Bank of America, N.A., v. Yorkshire Manor I Homeowners Association et al

Filing 74

ORDER that Strada's motion for summary judgment ECF No. 49 and Yorkshire's motion for summary judgment ECF No. 54 are denied; BANA's motion for summary judgment ECF No. 55 is granted; the Court grants summary judg ment in favor of BANA on its quiet title and declaratory relief claims and on Strada's counterclaim to quiet title; BANA is directed to file a status report to indicate whether it intends to pursue the remaining wrongful foreclosure claim. Signed by Judge Miranda M. Du on 1/14/2019. (Copies have been distributed pursuant to the NEF - 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. 3:16-cv-00475-MMD-WGC
Plaintiff,

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ORDER

v.
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YORKSHIRE MANOR I HOMEOWNERS
ASSOCIATION, et al.,
Defendants.

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I.

SUMMARY

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

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association lien. Before the Court are Defendant Strada Properties, LLC’s (“Strada”)

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motion for summary judgment (ECF No. 49), Defendant Yorkshire Manor I Homeowners

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Association’s (“Yorkshire” or (“HOA”)) motion for summary judgment (ECF No. 54), and

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Plaintiff Bank of America, N.A.’s (“BANA”) motion for summary judgment (ECF No. 55).

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The Court has reviewed the relevant joinders, responses, and replies (ECF Nos. 52, 56,

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57, 59, 64, 65, 69, 70). For the following reasons, the Court denies Strada and Yorkshire’s

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motions for summary judgment and grants BANA’s motion for summary judgment.

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II.

BACKGROUND

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The following facts are undisputed unless otherwise indicated.

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A.

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This action concerns the parties’ rights to real property located at 1617 London

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Circle, Sparks, NV 89431 (“Property”), within the HOA. (ECF No. 55 at 4.) Dinan J. Perry

Property, Note, and Deed of Trust

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(“Borrower”) executed a promissory note (“Note”) in the amount of $124,500 in favor of

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Countrywide Home Loans, Inc. (“Lender”) as the original lender on July 10, 2007. (ECF

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No. 49 at 2; ECF No. 55 at 4.) Repayment of the Note was secured by a deed of trust

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(“DOT”) on the Property that was recorded on July 16, 2007. (ECF No. 49 at 2; ECF No.

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55 at 4.) Under the DOT, Mortgage Electronic Registration Systems, Inc. (“MERS”) was

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the original beneficiary of record, solely as a nominee for Lender and Lender’s successors

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and assigns. (ECF No. 49 at 2-3; ECF No. 55 at 4.)

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MERS assigned the DOT to BAC Home Loans Servicing, LP fka Countrywide

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Home Loans Servicing LP (“BAC”) on August 25, 2008. (ECF No. 49 at 3.) The assignment

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was recorded on August 28, 2009. (Id.; ECF No. 55 at 4.)

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B.

BAC Foreclosure Sale

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BAC foreclosed on the DOT, and Federal National Mortgage Association (“Fannie

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Mae”) purchased the Property at the foreclosure sale on March 26, 2010, for $134,660.03.

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(ECF No. 49 at 3; ECF No. 55 at 4.) A foreclosure deed was recorded on April 1, 2010.

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(ECF No. 49 at 3; ECF No. 55 at 4.) BAC assigned the DOT to Fannie Mae on March 30,

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2010, and the assignment was recorded on April 1, 2010. (ECF No. 49 at 3; ECF No. 55

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at 5.)

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C.

HOA Foreclosure Sale

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The HOA recorded a notice of delinquent assessment lien in the amount of $917

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on September 28, 2009. (ECF No. 49 at 3.) The HOA recorded a second notice of

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delinquent assessment lien in the amount of $4,976.50 on October 27, 2010. (ECF No. 49

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at 3; ECF No. 55 at 5.) The HOA recorded a notice of default and election to sell on March

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25, 2011. (ECF No. 49 at 3; ECF No. 55 at 5.) The HOA recorded a notice of foreclosure

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sale on July 21, 2011, scheduling the sale for August 10, 2011, and indicating that the

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amount owed to the HOA was $6,992.50. (ECF No. 55 at 5.) The HOA sold the Property

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to Strada for $21,100 on August 10, 2011 (“HOA Sale”). (See ECF No. 49 at 4; ECF No.

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55 at 5.)

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D.

Interpleader Action

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The HOA filed a state court interpleader action (“Interpleader Action”) naming

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Fannie Mae as a defendant on October 19, 2011. (ECF No. 49 at 4.) Fannie Mae—BANA’s

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predecessor in interest—failed to appear and default judgment was entered in favor of the

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HOA. (Id.)
Rescission of BAC’s Foreclosure

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E.

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Fannie Mae rescinded BAC’s foreclosure of the DOT on February 12, 2014,

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transferring ownership of the Property back to the Borrower. (ECF No. 49 at 4; ECF No.

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55 at 5.)

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F.

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The DOT was assigned to BANA on April 7, 2014. (ECF No. 55 at 5.) BANA

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assigned the DOT to U.S. Bank Trust, N.A. as Trustee for LSF9 Master Participation Trust

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(“U.S. Bank.”) on March 26, 2015, and the assignment was recorded on April 8, 2015.

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(ECF No. 49 at 4; ECF No. 55 at 5.) U.S. Bank assigned the DOT back to BANA, and the

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assignment was recorded on June 9, 2016. (ECF No. 55 at 5.)

Subsequent Assignment of the Deed of Trust

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G.

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BANA filed the Complaint in this action on August 10, 2016, asserting the following

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claims for relief: (1) declaratory judgment against all Defendants that the DOT survived

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the HOA Sale due to the Federal Foreclosure Bar; (2) declaratory judgment against all

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Defendants that

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commercially unreasonable or otherwise failed to comply with the good faith requirement

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of NRS § 116.3116; (3) quiet title against Strada; (4) wrongful foreclosure against the HOA;

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and (5) injunctive relief against Strada. (ECF No. 1.)

the DOT survived the HOA Sale because the HOA Sale was

Strada asserted a counterclaim for quiet title. (ECF No. 11 at 6-7.)

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Complaint and Counterclaims

III.

LEGAL STANDARD

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

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

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F.3d 1468, 1471 (9th Cir. 1994). Summary judgment is appropriate when the pleadings,
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the discovery and disclosure materials on file, and any affidavits “show that there is no

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). “The mere

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existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient.”

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Anderson, 477 U.S. at 252.

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IV.

STRADA’S MOTION FOR SUMMARY JUDGMENT (ECF NO. 49)

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A.

Claim Preclusion

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Strada first argues that the Interpleader Action precludes BANA’s claims under the

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doctrine of claim preclusion. (ECF No. 49 at 5.) BANA responds, among other things, that

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Strada cannot assert claim preclusion because Strada was not involved in the Interpleader

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Action. (ECF No. 52 at 5.) The Court agrees with BANA.

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The Court applies the claim preclusion rules of Nevada because Strada seeks to

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give preclusive effect to a Nevada state court judgment. Robi v. Five Platters, Inc., 838

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F.2d 318, 322 (9th Cir. 1988) (“[The Full Faith and Credit Act] requires federal courts to

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apply the res judicata rules of a particular state to judgments issued by courts of that

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state.”). In Nevada, there are three elements that must be shown to assert claim

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preclusion: “(1) the parties or their privies are the same, (2) the final judgment is valid, and

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(3) the subsequent action is based on the same claims or any part of them that were or

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could have been brought in the first case.” Five Star Capital Corp. v. Ruby, 194 P.3d 709,

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713 (Nev. 2008), holding modified by Weddell v. Sharp, 350 P.3d 80 (Nev. 2015)

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(modifying only the privity requirement for nonmutual claim preclusion). “[B]oth the party

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against whom claim preclusion is asserted and the party asserting claim preclusion must

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have been ‘involved’ in the prior case or in privity with a party involved in the prior case.”

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See Dockins v. Am. Family Fin. Servs., Inc., 606 F. App’x 877, 879 (9th Cir. 2015) (citing

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Ruby, 194 P.3d at 714). Strada—the party asserting claim preclusion—does not argue

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that it was involved in the Interpleader Action or in privity with a party involved in the

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Interpleader Action. (See ECF No. 56 at 2-3.) Accordingly, Strada cannot assert claim

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preclusion.

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B.

Issue Preclusion

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Strada further argues that BANA’s claims are barred by issue preclusion. (ECF No.

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56 at 3; see also ECF No. 49 at 7.) The Court rejects Strada’s argument because it was

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raised for the first time in Strada’s reply. (Compare ECF No. 49 at 7 with ECF No. 56 at

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3.) “[I]t is improper for a party to raise a new argument in a reply brief.” United States v.
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Boyce, 148 F. Supp. 2d 1069, 1085 (S.D. Cal.2001) aff’d, 36 F. App’x 612 (9th Cir. 2002)

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(citing United States v. Bohn, 956 F.2d 208, 209 (9th Cir. 1992)). The Court also rejects

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this argument on its merits.

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“The doctrine of issue preclusion prevents relitigation of all ‘issues of fact or law

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that were actually litigated and necessarily decided’ in a prior proceeding.” Robi, 838 F.2d

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at 322 (quoting Segal v. Am. Tel. & Tel. Co., 606 F.2d 842, 845 (9th Cir. 1979)). Under

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Nevada law,1 issue preclusion applies if the following factors are satisfied: “‘(1) the issue

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decided in the prior litigation must be identical to the issue presented in the current action;

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(2) the initial ruling must have been on the merits and have become final; . . . (3) the party

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against whom the judgment is asserted must have been a party or in privity with a party

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to the prior litigation’; and (4) the issue was actually and necessarily litigated.” Alcantara

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ex rel. Alcantara v. Wal-Mart Stores, Inc., 321 P.3d 912, 916 (Nev. 2014) (alteration in

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original) (quoting Ruby, 194 P.3d at 710). The proponent of issue preclusion bears the

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burden of demonstrating that the doctrine applies. See, e.g., Bower v. Harrah’s Laughlin,

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Inc., 215 P.3d 709, 718 (Nev. 2009); Marine Midland Bank v. Monroe, 756 P.2d 1193,

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1194 (Nev. 1988).

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Issue preclusion is unavailable here because no issue was “actually and

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necessarily litigated” in the Interpleader Action. “When a default judgment is entered

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based on failure to answer, issue preclusion is not available because the issues raised in

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the initial action were never actually litigated.” Andrew v. Century Sur. Co., No. 2:12-CV-

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00978-APG, 2013 WL 5592889, at *7 (D. Nev. Oct. 10, 2013), on reconsideration in part,

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No. 2:12-CV-00978-APG, 2014 WL 1764740 (D. Nev. Apr. 29, 2014) (citing In re

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Sandoval, 232 P.3d 422, 425 (Nev. 2010)).

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Court must apply Nevada’s collateral estoppel rules in this case (not federal
common law) because Strada seeks to give preclusive effect to a prior Nevada state court
judgment (not a federal court judgment). See In re Cantrell, 329 F.3d 1119, 1123 (9th Cir.
2003) (citing 28 U.S.C. § 1738).
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C.

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Strada further argues that BANA’s claims are barred by Nev. R. Civ. P. 13(a) as

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compulsory counterclaims that should have been raised in the Interpleader Action. (ECF

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No. 49 at 7.) BANA argues, among other things, that Rule 13(a) does not apply here

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because Strada was not a party to the Interpleader Action. (ECF No. 52 at 7.) The Court

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agrees with BANA. Rule 13(a) requires a “pleading” to “state as a counterclaim any claim

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which at the time of serving the pleading the pleader has against any opposing party.”

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Rule 13(a) (emphasis added). Strada was not an opposing party in the interpleader action

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because Strada was not a party at all. Accordingly, Rule 13(a) did not require Fannie Mae

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Compulsory Counterclaims

to raise counterclaims against Strada.

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D.

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Strada further argues that the HOA foreclosure sale extinguished the DOT because

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Defendants complied with all requirements of NRS § 116.3116 et seq. (ECF No. 49 at 9.)

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However, the Court finds that the federal foreclosure bar preserved the DOT. See infra

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Section VI.
Accordingly, the Court denies Strada’s motion for summary judgment.

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NRS § 116.3116

V.

YORKSHIRE’S MOTION FOR SUMMARY JUDGMENT (ECF NO. 54)

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A.

Claim Preclusion

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Yorkshire first argues that BANA’s claims against the HOA are barred by claim

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preclusion. (ECF No. 54 at 5.) BANA counters that claim preclusion does not apply

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because this action is based on a different set of facts and circumstances than the

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Interpleader Action. (ECF No. 57 at 4.) The Court agrees with BANA.

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“The test for determining whether the claims, or any part of them, are barred in a

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subsequent action is if they are ‘based on the same set of facts and circumstances as the

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[initial action].’” Mendenhall v. Tassinari, 403 P.3d 364, 370 (Nev. 2017) (alteration in

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original). Here, they are not. The factual basis of the Interpleader Action was the existence

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of excess funds from the HOA foreclosure sale. The factual basis of this action is the effect

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of the HOA foreclosure sale on the DOT. While both actions relate to the foreclosure sale,
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the Interpleader Action arose from the funds generated by the foreclosure sale, and this

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action arises from the foreclosure sale itself. Accordingly, the Court finds that claim

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preclusion does not bar BANA’s claim.

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B.

Issue Preclusion

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Yorkshire further argues that BANA’s claims are barred by issue preclusion. (ECF

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No. 54 at 6.) Issue preclusion is unavailable here as discussed supra Section IV(B).

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Yorkshire’s citation to dated Nevada Supreme Court precedent is unpersuasive. (See ECF

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No. 70 at 9 (citing MacDonald v. Krause, 362 P.2d 724, 725 (Nev. 1961)).) Moreover,

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Yorkshire’s characterization of recent, controlling Nevada Supreme Court precedent—In

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re Sandoval—as limited to the facts of that case (see id. at 8) is incorrect—the Nevada

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Supreme Court expressly held that “[w]hen a default judgment is entered where an answer

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has not been filed, the issue presented was not actually and necessarily litigated, and

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issue preclusion does not apply in such circumstances.” 232 P.3d at 425.

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C.

Compulsory Counterclaims

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Yorkshire further argues that BANA’s claims are barred as compulsory

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counterclaims that should have been raised in the Interpleader Action under Nev. R. Civ.

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P. 13(a). (ECF No. 54 at 7.) BANA argues that Rule 13(a) does not apply because Fannie

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Mae did not file a responsive pleading in the Interpleader Action. (ECF No. 57 at 6.) The

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Court agrees with BANA. See Luis v. Metro. Life Ins. Co., 142 F. Supp. 3d 873, 878 (N.D.

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Cal. 2015) (quoting MRW, Inc. v. Big–O Tires, LLC, No. CIV. S–08–1732 LKK/DAD, 2008

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WL 5113782, at *10 (E.D. Cal. Nov. 26, 2008)) (“[T]he bar to future suit does not arise if

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the defendant in the prior action did not file a responsive pleading.”).

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Yorkshire argues that Rule 13(a) bars compulsory counterclaims regardless of

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whether the defendant filed a pleading in the first action, but two of the cases Yorkshire

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cites are distinguishable because they did not involve a default judgment. See Mendenhall

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v. Tassinari, 403 P.3d 364 (Nev. 2017); Exec. Mgmt., Ltd. v. Ticor Title Ins. Co., 963 P.2d

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465 (Nev. 1998). The remaining case Yorkshire cites in support of its position is also

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distinguishable because it did not expressly address the issue presented here. In Geraldo
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v. Richland Holdings, Inc., No. 2:17-CV-15 JCM (PAL), 2017 WL 3174918, at *4 (D. Nev.

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July 26, 2017), aff’d, 716 F. App’x 728 (9th Cir. 2018), the court found that the plaintiffs’

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claims were barred as compulsory counterclaims that should have been raised in a prior

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state action in which default judgment was entered against them. Id. at *4. However, the

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court did not expressly consider the argument presented here—that Rule 13(a) only

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applies to pleadings and has no force in actions where no pleading was filed. The plain

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language of Rule 13(a) limits its applicability to proceedings in which a pleading was

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actually filed by the party that supposedly waived a compulsory counterclaim. See Rule

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13(a) (requiring a “pleading” to state any compulsory counterclaim).

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Yorkshire argues that Big-O Tires is distinguishable because the defendant in that

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action was never “required” to file an answer or responsive pleading—a settlement through

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stipulated judgment was entered before the filing of a responsive pleading or answer. (ECF

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No. 70 at 11.) But this difference is immaterial. The fact remains that the defendant in that

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case never actually filed a pleading, and that was the basis of the court’s decision.
Accordingly, the Court denies Yorkshire’s motion for summary judgment.

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VI.

BANA’S MOTION FOR SUMMARY JUDGMENT (ECF NO. 55)

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BANA argues, among other things, that the HOA foreclosure sale did not extinguish

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the DOT because of the Federal Foreclosure Bar. (ECF No. 55 at 7.) The Court agrees.2

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The Federal Foreclosure Bar prohibits nonconsensual foreclosure of Federal

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Housing Finance Agency (“FHFA”) assets. Berezovsky v. Moniz, 869 F.3d 923, 925 (9th

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Cir. 2017). As a result, the Federal Foreclosure Bar generally protects Fannie Mae’s

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property interests from extinguishment if Fannie Mae was under FHFA’s conservatorship,

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possessed an enforceable property interest at the time of the HOA Sale, and did not

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consent to such extinguishment. See id. at 933.

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Here, it is undisputed that Fannie Mae was placed into conservatorship under FHFA

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in September 2008 and did not consent to the HOA Sale extinguishing or foreclosing

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2Accordingly,

the Court declines to address BANA’s other arguments.
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Fannie Mae's interest in the Property. (See ECF No. 55 (requesting judicial notice of these

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facts regarding Fannie Mae); ECF No. 65 (failing to oppose the request).) Fannie Mae

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acquired an enforceable property interest in the Property on March 30, 2010, and

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continued to hold that interest at the time of the HOA Sale on August 10, 2011. (ECF No.

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55 at 9.)

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The Court finds that the Federal Foreclosure Bar protected Fannie Mae's DOT from

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extinguishment given that Fannie Mae held an enforceable interest in the Property at the

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time of the HOA Sale, was under the conservatorship of FHFA at the time of the HOA

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Sale, and did not consent to the HOA Sale extinguishing or foreclosing Fannie Mae's

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interest in the Property. Accordingly, the HOA Sale did not extinguish Fannie Mae's

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interest in the Property, and the DOT therefore continues to encumber the Property.

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Strada argues that Fannie Mae’s rescission of the BAC foreclosure eliminated its

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DOT because the notice of rescission reversed: (1) the August 28, 2009 assignment from

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MERS to BAC; (2) the March 26, 2010 BAC foreclosure and Fannie Mae’s purchase; and

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(3) the April 1, 2010 BAC recorded assignment to Fannie Mae. (ECF No. 59 at 2-3.) The

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HOA makes similar arguments. (ECF No. 65 at 7.) BANA argues that the rescission had

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no effect on the DOT—it only affected ownership of the Property. (ECF No. 69 at 7-8.) The

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Court agrees with BANA. Fannie Mae only rescinded the BAC foreclosure—the effect of

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which was to transfer ownership of the Property from the Borrower to Fannie Mae. The

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BAC foreclosure did not change the record-beneficiary of the first DOT. Thus, rescinding

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the BAC foreclosure does not change the various assignments of the DOT.

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Accordingly, the Court grants BANA’s motion for summary judgment.

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VII.

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 Strada’s motion for summary judgment (ECF No. 49) is
denied.
It is further ordered that Yorkshire’s motion for summary judgment (ECF No. 54) is
denied.

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It is further ordered that BANA’s motion for summary judgment (ECF No. 55) is

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granted. The Court grants summary judgment in favor of BANA on its quiet title and

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declaratory relief claims and on Strada’s counterclaim to quiet title. The Court declares

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that the HOA Sale did not extinguish Fannie Mae’s interest in the Property that was

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subsequently assigned to BANA.

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BANA is directed to file a status report to indicate whether it intends to pursue the
remaining wrongful foreclosure claim.
DATED THIS 14th day of January 2019.

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MIRANDA M. DU
UNITED STATES DISTRICT JUDGE

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