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Recontrust Co. v. Zhang

Supreme Court of Nevada

January 30, 2014

RECONTRUST COMPANY, N.A.; Countrywide Home Loans, Inc., a New York Corporation; National Title Co., a Nevada Corporation, and Silver State Financial Services, Inc., a Nevada Corporation, Appellants/Cross-Respondents,
v.
Lanlin ZHANG, Respondent/Cross-Appellant.

Page 815

Gerrard Cox & Larsen, and Douglas D. Gerrard, and Sheldon A. Herbert, Henderson, for Appellants/Cross-Respondents.

Marquis Aurbach Coffing, and Scott A. Marquis, Micah S. Echols, and Tye S. Hanseen, Las Vegas, for Respondent/Cross-Appellant.

BEFORE THE COURT EN BANC.[1]

OPINION

PICKERING, J.:

This real property dispute returns to this court for the third time. We vacate and remand for the district court to decide the lender's equitable subrogation claim, which neither the trial nor the prior appeals resolved.

I.

This dispute grows out of a contract giving respondent Lanlin Zhang the right to buy Frank Sorichetti's house (the Property). Sorichetti reneged, so Zhang sued him for specific performance and recorded a lis pendens against the Property. Sorichetti moved to dismiss and to expunge Zhang's lis pendens; the district court granted his motions. Zhang successfully petitioned this court for a writ of mandamus directing the district court to reinstate Zhang's complaint and vacate its

Page 816

expungement order. Zhang v. Eighth Judicial Dist. Court (Zhang I ), 120 Nev. 1037, 103 P.3d 20 (2004), abrogated in part by Buzz Stew, L.L.C. v. City of N. Las Vegas, 124 Nev. 224, 228 n. 6, 181 P.3d 670, 672 n. 6 (2008).[2]

Months later, someone (the parties suspect Sorichetti) recorded the district court's nullified order of dismissal and expungement, giving the document a new title: " Release of Lis Pendens." Sorichetti then applied to appellant Countrywide for a $705,000 loan.[3] Before making the loan, Countrywide conducted a title search, which revealed both the lis pendens and the " Release." Countrywide accepted the " Release" as proof that the Property was no longer in litigation and loaned Sorichetti $705,000. Countrywide secured its loans by recording first and second deeds of trust against the Property. Of the amount loaned, $281,090.12 went to retire the preexisting mortgage debt. Sorichetti pocketed the balance and disappeared.

Sorichetti defaulted and Countrywide initiated foreclosure. When Zhang learned about the pending foreclosure, she amended her complaint to join Countrywide and add claims for declaratory judgment, negligence, slander of title, and to quiet title. Eventually, the district court entered default judgment against Sorichetti and ordered him to convey the Property to Zhang for the agreed-upon purchase price ($532,500) less damages due Zhang from Sorichetti ($262,868.31). But Zhang could not complete the purchase because of Countrywide's deeds of trust.

The district court conducted a bench trial on the dispute between Zhang and Countrywide. Before trial, the parties submitted a joint pretrial memorandum. The memorandum identified the " principal legal issue" as the validity and effect of Zhang's lis pendens. The parties stipulated " that Countrywide paid off prior loans against the Property in the amount of $230,864.29 and $50,225.83" and identified as an additional legal issue " [w]hether Countrywide is entitled to equitable subrogation in the amount of $281,090.12," the combined paid-off sum.

The district court ruled in Countrywide's favor without reaching equitable subrogation. It held that the ostensibly released lis pendens did not give Countrywide actual or constructive notice of Zhang's specific performance claim against Sorichetti. Thus, Countrywide's deeds of trust had priority for the full $705,000 they secured. Since the $705,000 included the $281,090.12 that retired the preexisting mortgage debt against the Property— the object of Countrywide's equitable subrogation claim— the district court did not need to decide that issue, and it didn't. It struck the equitable-subrogation references in the draft findings of ...


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