waived its rights, that it is estopped from preserving its deed of trust, or that it has unclean hands.

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In sum, there is no genuine issue of material fact that BNY Mellon’s predecessor-in-

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interest validly tendered the superpriority lien before Green Valley’s foreclosure. Likewise,

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equity does not require the Court to extinguish BNY Mellon’s interest in the property. Therefore,

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BNY Mellon’s deed of trust survived Green Valley’s nonjudicial foreclosure, and SFR

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Investments took its interest in the property subject to BNY Mellon’s.

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IV.

Conclusion

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Accordingly, IT IS HEREBY ORDERED that plaintiff/counterdefendant BNY Mellon’s

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motion for summary judgment (#46) is GRANTED. The Court declares that BNY Mellon’s

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deed of trust in the property located at 2856 Belleza Lane in Henderson, Nevada survived Green

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Valley South Owners Association’s nonjudicial foreclosure. Any interest SFR Investments Pool

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1, LLC took in the Belleza Lane property it took subject to BNY Mellon’s deed of trust.

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IT IS FURTHER ORDERED that defendant/counterclaimant SFR Investments Pool 1,
LLC’s motion for summary judgment (#45, corrected image at #48) is DENIED.
The Clerk of the Court shall ENTER JUDGMENT in favor of

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plaintiff/counterdefendant BNY Mellon and against defendant/counterclaimant SFR Investments

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Pool 1, LLC.

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Dated this 13th day of September, 2019.

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_____________________________
Kent J. Dawson
United States District Judge

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