Wells Fargo Bank, National Association as Trustee for Option One Mortgage Loan Trust 2007-5, Asset-Backed Certificates, Series 2007-5 v. Entrust Education Trust/Deuk Choi Trustee et al
Filing
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ORDER denying ECF No. 30 Entrust's Motion for Summary Judgment; granting ECF No. 31 Wells Fargo's Motion for Summary Judgment. Wells Fargo to file a notice of voluntary dismissal of any remaining claims by 8/22/2018. Signed by Judge Robert C. Jones on 7/23/2018. (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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WELLS FARGO BANK, NATIONAL
ASSOCIATION AS TRUSTEE FOR OPTION
ONE MORTGAGE LOAN TRUST 2007-5,
ASSET-BACKED CERTIFICATES, SERIES
2007-5,
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ORDER
Plaintiff,
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3:16-cv-00758-RCJ-VPC
vs.
ENTRUST EDUCATION TRUST/DEUK
CHOI TRUSTEE et al.,
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Defendants.
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This case arises from a residential foreclosure by the Meadowview Terrace Townhouse
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Association (“the HOA”) for failure to pay HOA assessments. Now pending before the Court are
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competing Motions for Summary Judgment. (ECF Nos. 30, 31.)
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I.
FACTS AND PROCEDURAL BACKGROUND
In February 1998, Deanna Milton purchased the subject property located at 2605 Starks
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Way in Reno, Nevada (“the Property”). On January 24, 2007, a deed of trust signed by Ms.
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Milton was recorded against the Property, securing a loan in the amount of $140,000, and
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identifying Option One Mortgage Corporation (“Option One”) as beneficiary (“the DOT”).
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(Deed of Trust, ECF No. 32-2.) On June 18, 2014, as a result of the homeowner’s failure to pay
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HOA fees, the HOA caused a lien for delinquent assessments to be recorded against the
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Property. Subsequently, a notice of default and election to sell (“NOD”) was recorded on July
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25, 2014, followed by a notice of foreclosure sale (“NOS”) on November 8, 2014. The NOS
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indicated the Property would be sold at public auction on December 17, 2014. (Notice of Sale,
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ECF No. 32-6.) Accordingly, a sale was conducted on that date, and Defendant Entrust
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Education Trust/Deuk Choi Trustee (“Entrust”) 1 purchased the Property for $51,100.
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(Foreclosure Deed, ECF No. 32-7.) Approximately two years later, in November 2016, Sand
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Canyon Corporation—successor entity to Option One—assigned the DOT to Plaintiff Wells
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Fargo. (Assignment, ECF No. 32-3.)
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On December 28, 2016, Wells Fargo filed this action, asserting claims against Entrust
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and the HOA for (1) quiet title and declaratory relief, (2) preliminary and permanent injunction,
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(3) unjust enrichment, (4) statutorily defective foreclosure, (5) negligence, and (6) negligence per
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se. The Complaint is aimed at establishing the continued validity of Wells Fargo’s DOT
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following the HOA’s foreclosure sale. On May 26, 2017, Entrust answered the Complaint and
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asserted a counterclaim for quiet title and declaratory judgment. Entrust also asserted cross-
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claims against the HOA for (1) unjust enrichment, (2) equitable mortgage, and (3) indemnity. On
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May 30, 2017, the HOA filed a third-party complaint against The Clarkson Law Group, P.C., its
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non-judicial foreclosure agent, but then voluntarily dismissed the complaint approximately four
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months later. (Notice of Voluntary Dismissal, ECF No. 27.)
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Now, Entrust moves for summary judgment on its quiet title counterclaim against Wells
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Fargo. (Def.’s Mot. Summ. J., ECF No. 30.) Wells Fargo also moves for summary judgment
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against Entrust. (Pl.’s Mot. Summ. J., ECF No. 31.) Wells Fargo argues that the Ninth Circuit’s
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ruling in Bourne Valley Court Tr. v. Wells Fargo Bank, NA, 832 F.3d 1154 (9th Cir. 2016), cert.
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1 In its summary judgment motion, Entrust noted that it has been incorrectly named in this
action, and that its proper name is Entrust Education Trust, Kwangsun Choe, Trustee.
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denied, 137 S. Ct. 2296, 198 L. Ed. 2d 726 (2017), entitles it to a declaration that the HOA’s
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foreclosure sale did not extinguish the DOT. If the Court grants this relief, then Wells Fargo
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asserts “the sole remaining claim in this case by Wells Fargo would [be] the claim for unjust
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enrichment,” and that it will “voluntarily dismiss that claim without prejudice.” (Pl.’s Mot.
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Summ. J. 7–8.)
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II.
LEGAL STANDARDS
A court must grant summary judgment when “the movant shows that there is no genuine
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dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
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Civ. P. 56(a). Material facts are those which may affect the outcome of the case. See Anderson
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v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if
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there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. See
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id. A principal purpose of summary judgment is “to isolate and dispose of factually unsupported
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claims.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986).
In determining summary judgment, a court uses a burden-shifting scheme. The moving
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party must first satisfy its initial burden. “When the party moving for summary judgment would
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bear the burden of proof at trial, it must come forward with evidence which would entitle it to a
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directed verdict if the evidence went uncontroverted at trial.” C.A.R. Transp. Brokerage Co. v.
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Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000) (citation and internal quotation marks
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omitted). In contrast, when the nonmoving party bears the burden of proving the claim or
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defense, the moving party can meet its burden in two ways: (1) by presenting evidence to negate
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an essential element of the nonmoving party’s case; or (2) by demonstrating that the nonmoving
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party failed to make a showing sufficient to establish an element essential to that party’s case on
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which that party will bear the burden of proof at trial. See Celotex Corp., 477 U.S. at 323–24.
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If the moving party fails to meet its initial burden, summary judgment must be denied and
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the court need not consider the nonmoving party’s evidence. See Adickes v. S.H. Kress & Co.,
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398 U.S. 144 (1970). If the moving party meets its initial burden, the burden then shifts to the
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opposing party to establish a genuine issue of material fact. See Matsushita Elec. Indus. Co. v.
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Zenith Radio Corp., 475 U.S. 574, 586 (1986). To establish the existence of a factual dispute,
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the opposing party need not establish a material issue of fact conclusively in its favor. It is
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sufficient that “the claimed factual dispute be shown to require a jury or judge to resolve the
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parties’ differing versions of the truth at trial.” T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors
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Ass’n, 809 F.2d 626, 631 (9th Cir. 1987). In other words, the nonmoving party cannot avoid
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summary judgment by relying solely on conclusory allegations unsupported by facts. See Taylor
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v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, the opposition must go beyond the
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assertions and allegations of the pleadings and set forth specific facts by producing competent
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evidence that shows a genuine issue for trial. See Fed. R. Civ. P. 56(e); Celotex Corp., 477 U.S.
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at 324.
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At the summary judgment stage, a court’s function is not to weigh the evidence and
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determine the truth, but to determine whether there is a genuine issue for trial. See Anderson, 477
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U.S. at 249. The evidence of the nonmovant is “to be believed, and all justifiable inferences are
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to be drawn in his favor.” Id. at 255. But if the evidence of the nonmoving party is merely
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colorable or is not significantly probative, summary judgment may be granted. See id. at 249–50.
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Notably, facts are only viewed in the light most favorable to the nonmoving party where there is
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a genuine dispute about those facts. Scott v. Harris, 550 U.S. 372, 380 (2007). That is, even
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where the underlying claim contains a reasonableness test, where a party’s evidence is so clearly
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contradicted by the record as a whole that no reasonable jury could believe it, “a court should not
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adopt that version of the facts for purposes of ruling on a motion for summary judgment.” Id.
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III.
ANALYSIS
a. Quiet Title and Declaratory Relief
This Court has ruled that because Bourne Valley struck down NRS Chapter 116’s “opt-
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in” notice scheme as facially unconstitutional, actual or reasonable notice is inapposite. See, e.g.,
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Bank of N.Y. Mellon v. Ravenstar Invs., LLC, No. 3:17–cv–116, 2017 WL 2588088, at *3–4 (D.
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Nev. June 14, 2017) (Jones, J.). The Court will therefore quiet title in favor of Wells Fargo under
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Bourne Valley.
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Contrary to the arguments of Entrust, no decision of the Nevada Supreme Court relieves
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this Court of its obligation to follow Bourne Valley. It is true that the Nevada Supreme Court has
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held that the non-judicial foreclosure scheme of NRS Chapter 116 does not implicate state action
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under the Due Process Clauses of the United States and Nevada Constitutions. See Saticoy Bay
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LLC Series 350 Durango 104 v. Wells Fargo Home Mortg., a Div. of Wells Fargo Bank, N.A.,
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388 P.3d 970, 975 (Nev. 2017). However, the Nevada Supreme Court’s opinion is not binding on
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this Court with respect to the statute’s constitutionality under the U.S. Constitution; on that
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question, the Court must adhere to Ninth Circuit precedent. See Watson v. Estelle, 886 F.2d
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1093, 1095 (9th Cir. 1989) (stating that the decision of a state supreme court construing the U.S.
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Constitution is not binding on federal courts).
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Entrust also argues that the foreclosure sale in this case is saved by Nevada’s “return
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doctrine.” That is, although the 1993 opt-in version of Chapter 116’s notice scheme was ruled
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unconstitutional in Bourne Valley, the previous version required the HOA to give notice without
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an opt-in requirement. See Nev. Rev. Stat. § 116.31168 (1991) (“The association must also give
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reasonable notice of its intent to foreclose to all holders of liens in the unit who are known to
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it.”). Defendants assert that under the return doctrine, an unconstitutional statute reverts to its
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latest constitutional version, see We the People Nev. ex rel. Angle v. Miller, 192 P.3d 1166, 1176
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(Nev. 2008), so the Court should assess the constitutionality of the HOA’s sale in this case under
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the 1991 version of NRS 116.31168. The Court rejects these arguments for reasons given by
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another judge of this District. See PNC Bank, N.A. v. Wingfield Springs Cmty. Ass’n, No. 3:15-
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cv-349, 2017 WL 4172616, at *3 (D. Nev. Sept. 20, 2017) (Du, J.).
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Upon even closer examination, the Court is convinced that the 1991 version of NRS
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116.31168 is also insufficient under the Due Process Clause. First, the previous statute only
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required notice of the “intent to foreclose,” Nev. Rev. Stat. § 116.31168 (1991), e.g., via a notice
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of default and election to sell. The Due Process Clause, however, requires “[n]otice by mail or
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other means as certain to ensure actual notice” of the “proceeding which will adversely affect the
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liberty or property interests of any party,” e.g., via a notice of sale. Mennonite Bd. of Missions v.
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Adams, 462 U.S. 791, 800 (1983) (“[A] mortgagee’s knowledge of delinquency in the payment
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of taxes is not equivalent to notice that a tax sale is pending.”). Second, the Due Process Clause
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requires notice not only to those lienholders “who are known,” Nev. Rev. Stat. § 116.31168
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(1991), but to all lienholders whose “name[s] and address[es] are reasonably ascertainable.”
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Mennonite Bd. of Missions, 462 U.S. at 800. Because the 1991 version of NRS 116.31168
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permitted foreclosure without reasonable notice of the time and place of sale to all lienholders
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whose identities and addresses were reasonably ascertainable, but only notice of the bare intent
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to foreclose to those lienholders who were already known, the return doctrine cannot validate the
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foreclosure here even assuming the doctrine applies precisely as Entrust argues it does.
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b. Commercial Unreasonableness
As the Court has noted in a number of other cases where a property was sold at auction
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for far less than its fair market value, issues related to commercial unreasonableness are best left
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to a jury. See, e.g., U.S. Bank v. Countryside Homeowners Ass’n, No. 2:15–cv–1463, 2016 WL
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3638112, at *6 (D. Nev. July 7, 2016) (Jones, J.). Therefore, because this case can be summarily
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adjudicated on other grounds, the Court declines to rule on these issues at this time.
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c. Remaining Claims and Cross-Claims
As indicated in Wells Fargo’s motion, the relief granted herein resolves all claims in its
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favor save the claim for unjust enrichment, which it intends to voluntarily dismiss. Accordingly,
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the Court requests that Wells Fargo file a notice of voluntary dismissal of any remaining claims
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forthwith. This case will then remain open only to dispose of the cross-claims asserted by Entrust
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against the HOA.
CONCLUSION
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IT IS HEREBY ORDERED that Entrust’s Motion for Summary Judgment (ECF No. 30)
is DENIED.
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IT IS FURTHER ORDERED that Wells Fargo’s Motion for Summary Judgment (ECF
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No. 31) is GRANTED. Wells Fargo shall file a notice of voluntary dismissal of any remaining
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claims within thirty days of this Order.
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IT IS SO ORDERED.
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_____________________________________
ROBERT C. JONES
United States District Judge
July 23, 2018
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