LVDG Series 125 established under LVDG, LLC, a Nevada series limited liability company v. Welles et al
Filing
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ORDER granting 4 Motion to Dismiss, granting 3 Motion to Expunge Lis Pendens. Plaintiff's 1 -Exhibit A complaint is dismissed in its entirety. Defendant Wells Fargo shall have 10 days to submit an appropriate proposed order expunging lis pendens. Signed by Judge Larry R. Hicks on 11/22/2013. (Copies have been distributed pursuant to the NEF - KR)
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UNITED STATES DISTRICT COURT
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DISTRICT OF NEVADA
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LVDG SERIES 125,
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Plaintiff,
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v.
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HAROLD M. WELLES; et al.,
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Defendants.
3:13-CV-00503-LRH-WGC
ORDER
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Before the court are defendant Wells Fargo Bank, N.A.’s (“Wells Fargo”) motion to
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expunge lis pendens (Doc. #31) and motion to dismiss (Doc. #4). Plaintiff LVDG Series 125
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(“LVDG”) filed an opposition (Doc. #21) to which Wells Fargo replied (Doc. #25).
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I.
Facts and Procedural History
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In May 1999, defendants Harold M. Welles and Valerie M. Welles (“the Welles”)
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purchased real property in Reno, Nevada. On November 6, 2006, the Welles executed a recorded
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deed of trust in favor of defendant Wells Fargo.
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Several years later, on January 12, 2010, a notice of delinquent assessment for homeowner’s
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association (“HOA”) dues was recorded on the property. On June 29, 2010, a notice of default and
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election to sell under the HOA lien was recorded. Eventually, on March 13, 2013, a notice of HOA
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sale was recorded. At the HOA sale, plaintiff LVDG purchased the property for $5,300.
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Refers to the court’s docket number.
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Subsequently, on August 23, 2013, LVDG filed a complaint against defendants to quiet title
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alleging that its purchase of the property from the HOA sale extinguished all the other liens,
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including Wells Fargo’s first deed of trust. Doc. #1, Exhibit A. Thereafter, Wells Fargo filed the
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present motion to dismiss. Doc. #4.
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II.
Legal Standard
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Wells Fargo seeks dismissal pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure
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to state a claim upon which relief can be granted. To survive a motion to dismiss for failure to state
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a claim, a complaint must satisfy the Federal Rule of Civil Procedure 8(a)(2) notice pleading
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standard. See Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1103 (9th Cir. 2008). That
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is, a complaint must contain “a short and plain statement of the claim showing that the pleader is
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entitled to relief.” Fed. R. Civ. P. 8(a)(2). The Rule 8(a)(2) pleading standard does not require
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detailed factual allegations; however, a pleading that offers “‘labels and conclusions’ or ‘a
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formulaic recitation of the elements of a cause of action’” will not suffice. Ashcroft v. Iqbal, 129 S.
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Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
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Furthermore, Rule 8(a)(2) requires a complaint to “contain sufficient factual matter,
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accepted as true, to ‘state a claim to relief that is plausible on its face.’” Id. at 1949 (quoting
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Twombly, 550 U.S. at 570). A claim has facial plausibility when the pleaded factual content allows
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the court to draw the reasonable inference, based on the court’s judicial experience and common
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sense, that the defendant is liable for the misconduct alleged. See id. at 1949-50. “The plausibility
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standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a
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defendant has acted unlawfully. Where a complaint pleads facts that are merely consistent with a
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defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to
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relief.” Id. at 1949 (internal quotation marks and citation omitted).
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In reviewing a motion to dismiss, the court accepts the facts alleged in the complaint as
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true. Id. However, “bare assertions . . . amount[ing] to nothing more than a formulaic recitation of
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the elements of a . . . claim . . . are not entitled to an assumption of truth.” Moss v. U.S. Secret
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Serv., 572 F.3d 962, 969 (9th Cir. 2009) (quoting Iqbal, 129 S. Ct. at 1951) (brackets in original)
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(internal quotation marks omitted). The court discounts these allegations because “they do nothing
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more than state a legal conclusion—even if that conclusion is cast in the form of a factual
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allegation.” Id. (citing Iqbal, 129 S. Ct. at 1951.) “In sum, for a complaint to survive a motion to
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dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that content, must be
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plausibly suggestive of a claim entitling the plaintiff to relief.” Id.
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III.
Discussion
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In its complaint, LVDG alleges that pursuant to NRS 116.3116(2)(b), Wells Fargo’s first
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deed of trust was extinguished by the HOA’s foreclosure and sale of the underlying property. See
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Doc. #1, Exhibit A.
The court has reviewed the documents and pleadings on file in this matter and finds that
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LVDG misconstrues the language of Section 3116(2)(b). NRS 116.3116 relates to liens by
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homeowner’s associations and reads as follows:
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2. A lien under this section is prior to all other liens and encumbrances on a unit except:
(b) A first security interest on the unit recorded before the date on which the assessment
sought to be enforced became delinquent or, in a cooperative, the first security interest
encumbering only the unit’s owner’s interest and perfected before the date on which the
assessment sought to be enforced became delinquent . . .
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By its very language, Section 3116(2)(b) specifically states that an HOA lien is prior to all other
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liens and encumbrances on the property except a first security interest recorded before the date the
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HOA assessment became delinquent.
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Here, the first deed of trust was recorded in November 2006, several years before the
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delinquent HOA assessment was recorded on the subject property in January 2010. Thus, Wells
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Fargo’s lien meets the statutory requirements of NRS 116.3116(2)(b) and survived the HOA sale.
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As such, LVDG took title to the property subject to the first deed of trust.
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As an alternative argument, LVDG contends that Section 3116(2)(c) carves out a limited
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exception to Section 3116(2)(b) that is applicable in this matter. NRS 116.3116(2)(c) provides in
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pertinent part that:
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The lien is also prior to all security interests described in paragraph (b) to the extent of any
charges incurred by the association . . .would have become due in the absence of acceleration
during the 9 months immediately preceding institution of an action to enforce the lien . . .
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LVDG contends that this section provides that the foreclosure of a delinquent HOA
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assessment lien extinguishes the first security interest on the property if it relates to charges
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incurred during the nine (9) months prior to the foreclosure. However, once again LVDG
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misconstrues the statute. The plain language of NRS 116.2116(2)(c) simply creates a limited super
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priority lien for nine (9) months of HOA assessments leading up to the foreclosure of the first
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mortgage, but it does not eliminate the first security interest. Contrary to LVDG’s assertion, the
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statutory scheme does not require an HOA to wait until the holder of the deed of trust forecloses on
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its interest. Rather, as in this case, the HOA may initiate a non-judicial foreclosure to recover
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delinquent assessments and the purchaser at the HOA sale takes the property subject to the first
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security interest. Therefore, based on the express language of the statutes, the court finds that
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LVDG’s claim for quiet title fails as a matter of law. Accordingly, the court shall grant Wells
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Fargo’s motion to dismiss.
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IT IS THEREFORE ORDERED that defendant’s motion to dismiss (Doc. #4) is
GRANTED. Plaintiff’s complaint (Doc. #1, Exhibit A) is DISMISSED in its entirety.
IT IS FURTHER ORDERED that defendant’s motion to expunge lis pendens (Doc. #3) is
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GRANTED. Defendant Wells Fargo Bank, N.A. shall have ten (10) days after entry of this order to
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prepare an appropriate proposed order expunging lis pendens and submit the same for approval and
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signature.
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IT IS SO ORDERED.
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DATED this 22nd day of November, 2013.
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LARRY R. HICKS
UNITED STATES DISTRICT JUDGE
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