US Bank National Association, as Trustee for the Specialty Underwriting and Residential Finance Trust Mortgage Loan Asset-Backed Certificates Series 2006-BC4 v. Woodland Village et al

Filing 32

ORDER granting without prejudice ECF No. 19 Motion to Dismiss for Lack of Jurisdiction. Plaintiff's quiet title claims against Westland and Thunder survive. All other claims are dismissed. Signed by Judge Robert C. Jones on 12/6/2016. (Copies have been distributed pursuant to the NEF - KR)

1
2
3
UNITED STATES DISTRICT COURT

4

DISTRICT OF NEVADA

5
6
7

U.S. BANK NATIONAL ASSOCIATION,

8

Plaintiff,

9
10

3:16-cv-00501-RCJ-WGC

vs.
ORDER

WOODLAND VILLAGE et al.,

11

Defendants.

12
This case arises from a residential foreclosure by the Woodland Village Homeowners

13
14

Association (“Woodland Village” or “HOA”) for failure to pay HOA fees. Pending before the

15

Court is Defendant Woodland Village’s Motion to Dismiss. (ECF No. 19.) For the reasons given

16

herein, the Court grants the Motion.

17
18

I.

FACTS AND PROCEDURAL BACKGROUND
In 2006, non-party homeowners obtained a $212,672 mortgage loan to purchase property

19

located at 17655 Little Peak Court, Cold Springs, Nevada 89508 (the “Property”). Plaintiff U.S.

20

Bank (“Plaintiff”) acquired the note and Deed of Trust (“DOT”) by Corporate Assignment of

21

Deed of Trust recorded July 24, 2009. (Mot. Dismiss 2, ECF No. 19.)

22

On February 17, 2010, as a result of the homeowners’ failure to pay HOA fees, the HOA

23

recorded a lien for delinquent assessment. (Compl. ¶ 16, ECF No. 1.) The HOA later foreclosed,

24

and on February 10, 2011, the HOA acquired the Property with a credit bid of $5,562.25, which

1 of 10

1

the HOA claims to be the total sum of “unpaid assessments and permitted costs, fees and

2

expenses incident to the enforcement of its lien . . . .” (Mot. Dismiss 2, ECF No. 19.) The deed of

3

sale was recorded on February 10, 2011. Subsequently, the HOA transferred its interest in the

4

Property to Defendant Westland Real Estate Development and Investments (“Westland”) by way

5

of quitclaim deed recorded April 30, 2013. (Compl. ¶ 27.) Westland then transferred its interest

6

in the Property to Defendant Thunder Properties Corp. (“Thunder”) by way of quitclaim deed

7

recorded August 26, 2013. (Id. at ¶ 28.) The chain of title indicates that Thunder is the current

8

owner of the Property.
On August 25, 2016, Plaintiff brought this action for quiet title and declaratory relief,

9
10

violation of NRS 116.1113, wrongful foreclosure, and injunctive relief. Woodland Village now

11

moves the Court to dismiss the claims asserted against it.

12

II.

MOTION TO DISMISS STANDARD

13

Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the

14

claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of

15

what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47

16

(1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action

17

that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule

18

12(b)(6) tests the complaint’s sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n, 720

19

F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for

20

failure to state a claim, dismissal is appropriate only when the complaint does not give the

21

defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell

22

Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is

23

sufficient to state a claim, the court will take all material allegations as true and construe them in

24

the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th

2 of 10

1

Cir. 1986). The court, however, is not required to accept as true allegations that are merely

2

conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden

3

State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

4

A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a

5

plaintiff must plead facts pertaining to his own case making a violation “plausible,” not just

6

“possible.” Ashcroft v. Iqbal, 556 U.S. 662, 677–79 (2009) (citing Twombly, 550 U.S. at 556)

7

(“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to

8

draw the reasonable inference that the defendant is liable for the misconduct alleged.”). That is,

9

under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a

10

cognizable cause of action (Conley review), but also must allege the facts of his case so that the

11

court can determine whether the plaintiff has any basis for relief under the cause of action he has

12

specified or implied, assuming the facts are as he alleges (Twombly-Iqbal review).

13

“Generally, a district court may not consider any material beyond the pleadings in ruling

14

on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the

15

complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner

16

& Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents

17

whose contents are alleged in a complaint and whose authenticity no party questions, but which

18

are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6)

19

motion to dismiss” without converting the motion to dismiss into a motion for summary

20

judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule

21

of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay

22

Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court

23

considers materials outside of the pleadings, the motion to dismiss is converted into a motion for

24

3 of 10

1

summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.

2

2001).

3

III.

4
5

ANALYSIS
a. Statute of Limitations
The Court generally agrees with the HOA that Plaintiff’s claims are time-barred. The

6

HOA argues that a five-year statute of limitations applies to Plaintiff’s quiet title claim, and that

7

a three-year statute of limitations applies to claims for violation of NRS 116.1113 and wrongful

8

foreclosure. The HOA additionally argues that the limitations period began running from the date

9

of foreclosure. Plaintiff counters that its claims are subject to the six-year statute of limitations of

10

NRS 11.190(1)(b) for actions based “upon a contract, obligation, or liability founded upon an

11

instrument in writing,” because its claims are aimed at “enforc[ing] the promises made in the

12

HOA’s CC&Rs.” (Resp. 6, ECF No. 27.) Plaintiff also contends that, even if the three and five-

13

year statutes are applicable, the limitations period has not yet begun to run, because it has not yet

14

been “legally established that Plaintiff’s mortgage did not survive foreclosure,” and therefore

15

Plaintiff has not yet suffered any injury.

16

i. The applicable limitations periods for claims arising from the
foreclosure sale began running at the time of foreclosure.

17
18

“In determining whether a statute of limitations has run against an action, the time must

19

be computed from the day the cause of action accrued. A cause of action ‘accrues’ when a suit

20

may be maintained thereon.” Clark v. Robison, 944 P.2d 788, 789 (Nev. 1997) (internal citation

21

omitted). “If the facts giving rise to the cause of action are matters of public record then ‘[t]he

22

public record gave notice sufficient to start the statute of limitations running.’” Job’s Peak Ranch

23

Cmty. Ass’n, Inc. v. Douglas Cty., No. 55572, 2015 WL 5056232, at *3 (Nev. Aug. 25, 2015)

24

(quoting Cumming v. San Bernardino Redev. Agency, 101 Cal. App. 4th 1229, 125 Cal. Rptr. 2d

4 of 10

1

42, 46 (Ct. App. 2002)); see also Allen v. Webb, 485 P.2d 677, 684 (Nev. 1971) (Gunderson, J.,

2

concurring) (concluding that, where a written document regarding real property was not properly

3

recorded, there was not proper notice of the conveyance of that property so as to trigger the

4

statute of limitations period on a quiet title action).

5

Plaintiff’s position that the statute of limitations period has not yet begun to run is

6

contrary to Nevada law, and contrary to its own filing of this action. In Nevada, a cause of action

7

accrues when a suit may be maintained thereon. Indeed, by filing this action, Plaintiff has

8

asserted that its claim may now be maintained, essentially an admission that the limitations

9

period began to run at some point prior to the filing of the Complaint. If Plaintiff believed that its

10

action could not be maintained until after it had been “legally established that [its] mortgage did

11

not survive foreclosure,” it would not have brought this action when it did.

12

In reality, Plaintiff’s interest in the Property was called into question at the time of the

13

foreclosure sale due to NRS 116.3116(2), which gives priority to that portion of an HOA lien

14

consisting solely of unpaid HOA assessments accrued during the “nine months immediately

15

preceding institution of an action to enforce the lien.” It is clear that Plaintiff could have brought

16

its action to quiet title against the HOA at any time following the HOA’s foreclosure sale, in

17

order to obtain a declaration that the sale had not extinguished its interest in the Property.

18

Similarly, Plaintiff could have asserted it claims for violation of NRS 116. 1113 and wrongful

19

foreclosure as soon as it obtained facts to support a contention that the HOA’s sale of the

20

Property was improper. There is no indication in the Complaint that such facts were obtained any

21

later than at the time of foreclosure. Therefore, the Court finds that the statutes of limitations

22

applicable to Plaintiff’s claims against the HOA began to run, at the latest, on the date of

23

recordation of the foreclosure deed—February 10, 2011.

24

///

5 of 10

ii. The quiet title claim is subject to a five-year statute of limitations.

1
2

In Nevada, the statute of limitations for quiet title claims is five years. See Nev. Rev. Stat.

3

§§ 11.070, 11.080. Plaintiff brought this action more than five years after the foreclosure deed

4

was recorded. Therefore, Plaintiff’s quiet title claim against the HOA is time-barred, and is

5

dismissed.

6

Following Silverton v. Dep’t of Treasury and its progeny, the Court will also dismiss the

7

quiet title claim against Phil Frink & Associates, Inc. (“Frink”), but declines to dismiss the quiet

8

title claim against Westland and Thunder. 644 F.2d 1341, 1345 (9th Cir. 1981) (“A [d]istrict

9

[c]ourt may properly on its own motion dismiss an action as to defendants who have not moved

10

to dismiss where such defendants are in a position similar to that of moving defendants.”).

11

Westland and Thunder acquired their interest in the Property within the five-year statute of

12

limitations period.

13

iii. The claim for violation of NRS 116.1113 is subject to a three-year
statute of limitations.

14
15

Plaintiff also alleges violations of NRS 116.1113, which states that “[e]very contract or

16

duty governed by this chapter imposes an obligation of good faith in its performance or

17

enforcement.” This claim is based “upon a liability created by statute,” Nev. Rev. Stat. §

18

11.190(3)(a); thus, the three-year statute of limitations applies. See, e.g., Bank of N.Y. Mellon

19

Trust Co., N.A. v. Jentz, No. 2:15-cv-01167-RCJ-CWH, 2016 WL 4487841, at *3 (D. Nev. Aug.

20

24, 2016); Nationstar Mortg. LLC v. Amber Hills II Homeowners Ass’n, No. 2:15-cv-01433-

21

APG-CWH, 2016 WL 1298108, at *5 (D. Nev. Mar. 31, 2016); HSBC Bank USA v. Park Ave.

22

Homeowners’ Ass’n, No. 2:16-cv-460-JCM-NJK, 2016 WL 5842845, at *3 (D. Nev. Oct. 3,

23

2016). Plaintiff filed this action more than three years after the recordation of the foreclosure

24

6 of 10

1

deed. Therefore, Plaintiff’s claim for violation of NRS 116.1113 is also time-barred, and is

2

dismissed against both the HOA and Frink. See Silverton, 644 F.2d at 1345.

3

iv. The wrongful foreclosure claim may be subject to either a three-year
or six-year statute of limitations.

4
5

“A wrongful foreclosure claim challenges the authority behind the foreclosure, not the

6

foreclosure act itself.” McKnight Family, L.L.P. v. Adept Mgmt., 310 P.3d 555, 559 (Nev. 2013).

7

The Nevada Supreme Court has opined that “deciding a wrongful foreclosure claim against a

8

homeowners’ association involves interpreting covenants, conditions, or restrictions applicable

9

to residential property.” Id. This is so because a wrongful foreclosure claim may lie where the

10

HOA’s foreclosure violated either (1) the statute giving the HOA authority to foreclose (i.e.,

11

NRS Chapter 116), or (2) the CC&Rs applicable to the foreclosed property. See Long v. Towne,

12

639 P.2d 528, 530 (Nev. 1982) (finding no impropriety where “the lien foreclosure sale was

13

conducted under authority of the CC&Rs and in compliance with NRS 107.080”). The

14

procedural requirements of NRS Chapter 116 may not be waived in the CC&Rs “except as

15

expressly provided in Chapter 116.” SFR Investments Pool 1 v. U.S. Bank, 334 P.3d 408, 419

16

(Nev. 2014), reh’g denied (Oct. 16, 2014) (internal brackets and quotation marks omitted) (citing

17

NRS 116.1104). Therefore, the CC&Rs may not ease the procedural requirements of Chapter

18

116, nor alter the statute’s substantive effect. However, an HOA could theoretically comply with

19

Chapter 116 and nonetheless fail to comply with supplementary or heightened procedural

20

requirements contained in the CC&Rs. In such a case, no wrongful foreclosure claim would arise

21

from statute, but may arise from the CC&Rs.

22

A wrongful foreclosure action based on an alleged failure to comply with Chapter 116 is

23

subject to the three-year statute of limitations for claims based “upon a liability created by

24

statute.” Nev. Rev. Stat. § 11.190(3)(a); see also Amber Hills II Homeowners Ass’n, 2016 WL

7 of 10

1

1298108, at *5; Park Ave. Homeowners’ Ass’n, 2016 WL 5842845, at *3. Therefore, to the

2

extent Plaintiff alleged wrongful foreclosure based on the requirements of Chapter 116, this

3

claim is dismissed because it was not brought within three years of the recordation of the

4

foreclosure deed. This dismissal is applicable both to the HOA and Frink. See Silverton, 644

5

F.2d at 1345.

6

However, Plaintiff also asserts wrongful foreclosure on the basis that the HOA violated

7

the terms of the CC&Rs. This claim is not based on an obligation created by a statute; rather, it

8

arises from a “contract, obligation, or liability founded upon an instrument in writing.” NRS §

9

11.190(1)(b). Therefore, to the extent Plaintiff’s wrongful foreclosure claim is based on a

10
11
12

violation of the CC&Rs, a six-year statute of limitations applies, and the claim is not time-barred.
b. Wrongful Foreclosure Arising from Violation of CC&Rs
Notwithstanding the timeliness of the claim, however, the Court finds that Plaintiff has

13

failed to plead wrongful foreclosure with plausibility. The Complaint fails to identify any

14

provision of the CC&Rs with which the HOA failed to comply in foreclosing on the Property.

15

Plaintiff points only to a “security interest provision,” which purports to subordinate the HOA’s

16

lien to any first recorded security interest. (Compl. ¶ 53, ECF No. 1.) Such “mortgage

17

protection” provisions are legally ineffectual—the priority position of an HOA’s super-priority

18

lien cannot be waived by agreement. See SFR Investments Pool 1, 334 P.3d at 419 (2014).

19

Moreover, the plain language of the provision does not impose any obligations on the HOA—

20

such as pre-foreclosure notice requirements or mandatory waiting periods—or limit the HOA’s

21

right to foreclose on the full value of its lien.

22
23

A wrongful foreclosure action is a challenge to the authority to foreclose. Plaintiff has not
identified any obligation under the CC&Rs that the HOA failed to satisfy in foreclosing on the

24

8 of 10

1

Property. Accordingly, Plaintiff has failed to state of plausible claim of wrongful foreclosure on

2

the basis of the CC&Rs.
In addition, Plaintiff has failed to exhaust administrative remedies under NRS 38.310.

3
4

See McKnight, 310 P.3d at 559 (“Wrongful foreclosure is a civil action subject to NRS 38.310’s

5

requirements . . . .”). Plaintiff alleges it submitted a demand for mediation to the Nevada Real

6

Estate Division (“NRED”), but NRED failed to schedule a mediation in the time period required

7

under NRS 38.330(1). Thus, Plaintiff argues it exhausted its administrative remedies prior to

8

filing this action “or was excused from doing so.” (Resp. 13, ECF No. 27.) Plaintiff fails to cite

9

any authority in support of its argument. Subsection (1) of NRS 38.330 states that “[u]nless

10

otherwise provided by an agreement of the parties, mediation must be completed within 60 days

11

after the filing of the written claim.” Nev. Rev. Stat. § 38.330(1). However, nothing in NRS

12

38.330 provides that NRED’s failure to appoint a mediator within sixty days constitutes

13

exhaustion. While Plaintiff has submitted a request for mediation, the parties have not

14

participated in mediation. Thus, Plaintiff has not exhausted its administrative remedies and must

15

mediate its wrongful foreclosure claim prior to initiating an action in court. See HSBC Bank

16

Nat’l Ass’n v. Stratford Homeowners Ass’n, No. 2:15-cv-01259-JAD-PAL, 2016 WL 3200106,

17

at *2–3 (D. Nev. June 7, 2016) (finding submission of mediation request alone insufficient to

18

exhaust under NRS 38.310); Bank of America, N.A., v. Ann Losee Homeowners Ass’n, 2:1-cv-

19

407-JCM-CWH, 2016 WL 6122933, at *2–3 (D. Nev. Oct. 18, 2016) (same).

20

///

21

///

22

///

23

///

24

///

9 of 10

CONCLUSION

1
2

IT IS HEREBY ORDERED that the Motion to Dismiss (ECF No. 19) is GRANTED

3

without prejudice. Plaintiff’s quiet title claims against Westland and Thunder survive; all other

4

claims are dismissed.

5

IT IS SO ORDERED.December 6, 2016.

6
7
8
9

_____________________________________
ROBERT C. JONES
United States District Judge

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24

10 of 10